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LESSON Factors of Successful Business

3
FACTORS OF SUCCESSFUL BUSINESS

CONTENTS
3.0 Aims and Objectives
3.1 Introduction
3.2 Issues in Business Start-up
3.2.1 Idea Formulation
3.2.2 Opportunity Recognition
3.3 Timing of Decision
3.4 Factors for Successful Business
3.4.1 The Business Concept
3.4.2 Understanding the Market
3.4.3 A Healthy, Growing and Stable Industry
3.4.4 Capable Management
3.4.5 Able Financial Control
3.4.6 A Consistent Business Focus
3.4.7 Ability to Attract, Motivate and Retain Employees
3.4.8 A Mind Set to Anticipate Change
3.4.9 A Company’s Values and Integrity
3.5 Avoid Business Failure
3.6 Essentials of a Successful Business
3.7 Let us Sum up
3.8 Lesson End Activity
3.9 Keywords
3.10 Questions for Discussion
3.11 Suggested Reading

3.0 AIMS AND OBJECTIVES

After studying this lesson, you will be able to:
 Identify the issues in business start up
 Understand the importance of timing of decision
 Examine the factors for successful business
 Enumerate factors for business failure
34
Business Plan and Ethics 3.1 INTRODUCTION
In the last lesson, the meaning and purpose of business plan discussed. In this lesson an
attempt is made to explain the issues that crop up in starting of business and examine the
factors for successful business. Further, it is explained the causes for the failure of
business.

3.2 ISSUES IN BUSINESS START-UP

The business start-up process can be broken down into a number of stages namely, the
formation of idea, opportunity of recognition, pre-start planning and preparation including
pilot - testing, entry into entrepreneurship, launch and subsequent development. Each of
these stages have a number of factors that will impinge on the process. These factors
will include the nature of the local environment, culture, access to finance and enterprise
support and encouragement. Some of these issues are discussed below:

3.2.1 Idea Formulation

The location and development of viable business idea is as much an art, or matter of
luck, as the use of systematic techniques. The starting point for developing new ideas
lies inside the prospective entrepreneur rather than the market place, laboratory, business
plan etc. The formation of business ideas will be affected by a nascent entrepreneur’s
past experience, training, education and skill development. This accumulation of
knowledge, skills and experience is termed ‘human capital’. A concept used particularly
in the context of labour markets by economists following pioneering work of Gary Becker:
Formulation of business ideas may be influenced by work experience, by individual training
and recognition that a particular product or process could be done better. Recognizing
that a process or product could be done in a superior and different way has been the spur
behind many new business.
For younger entrepreneurs, who will have limited human capital, it can be argued that
education can have an important role in providing a conducive environment for
idea formulation. It has been suggested that younger business owners (below 30) are
under-represented in entrepreneurship because of limited personal capital and limited
access to finance. The limited scope for idea formulation will also be a constraint, and
the limited experience (or human capital) that potential entrepreneurs in this age range
can draw upon will limit the scope of opportunities for developing ideas. Idea formulation
here will be affected by educational experience and early training. It is arguable that
education should provide scenarios that encourage creativity, lateral thinking and problem
solving. However, there can be a conflict in providing sufficient scope within a curriculum
for the development of such transferable and ‘core’ skills. There are indications that
greater importance is being placed on ‘enterprise’ abilities including problem-solving,
group work and ideas generation.
Finally, it should be realized that idea formulation can take considerable time. The sudden
breakthrough is comparatively rare. Ideas take time to refine; they benefit from discussion
with others, from research, from information gathering and from feedback. Thus being
creative is only part of the process. Additional skills must be developed that can take
basic ideas, then modify and refine them - perhaps involving considerable research -
before they become viable business start-up ventures.
3.2.2 Opportunity Recognition 35
Factors of Successful Business
Converting an idea into a business opportunity is the key element of the process of
business creation. Moving from the idea stage to the exploitation of the opportunity
requires many elements to be in place. The economic environment has to be conducive,
the culture must be appropriate for risk taking and the nascent entrepreneur must have
the confidence to take an idea suggested by opportunities through to fulfilment.
Opportunities are generated by change. Change may be political, economic, social,
demographic or technical. For example, economic change may be characterised by a
period of economic growth and expanding demand, which may create opportunities for
new business ideas that take advantage of increased affluence, leisure time and spending
power of the population. The growth in the leisure industry has spawned many new
developments and opened niche markets in areas such as sports, holidays and travel.
The increased pace of technical change has created opportunities for new business
ventures in new technologies, in new developments in information technology such as
the Internet, in new applications in biotechnology. Social and demographic change may
provide opportunities through changing attitudes or through creation of new markets in
ageing population structures. These factors are the engines of change but harnessing
such change to create new business ventures requires new entrepreneurs to formulate
ideas and fit them to the opportunity. It is this combination that is important. The idea has
to be right for the opportunity.

