what is the role of business in the economy essay

The Business Role in the Economy Essay

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Role of Business in the Society

Roles of for-profit and nonprofit organizations in the economy, impact of current fiscal and monetary policy on the economy, accessing global market through outsourcing at toyota, corporate social responsibility.

The main role of business in the society is to produce both goods and services in order to meet demand created by the public. However, it must do so in such a way that companies also make profits so that they can continue to exist.

Businesses provide goods and services that both the public and governments cannot do without having. In addition to this, businesses also consume both products and services from both the government and the public such as labour. Therefore, it is also the responsibility of any business to give back to society. This way the company will gain acceptability in society.

Business has the moral obligation to the consumers and the public not to produce goods and services that have the potential to cause any harm to people. In addition, it is the responsibility of business not to unreasonably over charge the consumers for its goods and services.

Recently it is has become the responsibility of business to contribute to the wellbeing of the society in which it carries out its business in the sense that a better society means a better environment for doing business.

In fact, a business social dimension is a plus in the conduct of business. It makes the very people who buy services and goods the mere existence of that business. This makes them to want to buy their products, which creates customer loyalty.

Business also has the obligation to trade fairly with other businesses and its suppliers to ensure an optimal business environment and to meet its financial obligations accordingly. It also has the responsibility to obey the laws of the country/state in which it is carrying out its business.

Profit and nonprofit organizations contribute to the growth of an economy. They both offer employment and contribute to the GDP. In 2011, for example, nonprofit organizations contributed about 5 % of the United States’ GDP. These organizations also offer employment to youth and create a sense of purpose in society by championing for certain causes.

For profit organizations, on the other hand, exist purely for profit making purposes. They pay tax and contribute to the economic development by employing individuals who in turn pay tax and use their disposable incomes to spur growth in various sectors of the economy.

Additionally, profit organizations engage in social responsibility work. This ensures that they maintain close contact with the business market and shows a sense of responsibility towards their sources of resources.

The government uses two policies to control money supply in a country. That is, expansionary and contractionary policy with the effect of increasing and reducing money supply respectively. The effect of expansionary policy on the AA-DD model is a shift to the right. This increases the exchange rate of a country’s money with respect to another country. However, this does not happen fast.

It takes on a transitional mode with many factors at play. For example, the real money supply exceeds the real money demand. This, in the short run, means that inflation levels increase quickly.

However, the trend lags as more people convert their money assets into non-money assets to beat or take advantage of the inflation levels. In the long term, the natural effect is that the exchange rate will increase with the amount of cash in the economy.

The US Government employs the contractionary monetary policy when the money supply in an economy reduces. This reduction has the effect of shifting the AA-DD model downwards. When this happens, there is an immediate reduction in Gross National Product of a country. It also leads to a relatively stronger local currency.

Fiscal policy refers to government spending. The government is the biggest consumer and its consumption has many policy effects on the economy. The government uses this power to effect policies in a country through either reduction in spending (contractionary fiscal policy) or increase in spending (expansionary fiscal policy). An increase in government spending causes AA-DD model to shift to the right.

This causes a decrease in the exchange rate. For example, the Canadian dollar would do better than the American dollar in this situation. However, this leads to an increase in the GNP for the country. This is because it may attract more foreign investment as it is favorable to them. There are many causes for an expansionary policy. This includes transfer payments, tax reductions, and government direct spending.

Outsourcing has become a trend in today’s business environment and Toyota is no exception of the firms that are increasingly outsourcing production of goods and services. It is not possible for the firm to produce every component that it requires in the production of its vehicles.

Even if it were possible to produce all these components, it would be more expensive as it may mean having other completely different plans and work set-ups. Additionally outsourcing allows the firm to concentrate on the core business of the firm and hence giving the firm room to be more efficient and effective in doing its core business. It also allows the firm to gain access to higher-level expertise and experience.

This may be unavailable within its staff or which is expensive to employ. Other benefits include legality of the process done on contractual basis, risk avoidance, tax benefit, commoditization, and many more. An example of components that the firm outsources includes wheels and oil.

Toyota, a multi-national company, gets its suppliers all over the word as long as they provide what the company requires and for a reasonable price in accordance with the firm’s intentions. This shows that outsourcing will increase market penetration to countries where Toyota does not operate and further increase its profits.

CSR obligation surpasses what the law requires a firm to do. It is the responsibility an organization takes upon itself to better the social lives of both the workforce and society. Currently, this is a worldwide trend.

This is because of the pressure from society and governments for organizations to feel more responsible for the sources of their resources. The members of society are also more sophisticated than sometime back. The competitive environment is also cutthroat with more companies joining the framework.

Corporate Social Responsibility at Toyota has greatly affected society in different areas of life. Among the greatest beneficiaries is the environment. Toyota has taken up the challenge of conserving the environment, as it is becoming a necessity for the whole of the business fraternity in the world to engage in environmental conservation activities.

Consequently, the world’s society is gaining from Toyota’s efforts, for instance increase in rainfall around the world, reduced global warming etc. The company is producing environmentally friendly cars such as Prius and actively engaging environmental conservation efforts at the corporate level such as planting trees.

