Problems in New Business

PROBLEMS BEFORE ESTABLISHING A NEW BUSINESS.
By establishing a business means to start a new business.
Before the industrial revolution, the goods were generally produced for local markets. If was: therefore, easy to establish and operate the business. The conditions are now entirely changed. The goods are produced by machines. The rate of production has gone up. There is stiff competition for the sale of goods in the market. Goods are produced in anticipation of demand. The risk in business has increased manifold. The entrepreneur, therefore, has to be very careful before undertaking any new business. The main factors or problems which are to be examined before establishing a new business are as follows:- Problems before starting a new business
Selection of business. The most important decision before engaging one-self in any business activity is the selection of business. Once a decision is taken and a business is established, it then becomes difficult to change it, So detailed investigations and utmost care should be taken up in the selection of business.
Demand for the product. A business should not be taken up on the basis of current demand only. Future trend in demand should be carefullyexamlned. If the demand for a product is irregular, seasonal, uncertain and the margin of profit earned by existinq firms is very low, it is no use in starting such a business. For examples, a beauty parlour in fashionable area can do more business than such a parlour in a locality where people of low income are living.
Size of business unit. The size of business unit means the scale of business. The size of business unit depends upon the demand for the commodity in the market, the availability of resources, technical and organizational ability of the entrepreneur etc. If the business is carried on a large scale, it brings economies in expenses. However, determination of the scale of business is an important factor to be considered before establishing a business. (4) Provision of capital. Capital is the life blood of business.
Before starting a business, the capital needs of the business is to be assessed. The capital needs depend upon its fixed and working capital requirements. After considering the financial requirements, the sources for raising funds for the business should be taken up. In case the full amount of capital required for establishing and operating business cannot be met' from owned capital, (own resources) then arrangements shall have to be made for the availability of raising of borrowed capital from banks, friends etc.
Location. The selection of a suitable place for the establishment of a business is of utmost importance for the success of a business. The availability of raw material, trained labour, banking facilities, telephone, gas, cheap transport, nearness to market for finished products etc etc. are the important considerations in the selection of site for business.
Selection of physical facilities. The selection of physical facilities depends upon the nature of a new business. In case of a manufacturing concern, the decisions acquiring land, building, machinery, godown etc through purchase, or on rent basis or on lease are to be carefully undertaken. In case of trading concern, the purchase/hire of shop in the shopping centre, provision and proper display of goods, etc need proper consideration.
Plant-layout. The success of a business particularly manufacturing depends greatly on its plan layout. The planlJay out is the setting up of machines and equipment of the factory. If the plan layout is good, it ,facilities the flow of work. There is an effective utilization of men, materials and machines.
Selection of staff. A new business has to acquire adequate staff both skilled and unskilled for the operation of a business. Here care should be taken that right persons are selected for the right job.
Office equipment. The provision of office equipment, tables, chairs, telephones, calculators, duplicating, air-conditioners machines etc are essential for a business house. These equipments improve the working and efficiency of the staff.
Fulfillment of legal requirements. An entrepreneur before starting a business has to fulfill the conditions and rules enforced by the state, if any. The non fulfillment of legal requirement may send him to jail. 8. BUSIN!=SS
Meaning of-business organization
Business organization is composed of two words, business and organization: In order to understand the nature of business organization, it is necessary that the meaning of these two words are made clear to the readers.
Business. Business is a human economic activity. It involves continuous and regular production and distribution of goods and services with a view to earn profit. Money flowing in and earning of profit through the satisfaction of the customers are the two measuring rods of the success of a business.
Organization. The meaning of the word organization is generally divided into two parts; (1) material organization and (2) human organization.
Material organization. The material organization is the determining and providing of necessary raw materials, tools, capital, personnel etc in an enterprise for its smooth functioning.
Human organization. It is the appointment of qualified staff, dividing the duties and responsibilities of the personnel employed. Then grouping these duties in the form of posts and delegating authority to each post so that work is carried out as planned.
Business organization thus is a process or an art of establishing effective cooperation between the factors of production (land, material, capital equipment, personnel) for producing or acquiring wealth with a view to earn profit in an enterprise. Scope of business organization.
The scope of business organization has considerably expanded after the Industrial Revolution. The process of production is now quite complicated. An organization is needed to determine what each person will do and how much authority each will have. The role of business organization in various forms Of business ownership is discussed in brief.
In sole proprietorship form of business, the organization structure is very simply. The entrepreneur generally introduces his own capital. He alone is the sole organiser, financier, decision taker, operator, controller and above all responsible for all the success and failures of business. There is generally little SUb-division of main work into small groups.
In a partnership form of business ownership, each partner provides capital, labour and management according to an agreement. The partners determine among themselves the extent to which each partner shall take part in the management. The pattern of division of activities, determination of responslbilltles, delegation of authority etc depends upon the nature and size of business. As the partnership business is generally run on small scale, the business organization structure is relatively simple, temporary and informal.
In a company form of business, there is a formal pattern of organization. The work of organization begins even before its incorporation by the promoters. This work of organization continues after incorporation. An organization chart of responsibilities is prepared. The duties and responsibilities of the personnel employed are defined, procedures are laid down. Methods are evolved discussed and put before the personnel in clear terms. The scope of business organization in corporate business is quite wide and complicated. Importance of Business Organization
Product growth. All activities directed towards production are better grouped through organization. It encourages product growth and diversification.
Efficient use. Organization helps in the efficient use of factors of production and thus reduces cost of production of goods.
Technological improvements. A . good organization provides for the optimum use of technological improvements.
Creative thinking. It stimulates independent creative thinking in various departments of production.
Use of skilled salesman. It is useful in providing skilled salesman for satisfying the various needs of the customers.
The study of business organization is very important. Its main advantages are as under:-
Modern concept of business organization. The old concept of business organization was that profit is the sole motive of any business organization. The modern concept is that profits through service is the main objective of business. The business should earn profit by providing quality goods and services to the consumers at reasonable prices. This consideration has increased the importance of the study of business organization.
Cut throat competition. In 1990's and in the 21 st century, the world is heading towards a police of openness, free markets. The multi-national corporations are undertaking, planning, financing, producing and marketing goods on an international basis. In the field of production, new inventions and researches are taking place. The functions of businessman has become complex. They can only be performed by persons having latest knowledge of business. Hence the study of business organization has become necessary.
Rise of protesslonal unions. There is now rapid growth in the size of business unions and the development of multinational corporations. The trade unions in business organization have organized themselves for getting job security, higher wages and for gaining fringe benefits such as pension, insurance etc. The gaining fringe benefits such as pension, insurance etc. The management should now be fully conversant with the principles, practices and ideals of business organization. Hence, the study of business organization is very important.
New technology. With the introduction of new technology especially the use of computers, the traditional entry system in ledgers, employment of personal secretary, copying of documents with hand etc. etc., have become obsolete. In order to become competent organizer, the management must be fully aware and have knowledge of latest of information technology in the business circles.