Understanding Business: Structure, Elements, and Responsibilities

Posted on Jan 23, 2025 in Business Administration and Management (BAM)

Company: Definition and Purpose

A company is a set of factors of production organized and led to produce goods and services for placement through sale to users in terms of risk, uncertainty, and profit. The company’s goal is to maximize profits.

The Value Chain

The value chain, according to Porter, is a form of business analysis. The purpose of a company is to maximize its value chain. This is actually a set of functions that add value to products and services.

Follow these steps:

  1. Market research
  2. Prototype and design
  3. Buy raw materials
  4. Produce

Elements of the Company

We can classify the elements of a company into four groups:

  • Human Factors: People who have a direct link with the company.
  • Material Factors: The economic assets of the company. We can differentiate between those in fixed capital, such as furniture, and those in working capital, which is all that is renewed each year and depends on the cycle of exploitation, such as raw materials.
  • Organization: Appears as a set of relations of authority for coordination and communication that form the activity of the human group among themselves and with the outside.
  • Environment: All those factors that determine the performance of the employer and, as a result, of the company.

Features of a Company

A company is divided into several functional areas:

  • Production: Its concern is the realization of the product.
  • Marketing: The target is to sell, the more expensive the better.
  • Human Resources: Producing good, nice, and cheap.
  • Financing and Investment: Is concerned with achieving the cheapest funds possible and assessing the profitability of investment projects.
  • Administration: Collects all the information flowing through the company.
  • General Direction: Directs all departments.
  • Supply and Logistics: Distribution and storage, buy low and in large quantities.

Corporate Social Responsibility

Corporate Social Responsibility refers to the actions taken by employers to reduce the negative social costs they generate. Costs are consumption and use of factors of production. Internal costs are those that are paid. External costs are those that are not paid. Damages are negative social costs.

The Entrepreneur

An entrepreneur is a person or persons whose purpose is to make decisions in the company to achieve previously established objectives and try to balance all the elements. They:

  • Plan and design an action plan after analyzing and diagnosing the economic situation of the moment, though it is interpreted as the wishes of consumers through market research.
  • Manage all the elements that make up the company towards achieving the objectives already identified or planned.
  • Organize and coordinate the company’s available elements.
  • Control, so you can know to what extent the targets set in its plan are being met and thus correct any deviations.

Types of Enterprises

By Size

  • Large
  • Medium
  • Small

Bounding Criteria

  • Economic: Depending on the income from sales.
  • Technical: Depending on the level of technological innovation capital.
  • Equity: The property, rights, and obligations.
  • Organizational: The number of employees and their organization.

According to Activity

  • Primary Sector: Direct exploitation of natural resources.
  • Secondary Sector: Processing companies, producing goods or material objects.
  • Tertiary Sector: All those not included in the above.

Under the Ownership of Capital

  • Private: Ownership of particular natural or legal persons.
  • Public: State or a public entity.
  • Mixed: Shared between the state and individuals.

According to Legal Structure

  • Individual: Only one owner.
  • Partnerships or Companies: Several owners.