Business is extremely important in the modern, open-market economy. The role of business in the economy can hardly be underestimated, because business contributes to the economic growth, whereas business activities are an essential condition of a stable economic development. The contemporary economy needs the progress of business activities, because business contributes to the progress of economy. In fact, it is business that creates new jobs, increases revenues of the state and federal budgets because the progress of business increases tax collection and business contributes to the growing wealth of individuals as well as nations.
At this point, it is important to distinguish for-profit and non-profit organizations. On comparing and contrasting the roles of for-profit and non-profit organizations in the economy, it is important to place emphasis on the fact that non-profit organizations focus on their goals, which are not related to gaining profits (Ngian, 2002). The main point of functioning of non-profit organizations is reaching their strategic goals. As a rule, non-profit organizations are public organizations that have publicly significant goals, such as the environment protection, rights protection, and others. In contrast, the main point of for-profit organizations is business development and gaining maximum profit. For-profit organizations attempt to increase their profits, because owners or shareholders of for-profit organizations benefit from high profits of their organizations and they naturally stimulate the further growth of profits of their for-profit organizations.
Business development, being extremely important for the economic growth, still depends on the current fiscal and monetary policy, which also have a considerable impact on the economy. In fact, virtually any business implies paying taxes. Fiscal and monetary policies set taxes and the amount of money in the economy. In such a situation, business may suffer from high taxes, for instance, that slow down business development and discourage business activities. In contrast, low taxes encourage business activities and, therefore, economic growth. The change of the money mass in the national economy affects the inflation rate. In the time of the economic recession, the rise of inflation may be essential to revive business activities and to create conditions for the economic recovery.
In actuality, many companies develop the strategy for accessing global markets to expand their markets and to introduce their products internationally. In this regard, it is possible to refer to the example of Toyota’s cars, which are sold internationally. Moreover, the company uses the localization of the production to make its cars available to customers worldwide and to increase the competitive position of its products (Latham and Braun 2008). For instance, Toyota’s vehicles are manufactured not only in Japan but also in the USA and the EU as well as other parts of the world that make them available to customers internationally.
At the same time, Toyota conducts the policy of social responsibility in relation to its employees, customers and local communities. The mission and vision of the company imply the social responsibility of the company, for Toyota focuses on the needs of local communities, where the company operates along with customers’ needs and expectations.
In actuality, it is possible to distinguish different forms of business depending on the form of ownership. In this regard, it is possible to distinguish the major forms of business ownership such as corporations, partnerships, sole proprietorship and others. Sole proprietorship is a form of business that has one owner only, who possesses the business and gains all the profits from the business, which is the major advantage of this form of business (Sloman, 2007). The major drawback of sole proprietorship is the lack of support from business partners or shareholders. Partnership implies the involvement of two or more partners, who possess their own share in business and gain profits respectively to their share. The advantage of this form of business is the support from the part of partners and their participation in expenses and profits of the business. The major drawback of the business is the necessity to share ownership and profits with a partner or partners. As for corporations, they are owned by shareholders, who have their shares, and the board that manages the corporations. The advantage of this form of business is the possibility to raise substantial funds through going public and sharing profits between shareholders proportionally to the amount of shares they possess. The major drawback of corporations is the complex structure and the separation between owners and managers of business.
Nevertheless, small business and entrepreneurship also play an important part in economy. Entrepreneurship is the act of being an entrepreneur, a person, who introduces innovations and conducts business and finance to transform innovations in economic goods. The entrepreneurship is traditional for the US economy, where individual efforts were traditionally viewed as a way to personal success and wealth. The great importance in the U.S. economy of small businesses is revealed through the large number of people having their small business, who comprise the middle class, which is the backbone of the US economy.
Finally, financial management and accounting are very important because they allow to maintaining positive performance of organizations. In addition, they are essential for effective human resource management that needs funds to pay employees and to develop marketing process, including the creation of products, their promotion, pricing, and distribution to customers.
Latham, S.F. and M.R. Braun. (2008). “The Performance Implications of Financial Slack during Economic Recession and Recovery: Observations from the Software Industry.” Journal of Managerial Issues. 20:1, p.30-42.
Ngian, K. J. (2002). Coping with the Asian Financial Crisis: The Singapore Experience. Institute of Southeast Asian Studies.
Sloman, J. (2007). Essentials of Economics. 4th ed. FT Prentice Hall.