Essay On Types Of Capital In Business Models.

Take an analytic framework and use it to show how different types of capital can be represented, and how their flows, interrelationships and practical implications can be understood. 

The Four Types of Capitals Used in Business Models

The concept of capital can be interpreted in a number of ways. The particular distinction between the different types of capitals can only be drawn on the basis of the application of these capitals. Researchers have segregated the type of capital into four kinds, which are financial capital, physical capital, human capital, and social capital. These different types of capitals are the fundamental cornerstones of any kind of business and are utilized for achieving the desired amount of profit.

This particular study aims to look into the different types of capitals, their flows and interrelationships through the framework of business models.

The different types of capitals that are utilized in a business for the purpose of achieving the desired profits are as follows:

• Financial capital – the financial capital refers to that kind of capital that can be measured in terms of monetary units. Financial capital is essentially utilized by the entrepreneurs and other businesses for purchasing the required raw materials in order to manufacture the business product. Financial capital is an essential portion of the capital structure of any kind of business belonging to retail, corporate or investment banking sector (Piketty 2015).
• Physical capital – physical capital refer to that capital that is utilized as potential factor of production or is utilized as an input into the process of production like land and building, computer, machinery and other equipments. Physical capital forms an important part of the capital structure of any kind of business and is very important as it increases the productivity of the business entity (Piketty 2015).
• Human capital – human capital refers to the collected repository of skills and knowledge that a single individual possesses and can be utilized to create economic value for the business entity. To be precise the human skills that are utilized for the development of  business are known as human capital. Furthermore, the concept of human capital puts the required distinction between the labor work force stating the all labor is not equal and that the quality of work done by the employees or the particular skills possesses by them can be improved both in terms of quality and quantity by facilitating the required investment in them (Piketty 2015).
• Social capital – Social capital refers to that type of capital that defines the link between the individuals and the entities and is economically valuable. To be precise the social capital of a firm can be defined as the social network that has been developed by the different stakeholders of business who trust and assist each other. Such a bonding and rapport can be a huge asset of a business organization. Moreover, the possession of social capital by a business entity makes the organization reach such a state that both the management and the stakeholders of business continuously try to improve the business standards along with the welfare of each other (Flemmen 2017).

The types of capitals that have been mentioned in the preceding paragraphs are the broad categories of capital that a business majorly constitutes of. It must be mentioned here that the success of the business organizations depend on various forms of capitals. The forms of capitals that are utilized by a particular organization’s depends on its value creation. 

The integration of the different types of capitals in the business model is a very crucial step. A business model refers to the particular plan or the strategy that has been adopted by a particular business entity for ensuring the achievement of the fundamental objective of the firm for which it has been established. To be precise, a business model refers to the rationale in regards to the different aspects that a particular business aims to develop in relation to the economic, social, cultural or other aspects.

Now, the particular integration of the different capitals in regards to a particular business model is essential. This can be explained with the help of the synchronization of the different types of capitals in the business model. Financial capital is the primary requirement for any kind of business. For instance, the example of a business model in regards to the establishment of a fitness facility can be taken. Financial capital that will be required for the gym or the fitness facility is capital that will be required for setting up the business.

Next, after the establishment of the financial particulars of business, the type of capital that will be required to be integrated in a business model is the physical capital. The physical capital refers to the physical assets that will be required for the proper running of the business facility. This means that the fitness equipments and the other machineries that will have to be purchased and the value of which can be measured in terms of monetary benefits refers to the financial capital required by business. 

Integration of Different Capitals in Business Models

After this, the human capital is an essential type of capital that will be required for business. The human capital that will be required for the fitness facility or the gym are the trainers or the facility managers and the other staff of the particular business or the fitness facility. Moreover, it must be noted here that the human capital that is employed within a business process will require a certain level of expenditure for the improvement of the possessed skills thus facilitating the addition to the economic value creation to business.

Lastly, the social capital that will be required for the business refers to the rapport and the mutual trust that has to be developed among the different stakeholders of the fitness facility that will result in a strong business model. Moreover, a business featured with a higher degree of social capital is certain to prosper as the mutual trusts exist between the staff of the fitness facility. Thus, the employees of the business entity along with the management of the facility will work with each other for the achievement of the business objectives.

The capitals that are generally utilized for the purpose of establishing a potential business model represent the repository of the values that are run down over time in regards to the manufacture of the goods and services in a business entity. It must be noted here that the applicability of the capitals and their affordability and quality has the capacity to affect the long term viability of the business model of an organization. This potentially reflects the ability of an organization for creating value over time (Chambers 2014). 

Advantages of utilizing the various types of capitals for the purpose of developing a business model

The advantages or benefits that can be perceived by a particular business entity for the purpose of developing a business model are as follows:

• The different types of capitals that are utilized serve as a benchmark for ensuring the fact that the organizations make optimum use of the different forms of capital that contribute directly to the productivity of the firm (Field 2016).
• Moreover, the utilization of the different types of forms of capital make sure that the organization puts enough focus on the aspect of economic value creation for the firm (Field 2016).
• It should also be noted that each of the types of capital that have been mentioned in this particular study are interrelated to each other and that enhancing or influencing one of the capitals will lead to the enhancement of another (Field 2016).

Therefore, it can be further deduced from the above discussions that the utilization of the different forms of capital is an essential process of business. The financial, physical, human and social forms of capital form a fundamental part of a business model and leads to the increase in the productivity both in terms of quality and quantity. 

Conclusion

There are various forms of capital that have to be mandatorily utilized for the setting up of business. A business model, as stated in the earlier part of this study refers to the particular plan that is constructed for the purpose of establishing a business. A business model is used to determine the different aspects of business that require attention like the physical assets required for the proper setting up of business, the human capital required and other related particulars. One of the most important factors of a business model is the capital structure that has to be built in such a way that it adds economic value to business. Therefore, the utilization of the different forms of capital are important for the establishment of a business model. 

References

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