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This presentation will be covering the evolution of business including Feudalism, Mercantilism, Capitalism and Commerce. It is very important that we understand how the modern business system works and how it was formed. The first forms of business systems are feudalism, mercantilism, and capitalism. Each one of them provide methods for different areas, but they all work together. First, we chart the development of Feudalism, a business system based on the control of property rights to land and labor. Second, we look at the operation of money in a business system, the way it facilitates trade, and promotes the accumulation of capital. Third, we examine mercantilism, the business system in which products are traded across markets and countries until they are put to their most highly valued use.
Each of the three main kinds of business systems feudalism, mercantilism, and capitalism is associated with a particular kind of ethical or moral position: for example, different views about the rights workers should have relative to the owners of land or capital.
Feudalism is the business system in which one class people who were named aristocrats. They controlled properties rights of all valuable resources even people. This type of business system occurred during the Middle Ages between A.D. 500 and A.D. 1500. During this time, people who had little to no rights possessed no motivation to perform at high levels because they did not share within the profits gained from the work. To increase motivation, land owners developed the tenant farming system. Much of the bargaining and negotiating that goes on in society, like that between landowners and tenants under feudalism, for example, results in land, labor and capital being put to its best use.
From early times, one of the most important uses for borrowed capital was to fund business trading. Mercantilism is the business system in which products are traded across markets and countries until they are put to their most highly valued use, that is, invested or consumed where they create the most utility. Merchants are traders who notice a discrepancy(difference) between the value and price of a product in one market and its value and price in another. They recognize an opportunity to profit from the price difference. The higher price can be obtained when a product has a higher utility (is more highly valued) in one market because it is more scarce and thus in higher demand. Merchants borrow capital and use it to purchase products in the market where they are plentiful, and then transport them to another market where they can be sold at a higher price.
Capitalism gave rise to increasing conflicts between capitalists and workers. This led to the formation oftrade unions that lobby on behalf of their members to increase their wages and working conditions.Capitalism also gave rise to a more complicated class system: a social hierarchy based uponpeople’s capital and wealth, heredity, kinship, fame, occupations, and connections. As business commerce evolved so did the forms of business organizations used to increase the productivity and profitability of productive resources. The hierarchy of authority evolved early to reduce the transaction costs surrounding business activity. The joint-stock corporation evolved to make it easier for enterprising people to borrow capital to pursue new ventures, and for wealthy people to find new ways in which they could build their capital and increase their wealth.
Capitalism gave rise to increasing conflicts between capitalists and workers. This led to the formation of trade unions that lobby on behalf of their members to increase their wages and working conditions. Capitalism also gave rise to a more complicated class system: a social hierarchy based upon people’s capital and wealth, heredity, kinship, fame, occupations, and connections.
The trick is to create a form of business organization that provides a way to employ all four productive factors to create profit and wealth. A major obstacle to being able to do this effectively is aligning the interests of people who want to borrow capital with the interests of people who own it. One of the problems with mercantilism, for example, was being able to attract investors. Given differences in the characteristics of land and labor across estates, regions, and countries, people have to engage in barter and trade to obtain products they cannot make themselves.
It is really important that we understand the evolution of business systems from past generations until now and that we are up to date with the techniques used back then and now. The techniques may be the same for various businesses but is important that we understand the similarities and the differences and that we look for ways to innovate our businesses to increase the productivity and raise the profitability. I hope this presentation provided you with a better understanding of the business evolution.
Feudalism, Mercantilism and Capitalism FeudalismBusiness or economic system inwhich one class of peoplearistocrats, possess propertyrights to all valuableresources, including people. Mercantilism Business or economic system in which merchants and bankers organize the trade of products across markets and countries until they are put to their most valued use. Capitalism Business or economic system in which capitalist or industrialist privately own the physical capital of industrial production and use it to produce, trade and distribute products.
Feudalism Is the business or economic system in which one class of people (aristocrats) control the property rights to all valuable resources, including people. A business system based on the control of property rights to land and labor. To make their estates more profitable landowners assigned the most able workers to take control of specific farms on their estates.
Mercantilism Is the business system in which products are traded across markets and countries until they are put to their most highly valued use. They recognize an opportunity to profit from the difference in prices by trading commodities between one market and the next. Merchants and bankers are traders who notice a difference between the value and the price of commodities.
Capitalism The economic or business system in which the private ownership of resources becomes the bases for the production and distribution of good and services. Capitalist are people who personally own or control the physical capital of industrial production such as machinery, factories and distribution networks, raw materials and technology. Capitalism gave rise to increasing conflicts between capitalist and workers. Capitalism started the social hierarchy.
The Class System in Capitalism Upper class Upper Middle Class Lower Middle Class Lower Middle Class Working Class and Proletariat
Commerce Labor and land are normally used in conjunction with capital and enterprise to promote trade and commerce. Business as commerce, occupation, and organization evolved to allow land, labor, capital, and enterprise to be used most productively and profitably. When people meet to barter one kind of good or service for another, a problem economist call the double coincidence of wants arises.
Conclusion Each business system operated based upon the unique situations of the time and the resources that were available for use. Using systems to increase productivity and profitability. Understanding innovation and techniques.
References University of Phoenix readings. The Evolution of Business (2007) Ch. 2 Pgs. 38-62