The Different Types of Business
No matter what kind of business you are in, there is always an element of risk and uncertainty. In fact, the very nature of business makes it an exciting and adventurous activity. Any economic activity aims to make money. Today, however, the main focus of business has moved beyond profit maximisation to become a social institution.
Profit motive is the highest motivator for any type of business
The profit motive helps people decide what they should do. It makes many decisions easier, such as whether they should pursue a particular career path or start a business. Employees also have a profit motive, which means they seek the best package possible in exchange for their time. This package may include monetary compensation, employee benefits, and a good work environment. For this reason, many companies offer profit-sharing plans to motivate employees.
The profit motive can be defined as the underlying reason why a person, organization, or corporation undertakes business activity. Adam Smith described this motive in his book, The Wealth of Nations, as a human tendency to engage in activities that will result in monetary gain. It helps explain why we purchase products, engage in business deals, and take risks.
Service businesses offer intangible goods or services
A service business does not produce tangible goods, but rather provides an intangible service that a consumer can access or utilize. The consumer is not the owner of the service, but rather pays the company for access or usage. A service business produces the same results as a traditional product business, but with a different customer base. Intangible goods are difficult to market and describe, but images and other tangible attributes can be helpful in communicating the benefits of the service.
An example of an intangible product is a life insurance policy. For the customer, the policy is a contract on paper that costs thousands of dollars, but the customer cannot hold the product. Therefore, businesses that sell intangible items need to focus on the results rather than the physical product.
Manufacturing businesses buy raw materials to produce their end product
The raw materials used by manufacturing businesses are natural resources that are unprocessed and are the starting point of production. These resources include cotton, coal, metal, wood, and mineral ores. Raw materials are also known as factors of production and inventory management. Raw materials can be plant-based, animal-based, or mineral-based. Many countries rely on these resources for economic growth. A manufacturing business must keep track of both the raw and finished materials it purchases in order to maintain production levels and keep costs down.
Raw materials can fluctuate in price due to global supply and demand. They can also be subject to supply chain issues, which can slow the entire manufacturing process. Furthermore, raw materials that are unavailable can result in product defects, which could result in expensive recalls, lawsuits, and damaged company reputation.
Non-profit organisations aim to create a profit through their operations
The primary purpose of a nonprofit organisation is to benefit the community and society as a whole. A nonprofit organisation is typically founded by an individual or group of individuals who want to provide a service to society. These organisations are usually managed by a managing committee, which is comprised of members who are committed to a particular outlook or social cause.
While nonprofits are not for profit, they do receive tax exemptions from the government. It’s important to understand the difference between a nonprofit and a for-profit organization so that you can make the right decisions to help the community and your organization’s mission.
Hybrid businesses combine all three activities
While traditional businesses focus on selling a product, hybrid businesses combine all three activities. For example, Cafedirect, a social enterprise with farmer ownership, is a hybrid business. It uses both traditional marketing techniques and innovative approaches to serve environmental and social goals. Its business model has a zero-carbon supply chain.
Hybrid businesses can be organized into distinct types. Some are office-based businesses, while others are home-based. Depending on the nature of the work, hybrid models can work best for some industries. For example, companies that rely on collaboration and on-site work may be most suited to this model. But for companies that rely on individual outputs, this model may prove counterproductive. Moreover, it could reduce productivity, especially if employees live far from the office. Another type of hybrid business structure is a designated-team model. It assigns certain days for remote and on-site work.
