DBA 100

Philosophy of Business
Purpose of a Business
by:

Evelyn Sanchez
Makadados

The purpose of a business

to offer value (through
products and/or services) to
customers, who pay for the
value with cash or
equivalents.
Minimally, the money
received should fund the costs
of operating the business as
well as to provide for the life
needs of the proprietor.

WHAT IS the purpose of business?

To make money, of course." will
be the random answer.
John Mackey,
CEO of Whole Foods Market,

"The purpose of business is to

create sustainable value for all
stakeholders." (See his recent
coauthored book,Conscious
Capitalism).

Other business leaders who

share this perspective include
Howard Schultz of Starbucks,
Bill Kelleher of Southwest
Airlines, Bill George of
Medtronic, Ratan N. Tata of Tata
Sons, and Biz Stone of Twitter.
Increasingly, business leaders
are focusing on the dignity of all
their stakeholders, and firms are
taking on projects in the wider
society to alleviate poverty.

They do this not because business

caused these problems,
but rather because as thinking
and feeling human beings, they
realize that their organizations
might have the managerial talent
and resources
to act where governments are
unable or unwilling to do so.
sense of being called upon to seek
the common good, to make a
difference, to make the world a
better place for their having been
there.

Important factor
Question of what the purpose of
business is and whether a
business should exist at all.
purpose of a business is not to
make money but rather to solve a
problem. Money and revenue
come second to helping people
ease certain pains. Just take a
look at Pinterest: zero revenue,
and yet investors still throw
money at it because it solves a
problem for customers, thereby
generating a huge user base.

Steve Blank, serial-entrepreneur and

leading founder of the Customer
Development methodology,
teaches that most startups do not fail
because the founders fight or because
the market is overdeveloped and there
are too many competitors (although
those certainly account for some of all
failures). Rather, it is because there are
nocustomers.

Blank describes something

called the Minimum Viable
Product (MVP), which is
essentially a calculated
launch strategy that gets
product to market as
efficiently as possible.
When first launched, an
MVP should only function
simply and without too
many or any features at all.
That comes later with

The purpose of a business

main

purpose of a business is to maximize

profits for its owners stockholders or in the

case of a publicly-traded company, its

stockholders.
Milton

Friedman

proponent of this view

Many fundamentalists used his 1970 historic
statement.
Darwinomics approach in doing business.

Principal purpose of business

serve the interests of a larger

group of stakeholders,
including employees,
customers, and even society as
a whole.
that business activities ought
to comform with legal and
moral strictures.
(proponent of this philosophy
has been U.S. businessmanturned-futurist John Renesch.)

John E. Renesch
"Corporations are human-made
organisms, associations of human
beings. To see this association as
having one solitary purpose and
responsibility, to grow only in
economic terms, is such an extreme
view that implosions like what
happened to Enron, WorldCom and
other corporate collapses will become
more and more commonplace.

Anu Agha, ex-chairperson of Thermax

Limited
"We survive by breathing but we can't say we
live to breathe. Likewise, making money is
very important for a business to survive, but
money alone cannot be the reason for
business to exist.
Profit maximization is extremely relevant
when top management is mandated with the
job of selecting the right strategy for the
business.

Michael Eugene Porter

According to him,
The primary goal for any business strategy exercise
must be that of maximizing profitability.
Bishop William Lawrence University Professor at
The Institute for Strategy and Competitiveness,
based at theHarvard Business School . He is a
leading authority on competitive strategy and
the competitiveness and economic development
of nations, states, and regions. Michael Porter's
work is recognized in many governments,
corporations.

Peter Drucker
Social ecologist and
Known as the man
Who invented
Management.
the

very purpose of business is

creating a satisfied customer.
This definition is also useful in
evaluating to what extent a
business is succeeding in
fulfilling its stated purpose.

Many observers would hold

that concepts such as
economic value added (EVA)
are useful in balancing profitmaking objectives with other
ends. They argue that
sustainable financial returns
are not possible without
taking into account the
aspirations and interests of
other stakeholders
(customers, employees,
society, environment.)

This conception suggests

principal challenge for a
business is to balance the
interests of parties affected by
the business, interests that are
sometimes in conflict with one
another.

Thank you for

listening.