3.3 TIMING OF DECISION

As suggested above the timing of entry is important. While advantages exist to first
movers, moving too early can result in insufficient customers to make heavy investment
worth while. The issue of timing becomes crucial if the protection of Intellectual Property
Rights (IPR) is involved. But the entrepreneur with a new product or process needs to
decide whether and when to patent. Patents are expensive and time consuming but they
may be a necessary prerequisite for formal or informal venture capital. Developing the
entry strategy is an important part of the launch of the new business; attention will need
to be paid to marketing, a factor that is sometimes neglected by a technology-based
entrepreneur. The important relationship between marketing and entrepreneurship has
been noted by a number of writers, but the concept of the development of the idea and
formulating strategies has been explored by only a few writers.
The role of serendipity is often an underplayed factor in the start-up and business creation
process. To the casual observer, the entrepreneurial and marketing strategies developed
in the case study firms may appear to contain a strong element of change, yet precursor
developments can be highly important as preparation for exploitation of the business
opportunity. With high technology-based ventures, non-high technology development
beforehand, in different cases, was an important preparation for the entrepreneurial and
marketing strategies concerned.

3.4 FACTORS FOR SUCCESSFUL BUSINESS

The modern business is as complicated as modern life in its various aspects. A business
plan basically defines the business, serves as the complete resume of the business firm,
identifies the goals and given an entrepreneurs a definite place in the path of business
success. A properly made business plan help the entrepreneur to allocate resources
properly, handle unforeseen complications and make good business decisions. Thus the
business plan helps the entrepreneur to fulfill his dreams of business success. In other
words the ultimate purpose of developing a business plan is to have a successful business.
36 In the long run, it is fruitless to write a business plan that can raise the funds the
Business Plan and Ethics
entrepreneur seek, if his enterprise is so poorly conceived it is bound to fail. So, as an
entrepreneur create his plan, be certain to address the long run needs of his business and
devise strategies that enhance both the overall performance of his firm and his personal
satisfaction.
In the business plan the following factors are to be included and they contribute most to
business success and should guide the planning process:
(a) A sound business concept
(b) Understanding the Market
(c) A healthy, growing and stable industry
(d) Capable Management
(e) Able Financial Control
(f) A consistent Business focus
(g) Ability to Attract, Motivate and Retain Employees
(h) A mindset to anticipate change
(i) Company’s values and integrity.

3.4.1 The Business Concept

The single most common mistake made by entrepreneurs is not selecting the right business
initially. The best way to learn about the prospective business is to work for some one
else in that business before beginning one’s own. There can be a huge gap between
entrepreneurs concept of a fine business and reality.
Typically, entrepreneurs get their original business inspiration from one of four sources:
(1) previous work experience; (2) education or training; (3) hobbies, talents, or other
personal interests; or (4) recognition of an unanswered need or market opportunity.
Occasionally, the impetus comes from the business experience of a relative or friend.
An Entrepreneur refines his business concept, keep in mind that successful businesses
incorporate at least one of these elements:
 Something New: This could be a new product, service, feature, or technology.
 Something Better: This could be an improvement on an existing product or service
encompassing more features, lower price, greater reliability, faster speed, or
increased convenience.
 An Underserved or New Market: This is a market for which there is greater
demand than competitors can currently satisfy, an unserved location, or a small
part of an overall market - a niche market - that hasn’t yet been dominated by
other competitors. Sometimes, markets become underserved when large companies
abandon or neglect smaller portions of their current customer base.
 New Delivery System or Distribution Channel: New technologies, particularly
the Internet, allow companies to reach customers more efficiently. This has opened
up many new opportunities for businesses to provide products or services less
expensively, to a wider geographic area, or with far greater choice.
 Increased Integration: This occurs when a product is both manufactured and
sold by the same company, or when a company offers more services or products in
one location.
The business should incorporate at least one of these factors - more than one if possible. 37
Factors of Successful Business
Ideally, that can bring a new or better product or service to an identifiable but underserved
market, perhaps using a more efficient distribution channel. Evaluate the ways the business
concept addresses the elements described above. The concept should be strong in at
least one area. If not, one should ask himself how his company will be truly competitive.

