Starting and Organizing the Enterprise

Does the idea fire your motivation and is it adequate enough to keep you going for next one to two years? Is it a viable business proposition in your area? Does it match the needs of your clientele, local or otherwise? Check it out with basic market research Test it out in the market Consult with experts Look out for competition in the field Is it a sunrise industry? Evaluate your business opportunity Project conceptualization

A Model of Opportunity Recognition Process Education Prior knowledge of markets and customer problems Networks Experience Work experiences Personal experiences Entrepreneurial alertness Outcome: Successful opportunity recognition

It is thinking ahead of objectives, strategies, financing, production, marketing, profit prospects, and growth responsibilities. However, business planning should be realistic. Business planning involves the attainment of goals, and the way to accomplish such goals.

Principles of Planning Planning must be realistic. Planning must be based on felt needs. Planning must be flexible. Planning must start with simple projects

Unplanned stage. At the start of the business, the owner-manager is busy looking for funds, customers, materials and equipment. He has no time for planning. His entire attention is devoted to the daily operations of his business in his intense desire to survive.

Budgeting-System stage. Eventually, the owner-manager realizes the need to develop and use a budgeting system. Estimated incomes from sales and expected expenditures are made. This is done to facilitate the orderly functions of the growing enterprise.

Annual planning stage. The owner-manager drafts an annual plan. He can use either the top-down planning or the bottom-up planning. In top-down approach, the owner-manager provides the goals and let the employees comply with them. In case the bottom-up approach, he encourages his employees to participate in planning the goals and strategies of the enterprise. The first approach in planning is autocratic while the other one is democratic.

Strategic planning stage. As the business enterprise becomes bigger, a long-range planning is needed. This is a three-or five-year plan. Such plan has flexibility to be able to adjust to changing conditions. An executive of the Xerox Corporation claims that some of their plans are being revised every day of the year. At this stage, planning develops into a more strategic character.

The plan should state clearly its objectives. The plan should provide measures for a satisfactory accomplishment of the objectives in terms of quantity, quality, time and cost. The plan should state the policies which should guide the people in attaining the objectives. The plan should indicate what department or unit will be involved in accomplishing the objectives. The plan should indicate the time which should be allowed for each activity. The plan should specify the required resources and their corresponding costs. The plan should designate the officers who will be held accountable for the accomplishment of the objectives.

Evaluate your personal resources and interests, and the resources of the community. Analyze your market. Choose a proper business location. Prepare a financial plan. Prepare a production plan. Prepare an organizational plan. Prepare a management plan.

An organization is a group of two or more persons who work together to attain a common set of goals. Organizing is a process of combining and coordinating resources and activities in order to accomplish efficiently and effectively certain objectives.

1. Single Proprietorship This is a form of business organization that is owned and usually managed by one person. It is the oldest and simplest form of business ownership. It is also the easiest to start. Advantages Ease and low cost of formation and dissolution. Retention of all profits. Independence and flexibility. Tax advantage and less government regulation. Disadvantage Unlimited liability. Lack of stability. Limited access to credit. Limited business skills and knowledge.

2. Partnership It is an association of two or more persons who act as co-owners of a business. Each partner contributes money, property or service to their organization. There are two types of partners: general partners and limited partners. The liability of a general partner extends up to his personal properties while a limited partner is only liable to the extent of his contribution to business. In our country, we have also the capitalist partner and industrial partner. The former contributes money while the latter provides service or management. ADVANTAGES Easy to organize. Availability of more capital and credit. Retention of profits. Better business skills and knowledge. DISADVANTAGES Unlimited liability. Lack of stability. Management disagreement. Idle investment.

3. CORPORATION It is an artificial being created by operation of law, having right of succession, and the powers, attributes and properties expressedly authorized by law or incident to its existence. The shares or certificates of ownership of a corporation are called stocks. The owners of stocks are called stockholders or shareholders. There are two types of corporations: private or close corporation and open corporation. The first one is owned by a few individuals, usually relatives and friends. The other one is owned by any individual who buys shares of stock which are openly traded in the stock markets. ADVANTAGES Limited liability. Easy to raise capital. Perpetual life. Specialized management. DISADVANTAGES Difficult to organize. Strictly regulated and supervised by the government. Some corporations are socially irresponsible. Formal and impersonal employer-employee relationship.

Organizational Structure Formal system of task and reporting relationships showing how workers use resources. Formal way employee responsibilities are assigned Organization Hierarchy of authority Specific rules and regulations for work Standardized training Division of work

Organizational design The process by which managers create a specific type of organizational structure and culture so that a company can operate in the most efficient and effective way

Factors Affecting Organizational Structure  Organizational environment Organizational environment  Strategy Strategy  Technology Technology  Human Resources Human Resources

10-22 The way an organization’s structure works depends on the choices managers make about: 1. How to group tasks into individual jobstasks into individual jobs 2. How to group jobs into functions and divisionsfunctions and divisions 3. How to allocate authority and coordinate functions and divisionsauthority and coordinate functions and divisions

10-23 Keys To Organization Clear line of authority and responsibility Responsibility coupled with authority Report to one supervisor Accountability moves upward Delegate authority to the lowest practical level Line personnel separated from staff personnel Simple yet flexible structure

10-24 Four Options For Departmentalization 1. Functional: arrange according to function such as production, marketing, research 2. Product: divide according to type of product sold 3. Geographic: divide according to region 4. Customer: divide according to the relationship with the customer such as wholesale, retail or direct sale

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STRENGTHS OF A PRODUCT OR SERVICE  cheap and abundant raw materials  sufficient funds  availability of technology  presence of skilled workers  management and technical expertise of the entrepreneur  good quality or service  ease of production WEAKNESSES OF A PRODUCT OR SERVICE  high price  poor quality/service  weak management  lack of skilled workers  irregular supply  unattractive design  high costs of production OPPORTUNITIES OF A PRODUCT OR SERVICE  big demand for the product or service  favorable government policy or support  scarcity of the product or service  poor quality of existing product  absence of product or service  possibilities of good profits THREATS  shortage of raw materials at a given time  entry of many competitors  increasing costs of production  expectation of unfavorable government laws, such as taxes  deteriorating peace and order  emergence of unfair demands of workers through labor union activities SWOT ANALYSIS