Why do businesses exist? To earn profit? Or to server a purpose?
Every business exists for a purpose, it may sell goods or services. And only by doing so will they generate profits in the long run. Businesses operate as a part of a supply chain in a market, where they can function as a supplier, manufacturer, distributor, retailer, or any combination of these roles.
Types of business
Manufacturing
Focuses on the production of goods, ranging from raw material suppliers to brand holders.
- Original Equipment Manufacturers (OEMs) - brand holders
- Companies that design and produce products under their own brand name.
- Examples: Toyota, Apple, Lenovo.
- Suppliers / licensed producers
- Companies that manufacture parts components, or products under licence or for other companies.
- Examples: Suppliers of automotive parts, electronic components, etc.
- Raw Materials
- Companies that extract, process, or provide raw materials used in manufacturing.
- Examples: Steel producers, coal mining companies, rubber suppliers.
Service
Encompasses a broad range of server-oriented businesses, including professional services, technology, hospitality, and education.
- Professional services
- Businesses that provide specialised services based on professional expertise.
- Examples: architects, financial planners, accounting firms, solicitors.
- Travel, leisure, hospitality
- Companies that provide services related to travel, entertainment, and accommodation
- Examples: hotels, airlines, travel agencies, resorts.
- Technology
- Businesses that offer IT services, software development, cloud services, and other tech-related services.
- Example: IT consulting firms, software development companies.
- Education
- Institution that provide educational services and training.
- Examples: TAFE, universities.
What is the purpose of a business
- Production of products and services
- Businesses create and deliver products or services that add value to customers.
- Division of labour
- They organise and divide tasks among individuals to manage complexity and improve productivity.
- Collaboration
- By working together, individuals within a business achieve greater goals than they could independently.
- Governance and control
- Businesses establish systems to manage operations, ensure compliance, and maintain order.
- Resource allocation
- They allocate resources efficiently to optimise input and output.
- Effectiveness
- Focus on doing the right things to deliver value and quality to customers.
- Efficiency
- Emphasise doing things right to minimise costs and maximise output.
- Profit
- Ultimately, businesses generate profit as a measure of success and sustainability.
How is a business organised
The organisation of a business can be understood through two primary structures: functional organisation and process organisation.
Functional organisation
This structure focuses on division of tasks within the company both vertically and horizontally.
- Horizontal distribution
- Dividing an organisation into different departments, such as marketing, finance, human resources, or production. Each department focuses on its specific area of expertise.
- Vertical distribution
- Dividing an organisation into different hierarchical levels, from top management down to operational staff. Decisions flow from higher to lower levels, and accountability is maintained through clearly defined roles.
Process organisation
Process organisation emphasises the flow of work and materials through the company. It focuses on workflows and processes, instead of dividing the company by function, a process organisation looks how tasks flow from one department to another to complete the business process.
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