[Guide to the Market Economy] Businesses Are the Flower of the Market Economy

From the late 19th century, Evian made money by selling water... Companies that lead civilization through innovation and core technologies

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The “King of Inventors,” Edison, was also a shrewd businessman. He did not leave his many inventions as mere “successful experiments,” but transformed them into profitable products. He founded an electric lighting company called Edison General Electric and amassed great wealth through his business acumen.

Evian is a world-famous bottled water brand. Evian was the first company in the world to successfully commercialize water by focusing on the fact that the glacial water from the Evian region of France contains abundant minerals beneficial to health. Today, buying bottled water may seem perfectly natural, but when Evian first began selling it, it was the late 19th century.

Selling water in bottles?

At the time, the very idea of drawing naturally flowing glacial water, bottling it, and selling it was more than innovation—it was a shock. For all we know, quite a few people must have predicted Evian’s failure. It is only natural, considering that this was an era when no one even imagined paying money to drink bottled water.

But in the end, Evian survived. More than that, it rose to become today’s undisputed No. 1 bottled water brand in the world and boasts enormous annual sales. How was Evian able to achieve such global success with nothing more than the naturally existing product of “water”? The reason is that Evian combined the creative idea of “selling bottled water” with the logic of commerce. Evian is known for maintaining a clean and safe production process from collecting glacial water melted from the perennial snow of the Alps to bottling it. This was possible because Evian was a company equipped with a rigorous hygiene management system and advanced manufacturing technology. In addition, by instilling in consumers the perception that its product was not just water but mineral-rich “medicinal water,” Evian succeeded in establishing the brand value of “water you can trust and buy to drink.”

Companies are the pillars of a nation

“Business is the pillar of a nation and society!” This is what the renowned American management scholar Peter Drucker said. Businesses are what enhance national competitiveness and serve as the source of national wealth creation. Companies are often called “the flower of the economy.” And for good reason: they are the entities that produce and supply the goods and services essential to our lives. Companies are also the foundation of job creation and the agents that increase a nation’s wealth. That is why former U.S. President Calvin Coolidge said, “Civilization and business profits go together.”

What if there were no companies? Without hesitation, one can say that the benefits and conveniences of civilization we enjoy today would never have been possible. That is because companies industrialized innovative core technologies, leading both economic growth and the advancement of civilization. A useful comparison is 18th-century France. At the time, France was truly a nation of scientists. It produced outstanding scholars in chemistry, electricity, and mathematical physics, achieving overwhelming advancement in the natural sciences. But unlike Britain, France experienced not the Industrial Revolution but the crisis of the French Revolution. That was because France lacked merchants—in other words, entrepreneurs and businesses. As a result, even though science and technology advanced, the nation’s wealth did not increase, the people’s lives did not improve, and in the end the unprecedented bloodshed of the French Revolution broke out.

Industrializing core technologies is the role of business

The United States was one of the great beneficiaries of the Industrial Revolution. The “King of Inventors,” Edison, was also a shrewd businessman. He did not leave his many inventions as mere “successful experiments,” but transformed them into profitable products. He founded an electric lighting company called Edison General Electric and made a great fortune by demonstrating his skill as a businessman. Edison General Electric was the predecessor of today’s global conglomerate General Electric (GE).

If core technologies are the domain of scientists, then using those core technologies to industrialize them is the role of business. Without companies, core technologies would remain merely within the realm of science. It is only because companies exist that core technologies can expand from the realm of science into the realm of the economy. The result appears in the form of increased national wealth through economic growth, along with qualitative improvements in our lives.

Sung-no Choi

President, Center for Free Enterprise (CFE)

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Original title: [시장경제 길라잡이] 기업은 시장경제의 꽃

Author: Sung-no Choi

Date: 2018-11-12

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=16&idx=11245