Economic Roles of a Business Essay

A business is an organisation that attempts to satisfy the needs and wants of a community by providing goods and services, however, a business does not exist only to serve the community, it also exists to maximise the financial investments of their owners. This is done through the social and economical role of a business. Economic roles are concerned with the financial impacts that the activities of a business have on various groups in the business environment. The economic roles are wealth creation, employment and innovation. Social roles are focused on the impacts of a business on the community. Social Roles are entrepreneurship, choice and quality of life. Economic roles are important for a business as they can increase the value and funds via wealth creation, employment and innovation. Wealth creation is done by increasing sales and developing strategies to promote brand awareness and sales. This will increase the value of the funds that owners have invested in the business. Businesses also generate increased wealth for the community. The profits generated are then taxed by the government in order to fund essential services such as improving educational, health and transport facilities. Employment is where the owners of a business will employ other people to perform various activities within the business. The goods and services that businesses provide to the community are formed using knowledge, skills and effort of human resources, because of this, employment is an important function in business. The third economic role, innovation can be defined as the process of improving the features of a product. It could also apply to the production process where improved methods of production are implemented. The new methods may make use of fewer resources and result in increased output, which would benefit the business in many ways. In the business environment, innovation is crucial for a business to maintain its competitive advantage over other businesses. The social roles of a business impact communities by improving their quality of life, choice in products and providing entrepreneurship. The quality of life of a community is improved through the variety of products and services provided by businesses. Organisations spend millions of dollars each year in business research and development to find ways to improve the quality of life. Many of the products that businesses provide are wants and not needs; they are often aimed at providing greater convenience for those with a busy lifestyle. An example of this is pre-prepared meals. Through the production of these products, the financial investments of the owner of the business are maximised. Most businesses operate in a competitive market; this means there is a large number of competitors offering similar goods and services. This provides a range of choice for the consumers. This choice encourages businesses to provide their products and services at the lowest possible prices, with the highest quality. Choice also encourages a business to be innovative and different from their competitors so that their product will be the one chosen by the consumer and profits can be made. An entrepreneur is an individual who has developed particular ideas and is willing to take a risk to execute these ideas through a business. They take risks by thinking up strategies for their ideas to be successful; this is why they pursue different goals as part of the operation of business. Through business entrepreneurs are given an opportunity to make their ideas a reality. The economic and social roles of a business, wealth creation, employment, innovation, quality of life, choice and entrepreneurship, are important to maximise the financial investments of the owners, without them, a business would not thrive or gain profits.