Attempt the following.
Define business. Explain its features.
Business is part of economic activities. Business is done to earn a profit. It is done by an individual or a group of individuals. Businesses can be defined in many ways by thinkers. Some of them are given below:
Prof. Haney: “Business activities are all those activities which are directed towards the production and processing of wealth”.
Prof. Pride, Huges and Kapoor: “The organised efforts of individuals to produce and sell for a profit, the goods and services that satisfy society’s needs”.
The term business also refers to the organised efforts and activities of individuals to produce and sell goods and services for profit.
The following are the features of business:
- Continuity in Dealings: Continuity is most important in the case of any business. Business requires regularity. Business activity should be carried on for a longer time. A transaction carried on only for one time or a few times cannot be called a business activity, e.g. Sale of own old motor car cannot be considered as a business activity.
- Uncertain Returns: The returns in any business are not fixed. They are uncertain and fluctuating. The profit of the business is not fixed or guaranteed.
- Risk Element: Business is exposed to many risks. These risks arise out of some unforeseen circumstances or wrong decisions or misjudgments of the businessman. A businessman cannot avoid the risks but he can minimize the risks by taking proper steps. Some risks can be transferred to an insurance company.
- Satisfaction: Customer is an integral part of any business activity. Without a customer, there cannot be buying or selling. Businesses need customers to fulfill their monetary objective and therefore customer satisfaction is the most important part of any business activity. Modern thinking on business gives topmost priority to customer satisfaction. If the customers are satisfied, there will be more sales and profit for the business.
- Two Parties: Business includes production and distribution. Every business transaction involves an exchange. For carrying out any exchange two parties are required. These two parties are the seller and the buyer. There is an oral or written agreement between the buyer and the seller to buy or sell the goods or services.
- Economic Activity: Business is an economic activity. The intention of carrying out any business is to earn money. Business is not conducted for satisfying the sentimental needs of a person. Business activity is purely monetary.
- Profit Motive: Business is basically conducted to earn a profit. Every businessman tries to get maximum profit out of the business. Profit is required for the businessman to earn the livelihood and also for the survival of the business. It is also required for the expansion of the business. Thus profit plays a vital role in business.
- Production of Goods and Services: Business has two aspects. One is the production of goods and services and distribution of them. Goods are produced by industries. Providing services also form an important part of business activities.
- Exchange of Goods and Services: Goods and services are exchanged for money or money’s worth. It is a business activity as there is a seller and a buyer and they exchange goods or services for the value. In modern days almost all the transactions are carried out with money as a medium of exchange. In the case of very few transactions, goods are exchanged for goods.
- Dealings in Goods and Services: In the case of business, goods or services are bought and sold. There cannot be a business without the exchange of goods or services. Goods can be consumer goods or industrial goods. Services are of different types like banking, insurance, etc. Services are also exchanged for a value