Business Administration and Management

Business Administration and Management


As long as people have been exchanging goods and services for payment of some sort, business transactions have been a part of life. Business was one of the factors that led to American independence, when the early settlers, who wanted to develop their own businesses and industries, rebelled against England's economic constraints.

Early businesses typically took one of two forms: private ownership or partnership. In a privately owned company, the person who established the business was solely responsible for the services provided, the employment of any workers, and the profits or losses of the business. Most of these early sole proprietorships evolved from a trade or skill the owner possessed. For example, a person skilled in working with iron might open a blacksmith shop, while a person skilled at sewing would open a tailor's shop.

Partnerships were businesses owned jointly by two or more individuals. In these business ventures, the partners usually pooled their resources to open and run a business, sharing in the profits and risks. In some cases, partners might equally split the financial cost of starting a business. In other cases, one partner might provide the funding, or capital, to start the business while another partner provided the idea, the managerial skills, the labor, or other, less tangible assets. Partnerships were especially common in family businesses, with two siblings often starting a business together. Often, the younger family members were trained on the job to follow their parents into the business when they were old enough to take over.

Corporations, today's common form of business, were developed in the early Middle Ages as a legal alternative to private businesses or partnerships. What made corporations significantly different from sole proprietorships or partnerships was that a corporation was considered its own entity in the business world independent of its controlling members. The first corporations were religious orders, universities, and town governments.

An important change in the legal structure of businesses took place in England in the 15th century. New limited liability laws were passed, mandating that no individual could be held financially responsible for the debts incurred by a corporation. If a corporation ran into financial trouble, the courts would not pursue the personal earnings of any one member or members of the corporation. The only money that the corporation founders could lose was the money they used to start and run the company. Between 1600 and the mid-1700s, some corporations took on the added responsibility of maintaining law in territories where they held a monopoly. The East India Company, a British firm in India, and the Hudson's Bay Company in North America were two such firms that regulated what eventually developed into British colonies. In their applications for incorporation, these companies had to state their goals for the advancement of public welfare.

The American concept of business changed dramatically with the American Revolution, however. The newly independent American colonists rejected the idea of business as a government regulator. Even so, most of the new corporations chartered in the early 1800s were involved in public service of some kind, such as construction of water routes, banking, and insurance. Eventually this changed, and commerce and manufacturing firms became the predominant applicants for charter in the United States.

With the burgeoning of the Industrial Revolution in the late 18th century, businesses became more mechanized and more specialized. Earlier companies had typically involved just a few people who together executed all the tasks necessary to manufacture a product or provide a service. As machinery made it possible for businesses to produce more materials faster, businesses expanded in size and scope. More workers were hired to keep up with the increased pace, and as a result, more management personnel were hired to oversee the workers and handle the financial aspects of the company. As they grew, companies began to structure themselves in different ways. Departments were formed to handle specific aspects of the business: financial, marketing, personnel, etc. This departmentalization of business responsibilities became a significant feature of the modern corporation.

A new way of structuring a business emerged in the late 19th century, when the Singer Corporation first allowed individuals to sell its sewing machines in particular regions. Soon afterward, General Motors started selling cars in the same manner, as did Coca-Cola with its soft drinks. This method of doing business is called franchising.

Fast-food restaurants soon got into the franchising business. Dairy Queen, one of the oldest fast-food franchises, opened in 1940 and began selling franchises in 1944. During the 1950s, franchising became prevalent. Among the most well-known franchisers to emerge at that time were McDonald's, Dunkin' Donuts, and AAMCO Transmissions. McDonald's was one of the first franchisers to establish guidelines for what the stores could look like, what products could be sold, and what types of promotions could be run. In this way, the corporation was able to maintain strict control over the quality of the product line, guaranteeing consistency across the country and building brand recognition and loyalty.

Originally, most franchises were offshoots of goods-producing companies, like Singer sewing machines. Eventually, however, franchising spread into many other kinds of industries. Today, the trend is toward service-industry franchises, such as real estate offices, law offices, insurance agencies, and cleaning services.

Today, the business world is more diverse than ever. In addition to the more traditional ways of structuring companies, factors such as technological improvements, loosening of trade restrictions, and changing demands on the part of employees have created new ways of doing business. One of the most important trends in today's business is that of doing business remotely, via the Internet. This type of business, called e-commerce, means that businesses can advertise their goods and services, take orders, and receive payment electronically. Businesses conducting e-commerce can often reach a far broader range of clients and customers than they would otherwise, at far less marketing and advertising cost.

Many companies conduct business online in addition to their more traditional methods of doing business. For example, many manufacturers and merchandisers who have traditionally displayed their goods in actual stores or customer showrooms now also maintain Web sites through which customers can order and pay for items. Some companies have even taken e-commerce one step further and have done away with the actual, physical store altogether. These companies, sometimes called virtual companies, operate only via the Internet. These companies save enormous amounts of money by not having to maintain and staff a store.

Technological advances, along with changing employee expectations, have contributed to another trend in today's business world: working at home. There are two subtrends in the movement toward working at home: home-based businesses and telecommuting. Home-based businesses are, essentially, very small organizations that conduct all their business from the owner's home. Many home-based businesses are one- or two-person operations, although some have more employees. They may be goods-producers or service businesses. Property managers, lawyers, public relations and marketing professionals, cleaning services, artists, sign makers, photographers, and many other business people have opted to run their businesses from home. By taking advantage of modern communications technology, these home-based businesses can market their goods across the country and even internationally by building Web sites, taking orders, and shipping their goods to the appropriate destinations.

Telecommuting, another at-home working trend, involves a company's employees working off-site, in their own homes, rather than at the company's offices. According to, the number of Americans who worked from home one or more days per week rose by more than 159 percent from 2005 to 2017. As employers become aware of the benefits of telecommuting and flexible scheduling, and as the technology to support it becomes more robust and affordable, this trend should continue for years to come

A final important trend is the increasingly global nature of business, as numerous firms take advantage of loosened trade restrictions to expand their operations into overseas markets. Many U.S. firms, for example, have targeted new and emerging markets by expanding into Latin America, India, Russia, China, and other countries. Commonly, a U.S. firm maintains its headquarters in the United States, and has satellite offices or branches in various other countries. Corporations that operate in more than one country at a time are called multinational corporations, and they are becoming increasingly common.