• International Monetary System
• National Economic Policy in Australia
• Mortgage Rates and Expansionary Economy Balance
• Japanese expansionary fiscal policy
• History of Alcoholics Anonymous (AA)
• Money Mechanics in the U.S.
• Monetary Policy: Easier does it
• Milton Friedman’s Life and Contribution to Economics
• Australian and Hong Kong monetary policy
• The Law of Demand
• Chicago (A-D)
• Chicago (N-B)

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The Role of Business in the Economy

The cornerstone and prosperity of any society depends on business. Through business, companies create resources that enable social development and welfare. This part will describe the role of business in the society.

Businesses provide goods and services that our daily lives depend on and also create employment. It is through business that the government is paid taxes from, to make it function. This means that business is a very important part of the economy. Business helps to develop, produce and supply goods and services to people (customers) who need it. This is done with a view of creating profit. Business helps people to fend for themselves by focusing on producing one product or by expertise. Business also helps the society to create jobs for customers, distributors and suppliers. Business helps to develop new goods and services and supply goods and services that customers may not produce.

Other roles that business plays in the economy will be to address the urbanization. Urbanization has been growing rather fast, but only being poorly managed. As such, the role of a business is to provide suitable solutions for emerging problems. All these problems will, thus, be taken by businesses in our society (Kropp, 2010).

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Businesses play a crucial role in the economy by driving innovation, creating jobs, and contributing to overall economic growth. Here are some key aspects of their role:

• Production of Goods and Services: Businesses produce a wide range of goods and services to meet the needs and wants of consumers. This production is essential for maintaining and improving the standard of living.
• Job Creation: By establishing and expanding operations, businesses create employment opportunities. This not only provides income for individuals but also stimulates economic activity through increased consumer spending.
• Innovation and Technology: Businesses invest in research and development to innovate and improve products and services. This technological advancement drives productivity and economic growth.
• Economic Value and Wealth Creation: Businesses generate economic value by creating wealth for owners, shareholders, and employees. This wealth creation is fundamental to economic development and prosperity.
• Market Coordination: Businesses facilitate trade and commerce by coordinating markets. They help in the efficient allocation of resources through the price mechanism, ensuring that goods and services are distributed where they are most needed.
• Social Responsibility: Modern businesses are increasingly expected to address social, economic, and environmental challenges. This includes sustainable practices, ethical operations, and contributing to community development.
• Partnership with Government: Businesses often collaborate with governments to solve social problems and drive economic policies. This partnership can lead to improved infrastructure, education, and healthcare systems.

Overall, businesses are integral to the functioning and growth of the economy, impacting various aspects of society and contributing to overall well-being.

Roles of For-Profit and Nonprofit Organizations in the Economy

For-profit organizations are those organizations established mainly for profit purposes. These organizations are important in the economy for they involve in research and development. This leads to better and dynamic efficiency. Such organizations like oil exploration are for-profit and without them the economy can stagnate. They also contribute to tax revenues from the government while result in profits getting saved to provide for during unexpected downturns. They also result into awards of shareholders leading to people buying shares (Entrepreneurs and Economic Profit).

Nonprofit organizations are those organizations that in the course of their business can generate income but are restricted on the amount of income that is distributed in comparison to generated. Non-profits organizations are those firms that provide essential goods and services, but not for profit purposes. Thus, they are organizations for mutual benefits or for charities. Organizations like health centres supported by the government are not for-profit as they provide essential services to all people regardless of their status. Nonprofit organizations have a role to play in efficiency to meet client’s needs at the lowest possible price. Through nonprofits organizations, the government can correct failures in the stock market. 

Discussion on the impact of current fiscal and monetary policy on the economy. Every major market trend has some underlying economic factors like declining employment, rising GDP or inflation. Fiscal policy is an economic policy instigated by the congress or the president through taxation and government spending. Increase of taxes means less disposable income for consumers, thus, little money to spend. Turning to the U.S., there has been a slow economic recovery from 2008 and, thus, we have a weak job creation, although expansionary fiscal policy seems to have averted a deeper recession in 2010 (Lipsky, 2010).

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Monetary policy means that the Federal Reserve of the U.S. controls the supply of money within the country’s economy. Thus, by affecting the cost of money, it affects the amount of money spent on businesses by consumers or by businesses. Maintaining a supportive monetary policy should be encouraged to help the slow pace that has been experienced during the recovery (Lipsky, 2010).

Wal-Mart Global Strategy

Wal-Mart is a U.S. leading retail store chain that has a global presence serving more than 200 times a week at more than its 8,000 retail outlets in 15 countries under different banners.  First established in 1962, the retail chain has grown to be one of the biggest employers in the world. The company’s retail stores are operated in diverse designs dividing the business into 3 main segments, namely: Sam’s club, Wal-Mart Stores and International stores.

Wal-Mart was focused on establishing large discount stores within small towns during its early years of operation; this ensures that low prices are guaranteed for each transaction and attract potential customers. Consumers always expect Wal-Mart to sell lower than its competitors and, as always, Wal-Mart delivers, thus, making the business highly recognizable. This interaction between the business and the customers gets established through trust. The potential strategy has seen Wal-Mart grow in its global businesses (Shah and Phipps, 2002).  

