Business

Business - an activity aimed at systematically making a profit.
In a market economy, most economic activities are forms of business, which is why business is considered source of economic and social development of society.

Based on the number of employees, volume of production, operating conditions, small, medium and large businesses are distinguished. Small businesses are the most widespread, with each businessman occupying a small share in the market. As a rule, this is a small enterprise that is engaged in retail trade, provision of services, or produces homogeneous products. In some countries, there is a system of government support for such businesses, since they provide widespread employment with low profitability.

A businessman usually seeks to turn his asset into capital, which will generate income regardless of the personal participation of the owner, who can continue to work at his enterprise, but can switch to another activity.

In a market economy, most economic activities are forms of business, which is why business is considered source of economic and social development of society.

Based on the number of employees, volume of production, operating conditions, small, medium and large businesses are distinguished. Small businesses are the most widespread, with each businessman occupying a small share in the market. As a rule, this is a small enterprise that is engaged in retail trade, provision of services, or produces homogeneous products. In some countries, there is a system of government support for such businesses, since they provide widespread employment with low profitability.

A businessman usually seeks to turn his asset into capital, which will generate income regardless of the personal participation of the owner, who can continue to work at his enterprise, but can switch to another activity.

Business history

The content of the concepts “business” and “entrepreneurship” began to be studied at the turn of the 19th—20th centuries. The economist A. Mashala (1907-1968) was the first to add a fourth factor, organization, to the above-mentioned three classical factors of production (land, capital, labor). Since that time, the concept of entrepreneurship has expanded, as have the functions assigned to it.

The English economist, Nobel Prize winner in economics for 1974, F. A. Hayek (1899-1984), took a fresh look at this problem. In his opinion, the essence of entrepreneurship is the search and study of new economic opportunities, a characteristic of behavior, and not a type of activity. Later it continued in classical theories and new concepts, reflecting the specifics of the development and functioning of social and economic systems.

Classical school of political economy (A. Smith and D. Ricardo). English economists A. Smith (1723-1790) and D. Ricardo (1772-1823) presented the economy as a self-regulating mechanism. An entrepreneur, in order to realize a certain commercial benefit and make a profit, takes a risk, since investing capital in a particular business always contains an element of risk. Entrepreneurial profit is, according to Smith, the owner's compensation for risk. He characterized this with the concept of “economic man,” which corresponds to the characteristics of rational (reasonable) behavior. Another author, D. Riccardo, saw business as an absolute, eternal and natural mode of production, and considered entrepreneurial activity as an essential element of effective economic management.

Marxism . According to the research of the German scientist K. Marx in his work “Capital”, the basis of profit is surplus value, which the entrepreneur appropriates in the form of the result of the “work” of his capital, and does not buy from the worker. Therefore, business is a contradictory phenomenon that can and does generate various conflicts in society, and thus it acts as an undesirable component of people’s lives in general.

The Theory of Advance Capital . It is the opposite of the previous point of view. According to it, the entrepreneur takes risks by paying wages to workers and buying new raw materials, without yet selling his products.

Institutionalism . The institutional direction of economic thought emerged in the first decades of the 20th century. (T. Veblen, J. Commons, W. Mitchell). They represented three major areas: socio-psychological, socio-legal and institutional-statistical. According to this approach, industry and business are a dichotomy (the former is the source of change and progress, and the latter is the factor that counteracts it).

Business Aspects

Accounting

Accounting is the measurement, processing and communication of financial information about business entities such as businesses and corporations . Modern accounting was created by the Italian mathematician Luca Pacioli in 1494. Accounting, which has been called the “language of business”, measures the economic performance of an organization and communicates this information to various users, including investors, creditors, managers and regulators. Accounting practitioners are called accountants. The terms "accounting" and "financial reporting" are often used interchangeably.

