The concept of business has been changing gradually over the years. Three broad concepts of business may be identified:
- Traditional Concept: Traditionally, business has been viewed as the commercial activities or functions of an individual or organization aimed at making profits. This is a narrow concept of business because it covers only the private sector of the economy and focuses only on profit motive. Traditional economic theory is based pm the assumption that the basic objective of business is profit maximisation. Under this theory, business consists merely of an enterprise formed to make profits. But a layman still believes that business means industry and commerce for making money.
- Business System: Under this concept, business is considered a system composed of several subsystems which are interrelated and interdependent. Business system operates within a wider system or supra-system. It is a part of the economic system. As a subsystem of economic system, business draws inputs (raw materials, manpower, machinery, capital, information, etc.), transforms these inputs with the help of certain processes, and sends the outputs to the economic systems. Thus, there is an exchange relationship between business system and economic, system. Business is thus a subsystem of the broader social system.
- Modern Concept (Social Institution): The traditional concept of business as a profit seeking enterprise has undergone a radical change. Today, business is considered a social institution which performs a social function and which has a significant influence on the way people live and work together.
Business has such an extensive influence and involvement in the social system that it cannot isolate itself from the society. Business is expected to process and develop economic values for the whole society.
The modern concept of business is very wide. Business is regarded as an organ of society to help attain the social goals. A business can earn profits only by serving the society. Therefore, the activities and decisions of business are subjected to social scrutiny and judgment.
According to Davis and Blomstorm, business society relationship involves three main issues.
- Values: Like any other social institution, business develops certain beliefs and values which drive business activities. These values motivate the people involved in business and guide their decisions. Business beliefs and values stem from several sources, such as mission of business, its location, the type of industry in which it operates and the nature of its employees.
- Viability: Viability means the drive to live and grow, to accomplish the latent potential, and to achieve everything which a living system can achieve. In order to be a viable social institution, business must shape the social environment instead of merely adapting to opportunities for itself.
- Public Visibility : The extent to which the activities of a business enterprise are known to outsiders is called public visibility. It is different from public image which means what people think about the enterprise. Public visibility is important because unless the activities of business are known, society cannot examine, discuss and judge them.