Business Integration & Management: Economic System & Functions

Business Integration in the Economic System

Companies are fundamental production units that create value, driving the flows of energy, materials, and money within the economic system.

They detect consumer needs and meet them through the development of goods or services. This interaction generates cash flow: a cost for consumers (purchase price) and sales revenue for the company.

All these activities occur within a fundamental element of the economic system: the market for goods and services.

To produce goods and services, companies utilize several fundamental operational factors, generally including:

• Materials: Provide the basis for production processes.
• Equipment: Used for manufacturing and/or assembly.
• Energy: Powers machinery and operations.
• Labor: Encompasses workers, employees, and human effort.
• Information: Includes knowledge, data, and experience.
• Capital: Financial resources for investment and operations.

When production units generate more than what is consumed, wealth is created for the economy.

The Company as an Open Social System: Functions & Structure

A company, as a complex and open system, implies that its various interconnected and organized subsystems and components form a unified whole. These components work together to perform a single set of functions aimed at achieving the company's overall objectives. This continuous interaction involves exchanging matter, energy, and information with its external environment.

From a functional perspective, a company's operations are categorized into various homogeneous subsystems:

• Subsystems for Core Functions:

  • Operations: Production and service delivery.
  • Investment & Financing: Capital allocation and funding.
  • Commercial: Marketing, sales, and distribution.

• Direction and Management Subsystem:

  Oversees strategic, tactical, and operational aspects of the core functions.

• Human Resources Subsystem:

  Manages personnel, talent acquisition, and development.

• Information Subsystem:

  Acts as the company's nervous system, connecting different areas internally and with the external environment.

Steps in Business Governance and Management

1. Clearly State Long-Term Objectives:

   For each objective, identify potential restrictions that could influence its achievement.

2. Define Required Changes:

   Outline the necessary changes for each long-term goal.

3. Determine Gaps:

   Identify the difference between desired developments and expected results.

4. Minimize the Gap:

   • Diagnose the current situation.
   • Search for strategic solutions.
   • Analyze and evaluate potential strategies.
   • Implement chosen short- and medium-term solutions.

5. Adapt Structures:

   Plan and program for the new strategy, adapting control and information systems accordingly.

6. Communicate Objectives:

   Clearly communicate medium- and short-term objectives to staff.

7. Control and Correct:

   Measure differences between forecasts and actual results, then implement appropriate corrective actions.