UNIT 1.

BUSINESS ORGANISATION AND ENVIRONMENT

TABLE OF CONTENTS
1. The entrepreneurial initiative. ................................................................................... 2
1.1. The entrepreneur. .................................................................................................................. 2
1.2. The business idea ................................................................................................................. 11
1.3. The business plan. ................................................................................................................ 12
2. Environment............................................................................................................ 20
2.1. General business environment or macroenvironment ....................................................... 20
2.2. Sector-specific environment or microenvironment ............................................................ 22
2.3. The competitors. SWOT analysis ......................................................................................... 24
2.4. Location ................................................................................................................................ 26
3. Business organisation .............................................................................................. 30
3.1. Types of organisation ............................................................................................................. 30
3.2. Legal forms.............................................................................................................................. 32
3.3. Business culture and corporate image .................................................................................. 35
3.4. Corporate Social Responsibility ........................................................................................... 37
1. The entrepreneurial initiative.

1.1. The entrepreneur.

1.1.1. Is business for me?

The lingo of the business world- cashflow, profit and loss statements, accounts
receivable, debt-to-equity ratio, and so on- makes business ownership appear far
more complicated than it really is. Don’t be fooled. You are probably more acquainted
with the basic concepts of doing business than you think. If you have ever participated
in a bake sale, been paid for a musical performance, or operated a baby-sitting,
painting, or lawn-mowing service, you have been involved in a small business.
Being a small-business owner does not mean that you have to work 70 hours a
week, make a six-figure income, or offer a unique product or service. There are many
successful small-business owners who work at their craft 40 hours a week or less and
some who work part-time at their business in addition to holding a regular job. The
vast majority of small-business owners provide products or services quite similar to
what’s already in the marketplace and make reasonable but not extraordinary sums
of money- and, thanks largely to the independence that small-business ownership, are
perfectly happy doing so!
Imagine back to your childhood . . . it’s a hot summer afternoon, and you’re
sweating it out under the shade of an elm tree in your front yard. “Boy, it’s hot,” you
say to yourself, sighing. “I could sure go for a glass of lemonade.” Eureka! With no
lemonade stand in sight, you seize upon your business idea.
You start by asking some of your neighbours if they’d buy lemonade from you,
and you quickly discover that the quality, service, and location of your proposed
business may attract a fair number of customers. You’ve just conducted your first
market research.
After you determine that your community has a need for your business, you also
have to determine a potential location. Although you could set up in front of your
house, you decide that your street doesn’t get enough traffic. To maximize sales, you
decide to set up your stand on the corner down the road. Luckily, Mrs. Ormsby gives
you permission to set up in front of her house, provided that she gets a free glass of
lemonade. You’ve just negotiated your first lease (and you’ve just had your first
experience at bartering).
With a tiny bit of creativity and ego, you determine the name of your business:
The World’s Best Lemonade Stand. After some transactions with the grocery store,
you have your lemonade stand (your store), your cash box, a table, a pitcher (your
furniture and fixtures), and the lemonade (your inventory). The World’s Best
Lemonade Stand (your brand) is now ready for business!

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 From the moment you first realized that you weren’t the only one who might be
interested in buying some lemonade, you faced the same business challenges and
issues that all small-business owners face. As a matter of fact, the business challenges
and issues that a lemonade stand faces are the same that American Express, Boeing,
Costco, Disney, and every other big company faces. The basics of doing business are
the same, no matter what size the business is:

✓ Sales: Boeing manufactures and sells airplanes; you sell lemonade. A sale is a
sale no matter what the product or service is or how large or small the ticket price is.

✓ Cost of goods: Boeing buys parts for its vendors and suppliers; you buy lemons,
sugar, and paper cups from the grocery store.

✓ Expenses: Boeing has employee wages and pension plans (or employee
benefits); you have sign-making costs and bubble-gum expenditures to keep your
employees happy (also a form of employee benefits).

✓ Profit: Profit is what’s left over after Boeing subtracts the cost of its goods and
expenses from its sales; the same is true for your lemonade stand.
Small business: Role model for big business.
While working as CEO of General Electric, Jack Welch once said in a speech to his
division managers, “Think small. What General Electric is trying relentlessly to do is to
get that small-company soul . . . and small-company speed . . . inside our big-company
body.”
Think small? What’s happening here? Why would the CEO of a gigantic company
like GE want his employees to think small? Because Jack Welch knew that small can
be beautiful and because success and survival in the business arena always favour the
agile over the cumbersome, the small over the big. Thanks to this “small is beautiful”
trend — and thanks to increasing technological advances — you no longer have to be
big to appear big; you can be small and still compete in most of today’s marketplaces.
Different people and businesses, similar issues
Okay, so you know what small business means and you can identify the people
who create and run one, but what about your particular small business? After all, in
your eyes anyway, the business you have in mind or the one you’re already running is
different from anyone else’s. Different products, different services, different legal
entity — the list goes on.
The term small business covers a wide range of product and service offerings. A
ten-person law practice is a small business. A doctor’s office is a small business.
Architects, surveyors, and dentists are also in the business of owning and operating
small businesses. How about a Subway franchisee? You guessed it — small business.
The same goes for freelance writers (hence, we, your humble authors, are both small-
business owners), consultants, and the dry cleaner on the corner. Each one is a small

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 business. Small business also covers all legal business entities. So small businesses can
be sole proprietorships, C Corporations, nonprofits, or limited liability corporations.
After all, each of the businesses and entities we list here has the same basic
needs:

✓ Marketing to make its products or services known

✓ Sales to get its products or services in the hands of the customer

✓ Varying degrees of administration and financial accounting to satisfy a number

of internal informational needs, as well as the needs of the IRS
Beyond the similarities in this list, each business is significantly different. Some
need employees; some don’t. Some require vast investments in real estate,
equipment, and elaborate information systems; some can get by with a desk,
computer, and phone. Some may need to borrow money to get the business up and
running; many others get by with what’s in the owner’s savings account. These
differences are what make owning a small business exciting because you should be
able to find a good fit for your desires and resources.
(Texto adaptado de Tyson, E. & Schell, J. (2012) Small Business for Dummies 4th
Edition. New Jersey. John Wiley & Sons, Inc.)

1.1.2. The comfort zone

After reading the above, do you think you are ready to start a business? Are
you willing to step out of your comfort zone? But…what is `comfort zone´? Don’t panic!
What Is the Comfort Zone in Psychology?

Now firmly embedded in cultural discourse, the metaphor of ‘leaving one’s comfort
zone’ became popular in the 1990s. The phrase ‘comfort zone’ was coined by management
thinker Judith Bardwick in her 1991 work Danger in the Comfort Zone:

“The comfort zone is a behavioural state within which a person operates in an anxiety-neutral
condition, using a limited set of behaviours to deliver a steady level of performance, usually
without a sense of risk.”
Within the comfort zone, there isn’t much incentive for people to reach new heights
of performance. It’s here that people go about routines devoid of risk, causing their progress
to plateau.

But the concept can be traced further back to the world of behavioural psychology.

In 1907, Robert Yerkes and John Dodson conducted one of the first experiments that
illuminated a link between anxiety and performance.

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 They saw that mice became more motivated to complete mazes when given electric
shocks of increasing intensity – but only up to a point. Above a certain threshold, they began
to hide rather than perform.

Corresponding behaviour has been seen in human beings. This makes sense because
in response to anxiety-provoking stimuli, the options are either fight (meet the challenge),
flight (run away/hide), or freeze (become paralyzed).

