Unit 1
Introduction to Business
Concept of Business
Human
beings are continuously engaged in some activity or other in order to satisfy
their unlimited wants. Every day we come across the word ‘business’ or
‘businessman’ directly or indirectly. Business has become essential part of
modern world. However, Business is an economic activity, which is related with
continuous and regular production and distribution of goods and services for
satisfying human wants.
All
of us need food, clothing and shelter. These needs are the basic human needs.
We also have many other household needs that are to be satisfied in our daily
lives. We meet these requirements from the shopkeeper. The shopkeeper gets from
wholesaler. The wholesaler gets from manufacturers. The shopkeeper, the
wholesaler, the manufacturer are doing business and therefore they are called
as Businessman.
Lewis
Henry defines business as, “Human activity directed towards producing or
acquiring wealth through buying and selling of goods.”
In
short, all those economic activities which are concerned with earning profit
and creating wealth through the production and exchange of goods and services
is called business.
Characteristics
of Business
1. Human activities:
Business cannot be performed without human efforts. The main aim
of business is to produce goods and services to fulfill the requirement of
human being internally associated in the production or the consumers.
2. Economic activities:
It is concerned with earning profits and generating wealth, which
are measured in terms of money. Economic activities include production of goods
and services, distribution of goods and services and the benefits generated
from them.
3. Production of goods and services:
The main feature of business is to produce goods and services.
Business is concerned with the production of goods and services to the society.
In this process we get goods from shopkeeper, shopkeeper gets from wholesaler.
The wholesaler gets from manufacturers. The shopkeeper, the wholesaler, the manufacturer
are doing business to earn profit.
4. Risk and uncertainty:
There is no business if there is no risk but accidents never
knock the door. In future anything may happen. So risk is a possibility that
losses may occur. Introduction of new product, change in government policies,
change in customer taste and preference etc are the risks
5. Profit motive:
Business has the main aim to earn profit. To get maximum profit
revenue of business should be maximized. Profit generation is vital for
business survival and expansion. However, profit should be earned through legal
and fair means and in ethical manner. Profit is the reward for the investors.
6. Continuous process:
Continuous process means to provide goods and services by the
business to the customers continuously and regularly. In business, the
exchange of goods and services is a regular feature. A businessman regularly
deals in a number of transactions and not just one or two transactions.
7. Satisfaction of customers:
The aim of business is to satisfy human demands by producing
quality of goods and also to supply right product in right time at right place
to meet the right needs. Quality goods should be provided at reasonable price.
8. Finance:
Finance is known as “life blood” of business. Business needs
investment of capital and to run smoothly. For regular and continuous business
finance is needed, finance includes purchase of raw materials, payment of
wages, assets of business and so in.
9. Organizing:
It means integration of all activities. Co-ordination is very
important for organizing. Allocation of limited resource, assigning job,
authority and responsibility also comes under organizing.
Component
of Business
Scope of
business
Business covers wide area and all economic activities. It also includes
all types of industry and commerce. Industries are related to the activities of
production of goods and services and commerce is related to distribution of
goods and services from producers (industries) and customers.
Types of industries
1. Genetic industries:
Genetic industries are also called heredity industries that
involve in production of goods from plants and animals to earn profit. Those
industries which produce medicines from herbs, perfume from flowers, milk and
meat form animals are called genetic industries
2. Extraction industries:
Industries that are involved in extracting the resources from
the sources of nature are called extraction industries. It supplies the raw
material to other industries. These types of industries are generally based in
mining, fishing etc.
3. Construction industries:
Those types of industries which are related to construction of
different infrastructures are called construction industries. They basically
construct road, bridges, houses and so on . It helps in development of country
4. Manufacturing industry:
It is related to produce finished goods. It processes raw
materials into finished goods. There are mainly 4 types of manufacturing
industry they are :
A. Analytical industry:
It is a industry which produces goods by analyzing raw materials
in scientific way. In this industry various goods ate purchased by single
materisl. For example dairy product (milk, ghee, butter, ice cream from milk)
B. Processing industry:
The industry which is involved for production of goods and
services by using different steps or stage is called processing industry. For
example for processing cotton into thread the processes of spinning, weaving,
dying, bleaching is used.
C. Synthetic industry:
The industry which is involved for using various raw materials
to produce a single good is called synthetic industry. For example to produce
cement limestone, red soil, chemicals etc are used.
D. Assembling industry:
The industry which is involved for production of goods by combining
different parts which are already manufactures by different industries is
called assembling industry. For example TV, computer, mobile, watch
manufacturing industries.
Commerce:
It is related with buying, selling and exchanging of goods and
services. It is related to economic activities to earn profit. The role of
bridge between manufacturer and customer is played by commerce
Types of commerce:
Trade:
Trade is related to buying and selling goods and services for
earning profit. It supplies quality goods with reasonable price. Those
activities which are related to buying, selling and distributing goods in
market is known as trade
Types of trade
1. Home trade:
Home trade means national, domestic or internal trade i.e.
