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Impact of the entire business’s activities on society

In our subject of Business Studies we must accept that it is the responsibility of businesses to act within the law. However, the question is the extent to which any private enterprise firm should go beyond the requirement of the law to act in the wider interests of society. The private enterprise system is based on the profit motive and it is naive to assume that entrepreneurs are motivated by social considerations. Back in the 18th century Adam Smith, one of the founding fathers of economics, argued that the baker does not supply us with bread or cakes out of social duty, but instead produces these goods because satisfying the customers with what they want is the route to profit. Therefore, profit is the motivating force that leads entrepreneurs to supply the goods and services we need. However, many would argue that businesses should do more than fulfil their minimum legal obligations and that they should regard their stakeholders as more than just a means to an end, ie a means of obtaining sales and profit. In some cases this means taking decisions that are socially responsible, but do not always maximise profit. Others, such as the 20th century economist Milton Friedman, would argue that it is the job of the government, not businesses to focus on solving society’s problems. The responsibility of a business is to satisfy customers, be efficient, treat employees humanely and, most of all, make profits. After all businesses exist to make their owners wealthy. To conclude, businesses do exist to make their owners wealthy, and should be judged against how owners’ returns are increased. This does not, however, mean that social responsibility and business ethics should be ignored. More importantly, behaving in a socially responsible and ethical manner does not necessarily mean taking action that sacrifices profits and is, in fact, in the long term interests of the business, helping to maintain a positive image and the positive trading relationships necessary to maintain and / or increase sales and, ultimately, maximise the return on investment to the owners ie shareholders.

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