Coca Cola CSR

Corporate Social Responsibility (CSR) involves the acts that are undertaken by corporate organizations in addressing a wide array of stakeholder concerns. Thus, the organization expands its business activities to a new and different dimension by involving the society as a whole. CSR, therefore, enhances its value from few community members to the whole world.  

Coca cola believes that it has a duty not only to contribute to the community but to target initiatives that will have a maximum impact on the environment. In Great Britain, Coca Cola has identified to cooperate with the public, NGO and government to seek solution to the environment problems.  The environmental management system called eKOsystem that “conducts its business to protect, preserve and enhance the environment” (1). Coca Cola is committed to take actions that result in minimizing negative environmental impact and it strives for constant improvement that seeks to provide leadership in energy and water efficiency and eliminate solid waste. And that is why Coca Cola has been supporting Tidy Britain group that supports local authorities to keep the environment clean by reducing graffiti, litter and dispose abandoned vehicles (The importance of social responsibility).

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1.3 How Business and Economics Work

• What are the primary features of the world’s economic systems, and how are the three sectors of the U.S. economy linked?

A business’s success depends in part on the economic systems of the countries where it is located and where it sells its products. A nation’s economic system is the combination of policies, laws, and choices made by its government to establish the systems that determine what goods and services are produced and how they are allocated. Economics is the study of how a society uses scarce resources to produce and distribute goods and services. The resources of a person, a firm, or a nation are limited. Hence, economics is the study of choices—what people, firms, or nations choose from among the available resources. Every economy is concerned with what types and amounts of goods and services should be produced, how they should be produced, and for whom. These decisions are made by the marketplace, the government, or both. In the United States, the government and the free-market system together guide the economy.

You probably know more about economics than you realize. Every day, many news stories deal with economic matters: a union wins wage increases at General Motors , the Federal Reserve Board lowers interest rates, Wall Street has a record day, the president proposes a cut in income taxes, consumer spending rises as the economy grows, or retail prices are on the rise, to mention just a few examples.

Global Economic Systems

Businesses and other organizations operate according to the economic systems of their home countries. Today the world’s major economic systems fall into two broad categories: free market, or capitalism; and planned economies, which include communism and socialism. However, in reality many countries use a mixed market system that incorporates elements from more than one economic system.

The major differentiator among economic systems is whether the government or individuals decide:

• How to allocate limited resources—the factors of production—to individuals and organizations to best satisfy unlimited societal needs
• What goods and services to produce and in what quantities
• How and by whom these goods and services are produced
• How to distribute goods and services to consumers

Managers must understand and adapt to the economic system or systems in which they operate. Companies that do business internationally may discover that they must make changes in production and selling methods to accommodate the economic system of other countries. Table 1.1 summarizes key factors of the world’s economic systems.

In recent years, more countries have shifted toward free-market economic systems and away from planned economies. Sometimes, as was the case of the former East Germany, the transition to capitalism was painful but fairly quick. In other countries, such as Russia, the movement has been characterized by false starts and backsliding. Capitalism , also known as the private enterprise system , is based on competition in the marketplace and private ownership of the factors of production (resources). In a competitive economic system, a large number of people and businesses buy and sell products freely in the marketplace. In pure capitalism, all the factors of production are owned privately, and the government does not try to set prices or coordinate economic activity.

A capitalist system guarantees certain economic rights: the right to own property, the right to make a profit, the right to make free choices, and the right to compete. The right to own property is central to capitalism. The main incentive in this system is profit, which encourages entrepreneurship. Profit is also necessary for producing goods and services, building manufacturing plants, paying dividends and taxes, and creating jobs. The freedom to choose whether to become an entrepreneur or to work for someone else means that people have the right to decide what they want to do on the basis of their own drive, interest, and training. The government does not create job quotas for each industry or give people tests to determine what they will do.

Competition is good for both businesses and consumers in a capitalist system. It leads to better and more diverse products, keeps prices stable, and increases the efficiency of producers. Companies try to produce their goods and services at the lowest possible cost and sell them at the highest possible price. But when profits are high, more businesses enter the market to seek a share of those profits. The resulting competition among companies tends to lower prices. Companies must then find new ways of operating more efficiently if they are to keep making a profit—and stay in business.

The complete opposite of capitalism is communism . In a communist economic system, the government owns virtually all resources and controls all markets. Economic decision-making is centralized: the government, rather than the competitive forces in the marketplace, decides what will be produced, where it will be produced, how much will be produced, where the raw materials and supplies will come from, who will get the output, and what the prices will be. This form of centralized economic system offers little if any choice to a country’s citizens. Early in the 20th century, countries that chose communism, such as the former Soviet Union and China, believed that it would raise their standard of living. In practice, however, the tight controls over most aspects of people’s lives, such as what careers they can choose, where they can work, and what they can buy, led to lower productivity. Workers had no reasons to work harder or produce quality goods, because there were no rewards for excellence. Errors in planning and resource allocation led to shortages of even basic items.

