Introduction to Business
Before we begin, note:
Each of the disciplines mentioned here is a topic of its own and will be described in more detail in separate blog posts. Disciplines have been simplified to make the concept of business easier to present and understand.
So let’s begin.
Ask yourself for a moment what is YOUR motivation to learn more about business? Do you want better earnings? Do you have a business idea that you want to implement? Do you want to advance in your career? Do you want to be your own boss? … Do you want to be someone else’s boss? 😉
Whatever your motivation, in order to be successful in business, you need to:
Create something VALUABLE to those PEOPLE who need it and sell it for enough MONEY to make it worth while you get on with the business.
Here we can already lay the foundations of business, which are: people, value and money.
Both in private life and in business, there is little we can achieve on our own. Of course, profit is very important – but without people you will hardly get to it. What people? These are:
- Clients – People who buy our product,
- Employees – Those who help us make this product and
- Suppliers – People/Companies who provide us with the materials and tools necessary to make a product.
Employees and suppliers CHARGE us for the value they create (costs), while customers PAY us for the value they receive (revenues).
A company is considered a success when it is able to sell value for more money than it spent to create it.
This is hard to do with just a few clients. For a successful business, it is necessary to constantly look for new customers. The company reaches new customers by ADVERTISING its offer to those people who need it and motivating them to buy.
The place where people who need a product similar to the one we offer is called the MARKET.
In business, marketing is tasked with understanding the target market as well as the characteristics of the customers within it in order to know in the best way to whom, when and how to advertise an offer.
In business, perhaps the biggest mistake is to think that your product is for everyone.
The goal of marketing is not to get everyone’s attention. Its goal is to find out who your potential customers are and what their characteristics are so that the offer is advertised TO THEM ( and not to someone who is not interested in your offer). Just as we can’t get along with everyone, our product isn’t for everyone… Real marketing awakens a desire in people – a desire to buy what you offer. This requires creativity and a deep understanding of human behavior and what they value (On the publication “What is Value?”, you will learn how people value things, people, and events).
What do our customers, employees and suppliers value?
The Client can evaluate the status, exclusivity, quality, reliability or speed of delivery. Employees on the other hand may value security, a sense of contribution, progress, or good earnings. It is important to the supplier that you are reliable, that you pay your debts on time, that you are transparent and that you are not difficult to cooperate with.
In the same way that a person stands up for his values, so does a company stand up for what he cares about.
The company can strive for high quality, reliability or excellent service. It can also advocate for environmental protection, assistance to vulnerable groups or a healthy lifestyle. When a company knows unequivocally what values it stands for, it communicates it to potential customers and the people it employs.
The company’s values are reflected in the CULTURE of business and its BRAND.
Let’s start with Brand. The perception of potential customers in relation to your company, its values and its mission is called brand. This perception can be created by customers through an experience with you, your company or your product. So, there are three types of brands:
- Product brand – Reflects in how customers see your product
- Company brand – Reflects in how customers see your company and what it stands for
- Personal brand – It is reflected in how customers see you and your goals for business and society as a whole.
The company does not need to have a personal brand – a large number of companies hire actors for their content and commercials. However, a personal brand can help you attract attention and increase sales much easier (it’s much easier to get behind a person and their mission than behind a company’s mission). Gary V: Gary is a personal brand of his wine library company. Likewise, Elon Musk is tesla’s personal brand, and it sells electric cars. Gary, the Wine Library and its products (each in its own way), contribute to a better perception of the brand with customers.
Based on these values, potential customers make a decision about whether to do business with you or not. In a similar way, you judge new employees by whether they will fit sufficiently into your business culture.
It is not enough just to perform tasks within the company, it is also important in what way. Although people come from different families, cities, educational institutions and value different things – company culture allows everyone within the company to behave according to its values (“here, things are done like this“). The company must be inclusive enough to accept as many different profiles of people as possible, but it must be strict about its values because its reputation and the trust it enjoys with its customers depend on it. If potential customers perceive your brand in one way, and in contact with your employees experience something completely different – your reputation will deteriorate and clients will not trust you. (Imagine going to the Animal Association and seeing that they treat animals in a bad way…)
Within the business, there are special departments that make sure that people who are in contact with your company actually experience the values that your business stands for. The department that most closely maintains relationships with suppliers is PROCUREMENT, the one that maintains customer relations is SALES, and with employees is HUMAN RESOURCES.
- Procurement strives to establish a partnership with suppliers. This creates an environment in which both companies are directed towards a common goal. The Supplier must feel that he really has a strategic relationship with you that is long-term and transparent.
- Sales tries to show the customer that they understood their problem, and then prove that the company is capable of solving the problem. The Customer must feel trust – he must believe that the company can really help him. Why? Because people hate risk. A successful seller understands how to transfer some of the risk to the company so that the buyer feels safe.
- Human Resources understand the business goals and culture of a company and strive to employ those people who fit into that culture best and are able to achieve those goals. While marketing advertises products and their benefits, human resources advertise open positions and benefits of working in the company.
The best way for a company to present the values it stands for is to connect with one of the human needs. The company must understand which need it satisfies, and then connect with it in some way.
According to Harvard Business School professors, all human beings have five main needs that have a powerful impact on our decisions and actions:
- Need for acquisition – The need to acquire physical objects as well as immaterial things such as status, power and influence. Companies that promise us to become rich, famous or influential are associated with this need.
- The need for relationships – The need to feel appreciated and loved. Companies that promise to make us attractive, loved, or appreciated are connecting with this need.
- Need for knowledge – The need to satisfy our curiosity. Companies that promise to make us more capable or competent are associated with this need.
- Need for defense/protection – The need to protect our family, ourselves or our property. Companies that promise to eliminate the problem, prevent bad things from happening, or keep us safe are connecting with this need.
