This statement limits the scope and missed other aspects when running a business that only focuses on increasing its profit. The operation of business involves many elements such as workers, customers, facilities, resources, revenue, expenses, and investment. Each element of a business unit is linked to each other directly or indirectly. Therefore, the operation of business units also creates varies impacts within and beyond the business network through the daily practices. When the only business goal is to increase profit, the elements within the business network act towards achieving the goal.
However, actions taken to increase the profit do not always create positive impact within the business network. For example, to create bigger profit margin, businesses may choose to cut down the cost. Given that the revenue stays the same, the lower the expenses are, the larger the business profit margin it will create. Using salary as an example, when employees take pay cuts to save the business’ operation cost, their household income drops, which might force them to look for another job in order to carry their financial burden such as mortgage, paying for tuition, or paying for medical treatment.
However, actions taken to increase the profit do not always create positive impact within the business network. For example, to create bigger profit margin, businesses may choose to cut down the cost. Given that the revenue stays the same, the lower the expenses are, the larger the business profit margin it will create. Using salary as an example, when employees take pay cuts to save the business’ operation cost, their household income drops, which might force them to look for another job in order to carry their financial burden such as mortgage, paying for tuition, or paying for medical treatment.
If not quitting the job, the employees might need to work a second job in order to generate extra income to maintain financial stability. Working two jobs usually takes away more personal time and leads to the reduction of social activities, recreational activities, and even daily activities such as sleeping, cooking or picking children up from day care. The lack of sufficient time for personal activities will then creates stress both physically and mentally, and impact work performance. Eventually, the business itself could suffer from poor work quality on the employee side and it could further shake the business stability because employees need to put more hours to get the same amount of work done as compared with no pay cut scenario.
Looking at this issue from a different angle, cutting down cost in business operation also has its good side. The limitation of the operation cost could also be a driving force for more efficient use of materials, energy use, or innovation. Companies might have an opportunity to review their energy use and find out possible ways to eliminate waste of electricity. The limitation of the material budget could increase sustainability because it decreases the environmental footprint by cutting down the resource consumption from upstream raw material production, the fuel burned during transportation, and the waste material.
Looking at this issue from a different angle, cutting down cost in business operation also has its good side. The limitation of the operation cost could also be a driving force for more efficient use of materials, energy use, or innovation. Companies might have an opportunity to review their energy use and find out possible ways to eliminate waste of electricity. The limitation of the material budget could increase sustainability because it decreases the environmental footprint by cutting down the resource consumption from upstream raw material production, the fuel burned during transportation, and the waste material.
There's no doubt that profit generating is a vital goal for businesses in order to sustain the business network. Increased profit could be used in many good ways such as sustainable technology innovative research. research. However, setting the increase of profit as the only goal in the business operation could create impact on the business in reverse and hurts the business. Therefore, the business of business should be more than just about increasing profit, aspects such as employee welfare, environmental performance, and innovative technological development can also be considered for business operation.
Very nice position on Friedman’s theory! It was definitely an interesting read as well. You elaborated on your point of view nicely, making it clear to me what exactly you meant. I found your grammar to be lacking here and there, especially in the last couple of paragraphs. Making these less of a smooth read. But I’m sure that over time this will also become flawless!
ReplyDeleteI really liked your point of view about “the business of business. I really liked the example that you gave about low wages and the impact that this has in the life of families in the long term. It made me think that if we do agree to the meaning of this phrase, in order for the business to generate more profit, it would be perfectly fine to reduce costs of production and low wages. Nevertheless, reducing salaries or putting them really low will reduce the quality of life of its employees and therefore also reducing the quality of the product for their consumers. Your example made me think that in the world we live nowadays, it is understandable that in order for businesses to have more profits, it is very important that they invest in researching forms to cut down the costs of production, especially when they can be more efficient reusing their resources and avoiding harming the environment. Nevertheless, companies should consider that the employee is the most important part in the company and this is why, it is also the best decision to invest in them. Therefore, when we say to invest in the employee, we are not talking about only making a profit, but also helping the society and all the issues around it.
ReplyDelete