The Final Cause of Business

PHILOSOPHY OF BUSINESS
MANAGEMENT (DBA 401)
THE CORPORATE OBJECTIVE

(The Final Cause of
Business)
Prepared by:
LEO H. CALINGASAN
The Final Cause of Business

For the acorn is to become an oak tree,

what is the final cause of business?

PROFIT
SERVICE

THE SIMPLE END CONCEPT

Everything that exist can be reduced to the concept of Act
A Person - Act of Doing
A Thing - Act of Existing
An Event - Act of Happening
An Act - Act of Being

ACT IN RELATION TO THE CONCEPT OF POTENCY

Natural Act Human Act
- A process or a movement such as; - Act of a Person or Agent

 Action
 Motion
 Mutation
- What WAS - Human (a rational being) as doer of

- What IS the Act.
- What WILL BE
Every Act tends towards an END.

END = the GOAL It is what the Agent intends to achieve in

pursuing the act, and that is what he is
headed for unless something or somebody
changes the course of the act along the
way.

VIEWS ON BUSINESS OBJECTIVE

1. The Corporation’s Sole Purpose is PROFIT.
Milton Friedman John Argenti
- To make profit is the most socially responsible role for - A company has one and only one permanent
business. unalterable raison d'être which is to make profit.
 Stockholders are the owners of the corporation hence Other than profit, the company has no reason for
corporate profits belong to the stockholders. Corporate existing.
managers are mere agents.
 Stockholders are entitled to their profit by virtue of a
- The objective of the company should satisfy the
contract between them and the other stakeholders. following conditions;
 If a corporate executive spends money to contribute to the  That which the company would never abandon under
social objective (say of improving the environment), he any circumstances;
would be spending the stockholders’ money and reduce  That which the company must do in order to survive; and
their return. In effect, he will also be spending the  That which if the company fails to attain, the company
customers’ money to raising prices. would fall as a company

THE OBJECTIVES OF BUSINESS

The Three (3) Dimensions of Business
As a Fundamental Social Process
As an Industry Function
As a Corporate Activity
• Role as a Company (Institution)

• Role as a Businessman (Person/Individual)


As a Fundamental Social Process

•Business is a natural consequence of the need for complementation
among men in society.
•Its natural objective is to provide a process to fill in the gap between
the needs and what are needed, towards the satisfaction of human
needs for the integration of man’s human existence or the total
development of the total man.
•“Quality of Life” and “Quality of Society”
•Business as “part of the society”


As an Industry Function
• It is an immediate objective of a Business to provide a
venue for business industries to operate. Business as
an industry is natural extension of business as a social
process. It shares the common objective of providing
quality of life and society.


As a Corporate Activity
• In its Role as a Company
• To provide the company Core Service as its immediate
objective.
• In its Role as a Businessman
• To provide his personal service as his immediate objective
by utilizing the company’s core service to create or
generate customer satisfaction which is his intermediate
end, in order to earn profit which is his ultimate end.


- On the Corporate Level of business,
 The company’s business activity produces or provides the Service.
 The businessman utilizes the business activity
as the means (immediate end) to earn his Profit.
- However, in their operations, the businessman and his business

activities are closely interlinked and one cannot operate without
the other. What the businessman does is a business activity and
anything performed by the business activity is attributed to and
caused by the businessman. This is referred to as the Corporate
Acitivity.


- Therefore, in the hierarchy of ends involved in the corporate
activity, two ends stands out;
 Immediate End - Service

 Ultimate End - Profit
- There is mutuality of cause and effect relationship between the two.
 Service is an operating ultimate end which addresses
the mediate ends of human/customer needs satisfaction and the
quality of life and of society.
 Profit is an ultimate end, although for the businessman it is his immediate
objective, it is the motivating ultimate end.

THE PROFIT ORIENTATION
Concepts of Profit
Profit as a CAUSE Profit as an EFFECT
Profit is a motivating ultimate end of Profit is what the businessman derives from
objective of the businessman. It causes the business and serves as his reward for
the businessman to go into business. good performance. It is what the
It serves as a standard against which the businessman expects to gain from his
operational efforts or performance of the business act or undertaking, what he looks
businessman is measured. forward to, that is, the subsequent bigger
rewards for subsequent better
It is the measure of how well the performance.
businessman can undertake the other
objectives of his business.

The Profit Motive

- Refers to the corporate objective of engaging in economic activities in order to earn
profit, an assumption based on the general assertion that in a free
enterprise economy, all business undertakings are profit oriented. Then, profit
orientation was often identified with greed and opportunism.
- Albeit the indignities slapped profit motive, there are factors in the judgment of profit
– intentions and processes, that is, how the profit is earned and how it is applied. In
other words, the issue on profit orientation looks at how profit is treated.

