The Theory of Business

MANAGEMENT ARTICLE SUMMARY

THE THEORY OF BUSINESS BY PETER F. DRUCKER

ABELDIA TAMEZ-HERNANDEZ

AMBERTON UNIVERSITY

The author reviewed older, outdated management techniques used by large successful companies and then went on to explain that those organizations that didn’t quickly adapt to the changes occurring in their environment, failed and those who were able to be flexible to changes within their organization, bounced back and survived.

The author states that there are four specifications of a valid theory of business, they are:

1. Assumptions about environment, mission, and core competencies must fit reality. This is basic logic and reasoning. When proposing a mission and considering your core competencies, the reality of the environment will help dictate that you run an organization with logic, reason and within reality, or else it won’t work.

2. All three assumptions must fit each other. This holy trinity must work together for a successful outcome.

3. All participates of the organization must be aware and understand the theory of business. It’s assumed that all participates help with the flow of business, in some shape or form. It is vital for the organization to have all of these individuals practicing the theory.

4. The organization must test their theory of business, constantly. Since the changes in the environment are always occurring, so must the theory of business.

What three things need to be done to keep the theory of a business updated and successful? According to the author, preventive care, early diagnosis and cure are the keys. There are two types of preventive measures that can be done, the first being a complete critical review of all the workings of that organization. Reviews must include product, service, policies and channels of distribution. This is called abandonment. This keeps you updated to potential new avenues that need to established in order to stay on top of the changes that occur in our market...