Why Do Businesses Exist?

Two of the basic reasons businesses exist are to provide society with goods and services and to make a profit. The latter motive is what separates them from government agencies and charities. Businesses also serve to establish and promote social cooperation, as noted by University of Virginia Professor Ed Freeman.

Dr. Freeman argues that the key to sustainability and success in business is to take into consideration all of the various stakeholders that are affected by that business. In addition to the interests of shareholders, whose investments must obviously be considered, businesses also exist to further the interests of other stakeholders, such as employees, vendors and suppliers, customers and the community at large.

In addition to the basic aim of generating a profit by providing goods or services, a business can exist to play a significant role in creating value within the society in which it operates. The stakeholder approach to business acknowledges the cause-and-effect relationships that develop between economic, ethical, social and political interests, as noted by the University of Virginia.