The Yerkes–Dodson Law (Yerkes & Dodson, 1907) is true not just for more tangible
types of performance, such as being given a stressful new task at work, but also in many life
areas such as understanding ourselves, relating to others, and so on.

The core idea is that our nervous systems have a Goldilocks zone of arousal. Too little,
and you remain in the comfort zone, where boredom sets in. But too much, and you enter
the ‘panic’ zone, which also stalls progress:

From Comfort Zone to the Growth Zone

When leaving the comfort zone, fear doesn’t always equate to being in the panic zone.
As the below diagram shows, fear can be a necessary step in route to the learning and growth
zones:

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Source: PositivePsychology.com ‘Leaving The Comfort Zone’ Toolkit

It takes courage to step from the comfort zone into the fear zone. Without a clear
roadmap, there’s no way to build on previous experiences. This can be anxiety provoking. Yet
persevere long enough, and you enter the learning zone, where you gain new skills and deal
with challenges resourcefully.

After a learning period, a new comfort zone is created, expanding one’s ability to reach
even greater heights. This is what it means to be in the growth zone.

It’s important to state that like most behavioural change attempts, moving into the
growth zone becomes harder without some level of self-awareness. Thus, it can be beneficial
for clients to consider the following:

• How big are their zones?

Across every life domain, everyone’s zones vary in size. To leave your comfort zone,
you must appreciate its outer limits. Similarly, you must develop an intuitive sense of
where your panic zone lies. Taking on challenges that lie somewhere in between will
stretch you, leading to growth and learning.
• What are their strengths?
Understanding and capitalizing on personal strengths can be of great use. Most
people have experienced leaving the comfort zone in at least one area of life, and
there are usually plenty of insights to be uncovered from this experience.

In reality, the process of moving from the comfort zone to a growth zone may not be
linear. Peaks, troughs, and plateaus often complicate the journey. Sometimes, we even need

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to retreat to the comfort zone periodically before mustering the strength to leave again.
Nevertheless, appreciating the steps can help in tolerating uncertainty.

While occupying the comfort zone, it’s tempting to feel safe, in control, and that the
environment is on an even keel. It’s smooth sailing.

The best sailors, however, aren’t born in smooth waters.

Ways to Leave Your Comfort Zone

1. Do everyday things differently.

In everyday life, there are ample opportunities to challenge yourself. Turn off your
smartphone and television while having dinner, decide what to wear more quickly, or just
slow down to take in the surroundings on a walk. These changes break you out of old,
comfortable routines.

2. Expand your professional skillset.

Growing your skillset can foster creativity and refresh your self-confidence, as well as
increase employability. Skills like public speaking, negotiation, and leadership can represent
a new challenge for many people. Investing in them can build resilience, personal satisfaction,
and open up more opportunities than ever.

3. Try a new diet.

Many people want to improve their diets and stop relying on ‘comfort foods.’ Doing
so often means trying something new.

Sticking to a healthy diet can be as challenging as it is rewarding, with self-efficacy

growing as you hit milestone goals along the way.

4. Take workouts to the next level.

Similarly, many aspire to this goal. For some, it can mean running their first 5K, but for
others, it might be completing a triathlon.

Aiming high with exercise is emblematic of leaving the comfort zone and a great way
to get the ball rolling.

5. Get creative.

Creativity – anything from writing a poem to building a business – usually involves an

element of risk. Creative endeavours are about stepping into the unknown, with failing and
subsequent learning as expected outcomes.

Exercising creativity is a good way to train yourself to have a growth mindset and let
go of a need for perfection from the outset.

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6. Challenge your beliefs.

While exploring alternative perspectives can be uncomfortable, it enables growth and

insight by challenging entrenched beliefs.

This might take several forms, such as reading varied book genres, diversifying who
you talk to, and visiting new places. It’s easy to get stuck in our ways, but this can lead to
complacency – a hallmark of being in the comfort zone.

7. Practice honesty.

When employed sensitively, honesty can be a tremendous catalyst for personal

growth. Whether being straight with yourself in a private journal or telling someone close
how you feel, honesty forces people out of their comfort zone. Through honest
communication, we can understand ourselves better and build deeper bonds with others.

(Texto adaptado de How to Leave your Comfort Zone and Enter your ‘Growth Zone’
(positivepsychology.com) )

1.1.3. Pros and cons of owning a business

Perhaps you have finally decided to take the risk and create your own business,
but if you are still not sure, here are some reasons to assess whether you want to do
it or not.
The reasons to own

✓ The satisfaction of creation: Have you ever experienced the pride of building a
chair, preparing a gourmet meal, or repairing a vacuum cleaner? Or how about providing a
needed counselling service that helps people solve their vexing financial problems? The small-
business owner gets to experience the thrill of creation on a daily basis, not to mention the
satisfaction of solving a customer’s problem.

✓ Establishment of their own culture: After you start your own business, the way
things are around here is a direct function of the way you intend them to be.

✓ Financial upside: According to some studies, small-business ownership is risky,

smallbusiness owners had a significantly higher probability of being classified as high income
and high wealth than their employed counterparts.

✓ Self-sufficiency: For many people, working for someone else has proven to be a less-
than-gratifying experience. As a result of such unfulfilling experiences, some people have
discovered that if they want to provide for themselves and their families, they’d better create
the opportunity themselves. It’s either that or be willing to occasionally spend a long wait in
the unemployment line.

✓ Flexibility: Perhaps you prefer to work in the evenings because that’s when your
spouse works or you want to spend more time with the kids during the day. Or you may prefer
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taking frequent three-day-weekend jaunts rather than a few full-week vacations every year.
As a small-business owner, despite the long hours you work, you should have more control
over your schedule. After all, you’re the boss, and you can usually tailor your schedule to meet
your personal needs, as well as those of your customers.

✓ Special perks: Small-business owners have several advantages over the typical
employee. For example, possibility of deducting some expenses.
The reasons not to own

✓ Responsibility: When you’re a small-business owner, not only does your family
depend on your business success, but so do your partners, your employees and their families,
your customers, and sometimes your vendors. If you’re the type of person who sometimes
takes on more responsibility than you can handle and works too many hours, beware that
another drawback of running your own business is that you may be prone to becoming a
workaholic.

✓ Competition: Although some people thrive on competition, that same competition

comes back to haunt you by threatening your security. You soon find out that a host of hungry
competitors is pursuing your customers and threatening your livelihood, whether by cutting
prices or offering a more complete package of unique services. You need to remember that
in order to have a competition, someone’s going to win and someone’s going to lose. That
someone could be you.

✓ Change: Products and services come, and products and services go. Nothing is
sacred in the business of doing business, and the pace of change today is significantly faster
than it was a generation ago — and it shows no signs of slowing down. If you don’t enjoy
change and the commotion it causes, then perhaps the stability that a larger, more
bureaucratic organization provides is best for you.

✓ Chance: Interest rates, the economy, theft, fire, natural disasters, sickness,
pestilence — the list goes on. Any of these random events can send your business reeling.

✓ Red tape (Bureaucracy): Taxes, tariffs, duties, treaties…

✓ Business failure: Finally, as if this list of a small business’s enemies isn’t long enough,
the owner faces the spectre of the ultimate downside: business failure in the form of
bankruptcy. This is the stage where the owner stands back and watches the creditors swoop
in like vultures to devour his remaining business — and sometimes personal — assets.

(Texto adaptado de Tyson, E. & Schell, J. (2012) Small Business for Dummies 4th Edition. New
Jersey. John Wiley & Sons, Inc.)

