Business structures and success factors
When an individual or a group of individuals team up to achieve certain goals which are commercial in nature we consider them to be a business organisation. The business organisation may or may not be created for profit, and a non-profit organisation, solely created for the purpose of raising money and resources, to help in the running of various public programs, also falls under the aegis of business organisation. Organisation as such is quite a broad term and it may also include sports teams and clubs which are non-business organisations. Thus, business organisation is basically an entity created for the purpose of executing commercial activities. Before we proceed further for the definition of the various fundamentals that create a business organisation, we need to zero in on the various types of for profit business structures.
This is one of the most common forms of business organisations and if you look around, you can see the sole traders everywhere. From plumbers to car mechanics each represent sole proprietorship. It is estimated, that in United Kingdom, approximately 10 percent of the sole traders are in catering and finance, while around 20 percent are in construction and retailing. There are certain advantages of having a sole proprietorship. To begin with, decision making is pretty easy and quick as compared to large organisations where the decision making has to pass through various channels to finally reach its conclusion. Also the likes and dislikes of the customers can be quickly zeroed in and catered to. Sole traders run their businesses through building a sound customer base, whose likes, dislikes as well as opinions are taken and given due importance by the proprietor.
Now that we have discussed the advantages of having a sole proprietorship, let’s try to figure the disadvantages of such business organisations. For starters, when the entire decision making is on your own shoulders, sometimes you may get tired as well as may have to chip in extra hours to keep the organisation floating as well as keep it profitable. Unlike large organisations, the liability here is not limited to certain aspects. You have to be solely and singlehandedly responsible for everything. But running a business requires a tight ship and the truth is that an excellent interior decorator may not really have a head for running a business and may actually make wrong decisions.
It could begin with two likeminded individuals looking for business opportunity and end up with more than two partners. In all circumstances the availability of more than one partner may result in limited liability of each, unlike the sole proprietorship where the entire onus is on the shoulders of the one individual. The advantages of having a partnership are many; to begin with, two or more individuals may pool in their resources as well as knowledge and create great value for the customers. For example, a group of carpenters can create a business and if any of the partners is indisposed or on leave, then the rest of the work can be handled by the other partners. When creating a partnership, it is important that a contract is created which covers all the necessary elements required for the running of the business. This type of organisation is the commonest format for business professionals such as lawyers, surveyors, accountants etc.
It is imperative to note here that a company is a legal entity and the law states that the existence of a company is separate from its owners. Therefore, legally speaking, a company may be sued as well as sue in its own name. A company has to first of all register with the registrar of companies and also have an official address. Shareholders of a company appoint directors to take decisions and direct various activities concerning the business. Private companies have ‘limited’ after their name. In general private companies are comparatively smaller than public companies, but some private companies such as Mars and Portakabin are comparatively larger. In a private company the buying and selling of shares can be undertaken only with the permission of the board of directors as well as the shareholders who have limited liability. A public limited company (a PLC) is where the shares are available to public through the stock exchange.
Thus, business organisation may be categorised under the above categories. But what are the success factors that drive any business organisation and also create value for the people involved?
Who and where are the customers?
You have a great idea and the plan looks great on paper. You collaborate and create your product or service and then wait. Wait for the first customer to choose you over thousands of other choices available. Thus, the most fundamental consideration for any business organisation is to identify and target the potential customers. Businesses need to undertake market research aimed at segmenting, targeting and positioning of their product or service. This can be undertaken by the business itself or by the use of a market research company.
Half of your battle is won if you can hire a professional and thoroughly dedicated team for your business. As a leader, your greatest assets are your human resources who are trained and adept at their job. Hiring is thus a major decision and putting the right person on the right job is a leader’s responsibility. But a leader’s role does not end at hiring the right resource. Nurturing the right talent, to obtain maximum results and at the same time also create conducive environment for the efficient running of the business is equally important. The leader has to play the prime role of motivating and inspiring the people around them so that the business succeeds and gets better with time.
So you have identified the potential customers, hired the best resource your money can buy, what next? The business needs to have an effective strategic plan. A strategic plan can look good on paper, but in reality when you start to implement it, things can start to get very tricky. This is because although you may have done lot of paper work before you launch your product or service, you will not know the result until your product undergoes the test of market exposure. The ground realities may often differ and sometimes the strategic planning has to be adapted in accordance with the changing market scenarios. Thus, having a sound strategic plan which is focused, as well as adaptable, is one of the primary premises for a business.
The day to day, and behind the scenes, operations are the ones that pull the business together and create value and profit. Just stop and speculate, what happens before a major product launch? For instance, the recent iPhone7 series launch by Apple was followed by the usual hoopla. The product, the marketing strategy, the traditional gimmicks followed by the buyer’s frenzy. All this has not been achieved in a day. The business has worked and operated under tight fisted deadlines to arrive at such a juncture.
Accounting and finance
If you do not understand how to maintain and keep accounts books and ledgers, then you need to hire a good resource that can do the required work efficiently. Accounting is important not only because good record keeping helps to keep everything under control but also because no business can survive or progress without effective management of its cash flow. Businesses need to manage their finances in order to create value and to enable them to survive and grow.
Marketing strategies can make or break the fate of your service or product. Marketing is more than advertisements. It is the creation of a brand and helps you carve out a niche in what is usually an already saturated market full of identical products. The initial stages of marketing will include segmenting, targeting and positioning, the later stages would cater to product differentiation and product positioning. Many a good product does not get the recognition it deserves due to ineffective marketing strategies, and many products, although rather average, can actually benefit because of effective strategies.
Business organisations work in a dynamic and unpredictable environment. There are so many things that can go wrong at any stage and a prudent business will always plan for the rainy day well in advance. Starting from natural calamities to human disasters, businesses have to stay afloat in unpredictability and adapt as well. For this, every business always needs to think two steps ahead and take action as per the situation. So, it’s imperative to have a plan B!
Business organisations therefore work within these parameters – a suitable ownership structure coupled with the factors leading to success. These parameters have to be met continuously to ensure the smooth running and continuation of the business.
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By an iQualify UK staff writer