The history and development of business



Business history, in the broadest sense of the world includes everything regarding the past of business, from the individual histories of firms up to the entire business process systems. The scope and boundaries of such has continued to be a subject of intense debates. However, business histories research insights into the nature and origins of innovations and wealth of nations. As a result of the researches, there have been understandings on the roles of business histories and development when it comes to business success.

By nature, business history is an interdisciplinary subject. First and foremost, businesses are economic units that make such decisions as how much of a good to produce, how to make it, and what to change for it, their behavior is nothing if not the subject of the economic theory. At the same time, however, businesses are organizations of people whose choices are affected by the social and cultural environment in which they live and work. Hence, understanding how businesses operated in the past - and why they have succeed or failed, is inevitably an interpretive activity that requires the tools and sensitivity of scholars of history as well.

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This paper should discuss the extent of the impact of understanding the business history and development in terms of the success of business. This shall provide situational examples so that the points of discussion can be discussed accordingly.

History of Business Strategies

The concept of strategy can be traced back during the military campaigns. The results of which, whether good or bad, were the products of the ideas of a strategists. The first recorded writing about strategic thinking was authored by Greeks and Romans (Shimizu, Carvalho, and Laurindo 2006). The oldest text that discusses the matter is “The Art of War” by the Chinese writer Sun Tzu in the fourth century B.C. this book reached the West during the 18th century and was well disseminated during the 20th century.

Various authors have published books regarding the concept. The most influential of all are Karl von Clausewitz, a Prussian general, and Antoine-Henri de Jomini, a French-Swiss general. Von Clausewitz works contribute in the understanding the relationship between theory and practice and envisions war as a dynamic process. According to him strategic theory should have a descriptive nature rather than prescriptive. An example of this is that there is no exact recipe in being successful; instead learning from outside experiences is possible.

On the other hand, Jomini's principles in strategy emphasized that there are scientific principles in military strategy. These principles should not only be prescribed, but should be followed. This was considered now as the prescriptive approach. Jomini considered that these strategic principles are always valid and are independent of a situations or the technology employed.

These two contradicting approaches have contributed in the strategies of the business world. Von Clausewitz use of analogy especially in taking cases is frequently being used in the study of business. These two authors have great influence in the strategic theory.

Michael Porter formulated the generic strategies in the 1980's. It outlines three main strategic options open to organizations that aims to achieve a competitive advantage. Each of options is considered within the context of the competitive environment. The three generic strategies are cost leadership, differentiation and focus.

Cost Leadership: In a low cost organization, factories are built and maintained. Labor force are recruited and trained in delivering the lowest cost of production. Cost advantage is the main focus. In every element of the value chain, costs are being shaved off. Low costs do not always mean low prices. Example of this strategy is practiced by Toyota.

Differentiation: This strategy satisfies the needs of customers through a sustainable advantage of competition. Companies are allowed to desensitize prices and focus on value providing a better market margin and a comparatively higher price. The advantage of this strategy is that allows organizations to segment its markets so that it can target specific segments. British Airways practice this kind of strategy.

Focus on Niche Strategy: This strategy is suitable when an organization can afford neither a wide scope of cost leadership nor a wide scope of differentiation strategy. In this strategy, the organization is focused in the effort and resources on a very narrow and segmented market. Telecommunications companies often use this kind of strategy.

Technology's Recent Development and Globalization

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Thomas Friedman's book entitled “The World is Flat” is a metaphor of the world in terms of its leverage in commerce and competition, just like in a playing field wherein everyone has an equal opportunity. In this book, he analyzed globalization's progress, giving emphasis on the 21st century. Friedman views globalization as a change in the economic core in the sense that it leveled in the competitive playing fields between the industrial countries and those with emerging markets.

There are a lot of globalization books available and this book by Friedman managed to entertain, inform and sometimes annoy its readers. The author was able to travel all points, however, he emphasized on two nations that will be the world's future giants, India and China. The details and the research that he used are very intriguing especially the data from the call center workers in India.

The writer made presented this book since it discusses about technology which is very important in the evolution of business history as well as its significant impact for the success of the business.

A Case Study

A case study was conducted by Sahai regarding the evolution and history of the Acer Company. It is shown that Acer had carefully articulated its strategy from the very beginning of its formation in all of its decisions organizational structure, people management, policy decisions, business strategies, etc. that was quite revolutionary in the Asian world. Acer has used innovative management techniques for its operations, human resources management, and diversification and channel strategies. It has been able to allow (almost) complete decision making power to its business units while still leveraging the competencies from these individual autonomous units by promoting a management style which promotes individual growth innovative operations management using the concepts from JIT building a “client server” organization which enables open communication and knowledge transfer wisely choosing its partners in successful companies like IBM in US and SNI in Europe.

These strategies have led the company to the stage where it is now faced with the Asian crisis and the growing international competition. Additionally, with the introduction of the internet, the division of labor and capital has disappeared. In other words, the competitive advantage of Acer is gradually going away. Partnership and new product strategies based on internet technologies seem to provide the solution. It has to adapt to the changing world and develop new set of policies. Developing corporate strategies is a phenomenon similar to learning from other species in the animal kingdom, and the five REM provide a basis for developing winning corporate policies.

