What is a Business Eco System?
The goal of a business is to generate capital appreciation and profits for its owners or stakeholders by engaging in provision of goods and services to customers within the eco system/framework governed by respective laws(local/international). The eco system involves various entities that the business works with for delivery of a product or service.
The goal of a business is to generate capital appreciation and profits for its owners or stakeholders by engaging in provision of goods and services to customers within the eco system/framework governed by respective laws(local/international). The eco system involves various entities that the business works with for delivery of a product or service. Suppliers, Employees, Employee unions, Trade bodies, Government agencies, Customers, Competitors are some of the organizations in the eco system involved in delivery of goods or services.
Modern business organizations run multiple product and service lines, operate globally, leverage large number of registered legal entities, and operate through complex matrix relationships. To stay competitive in the current global business environment, they must often develop highly diverse and complex organizational structures that cross international borders.
These complexities create need for advanced operational and supporting business processes to drive organization wide effectiveness, efficiency and achieve business objectives. This forces companies to create a diverse array of subsidiaries, legal entities, organizations, and accounting processes to ensure a smooth and profitable business flow. Tax considerations also impact how businesses construct these complex legal structures.
In this section we will explore the different legal and operational structures that are commonly adopted by these global conglomerates.
Importance of Business Eco System
A single business can never serve the needs of a customer unless it engages and works with the other entities in the eco system. For example, to manufacture a product there is a need for certain raw materials, some of which must be processed before they can be used in production and hence the need for suppliers. The Government creates the basic infrastructure like roads, ports, governing policies and procedures, trade agreements with other countries, basic research and development facilities, labor laws that will help businesses in setting up and running their operations. Hence a business engaging in manufacturing needs Suppliers, Government and other entities.
So, the business eco systems helps with
- Leveraging capabilities (production, purchase, engineering skills etc.) beyond the capability of a single entity
- Innovation from one party that helps in adding value to the overall process by cutting production cost or time or improving customer experience
- There is constant interaction between the parties resulting in exchange of ideas, learnings
James Moore, a business strategist wrote in a 1993 Harvard Business Review:
“In a business ecosystem, companies co-evolve capabilities around a new innovation: They work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.”
Internally, an organization can be structured in many different ways, depending on their objectives. The internal structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual.
We know that big multinational organizations operate in a matrix environment, constitute of many units and need different views of their operating and financial results. These different views may represent financials or profitability by geographies, countries, locations, businesses, segments, product lines, cost centers, functions, COE’s etc.
Related Links
You May Also Like
-
Shared Services is the centralization of service offering at one part of an organization or group sharing funding and resourcing. The providing department effectively becomes an internal service provider. The key is the idea of 'sharing' within an organization or group.
-
Generally Accepted Accounting Principles define the accounting procedures, and understanding them is essential to producing accurate and meaningful records. In this article we emphasize on accounting principles and concepts so that the learner can understand the “why” of accounting which will help you gain an understanding of the full significance of accounting.
-
Internally, an organization can be structured in many different ways, depending on their objectives. The internal structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual.
-
Understand what we mean by GAAP to STAT adjustments. This article discusses the different standards that are used for multiple representations of the financial results for global organizations. Understand the meaning of US GAAP, Local GAAP, STAT, IFRS, and STAT. Finally, understand why accounting differences arise and how they are adjusted for different financial representations.
-
Global Business Services (GBS) Model
Global business services (GBS) is an integrated, scalable, and mature version of the shared services model. Global Business Services Model is a result of shared services maturing and evolving on a global scale. It is represented by the growth and maturity of the Shared services to better service the global corporations they support.
-
Legal Structures for Multinational Companies
A multinational company generally has offices and/or factories in different countries and a centralized head office where they coordinate global management. A multinational company (MNC)is a corporate organization that owns or controls the production of goods or services in at least one country other than its home country.
-
GL - Different Type of Journals
Two basic types of journals exist: general and special. In this article, the learner will understand the meaning of journalizing and the steps required to create a journal entry. This article will also discuss the types of journals and will help you understand general journals & special journals. In the end, we will explain the impact of automated ERPs on the Journalizing Process.
-
Record to report (R2R) is a finance and accounting management process that involves collecting, processing, analyzing, validating, organizing, and finally reporting accurate financial data. R2R process provides strategic, financial, and operational feedback on the performance of the organization to inform management and external stakeholders. R2R process also covers the steps involved in preparing and reporting on the overall accounts.
-
A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. A joint venture takes place when two or more parties come together to take on one project.
-
GL - Journal Posting and Balances
In this tutorial, we will explain what we mean by the posting process and what are the major differences between the posting process in the manual accounting system compared to the automated accounting systems and ERPs. This article also explains how posting also happens in subsidiary ledgers and subsequently that information is again posted to the general ledger.
