Business life cycle

The business life cycle is the progression of a business in phases over time and is most commonly
divided into five stages: launch, growth, shake-out, maturity, and decline.

The following diagram is used to illustrate the different business life cycle:

Phase One: Launch

Each company begins its operations as a business and usually by launching new products or
services. During the launch phase, sales are low but slowly (and hopefully steadily) increasing.
Businesses focus on marketing to their target consumer segments by advertising their
comparative advantages and value propositions. However, as revenue is low and initial startup
costs are high, businesses are prone to incur losses in this phase.

The cash flow during the launch phase is also negative but dips even lower than the profit. This
is due to the capitalization of initial startup costs that may not be reflected in the business’ profit
but that are certainly reflected in its cash flow.
Phase Two: Growth

In the growth phase, companies experience rapid sales growth. As sales increase rapidly,
businesses start seeing profit once they pass the break-even point. However, as the profit cycle
still lags behind the sales cycle, the profit level is not as high as sales. Finally, the cash flow
during the growth phase becomes positive, representing an excess cash inflow.

Phase Three: Shake-out

During the shake-out phase, sales continue to increase, but at a slower rate, usually due to either
approaching market saturation or the entry of new competitors in the market. Sales peak during
the shake-out phase. Although sales continue to increase, profit starts to decrease in the shake-
out phase. This growth in sales and decline in profit represents a significant increase in costs.

Phase Four: Maturity

When the business matures, sales begin to decrease slowly. Profit margins get thinner, while
cash flow stays relatively stagnant. As firms approach maturity, major capital spending is largely
behind the business, and therefore cash generation is higher than the profit on the income
statement.

Phase Five: Decline

In the final stage of the business life cycle, sales, profit, and cash flow all decline. During this
phase, companies accept their failure to extend their business life cycle by adapting to the
changing business environment. Firms lose their competitive advantage and finally exit the
market.

Various forms of business

Partnership

You can classify a business partnership as either general or limited. General partnerships allow
both partners to invest in a business with 100% responsibility for any business debts. They don't
require a formal agreement. In comparison, limited partnerships require owners to file paperwork
with the state and compose formal agreements that describe all of the important details of the
partnership, such as who is responsible for certain debts.

Some advantages of partnerships include:

 Easy to establish: Compared to other business structures, partnerships require minimal

paperwork and legal documents to establish.
 Partners can combine expertise: With more than one like-minded individual, there are
more opportunities to increase their collaborative skillset.
  Distributed workload: People in partnerships commonly share responsibilities so that one
person doesn't have to do all the work.

Disadvantages to consider:

 Possibility for disagreements: By having more than one person involved in business
decisions, partners may disagree on some aspects of the operation.
 Difficulty in transferring ownership: Without a formal agreement that explicitly states
processes, a business may come to a halt if partners disagree and choose to end their
partnership.
 Full liability: In a partnership, all members are personally liable for business-related
debts and may be pursued in a lawsuit.

Corporation

A corporation is a business organization that acts as a unique and separate entity from its
shareholders. A corporation pays its own taxes before distributing profits or dividends to
shareholders..

Advantages of corporations include:

 Owners aren't responsible for business debts: In general, the shareholders of a corporation
are not liable for its debts. Instead, shareholders risk their equity.
 Tax exemptions: Corporations can deduct expenses related to company benefits,
including health insurance premiums, wages, taxes, travel, equipment and more.
 Quick capital through stocks: To raise additional funds for the business, shareholders
may sell shares in the corporation.

Disadvantages include:

 Double taxation for C-corporations: The corporation must pay income tax at the
corporate rate before profits transfer to the shareholders, who must then pay taxes on an
individual level.
 Annual record-keeping requirements: With the exception of an S-corporation, the
corporate business structure involves a substantial amount of paperwork.
 Owners are less involved than managers: When there are several investors with no clear
majority interest, the management team may direct business operations rather than the
owners.

Sole proprietorship

This popular form of business structure is the easiest to set up. Sole proprietorships have one
owner who makes all of the business decisions, and there is no distinction between the business
and the owner.

Advantages of a sole proprietorship include:

  Total control of the business: As the sole owner of your business, you have full control of
business decisions and spending habits.
 No public disclosure required: Sole proprietorships are not required to file annual reports
or other financial statements with the state or federal government.
 Easy tax reporting: Owners don't need to file any special tax forms with the IRS other
than the Schedule C (Profit or Loss from Business) form.
 Low start-up costs: While you may need to register your business and obtain a business
occupancy permit in some places, the costs of maintaining a sole proprietorship are much
less than other business structures.

Disadvantages include:

 Unlimited liability: You are personally responsible for all business debts and company
actions under this business structure.
 Lack of structure: Since you are not required to keep financial statements, there is a risk
of becoming too relaxed when managing your money.
 Difficulty in raising funds: Investors typically favor corporations when lending money
because they know that those businesses have strong financial records and other forms of
security.

Limited liability company

The most common form of business structure for small businesses is a limited liability company,
or LLC, which is defined as a separate legal entity and may have an unlimited amount of owners

One method that can be used to gather market information (advantages and disadvantages included)

Focus groups

A simple concept but one that can be hard to put into practice.

