Interrelationships of Major Fields of Business Management
The purpose of this paper is to explore the interrelationships of nine key areas of a business, and the synergism that results from the interactions of these key business areas. These interrelationships of all nine key areas of a business create a dynamic, successful, and responsive business by capitalizing on the whole instead of the component parts. To illustrate how synergism arises from these interactions, a fictitious business will be used. The business is a new, small retail business that caters to outdoor enthusiasts such as skiers, climbers and hikers. The retail business is located in the Rocky Mountains, and is called Rocky Mountain Outfitters (RMO). Business arises primarily from store traffic, although a limited web presence provides the opportunity for orders to be placed by mail, phone (voicemail), email or web.
RMO was established in the spring of 2004 as a sole proprietorship. This form of ownership was selected based on the ease provided for establishing the business. Since I plan on running the business as a lifestyle business that permits me to earn an income while pursuing personal interests such as wilderness recreation (primarily skiing, hiking and climbing), a sole proprietorship provided me with this flexibility. The key consideration when determining what form of ownership to use was the level of financial risk and investment that was required. Although other business forms were considered, my desire to retain complete control in directing the business, along with taking only personal financial risk for the venture, became determining factors in choosing a sole proprietorship. Given time-frames and personal desires, I was unable to pursue more formal business structures such as partnerships or incorporation, leaving sole proprietorship as my best choice. The decision to use a sole proprietorship required that I invest my complete savings in the business, as well as the limited equity that I have in personal possessions. I have therefore taken full responsibility for raising the finances required to get the business started, and have assumed full risk for the business in case of losses or profits.
The level of personal investment that I made allowed me to leverage an agreement with a financial institute for a small operating line of credit, to use for purchasing inventory and some start-up equipment. Personal funds (and credit) were needed to acquire other start-up materials, and to secure operating costs for the first six-months of business. Without sufficient funds to purchase a retail space, a three-year lease was secured on a modest (600 ft2) retail space with limited living quarters in the back (adjacent to the store-room). Personal funds will be directed to paying rent on this combined retail and accommodation unit, which lessens the need to support payments for separate retail and accommodation units. Earnings can therefore be applied to other overhead expenses, debt reduction and savings for future expansion. The choice of sole proprietorship allowed me to start my business quickly and affordably, with maximum risk taken by me personally, and financed primarily by me, with some assistance from my bank.
The choice of sole proprietorship allows me maximum flexibility in designing the business, including establishing the mission and strategic goals for the business. While a is desired, other goals have also been set for RMO. Since the focus of the business is on outfitting wilderness recreational users, RMO promotes low-impact environmental practices. Education of customers is key to the business strategy, and will be accomplished through personal discussions with clients, particularly novice wilderness users. The intimate nature of the retail space allows this kind of relationship to be formed with clients as they peruse the merchandise, thus creating a value-added service that supports price premiums. The primary focus of the business is on clothing, but equipment product-lines will also be carried on a seasonal basis (touring skis and ski accessories in winter, climbing and hiking gear in summer). Educational material and are also featured (books, maps, , biodegradable soaps, and so on).
The sale of environmentally friendly products is key to the business, but so are socially responsible products. As the sole proprietor, I’m able to research each product, and choose to carry only those that meet my criteria as having minimal environmental and social impacts. Products from developing nations will be carried as long as quality standards are met, and as long as social issues such as child labor are avoided. Appropriate disposal of waste material from the manufacturing processes must also be considered. These types of products may carry a price premium, but the target clientele generally supports environmental and social activism, and will pay a price premium to support these worthy causes. As the sole proprietor for RMO, my finances and reputation are at stake, which supports my need to run an ethical business. Therefore the choice of sole proprietorship, and the financing option that results (my money and my risk) allows me to monitor environmental, social, and ethical impacts of my business.
In the context of a sole proprietorship, and a fledgling and green business, financial resources will be limited, primarily during the start-up phase (which covers the first two years of business). These realities require that RMO operate as an extremely flat organization, with myself fulfilling most of the key business functions during the start-up phase. A couple of friends, who are fellow outdoor enthusiasts, have been hired to assist on an as-need basis for the first year, in exchange for a modest-yet-legal wage, seriously discounted equipment, coffee and snacks. The roles that the hired help fulfill include front-line sales, product assessments and tests, and web-site maintenance. In my capacity as sole proprietor, I make all management decisions, all human resources decisions, all purchasing decisions, all marketing decisions and all sales-terms decisions (mark-up, discounts, returns, exchanges, and so on).
