Understanding Business: Definition, Types, and Strategy

Posted on Mar 18, 2025 in Business Administration and Management (BAM)

Defining Enterprise

An enterprise is defined as a collection of material, human, technical, and financial resources, organized and managed by an entrepreneur with the goal of generating profit.

Classification of Companies

Companies can be classified based on several criteria, including the number of workers, revenue, and assets.

Functions of an Entrepreneur

• Risk/Capital: The entrepreneur contributes capital to finance the company.
• Director: Makes informed decisions based on comprehensive information.
• Entrepreneurship: Possesses the ability to develop and advance a business or idea.
• Innovation: Launches new products and activities, potentially creating new markets.

Identifying Opportunities: Entrepreneurs seek niche markets – groups of people whose needs are not being met and who are willing to pay for a solution.

The Value Chain

The value chain, a concept developed by economist Michael Porter, posits that a company’s primary function is to add value to the goods and services it provides to customers.

Business Environment

• Specific Environment: Factors that directly affect a specific company. The company has some control over these.
• General Environment: Factors that affect all companies within a country, over which the company has little to no control (e.g., political, demographic factors).

Business Ideas

The starting point of any business is an idea. Common sources include:

• Vocational: Driven by a clear career aspiration. Recommendations include familiarity with the target audience, identifying niche markets, and product differentiation.
• Employment: Seeking employment or improving earning potential. Recommendations include replicating successful models. A franchise is a contract between a franchisor and a franchisee, where the franchisor provides the structure and receives a percentage of revenue.

Key Factors for Company Consolidation

• Customers: The primary focus of the company. Gathering extensive information about them is crucial.
• Competition: Companies that sell similar or identical products.
• Environment: Market factors that can impact the business (e.g., legislation, socioeconomic trends, technology).

Market Research

Market research involves collecting, processing, and analyzing information about the business environment, competition, and customers.

Market Segmentation

Segmentation is the process of dividing consumers into homogeneous groups (segments) based on one or more variables, to tailor strategies for each segment. Common criteria include:

1. Demographic (sex, age, marital status)
2. Socioeconomic (income, education, occupation, religion)
3. Geographic (climate, region)
4. Buyer personality (compulsive/reflective)

Market Positioning

Positioning refers to the place a product or service occupies in the consumer’s mind relative to its competitors.

Investment

Investing involves acquiring assets by sacrificing current funds with the expectation of future income. Investment decisions are critical to a company’s performance and survival.

Assets

Assets represent the collection of goods, rights, and obligations of a person or entity. It encompasses everything owned by a person or organization.

SWOT Analysis

Balance Sheet