You get a bunch of people into a room, record them, and ask them about whatever you want. For
some it’ll be new product ideas, for others it might be views on a political candidate.

From these discussions, the organizer will try to pull out some insights, or use it judge the wider
society’s view on something. Generally the participants will be chosen based on certain criteria,
such as demographics, interests, or occupation.

A focus group’s strength is in the natural conversation and discussion that can take place
between participants (if they’re done right).
In comparison to a questionnaire or survey that have a rigid set of questions, a focus group can
go off on tangents the organizer could not have predicted (and therefore not planned questions
for). This can be good in that unexpected topics can arise, or bad if the aims of the research are to
answer a very particular set of questions.

The nature of discussion is important to recognize as a potential factor that skews the resulting
data. Focus groups can encourage participants to talk about things they might not have otherwise,
and they might be impacted by others in the group or the presence of the researcher. This can
also affect unstructured one-on-one interviews

Ways in which ICT can be used for enterprise growth

Development of ICT has seen many things can be performed more efficiently and with greater
success. For example, ICT makes it possible to even test different decision making scenarios.
This is the reason why many people believe that ICT might be used as a tool for creating and
developing entrepreneurial skills. Besides, ICT might offer learning opportunities, business
planning solutions, database tools as well as business training opportunities with the help of
business plan simulators. ICT can help to develop and enhance communication and social
networks as well.

From the vegetable trader downtown at the open air market putting calls through to her suppliers,
notifying them of her depleting stock; to the Jua kali artisan calling customers to inform them of
their ready-to-pick-up shoes; to the dressmaker who uses messaging apps and social media
platforms to display and sell her products; and the working professional who orders lunch from
online food delivery companies, technology with the added benefit of the internet and various
information & communication technology tools is gradually becoming an integral part of the
business environment and our lives.

Access to Markets: E-commerce as this is commonly referred to has greatly minimized the need
for physical infrastructure for trade to take place. Platforms like Jumia give entrepreneurs access
to markets in all parts of the country and all over the world.

Virtual and efficient business coordination: Technology has completely revolutionized the
manner in which businesses operate today especially businesses operating in a niche market.
These businesses use of apps and often times do not require the physical presence of the business
owner and can often times be efficiently run virtually such as Uber.

Advertising and Marketing Communication: With the emergence can be reached with
advertising messages via a tweet on twitter, a post on Facebook or videos on Youtube etc at way
cheaper rates.

Increasing revenue streams and Saving Time/Money: Technology has provided new and
exciting opportunities to increase revenue. Such opportunities include the provision of movies
and games for relaxation at a fee. For example, Netflix
Teleconferencing: Important meetings can also be held via video conferencing technology
systems which allow 2 or more locations to communicate via simultaneous 2-way audio and
video transmissions, eliminating the logistics of travelling, saving time and money. It is also
common practice to reach out to audiences by streaming seminars, conferences and programs
live on the internet.

Explanation on the process of innovation

Generating Ideas 

Generating ideas is the exhilarating part of the process. It is best to do this in teams, rather than
individually. Innovative ideas generally come from a vision, an unreasonable demand, or a goal. 

2. Capturing Ideas 

Capturing the ideas from the first stage is done by means of team discussion or discussion among
peers. It is important to record the ideas.  

3. Beginning Innovation 

Review the list of ideas and develop them into a series of statements of ideas. Next, quantify the
benefits of each idea to be pursued. Do this in reference to the department, the organization,
and/or the customer. Describe how the statement fits with the organization’s strategy, mission,
and objectives. Finally, estimate the business potential—the expected outcomes of implementing
the idea. These steps are designed to capture the idea and have the team members agree on a
statement of feasibility before presenting the suggested innovation to management. 

4. Developing a Business-Effectiveness Strategy 

Innovation implementation begins here. It usually means rethinking an existing process, product,
or service. This is not the same as looking at an existing process and improving it. It is describing
what a future process (such as building a house in three hours) will look like. 

The team first develops this “picture of the future.” This usually is where the innovation resides.
The easiest way to start is to have the team members list their basic assumptions about the way
things are now done (which the innovation is intended to overcome). Then they brainstorm,
record, and discuss every idea that arises about a possible future process. It helps to use yellow
self-stick notes to record ideas individually and then to consolidate them all

Applying Business Improvement 

Once the innovation is applied, it is necessary to continuously examine it for possible

improvements (to the process or product or service). In the example of building a house in three
hours, how could the team improve the process by using fewer people or less money? 
The team starts this process by identifying the business-process gaps between what is done in the
present and what is done in the innovation. This is followed by identifying the blockages and
barriers to implementing the innovation. Estimating the difficulties, benefits, costs, support
required, and risks is necessary before the team can refine the innovation process. Then it will be
ready to apply the improvements identified. 

6. Decline 

In time, it often becomes obvious that what was once an innovation no longer fits. Continuous
improvement of the existing process, product, or service is no longer of value; the former
innovation has become outdated or outmoded. It is time to let it go, abandon the existing
thinking, and set a new goal to start the innovation process once again. It is time for new
innovations in response to external pressure.