The most commonly faced problems or essentials of establishing a business house are as under:
Organizational Problems
Type of Ownership
Type of channel to be used
Nature of business
Infrastructure
Future of business
Finance or raising capital
Location and layout
Staffing
Type of goods and services to be dealt with in
Marketing
Competition
risk/insurance
Government laws
Business Information
All businesses have to face the problem of organising the businessman has to decide on the following:
Type of Ownership
Distribution channels
Internal organization
Type of Ownership
Ownership is of four kinds that a businessman has to decide on:
Sole proprietorship
Partnership
Joint stock company
Cooperative society
Sole proprietorship
It is a form of business organization that has only one owner who invests capital in the business and is fully responsible for his business operation. He enjoys all profit and is responsible for the losses.
Partnership:
It is the kind of business ownership with at least a co-owner and a maximum of twenty profit or loss divided pirata among partner partners who enjoy certain rights to perform duties that must be honoured. The partnership is based on an agreement among partners to carry on a business for profit.
Joint stock company:
It is also referred to as a corporation it is an artificial being intangibly invisible in existence by the law it has its existence separate from its owner (shareholders) and hence can sue to be sued and enter into an agreement in its name unlike sole proprietorship and partnership the owner of the company is not responsible for the acts of the company hence the liability of a shareholder is limited to their investment in the capital of the company memorandum of association article association and prospectus are fundamental documents required in the formation of the company which must be registered with the registrar of the company.
Cooperative societies:
It is an association of consumers to establish a business based on cooperation and operated on a no-profit and no-loss basis. Cooperative banks and housing are quite popular in Pakistan.
Type of distribution channel:
At the time of a business formation, it is decided as to what distribution channel is to be selected. That is the proprietor will decide to act as wholesaler, retailer, broker, importer, exporter or distributor and many more.
Internal organization and management:
To run a business systematically and efficiently it is necessary to draw up a proper internal organization which requires to work out on an organization chart.
Nature Of Business:
In starting a new business the businessman has to decide on the type and nature of the business. The fields open to him are industrial, commercial or service areas. He may choose manufacturing, wholesaling, retailing brokerage, import and export. The selection of his decision will be based on his expertise and experience nature of demand.
Infrastructure:
Infrastructure provides a sound basis for all types of businesses. It includes basic installation and facilities such as roads, power plants, transportation and communication systems.
Future of business:
This factor should be considered separately and precisely. Technology is of special consideration because it is fast changing and renders almost daily existing products outdated. Today's products will be outdated tomorrow. The business will have to go for tomorrow's technology, not yesterday's.
Finance/ Raising Capital:
Finance is the core part of the business. Finance in the business includes owner equity, loans, retained earnings and capital. Different types of business ownership bring in capital differently.
The business has three sources of finance:
Capital: it is raised from sole proprietors, partners or shareholders.
Loans: they can be borrowed from banks, financial institutions, businessmen, or the general public.
Retained Earnings: these are the accumulated profits over the previous years.
Location:
Business success depends on the right location. The right products at the right time at the right price at the right place are the ingredients of success. For the location of industries, different views are taken into account as availability of raw materials, labour, power, fuel, water, transportation, climate, nearness to the port, roads, communication systems and other infrastructure.
Labour Problems:
The business requires labour. The larger the business the greater the number of labourers required. Labours may be classified into three groups.
Skilled labour
Semi-skilled labour
Unskilled labour
Types of goods and services:
It has to be decided what type of goods and services are to be offered to consumers and whether they are to be manufactured or bought. Products are offered to the public based on price, colour, size, design, model packing and warranty.
Marketing:
Marketing facilitates the goods and services to move from producers to consumers. It includes buying, selling transporting and warehousing. Without grading and standardization, marketing is not possible. Promotion of sales and Advertising of personal selling are used to attract customers. Marketing revolves around price, place, products and promotion problems.
Competition:
Competition oligopoly, duopoly, and monopoly are different business conditions. Competition refers to a condition when a substantial number of suppliers exist in the market. The present business world is extremely competitive and the businessman must know how to beat the competition.
Risk:
Risk must be considered and studied carefully. Risk is an essential factor of every business. Before starting a new business the investors must calculate how much risk lies ahead and how much they can assume. Different businesses carry varying amounts and nature of risk. Figuring out risk correctly reduces the chances of loss and improves profitability.
Government Policies:
There is a big role of government policies in encouraging or discouraging starting a new business. The new business is boosted if the government offers incentives such as tax exemptions, loan facilities, and minimum government interference.
Business Information:
New and old businesses can only survive on the latest and relevant and right information. The businessman needs to know of the competition, sources of supply, location and income of the customers, inventions, changes in technology, government policies and a lot of other business information.
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