OPPapers.com

International Trade

The Theory of the Business
Peter Drucker, the author of this article argues in this article about large and successful organizations worldwide that their theory of the business no longer works. He defines theory of the business in every two or three paragraphs with a different meaning. The core meaning of theory of the business is identifying customers and competitors, their values and behavior. They are about technology and its dynamics, about a company’s strength and weaknesses. These assumptions are about what a company gets paid for. He wrote about big companies like IBM, GM, Siemens, Detusche Bank and etc. He shows how old these companies have used their own theory of the Business and survived through a lot of economical storms like the great depression, World War 1 and 2. The key for surviving through these economical storms is the kept on changing their theory of the Business. Drucker points that out a lot in this article, theory of the business should keep on changing every few years. Corp
orations or small businesses often find themselves in seemingly unmanageable crisis if they do not bother re-charging their theory.
The root cause of nearly every one of there crises is not that things are being done poorly. It is not even that the wrong things are being done. Indeed, in most cases, the right things are being done- - but fruitlessly. What accounts for this apparent paradox? The assumptions on which the organizations have been built and are being run no longer fit the reality. He said eventually every theory of the business becomes obsolete and then invalid.
Every organization, whether a business or not, has a theory of the business. In 1870, Georg Siemens, the architect and first CEO of Deutsche Bank, the first universal bank had an equal clear theory of the business: to use entrepreneurial finance to unify a still rural and splintered Germany through industrial development. Within 20 years of its founding, Deutsche Bank had become Europe’s...