- Need for feeling – Desire for intense emotional experiences (pleasure, excitement, fun, anticipation, etc.). Companies that promise to delight, make us laugh, give us pleasure or cheer us up are connecting with this need.
While a company defines a culture of doing business on the basis of which it sanctions or rewards employee behavior, regulatory bodies make sure that the company itself behaves according to certain rules (and not only it, but all companies within a specific industry).
REGULATIONS define the rules of conduct for clients, suppliers, employees as well as the company itself so as to protect them from fraud or abuse. They define standards and laws that must be adhered to by all parties involved in business. If a company damages a customer by delivering a product of below-industry quality, it is sanctioned. If the company treats its employees poorly, it will be punished. The regulatory body is able to investigate any company accused of violating the rules and impose penalties if it finds the company guilty. Of course, regulations are there to protect the company itself as well. In business, the legal department is one that helps us understand and comply with regulations.
However, even if we assume that everyone will follow the rules, we must be aware that our business also affects others. In business, those who are influenced by your decisions are called stakeholders. Stakeholders are all the people affected by our business – not only customers, employees and suppliers:
- The community can worry about how business affects the local population,
- The government on whether you pay taxes or pollute the environment,
- Bank on whether you are able to repay the loan,
- Shareholders for the value of shares,
- Trade unions for the treatment of workers, etc.
In business, every decision, big or small, has an impact. When we make a decision, we can’t fully know what it will affect. Therefore, business leaders are thinking about what consequences their decision (good or bad) would have on others.
Making a bad decision, one way or another, will contribute to increasing costs or reducing revenues.
In order for it to continue to exist, every business must bring sufficient income and keep expenses under control in order for it to be worth doing business. The money that goes in and out of business is MONEY FLOW.
REVENUE is the sum of all the money a company has raised from its customers. (Money doesn’t have to come only from sales, but can also come in the form of investments, donations or loans)
COST is the sum of all expenses for a company.
To get PROFIT, we have to subtract all expenses from income.
It seems easy, but it’s not really :). Consider the following:
If you want to increase profits, it is easiest to increase the price. If this is not possible, you may reduce costs. But how does it affect the business? If you reduce costs, you are likely to get a product of lower quality. Customers will not want to pay the same price for a lower quality product. That’s how you lose customers and your revenue decreases… The relationship between price and quality is key.
A good employer will know how to bring small, incremental changes that will reduce costs or increase the value of what they produce.
Because of this, the business monitors cash flow and makes as accurate projections of future income and expenses for a certain period (next month/quarter/year). This is not easy and involves the coordination of all units:
- The sale must say how many new contracts they will close for the future period and how much money they will need to do so,
- Delivery must say what is needed to produce/deliver value and how much it will cost,
- Procurement must say how much the materials/tools necessary for production will cost,
- Human resources need to say how many new people will be needed to generate that income and how much it will cost,
- Finally, finance collects this information and presents it to the company’s executives.
With the development of technology, for this purpose, various tools have been created that help these departments to present their predictions as accurately (and argumentatively) as possible:
- In order to track resources, the company uses an ERP (Enterprise Resource Planning) tool
- For customer relations and sales prediction, it uses a CRM (Customer Relationship Management) tool,
- In order to track production, the company uses a variety of Project Management tools,
- The higher the volume of sales, the number of customer support calls increases, so the company introduces a Call Center system,
- In order to collect all financial data, it introduces accounting systems, etc.
The main task of a company is to create as much VALUE as possible for as many CUSTOMERS as possible with the lowest COSTS. Thus, each department within the business strives to fulfill this task:
- Procurement strives to supply the best quality material at the lowest price,
- Sales try to explain the value to the buyer and sell it at a higher price,
- Marketing tries to better locate potential customers and motivate them to action, thereby reducing the amount of money needed to acquire new customers,
- Delivery/Production strives to optimize processes, eliminate/minimize risks and deliver the product on time and within budget,
- The legal team is trying to ensure that the company operates according to the regulations so as not to pay any fines.
As you can imagine, by recording these things, a lot of DATA is created. It’s data that will help you better understand people, value and money. They will help you make better decisions and be a better employer.
However, the employer is not the only one who wants to have access to data. Customers today also want to be informed. They want to know when what they paid for will arrive at their address. One of the factors that affects this is your location.
Business does not function only within the framework of the Market and Regulations – it is also located in a specific LOCATION.
The location determines how close you will be to customers, which people you will hire, what language you will speak as well as what currency you will use for business. The location of production can affect delivery times and whether you have taxes when importing goods. By choosing the right currency for your business, you protect your profits from fluctuations in exchange rates.
No matter where you are, there is a high probability that you are not alone – your COMPETITION is also there. A lot of people are disappointed when they discover that their idea is not unique and that there are already companies that do the same/similar thing. That shouldn’t discourage you. The very fact that there is competition also shows that there is a market in which you can do business. The mistake occurs when you think you can simply copy the competition and expect long-term success. You need to be DIFFERENT in something. It may not be possible to offer a product for a price lower than the competition. You may not even be able to compete in quality. It’s important to learn from your competitors and understand what you do better than them.
When you find something, use it as a reason for customers to do business with you. Show why you are unique and never stop looking for new things that can set you apart from the competition.
To summarize:
A successful business is a repeatable process that creates value for people and brings profit.
Business is about learning and growing so you know how to make people even happier and your products and services even better. People who work, who want to create a better world and become active members of their society, are ready to learn about business.
Business is of course a wide area and there are many things that we have not touched on in this announcement (transport, logistics, forms of ownership, business processes, business models, forms of value, quality management, project management and much more!). The purpose of this post was to lay the foundation. Now that we’ve done that, we can move on to other areas and upgrade our business knowledge.