Business Systems and Environments: Key Components

The Company

A company is an entity that combines a set of factors of production, organized and operated in the best possible way. Through revenue from the sale of goods and services, it ensures a profit and achieves targets set in a plan.

The Company as a System

A system is a set of interrelated elements and their environment, arranged so that, through a process of transformation, a set of inputs becomes a set of outputs.

Business System Features

• It's a global system: All elements are interrelated, so a change in any of them affects the others.
• It's a self-regulating system: The balance is achieved through the actual interaction between its elements.
• It's an open system: It is in permanent contact with the outside, i.e., with its environment.
• It is divided into subsystems:
  1. Operations subsystem: Includes the functions of procurement of inputs, production, and commercialization.
  2. Financial subsystem: Is responsible for finance and investment administration.
  3. Management subsystem: This is the planning of the operations to be performed.

The Business Environment

The business environment is everything surrounding the company.

Environmental Characteristics

• It is complex: It is increasingly difficult to cover the knowledge and have all the information necessary for successful business work.
• It's dynamic: Changes happen very quickly, limiting the responsiveness of companies and requiring great flexibility.
• It is favorable or hostile: Dependent on competition, availability of resources, etc.

Types of Environments

1. Specific Environment

• Clients: The number and characteristics of a company's clients largely determine its performance.
• Providers: As in the case of customers, suppliers' size and degree of implementation of their commitments partly determine the results obtained by the business.
• Competitors: Competition is getting bigger and more aggressive.
• Intermediaries: In many cases, companies depend on intermediaries to get the product to final consumers.
• Financial institutions: All companies need financial resources to perform their activity and look to financial institutions, mainly banks.

2. General Environment

• Economic environment: The general economic situation (inflation, interest rate, etc.).
• Population environment: The number of factors including population, age distribution, population pyramid, sex, etc.
• Political-legal environment: All the regulations that affect the company both economically and on the environment.
• Cultural environment: Refers to factors like education levels, lifestyles, consumption patterns, etc.
• Technological environment: The technological changes that we encounter.

Components of the Company

• Physical capital: The most obvious elements found in a company, which can be seen with the naked eye. All are essential for its activity involving the manufacture of goods or the provision of services.
• Human capital:
  • The entrepreneur: Coordinates the business.
  • Managers: Employees who are responsible for organizing and conducting various activities and functions performed in the company.
  • Workers: Employees who do not perform management functions, which does not mean they do not often have the autonomy to organize their work and take some responsibility depending on the work they perform.
• Financial capital: Money is everywhere in our lives. The company needs money from its source to buy the treasury and subsequently receive capital income from sales. It must pay workers, suppliers of raw materials, etc.
• Intangible elements: All the above are more or less tangible: machines, money, etc. But there are intangible elements that are crucial for the company. These can be divided into:
  • Intellectual capital: Refers to the prior training of persons working in the business.
  • Intangible assets: Belonging to the company but are not observable to the naked eye.