Why do businesses exist?
Understanding the Essence and Evolution of Business in Society
In a world where the corporate skyline is constantly changing, understanding why businesses exist is pivotal. This exploration begins by delving into various prominent theories that explain the raison d’être of businesses.
Opinion #1: The Profit Maximisation Perspective
Traditionally, the primary theory behind the existence of businesses has been profit maximisation. This perspective posits that businesses exist to generate profits for their shareholders. This capitalistic view, deeply rooted in economic theories, suggests that by pursuing profits, businesses inadvertently cater to societal needs, foster innovation, and contribute to economic growth.
Opinion #2: The Stakeholder Theory
Contrasting the profit-centric view is the stakeholder theory, which argues that businesses exist not just for their shareholders but for all stakeholders. This includes employees, customers, suppliers, and the community at large. This theory, gaining momentum in recent times, posits that businesses have a social contract with society, and their purpose transcends mere profit generation. I might be biased — but yes.
Opinion #3: The Social Enterprise Model
Another emerging opinion is the social enterprise model, which blends profit-making with social goals. Here, businesses exist to address societal challenges such as environmental sustainability, social injustice, and community development while still maintaining financial viability.
The thing is, the role of businesses in society has evolved significantly. Today, there is a growing emphasis on businesses being responsible citizens. This shift is reflected in their growing focus on sustainable practices, ethical conduct, and community engagement alongside profit-making.
In this context, the importance of an organisation’s vision and mission statement is paramount. The vision statement reflects what the organisation aspires to be, its ultimate goal. The mission statement, on the other hand, outlines how the organisation plans to achieve this vision. Its unique way that it’s going to address the big dream. These statements are not mere formalities but are core to a business’s strategic planning and decision-making process.
However, in the race for market dominance and financial success, many organisations have lost sight of their original vision and mission. Factors such as short-term financial pressures, market competition, and sometimes even leadership changes can derail an organisation from its intended path.
To realign with their vision and mission, organisations need a conscious effort to integrate these statements into their everyday operations and culture. This requires leadership commitment, employee engagement, and a strategic approach to decision-making that always considers the long-term vision and mission.
Case Study: HammondCare — Mission in Action
A shining example of aligning with one’s mission is HammondCare, an independent Christian charity specialising in dementia care and aged care. They effectively demonstrate their mission of providing life-transforming care through innovative approaches, research, and advocating for the elderly. HammondCare’s success lies in its unwavering commitment to its mission, which is ingrained in every aspect of its operation.
Measuring an organisation’s alignment with its vision and mission goes beyond financial metrics. It involves assessing the impact on stakeholders, societal contributions, and the fulfilment of social and environmental responsibilities. Businesses should care about these measures because they ensure long-term sustainability and societal well-being, which, in turn, lead to enduring business success.
While businesses exist for varied reasons, the alignment with their vision and mission is crucial for long-term success and societal contribution. As we move forward, it becomes increasingly important for businesses to not only understand why they exist but also to act on this understanding in a way that benefits both themselves and society at large.