3.4.2 Understanding the Market

A good way to test entrepreneur’s understanding is to test market his product or service
before he starts.
It is not enough to have a great idea or new invention as the basis of his business; he
must also have a market that is sufficiently large, accessible, and responsive. If the
market isn’t large enough, he can’t reach it efficiently, or it isn’t ready for him, the
business will fail, no matter how good his business concept. Consider the Automatic
Teller Machine (ATM) now seen on virtually every street corner. It was invented more
than 10 years before it became popular, but the company that initially marketed the ATM
was unsuccessful - people weren’t yet willing to trust their banking to machines.
First, evaluate whether market demand is adequate to support for company. For instance,
if one is opening a flower shop in a neighborhood where none currently exists, what
indications are there that the neighborhood residents are interested in buying flowers?
Do they currently purchase flowers at a nearby supermarket? Does national data on the
demographics of flower purchasers coincide with neighborhood demographics? Perhaps
you should conduct a survey of the neighborhood’s residents, asking about their flower
buying habits and preferences.
Next, if you are creating a new product or service, what indications are there that the
market will be receptive to you? Market readiness is one of the most difficult and most
unpredictable aspects to measure. That is why companies spend substantial amounts of
money on market research before launching a new product.
You may not have the funds to undertake extensive market research, but even a small
amount of analysis can help you gauge the receptivity of a particular market to your idea.

3.4.3 A Healthy, Growing and Stable Industry

One should remember that some of the great inventions of all time viz air planes and cars
did not result in economic benefit for many of those who tried to exploit these great
advances. Success comes to those who find business with great economics and not
necessarily great inventions or advances to man kind.
Your business does not operate in a vacuum; generally, your company is subject to the
same conditions that affect your overall industry. If consumer spending declines nationally,
there’s a good change your retail business - whether a neighborhood boutique or an on-
line shopping mall - will also experience poor sales.
As you develop your plan, you need to respond to the industry - wide factors affecting
your own company’s performance. While it is certainly possible to make money in an
industry that is experiencing hard times, you can only do so if you make a conscious
effort to position your company appropriately. For example, if you are in the construction
business and the number of new-home starts is down, you may want to target the
remodeling market or the commercial real estate market rather than the new-home
construction market.
Investors and lenders are particularly sensitive to issues of industry health. It is much
harder to raise money to start or expand business in troubled industries. Even though
38 opportunities exist in such fields, investors and bankers are concerned about the increased
Business Plan and Ethics
risks an enterprise faces in an unhealthy industry. Conversely, if your business is in a
healthy and expanding industry, investors are likely to be more receptive. What direction
is your industry going? It is important to look at the major trends that will influence
industry health in the future as well as examining its current condition. Is the industry
consolidating as big companies merge into huge businesses? What is happening
with pricing pressures, consumer demand, availability of parts and supplies, global
competition?
If you are seeking outside funds, your business plan must reassure investors or bankers
that you understand the industry factors affecting your company’s health and that you
have taken those factors into consideration when developing your business strategy.

