We explain what a business is and the different types. In addition, we explore main characteristics, resources and more.
What is a business?
A business is an organization in which two or more people agree to engage in commercial activities and achieve a common purpose, which is to obtain profits or benefits.
A business may produce goods or services. Every business is run by an executive team who manages human resources (people) and physical resources (supplies, machinery, and workspace).
Frequently asked questions
How is a business started?
The first step is to have a business idea and develop a plan. The second step is to define the legal structure and estimate the necessary financing and resources to start the business.
What is the purpose of a business?
The purpose is to generate profit by producing and selling goods or services.
What defines a successful business?
In addition to generating economic profit, it should also have a positive impact on the planet, both from a social and environmental perspective.
- See also: Multinational corporation
Types of businesses
Among the several types of business are:
According to size
- Micro businesses. They are businesses with fewer than 10 employees.
- Small businesses. They are businesses with between 10 and 49 employees.
- Medium-sized businesses. They are businesses with between 50 and 250 employees.
- Large businesses. They are businesses with over 250 employees.
According to their legal structure
- Sole proprietorship. They are businesses owned by a single owner.
- Limited company. They are businesses owned by a group of partners. They can be a Corporation (Inc.), a Limited Liability Company (LLC), or a Limited Partnership (LP).
- Cooperatives. They are businesses that are part of community models of social economy.
According to market reach
- Local businesses. They exclusively conduct their business activity in the region or town where the business is based. For example: a neighborhood bakery.
- National businesses. They conduct their activity across the national territory, regardless of the location of headquarters or stores. For example: a work clothing manufacturer which sells at different outlets across the country as well as through e-commerce.
- Multinational companies. They are incorporated in a certain territory but can operate in various countries. For example: Technology company Microsoft is American but has offices worldwide, selling its products and services almost everywhere on the planet.
- Traditional businesses. They engage in commercial activities that involve trades or tasks requiring knowledge passed down from generation to generation. For example: a craftsman, a toolmaker or a mechanic.
According to the type of economic activity
- Economic sectors are segments or stages of a country's overall production process. They form a chain of industries that coexist so that every business can engage in commercial activities.
According to the sector to which its productive activity belongs
- Primary sector. These businesses are engaged in the exploitation of natural resources to extract raw materials. For example: oil, mining and agricultural companies.
- Secondary sector. These businesses are engaged in turning raw materials into finished or semi-finished goods. For example: textile, food and automobile companies.
- Tertiary sector. These businesses are engaged in commercial and operational services, both for other industries and for the end consumer. For example: banks, insurance companies, telephone and internet companies.
- Quaternary sector. These businesses are engaged in the trading of information and knowledge, i.e. they provide services based on intellectual work or the knowledge economy. For example: companies dedicated to market research, consulting or media.
Resources of a business
Resources are a set of tangible assets and intangible values that are necessary for the operation and survival of an organization.
Among the resources of a company are:
- Tangible assets. They are all the physical goods necessary for a company to exist and conduct its business activity. For example: physical space, machinery, devices, tools, office furniture, raw materials and equipment, among other goods.
- Human resources. They are all the people employed by the company to perform the tasks required to carry out the business activity. For example: managers, executives, team supervisors, assistants, facilities staff, cleaning people, and security personnel.
Corporate social responsibility
Corporate Social Responsibility (CSR) is a type of organizational management that seeks to achieve a balance between the impact of business activity on society and the environment, and the realization of business objectives.
Among the issues that CSR take into account are:
- Energy efficiency
- Renewable resources
- Conscious use of resources
- Protection of biodiversity
- Reuse, repair and recycling of assets
- Human rights
- Education on gender perspective and legislation
- Healthy working conditions
- Community collaboration tasks
- Anti-corruption policies and measures, among other issues.
The implementation of CSR management arose from the need to regulate the production and consumption system. Currently, abusive exploitation of natural resources, excessive pollution and lack of waste treatment are causing irreversible damage to the planet and to living beings.
Organizations that implement CSR management have a positive impact on the environment and society, in addition to state benefits such as tax reduction, easier access to credit and financing, and improved corporate image.
- UNIDO, Naciones Unidas (2022). What is CSR?. Unido.
- Edmondson, B. (2022). What is Corporate Social Responsibility (CSR)?. TheBalanceMoney.
- Robbins, S. P., & Judge, T. A. (2009). Fundamentos del comportamiento organizacional. 13ra. Edición. Pearson. México.