The concept of a firm and its features

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:43

It's hard to imagine the modern world without firms. Firms provide a huge range of services and are one of the main features of the current economy. In this article, we will consider what a company is: the concept, classification of its features and main functions.

First you need to understand the conceptual apparatus. In theory, the concept of a firm means an independent entity in the economy that is engaged in commercial as well as industrial activities. Firms have their own, separate property. In economic theory, the firm does not have one clear definition, since within the same concept there may be a group of enterprises engaged in the production of goods or services. Let's describe several signs that reveal the concept of a firm.

Firstly, a firm is an economically distinct unit. Secondly, the firm is a legal entity, therefore it is legally independent. The firm must have a budget and its own charter. Third, the business organization must perform useful social functions, such as purchasing resources and producing socialbenefits based on them, which subsequently enter the market.

Fourthly, the enterprise itself decides on its own development and other management aspects. The last sign that reveals the concept of a firm is that the main goal of any commercial organization is to minimize costs and strive to maximize profits.

There is competition among firms, which is carried out through an increase in sales or an increase in market share or a decrease in staff turnover through wage increases, better working conditions and other methods of stimulating and motivating staff. Firms also need to come up with new strategies, especially in times of economic crisis, and create new types of services or products. Another effective way to compete is to use new technologies.

The concept of a company cannot be considered without specifying its functions: commercial (marketing, establishing relationships with investors and suppliers), production (organization of the production process), financial (work with the company's finances, increasing profits and minimizing costs), accounting (accounting and statistical calculations of various indicators), administrative (control over the production process, commercial activities, management), social (satisfying consumer demand, material incentives and staff support).

In the literature you can also find the conceptenterprises. Firms and enterprises imply the same market phenomenon that characterizes any commercial organization that satisfies all of the above characteristics and functions.

According to business activities, commercial companies can be divided into: transport (international transportation), industrial (production of goods), trade (purchase and sale operations), insurance and freight forwarding (delivery of goods to customers).