3.4.4 Capable Management

A business enterprise cannot succeed in the performance if its tasks and realisation of
its objectives unless it is efficiently managed; here management means the guidence,
direction, control and co-ordination of the efforts of the group. It will be realised that all
thus can be achieved only when the business leadership is dynamic and sound. This calls
for certain qualities in the businessman or those entrusted with the task of management.
Perhaps more than any other factor, competent management stands out as the most
important ingredient in business success. The people in key positions re crucial in
determining the health and viability of your business. Moreover, because of the importance
of capable management to business success, many investors and venture capital firms
place the single greatest emphasis on this factor when evaluating business plans and
deciding on loans or investments. They’ll review the management section of a business
plan with special scrutiny. Your business plan must inspire confidence in the capabilities
of your management, and you should put your management team together carefully.
Before submitting your business plan to investors, conduct your own analysis of your
management team. Evaluate each individual (and yourself) to see if he or she fits the
profile of a successful manager. Some of the traits shared by successful managers are:
 Experience: They have a long work history in their company’s industry and/or
they have a solid management background that translates well to the specifics of
any business in which they become involved.
 Realism: They understand the many needs and challenges of their business and
honestly asses their own limitations. They recognize the need for careful planning
and hard work.
 Flexibility: They know things go wrong or change over time, and they are able to
adapt without losing focus.
 Ability to Work Well with People: They are leaders and motivators with the
patience necessary to deal with a variety of people. They may be demanding, but
they are fair.
In developing your business plan, determine whether key members of your management
team posses these characteristics. If not, perhaps you can increase training, add staff, or
take other measures to enhance your management’s effectiveness. For instance, if you
have little or no experience in your chosen field, perhaps you should first take a job with
an existing company in that field before opening your own business.
In addition to evaluating the traits of each individual, look at the overall balance of your
management team. Do you have people who are capable and experienced in the various
aspects of your business - marketing, operations, technology, finance, etc.? Are some 39
Factors of Successful Business
managers better as dealing with internal issues and others at handling external relations?
Or do the talents and traits of your managers duplicate each other?

3.4.5 Able Financial Control

Business objectives may be most clearly defined, plans may be based on research, the
organisation may be sound, but, unless adequate finances both for long and short term
requirements can be secured, the business cannot succeed. Finance is the life blood of
the business firm, insufficiency of which may lead to losses and embarrassment.
Key to any business is how it handles money. Not fully anticipating start-up costs can
immediately plan impossible pressures on a new business. Poor cash-flow management
can bring down even a seemingly thriving business. One of “Rhonda’s Rules” is “ Things
take longer and cost more than anticipated.” Build financial cushions in your plan to
allow for unanticipated expenses and delays.
As you develop your business plan, make sure you have the information to understand
your financial picture on an ongoing basis. What does it take to open your doors each
month? Where is your real profit center? How much expansion do you need to maintain
growth? What are the hidden costs of marketing your company? What are the
consequences of your credit policies?
Build in mechanisms to keep you continually informed as your business develops. It is
easier to establish good financial procedures right from the start than to wait until you
face a financial crisis. How frequently will you do your billing? What kind of credit
policies will your business follow? How will you keep informed on inventory?
Make certain you receive detailed financial statements at least monthly and that you
understand them thoroughly. Examine financial reports for any deviations from your plan
or any indications of impending cash-flow problems.
Controlling and understanding your finances make decisions easier. And you’ll sleep
better at night.

3.4.6 A Consistent Business Focus

As a rule, people who specialise in a product or service will do better than people who do
not specialise. Business man to focus his efforts on some thing that he can do so well
and that he will not be competing solely on the basis of price.
A crucial factor for a successful business is the development of a clear strategic position
that differentiates you from you competition - and then maintaining focus on that position.
All too often business fail because management loses sight of the central character of
the enterprise.
Defining a clear strategic position enables you to capture a particular place in the market
and distinguish yourself from your competitors. Different companies may sell a similar
product, but each may have a very different sense of what is business is really all about.
A second aspect of positioning your company and maintaining focus is the development
of a company style or corporate culture. By creating a consistent style that permeates
every aspect of your enterprise, from the design of your stationery to personnel policies,
you give your customers and employees a sense of trust in your company.
To help clarify your company’s position and focus as part of the business plan process,
you should define a Statement of Mission. This Mission Statement should guide your
company’s short-term activities and long term strategy, position your marketing, and
influence your internal policies.
40 3.4.7 Ability to Attract, Motivate and Retain Employees
Business Plan and Ethics
To attain the objectives and implement business plans, the firm must be stated adequately
and properly. There should be sufficient number of people of various talents and skills,
selected in a systematic and logical way so as to complete the work smoothly. The
people working shall be imparted with on the job training and rewarded with monetary
and non-monetary incentives. The welfare of the personnel must be given importance
and all should feel to contribute everything for the success of business.
A company is only as good as its people. The ability to find, attract, and keep outstanding
employees and managers is crucial to a company’s long term viability and competitiveness.
Employee morale also has significant impact on a company’s productivity, the quality of
its products or services, and its ability to provide outstanding customer service. Unhappy
employees are less motivated to do excellent work, satisfied employees are fat more
likely to want to see their company succeed, and they can dramatically alter a company’s
bottom-line.
Examine your management style and policies as part of your overall business planning
process. Develop management practices that treat employees fairly, offer opportunities
for advancement, afford reasonable job security, and provide fair pay and benefits.

