Leadership and Entrepreneurship

Characteristics of a business

  • Economic Activity

Business is an economic activity, as it is conducted with the primary objective of earning money, i.e. for an economic motive.

  • Production/purchase of goods and services

Goods and services are produced or procured by business entities, so as to add value and sell them to the consumer.

Goods are either manufactured by the company or procured from the supplier, with the aim of selling them further to the consumer, for profit.

  • Selling of goods and services

Business must involve the transfer of goods to the customer for value, through selling.

If the goods are acquired for personal consumption, then the transaction will not amount to business activity.

  • Continuity in dealings

Every business requires regularity in transactions.

An isolated transaction of exchange of goods or services will not be considered a business.

So, to constitute business, the dealings must be carried out on a regular basis.

  • Profit earning

The basic purpose of a business is to make a profit from its activities. It is the spine of the business, which keeps the business going, in the long term.

Profit: a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.

  • Element of Risk

Risk is the key element of every business, concerned with exposure to loss.

The factors that affect business are uncertain and so does the business opportunities, which can be:

  • a  shift in demand

  • Natural disasters

  • Fall in prices

  • Strikes

  • money market fluctuation, etc.

  • Uncertain return

In business, the return is never predictable and guaranteed

The amount of money that the business is going to reap is not certain.

It may be possible that the business earns a huge profit or suffer heavy losses.

  • Legal and Lawful

No matter, in which type of business the company is engaged, it should be legal in the eyes of the law, or else it will not be considered as business.

  • Consumer Satisfaction

The aim of business is to supply goods and services to consumers, so as to satisfy their wants, as when the consumer (final user) is satisfied, he/she will purchase the goods or services.

But, if they are not, there are chances that they will look for substitutes.

Functions of a Business

  • Production
  • Marketing
  • Finance
  • Human Resources
  • Management Information
  • Innovation (Research & Development)
  1. Production.
  • Production is the creation of goods and services with the help of certain processes.
  • The production of goods depends essentially on the organization of men, money, materials, and facilities into a smoothly operating business.
  • In modern organizations, production is highly organized, mechanized, and specialized mass production, and, therefore, its overall charge is entrusted to the Production Manager.
  1. Marketing
  • Marketing is the process of getting goods and services into the hands of the consumer with a view to satisfying the needs and desires of consumers and producers.
  • The marketing function creates a process through which producers and consumers are brought together in an exchange relationship and a transfer of ownership takes place.
  • This process is based on the 4Ps: Product, Physical Distribution, Promotion, and Pricing.
  1. Finance
  • The finance function of a business is basically responsible for three decisions and their proper implementation:
    • Investment decisions (financial planning, capital budgeting, etc.)
    • Financial decisions (capital structure—fixed and working; short and long-term
    • Dividend decisions (maximization of shareholders’ wealth)
  1. Human Resources
  • The HR function deals with the human side of the business.
  • It is concerned with increasing the effectiveness of human performance in any organization.
  • The HR function aims at obtaining arid maintaining a capable and effective workforce, motivating the employees individually and in groups to contribute their maximum to the fulfillment of organizational goals.
  • The HR manager has to undertake the following functions:
    • Selection—determination of manpower requirements, job analysis, nature and sources of recruitment, employee selection, and induction and follow-up.
    • Training—human resource development.
    • Promotions and transfers.
    • Employee compensation—wage and salary administration.
    • Employee involvement and welfare activities.
    • Industrial relations—industrial discipline, industrial unrest, trade unionism, and workers’ participation in management.
  1. Management Information
  • The information function is basically concerned with records.
  • The net result of the preparation of records is the generation of a mass of “information”.
  • The purpose of the information function is to collect, generate, and communicate, in a clearly and easily intelligible form the information for purposes of decision-making and policy formulation.
  1. Innovation (Research & Development)
  • Innovation, which means creativity as well, is more of a philosophy and the entire business function needs to adopt it.
  • Research and Development.
  • The importance of innovation is hardly exaggerated. Normally businesses innovate through products or processes.

Types of business

According to its activity
  • Primary

Activity is connected with the production of wealth directly from natural resources.

Processing and extraction of natural resources.

  • Secondary

The industry uses raw materials as input and produces finished products as output.

Manufacturing and Construction.

  • Tertiary

Providing services to promote the flow of services and goods.

According to its size.
  • Micro: 1 to 10 employees
  • Small: 11 to 49 employees
  • Medium: 50 to 250 employees
  • Large: More than 250 employees
According to its capital:
  • Private

Capital comes from private citizens

  • Public

Capital comes from the State (government).

  • Mixed

Capital is a mixture of Private and Public capital.

According to its legal form:
  • Sole property

It’s owned by one person. From a legal perspective, the company and its owner are considered one and the same.

  • Partnership

A partnership is similar to a sole proprietorship in that the partners are the only beneficiaries of the firm’s profits, but they are also responsible for any losses and debts.

  • Corporation

Corporations involve the separation of ownership and management. Corporations sell shares of ownership that are publicly traded in stock markets, and they are managed by professional executives.

Company Philosophy

Mission
  • A mission statement communicates the organization’s reason for being, and how it aims to serve its key stakeholders.
    • Customers, employees, and investors are the stakeholders most often emphasized.
    • Other stakeholders like the government or communities can also be discussed.
  • The mission statement lays out the organization’s “purpose for being”.
  • Mission statements are often long statements and include a summation of the firm’s values.
Vision
  • A future-oriented declaration of the organization’s purpose and aspirations.
  • The vision statement says “This is what we want to become.”
  • They are relatively brief.
Values

The beliefs of an individual or group, and in this case the organization, in which they are emotionally invested.

Policy
  • A general statement is formulated by an organization for the guidance of its personnel.
  • The objectives are first formulated and then policies are planned to achieve them.
  • Policies are a mode of thought and the principles underlying the activities of an organization or an institution.
  • Policies do not require action but are intended to guide managers in their decision commitments when they do not make decisions.
Corporate Social Responsibility
  • It’s a type of business self-regulation with the aim of being socially accountable.
  • There is no one "right" way companies can practice CSR.
  • Many corporate CSR initiatives strive to positively contribute to the public, the economy, or the environment.
  • In today's socially conscious environment, employees and customers place a premium on working for and spending their money with businesses that prioritize CSR.
    • Environmentalefforts.Environmental efforts.
    • ==Philanthropy.==
    • Donating money, products, or services to social causes and nonprofits.
    • ==Ethical labor practices.==
    • By treating employees fairly and ethically, companies can demonstrate CSR.
    • ==Volunteering.==
    • Participating in local causes or volunteering your time(and your staff's time) in community events says a lot about a company's sincerity
Objectives of a Business
  • Business objectives are the specific and measurable results companies hope to maintain as their organization grows.
  • Entrepreneurs and business leaders must track performance in every part of their business to make sure they’re moving in the right direction.
  • Business objectives act as a compass for the company, dictating how the organization should allocate strengths, weaknesses, and opportunities that may be available.
  • Most of the time, objectives remain the same until the company’s circumstances change.

How to create effective business objectives?

The best way to determine business objectives for any brand is to use the SMART goal-setting strategy. Objectives must be:

  • Specific: Include details that outline the preferred outcome of the objective and who will be responsible for maintaining these results.
  • Measurable: Include a schedule of regular reporting to let everyone know where they stand in achieving their objectives.
  • Attainable: While goals should be lofty, employees must believe they’re achievable. Make sure targets aren’t too ambitious.
  • Relevant: Each objective must align with specific goals for the company.
  • Timely: Objectives need to follow a specific schedule. For instance, sales teams may have a particular sales figure to achieve each month.