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 1.1.4. Characteristics of the entrepreneur
The entrepreneur is the person who undertakes, who makes decisions that involve
some degree of risk or difficulty. The entrepreneur identifies opportunities, organizes the
necessary resources, and puts their idea into practice.
There are entrepreneurs in all areas: political, scientific, educational, economic. In the
economic field, the entrepreneur sets up her/his own company (independent entrepreneur)
or the employee (usually management) who acts with initiative and autonomy to meet the
objectives of the company (dependent entrepreneur or intrapreneurship).
New business ventures started by entrepreneurs can be based on a totally new
product or customer service idea or a new way of offering a service. People who set up their
own new business show skills of ‘entrepreneurship’. They have:
● had an idea for a new business
● invested some of their own savings and capital
● accepted the responsibility of managing the business
● accepted the possible risks of failure.
The personal qualities and skills needed to make a success of a new business venture
are described below.
Innovative
The entrepreneur may not be a ‘product inventor’, but they must be able to carve a
new niche in the market, attract consumers in innovative ways and present their business as
being ‘different’. This requires original ideas and an ability to do things innovatively.
Commitment and self-motivation
It is never an easy option to set up and run your own business. It is hard work and
may take up many hours of each day. A willingness to work hard, a keen ambition to succeed,
energy and focus are all essential qualities of a successful entrepreneur.
Multi-skilled
An entrepreneur will have to make the product or provide the service, promote it, sell
it and count the money. These different business tasks require a person with many different
qualities such as being keen to learn technical skills, an ability to get on with people and being
good at handling money and keeping accounting records.
Leadership skills
An entrepreneur has to lead by example and must have a personality that encourages
people in the business to follow them and be motivated by them.

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 Belief in oneself
Many business start-ups fail, yet this would not discourage a true entrepreneur who
would have such self-belief in their abilities and business idea that they would bounce back
from any setbacks.
Risk taker
Entrepreneurs must be willing to take risks in order to see results. Often the risk they
take involves investing their own savings in a new business.
(Texto adaptado de Simpson, P. & Smith, A. (2011) Business and management for the
IB diploma. Cambridge. Cambridge University Press)

1.2. The business idea

1.2.1. Sources of ideas

Many people say that they want to work for themselves, but they then do not make
the leap into entrepreneurship successfully because they have not been able to identify a
market opportunity that will generate sufficient demand for their product or service to enable
the business to be profitable. The original idea for most new businesses comes from one of
several sources including:
● own skills or hobbies, e.g. dress making or car bodywork repairer
● previous employment experience, e.g. learning hairdressing skills with an
established business
● franchising conferences and exhibitions offering a wide range of new business start-
up ideas, e.g. fast food restaurants
● small budget market research – the use of the internet allows any user to browse
business directories to see how many businesses there are in the local area offering certain
goods or services. This low-cost research might indicate gaps in local markets that could be
profitably filled by the entrepreneur.
(Texto adaptado de P. & Smith, A. (2011) Business and management for the IB diploma.
Cambridge. Cambridge University Press)

1.2.2. Innovation
Few markets avoid change, which involves new products or new ways of making
existing products. Some industries are more likely to undergo substantial changes brought
about by new technologies and new adaptations of existing technologies. The IT, computer
and mobile phone markets are experiencing more innovation than most. How do businesses

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benefit from introducing radical new products and what factors influence the range and pace
of innovation?
The importance of research and development
Spending on research and development (R&D) is growing globally and in most
industrial sectors. The benefits to a country of encouraging R&D spending include:
● creation of high-tech jobs
● creation of high-added-value products that may then be manufactured in that
country
● prestige – a country being linked to scientific and technological breakthroughs
● attraction of investment by multinational corporations.
The importance of R&D for business
The benefits of successful R&D spending – that is, spending that leads to innovative
products – include:
● competitive advantage over competitors – Dyson has become one of the world’s
leading vacuum-cleaner manufacturers in 20 years as a result of its ‘dual cyclone’ technology.
● customer loyalty – Microsoft’s continuous development and improvement
programme for its computer operating systems help to keep customers loyal to the brand
even though competitors are becoming more numerous.
● high, premium prices – being first into a market with an innovative product can
allow high prices to be charged, e.g. the tiny but expensive Smart Car was marketed not as a
low-cost form of transport but an eco-friendly vehicle, worth paying ‘extra’ for.
● publicity – Apple receives free worldwide publicity for each new innovative product
it launches.
● lower costs – Pilkington, the glass maker, revolutionised float-glass making and
slashed the cost of making glass to give it substantial cost advantages.
(Texto adaptado de P. & Smith, A. (2011) Business and management for the IB diploma.
Cambridge. Cambridge University Press)

1.3. The business plan.

1.3.1. What is a BP and why write a it?

A Business Plan is a written document that describes a business, its objectives and its
strategies, the market it.
The contents of a typical business plan are:
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 ● the executive summary − an overview of the new business and its strategies
● description of the business opportunity − details of the entrepreneur; what is going
to be sold, why and to whom
● marketing and sales strategy − details of why the entrepreneur thinks customers
will buy what the business plans to sell and how the business plans to sell to them
● management team and personnel − the skills and experience of the entrepreneur
and the staff he/she intends to recruit
● operations − premises to be used, production facilities, IT systems
● financial forecasts − the future projections of sales, profit and cash flow – for at least
one year ahead. is in and its financial forecasts.
(Texto de P. & Smith, A. (2011) Business and management for the IB diploma.
Cambridge. Cambridge University Press )

Why write it?

1. Opening a business without a business plan is like setting out into the middle of
nowhere with no map or supplies and trying to find a specific location you’ve never been to.
You have an idea where you want to go but you have no idea of which direction to take or
what supplies you will need. How can you possibly hope to get there?
2. The matter of the fact is that most entrepreneurs do exactly that. They have a
brilliant idea and the courage to go after it. But that’s not enough. There are thousands upon
thousands of small businesses that failed, despite that initial great idea and their owner’s
courage to go after it.
3. Why do they fail? Lack of funding, ignoring the competition, ineffective marketing,
poor location, not understanding customer needs, cash flow problems… there are a multitude
of reasons why businesses fail.
4. However, all these reasons have one crucial factor in common – they could have
been avoided if the business owners had compiled a comprehensive business plan before
they opened their doors for business.
5. The primary purpose of the business plan is to guide you in successfully setting up
and operating your business. Preparing the plan forces you to consider all aspects of your
business and to confront any problems the plan highlights. . . while your business is still on
paper.
6. The fact is: Your business plan is literally your roadmap to your success. Any road
will take your business somewhere, but only a well-executed business plan will help you take
your business where you want it to go.
(Texto de The Business Plan Book. Sanlam.)

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 1.3.2. Business Model Canvas

The Business Model Canvas (BMC) is a strategic management tool to quickly and
easily define and communicate a business idea.

It is a one-page document which works through the fundamental elements of a

business or product, structuring an idea in a coherent way.

The right side of the BMC focuses on the customer (external), while, the left side of
the canvas focuses on the business (internal).

Both external and internal factors meet around the value proposition, which is the
exchange of value between your business and your customer/clients.

Why we use it?

• To quickly draw a picture of what the idea entails.

• It allows us to get an understanding of your business and to go through the process of
making connections between what your idea is and how to make it into a business.
• It looks at what kinds of customer decisions influence the use of your systems.
• It allows everyone to get a clear idea of what the business will likely be.

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 How to use it

Value Proposition:

The Value Proposition is foundational to any business/product.

It is the fundamental concept of the exchange of value between your business and your
customer/clients.

