The Final Cause of Business

PHILOSOPHY OF BUSINESS (MBA 102)
The Final Cause of Business
THE CORPORATE OBJECTIVE
(The Final Cause of Business)
George Silandote Jr.

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;
 Action
 Motion
 Mutation
- Act of a Person or Agent
- What WAS
- What IS
- What WILL BE
- Human (a rational being) as doer of
the Act.
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.

AN AGENT intends
TO DO
TO ACHIEVE
AN ACT
(Agent’s Act)
AN END
(Agent’s End)
Naturallytendstowards
WHICH IS
PURSUED
WHICH IS
ACHIEVED
EITHERASEITHERAS
THE
INTENDED
ACT
THE INTENDED
CONSEQUENCE
OR AS
OR AS
A
MODIFIED
ACT
A
MODIFIED
CONSEQUENCE
(Circumstantial Act)
(Circumstantial End)
(Act’s Natural End)
Illustration: THE GOAL CONCEPT

Illustration: THE COMPLEX ACT-END RELATIONSHIP
AGENT
ACT
ULTIMATEEND
IMMEDIATEEND
INTERMEDIATES
END END END END END
MEDIATE ENDS
Long Range Plans
Short and Medium Range Plans

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

Proving Argenti’s
Theory on Profit Argenti’s Theory Proponent
Business Objective
The company would never
abandon
The company must do in order to
survive
If the company fails to attain, it
 Increase in Market Share   
 Increase in Sales Volume   
 Industry leadership in
technology
  
 Increased production   
 Profit   

Proving Argenti’s
Theory on Profit Argenti’s Theory Proponent
Business Objective
The company would never
abandon
The company must do in order to
survive
If the company fails to attain, it
 Increase in Market Share   
 Increase in Sales Volume   
 Industry leadership in
technology
  
 Increased production   
 Profit   
 Service   

THE OBJECTIVES OF BUSINESS
The Three (3) Dimensions of Business
As a Fundamental Social Process
As an Industry Function
•Role as a Company (Institution)
•Role as a Businessman (Person/Individual)
As a Corporate Activity

• 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 a Fundamental Social Process

• 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 an Industry Function

• 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.
As a Corporate Activity

Business
Dimensions
Immediate
Objective
Intermediate
Objective
Ultimate
Objective
Remote
Objective
As a Social
Process
To provide a
process
Quality of Life
and Society
Man
As an Industry
To provide a
Venue/Arena
Quality of Life
and Society
Man
The Corporate
Entity (Company)
To provide
Company Core
Service
Human Needs
satisfaction
Quality of Life
and Society
Man
The Businessman
To provide
Personal Core
Service
Customer
Satisfaction
Profit Man

- 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 Acitivty.

- 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
objective of the businessman. It causes
the businessman to go into business.
Profit is what the businessman derives
from the business and serves as his
reward for good performance. It is what
the businessman expects to gain from his
business act or undertaking, what he
looks forward to, that is, the subsequent
bigger rewards for subsequent better
performance.
It serves as a standard against which the
operational efforts or performance of the
businessman is measured.
It is the measure of how well the
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.

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

THE SERVICE CONCEPT
 Marginal Service – Services which are not inherent in the company
or in the product or in the service providers (not in the essence of
the company’s subject).
o Company Extended Service – additional services a company provides in
the sales of its products partaking the nature of sales promotions.
o Product Extended Service – extra attributes or extra functions
incorporated into a product for better convenience of the consumer.
o Personal Extended Service – the businessman, his salesman and his
personnel force are involved in personal services in support of the
company or product augmentation.

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.

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

SERVICE
Illustration: The Service-Profit Interlink
PROFIT
generates
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…

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

The Final Cause of Business

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