What is a Business Eco System?
The goal of a business is to generate capital appreciation and profits for its owners or stakeholders by engaging in provision of goods and services to customers within the eco system/framework governed by respective laws(local/international). The eco system involves various entities that the business works with for delivery of a product or service.
The goal of a business is to generate capital appreciation and profits for its owners or stakeholders by engaging in provision of goods and services to customers within the eco system/framework governed by respective laws(local/international). The eco system involves various entities that the business works with for delivery of a product or service. Suppliers, Employees, Employee unions, Trade bodies, Government agencies, Customers, Competitors are some of the organizations in the eco system involved in delivery of goods or services.
Modern business organizations run multiple product and service lines, operate globally, leverage large number of registered legal entities, and operate through complex matrix relationships. To stay competitive in the current global business environment, they must often develop highly diverse and complex organizational structures that cross international borders.
These complexities create need for advanced operational and supporting business processes to drive organization wide effectiveness, efficiency and achieve business objectives. This forces companies to create a diverse array of subsidiaries, legal entities, organizations, and accounting processes to ensure a smooth and profitable business flow. Tax considerations also impact how businesses construct these complex legal structures.
In this section we will explore the different legal and operational structures that are commonly adopted by these global conglomerates.
Importance of Business Eco System
A single business can never serve the needs of a customer unless it engages and works with the other entities in the eco system. For example, to manufacture a product there is a need for certain raw materials, some of which must be processed before they can be used in production and hence the need for suppliers. The Government creates the basic infrastructure like roads, ports, governing policies and procedures, trade agreements with other countries, basic research and development facilities, labor laws that will help businesses in setting up and running their operations. Hence a business engaging in manufacturing needs Suppliers, Government and other entities.
So, the business eco systems helps with
- Leveraging capabilities (production, purchase, engineering skills etc.) beyond the capability of a single entity
- Innovation from one party that helps in adding value to the overall process by cutting production cost or time or improving customer experience
- There is constant interaction between the parties resulting in exchange of ideas, learnings
James Moore, a business strategist wrote in a 1993 Harvard Business Review:
“In a business ecosystem, companies co-evolve capabilities around a new innovation: They work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.”
Internally, an organization can be structured in many different ways, depending on their objectives. The internal structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual.
We know that big multinational organizations operate in a matrix environment, constitute of many units and need different views of their operating and financial results. These different views may represent financials or profitability by geographies, countries, locations, businesses, segments, product lines, cost centers, functions, COE’s etc.
Related Links
You May Also Like
-
A Company (also called corporation) may be understood as an association of persons in which money is contributed by them, to carry on some business or undertaking. Persons who contribute the money are called the shareholders or the members of the company. A corporation is an artificial being, invisible, intangible and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it.
-
In this article, we will describe how to determine if an account needs adjustment entries due to the application of the matching concept. Learners will get a thorough understanding of the adjustment process and the nature of the adjustment entries. We will discuss the four types of adjustments resulting from unearned revenue, prepaid expenses, accrued expenses, and accrued revenue.
-
What is Accounting & Book Keeping
Accounting is a process designed to capture the economic impact of everyday transactions. Each day, many events and activities occur in an entity, these events and activities are in the normal course of business; however, each of these events may or may not have an economic impact. Events or activities that have an effect on the accounting equation are accounting events.
-
Functional Organizational Structures
A functional organizational structure is a structure that consists of activities such as coordination, supervision and task allocation. The organizational structure determines how the organization performs or operates. The term organizational structure refers to how the people in an organization are grouped and to whom they report.
-
Reversing Journals are special journals that are automatically reversed after a specified date. A reversing entry is a journal entry to “undo” an adjusting entry. When you create a reversing journal entry it nullifies the accounting impact of the original entry. Reversing entries make it easier to record subsequent transactions by eliminating the need for certain compound entries. See an example of reversing journal entry!
-
Internally, an organization can be structured in many different ways, depending on their objectives. The internal structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual.
-
Hierarchical Organization Structures
Hierarchical structure is typical for larger businesses and organizations. It relies on having different levels of authority with a chain of command connecting multiple management levels within the organization. The decision-making process is typically formal and flows from the top down.
-
Driving Business Efficiency through Divisions and Departments
In case of a multi-divisional organizational structure, there is one parent company, or head-office. And that parent owns smaller departments, under the same brand name. Dividing the firm, into several self-contained, autonomous units, provides the optimal level of centralization, in a company.
-
An organizational design is the process by which a company defines and manages elements of structure so that an organization can control the activities necessary to achieve its goals. Good organizational structure and design helps improve communication, increase productivity, and inspire innovation. Organizational structure is the formal system of task and activity relationships to clearly define how people coordinate their actions and use resources to achieve organizational goals.
-
When the quantum of business is expected to be moderate and the entrepreneur desires that the risk involved in the operation be shared, he or she may prefer a partnership. A partnership comes into existence when two or more persons agree to share the profits of a business, which they run together.