3.4.8 A Mind Set to Anticipate Change

Change is inevitable, and the rate of change gets ever faster. In today’s world, your
company needs to anticipate and respond to change quickly and train its employees to be
adaptable. Companies that are nimble and able to quickly evaluate and respond to changing
conditions are most likely to be successful.
In planning for change, keep in mind the kinds of conditions that will affect your business’
future. They include:
 Technological Changes: It’s impossible to predict the exact technological
developments that will affect your industry, but you can be sure that you will be
faced with such changes. Even if you are making old-fashioned chocolate chip
cookies, advancements in oven design, food storage, or inventory control software
will place competitive pressures on your business. Competitor’s technological
advances may cause significant downward pricing pressures on you.
 Sociological Changes: Evaluate demographic and lifestyle trends in light of their
potential influence on your business. In the cookie business, for example, consumer
interest in natural foods or the number of school age children in the population may
influence the number and kind of cookies you sell. What sociological factors have
the greatest impact on your company? Keep your eye on trends that represent true
change; be careful not to build a business on passing fads.
 Competitive Changes: New business start everyday. How hard is it for a new
competitor to enter the market, and what are the barriers to entry? The Internet
has made it possible for companies all over the world to compete against each
other, increasing the number and type of competitors you may face.
When developing your business plan, consider how your company deals with these outside
changes. Also anticipate major internal changes, such as growth, the arrival or departure
of key personnel, and new products or services.

3.4.9 A Company’s Values and Integrity

Every company must make money. You can’t stay in business unless you earn a profit
However, studies of business success over time the shown that companies that emphasize
goals in addition to making money succeed better and survive longer than companies 41
Factors of Successful Business
whose sole is monetary.
As you develop your business plan, keep in mind those values you wish to the characterize
the company you are creating or expanding. These values can be aimed externally - at
achieving some business, social, or environmental goal - or they can be aimed internally -
at achieving a certain type of work place or quality of product or service - or both.
Calculating your company’s values to employees, suppliers, and even your customers
can strengthen their commitment to your business. Values given companies often have
greater success in attracting and retaining and employees, and they can usually better
weather short-term financial books because employees and management share a
commitment to goals in addition to financial rewards.
A company is likewise strengthened by maintaining integrity in all aspects of its dealings -
with employees, customers, suppliers, and the community. Certainly, you will face
situations where it appears that you will be at a disadvantage if you are more honest than
your competitors or more fair than other employees. However, the long-term benefits of
earning and keeping a reputation for integrity outweigh the perceived immediate
disadvantages. A clear policy of honesty and fairness makes decision-making in difficult
situations easier, inspires customer and employee loyalty, and helps goods costly lawsuits
and regulatory fines. It’s also the right thing to do.

Check Your Progress 1

State whether the following statements are true or false:

1. A business plan basically defines the business, serves as the complete resume
of the business firm, identifies the goals and gives an entrepreneur a definite
place in the path of business success.
2. A properly made business plan helps the entrepreneur to allocate resources
properly, handle unforeseen complications and make good business decisions.
3. A well knit business plan helps the entrepreneur to fulfill his dreams of business
success.
4. The ultimate purpose of developing a business plan is not to have a successful
business.

3.5 AVOID BUSINESS FAILURE

This part is most relevant to entrepreneurs or management that have a clear vision and
mission for their business and are in the process of developing the primary strategies to
be followed. It is closely linked to other papers in this series, most notably Developing a
Strategic Business Plan which offers a frame work for a strategic plan and Getting New
Business Ideas. The development of a suite of strategies is an iterative process and
involves circular thinking on the basis that optimal strategies will evolve gradually and be
very interdependent. Accordingly, the best way to utilize this part is to review it in its
entirety and then use it as a checklist and basis for brainstorming and systematic analysis.
A venture is most prone to failure during its first three or so years of operation-the so-
called ‘valley of death’. A key to getting through these early years is to avoid the obvious
mistakes. Generally speaking, businesses fail for significant and substantial reasons which
are often very evident to outsiders. Insiders often fail to see them because of their
closeness, determination and so on.
42 Basic reasons for failure include the following:
Business Plan and Ethics
Finance Market/Sales Management Offerings Operations
Underestimating Misjudging the size Lack of relevant Inability to sup- Under-investment in
start-up costs (for or growth of the sectorial experi- ply profitably to equipment etc.
operations & capital overall market. ence. required price.
expenditure)