Generally, value is exchanged from a customer for money when a problem is solved or a pain
is relieved for them by your business.

Good questions to ask when defining your business/product:

• What is the problem I am solving?

• Why would someone want to have this problem solved?
• What is the underlying motivator for this problem?

Tips:

A good way to approach this for users/customers is by looking at your customer segments
and figuring out where your product/service solves the problem for your customer, based on
Maslow’s Hierarchy of Needs.

If you are selling your product or service to another business, you are a key partner in them
achieving their Value Proposition for their customers.

It is important to have context around the goals the company is trying to achieve for their
Customer Segments and where your business/product/service fits in the value chain.

Customer Segments

Customer Segmenting is the practice of dividing a customer base into groups of individuals
that are similar in specific ways, such as age, gender, interests and spending habits.

Things to consider when determining your Customer Segments:

• Who are we solving the problem for?

• Who are the people that will value my value proposition?
• Are they another business?
• If so, what are the characteristics of those businesses?
• Or, are they other people?
• Does my value proposition appeal to men/women or both?
• Does it appeal to young adults aged 20 to 30 or teenagers?
• What are the characteristics of the people who are looking for my value proposition?

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Another thing to gauge and understand is your market size, and how many people there are
in the Customer Segment. This will help you understand your market from a micro and macro
perspective.

Customer relationships

Customer Relationships is defined as how a business interacts with its customers.

So, do you meet with them in person? Or over the phone? Or is your business predominantly
run online so the relationship will be online too?

Some examples are:

• In person (one-to-one)
• Third party contractors
• Online
• Events (one-to-many)
• Phone

Channels

Channels are defined as the avenues through which your customer comes into contact with
your business and becomes part of your sales cycle.

This is generally covered under the marketing plan for your business.

Good questions to ask when identifying the channels to reach your customers are:

• How are we going to tell our customer segment about our value proposition?
• Where are our customers?
• Are they on social media?
• Are they driving their car and listening to the radio?
• Are they at an event or conference?
• Do they watch TV at 7pm on a Friday night?

Examples of channels:

• Social media
• Public speaking
• Electronic mail (email marketing)
• Networking
• SEM (Search Engine Marketing)
• SEO (Search Engine Optimisation)
• Engineering as marketing
• Viral marketing
• Targeting blogs
• Sales and promotions for commissions
• Affiliates
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 • Existing platforms
• PR (Public Relationships)
• Unconventional PR
• Social advertising
• Trade shows
• Content marketing
• Community building
• Offline advertising (billboards, TV, radio)

Understanding how to reach your customers is so crucial to your business.

Key Activities

The Key Activities of your business/product are the actions that your business undertakes to
achieve the value proposition for your customers.

Questions to ask:

• What activities does the business undertake in achieving the value proposition for the
customer?
• What is the resource used?
• Time?
• Expertise?
• Distribution of product?
• Technical development?
• Strategy?
• Offer resources (human/physical)?
• What actions does it take you and/or your staff to achieve value exchange?

Examples:

• Consulting
• Designing
• Web development
• Baking
• Driving
• Shovelling

Key Resources

Next you should think about what practical resources are needed to achieve the key activities
(actions) of the business?

Key means the resources your business requires to do business.

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These resources are what is needed practically to undertake the action/activities of your
business:

• Office space
• Computers
• Hosting
• People (staff)
• Internet connection
• Car
• Bike
• Oven
• Electricity
• Car Parts

Key partners

Key Partners are a list of other external companies/suppliers/parties you may need to achieve
your key activities and deliver value to the customer.

This moves into the realm of ‘if my business cannot achieve the value proposition alone, who
else do I need to rely on to do it?’.

An example of this is ‘if I sell groceries to customers, I may need a local baker to supply fresh
bread to my store’.

They are a key partner to achieve the value my business promises to the customer.

Cost Structures

Your business cost structure is defined as the monetary cost of operating as a business.

• How much does it cost to achieve my businesses key activities?

• What are the cost of my key resources and key partnerships?
• How much does it cost to achieve the value proposition for my customers/users?
• Are there additional costs to running a business?
• Legal?
• Insurance?
• What is the cost of my business?
• It is important also to place a monetary value on your time as a cost.
• How much would it cost you to hire you?
• What is the opportunity cost of running your business?

Revenue streams

Revenue Streams are defined as the way by which your business converts your Value
Proposition or solution to the customer’s problem into financial gain.
EMPRESA E INICIATIVA EMPRENDEDORA 18
It is also important to understand pricing your business accordingly to pain of purchase in
exchange for the pain of solving the problem for your customer.

But how do you gain revenue?

There are many different revenue models here:

• Pay per product (pay per view)

• Fee for service
• Fixed rate
• Subscription
• Dividends
• Referral feeds
• Freemium
• Equity gain

Case studies

EMPRESA E INICIATIVA EMPRENDEDORA 19

(Texto adaptado de https://medium.com/seed-digital/how-to-business-model-canvas-
explained-ad3676b6fe4a)

2. Environment

2.1. General business environment or macroenvironment

Businesses depend for their survival on understanding and responding to external factors
that are beyond their control. Many of the factors are ‘constraints’ because they may limit
the nature of decisions that business managers can take. The legal requirements imposed by
governments, on environmental pollution for example, are one of the most obvious
constraining influences on business activity. However, external influences can also create
opportunities and enable a business to become even more successful – introducing new
technology in advance of rival firms is one example.
PEST Analysis
It is an acronym standing for political, economic, social, technological that refers to an
analytical framework for external environmental factors affecting business objectives and
strategies.
Managers undertake PEST analysis to assess the importance of the major external
influences on their organisation’s future activities.
Some businesses may only do this form of analysis as a one-off when a major decision
needs to be taken. This is likely to be less effective than regular PEST reviews which monitor
EMPRESA E INICIATIVA EMPRENDEDORA 20
changes to the external environment. It is the responsibility of managers to decide which of
the key PEST factors are relevant to their business. The analysis itself can be undertaken by
managers alone or with the participation of other staff.
In the table below we can have a look to the main external factors we can consider in a
PEST Analysis:

POLITICAL AND LEGAL CONSTRAINTS ECONOMIC INFLUENCES

-Employment laws -Economic growth or recession
-Consumer protection laws -Interest rates
-Business competition laws -Exchange rates
-Political changes resulting from a new government -Tax changes
-Major policy changes such as nationalising -Unemployment
-Inflation
SOCIAL AND CULTURAL INFLUENCES IMPACT OF TECHNOLOGY
-An ageing population -Internet
-Changing role of women -New business applications of IT
-Improved education facilities -Robotics
-Early retirement -Metaverse
-Rising divorce rates
-Increased levels of immigration

Next table shows a simplified PEST analysis for McDonald’s restaurants which the
company would carry out when planning to enter a national market for the first time. Other
business scenarios may lead to different factors being considered important.

(Texto adaptado de P. & Smith, A. (2011) Business and management for the IB diploma.
Cambridge. Cambridge University Press )

EMPRESA E INICIATIVA EMPRENDEDORA 21

 2.2. Sector-specific environment or microenvironment

Companies are also affected by a variety of factors specific to their sector. For example,
a restaurant is not the same as a nursery school.

