Drucker Chapter 2

In the second chapter we looked deeper into what Drucker thought the purpose business is. He did not like the fact that people thought there were different ethics to be followed in business and a person’s everyday life. He felt as though people should use the same set of ethics in everything they do. This will help a business be a positive influence on their community, their country, and the world. Drucker also said that a business must make profit but should not be looking to maximize their profits. In maximizing profits, a business tends to take advantage of a certain factor that does not need to be used as leverage. He also says that there is no proof that a company will become more prosperous when they increase profits. This does not necessarily save a failing company and it will not keep a successful company successful over the long term. Another point made was that when costs of doing business rise it does not always work to simply pass these costs onto the customer. This is an example of why raising prices does not always help a business. A restraint with rising food prices may raise the prices on their dishes while another chooses not to and the one with higher prices may begin to see a decrease in sales and eventually fail.

William Cohen, the Author of this book, even makes the point that the profit motive is not enough for professionals in making career decisions. He uses the example of a high school football team. The players on the team work very hard, give up free time, and are happy and without complaint while receiving no payment. This shows how many other factors are important to many individuals other than money. Many people pick a career that is less lucrative because they are happier doing it than doing something else that would get them a higher salary.

Profit is necessary for businesses however. Profits are like oxygen to a human body.  A certain amount is necessary for survival but too much can cause damage and possible be fatal to the human body or in the case of profits to a business.

Drucker wrote “The customer is the foundation of a business and keeps it in existence. He alone gives employment. To supply the wants and needs of a customer, society entrusts wealth-producing resources to the business enterprise.” He made this statement to reinforce the fact the businesses are in business to create customers not profits.