Finance

Finance is the field that deals with the study of investments . It includes the dynamics of assets and liabilities over time under conditions of varying degrees of uncertainty and risk. Finance can also be defined as the science of money management. They aim to evaluate assets based on their level of risk and return. Finance can be divided into three different subcategories: public, corporate and personal.

Production

Manufacturing is the production of goods for use or sale using employees and machines, tools, chemical and biological processing or formulation. The term can refer to a range of human activities, from crafts to high technology, but is most often applied to industrial production in which raw materials are converted into finished products on a large scale.

Marketing

The American Marketing Association defines marketing as “the activities, institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for consumers, clients, partners, and society at large.” The term evolved from its original meaning, which literally meant going to market to buy or sell goods or services. Marketing tactics include advertising as well as pricing.

With the rise of technology, marketing is further divided into a class called digital marketing . It is the marketing of products and services using digital technologies.

Research and development

Research and development refers to activities related to corporate or government innovation. Research and development represents the first stage in developing a potential new service or product. Research and development is very difficult to manage because the defining feature of research is that researchers do not know in advance exactly how to achieve the desired result.

Security

Injuries cost businesses billions of dollars annually. Research has shown how a company's adoption and implementation of comprehensive safety and health management systems reduces incidents, insurance costs , and workers' compensation claims. New technologies such as wearable security devices and online security training continue to be developed to encourage employers to invest in security and reduce the cost to businesses of protecting their employees.

Sales

Sales is an activity that deals with the number of goods or services sold in a given period of time. Sales is often integrated with all areas of the business and is key to a company's success.

Management

The efficient and effective management of a business, and the study of this subject, is called management. The main branches of management are financial management, marketing management, human resources management, strategic management, production management, operations management , service management and information technology management. Owners can manage their business themselves or hire managers to do so. Whether they are owners or employees, managers manage the three main components of business value: financial resources, capital (material resources), and human resources. These resources are managed in at least six functional areas: legal contracts, production or production services, marketing, accounting, finance and human resources.

Restructuring of state-owned enterprises

In recent decades, states have modeled some of their assets and businesses after commercial enterprises. For example, in 2003, the People's Republic of China modeled 80% of its state-owned enterprises on a corporate-style management system. Many government agencies and enterprises in China and Russia have become joint stock companies, some of whose shares are listed on public stock markets.

Business process management (BPM) is a holistic management approach that focuses on aligning all aspects of an organization with the wants and needs of customers. BPM attempts to continually improve processes. Therefore, it can be described as a “process optimization process.” It is argued that BPM enables organizations to be more efficient, effective and capable of change than the functionally oriented traditional hierarchical management approach.

Organization and regulation

Most legal jurisdictions define the forms of ownership a business can take, creating a body of business law for each type.

The main factors influencing the organization of a business are usually:

• The size and scope of a firm, its structure, management and ownership are widely analyzed in the theory of the firm. Typically, small businesses are more flexible, while larger businesses, or those with broader ownership or more formal structures, will usually be organized as corporations or (less commonly) partnerships. Additionally, a business that wants to raise money on the stock market or be owned by the general public will often need to take some form of legal form to do so.
• Sector and country. Private business enterprises are different from government agencies. In some countries, certain businesses are legally required to be organized in a certain way.
• Tax benefits. Different structures are treated differently in tax law and may have advantages for this reason.
• Disclosure and Compliance Requirements . Different businesses may be required to publish less or more information (or report it to relevant authorities) and may be required to comply with different rules and regulations.

Many businesses are operated through a separate entity, such as a corporation or partnership (either formed with or without limited liability). Most legal systems allow people to organize by filing certain charter documents with the appropriate Secretary of State or equivalent and satisfying certain other ongoing obligations. The relationships and legal rights of share holders , limited partners, or members are governed partly by the charter documents and partly by the law of the jurisdiction in which the organization is organized. Generally speaking, shareholders in a corporation, limited partners in a limited partnership, and members of a limited liability company are protected from personal liability for the debts and obligations of the entity, which is legally treated as a separate “person.” This means that, unless there is a violation of the rules, the owner's own property is strictly protected by law if the business does not succeed.

