Understanding Companies: Types, Functions, and Objectives

MA 1

What Is a Company?

Companies are the foundation of our economic system. A company is an entity that integrates a set of items organized and operated to achieve a set of goals through the implementation of a particular economic activity.

All this must be addressed and organized by a figure known as the entrepreneur.

• Types of Companies: Depending on the size (small, medium, and large), scope (local, national, and multinational), or economic activity (primary, secondary, tertiary).

Sole Trader: A person who conducts a business activity on their own.

Functions and Objectives of a Company

Features:

• Creation of value: New gadgets, mobile devices, etc.
• Social function: Companies provide the necessary income to live through wages paid to employees or the benefits that their owners derive. Technology and innovation advance.

Objectives:

• Maximum benefit
• Growth: Reinvest profits to grow, increase market participation, and secure a strong future position.
• Customer satisfaction: Customers are essential, and we must treat them well so they are satisfied and trust us.
• Quality: Not only in products but in the whole process of production and distribution.
• Survival: In a period of crisis or a delicate situation, the company may only want to stay afloat and wait for conditions to normalize.
• Social objectives: Not only must a company worry about making money, but it should also respect the environment and ensure good living standards for workers.

Elements of a Company

Human Factors:

• Employees: Labor
• Employer: Coordinates and organizes all productive activity. Assumes the risk of corporate activity.

Material Elements:

• Natural resources: These are raw materials and other resources obtained directly from nature.
• Physical capital: Unlike natural resources, capital has been obtained by the action of individuals.
• Intangible elements: Those that have no physical representation (a brand, a patent).

Production Process: The process by which plants transform inputs (raw materials, labor) into outputs (goods and services) using appropriate technology and organizational work by the employer.

The Company as a System

Business System: A set of elements (subsystems) related to each other and their environment, designed to meet several objectives.

• Specific environment: Affects our company in a specific way and is closer.
• General environment: Affects all firms directly.

Specific Environment

Includes those elements external to the company that are closely related to it and therefore have a very direct influence.

Components:

• Suppliers: Businesses need inputs for their production process.
• Customers: Recipients of goods and services provided by the company.
• Competitors: Other companies in the same market.
• Financial institutions: The most common are banks that lend money to companies in exchange for interest.
• Government: Municipalities. To open a new facility, it is necessary to apply for a license.
• Labor market:
  • Labor costs: They are a major source of the company's costs.
  • Qualification: This is important in the technology sector and service companies (need for qualified personnel, therefore, they should be well-positioned).
• Community: Because it has a particular social structure, more or less concern for the environment, and individual lifestyle.