Michael Porter developed a model to study them. He provided a framework that

analyses an industry as being influenced by five forces. It has been suggested that
management, attempting to establish a competitive advantage over rivals, can use this model
to understand the industry context in which the business operates and take appropriate
strategic decisions.
1 Threat of entry
This means the ease with which other firms can join the industry and compete with
existing businesses. The threat of entry is greatest when:
● economies of scale are low in the industry
● technology needed to enter the industry is relatively cheap
● distribution channels are easy to access, e.g. retail shops are not owned by existing
manufacturers in the industry
● there are no legal or patent restrictions on entry
● the importance of product differentiation is low, so extensive advertising may not be
required to get established.
2 The power of buyers
This refers to the power that customers have on the producing industry. For example, if
there are four major supermarket groups that dominate this sector of retailing, their buyer
power over food and other producers will be great. Buyer power will also be increased when:

EMPRESA E INICIATIVA EMPRENDEDORA 22

 ● there are many undifferentiated small supplying firms, e.g. many small farmers
supplying milk or chicken to large supermarket businesses
● the cost of switching suppliers is low
● buyers can realistically and easily buy from other suppliers
3 The power of suppliers
Suppliers will be relatively powerful compared with buyers when:
● the cost of switching is high, e.g. from PC computers to AppleMacs
● when the brand being sold is very powerful and well known, e.g. Cadbury’s chocolate
or Nike shoes
● suppliers could realistically threaten to open their own forward-integration operations,
e.g. coffee suppliers open their own cafés
● customers have little bargaining power as they are small firms and fragmented, e.g.
dispersed around the country as with independent petrol stations
4 The threat of substitutes
In Porter’s model, ‘substitute products’ does not mean alternatives in the same industry
such as Toyota for Honda cars. It refers to substitute products in other industries. For instance,
the demand for aluminium for cans is partly affected by the price of glass for bottling and
plastic for containers. These are substitutes for aluminium, but they are not rivals in the same
industry. Threats of substitution will exist when:
● new technology makes other options available such as satellite TV instead of traditional
antenna reception
● price competition forces customers to consider alternatives, e.g. lower bus fares might
make some travellers switch from rail transport
● any significant new product leads to consumer spending that results in less being spent
on other goods, e.g. increasing spending on mobile phones by young people reduces the cash
they have available to spend on clothes
5 Competitive rivalry
This is the key part of this analysis – it sums up the most important factors that
determine the level of competition or rivalry in an industry. It is based on the other four forces
which is why it is often illustrated in the centre of the Five Forces diagram. Competitive rivalry
is most likely to be high where:
● it is cheap and easy for new firms to enter an industry
● there is a threat from substitute products
● suppliers have much power

EMPRESA E INICIATIVA EMPRENDEDORA 23

 ● buyers have much power.
There will also be great rivalry between competing firms in an industry when:
● there are a large number of firms with similar market share
● high fixed costs force firms to try to obtain economies of scale
● there is slow market growth that forces firms to take share from rivals if they wish to
increase sales.

2.3. The competitors. SWOT analysis

The environment is very dynamic, everything changes very quickly and you have to react
as soon as possible to the competition. Not knowing what competition exists or not knowing
that they are doing can cause the business project to fail.
So, what do I need to know about the competitors?

• How many are there and what are their names?

• What do they sell?
• How much do they sell?
• Prices
• Promotion
• Distribution
• Satisfaction and customer service
• Strategies
• S.W.O.T. (D.A.F.O. en español)

What is S.W.O.T. Analysis?

It is a form of strategic analysis that identifies and analyses the main internal strengths
and weaknesses and external opportunities and threats that will influence the future
direction and success of a business.
A SWOT analysis provides information that can be helpful in matching the firm’s
resources and strengths to the competitive environment in which it operates. It is, therefore,
useful in strategy formulation and selection. It comprises:
S = strengths These are the internal factors about a business that can be looked upon as
real advantages. They could be used as a basis for developing a competitive advantage. They
might include experienced management, product patents, loyal workforce and good product
range. These factors are identified by undertaking an internal audit of the fi rm. This is often
carried out by specialist management consultants who analyse the effectiveness of the
business and the effectiveness of each of its departments and major product ranges.

EMPRESA E INICIATIVA EMPRENDEDORA 24

 W = weaknesses These are the internal factors about a business that can be seen as
negative factors. In some cases, they can be the flip side of a strength. For example, whereas
a large amount of spare manufacturing capacity might be a strength in times of a rapid
economic upturn, if it continues to be unused it could add substantially to a firm’s average
costs of production. Weaknesses might include poorly trained workforce, limited production
capacity and ageing equipment. This information would also have been obtained from an
internal audit.
O = opportunities These are the potential areas for expansion of the business and future
profits. These factors are obtained by an external audit of the market the firm operates in and
its major competitors. Examples include new technologies, export markets expanding faster
than domestic markets and lower rates of interest increasing consumer demand.
T = threats These are also external factors, gained from an external audit. This audit
analyses the business and economic environment, market conditions and the strength of
competitors. Examples of threats are new competitors entering the market, globalisation
driving down prices, changes in the law regarding the sale of the firm’s product and changes
in government economic policy.
This information is usually presented in the form of a four-box grid as shown in the next
table.

(Texto adaptado de P. & Smith, A. (2011) Business and management for the IB diploma.
Cambridge. Cambridge University Press)
Based on the previous analysis we will try to:
- Keep the strengths
- Correct weaknesses
- Take advantage of opportunities
- Face threats

EMPRESA E INICIATIVA EMPRENDEDORA 25

 2.4. Location

An ‘optimal’ location decision is one that selects the best site for expansion of the
business or for its relocation, given current information. This best site should maximise the
long-term profits of the business.
The optimal site is nearly always a compromise between conflicting benefits and
drawbacks. For example:
1 A well-positioned high-street shop will have the potential for high sales but will have
higher rental charges than a similar sized shop out of town.
2 A factory location which is cheap to purchase due to its distance from major towns
might have problems recruiting staff due to lack of a large and trained working population.
Factors influencing location decisions
Site and other capital costs such as building or shop-fitting costs
These vary greatly from region to region within a country and between countries. The
best office and retail sites may be so expensive that the cost of them is beyond the resources
of all but the largest companies. The cost of building on a greenfield site – one that has never
previously been developed – must be compared with the costs of adapting existing buildings
on a developed site.
Labour costs
The relative importance of these as a locational factor depends on whether the business
is capital or labour intensive. An insurance company call centre will need many staff, but the
labour costs of a nuclear power station will be a very small proportion of its total costs. The
attraction of much lower wage rates overseas has encouraged many European businesses to
set up operations in other countries – for example, bank and insurance company call centres.
Transport costs
Businesses that use heavy and bulky raw materials – such as steel making – will incur
high transport costs if suppliers are at a great distance from the steel plant. Goods that
increase in bulk during production will, traditionally, reduce transport costs by locating close
to the market. Service industries, such as hotels and retailing, need to be conveniently located
for customers and transport costs will be of less significance.
Sales revenue potential
The level of sales made by a business can depend directly on location. Confectionery
shops and convenience stores have to be just that – convenient to potential customers. In
addition to this, certain locations can add status and image to a business and this may allow
value to be added to the product in the eyes of the consumers. This is true for high-class
retailers situated in London’s Bond Street, but also for financial specialists operating from an
address in New York’s Wall Street.