These factors were among the reasons for the 1991 collapse of the Soviet Union into multiple independent nations. Recent reforms in Russia, China, and most of the eastern European nations have moved these economies toward more capitalistic, market-oriented systems. North Korea and Cuba are the best remaining examples of communist economic systems. Time will tell whether Cuba takes small steps toward a market economy now that the United States reestablished diplomatic relations with the island country a few years ago. 16

Socialism is an economic system in which the basic industries are owned by the government or by the private sector under strong government control. A socialist state controls critical, large-scale industries such as transportation, communications, and utilities. Smaller businesses and those considered less critical, such as retail, may be privately owned. To varying degrees, the state also determines the goals of businesses, the prices and selection of goods, and the rights of workers. Socialist countries typically provide their citizens with a higher level of services, such as health care and unemployment benefits, than do most capitalist countries. As a result, taxes and unemployment may also be higher in socialist countries. For example, in 2017, the top individual tax rate in France was 45 percent, compared to 39.6 percent in the United States. With both countries electing new presidents in 2017, tax cuts were a campaign promise that both President Macron and President Trump took on as part of their overall economic agendas. 17

Many countries, including the United Kingdom, Denmark, India, and Israel, have socialist systems, but the systems vary from country to country. In Denmark, for example, most businesses are privately owned and operated, but two-thirds of the population is sustained by the state through government welfare programs.

Mixed Economic Systems

Pure capitalism and communism are extremes; real-world economies fall somewhere between the two. The U.S. economy leans toward pure capitalism, but it uses government policies to promote economic stability and growth. Also, through policies and laws, the government transfers money to the poor, the unemployed, and the elderly or disabled. American capitalism has produced some very powerful organizations in the form of large corporations, such as General Motors and Microsoft . To protect smaller firms and entrepreneurs, the government has passed legislation that requires that the giants compete fairly against weaker competitors.

Canada, Sweden, and the UK, among others, are also called mixed economies ; that is, they use more than one economic system. Sometimes, the government is basically socialist and owns basic industries. In Canada, for example, the government owns the communications, transportation, and utilities industries, as well as some of the natural-resource industries. It also provides health care to its citizens. But most other activity is carried on by private enterprise, as in a capitalist system. In 2016, UK citizens voted for Britain to leave the European Union, a move that will take two or more years to finalize. It is too early to tell what impact the Brexit decision will have on the UK economy and other economies around the world. 18

The few factors of production owned by the government in a mixed economy include some public lands, the postal service, and some water resources. But the government is extensively involved in the economic system through taxing, spending, and welfare activities. The economy is also mixed in the sense that the country tries to achieve many social goals—income redistribution and retirement pensions, for example—that may not be attempted in purely capitalist systems.

Macroeconomics and Microeconomics

The state of the economy affects both people and businesses. How you spend your money (or save it) is a personal economic decision. Whether you continue in school and whether you work part-time are also economic decisions. Every business also operates within the economy. Based on their economic expectations, businesses decide what products to produce, how to price them, how many people to employ, how much to pay these employees, how much to expand the business, and so on.

Economics has two main subareas. Macroeconomics is the study of the economy as a whole. It looks at aggregate data for large groups of people, companies, or products considered as a whole. In contrast, microeconomics focuses on individual parts of the economy, such as households or firms.

Both macroeconomics and microeconomics offer a valuable outlook on the economy. For example, Ford might use both to decide whether to introduce a new line of vehicles. The company would consider such macroeconomic factors as the national level of personal income, the unemployment rate, interest rates, fuel costs, and the national level of sales of new vehicles. From a microeconomic viewpoint, Ford would judge consumer demand for new vehicles versus the existing supply, competing models, labor and material costs and availability, and current prices and sales incentives.

Economics as a Circular Flow

Another way to see how the sectors of the economy interact is to examine the circular flow of inputs and outputs among households, businesses, and governments as shown in Exhibit 1.6 . Let’s review the exchanges by following the red circle around the inside of the diagram. Households provide inputs (natural resources, labor, capital, entrepreneurship, knowledge) to businesses, which convert these inputs into outputs (goods and services) for consumers. In return, households receive income from rent, wages, interest, and ownership profits (blue circle). Businesses receive revenue from consumer purchases of goods and services.

The other important exchange in Exhibit 1.6 takes place between governments (federal, state, and local) and both households and businesses. Governments supply many types of publicly provided goods and services (highways, schools, police, courts, health services, unemployment insurance, social security) that benefit consumers and businesses. Government purchases from businesses also contribute to business revenues. When a construction firm repairs a local stretch of state highway, for example, government pays for the work. As the diagram shows, government receives taxes from households and businesses to complete the flow.

Changes in one flow affect the others. If government raises taxes, households have less to spend on goods and services. Lower consumer spending causes businesses to reduce production, and economic activity declines; unemployment may rise. In contrast, cutting taxes can stimulate economic activity. Keep the circular flow in mind as we continue our study of economics. The way economic sectors interact will become more evident as we explore macroeconomics and microeconomics.

Concept Check

• What is economics, and how can you benefit from understanding basic economic concepts?
• Compare and contrast the world’s major economic systems. Why is capitalism growing, communism declining, and socialism still popular?
• What is the difference between macroeconomics and microeconomics?

