Enterprise, to many, is synonymous with making money. But the truth is, there are a lot more things that make organizations successful than money does. A good analogy is a garden-variety company run by dedicated people – a business enterprise. That’s just an example – there are many other businesses out there that run efficiently and profitably without having to spend a cent. So what makes an enterprise? What do we mean when we say it’s an enterprise?
Enterprise, according to economists, is a specific term for a set of experiences, the outcome of actions, or the gain of benefits resulting from undertaking special tasks that yield more of a return than the expenses incurred in performing them. Enterprise, then, includes the aspects of management that yields more of a return: research, development, marketing, accounting, and business administration. It also includes certain activities of management that yield less of a return: controlling costs, purchasing and managing assets, and freeing up employees for other purposes. More specifically, the enterprise can be understood to be the combined efforts of all the elements of production handled by any one firm or organization. And that, economists have argued, is how limited companies are able to compete successfully against large enterprises that control most of the economic activity in the economy.
There are several theories of how an enterprise is established. According to traditional theory, an enterprise is established when and only if some natural or human scarcity creates an external demand for the goods or services offered by the enterprise. In fact, all entrepreneurs, starting out with a small investment, look for ways to provide as much goods or services as possible at the least cost. But unlike a small business, where the owner or proprietor usually has personal ties to the enterprise, a large corporation is generally owned by many different people, all of whom have competing interests. By the process of general competition, the enterprise is able to increase its innovations, produce its products or services at the lowest possible prices, and provide its customers with better service.