Wednesday, April 20, 2011

What Is a Business Organisation?

Confused of Calcutta is not a Bong but a near-Bong South-Indian named J P Rangaswami who writes a blog. The blog expounds mostly on technical subjects too complex for my simple mind to understand. However here's what he says about what a business is:

"To paraphrase Peter Drucker, the primary purpose of a business is to create customers, people who are able and willing to part with their money to buy goods and services from you.

"To paraphrase Ronald Coase, the primary purpose of a firm is to reduce business transaction costs, principally the costs of information, search, contracting and enforcement."

The statements seem congruent with each other. Reducing transaction costs: cost of information, search, contracting and enforcement is creating customers who will buy from a business. 

These days how many business organisations fail because they don't bother to create customers. I came away today from my fruit-seller feeling cheated and aggrieved. The reason is that instead of his usual amiable chat, he was chatting with another man when I came to buy some apple from him. Then when he weighed out the apple it seemed as if he was cheating me. One thought led to another. My irritation had become a constant reminder of how badly I interpreted the situation. I vowed not to buy fruits from him anymore for the reasons mentioned above. In that case he had lost a customer. 

However according to what Ronald Chase states did it reduce transaction costs? I don't know. I mean to ask someone who knows about management one of these days.

1 comment:

Anonymous said...

Complex Post. This enter helped me in my school assignment. Thanks Alot