Meaning of Business
Business is an economic activity that involves the production, distribution,
and exchange of goods and services with the primary objective of earning profit
by satisfying the needs and wants of consumers.
In simple terms, business is a human activity carried out to earn wealth through
producing, buying, and selling goods and services desired by customers.
Characteristics of Business
- Creation of Utility: Business creates form, place, time, and possession utility.
- Production, Distribution, and Exchange: Goods and services are produced and made available to consumers.
- Continuous Activity: Business activities are carried out regularly, not occasionally.
- Risk and Uncertainty: Business involves uncertainty of profit and risk of loss.
- Profit Motive: Earning profit is the main objective of business.
- Consumer Satisfaction: Business aims to satisfy customer needs and wants.
- Mutual Benefit: Both producers and consumers benefit from business.
- Capital Investment: Initial and ongoing investment is required.
- Socio-Economic Activity: Business serves both economic and social purposes.
- Organization: Proper planning and organization are necessary.
Dimensions of Business
Business activities are broadly classified into three major dimensions:
A. Industry
Industry involves the production and processing of goods.
- Extractive Industry: Extraction of natural resources (e.g., mining, fishing)
- Manufacturing Industry: Conversion of raw materials into finished goods
- Analytical Industry
- Synthetic Industry
- Processing Industry
- Assembling Industry
- Construction Industry: Construction of buildings, roads, bridges, etc.
- Genetic Industry: Breeding and reproduction (e.g., agriculture, animal husbandry)
B. Commerce
Commerce deals with the distribution of goods from producers to consumers.
- Trade
- Home Trade
- Wholesale Trade
- Retail Trade
- Foreign Trade
- Import Trade
- Export Trade
- Entrepot Trade
- Service Enterprises: Banking, insurance, transport, etc.
C. Auxiliary to Industry and Trade
These activities assist industry and commerce:
- Transportation
- Warehousing
- Insurance
- Banking
- Communication
- Promotion
- Packaging
- Other Auxiliary Activities
Objectives of Business
A. Economic Objectives
- Profit earning
- Creation of customers
- Innovation
- Productivity improvement
- Increase in market share
B. Social Objectives
- Supply of desired goods and services
- Supply of quality goods at fair prices
- Creation of employment opportunities
- Timely supply of goods and services
- Maintenance of healthy social environment
- Fair dealing with suppliers and competitors
C. Human Objectives
- Cordial relations with employees
- Human resource development
- Employee participation in management
- Job satisfaction
- Satisfaction to investors
D. National Objectives
- Proper utilization of national resources
- Payment of taxes to the government
- Creation of employment
- Balanced regional development
E. Organic Objectives
- Survival of business
- Growth and expansion
- Development of goodwill and image
Functions of Business
- Organizing function
- Service function
- Production function
- Financial function
- Distribution function
- Employment function
- Research and development function
- Human resource function
- Coordination function
Business Environment
Meaning of Business Environment
Business organizations operate within society. The political, economic, social,
technological, and legal systems of society influence business activities.
These external forces together form the business environment, which directly
or indirectly affects business operations.
Components of Business Environment
A. Internal Environment
- Owners
- Board of Directors
- Organizational resources
- Organizational structure
- Organizational culture
B. External Environment
1. General Environment
- Politico-legal environment
- Economic environment
- Socio-cultural environment
- Technological environment
2. Task Environment
- Customers
- Suppliers
- Competitors
- Government
- Pressure groups
- Financial institutions
- Strategic alliances