The Evolution of Business
Principles of Management
Lesson 2
Chapter Objectives
1. Define the system of feudalism, and the issues in
combining land and labor to speed the accumulation of
capital.
2. Describe the system of mercantilism, and appreciate
the role played by merchants, and bankers in speeding
the development in global trade.
3. Explain the causes of the industrial revolution and the
development of capitalism, unionism, and the class
system.
4. Explain how and why the form of business organization
used to manage business commerce has changed over
time.
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Lesson 2
Origin of Business
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•
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Business and its related activities began three to
six thousand years ago
Think of the division of labor needed to build the
pyramids in Egypt
Think of the food and water needed for a very
valuable resource – labor
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Lesson 2
Feudalism
•
Land and other resources were given by a king
to the nobility and they in turn controlled the
proletariats or peasants who worked the land for
a hut and a subsistence wage
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Lesson 2
Feudalism
•
The absence of motivation on the part of the
peasants gave rise to tenant farmers sharing in
more of the till and toil of the land
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Lesson 2
Mercantilism
•
Merchants saw opportunities to trade at a profit
•
Mercantilism has evolved into Capitalism today,
as private industrialists produce, trade, and
distribute products
•
The use of money increases occupational
specialization (similar to outsourcing of today)
and the wealth that can be generated from labor
and land
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Lesson 2
Industrial Revolution
•
Increasing change and the growth of capitalism,
led to technological progress and the most
significant change in the business system
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Lesson 2
Industrial Revolution
•
Increasing change and the growth of capitalism,
led to technological progress and the most
significant change in the business system
•
Change was pervasive in both farming and
manufacturing as the use of technology could be
used more efficiently than labor such as steam
power or interchangeable parts to build sewing
machines to manufacture clothing
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Lesson 2
Capitalism
•
Private ownership of the means of production
and distribution (property rights)
•
Its growth was not without its faults as some
folks were ruthless and pursued their own self
interest at the expense of others
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Lesson 2
Capitalism
•Capitalist factory owners exerted their economic
power with greater demands upon labor
• Declining wages and longer work hours created a
proletariat working class and the workers reacted
by forming trade unions
•The Industrial Revolution and the rise of capitalism
contributed to the creation of a class system based
upon wealth and occupation as opposed to heredity
as in aristocracy
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Lesson 2
Business Commerce
•As business commerce evolved so did the forms of
business organizations used to increase the
productivity and profitability of productive resources
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Lesson 2
The Evolution of Company
•The hierarchy of authority evolved early to reduce
the transaction costs surrounding business activity
•The joint stock company 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
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