The Business Book

(Joyce) #1


rom the time that goods
and services began to be
traded in early civilizations,
people have been thinking about
business. The emergence of
specialized producers and the use
of money as a means of exchange
were methods by which individuals
and societies could, in modern
terms, gain a “business edge.” The
ancient Egyptians, the Mayans, the
Greeks, and the Romans all knew
that wealth creation through the
mechanism of commerce was
fundamental to the acquisition of
power, and formed the base on
which civilization could prosper.
The lessons of the early traders
resonate even today. Specialism
revealed the benefits of economies

of scale—that production costs fall
as more items are produced. Money
gave rise to the concept of “value
added”—selling an item for more
than it cost to produce. Even when
barter was the norm, producers still
knew it was advantageous to lower
costs and raise the value of goods.
Today’s companies may use different
technologies and trade on a global
scale, but the essence of business
has changed little in millennia.

An era of change
However, the study of business as
an activity in its own right emerged
relatively recently. The terms
“manager” and “management” did
not appear in the English language
until the late 16th century. In his
1977 text The Visible Hand, Dr.
Alfred Chandler divided business
history into two periods: pre-
and post-1850. Before 1850 local,
family-owned firms dominated the
business environment. With
commerce operating on a relatively
small scale, little thought was given
to the wider disciplines of business.
The growth of the railroads in
the mid-1800s, followed by the
Industrial Revolution, enabled
businesses to grow beyond the
immediate gaze of friends or family,
and outside the immediate locale.
To prosper in this new—and

increasingly international—
environment businesses needed
different, and more rigorous,
processes and structures. The
geographic scope and ever-growing
size of these evolving businesses
required new levels of coordination
and communication—in short,
businesses needed management.

Managing production
The initial focus of the new breed
of manager was on production.
As manufacturing moved from
individual craftsmen to machinery,
and as ever-greater scale was
required, theorists such as Henri
Fayol examined ever-more-efficient
ways of operating. The theories
of Scientific Management, chiefly
formulated by Frederick Taylor,
suggested that there was “one best
way” to perform a task. Businesses
were organized by precise routines,
and the role of the worker was simply
to supervise and “feed” machinery,
as though they were part of it. With
the advent of production lines
in the early 1900s, business was
characterized by standardization
and mass production.
While Henry Ford’s Model T car
is seen as a major accomplishment
of industrialization, Ford also
remarked “why is it every time I ask
for a pair of hands, they come with


The art of administration
is as old as the
human race.
Edward D. Jones
US investment banker
(1893 –1982)
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