Different Types of Business and Their Definitions - Assignment Example

BUSINESS FUNCTIONS By List the different types of business and provide definitions There are three primary types of activities based on the type of activities that they carry out. Business conduct some activities to make profit, the nature of those activities is the basis under which business are grouped into three main groups. The first business type is the merchandising business. It is a common form of business as it is practiced by many business people. Merchandising is whereby an business people buys goods in large quantity or rather in wholesale at a lower cost and later resale the goods in retail at a higher price to create profit for the business. The role of the entrepreneur in this case is exclusively limited to reselling products without adding anything to them in any form. However, in some instances the persons might repackage the good into smaller quantities affordable to the customers. The manufacturing business is yet another type of business that is commonly practices as it is through this kind of business that products come into the market. In manufacturing the company person buys raw material with the intention of transforming them to come up with goods that satisfy the needs of the customers. The finished product is entirely different from the raw materials since it has undergone manufacturing and processing to create a finished good that has more value than the former (Dlabay, Burrow, & Kleindl, 2011). Production involves a process whereby the raw materials are combined with labour and technology to come up with an innovative product that can create value to the consumers. This type of business is typically conducted in large scale to ensure the firms enjoy the economies of scale thus producing goods a reduced cost to ensure merchandisers can obtain the same products at a fair price for retailing. Another type of business is the service industry. Service businesses specialise in the provision of intangible products that satisfy the needs of the clients. They offer professional skills, advice and expertise that are of value to the customers. Some examples of service business include; education (Cambridge University), security (G4S) and banking (Bank of Scotland). However, some companies combine aspects of more than one business type and thus they cannot be grouped to any particular business. Such companies are frequently referred to as hybrid since they have characteristics of more than one type of business for instance hotels and restaurants i.e. Haymarket Hotel. These kind of business undertakes a broad range of activities that fall into various groups when classifying businesses, for example, they buy ingredients with the purpose of changing them into excellent meals a process that can be described as processing that falls under manufacturing business. Additionally, they buy other goods for resale, for example, soft drinks such as wines, beers and other beverages that are ready made from the industries for consumption (Ristau, 2011). Describe at least three different types of business ownership, giving examples for each type of any supporting information you have researched Sole proprietorship In this form of business ownership the person is the owner of the enterprise and has unlimited liability towards it. That implies that he may lose a personal property to pay the debts that the business has incurred. In essence, the sole owner and the business cannot be separated. Sole proprietorship involves a situation whereby the business owner is required with all the day to day activities of the entity. Relatively, the owner is entitled to all the profits that come from the enterprise. The sole proprietorship has some advantages some of them are elaborated below. The sole proprietorship is easier to start and manage since it only requires a few legal formalities for it to commence operations. Additionally, the initial amount of capital that is required is relatively small thus making it convenient for sole owners to set this kind of business structures. The owner of a sole proprietorship form of business is his/her boss since he/she can make crucial business decisions without consulting anybody. Thus, it makes the business to be flexible to take any changes that might come up in the enterprise environment. However, a sole proprietorship is characterised by unlimited liability whereby the losses incurred by the company can be recovered from the owner’s personal property. Ideally, since it is made up of only a single person, the company will face cash constraints problems since it has limited access to resources for expansion purposes. Relatively, the life span of a sole proprietorship kind of business is limited since it depends on the owner. During instances such as ill-health or death of the sole proprietor the business suffers as it will be automatically terminated (Dlabay, Burrow, & Kleindl, 2011). Partnership Typically, business partnerships are formed by more than a group of two or more individuals who have a common business goal that they ought to undertake for instance Lloyd and Sons law firm. Partnership form of business ownerships are classified into two types, limited and general partnership. General partnership is whereby the partners that form the business entity share in all managerial roles as well as the liability of the enterprise. In a limited partnership, one or more partners is general at the same time one or more partners is also limited. The association form of ownership is characterised by joint ownership of the business whereby all the individuals are creating the entity own a stake and thus are entitled to participate in the management of the enterprise as well as sharing profit. The general partners have unlimited liability, and thus their individual property can be taken to pay for the debts the business has incurred. Relatively, limited partners tend to have limited liability in that their liability to the company is limited to the members’ contribution to that particular entity. This form of business ownership enjoys shared management since different partners come with varied skills and knowledge that will enhance the overall administration of the body. Relatively, the losses incurred by the business are shared among the partners; thus no single partner will suffer the impact alone (Kurtz and Boone, 2011). Corporations These are entities that are created by law with authority to act, and they have a liability that is separate from its owners. In essence, a company is an artificial person since it can sue or be sued and has its capacity to handle its liability for example G4S UK. Corporations are advantageous since they have access to a large pool of resources thus they can expand their operations by investing in other portfolios to diversify business risk. Due to their large pool of resources, corporations can attract skilled personnel thus ensuring the firms are run by qualified management to increase their overall performance. However, companies are subjected to double taxation in that the firms pay the tax before they share their income with their owners again the pay shareholder tax after receiving dividends from the corporation. Once a disagreement ensues among the shareholder or rather if the firm regularly incurs losses the process of termination this form of business ownership is long and challenging since numerous legal formalities have to be undertaken for its operations to be successfully terminated (Kurtz and Boone, 2011). Explain the different factors that need to be taken into consideration when an entrepreneur is starting a business Ideally, some factors have to be considered before starting any form of business to avoid instances of business failure. To begin with the individual who is planning to start a new business should assess whether he/she has relevant expertise or rather knowledge about the product or service that the enterprise is going to deal with. In that light, the business owner will be in a better position to handle any issue that may come up due to prior knowledge of that field. Additionally, knowledge of the products or services that the firm deals with gives the owner a competitive advantage since he/she will be making first-hand decisions without consulting other parties thus enhances the flexibility of the business to adapt to varied environments (Dlabay, Burrow, & Kleindl, 2011). The market for the products is the objective of any business. Thus, prior to starting operations the market or rather demand of the goods and services that the firm plan to deal with should be determined to establish the reliability of that business. Some goods have seasonal demand while other have international demand as opposed to local demand thus this information will be crucial for decision-making to ensure the firm captures the right market for its products. Relatively, the level of competition in that particular market has to be analysed before operations commence. Some markets are characterised by intense competition thus making it difficult for new market entrants to enter. Ideally, new firms have to come up with innovative strategies that will enable them make a successful in those markets. On that light, markets with the intense competition are prone to high levels of risks, and the probability of business failure is high if the owner does not make decisions to position her firm in the market. The location of the business another factor that requires consideration since firm should be strategically placed to ensure a closeness to its raw materials as well as being accessible to its target market. However, a firm might choose to base its location close to raw materials due to the high logistical costs incurred in the transportation but then create an efficient distribution channel that will ensure its finished products reach their target markets as required. Ideally, the initial cost of starting a business is high thus those involved have to factor out how they are going to source for capital to fund their plans (Ristau, 2011). References Dlabay, L. R., Burrow, J., & Kleindl, B., 2011. Principles of business. Mason, OH, South-Western Cengage Learning. Kurtz, D. L., & Boone, L. E., 2011. Contemporary business. Hoboken, N.J., Wiley. Ristau, R. A., 2011. Intro to business. Mason, OH, South-Western Cengage Learning. Read More