Three Key Terms That Make Up Business Activity
What is a business? A business is simply defined as an entity or organized entity organized for the purpose of conducting commercial, industrial, or other productive activities. A business may be for-profit or non-profit entities that conduct activities to meet a social cause or further an ethical purpose. Companies are not only for profit making businesses but there are many government organizations that function as non-profit businesses.
The three key elements of a business are the stakeholders, the production process and the service or product. Stakeholders are all the people and organizations involved in the production, processing or distribution of the product or service. The production process includes the planning, development and marketing of the product or service. All the three have to be in sync with each other for the organization to achieve its strategic goals.
A way to make money through a nonprofit organization is to generate surplus revenues. Surplus revenues are revenues that come in year after year due to year-round operation or other factors. Such revenues can then be used to either support the organization furthers its mission or purposes or use it to generate surplus revenue. There are many ways to generate surplus revenues from nonprofit organizations; such as sponsorship, donations, merchandising and events.
The three key points of a business activity are its nature, objectives and key players. The nature refers to the overall goal and the strategy involved for realizing the overall goal. The objectives refer to the means and methods of achieving the overall objective. Key players include the staff of the nonprofit organization, key volunteers and partners, donors and sponsors.
The key terms for understanding this article are stakeholders, profit and loss, economic value added, social responsibility, market share and value creation. Stakeholders refer to individuals, firms, organizations, communities, government agencies and groups that could potentially benefit from the goods and services offered by your company or other entity. Profit and loss refer to the amount of money that would be generated during a given time period from the activities of the firm. Economic value added refers to the societal value created by the firm.
Profit and loss are the key terms that need to be understood before one can clearly define the meaning of profits. Profit, in a very simple form, refers to the net income obtained from the firm multiplied by the total costs incurred in bringing in that income. A company’s profits can also mean the return of investment. In order for the firm to create surplus profits and not lose all its potential profits, it should carefully assess its costs and allocate them to different activities, such as providing public services or products or generating revenue. Corporate social responsibility means taking an active role in the society.