EMPRESA E INICIATIVA EMPRENDEDORA 26

 Government grants
Governments across the world are very keen to attract new businesses to locate in their
country. Grants may be offered to act as an incentive. Existing businesses operating in a
country can also be provided with financial assistance to retain existing jobs or attract new
employment to deprived areas of high unemployment.
Safety
To avoid potential risk to the public and damage to the company’s reputation as a
consequence of an accident that risked public safety, some industrial plants will be located in
remote areas, even though these may increase transport and other costs.
Room for further expansion
It is expensive to relocate if a site proves to be too small to accommodate an expanding
business. If a location has room for further expansion of the business, then this might be an
important long-term consideration.
Managers’ preferences
In small businesses, managers’ personal preferences regarding desirable work and home
environments could influence location decisions of the business. In larger organisations, such
as a PLC (Public Limited Company, S.A. en español), this is unlikely to be a factor, as earning
profits and increasing returns to shareholders will be key objectives that will take priority in
location decisions.
Labour supply
Apart from the cost of labour, the availability or nonavailability of workers with
appropriate skills will be an important factor for most business location decisions.
Ethical considerations
A business deciding to relocate from the UK is likely to make workers redundant. This
will cause bad publicity and could also be contrary to the ethical code of the business and may
be viewed by stakeholders as being immoral. In addition, if the relocation is to a country with
much weaker controls over worker welfare and the environment, there could be further
claims that the business is acting unethically.
Environmental concerns
A business might be reluctant to set up in an area that is particularly sensitive from an
environmental viewpoint, as this could lead to poor public relations and action from pressure
groups.
Infrastructure
The quality of the local infrastructure, especially transport and communication links, will
influence the choice of location. Singapore’s huge port facilities have encouraged many of the
world’s largest shipping firms to set up a base there. The quality of IT infrastructure varies

EMPRESA E INICIATIVA EMPRENDEDORA 27

considerably around the world and this is an important consideration for companies that need
quick communication with their different sites or customers, for example call centres or
selling via the internet. The growing popularity of online shopping in developed countries may
lead to some retailers opening fewer high-street stores and more ‘warehouse’ operations to
supply consumers.
Globalisation and international location decisions
The issues considered so far could apply to any location decision – a new business start-
up, the relocation or expansion of existing business. These issues are all relevant whether the
location decision is a regional, national or international one. However, there are some
additional factors that need to be weighed up when a firm is considering locating in another
country.
One of the main features of globalisation is the growing trend for businesses to relocate
completely to another country or to set up new operating bases abroad. This process is often
referred to as ‘offshoring’. The world’s largest corporations are now virtually all
multinationals.
Do not confuse offshoring with outsourcing, although they may be linked. Outsourcing
is transferring a business function, such as human resources, to another company. It is only
offshoring if this company is based in another country.
Reasons for location decisions and impact on functional departments
1 To reduce costs
This is undoubtedly the major reason explaining most company moves abroad. The
potential for higher profits will benefit the finance department despite the initial set-up costs
in overseas locations. With labour wage rates in India, Malaysia, China and eastern Europe
being a fraction of those in western Europe and the USA, it is not surprising that businesses
that wish to remain competitive have to seriously consider relocation to low-wage
economies.
In developing countries, because of the shortage of jobs, the human resource
department will find it easy to recruit unskilled or semi-skilled workers.
2 To access global markets
Rapid economic growth in developing countries has created huge potential for the
marketing department to exploit. Access to these markets is often best achieved by direct
operation in the countries concerned. Markets for some products in western Europe have
reached saturation point and further sales growth can only be achieved by expanding abroad.
Some businesses have reached the limit of their internal domestic expansion as the market
may have reached saturation. There may be threats from government regulatory bodies
about increasing monopoly power.

EMPRESA E INICIATIVA EMPRENDEDORA 28

 3 To avoid protectionist trade barriers
Barriers to free international trade are rapidly being reduced, but some still exist –
notably between the large trading blocs, such as the EU, North American Free Trade
Association (NAFTA) and Association of South East Asian Nations (ASEAN). To avoid tariff
barriers on imported goods into most countries or trading blocs, it is necessary to set up
operations within the country or trading bloc concerned. Examples include Honda’s factory in
Swindon that produces cars for the EU market and Toyota’s new factory in Mexico that gives
tariff-free access to this country’s car market.
4 Other reasons
These include substantial government financial support to relocating businesses, good
educational standards (as in India and China) and highly qualified staff and avoidance of
problems resulting from exchange rate fluctuations. This last point makes pricing decisions
difficult for the marketing department, especially for products that are not made within the
country, but are imported, when its currency fluctuates considerably. One way around this
problem is to locate production in this country.
Potential limitations of international location and impact on functional departments
International locations can also add to the number of drawbacks that might result from
an inappropriate location decision. Here are some of the major additional issues that need to
be weighed up carefully before going offshore.
1 Language and other communication barriers
Distance is often a problem for effective communication. These human resources
problem is made worse when company employees, suppliers or customers use another
language altogether. This is one of the reasons for India’s success in attracting offshoring
companies – English is one of the official languages.
2 Cultural differences
These are important for the marketing department if products are being sold in the
country concerned – consumer tastes and religious factors will play a significant role in
determining what goods should be stocked. Cultural differences also exist in the workplace
and impact on human resource management. Toyota found that the typical Mexican worker
is self-reliant and independent, yet the Toyota manufacturing system depends greatly on
teamwork and co-operation. Effective staff training may be necessary to ensure that cultural
differences do not prevent successful overseas expansion.
3 Level of service concerns
This operations management issue applies particularly to the offshoring of call centres,
technical support centres and functions such as accounting. Some consumer groups argue
that offshoring of these services has led to inferior customer service due to time difference
problems, time delays in phone messages, language barriers and different practices and
conventions, for example with accounting systems.

EMPRESA E INICIATIVA EMPRENDEDORA 29

 4 Supply-chain concerns
The operations management department will also be concerned about the loss of
control over quality and reliability of delivery with overseas manufacturing plants. This reason
is always cited by Zara, the clothing company, for its decision to not offshore clothing
production to cheaper countries as ‘fast fashion’ requires very close contact with suppliers.
Using just-in-time manufacturing may become much riskier if important supplies have to be
shipped thousands of miles to an assembly plant.
5 Ethical considerations
There may be a loss of jobs when a company locates all or some of its operations abroad
and this may, as in the case of Burberry clothing, led to a consumer boycott as there were
claims that the company’s decision to close its Welsh factory was not ‘the right thing to do’.
In addition, there are several reports of high-street clothing retailers sourcing supplies from
Asian factories using child labour and very low-wage labour. Could this negative publicity
cancel out the competitive advantage of low-cost supplies? Will the marketing department
experience lost sales from negative publicity and will human resources find it more difficult
to recruit well-qualified staff if the business is viewed as being unethical?
(Texto adaptado de P. & Smith, A. (2011) Business and management for the IB diploma.
Cambridge. Cambridge University Press )

3. Business organisation

3.1. Types of organisation

We can classify business activity into:

