Nature of businesses

There are two main types of nature of businesses

Manufacturing businesses.
Service oriented businesses.

Manufacturing businesses:-

A traditional manufacturing system involves the process from the procurement of raw materials through the different stages of conversion of these raw materials into the final product and sale of these products.

Concept of value chain relates to manufacturing business. Value chain is description of activities of organization which add value to organization. There are two types of activities take place in organization. These are primary activities and secondary activities.

Primary activities                                                               Secondary activities

  • Inbound logistics                                                                                                                          Infrastructure
  • Operations                                                                                                                         Human resource management
  • Outbound logistics                                                                                                                         Procurement
  • Marketing and sales                                                                                                                         Research and development
  • Services
Main issues in manufacturing environment
  • Identifying the cost of production.
  • Identifying the production mix.
  • Ascertaining the product price.
  • Quality aspects.
  • Quantity aspects.
  • Decision making.
  • Capacity utilization.
  • Input-output ratio.

Service oriented businesses:-

Services are intangible in nature. For example (software development, hospitality services, teaching, services and transport services). They cannot be quantified easily into units of measurement. In order to understand the impact of service based business on accounting techniques, we should understand the nature of services. So services are very different to normal manufacturing businesses.

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