If you are the one who likes the business side of world, here’s the right place. The article shall help you build a basic know-how on different models in which business occurs.
Any institution working towards a profit (not only monetary) can be termed as business. There are 3 different kinds of models in which business institutions can exist:
a) Production: These businesses produce or add significant value to the raw materials entering in their premises. Production can be 2 types.
Natural production or Agricultural: The production or value add is done via natural processes to produce materials which are later consumed in various economic processes. Example: Rice production for food, Cotton production for textile, Wood production for paper, etc.
Technical production or Industrial: In industrial production, value add is done via human intervened processes which wouldn’t have existed in nature or aren’t efficient in nature. Example: Automobile production, Chemical production etc.
b)Trading: Trading entails exchange and distribution of goods produced by the production businesses. Generally, trading would consist of logistics, warehousing, distribution of goods. There is no physical value add to the products at this stage, but the products are brought nearer and made available at the point of consumption or further value add. Hence, trading businesses add a significant value in terms of flexibility and availability of products. Thus, there is a virtual value add. Example: Logistics company, authorized stockists, last mile vendors etc.
c) Services: Services business exist to add value via processes which cannot be performed by manufacturing businesses due to lack of expertise or time. Hence, a service business provides insight or convenience or both. A service business can cater to other businesses or end-point consumer depending upon the value proposition. Example: IT Services, Consulting, Banking, etc
Depending upon the requirement and business sense, an organization can operate in one or more of the above distinctions. For example, Amazon, as an e-commerce company, operates predominantly in the ‘Services’ proposition. But to have that service seamless to the customers, Amazon also operations warehouses and fulfillment services for customers, which puts Amazon in the ‘Trading’ wing. Similarly, it also maintains and produces electronics such as Fire TV and Amazon Echo for servicing its customers via Alexa and Amazon Prime Video. Due to this, Amazon can also be termed as ‘Manufacturing’ business. As we can see, for multinational giants the lines tend to blur, but for companies operating in one vertical the definitions remain intact.Even the multi-vertical companies tend to divide their business into either of the 3 sectors.While, none of these business types can operate in isolation, we must keep in mind, that the demarcation is necessary to keep the corporate strategies-relevant.