Essay on role of profit in business

Putting Purpose Back Into Capitalism
  1. Top 8 Roles of Profit in Business
  2. How useful was this post?
  3. Is Profitability or Growth More Important for a Business?

Even in small business, marketing is automated, selling is automated, transactions are automated and hundreds of others things are automated by the use of Business Intelligence applications, artificial intelligence and clouding computing. When the cost of conducting business is low, then the business can spend or will spend more money on marketing and distribution process. That will increase demand. Even after some time if demand goes negative due to negative demand curve or inflation or government policy change or unbalanced situation between demand and supply, they can modify, reconstruct, and remarket the products and services by using computer and Internet.

They collected this data by using business analytics tracking codes such as the Google Analytics code on the website in the process of marketing and selling.

They have feedback and reviews. So, they analyze that data to take a future decision. As you know decision-based on data is like risk management. In which data can help business consultant or entrepreneurs to take the calculated risk and grow in the market silently. In every bank, you see employees are working on Computers, managing and handling daily cash withdrawal, transfers, cash deposits, and checks, etc.

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They are writing those details in the diary and also on computer applications. Most of the computer application needs internet accesses, some application is banks own intranet-based applications and others are offline such as Microsoft Office. Even now Microsoft Office can be used online or cloud-based application.

Even understanding computer in banking works can explore various things about the importance of computer in business. But similarly, in businesses computer are used in every step. You find a computer in front office or reception, you can see employees working on the computer, you can see managers are working on Laptops, you can see they are using transferring money, and communicating about net emails, mobile banking, and the payment gateway, etc. Because in every part of the business, we all have to use the computer directly and indirectly. And sometimes we use it as a customer and some time as a service provider.

Top 8 Roles of Profit in Business

They have or 10 machines. Various online and offline IT-related business is earning money by using computer and technologies. Someone selling computer and earning money, other one teaching computer earning money, someone selling computer application and earning money, someone is earning money by repairing the computer. Now I hope you got the main points about the Importance of computer. So, I am concluding that computer help to earn more profit by reducing the cost of conducting business. It is helpful in the training and development of employees.

Communication in business by using email, video conferencing is very helpful and effective. Business and career degrees are online due to computers. Anyone can start a business from home by using a computer. Easy for the government to create policies for well-managed business. New innovative business ideas are in the market due to computer and internet.

Instead of saying Computer is an electronic machine, you can say a Computer is a business machine, which is used to start the business, used to manage the business, used to collect and analyze customer data, used to create and produce products and services quickly and accurately. How useful was this post? Click on a star to rate it! As you found this post useful Please share on social media!

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  • I work and provide my services as a Freelancer at WPjuggler. This belief leads to a corollary, another myth, believed by all—that is, that the goal of any business is profit maximization. Another words, whatever your business, your goal should be to make as much profit as possible. This might even seem worthy to many. Not so fast, Gordon. As Drucker so often said, whatever everyone knows is usually wrong, Hollywood films not excepted. Drucker told us first that profit is not the purpose of business and that the concept of profit maximization is not only meaningless, but dangerous.

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    The Myth of Profit Maximization and Why it is a Dangerous Fallacy Drucker explained that the source of the confusion was that many economists consider profit maximization a basic theorem. In its simplicity it is simply another way of saying that a business buys low and sells high. However, as Drucker pointed out this simple prescription by itself, hardly explains the success or failure of any business.

    If we look at the difficulties as many businesses struggle today, and the many failures that have already occurred, it is clear that buying low and selling high explains very little about why these businesses fail, just as buying low and selling high explains very little about those that are still successful, and even those that are accelerating their success despite the current economic challenges of the day.

    Functions of Profit

    Profit maximization implies that you might save any business from failure by simply raising prices and creating a greater differential between revenue and cost, that is, maintain or increase the profit margin. In fact, as costs to business rise, be they gasoline, material, or anything else, this is the immediate and simplistic response of many businesses.

    Yet they still fail, or succeed, independent of the act of raising prices, and passing any increases on to the ultimate consumer may not be the determining factor. For example, I was told that a local restaurant recently failed due to the rising cost of produce. Yet other restaurants in the same general area serving the same target market have not failed.

    The Role of Business in the Economy

    In fact, some are thriving and even increasing sales. Drucker also called the "profit motive" into question. He claimed that there has never been any evidence for such a motive, and that the theory was invented by classical economists to explain a reality which their theory of economic equilibrium could not explain. In support of his contention, there is considerable evidence against the profit motive.

    So called "dollar a year men" in the higher levels of government are examples which run contrary to the profit motive. A good deal of volunteerism in which individuals, some quite highly paid in other roles others not, work long, hard, hours for the common good in the Boy Scouts and Girls Scouts, religious and community activities and services, and more. Moreover, few can doubt that many talented individuals knowingly choose occupations which are less financially rewarding due to their personal interest or calling guidance counselor to the Peace Corps. From this we can conclude that while profit can be motivating, it need not be the primary motivator and the notion of maximizing profit as the goal for a business or the life purpose of an individual is at best overstated.

    Drucker pointed out that the danger is that we might think from all this that profitability in itself must be a myth, so why worry about it? It might even lead us to the mistaken belief that seeking profit in business or privately is not only a waste of time, but immoral.

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    In fact, every time there is moral failure on the part of an Enron, or a business thief such as Bernard Madoff is exposed, we hear new cries to develop laws to protect us not just from illegal acts and lapses of morality, but from those who seek "excessive profits," and to punish and discourage perpetrators wherever possible. Some even question the basic principles of capitalism and whether profits are really necessary at all. As a result, the profit motive is worse than irrelevant. Drucker said considering profitability is a myth is the great danger because profitability, far from being a myth, immoral, or unneeded it is crucial for the success of both individual businesses and for society.

    In fact, he considered profit as opposed to profit maximization even more important for society than for an individual business. Why Profit, but not Profit Maximization is Necessary Profit and profitability are absolute requirements. However, this does not mean that profit is the basic purpose of a business.

    Profitability really is an essential ingredient by itself which might be better spoken of in terms of an optimal, rather than a maximum size.

    Is Profitability or Growth More Important for a Business?

    In support of this thesis, Drucker noted that the primary test of any business is not the maximization of profit, but the achievement of sufficient profit to allow for the risks of the financial activity of the business, and thus to avoid catastrophic loss leading to failure. And we might add, achieve the success which would benefit both the business and society. So profit is necessary, but the purpose of business. Why is profit so necessary? Because profit is like oxygen for the human body. Without oxygen, the body cannot survive. Oxygen insures that the body lives, survives, and grows.

    Without it, the body dies. The same is true of profit for a "business" whether incorporated as for profit or non-profit under the law. Oxygen supplies the body with needed energy.