The concept of the firm and its features

It is difficult to imagine the modern world without the presence of firms in it. Firms provide a huge range of services and are one of the main features of the current economy. In this article we will consider what is a firm: the concept, the classification of its characteristics and the main functions.

To begin with, it is necessary to understand the conceptual apparatus. In theory, the concept of a firm means an independent subject in an economy that deals with commercial as well as production activities. Firms have their own, separate property. In economic theory, the firm does not have one clear definition, since within the same concept there may be a group of enterprises engaged in the production of goods or services. We will describe several features that reveal the concept of a firm.

First, the company is an economically isolated unit. Secondly, the firm is a legal entity, therefore it is independent legally. The firm must have a budget and its own charter. Thirdly, a commercial organization must perform useful social functions, such as the purchase of resources and the production of social benefits on their basis, which subsequently enter the market. Fourth, the enterprise itself makes a decision about its own development and other management aspects. The last sign, which reveals the concept of a company, is that the main goal of any commercial organization is to minimize costs and strive for maximum profit.

Among the firms there is competition, which is carried out through the increase in sales or the increase in market share, or a decrease in employee turnover through higher wages, better working conditions, and other methods to stimulate and motivate staff. Also, firms need to come up with new strategies, especially in economically crisis periods, and create new types of services or goods. Another effective way to compete is the use of new technologies.

The concept of a firm can not be considered without specifying its functions: commercial (marketing, establishing links with investors and suppliers), production (organization of the production process), financial (work with the firm's finances, increase profits and minimize costs), accounting (accounting and statistical calculations of various indicators ), Administrative (control over the production process, commercial activities, management), social (meeting consumer demand, material incentives and support rsonala).

In the literature, one can also find the concept of an enterprise. Firms and enterprises mean by themselves the same market phenomenon, characterizing any commercial organization that meets all of the above characteristics and functions.

On economic activity, commercial companies can be divided into: transport (international transportation), industrial (production of goods), trade (purchase and sale transactions), insurance and freight forwarding (delivery of goods to customers).