Insufficient funds or Over optimistic Insufficient func- Problems with Excessive overheads
access to top-up fi- estimates of mar- tional breadth. maintaining qual- (relative to scale of
nance. ket penetration & ity standards. operations)
shares.

Wrong mix of funds Delays in securing Unresolved differ- Restricted range High operational
(e.g. too much debt or developing dis- ences of opinion of offerings. costs and/or low
and gearing too tribution channels. productivity.
high).

trade credit (receiv- the strength of expectations. innovation (me- capacity utilization.
ables). competitors too offerings).

Mistaking profit for Misreading cus- No formal or clear Problems sourcing Inadequate physical
cash flow (see here). tomer require- structures. supplies. distribution.
ments.

Overoptimistic pro- Lack of promo- Ineffective finan- Offerings out of Inappropriate busi-
jections or overtrad- tion & customer cial & managerial line with customer ness location.
ing. awareness. control systems. needs.

Unable to withstand Inability to handle

interest rate in- an economic slow-
creases. down.

Clearly, there are very many other reasons as to why businesses fail. The key point is
that causes are usually very apparent (especially with hindsight) and the trick is to anticipate
them by executing appropriate strategies at the outset. Three examples:
 Use market research to confirm demand and assess suitability of proposed offerings.
 Create a management team to offset any gaps in experience or expertise.
 Raise equity to reduce exposure to interest rate changes, reduce gearing etc.
Given that reasons for failure are often both simple and clear, it should (in theory) be
possible to reduce the possibility of failure through prior experience, forethought and
effective planning.

Check Your Progress 2

Fill in the blanks:

(a) The idea formulation can take .................... time and the sudden break through
is comparatively .................... .
(b) There can be a huge gap between entrepreneurs concept of a ....................
business and .................... .
(c) Investors and lenders are particularly .................... to issues of industry
.................... .
(d) The conditions which affect future if the business include technological
changes, sociological changes and .................... .
 43
3.6 ESSENTIALS OF A SUCCESSFUL BUSINESS Factors of Successful Business

