Question

Discuss the five core characteristics of the business corporation

Answer 1

Characteristics of business corporation:

1. Economic activity: Business is an economic activity involving the production and distribution of goods and services. In the process, they create employment in numerous related sectors.

2.The motive of a business organization is to earn profits /maximize the wealth of shareholders. Success/ failure of a business organization is measured by profit/ loss it makes

3 Every business organizations irrespective of its size or geography is exposed to risks and uncertainties. Risks include but are not limited to market risks- impact of local economy, emergence of new competitors or substitutes/ alternatives, counterparty risks etc.

4. Dynamic and continuous: Business have to continously evolve with time in terms of organization structure, product and service portfolio, policies in order to stay competitive and keep the workforce productive and motivated. Businesses need to look for innovative ideas to reach market , to cut costs by eliminating wastages/ by use of efficient technologies, to increase revenues. Business history is full of examples where non-evolving / non-dynamic organizations have gone from market leadership to bankruptcy/ irrelevance within a decade. Example: Blackberry, Kodak

5. Business organizations not only perform economic activity but social activity too. Thus, business is a socio-economic activity. Both businesses and society are interdependent. Business need the support of various social groups - customers, employees, local community, suppliers, creditors , researchers , shareholders , government etc. Often, govt. acts as the trustee of these social groups and enforces the laws/ taking decisions, thus controlling the organizations.

Example: 1. If contract with lender is not honored, it can be challenged in the court of law.

2. Land acquisition for a large project often gets delayed/ blocked due to protests of local communities