Understanding Business Structures, Operations, and Economic Influence
1.1 The Company and Economic Unit
The business concept is not new; it has existed since people needed goods and services. These needs are often diverse and unlimited, while resources to meet them are scarce, making property valuable. This is the starting point for the company and economic production unit, meaning any process where production is envisioned to create or make goods and services available to citizens.
A) Objectives of the Company
Its basic objectives are to maximize profits while minimizing environmental costs. Another objective is to optimize its value chain. This involves analyzing the company’s main activities to identify sources of competitive advantage. It’s a set of functions that add value to the company’s products and services, aiming for maximum profitability. There are three elements: Primary Activities (related to development), Support Activities (administration, human resources, and organization), and Margin (the difference between total value and total costs).
B) Elements of the Company
- Human Factors: People directly linked with the company.
- Material Factors: Economic assets of the company.
- Organization: Joint authority relationships, coordination, and communication within the group and externally.
- Environment: Factors influencing the entrepreneur and enterprise performance.
C) Functions of the Company
- Production Area: Controls the supply of raw materials and production.
- HR Area: Organizes and manages company staff and investment.
- Finance and Business Area: Marketing and distributing the product.
1.2 Influence of the Environment on the Company
A) The Company as a System
It has the following features:
- It’s an open system; external factors affect and influence company decisions.
- It consists of a combination of different elements or subsystems.
- It’s a global system; any influence on one subsystem impacts others.
- It is self-controlling.
D) Business Ethics
Ethics must be applied in all activities. Doing so generates benefits such as:
- Increased prestige.
- Customer and supplier loyalty.
- Improved staff motivation and productivity.
- Ability to receive greater financial support.
1.3 Classes of Business
A) The Employer
Its functions are:
- Planning: Setting goals, creating strategies to achieve them, establishing policies, and setting decision criteria.
- Managing: Ensuring that company personnel perform tasks necessary to achieve objectives.
- Organizing: Designing a structure where each person’s functions are defined.
- Controlling: Verifying that everything goes as planned.
B) Types of Companies
- According to size (economic, technical, and organizational assets).
- According to activity (primary, secondary, and tertiary).
- According to capital ownership (private, public, or mixed).
- According to legal framework (types of companies).
1.4 Location and Dimension of the Company
A) Location
- Market Demand: Analyze population or area interest in the product.
- Procurement of Raw Materials: Assess the quality of relevant materials.
- Labor Market: Potential workers and their skills.
- Communications and Transport: Consider transport availability.
- Supplies: Information on the availability of necessary supplies.
- Cost of Construction and Land: Prices vary by location.
- Law: Know the legal rules.
- Investment and Financing: Locate the business where access is easy.
- Regional Economic Development: Evaluate the development of the chosen region.
B) Size
This refers to productive capacity, influenced by factors like location and technology. Decisions on location and dimension should be made simultaneously when creating the company. Dimension involves knowing what is needed, and capacity is the maximum production level achievable in a given time.
C) Multinational Enterprises and Globalization
Globalization refers to the extent of economic relations between countries, creating a global economy where each economy depends on others. This is a social, economic, and political process. Multinationals emerge from market expansion by large enterprises. Small and medium businesses (SMEs) are defined as small with fewer than 50 employees and a sales volume of EUR 5 million per year, and medium with 50 to 250 employees and sales between 5 and 10 million. Their characteristics are:
- Low financial capacity and business formation.
- Staff qualification, training, and technological obsolescence.
- Flexible organization and personnel.
- Integration and development of interstitial markets (using gaps left by large companies and focusing on productions that allow economies of scale).
- Creative jobs (as these companies have more working capital resources).