Business Enterprise

Types of business enterprises

There are many types of business enterprises providing a wide variety of services or products. Business enterprises can be classified into three main categories, according to the production stage:

Business Enterprise: Primary sector

Primary companies are mostly made of business-to-business (B2B) models, where you have one business supplying to the other. For example, oil exploration companies produce oil that retail companies sell, or other businesses use for production processes. Restaurants use agricultural goods produced by this sector to provide meals to their customers.

Primary sector example - Oil Pump, Wikimedia Commons

Business Enterprise: Secondary sector

The secondary sector consists of business enterprises at the second step of the production process. These businesses use raw materials produced from the primary sector to develop into new goods and services. For example, car manufacturers use raw materials to build new cars, which they later supply to customers.

Secondary sector example - Manufactured car, Wikimedia Commons

Business Enterprise: Tertiary sector

Examples of companies in the tertiary sector include banks that help individuals get loans or airline companies that enable one to fly around the world.

Keep in mind that a business enterprise can offer goods, services, or both. You could buy a car provided by Tesla, go to a travel agency for your next trip to Europe, or go to a restaurant and receive goods and services combined.

Tertiary sector example - Travel agency, Wikimedia Commons

Functions of a business enterprise

The four basic functions of a business enterprise are Finance, Operations, Human Resources, and Marketing.

Business Enterprise: Finance

One of the essential functions of a business is raising and managing money. A business enterprise may use internal or external sources of finance to raise the funds needed to get the business going. Internal sources of finance involve the money that business owners invest in their own business.

In contrast, external sources of finance involve cash from outside sources, such as money from family, banks loans, and investors. After the money starts moving around the business, the business managers should manage it cautiously so they don’t have too many costs, thereby failing to make any sales.

Business Enterprise: Operations

An important function of a business enterprise is the use of raw materials to produce new goods that will be served to customers. A business also uses its resources to provide services to customers. A business enterprise is always concerned with producing types of goods or offering services that meet the needs and demands of customers. If this need or demand is not met or is relatively small, there is no real purpose for production.

Business Enterprise: Human Resources

Another important function of a business enterprise is that of human resources. A business needs to get the right human capital to provide goods or services. This entails hiring people with the necessary expertise and skillset that the production process requires.

Business Enterprise: Marketing

Marketing is concerned with commercializing the goods and services a business offers. This includes pricing strategies, strategising the way customers are approached, and determining why someone would want to buy the good or service.

Importance of business enterprise

Amazon's market capitalization is slightly above $1.5 trillion. Jeff Bezos owns just under 10% of the company. This implies that Jeff Bezos has earned over $150 billion from Amazon. However, the rest of Amazon's market capitalisation value lies in the economy and is shared among investors, consumers, and the rest of the population.

To further illustrate the importance of a business enterprise, think about how many jobs Amazon has created, how many needs it has met for customers, and how much easier it has made our shopping life, especially throughout the COVID-19 pandemic.

Business enterprises are crucial to the economy for the following reasons:

Business Enterprise: Economic development

Business enterprises are critical to the advancement of the economy. Industries use people, money, resources, procedures, and machinery, all of which contribute to creating jobs. They also aid in earning foreign cash via the export of goods.

The development of industries aids in better use of natural resources, which is advantageous for society as a whole. These natural elements contribute to the growth of the country's economy and therefore to its overall well-being.

Business Enterprise: Solving problems

Business enterprises serve the function of meeting human needs and solving problems for the betterment of society. These companies have the incentive to develop innovative products that through this problem-solving improve our lives, a goal that any entrepreneurial start-up aims to achieve.

Business Enterprise: Creating jobs

Business enterprises are a vital source of jobs in an economy. As most business processes depend on labour, this gives job seekers opportunities for work. Economies with fewer enterprises tend to struggle with higher levels of unemployment.

Business Enterprise: Investment opportunities

The establishment of new industries and businesses is important for people looking to invest and become part of the growth of a company or an industry. Think how many early investors in Facebook or Amazon, or Apple benefited from investing in these business enterprises.

Furthermore, the profit earned by the investors as a result of the company's successful operation contributes to the accumulation of a greater quantity of savings, which may be used to fund future businesses. As a result, business is crucial in creating investment possibilities.

To sum up, business enterprises produce goods and services in exchange for commercial benefits. As drivers of innovation and investment, problem solvers, creators of jobs, and stimulants to the overall economy, these enterprises serve a vital function in our society.