Business Fundamentals and Social Responsibility Models

Fundamental Business Concepts

The primary purpose of a business: A business seeks to make a profit by selling goods or services to others.

For-Profit vs. Non-Profit Organizations

A for-profit business is an organization formed to make money, or profits, by selling goods or services.

• A non-profit organization's purpose is not to distribute its surplus funds, or profits, to owners but rather to further its goals.

Key Business Terminology

Revenue: The total amount of money that the selling of goods or services produces for a business during a defined period of time.

Goods: Tangible products (items you can touch).

Services: Intangible products (items you cannot touch).

Profit: The amount of money a business makes after paying for its salaries and all other costs—that is, revenue minus expenses.

E-commerce: Also known as electronic commerce, this refers to the buying and selling of products or services over computer networks.

Carroll’s Global Social Responsibility Pyramid

University of Georgia business-ethics scholar Archie B. Carroll provides a framework for thinking about such practical and moral matters. His Global Corporate Social Responsibility Pyramid suggests the obligations of an organization in the global economy are to make a profit, to obey the law, to be ethical, and to be a good global corporate citizen.

Some people hold that a company’s first and only duty is to make a profit. However, Carroll suggests an organization’s global responsibilities should have the following priorities, with profit being the most fundamental (the base of the pyramid) and corporate citizenship at the top:

• Make a profit consistent with expectations for international business. (This is called economic responsibility.)
• Obey the law of host countries as well as international law. (This is legal responsibility.)
• Be ethical in its practices, taking host-country and global standards into consideration. (This is ethical responsibility.)
• Be a good global corporate citizen, as defined by the host country’s expectations. (This is philanthropic responsibility.)

These priorities—profit, law, ethics, and citizenship—could apply to the corporation’s and its employees’ business behavior in its home country as well.