Well, any decision-making organization that is involved in the process of using inputs to produce output that has the power to satisfy the demands of its customers is called a business.
It involves identification of HR needs of the business, workforce planning, recruitment and training, appraisals, dismissals, etc. to keep the human resources intact.
Finance is a key functional area of business which includes monitoring of all the finance-related activities of an enterprise such as managing the source of finance, preparation of accounts, presentation of financial statements to the directors, shareholders, senior management and potential investors of the company.
This is the functional area of an organization responsible for arranging adequate raw materials for the production and maintaining the efficiency of production along with the quality of output.
The businesses can be classified into four interdependent sectors based on the stage of production they are in.
Primary | Secondary | Tertiary | Quaternary |
| Enterprises in the primary sector participate in mining of natural resources that are processed and used for production of goods/services. E.g.- Fishing, | Businesses in this sector are involved in the conversion and processing of natural resources to produce final products. | On the other hand, the tertiary sector includes all the businesses that provide services to the customers. | This sector is a specialized subcategory of the tertiary sector, engaged in the use of knowledge/intellect for provision of information-based services. |
With the development of countries, there is change in the relative share of national output/GDP and employment from primary to secondary and tertiary sectors.
The shift in this share is termed as ‘sectoral change’.
Entrepreneur | Intrapreneur |
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It is true that you might have to undertake risks and responsibilities if you plan to start your own business, but the reasons listed below might encourage you to think of the same.
Capital growth (appreciation in the value of assets) acts as an incentive for the entrepreneurs to expand their business and make more profit out of it. Entrepreneurs like Mark Zuckerberg, Jeff Bezos have successfully made their fortunes from capital growth.
If a person has the capability to capitalize on the opportunities and turn the risks into profit, startup might be the best option to go for.
Most of the entrepreneurs think of their business as something which can be transferred to their upcoming generation who can inherit and expand it. Example- Reliance Ltd. was started by Dhirubhai Ambani and then inherited by his son Mukesh Ambani, who is the richest entrepreneur in Asia today. With his entrepreneurial spirit, he continued his father’s business and took it to another level of height.
One who is driven by challenges and takes pride in overcoming them can think of starting a business.
When a person works under another person in authority in an organization, he/she must adhere to the guidelines and work in the provided working conditions and pay. On the contrary, a self-employed person is independent.
Job security is a dreadful issue for all the employees working in private organizations. They may be dismissed by the company’s senior management for the company’s benefit, at any point of time. In an enterprise of your own, these risks are quite eliminated.
1.) Before a business can start the operations, it needs to fulfil all the legal requirements related to setting up of an organization. The business must be registered in the books of registrar after submitting the necessary documents and details.
2.) Next step includes taking up necessary decisions related to finance and capital requirements of the enterprise. Evaluation of the amount of funds required, identification of the sources of finance, etc. are the major decisions to be taken.
3.) Before a business can start the operations, it needs to fulfil all the legal requirements related to setting up of an organization. The business must be registered in the books of registrar after submitting the necessary documents and details.
4.) Once the registration happens, a business bank account (current account) needs to be opened to facilitate the financial operations such as payments and receipts.
Due to the lack of credentials, they face difficulty in borrowing funds. In few businesses, either the funds borrowed prove insufficient, or the interest charges are so high that the entire cash flow position is affected.
Cash flow problems arise in most of the new firms because of the shortage of working capital (capital required to meet day-to-day obligations of an enterprise). It may happen when there is a lengthy credit period facility given to customers. Increase in unused stocks of raw materials, unexpected changes in external environment are few other reasons for shortage of working capital.
A planned marketing is necessary to provide the target customers with right products at a reasonable price. If the marketing plan fails, the sale of the product would be affected adversely, and hence the revenue and the profit, leading to complete failure.
The small startups are not able to benefit from the economies of scale (benefits availed by established businesses due to large scale of operations, e.g., discounts on bulk purchases.) because of their small scale of operations. Moreover, incurring fixed costs with a small portion of revenue generated in the beginning years leads to higher production cost.
It is quite difficult for a new business to forecast the demand levels of customers accurately in the initial years. This leads to the problems of overproduction or underproduction causing dissatisfaction among customers many times.
A new business might find the management of its human resources quite challenging in the beginning.
Legalities- All the businesses must necessarily comply with the legal formalities and paperwork such as registration, licensing, consumer and employee protection laws, etc. A new business firm may find it confusing to assimilate it in the beginning, leading to payment of penalties.
An established enterprise has the power to insulate itself from the external changes due to the experience and provisions made in advance. But a new firm may be vulnerable to such external changes (E.g.- technological change, change in government regulations, economic recession, etc.).
A detailed report on the goals and objectives of a business organization. It acts as a planning tool to set the targets after considering the available resources to get an idea of how the activities are to be performed to reach the defined objectives. The key elements of this report are:
The report needs to contain a few things related to business. The name, address, details of the owner, type of business organization, costs of premises, etc.
Key areas to be covered would be details of the good/service to be produced, costs and the pricing strategies to be followed, place and process of production, details of suppliers of the raw materials, etc.
Proposed sources of funds, break even analysis, cash flow and revenue forecast, rate of return for investors, etc. are the few subjects of issue.
The report also enlists the nature of target market, plan for market segmentation, expected growth and sales, competitor analysis (SWOT), etc.
The business plan necessarily includes the plans related to recruitment and training of employees, their remuneration, job roles, organizational structure, etc.