Types of Business Activities And its Types

All of us possess an inherent aptitude. We need to identify our area of interest and inner strengths, and develop our skills In every sphere of our life, we face tough competition and various challenges. To have a winning attitude, we need to be optimistic and think differently.

After completing your education, what career would you like to pursue? Would you like to explore different job opportunities, prepare for competitions, and appear for competitive tests and interviews? Yes, you can think about that, but there is also a choice to become self-employed. Here, you can pursue your passion and be your own boss How about becoming an entrepreneur?

Entrepreneurial Skills

An entrepreneur is a person who takes the initiative of starting a business, bears the risk of investing money, manages the business at all levels, and is responsible for its success or failure .A business or a company is known as an ‘enterprise’. An entrepreneur can be an artist, educator, professional, restaurateur, businessman, or an inventor.

Entrepreneurs play a significant role in society because they provide goods and services to people and create employment opportunities in society. Entrepreneurs can be from any socio economic background Can you think of some entrepreneurs who provide different products or services to you?

Some Entrepreneurs in the Local Communities

The shopkeepers that you see in a shopping complex are all entrepreneurs who are engaged in different types of business activities .The most popular business in any local community is of grocery items The grocery stores deal in FMCG (Fast-Moving Consumer Goods), which include perishable as well as non-perishable items .These are packaged good that are sold quickly and at a relatively low cost. For example, packaged food items, chocolates, beverages, toiletries, ration, and many other consumables.

Some entrepreneurs deal in businesses which provide daily life essentials, such as vegetable and fruit vendors, chemist shops, salons, tailoring shops, dry cleaners, doctor’s clinics, restaurants, and food outlets.

There are some other businesses, which are very important in any neighbourhood, for example, photocopying and printing services, books and stationery shops, gift stores, electrical goods and appliances shops, electronic repair shops, readymade garments store, coaching centres, playschools, and creche facilities.

If you take a look at the world around you, you will find the entrepreneurs from all age groups. Some entrepreneurs have been successful at a very young age, while others have struggled and prospered over time. For example, Facebook and Microsoft were started by youngsters in their twenties, whereas the founders of McDonald’s and KFC were in the late fifties when they started their ventures.

However, a few things common among them all are that they capitalised on their talent, took the initiative and the risk to start their own business, and worked hard to achieve their goals.

Example:-Mark Zuckerberg became one of the youngest billionaires with his talent and skills at computers. So, how did a young computer programmer come to lead one of the most influential global companies? It is because he was determined to do something new by using his special talent at computers. He recognised the need of the hour. i.e to connect with people He identified a potential market for his idea and capitalised on the idea of connecting people using his technological skills.

The field of entrepreneurship is full of opportunities for those who have a dream. Now, it is your turn to start thinking about what you would want to do in the future. What are your talents? Explore and identify your area of interest and be confident and bold to take up new challenges in life Be on a lookout for the gaps (business opportunities) in the existing market, and try to find out a profitable solution for it Be innovative so that you stand out from the others in the market As Malcolm X correctly said, “The future belongs to those who prepare for it today.”

Let us understand the day-to-day activities of an entrepreneur with the help of an example of a grocery store.

You must have visited the grocery store near your house. Here are some activities that are a part of the business.

  • The shopkeeper purchases goods for his shop.
  • His sales and earnings may fluctuate (During some months the sale may be very good, for example during festivals, while at other times the sale may be low).
  • He sells his goods and keeps on adding fresh stock.
  • At times there may be many customers and all of them may want to be attended to immediately.
  • The customers may even get angry and argue with him.
  • He has to handle the cash carefully without making any mistake.
  • He has to pay salaries to his employees.
  • If it is a rented shop, he has to pay the rent of the shop.
  • He has to pay the electricity bill for his shop.
  • He has to spend on the maintenance of the shop.

Thus, we see that a shopkeeper has to manage so many things You can see that a businessman needs to develop skills related to finance, sales, marketing, management, and accounting .One also needs to develop skills, such as innovative behaviour, excellent communication, and a lot of patience. To understand and develop all the required entrepreneurial skills, one can study entrepreneurship.

Benefits of Studying Entrepreneurship

The benefits of studying entrepreneurship are:

  • It helps to think about new business ideas.
  • It helps to cultivate skills and knowledge for starting an enterprise.
  • It develops business skills in areas such as finance, sales, marketing, management, and accounting.
  • It helps in the development of other skills such as adaptability, effective communication, business discipline, and confidence.

Types of Businesses

What is the meaning of the term ‘business’? Business is an area of work or an activity related to production buying, and selling of goods or services If you are thinking about becoming an entrepreneur, you should know about the different types of businesses.

Businesses can broadly be classified into four types:

  • Hybrid
  • Manufacturing
  • Merchandising
  • Service

Service Business

A service business provides products, which do not have a physical form or cannot be touched. Such business companies provide professional skills, expertise, advice, and other similar services. Some examples of a service business are-salons, repair shops, housekeeping agencies, schools, coaching institutes, sports academies, hotels and resorts, accounting firms, and law firms. From such businesses you are not buying any physical product, rather you are paying for different types of services.

Merchandising Business

Merchandising business is also known as ‘buy and sell’ or ‘trading’ business. A merchandising business firm buys goods or products at wholesale price and sells the same at’ retail price’.

Wholesale price is the price charged for goods that are sold in bulk or large quantities to a businessman or a trader in other words, it is the price a businessman or trader pays for buying a large number of goods that he will sell in his shop.

Retail price is the price of goods or products when they are sold individually to customers for consumption, and not for resale The shopkeeper makes his profit by pricing the goods to enable him to earn profits.

