Characteristics And Dynamics Of Modern Business

CHARACTERISTICS AND DYNAMICS OF MODERN BUSINESS Characteristics of Business Exchange of Goods/Services for Income: Business involves exchanging goods or services to generate income, usually through money payments. Buyers must get some satisfaction from the exchange to make purchases. So business really means exchanging goods/services for consumer satisfaction and income. Recurring Activities: A business enterprise's activities are generally ongoing and continuous. This doesn't mean a seasonal business must operate off-season or can't have layoffs. But a business operates more or less continuously over time. Profit Motive: The profit motive heavily influences a business's choices regarding products, markets, technology, plant size, pricing, etc. Although some public sector firms don't seek profits, many do aim to generate profits. Risks: Business involves many risks, which is why profit is seen as a reward for risk-taking. Common business risks relate to technology, consumer preferences, supply conditions, competition, demand, etc. Dynamics of Modern Business Strategic Orientation: Strategic management involves establishing a proper fit between the firm and its environment. A firm has strengths/weaknesses while the environment presents opportunities/threats. Industry characteristics and competition often change. A dynamic firm defines its business scope and competitive intent by assessing internal and external factors. Global Orientation: Liberalization and global competition make global orientation essential for survival. Globalization increases domestic firms' exposure to global business dynamics. As Peter Drucker said, global competitiveness must become a strategic goal. Firms must meet global standards to survive and succeed. The number of MNCs and their global reach/affiliates has rapidly grown. Even domestic firms now face global competition from MNC imports and local production. Nirma, for example, competes with MNCs like Unilever and P&G in India. Global orientation means leveraging global opportunities and achieving global standards, not necessarily global marketing. Professionalization: The growth of management education and training has enabled increased professionalization, contributing to firms' social orientation. Professionalization brings responsibility and dignity to management. Professionals use knowledge ethically and avoid harming customers. In India, many family firms have also professionalized management. Strategic Operations Management: In an intensely competitive market, firms must win the race to satisfy consumers on product, price, delivery, service, etc. A holistic view of the business system covering key success factors is needed. The business system integrates diverse activities ranging from R&D to after-sales service. Firms can undertake all activities in-house or outsource many. Operations management covers all these activities. Even domestic firms' operations may be international, like global sourcing of inputs or outsourced manufacturing. Firms should leverage favorable conditions globally. Operations management involves extensive supply chain management across organizational boundaries, from procurement to distribution. The goal is timely, efficient product flow and delivery. Supply chain management equals managing the value chain to gain competitive advantage. Operational efficiency strongly impacts cost and value. Technology Overlaps and Integration: Many products/industries see increasing technology overlap and integration - cars integrate mechanical, electrical, and electronic technologies. Digital technology is widely applied across diverse fields. New opportunities often require system integration spanning multiple businesses, companies, and countries. Firms partner to create integrated innovations. Restructuring: Environmental changes lead firms to restructure their business portfolios, products, markets, finances, organizations, etc. Companies commonly exit/enter businesses and restructure organizationally and financially. Focus and Diversification: There is a trend toward focus on one or few key businesses rather than diverse portfolios. Many diversified firms have unbundled. Earlier, ambitions for fast growth and notions of stability/optimization drove diversification. But focus is key to success initially. Over time, companies become unfocused, stretched over too many areas. Lack of direction and mission follows. Diversification often disappoints many acquisitions are later divested, usually in around 6 years. But focus can't be forever - it eventually becomes obsolete and requires re-focusing. But this takes decades, faster only in hightech industries. Some diversification relates to focus expanding products/services for a key target market. Coexistence of Sectors: Most industries have different sectors small, medium, large, organized, unorganized. Competitive strategies differ. In many industries, the unorganized sector severely threatens the organized sector on cost. Fast Changes: Many facets of business are changing faster - product obsolescence, shorter product/brand life cycles, the importance of modifications and improvements. Segmentation: Extensive market segmentation and customization are gaining attention.