The functions and roles of businesses
Yvonne Harvey, Contributor

The specific objectives for this week's lesson indicate that students should be able to:

1. outline the functions of a business
2. describe the role of a business within a community

However, it is fitting for us to begin by defining the term, business. A business or business unit consists of a person or group of persons engaged in trade or some other commercial activity, with a view to making a profit. Not all organisations can be regarded as businesses. A non-profit organisation is not a business. For example, a church bazaar may be engaged in selling goods, but it is not a business, because the money made will be given to the church or a charity. This was their aim in selling the goods; they did not sell with the aim of making a profit. A private school, run for a profit by its owners, is a business, but a government school, provided as a service to the community is not.

The functions of a business

The functions that a business carries out, depends on its aims, goals and objectives. However, for most businesses there are three main functions:

1. The production of goods and services to satisfy wants

Goods are made through the use of raw materials and other productive resources. They are tangible items.
Services are intangible and there are two types, direct or personal and indirect or impersonal.

2. The creation of jobs

Labour is one of the productive resources used to make goods and provide services, therefore, businesses employ labour and in doing so, they create jobs for those seeking employment. They create jobs for skilled, semi-skilled and unskilled labour, thereby reducing unemployment.

3. The creation of profit

Businesses aim to make profit. In the private sector, the aim is to maximise profits and to minimise the use of resources in doing so. In order to realise a profit, a business must keep its production costs as low as possible and sell its product for more than it costs to produce. Being in business does not, of itself, guarantee that a profit will be made. Among other things, to be successful, a business must produce goods and services that people want, at a price they are willing to pay.

Other functions of the business include:

1. Businesses aid in the development of the country in which it is located.

2. A business helps to upgrade the skills of the workforce and contributes to the rise in the standard of living.

3. To promote or improve local industry using local raw materials.

Now let us consider the roles or responsibilities of a business.

The roles of businesses

The roles of a business fall under four main headings:

1. Economic roles

These include:

• To sell goods and services of a high quality at prices so the majority wishing to purchase them can do so
• To give export orders priority and to try to increase these order
• To make a profit
• To improve the good or service
• To contribute towards the improvement of the community
• To create employment

2. Financial roles

These include:

• To make a profit
• To be in a good financial standing with its bankers
• To plough back profit into the business for expansion
• To pay shareholders
• To invest in other productive areas

3. Political roles

These include:

• To lobby and vote for parties whose policies coincide with their own wishes
• To donate to the funds of political parties they favour
• To influence government into establishing policies which will benefit their businesses as well as their country

4. Social roles

These include:

• To develop a good community spirit by donating to charities and sponsoring educational, health and sporting events
• To promote the well-being of employees
• To take part in community clean-up campaigns
• To maintain homes and community centres

This now completes section one of the syllabus. Next week we will begin section two:

Internal organisational environment

The first part of this section considers

functional areas of a business and functions and responsibilities of management

Before I go, here is your assignment:

(a) What do you understand by the term, 'business'? (2 marks)

(b) Explain why not all organisations are regarded as businesses. (4 marks)

(c) List TWO of the MAIN functions of a business. (2 marks)

(d) Give THREE roles of a business under each of the following headings:

(1) Economic roles

(2) Financial roles

(3) Political roles

(4) Social roles. (12 marks)

Total marks: 20

See you next week.

Yvonne Harvey teaches at Glenmuir High School.