In this type of business activity, the businessman makes profit by selling the products. Some examples of merchandising business are grocery stores, convenience stores, chemists, electronic stores, automobile dealers, and other resellers.

Manufacturing Business

A manufacturing business uses raw material, labour, and other production processes to manufacture goods A manufacturing business buys raw material for making a new product. The goods that are manufactured are generally sold to wholesalers who further sell them to retailers who then sell them to the end users or consumers.

Example:-A cotton/woollen textile company uses cotton yarn/wool as raw material, machines, power, and labour to manufacture cotton/woollen fabric.

Example:-A mobile phone manufacturer uses circuit boards, electronic parts, LCD screens, and batteries as raw material to manufacture mobile phones.

Example:- A furniture manufacturer uses timber, skilled labour, machinery and tools to create different designs of furniture.

Hybrid Business

A hybrid company does not belong to any one specific type of business, it is a mixed type of business.

Example:-The best example is a restaurant. A restaurant uses ingredients for making a fine meal (manufacturing), sells bottled water or cold drinks (merchandising), and serves customer orders (service). All three types of business functions can be seen in a restaurant.

Types of Business Organisations in Our Community

The first step as an entrepreneur is to decide the form of business you want to choose Businesses may be organised in different forms. The form of business activity depends on the type of business ownership. Ownership means possessing something’. When you own a business, it is a big responsibility of how you organise and manage it. You are responsible for your business in every way. Being legally responsible for a business is termed as ‘liability’ All forms of business ownership have liabilities

Four main types of business organisations, based on ownership are as follows:

  • Cooperative
  • Corporation
  • Partnership
  • Sole Proprietorship

Sole Proprietorship

A sole proprietorship is a business owned by a single person. It is easy to set up and is the least costly among all forms of ownership. Sole proprietorship is usually adopted for small independent businesses We can call it the one-man business organisation.

Starting and closing a sole proprietorship is simple and requires minimum costs. The owner keeps all the profits, however, he is solely liable for all the debts. Moreover, he has a limited capacity to raise capital. Thus, sole proprietorship is often considered as the most appropriate form during the early stages of a business.

Example:-Mr Gupta has a small grocery store. He is the single owner of this store. He owns, invests money, and enjoys the profits from his store.

For these reasons, sole proprietorships are often the most appropriate during the early stages of a business where the owner has little capital/resources to work with but also has a few debts to pay.

Partnership

A partnership is a business owned by two or more persons who jointly invest money in the business. The partners divide (share) the profits of the business among themselves. They even bear the losses together. They discuss all business matters among themselves and take joint decisions. Both partners are legally responsible for the business.

Due to the sharing of profits and the additional resources, this type of ownership is often expected to yield higher growth rates than a sole proprietorship. Partnership also offers the opportunity for income splitting and tax saving. In partnership, it is easy to change the legal status of the business if such a need arises.

However, the liability of the partners for the debts of the business is unlimited, i.e., each partner is liable for the partnership’s debts and the consequences of each other’s actions. Also, there is always a risk of disagreements and friction among partners.

Corporation

A corporate structure is more complex than other business structures. Unlike the previous two business ownerships, a corporation is a business organisation that is considered a separate entity from its owners and pays its tax separately. The owners of the business are called ‘shareholder’.They hold stock in a company and reap the benefits of the company’s successes in the form of an increased value of stocks.

The shareholders elect a board of directors who set the policy and vision for the corporation. The board of directors appoint corporate officers who run the day-to-day operations of the corporation.Corporations attract investors because shareholders of a corporation have limited liability, i.e., crediton can only claim the assets of the corporation and not the personal assets of the stockholders for the settlement of the corporation’s debts or liabilities.

Shares of the ownership are transferable, so the corporation continues to exist even if the management changes. However, starting a corporation is costly Moreover, corporations are highly regulated by laws and dissolving such a business involves a complicated legal process.

Example:- The Walt Disney company and Johnson and Johnson are among the five most successful corporations in the world. These companies have a strong financial history, provide products and services that benefit society, and have been able to survive over a long period of time.

Cooperative

Co-operative is an enterprise or an organisation that is owned and managed jointly by those who are its members. It is democratically controlled and operated on a non-profit basis. The basic objective of such an organisation is to meet the economic, social, and cultural needs of its members. It should have a minimum of ten members, but there is no limit to the maximum number of members. They contribute capital to the organisation and reap the benefits. The liability of members is limited to the extent of their capital in the cooperative society. The managing committee is elected by the members to run the organisation

A co-operative mainly aims at providing services in place of earning profits. They need to be registered with the Registrar of Co-operative Societies.

Formation of a co-operative society is easy. A co-operative society is a separate legal entity. Hence, the death, bankruptcy, retirement, etc., of the members do not affect the continuity and existence of a co operative society. It is also exempted from income tax. Moreover, the government offers loans and financial assistance to co-operative societies.

On the other hand, it is quite difficult for a co-operative to maintain the secrecy of its business affairs because it has to report to the Registrar of Cooperative Societies Lack of profit motive may breed Inefficiency, fraud, and corruption in the management.

Example:-The best example of the co-operative form of business model is Amul. It has protected the interests of the milk-producing farmers who are its suppliers as well Example as its owners. Amul is the largest cooperative movement in India with 22 million milk producers There are 38,000 crore successful business entities which supply products to over 40 countries and provide livelihood to crores of individual dairy farmers in Gujarat and the rest of India.

Example:-

Another example is the Shri Mahila Griha Udyog Lijjat Papad. It is an Indian women’s cooperative involved in the manufacturing of various fast-moving consumer goods . The organisation’s main objective is the empowerment of women by providing them with employment opportunities. It started with a loan of mere 80, and now the cooperative has an annual sale of more than 301 crores (3.1 billion)!

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