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Better Knowledge. Your Insight Is Sharper

Roles of Business: Satisfying Needs and Wants and Creating Value, Jobs, Income

Updated: August 18, 2024 · Reviewed by: Ahmad Nasrudin

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Business plays a vital role in our lives. First, it creates goods and services to satisfy our needs and wants. Then, it recruits households as labor and provides them with compensation, such as wages, salaries, and benefits. Thus, it becomes a source of their income, which can be used to sustain their lives.

Where does business come into play and operate? Business is everywhere. It can operate in the primary sector to extract natural resources, such as mining, or harvest various agricultural commodities. It usually produces raw materials, which are inputs for other businesses in the  secondary sector .

Others operate in the secondary sector. They process raw materials into intermediate products or final products. Intermediate products are sold to other businesses to be further processed into final products and then sold to consumers. Meanwhile, the final products are for final consumption without going through further processing to obtain their benefits.

Some businesses operate in the tertiary sector . They offer services. Their activities range from trading services (retail and wholesale) and tourism services to financial services such as banking and insurance. Apart from providing services to businesses in the primary and secondary sectors, they also provide them to households.

How does business play a role?

Businesses buy inputs such as raw materials from suppliers. They then process them into output, which they can sell at a higher price than the dollars they pay suppliers. This process we call value-adding, wherein they convert lower-priced inputs into higher-priced outputs.

The output then we use to fulfill our needs and wants. What are needs and wants?

• Needs  are essential for our survival. Without fulfilling them, we could face significant risks, such as death. An example is our need for food, drink, clothing, and shelter.
• Wants  are something we need but are less essential for our survival. For example, we want a vacation and a smartphone, although we’d be fine without both. Likewise, standard clothing is a necessity, but we may want luxury clothes if we have enough money.

What output does the business produce?

Business output falls into two main categories: goods and services. We call them both products.

• Goods  are tangible products that we can see or touch. We can also save them for later use. Examples are clothes, food, smartphones, and cars.
• Services  are intangible products. We can only feel their benefits without being able to see or touch them. Banking services, hotels, consultants, and barbershops are examples. We can interact with the people who gave them but can’t see what they gave us like when we receive the goods from the seller.

What inputs are used?

In a broad definition, inputs include not only raw materials. For a business to operate , it requires the following four resources – we refer to as factors of production:

• Land – such as land for factory and office locations and natural resources for raw materials.
• Labor – includes the physical and mental effort of a worker.
• Capital – includes man-made to assist production, such as machinery and equipment.
• Entrepreneurship is our attempt to establish a business by bringing together and organizing land, labor, and capital. We take risks.

The vital role of businesses in society and the economy

As with the opening sentence, the role of business is vital to our society and economy. Businesses don’t just satisfy our needs and want through the products they produce. But, they also create jobs and income in the economy.  In addition, competition  between them encourages  innovation  and efficiency, making goods and services cheaper and of higher quality.

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Satisfying our needs and wants

Businesses sell goods and services to satisfy our needs and desires for profit. So, without them, we would have to produce everything ourselves, including our food and clothes.

Then, businesses also have to compete with each other. To keep the money flowing, they must deliver higher satisfaction than competitors do. Competition forces them to be more efficient and innovative, leading to lower prices and better quality.

Creating added value

Businesses create wealth in the economy by adding value to the inputs they use. It makes the output more valuable than the input used. Finally,  added value  makes their products more attractive, and customers will usually be willing to pay more.

Value creation or value addition can be done in several ways. For example, businesses transform inputs into more valuable forms, such as converting bauxite into aluminum slabs and processing them into car bodies.

Another example is offering convenience, such as saving customers time, as fast food businesses offer. Quality also contributes to added value, such as embedding 4G technology in smartphones instead of 3G.

Creating jobs

Business creates jobs in the economy. Therefore, the more businesses there are, the more manpower is needed. Likewise, as their size grows, they also require more manpower.

When starting a business, employers hire workers to support operations. These workers work in functional areas such as accounting and finance, human resources, marketing, and production.

Then, as businesses grow, employers also need more workers. The larger business size makes operations more complex and requires more staff to handle tasks and jobs.

Income creation

Entrepreneurs set up businesses for profit. If the business is successful, their income and wealth increase.

Likewise, individuals earn income by working. The money they get can be used to fulfill their needs and wants.

Thus, growing business activity creates more income in the economy. More people work for income, and higher incomes drive more demand for goods and services.

Then, with high demand, entrepreneurs see more opportunities to grow their businesses and introduce new businesses.

Economic development

The business contributes to promoting economic development. In addition, business activity creates a ripple effect, encouraging other businesses to emerge and creating more regional income and jobs.

Business growth in the region does not only contribute to job creation. But, it will also lead to improvements to infrastructure, such as roads and railways in the region. In addition, health facilities, education, shopping centers, and other public and private services are also developing. Eventually, the economy in the region grew.

Living standard improvement

Business activities contribute to improving people’s living standards. It can go through several channels.