Modern economy is complicated and very elaborate. There are many uncontrollable
factors affecting the prospects of any business. We may enumerate the significant factors
demanding special attention to make any business successful and flourishing:
1. Objectives: Every business enterprise must have a set of objectives or goals to be
achieved - primary or main objectives as well as secondary or subsidiary goals.
These objectives point out where we have to go and what is our destination or
target. Objectives should be the first consideration in organisation planning. They
determine the plan of action or the work to be done.
2. Planning: Modern business activity is based on predetermined plans, policies and
programmes formulated on the basis of intelligent forecasts about the future events.
Planning assures reasonable success in any business. It reduces risk of loss or
uncertainty. Of course, plans must be based on reliable, adequate and up-to-date
information reflecting the past, present, and future conditions.
3. Location, Layout and Size: Favourable location, proper plan layout and appropriate
size of the business can assure minimization of costs and maximisation of profits in
a competitive or free market economy.
4. Financial Resources: Finance is the life-blood of modern business. Adequate
short-term and long-term funds assure solvency as well as normal growth or
expansion. Liberal and cheaper finance must be made available for any business.
5. Efficient Organisation: An organisation is a medium for effective conduct and
management of any business. An organisation is a structured process in which
persons interact for objectives. It is defined as the division of work among people
whose efforts must be co-ordinated to achieve desired specific objectives. A sound
organisation evokes willing co-operation of employees and provides best
communication channels for proper decision-making. It ensures teamwork. Mere
collection of people at a place or mere going together in one direction is not an
organisation. Hence, people in a bus queue or in a railway coach do not form an
organisation. The three essentials of an organisation are : (1) people competent
and willing to work together; (2) common purpose or goal to be achieved through
joint efforts of people; (3) physical facilities and equipment necessary for doing the
work.
6. Good Management: Management plays a very important role as a central organising,
planning, controlling and co-ordinating agency or authority for directing effectively
any business. Management is responsible for judicious and conscious as well as
orderly arrangement of various resources such as men, money, machines, materials
for the production and distribution of goods in the home or even foreign markets.
Management provides entrepreneurial ability (risk-bearing ability) and managerial
skills. Competent management is a firm’s single most important resource. In fact,
even a flourishing sound business may go to the brink of insolvency, if we have
incompetent and fraudulent managers. Management also provides leadership for
getting things done through other people.
7. Employee Morale: Modern business demands collective enterprise. If employees
are well-treated and offered all the amenities to ensure job satisfaction, and if they
develop a sense of belonging to the organisation, they will put their heart and soul in
their work and employee morale will be high. Ease of work gives speed of work. It
is the responsibility of management to devise ways and means (job rotation, job
enlargement, wage incentives) to achieve labour co-operation and goodwill.
44 8. Best Marketing System: Mass production is done scientifically. We also need a
Business Plan and Ethics
scientific or systematic distribution system to sell our goods at a profit in mass
markets. All marketing plans and policies today are customer-centred and not
product-centred. Consumer frustration and dissatisfaction will indicate failure of
our marketing system.
9. Innovation: Fundamental research and applied product development provide
innovation. Innovation or change is the essence of progress. Unprecedented
development of science and technology demands continuous business research to
keep ourselves up-to-date. Similarly, ever-changing consumer demand needs
marketing research to adapt our production to changing market needs. Top
management gives special attention to R & D in integrated business planning.
Research and development alone can help a business planning. Research and
development alone can help a business to face successfully keen competition in the
market. Creativity is now recognised an important managerial function.
10. Equipment and Machinery: Modern business requires proper man-machine
organisation. Physical facilities, equipment, machinery, etc., contribute a lot for
business prosperity. Productivity depends upon the best technology. Business is a
unique combination of technical, human and managerial resources. Technical
resources include machinery, equipment, materials and finance. Human resources
include men and women working in the enterprise. Managerial resources include
executive leadership at all levels to co-ordinate and control all other resources
effectively. Business is now recognised as psycho-social technological system.

3.7 LET US SUM UP

Factors of successful business include the good management with its managers having
the traits like: experience, realism, leadership, foresightedness, flexibility and ability to
work with people. A crucial factor for a successful business is the development of a
clear strategic position that differentiates you from you competition - and then maintaining
focus on that position. All too often business fail because management loses sight of the
central character of the enterprise.
The other traits and factors of a good business are that, it is:
1. Sensibly financed (with prudent mix of equity and debt).
2. Strong cash position (with access to follow-on or contingency funds).
3. Offers above-average profitability (in terms of return on capital invested).
4. Aims for rapid growth in revenues (with profits lagging but in prospect).
5. Targets expanding, or otherwise attractive, market segments.
6. Develops a strong franchise or brand.
7. Devotes substantial resources to innovation (R & D, offerings or market).
8. Competes on non-price issues (e.g. quality, service, functionality).
9. Very close to customers and responsive to their needs.
10. Seeks specialist/leadership image with superior offerings.
11. Well managed with high-grade staff & good people - management.
Behind every characteristic there should be an explicit strategy designed to increase the
chances of success and not simply aimed at reducing the likelihood of failure.
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3.8 LESSON END ACTIVITY Factors of Successful Business

Imagine two different restaurants on the same street, both with basically the same business
mission:- providing good, fast food, priced at only a few rupees a meal.
The first restaurant is a national burger chain and the second one is a diner.
What kind of management style do you suggest to attract customers and retain employees?

3.9 KEYWORDS
Mile Stone: A particular business achievement by which a company can be judged.
Venture Capitalist: Individual or firm who invests money in new enterprises.

3.10 QUESTIONS FOR DISCUSSION

1. Explain the issues involved in business start up.
2. Discuss the essentials of a successful business.
3. What are the basic reasons for failure of a business?

Check Your Progress: Model Answers

CYP 1
1.T, 2.T, 3.T, 4.F
CYP 2
(a) Time; rare
(b) fine; reality
(c) sensitive; health
(d) Competitive changes

3.11 SUGGESTED READING

Rhonda Abrams, The successful Business Plan, Prentice - Hall of India, New Delhi.