Consideration before starting a new business
1. Selection of business: There are different types of business i.e. industry, trade, service enterprises etc. The first and important consideration before starting a new business Is the selection of a suitable business area. At the time selection of a business the following factors should be considered.
- Personal ability, Knowledge & Skill
- Degree of risk
- Profitability
- Availability of resources
- Possibility of growth and expansion
- Competition
2. Detailed study of business opportunities: Today, the complexities of marketing and technology have been growing, Before starting a new business therefore a detailed study of market, demand, changing customers habit, degree of competition, degree of risk and uncertainty etc.
3. Personal attitude and interest of businessman: A business man is the investors and owners of the business. Therefore, his personal attitude and interest affect the decision. Businessman considers the following questions. Is the field of proposed business interesting ? What are one’s personal attitudes and interest?
4. Financial planning: Finance is the life blood of the business without financing we cannot operate business regularly. Financial planning is the planning for short term and long term investment. Before starting a business it is necessary to estimate how much cost will be needed at the start and how much will it need for regular operation. Business organization need fixed capital as well as working capital.
5. Government policies and rules: The government also prepares rules, regulations and law related to business. Before starting the decision to start a business these laws and regulations should he studied in detail. Impact of government action and policies should be analyzed properly.
6. Form of business organization: There are many different forms of business organization. Best on the available resources, the types of business Sole trading, partnership or a company, co-operative business is to be decided. Each form of organization has its own merits and demerits. However, to a great extend this decision depends on the nature of proposed business, resources of business and size of the business.
7. Location of business: Location is a major factors for business to consider. For retail trading business with daily consumable goods, highly populated location is favorable where as for other business population mayn’t be a key factors. Before starting a new business the availability of communication, transportation, raw materials, banking, warehousing should be considered.
8. Selection of human resources: Business Success or failure depends upon the quality of its working people. Before starting a business therefore it is essential to have appropriate human resources planning. The plan must be prepared on the basis of valid and reliable source of Information. It should include the number of people needed for the business, their qualification, experience & other required qualities.
Requisites of business success
1. Determination of objectives: An objective is the first consideration in business planning. Objective determines the plan of action. The plan of action point out the exact way to conduct business. It decides in advance where to go, where is the destination, what resources to be used and soon. Objective also indicates standard and help to measure the actual performance.
2. Good management: Management is the art of achieving desired results through proper utilization o resources. A business can achieve its goals if the resources are mobilized in proper manner. There must be effective and efficient management system to realize these goals. Management provides the strength to bear the risk and the leadership to get the things done. Management is known as the backbone of an enterprise. It involves activities consisting of directing, coordinating and controlling the human efforts for achievement of predetermined objectives. A business unit cannot be successful inspitete of proper planning and sound organization, if the management system is not effective.
3. Sufficient capital: There should be adequate financial resources business. Business need fixed and working capital for day to day operation. Without sufficient capital business goals cannot be achieved. It is essential to estimate the requirement of capital for present work and also for future performance.
4. Modern technology: Technology brings efficiency in business operation. It develop new idea, innovation and new methods in production process. Sufficient resources in-terms of equipment and machinery and the prime requirement of business.
5. Best marketing system: Consumer are the backbone and main pillar of business. Mass production, scientific distribution system, effective promotional activities and the appropriate pricing techniques are the components of good marketing system. The efficient marketing system is essential to promote business to satisfy customers.
6. Employee morale: Business success also dependent upon satisfied and motivated employees. Such employees contribute to efficiency and productivity. The employees therefore, must be treated at the major assets. Employees can be motivated by providing fair wages, better working environment and stability of employment and prospects of promotion.
7. Facilities for research: Research helps The business to create new idea and new product successful. A successful business Should always provide research facilities for product development and modification. It help for innovation of new concept, model, size, design, structure, knowledge, strategy and technology. It contributes for generation of new products and service. Therefore, research is an indispensable components for survival and growth of business.
8. Proper location, layout & size: Proper location ensure the convenience such as electricity, transportation, drinking water, warehousing, communication, availability of raw materials and labour force etc. Proper layout is the system of organizing the machine and other equipments and putting them in right order. A Manufacturer has to layout its plant in such a way that production work con be carried out in efficiently and timely. For eg, Fashionable business unit must be established in the center of the city where more public visits.
9. Efficient and dynamic leadership: Success or failure of a business depends upon the qualities of its leadership. Leader has the ability to influence people or employees towards the achievement of desired goals. A leader should be dynamic, who can determine goals, encourage teamwork, co-ordinate activities, motivate employees and represent the whole business organization A dynamic business leadership has the following qualities:
- Idealism
- Business education
- Morality
- Winning personality
- Attitude for research and analysis
- Initiation and capacity to take prompt decision
Business environment
Business environment consists of a components which are surrounding of business organization which affect or influence its operation and determine effectiveness. Environment is dynamic and changes according to the time. It is also complex and difficult to forecast. Every business organization obtain input from environment transform them into output and again supply to the environment i.e. business is made up of Internal and External factors.
According to Keith Davis, “Business environment is the aggregate of all conditions, events and influence that surround and affect business”
Components of Business environment:
The components of business environment are as follows.
A) Internal environment:
Internal environment refers to various process that operate within the organization. Such environmental component are controllable by the management. It is also referred to as micro-environment factor. The following are the components of internal environment of a business.
i. Employees: Employees are assets of an organization and part of Internal environment. They resist organizational changes but management has to mobilize them in order to achieve their organizational goal. The management should motivate and mobilize the employees in order to perform the organizational job efficiency.
ii. Organizational Structure: Organizational structure is concerned with overall framework for different roles, functions and authority. It includes individuals groups, units and relationship between them. It provides a hierarchy for effective flow of instructions & feedback within the organization.
iii. Corporate Culture: The feeling or assumption that members in an organization is called culture. Every organization has its own culture, belief and value. The corporate culture beliefs and values have a very strong influence on the decision making & functioning of organization.
iv. Shareholders: The Shareholders are the owners and have a direct interest in the performance of business. They elect board of directors or management committee to manage the business on their behalf. The management committee directly involves in day to day operation of the business.
B) External environment: External environment refers to those factors that are beyond the control of management and outside the operating system of business. However, these factors affect business quite seriously if management is not responsive to changes. The external environment factor are also referred as macro environmental factors. The following are the components of external environment: PESTEL
P – Political environment
E – Economic environment
S – Socio-cultural environment
T – Technological environment
E – Ecological environment
L – Legal environment
i. Political environment: Political ideologies and thinking also affects the business. Political environment include political system ideologies, political institutions, political parties, political pressure group etc. Politics is a universal activity which affects the business world in a variety of way.
ii. Economic environment: The economic system determines the economic environment. The major elements of economic factor in the national context are economic policy, monetary policy, fiscal policy, industrial policy etc. The economic environment is concerned with income tax rate, rate of interest, purchasing power of people, sources of capital etc.
iii. Socio-cultural environment: Consumer satisfaction is the foundation stone of successful business. Business has to produce goods according to the needs of the customer. while producing commodities business has to take into consideration the tradition, customer’s beliefs and values, lifestyles, habits, education, thinking, behavior, income level of the people and so on.
iv. Technological environment: It consist of new products, new techniques and new approach to production, new methods & new equipments. Latest trend of using computer controlled machine and robot is emerging fast. An enlightened manager cannot ignore all those emerging changes. Technological changes like digital watch, artificial fibre cloth, computer technology and communication, media help affects business opportunities to a great extent.
v. Legal environment: legal environment consists of legislation passed by the government. Its prescribes rules and law which must be followed by business units. These days the government regulates the business according its economy trade and industrial policy.