The Profit Motive

The Two Types of Profit Orientation
-Profit Maximization is the traditional standard in

extreme capitalistic systems which is also called the profit ethic.
 “Whatever the businessman does for himself is something good that

is done for society.”

The Profit Motive

The Two Types of Profit Orientation
-Profit Sublimation
 To apply profit not only for wealth accumulation but for the business
objective with a social orientation.
 It means profitability with a social commitment.
 The businessman, in order to strike a balance between (1) The need to maximize
Profit and (2) The need to satisfy the interest groups, had to settle for a profit level
less than the maximum but sufficient to satisfy the company’s other
objectives. This is called “Profit Satisficers”

Profit Perspectives
The Two Views on Profit Perspective
-Profit Out of Greed

 As an excessive gain, profit is oppressive. It is associated with the ugly concept of
profiteering.
 It is not money or profit which is evil, but how it is acquired and how it is used.
-Profit Out of Need

 The reasonable excess of income over cost, the reasonable difference between
what it costs to produce and sell the product and the revenue from its sale.
 The residual which is left after all production and
selling costs have been deducted from the revenue derived, and after
considering all relevant factors.

THE SERVICE CONCEPT
Service as Orientation of Business

- As a Commodity
- As an Objective
 Service on the Social Process Level
 Service on the Industry Level
 Service on the Corporate Level

THE SERVICE CONCEPT
 Service on the Social Process Level

o The objective of the business on its basic concept level, that is,
business as a fundamental social process. It is a natural process
inherent in the very nature of society designed by nature to
bridge the gap between what men produce for mutual
exchange and the mutual needs.

THE SERVICE CONCEPT
 Service on the Industry Level

o As the venue for the production and distribution of goods
and services, business on the industrial level provides the
functional arena in which the social process of business is given
expression.
o The production function and the distribution function are natural
component of the exchange process.

THE SERVICE CONCEPT

 Service on the Corporate Level
o Core Service – service as an essential business function consists in
those services which are essential to the business concept itself,
without which business on the corporate level is impossible.
i. Company Core Service – corporate or company core service is the
purpose for which a company was established.
ii. Product Core Service – what a product is intended for, or what

a product is expected to do or provide.
iii. Personal Core Service – refers to the functional service of a

person, that is, the service he renders according to his
function in the business organization

THE SERVICE CONCEPT

 Social Responsibility Service – “the social responsibility of business is to
increase its profits” is a direct social responsibility to the stockholders. There are
other direct and indirect social responsibilities which are contained in law and
ethical customs.
1. Social Responsibility is inherent in the imperatives of product quality which both the
law and ethical customs demand. There are provision in the constitution that pertains
to consumer protection in terms of adequate product quality that will safeguard the
safety of the consumers.
2. Social Responsibility is the underlying philosophy in environmental conservation and

protection, which posits a direct and mutual relationship between business business
and its environment: A favorable business attitude is conducive to environmental
conservation; and a favorable environment is conducive to business success.

PHILOSOPHY OF BUSINESS (MBA 102)
THE SERVICE CONCEPT

 Social Responsibility Service – “the social responsibility of business is to
increase its profits” is a direct social responsibility to the stockholders. There are
other direct and indirect social responsibilities which are contained in law and
ethical customs.
3. Social Responsibility serves in promoting a good image for the company that is
committed to it.

THE PROFITABLE SERVICE

The Corporate Objective
 Business Provides Service to Generate Profit.

 Business Makes Profit by Providing Service.
The relationship between Profit and Service is one of alternating cause

and effect in a circular motion, or in a spiral progression.
This, we may also call, The Service-Profit Interlink

Illustration: The Service-Profit Interlink
generates
SERVICE PROFIT
motivates


The Service-Profit Interlink
• Service and profit are cause and effect to each other – service is an
effect of profit, is an effect of service, is an effect of profit.
• As business continues in its operations, and as profit increases, service
improves, and profit increases in turn to cause the service to improve…

PROFIT
SERVICE

PROFITABLE SERVICE


Profitable Service: The Ultimate
•Profit is important to a business, that cannot be

denied. It is necessary for and
indispensable nourishment of a business
enabling it to survive, operate and grow.
•As a motivation for the company to provide its
service, it must earn profit, in the same way
that while the principal objective of a product
is the provision of its service.


The Relationship of Precedence
• In terms of Operation, SERVICE is the objective.

• In terms of Motivation, PROFIT is the objective.
• Service is the Objective of the COMPANY.

• Profit is the Objective of the BUSINESSMAN.

END OF REPORT
THANK YOU FOR LISTENING.

The Final Cause of Business

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PHILOSOPHY OF BUSINESS

MANAGEMENT (DBA 401)

THE CORPORATE OBJECTIVE