Concerning staff, teamwork, communications, motivation and unions, these business areas are not be primary concerns in the foreseeable future. The workforce will remain small during the start-up phase, with a maximum anticipated roster of employees being between two and four. These employees will act in a sales capacity, including the role of educator and promoter of responsible wilderness use. The role of employees in the service industry is critical, and in the case of RMO, the significance of employees is not reduced. The business model relies on creating relationships with customers and providing an educational experience. During the start-up phase, employment will generally be restricted to known entities such as co-recreationists (not necessarily friends, to maintain an arms-length relationship between employer and employee).
Communications during this period will remain relatively informal, revolving around key expectations and evaluation of performance against expectations. Rewards will be based on commissions, cash bonuses and equipment discounts. Motivation will be provided through commissions, but equally importantly, through sunshine days (I cover some good outdoor days, to allow staff to test the equipment under optimal conditions). Month-end pizza and beer nights will also be offered when sales targets are met; the quantity and quality of food and beverage will increase commensurate with percentage of profits over projections. Through the interrelationships of my business structure, corporate values, management structure, workforce structure and compensation schemes, RMO will create and maintain a positive work environment. Communication will be timely and honest, teamwork will be promoted, motivation will be maintained and unionization will not be an issue.
The area of production is simplified in this retail context, since goods are purchased instead of produced. Services are created through knowledgeable staff, and value-added services such as education on appropriate wilderness use are provided by experienced staff. Goods that are offered for sale must meet environmental and social objectives. Operations are dealt with effectively and easily because of the structure of the business as a sole proprietorship in its formative years. Issues are dealt with quickly, and adjustments are made as situations arise. If defective merchandise is received, it is returned and substitute products are found. If staff don’t show for work, other staff are called in or I cover the store. TQM is pursued primarily through the acquisition of quality products, and the verification of product durability in the Rocky Mountain setting through the testing by myself, my employees, and my acquaintances. These areas are directly affected by the corporate structure and functioning of RMO.
Marketing is intertwined with all of the business functions that have already been discussed in several ways. First, promotions will be pursued through outdoor publications, local tourism-based publications, the Internet, area festivals and outdoor competitions (ski loppets, climbing celebrations and other relevant events). Other elements of the marketing mix such as product and price will be monitored through personal interactions with clients, and through feedback received by staff. Employees have their fingers on the pulse of the target market, and can provide insights to new product lines that are desired, comments on product usefulness, satisfaction and concerns, and other areas that will improve the overall success of RMO. Opportunities for feedback and suggestions will also be available on an ongoing basis through email and the website. Adjustments to the marketing program are made easily because of the business structure, the small size of the workforce and the nature of the target market as a dedicated, passionate group of wilderness users with values and money to support these values.
Automated and integrated systems support operational and administrative functions, to ensure that maximum resources are available to support business growth and minimum resources are need for overhead functions such as IT, accounting and the overall management of information. A point-of-sale system is used to receive materials, track inventory, and record sales transactions. The data can be downloaded to accounting software, to facilitate the efficient recording of transactions for accounting purposes. The integration of IT with the management of information creates a for small businesses such as RMO that rely heavily on one individual for efficient business functions. are easy to set-up and maintain, allowing for the easy training and fool-proof operation by employees.
Despite my role as CEO, sales, purchasing, HR, book-keeper, marketing and custodian, synergism is created within RMO by the interrelationships of the nine key business areas. Starting with the business structure as a sole proprietorship, significant burden is placed on me in the area of finances required to start and sustain the business, along with risk associated with starting RMO. This business form allows me, as sole proprietor, to impose my environmental and social values on the company, thus creating a certain ethical standard for the business. The use of a flat organizational structure, supported by the business structure, allows the organization to operate in a very lean and streamlined manner. This management structure, supported by the fledgling sole proprietorship, creates an intimate environment for the limited workforce. Teamwork, communications and motivation are positively supported. Again the business form and management structure guide the areas of production, operations and TQM. Marketing is fairly low-key and grassroots, supported by a web presence. IT is integrated throughout the company. As a local sole proprietorship catering to wilderness enthusiasts, RMO has no international implications. This synergism creates a dynamic, successful and responsive RMO.