Understanding the Company as an Economic Unit
The Company as an Economic Unit
Companies are organizations that provide goods and services to meet the needs of the population. However, not all human needs are met by companies (e.g., knowledge, happiness). Companies produce goods and services for those who can afford them, creating a market. Families are the basic consumption unit, using goods and services and providing production factors (labor, capital, and natural resources). Consumption and production factors are key elements in the economic system.
Company Strategy
Strategy is the art of using available means to achieve a specific goal. Actions are based on the company’s mission and vision, guided by core values.
- Mission: The company’s reason for being, its fundamental purpose, and its relationship with different stakeholders.
- Vision: A long-term projection of what the company aspires to achieve.
- Values: The principles that define the company’s identity and guide its actions.
Company Objectives
The general aim (mission) is the company’s reason for being as an economic unit. It expresses long-term goals and is the starting point for business activity.
Objectives are what the company wants to achieve within a specific time frame. They are chosen after analyzing the environment and adapting to it, usually maximizing profit and minimizing costs.
Sub-objectives (departmental or operational) help achieve the overall objectives, involving the entire staff.
Conflicts of Objectives
Conflicts of interest arise among company members because everyone seeks to satisfy their own needs:
- Owners, partners, shareholders: Maximum yield and profit.
- Professional managers: Good management and company growth.
- Workers: Increased wages and better working conditions.
- Company: Review of delivery commitments and discounts.
- Suppliers: Timely payments.
- Banks and institutions: Repayment of loans.
- Government/administrations: Collection of taxes.
The Value Chain
Optimizing the value chain is a key objective. Value chain analysis breaks down business activities to identify areas that generate competitive value. The goal is to maximize profitability by reducing unnecessary costs. There are three components:
- Primary activities: Directly related to the development of the good or service offered.
- Support activities: Support the primary activities (e.g., technology development, finance).
- Margin: The difference between the actual value and the total costs incurred to generate that value.
Elements of a Company
Every company should consider certain factors for correct operation:
- Human factors or assets: Individuals or legal entities directly linked to the company (partners, shareholders, employees).
- Material factors or liabilities: The company’s real economic assets, including fixed capital (machinery, furniture) and current assets (raw materials, office supplies).
- Organization: The relationships, coordination, and communication within the company and with external stakeholders.
- Environment: Factors that affect the company’s operations, from government regulations to customers and suppliers.