Unit 1 Introduction to Business
“A friendship founded on business is better than a business founded on friendship.”
—John D. Rockefeller（ 1839–1937）,American oil industry business magnate and philanthropist
Text A Motives and Functions of a Business
By Jeff Madura
1. What does a “business” serve for the society? What are the roles of a business?
2. Are there any benefits you can get from a business?
3. How can you understand a successful business? Please give some examples.
A business is created to provide products or services for customers. Businesses can be beneficial to society in various ways. The first step in understanding how businesses operate is to recognize their most important functions and the environment in which they operate.
The Goal of a Business
What is the goal of a business? Businesses are established to serve the needs of consumers by owners who seek to make profits. The people who create a business may see an opportunity to provide a product or service that is not already being offered by other firms. Alternatively, they may believe that they can produce a product or service that they can sell for a lower price than existing firms. By providing a product that is desired by customers, they may be able to make profits for their business.
Where the Profits Come From
Businesses such as Dell, Gap, Ford Motor Company, and Motorola were created to provide products to customers. Businesses such as Southwest Airlines and Hilton Hotels were created to provide services to customers. Other service firms include dentists, hairstylists, travel agencies, insurance companies, tax services, and law firms. Some firms, such as AT&T, Microsoft, and IBM, provide both products and services to customers. Managing a service business can be just as challenging and rewarding as managing a business that produces products.
A business receives revenue when it sells its products or services. It incurs expenses from paying its employees and when it purchases machinery or facilities. The difference between the revenue and the expenses is the profits (or earnings) generated by the business. The profits go to the owners of the business. Thus, owners who create a business have a strong incentive to ensure that it is successful, as they are directly rewarded for their efforts.
Since you are the only owner of this business, all the profits go to you, although you may be taxed on the profits that you earn. You can increase your profits next year by either increasing your revenue or reducing your expenses.