At their essence, businesses are entities providing something of value to others in exchange for money. Businesses deliver value in the guise of solutions to existing problems, enhanced lifestyles, or the satisfaction of needs, be it a product or a service. In this article you will learn about the function of businesses in the economy, the important factors driving profitability and how businesses create value for customers, employees and the bigger community.
The Fundamental Purpose of a Business
A company lives to earn, but it does so by continuously providing value. Business creates value in the economy by satisfying an existing need or want in the marketplace. This could be a physical product (for example, a smartphone), a service (for example, legal advice), or a less-perceptual offering (for example, access to information via online platforms).
For example, Apple is able to profit by designing groundbreaking electronics that satiate consumers’ desire for technology that improves productivity, communication and entertainment. Just like a law firm brings in useful expertise that assists an individual or company in the complex nature of the law.
Profits and Value: What’s the Relationship?
Although profit is the end goal for every company, profit as a goal can not be pursued in a bubble. Profitability is a byproduct of delivering value to customers. If businesses are able to successfully meet the needs and expectations of their target audience, it can help to drive revenue, and in turn, lead to the growth of the business.
Profit is what a business has left over after selling its product or service, minus its costs to either produce or deliver that product. But wishing to be infinitely rich is myopic. Companies that focus on providing long-term value to their customers, employees, and broader stakeholders are more likely to become sustainably successful.
How Businesses Create Value
- Step 1: Finding a gap in the market: All businesses begin by finding a gap in the market. Great companies study the way consumers behave and trends they follow and find ways to build solutions to satisfy needs that may not have been met before. This could mean enhancing existing products or creating entirely new ones.
- Product and Service Innovation: Businesses need to constantly innovate to stay competitive. This does not only encompass enhancing products and services, but also improving business procedures, customer satisfaction, and even business models.
- Importance of Customer Satisfaction: As a thumb rule companies prioritizing customer satisfaction are winning. Good customer service, attention to how the demand for your products changes, and responding to their feedback can extend this loyalty, which is one of the driving factors of profitability in the long term.
- Engaged Employees: Creating value requires a motivated and engaged workforce; When employees feel valued, they are more likely to produce high-quality work, come up with innovative solutions, and maintain a positive reputation for the company.
- Social Responsibility: In the connected world we find ourselves, businesses are expected to give back to society. Avoiding corporate social responsibility (CSR) when implementing strategies towards sustainable practices has garnered positivity around stakeholders like customers, employees, and investors. Ironically, this is a commitment that is likely to earn goodwill, engender brand loyalty, and ultimately translate into monetization.
The Importance of Profit
Profit is critical to the continued existence and expansion of a company. It enables the business to reinvest in itself, grow, innovate, and issue returns to its owners and shareholders. Additionally, profit allows a business to compensate its workers, create infrastructure, and contribute to its community through philanthropy.
But profit shouldn’t be the only reason behind a business. The key to sustained success lies in the delicate balance between wealth generation and authentic value nomen cosis. Companies that take a transparent, ethical and sustainable approach are set to build stronger ties with all the people to whom they are accountable — and will ultimately win in the marketplace.
Conclusion
Organizations create value as part of the system in which they operate, satisfying specific needs and generating profit—essential societal roles for business. A thriving business that simply does well — and does good. A key factor in this balance of creating value without sacrificing profit will help guide everyone from small businesses to large companies. Respectively as all businesses are for profit, the best are those who create solid value and earn profit in an ethical and sustainable way.