Relationship Marketing

Certain organizational changes have facilitated the growth of relationship marketing. Amongst these the most significant is the role definition of the members of the organization. Through a variety of changes in organizational processes, companies are now directly involving users of products and services in the purchase and acquisition decisions of the company. For a considerable time, these functions were managed by the procurement department as a specialized function, with little or no input from the actual users of these products and services. Thus the separation that existed between the producer and the user due to the existence of user middlemen, acting as gatekeepers, is potentially bridged in many cases. Wherever such changes are being made, direct interaction and cooperative relationship between producers and users develop.

Finally, in the post-industrialization period the increase in competitive intensity is forcing marketers to be concerned with customer retention. As several studies have indicated, retaining customers is less expensive and perhaps a more sustainable competitive advantage than acquiring new customers. Marketers are realizing that it costs less to retain customers than to compete for new ones (Rosenberg & Czepiel 1984). On the supply side it pays more to develop closer relationships with a few suppliers than to develop more vendors (Hayes, Wheelwright and Clark 1988; Spekman 1988). In addition, several marketers are also concerned with keeping customers for life, rather than merely making a one-time sale (Cannie and Caplin 1991).

In summary, relationship-orientation in marketing has staged a comeback. It was only during the peak of industrialization that marketing's orientation shifted toward a transactional approach. With the advent of middlemen, and the separation of producers and users, there was a greater transactions orientation. Industrialization led to a reversal in the relationship between supply and demand, when due to mass production efforts producers created excess supply of goods and services and were them selves preoccupied with achieving production efficiencies. Thus, they needed middlemen to service the customer. The middlemen in turn, adopted a transactional approach as they were more interested in the economic benefits of exchange than the value of production and/or consumption. Although efficiencies in product distribution were achieved through middlemen, effectiveness was not always accomplished as was evident from the literature on channel conflict.

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Although the exchange paradigm has been very useful in the development of marketing theory, it has outlived its utility. Born out of the transactions focus, the exchange paradigm serves a useful purpose in explaining value distribution among marketing actors. In the industrial era, where only manufacturers created value through their developmental and production activities, and middlemen shared the risk of ownership and provided the time and place utility, exchange paradigm was a useful way to study value distribution among these marketing actors. Consumers derived a surplus and utility from this exchange, but they could not contribute as much in value creation. However, where consumers are involved in co-production and have interdependent relationships with producers, the concern for value creation is paramount. For example, in home building, buyers get involved and emotionally attached with the home building process seeking to create value for them. The nature of interactions between the builder and the home buyer is not related to the exchange as much as it to create a dream home for the buyer. Exchange paradigm may explain the transaction in an existing home sale where value distribution is being undertaken, however, in the home building case or other situations where consumers are directly involved as co-producers, co-designers or co-marketers, there is a need for an alternative paradigm of marketing.


By nature, business history is an interdisciplinary subject. First and foremost, businesses are economic units that make such decisions as how much of a good to produce, how to make it, and what to change for it, their behavior is nothing if not the subject of the economic theory. At the same time, however, businesses are organizations of people whose choices are affected by the social and cultural environment in which they live and work. Hence, understanding how businesses operated in the past - and why they have succeed or failed, is inevitably an interpretive activity that requires the tools and sensitivity of scholars of history as well.

It is true that historical knowledge has sometimes been reduced to studying the facts without contextualization, without paying attention to their vital environment, to the political, cultural or social context of an era. We must not fall into this trap. Fortunately, ours is a young discipline, and this means that we are free of the paralyzing perspectives and lifeless dissections which sometimes dog the study of history.

According to classical authors, the first role of history is to teach us about life. It shows us how to avoid stumbling over the same stone again and again. It tells us, for example, who the main actors were in the most important events, and why they acted as they did. It informs us about moments of crisis and how people responded to them. It reports the most noteworthy successes. And it offers the upcoming generations a new way of working. History contributes so much, and so it should be cultivated, because it helps to keep alive the true identity of our profession.

The main problem is the sources. We cannot know what no one has taken the trouble to preserve. This is why it is so important to read the books written by the great figures of business development. But it is also vital to complete the picture by reading other points of view. We have to consult state archives, specialized journals, documents from businesses and bibliographical sources. It is not enough to collect the great masterpieces written by leading figures. It is just as important to take note of everyday matters, because it is this, in the long run, which will enable us to delineate more accurately the distinctive features of our profession. In this sense, there are some historical sources which are of primary importance: internal bulletins of companies and professional associations, reports produced by experts, and empirical analyses. All documents are useful to reconstruct later the identity of a particular corporation, the features of a particular event, or the overall history of business. Those of us who work in this profession will thus be empowered to project its strategy into the future, because we thoroughly understand its past.


Cannie, J. K., and Caplin, D. (1991) Keeping Customers for Life. American Management Association, New York.

Hayes, R. H., Wheelright, S.C. and Clarke, K. (1988) Dynamic Manufacturing. The Free Press, New York.

Pearce, Robert. (2006). Globalization and Development: an International Business Strategy Approach. Transnational Corporations. Volume 15, Number 1, pp. 39-74.

Rosenberg, L. J. and Cziepiel, J. A. (1984) A Marketing Approach to Customer Retention, Journal of Consumer Marketing, Vol. 1, Spring, pp.45-51.

Sahi, A. K. Learning from Evolution. Unpublished Dissertation, Massachusetts Institute of Technology.

Shimizu, T., Carvalho, M.M. and Laurindo F.J.B. (2006). Strategic Alignment Process and Decision Support Systems: Theory and Case Studies. Idea Group Inc. pp. 1-13.

Spekman, R. E. (1988) Strategic Supplier Selection: Understanding Long-Term Buyer Relationships, Business Horizons, (July/August), pp. 75-81.