If two or more individuals own a business together but have failed to organize a more specialized form of vehicle, they will be treated as a general partnership. The terms of a partnership are governed in part by the partnership agreement, if one is created, and in part by the law of the jurisdiction in which the partnership is located. No paperwork or filing is required to form a partnership, and without an agreement, the relationships and legal rights of the partners will be entirely governed by the laws of the jurisdiction in which the partnership is located. One person who owns and operates a business is usually known as a sole proprietor, whether he owns it directly or through a formally organized entity. Depending on the needs of the business, the consultant can decide which type of property will be most suitable.

Several important factors to consider when deciding how to run a business include:

1. The general partners in a partnership (other than a limited liability partnership), as well as anyone who personally owns and operates the business without creating a separate legal entity, are personally liable for the debts and obligations of the business.
2. Generally, corporations are required to pay taxes just like “real” people. In some tax systems, this can result in what is called double taxation, since the corporation pays income tax first, and then when the corporation distributes its profits to its owners, individuals must include the dividends in their income when they file their personal tax returns, after which introduces the second level of income tax.
3. Most countries have laws that treat small corporations differently from large corporations. They may be exempt from certain legal requirements, have simplified procedures in specialized areas and have simplified, favorable or slightly different tax treatment.
4. "Going public" through a process known as an initial public offering (IPO) means that part of the business will be owned by members of the public. This requires the organization, as a separate entity, to disclose information to the public and adhere to a more stringent set of laws and procedures. Most public companies are corporations that have sold shares, but increasingly there are also public LLCs that sell mutual funds (sometimes also called shares), as well as other more exotic entities such as real estate investment trusts in the US and unit trusts in the UK. . A general partnership cannot “become public”.

Types of business

Manufacturing business

Manufacturing business is implemented within specific production structures (mainly within non-state enterprises) that perform a particularly important function in society. They produce material and spiritual goods that are used by both individuals (consumer goods) and legal entities (means of production).

Commercial business

Commercial business can be carried out through appropriate commercial organizations. These include trading establishments - shops, supermarkets, commodity exchanges, etc. The scope of their main commercial activity is the purchase and sale of various goods and services. Commercial business includes the purchasing and intermediary activities of numerous organizations that buy goods from commodity producers and sell them to trading establishments and thereby make their own profit. The more intermediaries there are between commodity producers and trading organizations, the more expensive the goods purchased by consumers.

Financial business

Financial business is a special, independent sphere of commercial business in which specific goods are sold and purchased - national and foreign currency, securities (stocks, bills, bonds, etc.). In this business, money in the form of a loan is “sold” for a certain time to the buyer, who subsequently returns in full the entire amount borrowed from the lender and pays a certain percentage for its use. The latter represents a kind of price for this product and provides the credit institution with a certain profit. The sale and resale of foreign currency, as well as securities, also belong to the area of ​​​​financial business, which has its own subject of labor and its own finished product, which brings profit to its owner if the business is successfully conducted. Financial business is carried out through various organizations and institutions, such as commercial banks, credit unions, investment and leasing companies, stock exchanges, insurance and trust companies.

Intermediary business

Its essence consists in connecting the parties interested in a transaction for a certain fee or percentage of the transaction. For example, Real Estate Agency.

Insurance business

The insurance business is a special form of financial business. The insurance company pays clients compensation upon the occurrence of an insured event from previously paid insurance premiums . Typically, the occurrence of an insured event is unlikely, and the payment exceeds the insurance premium. The insurance is also valid for a certain time. For example, 10 people insured their cars against accidents for a year, making insurance premiums of 100 dollars. During this year, only one person had an accident and received compensation for damages of 300 dollars. The remaining 700 dollars at the end of the year are the net profit of the insurance company.