Menu ↓

What is the purpose of business?

· April 14, 2014

The historically most accepted view is that the purpose of business is to make maximum profits for its owners. I believe it should be to make the world a better place.

The purpose of business is to make the world a better place. Miroslav Chodak

In my last post, I defined the term “business” and identified the single most important component of any successful business. Now, let’s examine more closely the question of what is the purpose of a business.

One might assume that, just like with the definition of business, there would be a consensus. However, the reality cannot be more different.

Three schools of thought

Overall, there are three different schools of thought on this subject. The starting point is the historically most accepted view that the purpose of business is to make maximum profits for its owners.

Each school of thought has a different take on this definition:

1. Yup!

The first school completely subscribes to the “maximum profits for its owners” view but also attempts to answer the how question. The resulting definitions include things like: provide goods and/or services, offer value, fill a need, solve a problem or (most famously, perhaps) create a customer.

2. Yes, but…

The second school also accepts the “maximum profits for its owners” view, but adds a second(ary) dimension. For example: create sustainable value for all stakeholders.

3. No way!

The third school takes a completely different view. They reject the profit maximization objective out of hand and instead propose an alternative purpose. For example, the purpose of a social business is to maximize improvements in human and environmental well-being.

What’s my definition?

I don’t dispute the fact that a business must be able to make money. But, I don’t consider it its purpose (a function, yes, but not a purpose). In fact, the sole focus on profit maximization is extremely harmful to the society, because it leads to inequality, unemployment and eventual collapse of the economy. Not to mention the environmental pollution, the collapse of natural ecosystems and the depletion of natural resources.

Businesses are the major driving force in our society today. More so than individual members of the public—who are employed by the businesses, and more so than governments or political parties—which are financed by the businesses.

Make the world a better place

If anybody can institute lasting change in this world, it’s the businesses. Therefore, it is my belief that the purpose of every business should be to make the world a better place.