When starting a business one needs to know what being an entrepreneur or a manager of one’s own

business entails.

Principles of Managing Business

According to Henri Fayol, a French businessman, all managers perform five functions: planning,
organizing, commanding, coordinating, and controlling. But today these have been condensed into
four major functions: planning, organizing, leading, and controlling.

Planning is the setting of goals, establishing strategies for achieving those goals, and developing
plans to integrate and coordinate activities.

Organizing involves arranging and structuring work to accomplish the organization’s goals.

Leading is working with and through people. This is when leaders/managers motivate subordinates,
help resolve work group conflicts, or influence individuals or teams they are leading.

Controlling is the evaluation of whether things are going as planned after planning, organizing, and
leading. This is to ensure that goals are being met.

When the business is already established, one also needs to make sure that the business being formed
would be able to compete against its rivals in the market. Identifying the business’ core competencies
would help the firm to be distinguished. This will also give the business an advantage over its
competitors.

Competitive Advantage

It is a condition or ability that a firm has or able to do better than its competitors which puts the
company in a favourable or superior business position. This allows the firm to generate greater value
for the business itself and its stakeholders.

Stakeholders are anyone that can affect or be affected by the organization’s decisions. Examples of
key stakeholders are its employees, the government, and the owners or shareholders.

A competitive advantage can be created by focusing on the business’ core strengths.

Unique selling proposition (USP) is a feature that distinguishes a product from its competitors. This
includes focusing on offering the lowest price, product and service quality, or providing a first-ever
product of its kind.

Critical Success Factors

This is also known as Key Results Area (KRAs) and are the important elements of activity that must
be performed well in order to achieve the goals or objectives of a business. It helps in identifying the
most important part and will provide focus in achieving the same aim.

Core Strategy Tools

                The use of tools in evaluating the business’ performance for better formulation of
strategies.

SWOT Analysis

                SWOT is an acronym for strengths, weaknesses, opportunities, and threats. It evaluates

the internal and external environment of a business. SWOT Analysis is used for the identification of
a firm’s competitive advantage through its strengths, to fix its weaknesses, recognize opportunities
for further growth, and possible threats that the business may face.

TOWS Analysis

                This is a tool which applies the same principles used in SWOT analysis. The only
difference is that threats and opportunities are examined first before the strengths and weaknesses.

Porter’s Five Forces

                It is a framework for analysing competition in the industry and understanding the forces
that shape such competition. The five forces perspective is proposed by an American academic
Michael E. Porter and was first published in Harvard Business Review in 1979.

According to him, the competitiveness of an industry can be viewed as a composite of five forces:

1. Rivalry among competing firms

The strategies used by a business can only be successful if it is able to create a competitive advantage
over its rivals.

1. Potential Entry of New Competitors

The level of competition in the market is characterized by the number of sellers offering the
same/alternative products. An additional entry of another competitor will lead to an increase in the
intensity of competitiveness among firms.
 

1. Development of Substitute Products

The presence of possible substitutes increases competitive pressure as these products offer
alternatives to the same target market. There’s a chance that firms offering substitute products have
lower price or improved quality which can attract customers.

1. Bargaining Power of Suppliers

This refers to the pressure the suppliers can bring in the market. When suppliers have strong
position they can threaten to increase price or reduce the quality of product and services.
Firms may pursue backward integration to gain control or ownership of the supplier.

1. Bargaining Power of Consumers

When consumers have a strong influence they can bring pressure to the market which will demand
the suppliers to offer higher quality products, better consumer services, and lower price.

PESTLE Analysis

                It is an acronym for political, economic, social, technological, legal, and environmental—

key external forces that may influence a business. It is q framework of macro-environmental factors
that is used when doing an environmental scanning.

Environmental Scanning is the screening of large amounts of information to anticipate and interpret
changes in the environment.