ROLE OF BUSINESS IN ECONOMIC SYSTEMS
There exist many economic systems, viz. capitalism, socialism, and mixed economy. The business under any economic system provides employment, offers goods and services, earns foreign exchange, is instrumental to raise standard of living, provides income to individuals, earn taxes for the government, increases wealth and creates healthy conditions in a society. Although the history of business can be traced back as far as hundreds of years but the concept of systematic business emerged with the industrial revolution which started in 1750 with the inventions of textile machines and processes. The inventors who laid foundation stone of industrial revolution are Richard Ark Wright and Samuel Crompton. As a result of their inventions the production of textile goods became speedy, efficient, and of improved quality. Weaving, dyeing, drying of cloth became far improved. Due to damp climate ofEnglanddrying of dyed cloth would take six months, but after the inventions it look only one to two weeks.
The role of business under any economic system includes following:
Success of Inventions and Technologies:
Success of an invention or technological development lies in successful marketing. It is only business that boosts the success of an invention. In this connection computer can be quoted as a good example in which new technologies and development are getting wide acceptance from the consumers. Should they refuse to accept a new product, the new invention, or development will definitely be liable to fail.
Large scale Economies:
When the production is made on commercial basis the cost of production per unit moves down resulting in the economy of prices. On the other hand, low production increases unit cost and selling price. Large scale economics result in high consumption and increased production.
InPakistanthe prices of goods and services are too high despite low per capita income. On the other hand, in theU.S.the prices are low ignoring high income of masses. One of the reasons for this difference is low production inPakistanand high production in theU.S.producing the benefits of large-scale economies. InPakistana 1300 cc car sells at Rs. 12, 00,000 ($20000). The same make of a car in theU.S.is sold for $5000 despite a sea difference in per capital income of both the countries. One of the major reasons of this difference of price comes from the fact that inPakistanproduction rate is low and in he L .S. It is very high. In short business under any economics system calls for large scale production creating economics in cost and prices.
Distribution of Goods & Services
Role of business comprises the supplying of goods and services o consumers. Once the goods are produced they must reach them. Any distribution system is composed of transportation and warehousing. In fact the total business activity is the composition of production (manufacturing), trade (buying and selling), distribution (transportation and storage/warehousing), finance (bunking), risk (insurance) information (advertising), grading and standardization(brands. etc). This composition can be summarized in the following diagrams.
Business/Commerce = Production + Marketing
Marketing= Buying + Selling + Transporting + Storage + Finance +Risk + Information + Grading and Standardization
Business Production + Buying + Selling + Transporting + Storage + Finance + Risk + Information + Grading and Standardization
Business has given rise to home trade, foreign trade, multinational corporations, wholesaling, retailing, super markets, chain stores, leasing and franchise.
Employment & Standard of Living
Conducting a business requires the formation of a sole proprietorship, a partnership, or a company. Business in the either form provides employment to the mankind. Six billion people around the world get their livelihood directly or otherwise through business. Modern business has provided a lot of employment opportunities. Business enriched with the development of new technologies and inventions is constantly expanding job market. InPakistan, mobile phones, plastic money, and information technology are cases in point in the fields, of which thousands of jobs have been created. Businesses not only create jobs but also increase profits, expand wealth, make inventions successful, facilitates innovations all necessary factors for raising standard of living.
Dissemination of Education
Business has widely spread education in various fields. The world has seen the eras when the rich was always rich, the poor always poor, and the slave always slave through ices after races. One born rich, poor or slave and his status would not change and would die the same. Now business under any economic system has the power to change one’s born status for the better through education which plays a vital role for the employee getting high slot in a company and for the businessman to run his business successfully. Education in medicine, engineering, business administration, and other fields offers opportunities to people to break with their low-status past and enjoy a far pleasant life.
With the passage of time business and education are increasingly becoming dependent on each other. The modern business world is unusually facing complexities arising out of innovations, new inventions, new world order, severe competitions, open market economy, changed American policies towards the third world countries, policies of I.M.F. and World Bank and the laws of World Trade Organization(W.T.O.). These complexities can only be resolved with the high level of education.
Survival of Nations
The importance of business has reached the stage where nations can only survive on trade with the foreign nations. Countries need foreign exchange which they earn through exporting their goods in which they specialize. Economic progress can make a country dominate others. In this modern world the power of developed countries has shifted to business corporations which not only control their local governments but also exercise a tremendous influence over developing countries. It is the power of business that the U.S. is referred to as Corporate America.
Governments survive on taxes, excise, and tariffs which they receive from businesses. Income from these sources helps governments run the country. Expenditure on defense, education, communication, salaries, pension, and health are met from the taxes collected from the business and individuals. In other words, it is the business that runs the country.
Developed business gives impetus to the economic growth. Whether a country’s economy is run on socialism, capitalism or mixed economic system its survival is on the business, which includes import, export, production, distribution and communication. Economic growth of a country depends upon the development of business organizations. InAmericaandJapanthere are such giant cooperators whose individual annual budget is greater than thePakistan’s national budget. Examples are Toyota Corporation, IBM, and Microsoft.
End to Cold & Hot Wars
Business and economic activities have assumed such an important position that the big powers have put an end to hot and cold wars. All developed countries including some developing nations have buckled down to focus their attention on business and trade, form economic blocs and buried their differences with neighboring countries. Those countries indulging in disputes with neighboring countries and internal political crisis ignoring economic and business activities, and spending on defense would have no comfortable place in the economically prosperous world.