Universal Enterprise Model (UEM) – applicability of the scheme
The ‘universal’ enterprise model can really be used for all kinds of entities
The universal enterprise model is a flow model in which all possible flows are reduced to a number of types with common characteristics. In terms of flows the societal activity can be summarized by saying that it is about the collection of all flows of goods, services, and money. In reality these flows show up in numberless different ways, so that in principle there are also several ways to group them in order to come to a surveyable representation with yet sufficient detail.
In the ERS context it is self-evident that the flows are grouped in accordance with the characteristics that became manifest in the analysis of the flows and entities. Because the scheme would become too compact that way, it has further been detailed by headings that are currently used: this has led to a scheme with easy recognition and consequently good accessibility.
In the description of the societal system as a tight web with knots we also mentioned that the connections / flows among the knots could be intense and long lasting as well as short and unique. The knots themselves do not have a fixed size: they can grow or shrink and evolve as to their character.
The generally valid and dynamic UEM scheme enumerates a number of headings of which the concrete filling-in, depending on the peculiarity of an economic entity for a given period, can vary between absence and extensive detail.
The general usefulness of the UEM is briefly explained hereafter for the five currently used groups of entities: households, profit enterprises, financial enterprises, social/non-profit enterprises, and government institutions. We start with the profit enterprises (industrial, service, and trade enterprises) because they have flows in the majority of the headings, so that they can best illustrate recognition.
… applied to profit-enterprises
An industrial enterprise has to put up a lot of infrastructure before it can start the chosen business activity. Purchase or leasing or (long term) hiring of machines and buildings is needed together with the insurance of those production means, as well as the necessary maintenance and the personnel to keep the whole operational.
The production activity itself requires energy, materials, services, and the hiring of labour force. At the same time intensive use is made of all kinds of public infrastructure (network of roads, harbours, …) and the aid of free natural flows is welcome (cooling towers: river water and air as coolant, etc.).
The whole of the activities in the infrastructure and the production layers entails an extensive need of capital and credit, and causes a lot of transactions in the financial layer.
A service enterprise and a trade enterprise need less extensive flows as to infrastructure and production; as a consequence less activity will be seen in the financial layer.
… applied to family-entities
The application (and usefulness) of the UEM for family entities is probably less immediately obvious, but this is so because in common speech similar things are called differently in an enterprise and in a household.
Inside a household a lot of labour is achieved, of which only the own family members can have the pleasure and the profit, but the households are also the largest group of suppliers of services: they supply labour to the above mentioned profit enterprises as well as to financial enterprises, social and profit enterprises and the government. Self-employed accomplish their labour for their own business or enterprise (which is a separate entity, although the separation is not always very well visible).
The production process of a family consists of the bringing-up and the education of one or more family-members, guaranteeing them of a sound and balanced life in order to make and keep them suitable to accomplish labour in other economic entities.
The infrastructure that families use for that purpose consists of: the house with all its structures like bathroom, kitchen, heating unit, and all the furniture present in the house from the cellar till the attic. Further there are also means of transportation like bicycles, mopeds, motorcycles and/or a car, a camper, a caravan, etc. and clothing.
Although most families do not have a permanent domestic staff (only a smaller group of financially stronger households have a cook or a nurse or an employee, a bodyguard, a butler, etc.), there can be periods in the course of the existence of a family when help for cleaning, a nurse or a gardener, etc. is needed.
The flows or inputs in the production layer of a household are water, energy, food, and a whole range of non-food products. As to services, households usually have fetched their own services (visiting café, restaurant, all kinds of active or passive diversion, etc.) instead of them being delivered at home (e.g. delivery of pizzas).
Families also take up loans and credits (for the house and several infrastructures) and can make financial investments with their savings. They can also get premiums (for isolation, solar cell panels) and subsidies (child allowances, legal pension, and so on).
There is no problem at all to apply the UEM to a household (= the family as an economic entity), and this approach permits to dispense with the usual rigid but misleading division of the economic entities into enterprises and households, and it opens the possibility of reflecting more freely, more openly, and more correctly on the history and the evolution of the societal system.
… applied to financial institutions
With financial enterprises (banks, insurance companies, holdings or investment companies) the gravity centre of the flows lies of course in the top part of the scheme. They are mainly engaged in credits, formation of capitals, and financial investments, for which they use personnel, communication and computer equipment and the infrastructure of their network of offices. In that sector the proper production requires very few articles of consumption – mainly stationery to materialize their services in contracts and the like.
… applied to social / non-profit enterprises
For non-profit enterprises (hospitals, schools, etc.) the filling-in of the scheme is fairly comparable with the situation of ‘normal’ enterprises but with a few important differences:
- For several reasons they cannot ask the market price for the services they render. Only a contribution is paid by the user, and the rest comes through different channels.
- The money for labour, infrastructure and articles of consumption comes from subsidies; these are mainly money from taxes passed to that sector. The public goods and services that are produced with tax-money are produced and supplied to a large extent via the non-profit.
- Due to their non-profit character these enterprises cannot be active in financial investments. Nevertheless some financial yield remains possible by good financial management.
Social-profit enterprises can be compared with profit enterprises, but they can count on extra subsidies, because their main goal is to create jobs for weaker groups in society. They normally have to strive for a financial break-even on a yearly basis (neither profit, nor loss).
… applied to government institutions
For the many different government institutions the filling-in of the scheme depends on the specific task they have to accomplish:
- tax administrations are mainly comparable with financial enterprises except that the emphasis lies on passing the money to other government administrations instead of financial investments;
- the other government entities are comparable with industrial or service enterprises as to their activities.