First, we can fulfill our needs and wants by purchasing the goods and services produced by the business. Second, we get income from the jobs created. We can use the money to buy various goods and services to satisfy our needs and wants. We can also invest it to support future needs, for example, during retirement. Then, we can also use it to buy insurance to minimize the losses we may experience.

Third, competition leads to lower prices and higher-quality goods and services. Businesses must outperform their competitors in satisfying their customers, forcing them to be more efficient and innovative. It ultimately makes our lives more comfortable and better because we can get lower prices and higher quality products.

For example, we can capture and photograph our best moments with mobile phones without buying a camera. We couldn’t do this in the past because manufacturers didn’t embed high-resolution cameras into phones.

Community empowerment

Some business organizations seek to strike a balance between profit, social and environmental. They do not pursue maximum profit and wealth for the owner. But they reinvest the profits into social and environmental causes.

For example, microfinance providers raise money through crowdfunding and lend it to small entrepreneurs on flexible terms and low interest rates. This allows small businesses to thrive, creating more jobs and income for the neighborhood. Then, microfinance providers use the profits to expand the reach of their services to communities elsewhere.

In other cases,  social enterprises  empower a community by training people in entrepreneurial skills. They then help the community market the product and use the sales money to provide more training and build public facilities such as education and health.

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How Did Business’s Role in Society Change in 2020?

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Ten stories that defined the year.

What are the 10 most important stories about the intersection of business and society in 2020? Covid-related issues top the list and include both ways companies innovated and the roadblocks that resulted in less progress on sustainable development. Other top stories are fossil fuels continuing on their path to irrelevance, an expansion of the definition of corporate responsibility, companies saying “Black Lives Matter” (and many taking concrete action), and increased calls for reforming capitalism.

The year 2020 was incredibly rough, but with one big bright spot at the end.

• Andrew Winston is one of the world’s leading thinkers on sustainable business strategy. His books include Green to Gold , The Big Pivot , and Net Positive . AndrewWinston

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The Role of Business in Society

• First Online: 01 January 2013

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• Mollie Painter-Morland 3  

Part of the book series: CSR, Sustainability, Ethics & Governance ((CSEG))

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When thinking about the role of business in society we find ourselves already confined by certain implicit assumptions. We tend to assume that business exists as separate from society. However, in fact, as one of the most important human institutions, business is central to the way in which we constitute a society and how we live within society. Business therefore helps define society as such. By the same token, our views about ‘society’ ought to give shape to what is perceived as ‘business’. When one conceives of the relationship between business and society as one of codetermination, a lot is at stake. It is in and through this relationship, amongst some others, that we define who we are and how we want to live.

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Painter-Morland, M. (2013). The Role of Business in Society. In: Osburg, T., Schmidpeter, R. (eds) Social Innovation. CSR, Sustainability, Ethics & Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-36540-9_25

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The Role of Business in the Economy

An overview of the role that businesses play in the economy.

Firms are a very important part of an economy. They produce goods and services for consumers to buy and experience. The  role of business in the economy  is to produce goods and services in order to satisfy consumers’ needs and wants.

Firm’s Production Decisions

Firms have certain production decisions they must make. This includes looking at inputs, the production process, and outputs. The video below talks more about firms and their certain decision-making processes.

Businesses and Economic Growth

Firms are organised in such a way as to establish clear goals that guide business behaviour. With the achievement of business goals, firms grow and expand, contributing to  economic growth . Common business goals include:

• Profit maximization;
• Maximizing growth;
• Increasing market share;
• Meeting shareholder expectations; and
• Satisficing behaviour.

The video below looks at what each of these goals mean. Check it out!

Efficiency and the Production Process

In order for businesses to be successful and sustainable, they must be  efficient  in their  production process . In the preliminary economic course, we define efficiency as the optimal allocation of resources such that output is maximised. In other words, if a firm is efficient, they use minimal inputs for maximum output. The video below looks at the different aspects of productivity in an economic landscape.

https://www.youtube.com/watch?v=mRxICdUYaCs

Economies of Scale

Economies of scale refer to the reductions in a firm’s average costs as output increases. In other words, they are the ‘savings of size’ if a firm is able to increase the size or scale of its production process in the long run .

Diseconomies of Scale

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The future of e-commerce: trends to watch in 2024.

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Denis Sinelnikov is the CEO of Media Components and Curis Digital, an award-winning, full-service digital marketing agency.

E-commerce is a dynamic industry that has transformed the way we shop and conduct business. With rapid advancements in technology and changing consumer preferences, your business must stay ahead of the curve to remain competitive.

Several emerging trends are set to reshape e-commerce in 2024. I’ll focus on the ones that are worth keeping an eye on this year and then share some tips for taking advantage of them.

Which Trends To Watch

Augmented reality shopping experiences.

AR enables customers to have immersive shopping experiences from the comfort of their homes. It allows them to visualize products in a real-world context, making informed decisions before making a purchase. Ikea has been using AR technology with its app for a few years now , proving that it isn’t merely a short-lived fad.

Ikea doesn’t have to be an outlier. We have the frameworks to apply AR technology to e-commerce on a broader scale than we currently do. TikTok and Instagram filters alone prove that we can do this easily, and relatively inexpensively. What we need is for companies that can most benefit from this tech—salons, clothing retailers and more furniture and home improvement retailers—to provide this interactive and engaging shopping experience.

