Disambiguation of Business

The term "business" is ambiguous, so it seems necessary to consider some of the definitions of the term, if only to dismiss them from the context of the present study. "Business" is sometimes applied to connote an entire industry - all businesses that sell clothing are said to be in the "clothing business." "Business" is sometimes applied to connote the commercial sector - all businesses in a given country or economy, or even the world.

The problem with such uses of the term is that it is most often used when an individual is unable or unwilling to identify the specific firms involved. That is to say, the behavior of a few specific firms (even an imagined behavior that is not evidenced in action at all) are used to imply those of all firms of a similar nature.

While ethics deals in generalization, with the intention of application in specific situations, it applies to the decision making process - which itself may bear further consideration - which is done on the level of an individual firm. Even in situations where a cartel or industry group arrives at an agreement for a given course of action, it is the decision of each firm to abide by this agreement, and the decision is revisited each time the firm is faced with the situation in which such a decision must be made.

Arguably, considering ethics even on the level of a single firm may be too ambiguous and abstract. The "business" does not make a decision, nor does it undertake action, as an indivisible unit. An individual within the business makes the decision, others support the decision. This merits further consideration.

What is Not Business?

It seems worthwhile to distinguish "business" from other forms of organization - while there may be some similarities in their nature, their operations, and the ethical environment surrounding them, there are distinct differences that are essential to the consideration of an organization as a business as opposed to an organization of another kind. Specifically, business is to be differentiated from government and nonprofit organizations.

The difference between government (1) and business is in the absence of force. It is accepted, or at least conceded, that government accomplishes its goals by the application of force, in the sense of physical violence. Certain actions are prohibited or required, and the consequence of failing to comply is to do violence upon those who refuse to comply - or, as a mitigating step, to threaten violence before actual recourse to violent action. This is common to goals pertaining to actions as well as goals pertaining to material goods.

It's also worth noting that the application of physical force is characteristic of government, but the absence of physical force is a quality, but not a distinguishing characteristic, of business. Nonprofit organizations also seek to accomplish their goals without recourse to violence.

The difference between business and nonprofit organizations would seem to be the generation of profit (a non-profit being, by its very name, and organization that does not generate profit). However, this is not entirely accurate. Many nonprofits sell merchandise, and even those who do not engage in fundraising sales generate earnings from donations that exceed the value of the benefits they provide, by more than enough to cover overhead expenses. Therefore it can't be accurately said that nonprofit organizations do not make a profit at all.

The chief difference is in the way in which the profits of a business or a nonprofit are dispersed. The top-line or "gross" profit of a business or nonprofit organization may be reinvested in the organization or held in reserve. But the bottom-line or "net" profit of a business is redistributed to its owners, whereas a nonprofit organization seeks to use all net profit to accomplish the goals of the organization. While it may happen that in a given fiscal year or quarter, a nonprofit organization has generated a net profit, this amount is consumed by the organization in the long run, rather than being dispersed to owners.

Admittedly, there are instances in which the profit of a nonprofit organization is dispersed to the owners of the nonprofit in the form of benefits - a youth group holds a fundraising event to generate cash that pays for a benefit to the members of the group (such as a vacation trip for members of the organization) - so it may be argued that this is not a legitimate nonprofit, or a legitimate use of funds for the purpose of the nonprofit, but this seems like a red herring.

Insofar as differentiating a business from a nonprofit is concerned, the distinguishing characteristic of business seems to be the generation of a profit that will be returned to the owners of the business as a monetary payment.

I expect that the details will bear further consideration, and that there may be a number of "exceptional" cases, but my sense is that the essence of this distinction is correct.

NOTES

1. I realize that any mention of "government" tends to draw fire. My intention is not to open that can of worms, but merely differentiate government from business. Comments along those lines - particularly in suggesting a more accurate way to distinguish the two - will be accepted. Comments on politics in general will not be posted here. There are more appropriate venues for political discussions.

What is Business?

Here is a working definition of "business" as a core concept for this blog:

A business is an organization that sells a product to generate a profit for its owners.

It's likely this definition will be refined and reworked as I progress, but I feel this is a good starting point.

To expound upon this definition:

I define business as an organization because it is primarily a group of people who are assembled into an ordered structure. I cannot presently conceive of a business in which people are not involved, and while a business might consist of only one person, that tends to be unusual.

While business generally involves a collection of capital resources, my sense is that this is not a distinguishing characteristic. These items are incidental, necessary to support the operations of a business, but are not strictly essential.

The activity of selling is also a distinguishing feature of a business. Perhaps it is unnecessary to state, as it would be absurd to have an business that does not "sell" anything - but my present purpose is to use this term to encompass businesses that create a product from raw materials (manufacturing) as well as those who purchase an existing product and re-sells it to another party. The point being that how the product is created or obtained is incidental, and the key activity is the selling of the product.

The term product is also an abstraction, meant to characterize both material goods as well as services. I favor this term because it carries with it the notion that the item or service must be produced - and "produce" can denote manufacture or other activities required to render a benefit.

I foresee that discussion in this blog will largely focus on material goods, as they are more concrete that services and easier to conceptualize. However, much of what can be said of goods is also true of services, though there may be instances where it is necessary to consider the essential differences between them.

The notion of profit is also a distinguishing characteristic of business. There are other organizations (charities and government agencies) that may provide a product with the goal of satisfying need, with no generation of profit. A charity or government may also engage in selling, receiving money in exchange for the product, though in these instances the intention is merely to cover costs or fund other operations, not to generate wealth by means of profit.