A business is an activity or entity, normally engaged in the provision of products and or services, for commercial gain, extending to non-Commercial organizations that may or may not be profit-oriented.
This is irrespective of the size and autonomy. With this definition, non-governmental organizations, private, public service sector like schools and hospitals are regarded as ‘businesses‟.
Table of Contents
- 1 Definition of Business
- 2 Features of Business
- 3 Classification of Business Activities
- 4 Classification / Types Of Industries
- 5 Commerce
Meanwhile,a plan is a statement of calculated intention to organize effort and resource toachieve an outcome. This may or may not be in written form, but essentiallycomprising explanations, justifications and relevant numerical and financial statistical data.
Definition of Business
A business as, “human activity directed towards producing or acquiring wealth through buying and selling of goods. – Lewis Henry
Business as “any enterprise which makes, distributes or provides any article or service which the other members of the community need and are able and willing to pay for. – Urwick and Hunt
Business is that it is “an enterprise engaged in the production and distribution of goods for sale in a market or rendering services for a price. – Prof. Owen’s
Features of Business
To understand how a business activity is different from other activities in society, the nature of a business or its fundamental characteristics must be explained in terms of its distinguishing characteristics.
A business has several important features that are as follows:
- Economic Activity
- Creation Of Utilities
- Profit Motive
- Risk And Uncertainties
- Dealings In Goods And Services
- Continuous Process
- Government Control
A Business is primarily an economic activity because it involves production and distribution of goods and services for earning money. However, a business is also a social institution because it helps to improve the living standards of people through effective use of scarce resources of the society.
Creation Of Utilities
Business makes goods more useful to satisfy human wants. It adds time, place, form and possession utilities to various types of goods. Business enables people to satisfy their wants more effectively and economically. It carries goods from place of surplus to the place of scarcity (place utility). It makes goods available for use in future through storage (time utility)
Profit is an indicator of success and failure of business. It is the difference between income and expenses of the business. The primary goal of a business is usually to obtain the highest possible level of profit through the production and sale of goods and services
Risk And Uncertainties
Risk is defined as the effect of uncertainty arising on the objectives of the business. Risk is associated with every business. Business is exposed to two types of risk, Insurable and Non-insurable. Insurable risk is predictable. Changes in customers’ tastes and fashions, demand, competition, Government policies, etc. create risk.
Dealings In Goods And Services
Every business enterprise produces and/or buys goods and services for selling them to others. Goods may be consumer goods or producer goods. Consumer goods are meant for direct use by the ultimate consumers, such as bread, tea, shoes etc.
Producer goods are used for the production of consumer or capital goods such as raw materials and machinery. Services, namely, transport, warehousing, banking and insurance, may be considered as intangible and invisible goods.
Business is not a single time activity. It is a continuous process of production and distribution of goods and services. A single transaction of trade cannot be termed as a business.
Business organisations are subject to government control. They have to follow certain rules and regulations enacted by the government. The government ensures that the business is conducted for social good by keeping effective supervision and control by enacting and amending laws and rules from time to time.
Classification of Business Activities
Thus business activities may be broadly classified into two categories: (i) Industry, and (ii) Commerce. Industry is concerned with the production of goods and materials, while commerce is mainly concerned with their distribution.
This refers to economic activities, which are connected with conversion of resources into useful goods. Generally, the term industry is used for activities in which mechanical appliances and technical skills are involved. These include activities relating to producing or processing of goods and breeding and raising of livestock.
Goods produced by industries may be consumer goods or producer goods. Consumer goods are meant for direct consumption by the consumer, such as shoes, cloth, toothpaste and radio. Producer goods or capital goods are used in the production of other goods. Steel, machinery and factory buildings are some examples of producer goods.
Characteristics of Industry
The main characteristics of industry are;
- Production is done by the application of human or mechanical power.
- It creates form utility to natural or partly processed goods.
- It is concerned with the production of both producer and consumer goods.
- Industrial activities are regulated by different laws.
- It involves continuous operation.
Classification / Types Of Industries
Thus, the activities of human beings engaged in extraction, production, processing, construction and fabrication of goods come under industry. In another sense, industry means a group of factories usually specializing in a particular product line.
Industries may be classified in to primary industries and secondary industries.
Primary industries include all those activities which are connected with extraction, producing and processing of natural resources. It is a nature-oriented industry, which requires very little human effort. e.g. Agriculture, farming, forestry, fishing, horticulture, etc.
These industries may be further sub-divided into two types:
(a) Extractive : This is related to the re-producing and multiplying of certain species of animals and plants with the objective of earning profits from their sale. This includes nurseries, cattle breeding, fish hatcheries, poultry farms.
(b) Genetic : This industry extracts or obtains products from natural sources. Extractive industries supply some basic raw materials that are mostly products of a geographical or natural environment.
Products of these industries are usually transformed into many other useful goods by manufacturing industries .e.g. mining industry, coal mineral, oil industry, iron ore, extraction of timber and rubber from forests, etc.
The industrial sector of an economy that is dominated by the manufacture of finished products. Unlike a primary industry, which collects and produces raw materials for manufacture, a secondary industry makes products that are more likely to be consumed by individuals.
Secondary industries may also be of two types manufacturing, and construction.
Manufacturing Industry : This industry is engaged in producing goods through processing of raw materials and thus creating form utilities.
They bring out diverse finished products that we consume or use, through the conversion of raw materials or partly finished materials in their manufacturing operations.
Construction industry: This industry entails the construction of buildings, bridges, roads, dams, canals, etc. It is different from all other types of industries, because goods of other industries can be produced at one place and sold at another place. However, goods produced and sold by the constructive industry are erected at one place.
Although industries are concerned with the production of goods, commerce is concerned with making the same available to those who need them. Commerce looks after the distribution aspect of a business. Thus, there is a need for commerce, which is concerned with the smooth buying and selling of goods and services.
According to James Stephenson, “Commerce is an organized system for the exchange of goods between the members of the industrial world.”
Commerce is that part of business which is concerned with the exchange of goods and services and includes all those activities which directly or indirectly facilitate that exchange. Mainly, the term commerce includes ‘trade’ and ‘auxiliaries to trade’.