Blockchain For Supply Chain Transparency

Blockchain technology is not new to the e-commerce industry, but its application is evolving. While we tend to think of blockchain in terms of cryptocurrency and NFTs, it has more potential uses. A blockchain is an append-only ledger, meaning that data can be added to the chain but not removed. The accountants and security professionals among you undoubtedly recognize the term and can immediately see the transparency a blockchain ledger can provide.

Logistics companies could greatly benefit from a blockchain ledger. It would provide transparency to their shipping clients and improve communication with their contracted owner/operators. The benefits could even extend to the customers of their clients, who could use the blockchain to provide real-time updates for restocking and shipments.

Customized Loyalty Programs

Personalization has been a hallmark of e-commerce; however, its scope has been historically limited to cross-selling through product recommendations. In 2024, I want to see us bring personalization further as retailers harness data analytics and AI. This could involve large retailers offering more personalized content to users and allowing users to customize loyalty programs to meet their specific shopping habits and needs. Ultimately, increased personalization can forge stronger connections between brands and their customers.

Eco-Friendly E-Commerce

The focus on sustainability and eco-friendliness has gained momentum in recent years. In 2024, this trend will likely intensify in the e-commerce industry. Customers expect e-commerce platforms to offer eco-friendly options, reduce packaging waste and embrace sustainable practices. I want to see retailers align with these values to improve their businesses and gain a competitive edge in the market.

Stronger Security And Privacy Measures

In 2024, I see consumers gravitating toward platforms that prioritize their personal data security, and governments are likely to introduce more stringent regulations. Retailers must invest in advanced security technologies and adopt transparent practices to build trust with their customers.

More Personalized Subscription Models

Subscription services have become increasingly popular in the e-commerce industry, but in 2024, I expect retailers will offer subscriptions tailored to individual preferences, not only in terms of product selection but also in the frequency and timing of deliveries. These highly customized subscription models can enhance customer loyalty and supply a steady revenue stream for businesses.

Taking Advantage Of The 2024 Trends

Knowing the trends isn’t enough. The companies that will rise to the top in 2024 are the ones that position themselves to implement them successfully. We are well past the era of “move fast and break things.” This needs to be the year that you build consumer trust as you take advantage of these trends.

The Considerations

Before you begin jumping on these trends, you need to consider which ones fit your brand, your industry and your customer needs. Ask yourself questions before you start looking at bringing these trends into your e-commerce strategy. Here are some key questions to get you started:

• Who is our consistent customer base, and what keeps them loyal?

• What new markets do we want to expand into this year?

• What security measures do we have in place for customer data, financial data and company data?

• What weaknesses do we have in our security?

• How are we collecting data, and are we continuing to receive valuable information on customers and leads?

• Which trends match our company vision, goals and culture?

• What is our process for converting leads to customers, and how do these trends fit into this process?

The Technology

Once you have an idea of what trends you want to implement and what roadblocks may be ahead of you, let’s look at what you will need to have in place to make these trends work for you.

• Have a solid data collection strategy and software. Several of the strategies I’ve discussed revolve around customer data. If you don’t have a reliable program that can run reports, monitor customer activity and interpret data, you will fall behind on these trends. Tools like Qualtrics that use AI can help companies not only capture information but use it to create the personalized experiences consumers want.

• Improve your data encryption and security. No matter how good your current security is, you need to improve it this year. Because so many of these trends rely on consumer habits and customer data, it’s more important than ever that you can safeguard that data. Not only will the increased security improve consumer trust in your brand, but it will also protect that valuable data from competitors.

• Invest in AI technology. Investing in AI tools for security, data collection and analysis and customer service interactions is a vital step to help you take advantage of each trend we have looked at here.

E-commerce in 2024 is characterized by several trends that I expect to reshape the industry. From the integration of augmented reality and blockchain for transparency to subscription models with increased personalization and a heightened focus on sustainability, e-commerce is set to offer customers innovative and socially responsible shopping experiences. By figuring out which trends best fit their brand and then investing in technology to enable them, businesses can navigate the e-commerce world of 2024 with confidence and enthusiasm.

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Harris zeroes in on high food and housing prices as inflation plays a big role in the campaign

President Joe Biden, right, listens as Democratic presidential nominee Vice President Kamala Harris speaks about the administration’s efforts to lower costs during an event at Prince George’s Community College in Largo, Md., Thursday, Aug. 15, 2024. (AP Photo/Susan Walsh)

President Joe Biden, left, and Democratic presidential nominee Vice President Kamala Harris arrive to speak about the administration’s efforts to lower costs during an event at Prince George’s Community College in Largo, Md., Thursday, Aug. 15, 2024. (AP Photo/Susan Walsh)

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WASHINGTON (AP) — Vice President Kamala Harris is zeroing in on high food and housing prices as her campaign previews an economic policy speech Friday in North Carolina, promising to push for a federal ban on price gouging on groceries and laying out plans to cut other costs as she looks to address one of voters’ top concerns.

