About starting a business


When a person thinks about starting a business, the first thought that comes into his mind is to earn money. With this primary motive, people start and plan their business. However, there is more to business than just making money. There are many other factors you have to consider in order to make your business survive or successful. In this assignment, I will emphasise on the influence of the business environment that helps to run the business.

First of all, we need to know what business is. In the Longman Dictionary, business is defined as:

“Buying or selling goods or services; the activity of making money by producing or buying and selling goods, or providing services”


It is really a simple description for something that can be done in various forms such as:

  • Sole proprietor: A form business that has a sole owner. The business is normally run by the owner himself or he may hire other people to assist him. The owner of the business is liable to the debts incurred by the business.
  • Partnership: A form of business that is operated by in two or more people for a common goal such as making profit. In most of the partnerships, each partner is liable to the debts incurred by the business. The three common types of partnerships are known as general, limited and limited liability partnerships.
  • Corporation: A form of business that has a limited liability organisation that has a legal personality of its own which is separated from its members. It can be organised for-profit or not-for-profit purpose. A corporation is owned by multiple shareholders and is run by group of people known as the board of directors. This group is the one who hire the business's managerial staff. The two types of corporate are privately-owned corporate models and state-owned corporate models.
  • Franchise: A form of business organisation in which a business which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor's trade name and usually with the franchisor's guidance, in exchange for a fee.
  • Cooperative: A form of business, sometimes also called "co-op", that is a limited liability organisation that can be organised for-profit or not-for-profit purposes. The difference between a cooperative and an corporation is that instead of having shareholders, they have members who shares the authority of decision making. Cooperatives are usually under the classification of consumer or worker cooperatives. Cooperatives are essential to the ideology of economic democracy.

When a business is successful, it can lead to expansion. The expansion of a business is defined as when it grows larger. The growth of a business can be can be assessed by:

  • The sales revenue
  • The number of people employed
  • The Capital Stock
  • The Market Share
  • The number of branches of the organisation

Business may lead to growth with or without meticulous effort. There are two ways a business can grow. They are known as organic growth and acquisitions and mergers.

Organic growth is the growth of business by that expanded through the number of sales or their operations. Their main source of finance is the profits they made within the business.

Acquisitions and mergers are known as the process of businesses joining or being bought over by other businesses which may not necessarily be the same type.

Businesses may desire expansions because:

  • It is beneficial in terms of economies of scale
  • Having a larger market share since the organisation can sell more different types of products, which means they can usually sell them at higher prices.
  • As means of survival if they want to compete with other growing businesses

There are some businesses that desire to diversify their business. To diversify means to sell or merge with business that sells products that is not in the current market they are selling in.

Businesses might need to diversify because it:

  • It helps to spread the risk since different products are sold in the different market. Hence if one of the products fails, the other products in the other market will not be affected since they are in a different market.
  • Is a favourable way of expansion if present market that seems already at the peak.
  • Gives the business new objectives that can motivate the managers and the employees.

A business can organically grow by:

  • Reducing the price - People are more willing buy products at a low price.
  • Increasing advertisement -To increase the awareness and the attraction of the products to the current customers and potential customers.
  • Sell in a different area -Selling in new area means more potential customers.
  • Sales on credit - Customers find buying now and paying later appealing.

Mergers and Acquisitions

Mergers with acquisitions should not be confused with one another. A merger is known as two or more businesses mutually agreeing to join together to become one, whereas, an acquisition is when one business buys over another business.

When a one business buys out another business, there is a possibility of integrating a new product with the current product they have. The product can be integrated vertically or horizontally.

Mergers and acquisitions are an important factor if the business desires to grow in a rapid pace. However, this is a high risk strategy for there are chances for a business to buy a wrong product or buying a product at the wrong price.

The advantages of having mergers and acquisitions are:

  • Beneficial to the economies of scale.
  • Having a larger market share since the organisation can sell more different types of products, which means they can usually sell them at higher prices.
  • Spreads risks if products different are made in the two businesses.
  • Lowers competition if a rival business is acquired.
  • Having new specialists to the business obtained by the other business.
  • Money is easier to raise if the business is larger.

The disadvantages of having mergers and acquisitions are:

  • There might be an imbalance in economy of scale if the business becomes too enormous, which will end up requiring higher unit costs.
  • Having disagreements due to the difference of culture between different types of businesses which will reduce the effectiveness of the integration.
  • They may have to let go of some of the employees, especially line managers. This might affect the motivation level in the rest of the employees.
  • There might be a clash in the objectives between two different businesses and thus resulting in difficulties when it comes decision making. This will end up disrupting the functioning of business.

Limitation on Growth

There are times when a business may not be able to grow. The reasons are:

Limitation in finance- the business either could not gain enough profit for growth or the bank or and other financial sources are not willing to lend money to the business.

Limitation in the market - having a limited number of people buying the product.

Limitation from government - if the government decides there is no necessity to have a large business, they might not allow the process of merging. They may set limits such as not having more than 25% of market share.

Limitation in human resource - there might not be enough people with necessary skills available for the job. This especially happens when it comes to getting specialists.

No matter which type of business a person decides to do, these are the main fundamental points of a business environment he must always remember:

- Mission, values and the objective of the business (T1)

- Objectives and impact of stake holders in the business (T1, T2)

- Business ethics and responsibilities (T3)

- Economic system of a country (T4)

- Social welfare or duty and industrial policies (T5)

- Macroeconomic system of a country and global economy (T6)

Without further ado, I shall go into the details to show why these fundamental points must always be considered in a business plan.

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!