Unit 1 - Business Basics
Learning Target 4: I can explain the evolution of modern business
Business has come a long way. Let’s take a quick look at the some significant revolutions and eras of business. We will first take a look at the industrial revolution. Between 1815 and 1875 the industrial revolution transformed the United States from an agrarian economy to and industrial giant. The Industrial Revolution also facilitated mass production and the factory system. The factory system was a method of mass production in which raw materials, machinery, and labor are brought together in large volumes in location to produce goods less expensively in dispersed locations. A major drawback of the factory system and mass production was not enough people to work in the factories. In order to combat this companies created machines that could produce the items more cost efficiently and uniformly than what workers can do. This type of manufacturing process lead to the specialization of labor where the businesses grouped employees to work on assigned tasks on the basis of their specific skills and factory demand.
Now let’s move on to the "entrepreneurship era" Large-scale entrepreneurs such as John Rockefeller and Dale Carnegie emerged in the second half of the 1800s—the Entrepreneurship Era. They built business empires, created enormous wealth, and raised the standard of living for the entire country. Yet success came with a price. Many forced out competitors, manipulated prices, exploited workers, and decimated the environment because of laissez-faire. In Laissez-faire businesses are free to do what they chose to do. Another side effect of Laissez-faire was it encouraged businesses merge to create market domination. This strategy of acquiring competitors or scheming with them to control prices and prevent new competitors from entering the market made the government take an active role in regulating businesses.
By the end of the 1800s, the government stepped in to create antitrust laws to regulate business, protect consumers and workers, and bring more balance to the economy. Watch this short video on this era.
Next we move to the production era, when major businesses focused on achieving even greater efficiencies in the production process. Jobs became more specialized which increased productivity while lowering costs and prices. When Henry Ford introduced his assembly line in 1913, it quickly became the standard across industry. The downside to the assembly line is that a monotonous workplace for the employee and put increased pressure for workers to perform better and faster. This is also when labor unions were formed to protect worker rights. Managers during this era focused on efficiency, leaving consumers as an afterthought. But the belt tightening of the Great Depression and World War II brought a new attitude from businesses, which took to hard selling to separate consumers from their cash.
After World War II, the balance of power shifted away from producers and toward consumers. It was the Marketing Era when businesses began establishing brands to differentiate themselves from competitors. Businesses began to create and build brands which allowed customers to understand the differences between products. The “marketing concept” emerged: a consumer focus began to permeate successful companies in every department, at every level. This approach continues to influence business decisions even now as global competition heats up to unprecedented levels.
Today we are in the relationship era. Businesses try to create a long term relationship with its customers which in terms generates repeat sales with allows businesses the opportunity to accomplish the #1 goal of every business and that is profit. Satisfied customers can be more effective than the best promotional campaign, and nurturing current customers is more profitable than constantly seeking new ones. Technology is key. The Web and other digital resources help businesses gather detailed information about their customers—data that can be used to serve them better.
Show What You Know: If you had to name the most significant event in the evolution of business what would it be and why?