● the private and public sectors
● profit-based and non-profit-based organisations
Profit-based businesses in the private sector can take different legal forms and the
advantages and disadvantages of these are very important. Public and private sector
organisations Industry may be classified by public or private sector and by type of legal
organisation. These two types of classification are interlinked as some types of legal structure
are only found in the private sector. The relative importance of the private sector compared
to the public sector is not the same in all mixed economies. Those economies that are closest
to free-market systems have very small public sectors. Those countries with central planning
command economies will have very few businesses in the private sector.
In most mixed economies, certain important goods and services are provided by state-
run organisations – they are in the public sector. It is argued that they are too significant to
be left to private sector businesses. They include health and education services, defence and
law and order (police force). In some countries, important ‘strategic’ industries are also state
EMPRESA E INICIATIVA EMPRENDEDORA 30
owned and controlled, such as energy, telecommunications and public transport. These public
sector organisations therefore provide essential goods and services for individual citizens and
organisations in the private sector, and they often have objectives other than profit; for
example:
● ensuring supplies of essential goods and services – perhaps free of charge to the user,
e.g. health and education services in some countries
● preventing private monopolies – single firms that dominate an industry – from
controlling supply
● maintaining employment
● maintaining environmental standards. In recent years, there has been a trend towards
selling some public sector organisations to the private sector – privatisation – and this means
that they put profit making as one of their main objectives.
The main types of profit-based private-sector business are:
▪ Sole traders
▪ Partnerships
Sole trader
It is a business in which one person provides the permanent finance and, in return,
has full control of the business and is able to keep all of the profits.
This is the most common form of business organisation. Although there is a single
owner in this business organisation, there may be employees but the firm is likely to
remain very small. Although they are great in number, sole traders account for only a
small proportion of total business turnover. All sole traders have unlimited liability. This
means that the owner’s personal possessions and property can be taken to pay off the
debts of the business should it fail. This can discourage some potential entrepreneurs
from starting their own businesses.
Another problem faced by sole traders involves finance for expansion. Many sole
traders remain small because the owner wishes to remain in control of their own
business, but another reason is the limitations that they have in raising additional capital.
As soon as partners or shareholders are sought in order to raise finance, then the sole
trader becomes another form of organisation altogether. In order to remain a sole trader
the owner is dependent on own savings, profits made and loans for injections of capital.
This type of business organisation is most commonly established in retailing,
hairdressing, car servicing, catering… The advantages and disadvantages of sole traders
are summarised in next table.

EMPRESA E INICIATIVA EMPRENDEDORA 31

 Partnership
It is a business formed by two or more people to carry on a business together, with
shared capital investment and, usually, shared responsibilities.
Partnerships are formed in order to overcome some of the drawbacks of a sole trader.
When planning to go into partnership it is important to choose business partners carefully –
the errors and poor decisions of any one partner are considered to be the responsibility of
them all. In some cases, this also applies to business debts incurred by one partner. It is usual
to draw up a formal Deed of Partnership between all partners. This would provide agreement
on issues such as voting rights, the distribution of profits, the management role of each
partner and who has authority to sign contracts. The advantages and disadvantages of
partnerships depend on the type of legal form they have. We will see it in the next section.
(Texto adaptado de P. & Smith, A. (2011) Business and management for the IB diploma.
Cambridge. Cambridge University Press )

3.2. Legal forms

In Spain this is the scheme of the different legal forms:

• Companies with physical personality.

 Individual entrepreneur: self-employed worker.

 Community of goods.
EMPRESA E INICIATIVA EMPRENDEDORA 32
  Civil company.

• Companies with legal personality.

 Personal companies.

• Collective company.

• Limited partnership.

• Limited partnership by shares.

 Capitalist companies.

• Limited liability partnership.

• New limited liability company.

• Public limited company.

 Corporate social economy.

• Labour limited liability partnership.

• Labour public limited company.

• Cooperative.
It is important to distinguish between the physical person and legal person: physical
person is 24 hours after birth. Legal person is an entity, formed by individuals, that the
legislation recognizes the rights and obligations different from people who make it up.
In companies with physical personality, there is no separation between the personal
assets of the entrepreneur and the business assets of the company. The responsibility for the
debts of the entrepreneur is unlimited. In this group, the most common legal form is the
individual entrepreneur, the most simple and cheap but the less suitable for growing
companies.
In companies with legal personality, there are two different types of assets: those
belonging to the partners on the one hand, and the business assets on the other hand.
In the group of personal companies, the most important is the trust between partners
who contribute with capital and labour, and partners who only contribute with work.
In the group of capitalist companies, the most important is the contribution of capital,
but with different intensity:

• In a Limited Liability partnership company (Ltd) (S.L.), the identity of the partners is
very important, because they are, due to its characteristics, appropriate for family or
friendship.

EMPRESA E INICIATIVA EMPRENDEDORA 33

 • In Public limited company (plc) (S.A.) only the capital contribution is important, not
the identity of the partners. They are designed to facilitate rapid uptake of large amounts of
capital, so they are appropriate for large companies.
This priority in favour of economic benefits contrasts with the situation of the companies
in the social economy: They seek to combine economic benefits with a concern for people,
the social and environmental values. In this group, we have:

• Labour companies, in which most of the capital belongs to the working partners.

• Cooperative companies are also very important. They are companies based on
participative and democratic management (one member, one vote) and a distribution of
profits (called surplus) depending on the work and not according to the contributed capital.
Characteristics of the different legal forms.
Have a look to the table with the characteristics in Spanish.
Criteria for choosing the legal form
Number of promoters or partners legally required.
We can use these criteria to make a first discard of some of the legal forms.
Minimum capital required by law.
If we are few partners and the project does not require much investment may be
advisable to avoid the legal forms that require more capital to its constitution.
Financial liability of the company to third parties.
These third parties are basically providers, banks, Treasury, Social Security, customers
and our employees. The unlimited liability means that if the debts exceed the business assets
(buildings, machinery, tools, billing rights ....) the members can see affected their personal
property (the house, the vehicle ....). A limited responsibility means, in the previous case, their
personal assets would not be affected by the debts.
Taxes.
The self-employer worker and the community of goods tax according to the Income Tax
of Individuals (IRPF). The other legal forms tax according to the Corporation Tax (IS). Income
tax must pay a percentage of company profits but is a variable percentage that increases
when increasing the profits.
The general type of corporation tax is 25%. Reduced rates of 15% for entrepreneurs, a
necessary condition to be satisfied is that the company is the beginning of an economic
activity. Apply in the first tax period in which the tax base is positive (and therefore we are
required to pay corporate tax) and the next. Reduced rate of 20 or 25% for micro, small and
medium enterprises. Reduced rate of 20% for cooperatives: generically applicable to
cooperative companies in tax treatment, except for the extra-results, which taxed at large.

EMPRESA E INICIATIVA EMPRENDEDORA 34

 Complexity of processing.
The legal forms with legal personality are more complex than those with physical
personality, since the first require additions procedures to acquire legal personality.
If we want to prevent that other are part of the company, we will have to choose legal
forms that have restrictions in the transfer of shares of the capital as the Limited liability
partnership company, new limited liability company, the labour company.
The sensitivity for the people and the social and environmental values.
Any company, regardless of the legal form that has, can incorporate this sensitivity. But
it can be said that the social economy companies have an "ethical advantage" in these
matters. Above all the cooperative, in which the vote of each member has equal value and
that the benefit of each depends on the work contributed.