Year-over-year inflation has reached its lowest level in more than three years, but food prices are 21% above where they were three years ago. Republican presidential nominee Donald Trump has pointed to inflation as a key failing of the Biden administration.

The cost of housing is another major driver of inflation, and Harris plans to use federal resources to promote the construction of 3 million new housing units if elected, pass legislation to slow rent increases, and provide a $25,000 in down-payment assistance for first time homebuyers.

Harris is drawing closer to President Joe Biden’s legislative and economic record, casting her initiatives as an extension of the work their administration has done over the last three and a half years.

The Harris housing plan includes establishing a tax credit for homebuilders who construct starter homes for first-time homebuyers, and doubling a $20 billion Biden administration “innovation fund” for housing construction. The down-payment assistance would significantly expand on a Biden proposal to provide federal support to first-time buyers.

Earlier Thursday, Biden and Harris celebrated their efforts to cut prescription drug prices at an event in Maryland as she made her first joint speaking appearance with Biden since she replaced him at the top of the Democratic ticket nearly four weeks ago.

They announced that drug price negotiations will knock hundreds of dollars — in some cases thousands — off the list prices of 10 of Medicare’s most popular and costliest drugs . The program was created through the 2022 health care- and climate-focused Inflation Reduction Act. Harris’ vote Senate vote, as vice president, helped Democrats overcome unanimous GOP opposition to make the bill law.

“The tiebreaking vote of Kamala,” Biden told the audience, “made that possible.”

He added that Harris is “gonna make one helluva president.”

Biden undertook his own efforts to contain rising food prices , including creating a “competition council” that tried to reduce costs by increasing competition within the meat industry, part of a broader effort to show his administration is trying to combat inflation .

Asked Thursday if he was concerned Harris would seek to distance herself from his economic record, Biden told reporters, “She’s not going to.”

Americans are more likely to trust Trump over Harris when it comes to handling the economy, but the difference is slight: 45% say Trump is better positioned to handle the economy, while 38% say that about Harris. About 1 in 10 trust neither Harris nor Trump to better handle the economy, according to the latest Associated Press-NORC Center for Public Affairs Research poll .

Trump, speaking Thursday at his golf club in Bedminster, New Jersey, argued Harris is proposing “communist price controls” that would lead to shortages, hunger and more inflation. He was flanked by popular grocery store items as he sought to highlight the rising cost of food.

Harris, in her housing plan, also wants to crack down on data-sharing and price-setting tools that landlords to set rents, and to remove a tax incentive that has led investment firms to purchase wide swaths of the country’s housing stock. She intends to contrast her plan with Trump, who was sued by the Justice Department for housing discrimination five decades ago.

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Consumer confidence surveys show that high prices remain a persistent source of frustration for shoppers, particularly among lower-income Americans, even as inflation has cooled. Overall prices are about 21% higher than before the pandemic. Average incomes have risen by slightly more than that, boosting spending even as Americans report a gloomy outlook on the economy.

Some meat prices have risen by even more than overall inflation: Beef prices have increased nearly 33% in the 4 1/2 years since the pandemic began, while chicken prices have jumped 31%. Pork is 21% more expensive, according to government data.

Supply disruptions during the pandemic were one reason prices rose. Many meat processing plants closed temporarily after COVID-19 outbreaks among their workers.

But the Biden administration has charged that corporate consolidation in the meat processing industry has played a larger role by enabling a small number of companies to raise their prices by more than their their costs.

Four large companies control 55% to 85% of the beef, chicken, and poultry markets, the White House said in late 2021, including Tyson Foods and JBS. Several of the biggest meat companies have collectively paid out hundreds of millions of dollars to settle lawsuits accusing them of fixing prices for chicken, beef and pork, but they didn’t admit any wrongdoing.

Some economists have argued that large food and consumer goods companies took advantage of pandemic-era disruptions. Economist Isabella Weber at the University of Massachusetts, Amherst, called it “seller’s inflation.” Others referred to it as “greedflation.”

Harris’ proposals on price gouging come as there is some evidence that “sellers’ inflation” is fading. Consumers have become more discriminating, and are passing on some higher-price purchases while seeking out cheaper alternatives.

Grocery prices, on average nationwide, have risen just 1.1% in the past 12 months, in line with pre-pandemic increases, the government said Wednesday.

The meat industry has been fending off allegations of price gouging and price fixing for years, and the major players dispute the notion that the extreme consolidation in the industry is to blame for high prices.

Kansas State University agricultural economist Glynn Tonsor said “the cost of raising the animal, the cost of converting it into meat, and the cost of getting that meat to people is higher than it was.”

“Yes, consumers are seeing higher prices, but it doesn’t necessarily mean somebody is gouging them,” Tonsor said.

The head of the Meat Institute trade group, President and CEO Julie Anna Potts, said Harris’ idea would not solve the problems of inflation driving up the price of everything.

“Consumers have been impacted by high prices due to inflation on everything from services to rent to automobiles, not just at the grocery store,” Potts said. “A federal ban on price gouging does not address the real causes of inflation.”

AP Business Writers Josh Funk in Omaha, Nebraska, and Chris Rugaber in Washington, and Associated Press writer Darlene Superville in Largo, Maryland, contributed to this report.