LEADERSHIP & MANAGEMENT.

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Selected by Zeeshan Ahmed Khan

July 04 - 10, 2005
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THE PURPOSE OF PROFIT

"Profit is the ultimate test of business performance."

Profit serves three purposes. One is it measures the net effectiveness and soundness of a business's efforts. Another is the "risk premium" that covers the cost of staying in business- replacement, obsolescence, market risk and uncertainty. Seen from this point of view, there is no such thing as "profit"; there are only "cost of being in business" and "cost of staying in business". And the task of a business is to provide adequately for these cost of staying in business by earning adequate profit. Finally, profit ensures the supply of future capital for innovation and expansion, either directly, by providing the means of self-financing out of retained earnings, or indirectly, through providing sufficient inducement for new outside capital in the form in which it is best suited to the enterprise's objectives.

ACTION POINT: Beside to pull the plug on an unprofitable business if it is not covering the cost required to stay in business or providing enough capital for future growth.

THE PRACTICE OF MANGEMENT

The purpose of a business

"A business enterprise has two basic functions: Marketing and innovation."

If we want to know what a business is, we have to start with its purpose. And the purpose must lie outside the business itself. In fact, it must lie in society, since a business enterprise is an organ of society. There is only one valid definition of business purpose: To create a customer. The customer is the foundation of a business and keeps it in existence. He alone gives employment. And it is to supply the customer that society entrusts wealth producing resources to the business enterprise.

Because it is a purpose to create a customer, any business enterprise has two - and only two- basic functions: Marketing and innovation. These are the entrepreneurial functions. Marketing is the distinguishing, the unique function of Business.

ACTION POINT: Find out what needs your customer's want fulfilled today. Determine how well your products are meeting the needs of your customers.

THE PRACTICE OF MANAGEMENT

Business Wisdom

 

 

"I do not mind lying, but I hate inaccuracy."

SAMUEL BUTLER(1835-1902), British scholar, Translator and novelist.

"I don't want to achieve immortality through my work. I want to achieve it by not dying."

WOODY ALLEN, American screenwriter, film producer and Director.

"Ambition can be an overwhelming drive that can send you insane. I have a philosophy-good things come to those who wait and work hard."

LIZ DAVENPORT, Australian fashion designer.

"Everybody knows good counsel except him that have need of it."

German Proverb.

"He who waits to every man's advice will have a crooked house."

Danish Proverb

"I'm aware of the risks involved with change. But this is a business, not a monument. We have a responsibility to our shareholders."

ROBYN AHERN, Australian businesswoman and CEO of Aherns department store chain.

"Its amazing how many people beat you at golf now that you are no longer president."

GEORGE BUSH Sr., American statesman, and 41st President of the USA.(1989-1993)

"Money, like dung, does no good till 'tis spread."

THOMAS FULLER M.D. (1654-1734), British physician and author.

"A bank is place that will lend you money if you can prove that you don't need it."

BOB HOPE, American comedian and actor.