The activities which have the capacity of earning profit called Business or Business means all the activities which are engaged in production and distribution as well as the exchange of goods for earning profit.
In other words, Business may be defined as human activities directed towards providing or acquiring wealth through buying hand selling of goods.
The definition implies that business means trade I.E buying and selling of goods which are not harmful for society and help to earn the profit.
Utilities of Business:
A) Form Utility: It producing finished products from raw materials.
B) Time Utility: It stores the goods when supply is more and makes delivery of goods when demand is high.
C) Place Utility: It makes the goods available where the demand is.
D) Possession Utility: It transferring the title of goods from the seller to the purchaser of the goods.
Characteristics of Business:
The main characteristics of Business are as follows:
1) Creation of Utilities: Utility means the capacity of a commodity or service to satisfy human wants.
These goods and services produced for businesses must have the capacity to satisfy human wants.
The utility may be created by changing the form of raw materials such as converting certain pieces of plants into the shape of chairs and tables etc.
2) Business deals in goods and services: Business involves production, purchase, sale, and transfer of goods and rendering of services are provided for a price and not free of cost.
Earning commission by investing own savings in government securities is not business, but earning a commission by investing other’s savings in government securities becomes business.
3) Regularity And continuity in dealings:
The regularity of transactions is the essence of business.
The business undertakes to manufacture, buying and selling of goods and rendering of services on a continuous and regular basis.
It always involves a series of transactions. A single transaction cannot be called a business.
4) The element of enterprise:It exists in every business. The person who recognizes the need for a product or service is known as an Entrepreneur.
Entrepreneurs are an important factor in the process of economic growth.
5) Economic Activities: Only Economic activities are included in the business. These activities are undertaken with economic motives.
Economic activities are related to the production and distribution of goods and services.
6) Profit is the main motive of business: Business must earn profit for its survival, growth and expansion, measurement of its efficiency, the undertaking of its own prestige.
A business without profit will never be able to perform its social obligations.
7) Business must grow and Expand: Business and stagnation do not go together. No business can afford to be static. Growth and expansion must be routine processes with business.
Businesses must grow and expand to survive, to economize, to modernize and to be ahead of the competitors.
Importance of Business:
There are two types of Business objectives:
- Economic objectives
- Non-economic objectives
1) Economic Objectives:
A) Earning profit: Business activities are undertaken primarily to earn a profit, which is the excess income over expenses.
B) Creation of Demand: Customers become the basis of sales and profits for business enterprises. To create customers, a businessman must undertake marketing research and determine the needs, preferences and buying capacity of customers and produce goods and services accordingly.
C) Optimum use of Resources: Resources are always limited, so it is essential to utilize the available resources in the best possible way.
D) Innovation: It means to explore and discover ways and means of making existing products mad services more useful and produce new and sophisticated products and services.
2) Non-Economic Objectives:
A) Social Objectives: Business these days is recognized as a social venture. It has now been accepted as a social and economic organ of society.
Business is formed within the society, with the resources of society and satisfy the needs of society.
B) Human Objectives: Human objectives demand careful consideration and we’ll bring off the employees, consumers, suppliers and another interested group.
This objective is an attempt on the part of business firms to maintain a proper balance in the conflicting interest of the various concerning parties.
C) Organic objective: A business is run by the people and for the people. Generally business has the following objectives:
- Earn recognition and prestige
D) National Objectives: It requires the business people to take up and develop such lines of business that are needed by the country at a particular time and in a particular place.
Classification of Business Activities:
There are two types of Business:
Business = Industry+Commerce
1) Industry: It refers to economic activities that are primarily involved with the conversation of resources into useful products.
The term industry is applied for those activities in which mechanical appliances and technical skills are involved.
In a broad sense, the term industry also means a group of firms producing similar or related gold.
2) Commerce: Commerce means the sum total of those processes which are engaged in the removal of the hindrances.
It involves two types of activities (1) Purchase and sale of goods and (2) Facilitate trade.
Definition of Business:
1) An enterprise which engaged in the production and distribution of goods for sale in a market or the rendering of services for a price.
As per the definition, the activity of producing goods and providing service to others for a price by any individual or institution is business.
2) Business is a form of activity pursued primarily with the object of earning profit for the benefits of those on whose behalf the is conduct.
This definition limits the scope of business by stating the sole purpose of business is to earn profit for the owners of the institution.
3) Business creates and delivers value satisfaction at a profit.
Here, it implies that business means the creation and distribution of various utilities for customer’s satisfaction at a certain price to earning the profit.
4) The business may be defined as human activities directed towards providing or acquiring wealth through buying and selling goods.
This implies that business means trade I.E buying and selling of goods which are not harmful for society and help to earn a profit.
In marketing, the word ‘goods’ always implies goods as well as service.
5) Business is an institution organized and operated to provide goods and services to society under the incentive or private gain.
It implies that business continues for providing goods and services in a systematic way by any institution or business house with a motive of earning profit.