3.3. Business culture and corporate image

A commonly used definition of organisational culture is ‘the way we do things around

here’. This means how people within the organisation view the world and respond to it in
trying to achieve certain goals.
It is widely understood that different organisations have distinctive cultures. This is true
of businesses as well as other organisations such as schools and colleges. The culture of a
steel company will be very different to that of a nursing home, for example. Similarly, some
schools’ culture is driven by the need for better examination results while others view that
educating the ‘complete person’ is more important.
The culture of an organisation gives it a sense of identity and is based on the values,
attitudes and beliefs of the people who work in it, especially senior management.
Values, attitudes, and beliefs have a very powerful influence on the way staff in a
business will act, take decisions, and relate to others in the organisation. They define what is
‘normal’ in an organisation, so it is possible for the same person to act in different ways in
different organisations. What we do and how we behave – in society in general and in
business in particular – are largely determined by our culture.
Influences on organisational culture
Senior management may influence the culture of the organisation through:
● mission and vision statements – these inform staff about what the business is trying
to achieve
● the appointment of senior staff – they are likely to share the same values, attitudes,
and beliefs as the directors of the business

EMPRESA E INICIATIVA EMPRENDEDORA 35

 ● the organisation’s ethical code of conduct – this lists the ‘dos’ and ‘don’ts’ that must
be observed by staff when dealing with external stakeholders
● strategies on social and environmental issues – these will provide a clear guide to the
organisation’s social and environmental values and beliefs
● the example they set, e.g., how they treat subordinates and take decisions.
The industry the business operates in will also influence the values and beliefs of the
organisation. For instance, the culture of a weapons manufacturer or a tobacco company is
likely to be very different to that of a workers’ co-operative or a business operating homes
for the elderly. The legal constraints, social norms and cultural values of countries vary
markedly, and these are likely to be reflected in the culture of organisations that are based
there.
Mission and vision statements
A mission statement is an attempt to condense the central purpose of a business’s
existence into one short paragraph. It is not concerned with specific, quantifiable goals but
tries to sum up the aims of the business in a motivating and appealing way. It can be summed
up as a statement about ‘who we are and what we do’.
Some examples of mission statements:
Nike -`To bring inspiration and innovation to every athlete in the world´
Google- `To organise the world’s information and make it universally accessible and
useful´
An effective mission statement should answer three key questions:
● What do we do?
● For whom do we do it?
● What is the benefit?
Mission statements outline the overall purpose of the organisation. A vision statement,
on the other hand, describes a picture of the ‘preferred future’ and outlines how the future
will look if the organisation achieves its mission. It is a clear statement of the future position
that offers the ideal of what owners and directors want their business organisation to
become.
Here is an example to compare the vision and mission statement:
McDonald’s restaurants:
- Vision: Where the world buys more McDonald’s than any other fast food.
- Mission: McDonald’s aims to be the world’s best quick service restaurant
experience. Being the best means providing outstanding quality, service,
cleanliness, and value so that we make every customer in every restaurant
smile.
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 It is important that both vision and mission statements are applicable to the business,
understood by employees and convertible into genuine strategic actions.
(Texto adaptado de P. & Smith, A. (2011) Business and management for the IB diploma.
Cambridge. Cambridge University Press )
Values are the principles that are considered valid within an organization, and
therefore, accepted by its members, reflect the ethical values for the company.
Both the mission, vision and values are part of the organizational culture.

Corporate image

It is the consumer perception of the company behind a brand.

In a competitive business climate many businesses actively work to create and
communicate a positive image to their customers and other stakeholders. This helps to build
a good reputation, has a positive impact on sales and makes the successful launch of new
products easier to achieve.
In Building Your Company’s Good Name (1996), Davis Young recommends the
following steps to achieving a positive corporate image:
● Focus on long-term reputation, not short-term profits.
● Insist on honesty in all business dealings.
● Uphold the stakeholders’ right to information about the company and its
activities.
● Develop good company policies, e.g. towards staff, rather than trying to control
damage caused by bad company policies.
Young notes, ‘A good corporate image can take years to build and only moments to
destroy.’ This saying was certainly true in the case of Toyota in 2010. The carefully crafted
image of ‘quality products’ and ‘customer comes first’ was shattered by revelations about
faulty, potentially dangerous cars being produced and sold in the USA and Europe even
though, it has been alleged, the company knew about potential problems. Toyota initially
responded slowly to these concerns and was then forced to take very expensive remedial
action to millions of cars worldwide. Would this action be enough to save the company’s
image and reputation? Only time – and sales figures – will tell.

3.4. Corporate Social Responsibility

This concept applies to those businesses that consider the interests of society by
taking responsibility for the impact of their decisions and activities on customers,
employees, communities, and the environment.
To whom is business answerable? Should business activity be solely concerned with
making profits to meet the objectives of shareholders and investors or should business
decisions also be influenced by the needs of other stakeholders? When a firm fully
accepts its legal and moral obligations to stakeholders other than investors, it is said to
be accepting corporate social responsibility (CSR).
One important measure of a firm’s attitude to its social responsibility is the way in
which it deals with environmental issues. Our environment can be greatly affected by

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 business activity. Air and noise pollution from manufacturing processes, road congestion
caused by heavy trucks, business expansion into country areas, emissions of gases that
can lead to global warming and the use of scarce non-renewable natural resources are
all environmental issues that are of increasing concern to people and governments all
over the world.
How should business managers react to these concerns? Should they respond by
adopting environmentally safe or green policies, even if these are expensive, or should
they always take the cheapest option no matter what the consequences for the
environment might be?
Other issues connected with the concept of CSR cross over into ethical decisions. In
fact, the two concepts are closely linked.
Next table looks at the benefits and drawbacks for business of adopting CSR policies.

Environmental audits
An audit simply means an independent check. It is most commonly known in connection
with the accounts of a company which have to be verified as a true and fair record by an
external auditor. Accounts only measure the financial performance of a business. In recent
years, some businesses have been using the auditing approach to evaluate their performance
in other ways than just profit and loss.
Environmental factors are often difficult to measure in monetary terms and they do not,
currently, have to be legally included in published accounts. An environmental audit would
check the pollution levels, wastage levels, energy use, transport use and recycling rates of the
business and compare them with previous years, pre-set targets and possibly other similar
businesses.
At present, these audits are entirely voluntary. Those firms who undertake them and
publish the results nearly always have a very good environmental record – that is why they
are published. Firms with a poor reputation or record in this area are unlikely to carry out an
audit unless it becomes compulsory. Those firms that do publish the results of environmental
audits expect to gain something from the process. Favourable consumer reaction could lead

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to increased sales. Positive media coverage will give free publicity. Working towards the
common aim of reducing harm to the environment could help to bring workers and managers
together as a team.

Social audits
Social audits report on a firm’s ‘social’ performance, that is the impact it has on society
and how effectively its ethical behaviour matches up to its ethical objectives. Social audits can
include an environmental audit (see above), but they give details of other impacts on society
too. These include:
● health and safety record, e.g. number of accidents and fatalities
● contributions to local community events and charities
● proportion of supplies that come from ethical sources, e.g. Fairtrade Foundation
suppliers
● employee benefit schemes
● feedback from customers and suppliers on how they perceive the ethical nature of the
business’s activities.
The social audit will also contain annual targets to be reached to improve a firm’s level
of social responsibility and details of the policies to be followed to achieve these aims. By
researching and publishing these reports, firms are often able to identify potentially anti-
social behaviour and take steps to root this out of the company’s practices. Publishing
detailed and independently verified social and environmental audits can improve a firm’s
public image, increase consumer loyalty and give the business a clear direction for future
improvements in its socially responsibility achievements.

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 The benefits and limitations of social audits are considered in next table.

Evaluation of audits
● Until environmental and social audits are made compulsory and there is general
agreement about what they should include and how the contents will be verified, some
observers will not take them seriously.
● Companies have been accused of using them as a publicity stunt or a ‘smokescreen’
to hide their true intentions and potentially damaging practices.
● They can be very time consuming and expensive to produce and publish and this may
make them of limited value to small businesses or those with very limited finance.
Related to all the above, the social balance sheet of a company is the instrument in which
costs and benefits of the impact of the actions or activities undertaken by a company in
society (or in a specific territory) are detailed. Thanks to this type of balance sheet, any user
can know if the company complies with the provisions of social responsibility and if the
actions it undertakes are in favour or against the ethical-moral principles of its own
philosophy or society in general.
(Texto adaptado de P. & Smith, A. (2011) Business and management for the IB diploma.
Cambridge. Cambridge University Press)

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