Buying and selling within a nation. In home trade both buyer and seller are
from the same nation. In home trade task is simple than foreign trade. It is
classified into two types they are.
A. Wholesale trade:
When trader buy goods in bulk amount and resell to retail in
small volume is called whole sale trade. In this trade goods are bought from
manufacturer and are sold to retail. It acts as a middleman between
manufacturer and retailer. It deals with special product
B. Retail trade:
When trader buy goods in bulk amount and resell to customer in
small volume is called retail trade. In this trade goods are bought from
wholesaler and are sold to customer. It acts as a middleman between wholesaler
and customer. It deals with various types of product.
2. Foreign trade:
Foreign trade means international, global, external trade i.e.
Buying and selling is between two or more nation. In foreign trade buyer and
seller are from different nation. In foreign trade task is difficult than home
trade. It is classified into three types they are.
A. Import:
A good or service brought into one country from another is
called import. Along with exports, imports form the backbone of international
trade. The higher the value of imports entering a country, compared to the
value of exports, the more negative that country’s balance of trade becomes.
Buying goods from India, china is called import.
B. Export:
A good or service sold to another country from one is called
export. Along with imports, exports form the backbone of international trade.
The higher the value of exports exiting a country, compared to the value of
imports, the more positive that country’s balance of trade becomes. Exporting
herbs, garments to Germany, India is the example of export
C. Entry port:
The trade in which a country purchases the goods from one
country and sells it to another country is called entry port trade. The goods
bought from a country is not used for self benefit but is rather exported to
another country. For example India buys herbs from Nepal and sells it to china.
Auxiliaries of trade:
It supports or assists the trade activities. It helps to run
business smoothly. It helps for transfer goods from production area to
consumption area. It creates time and place utility.
1. Transportation:
It transfers goods from one place to another. There are many
means of transportation that can assist business and trade activities. They are
air travel. Bus route, sea route, rope route etc. It delivers right product and
right time in right place. It creates time utility
2. Warehouse:
It is one of the auxiliary of trade. It helps to protect and
store goods until customers uses them. It provides the goods hen demand is
created. It also helps to provide unseasonal goods.
3. Insurance:
It acts as nutrition to trading activities. It helps to reduce risk
and uncertainties. It is a contract between organization and their future. The
system that takes the responsibility of compensation of certain risk is called
insurance system.
4. Banking:
Banks are the financial institution that supports for traders. It
provides loan, investment, credits facilities to the trading companies. It
helps for expansion and flexibility of trade.
5. Advertising:
It is a supporter to trade. It provides information to customer
about goods and services. Its aim is for creation of demand. It also acts as a
promotional tool.
Functions of business
1.
Organizing function:
It helps to organize all the activities. It organizes men,
Machine, materials, money and methods. It performs different activities and all
activities are organized properly
2.
Financing function:
It is related to money. It helps in maximum utilization of
resources. Bank is a financial company. All the activities related to money are
defined in this function.
3.
Production function:
The main function of business is to produce goods and
commodities and transfer them to right place at right time. It helps to
complete needs of human beings.
4.
Distributing function:
It helps in the transfer of goods/services from producers to
customers. It transfers right product at right time in right place.
5.
Personnel function:
It deals with human activities. It is related o the utilization
of people to perform different activities. It is also called staffing function.
It helps in management of resources.
6.
Managing function:
It helps in management of business. It includes planning,
organizing, controlling, coordinating, decision making and so on. It helps
making activities of people effective.
7.
Research and development function:
It helps in improvement of product. It works under the taste, desire
and preference of the customers. In it various marketing, strategies, skills,
knowledge and experts are used. Research and development is the main way to
achieve profit with customer satisfaction
Objectives of business
1.
Economic objectives
The economic objectives are related to earning profit through
customer satisfaction. It is to provide quality goods with reasonable price.
Economic objectives can be defined in terms of money too. Some of the major
economic objectives are:
1.
Earning profit:
The main economic function of business is earning profit. It
includes supply of quality goods and services to gain profit. T is done for the
survival of business and it is also reward for the investors. It is required
for expansion if business
2.
Production of commodities:
Production of goods and services are to be done according to the
customer demand and desired. Supply of commodities is also to be done according
to needs of customer.
3.
Creation of market:
Business can provide service only if demand of customers are fulfilled.
When production is made according to the requirements of the customers then
there is creation of new customer which creates new market. Creation of market
helps in enlargement of production and promotes business expansion too
4.
Technical improvement:
Use of modern technology is the base for successful operation o
business. When modern tools, techniques and technologies are used then there is
production of quality goods. Changes are the basic factor for flexibility and
changes in terms of working methods is the main objective of business
5.
Innovation:
New ideas, methods, men, tactics and technology create the ways
of better production and services. It helps in survival of business too.
2. Social objectives
Business is operated in society and use resource available in
society. This is known social objectives. It fulfills social expectation. All
business operations are established in society, grow in society and fulfill all
its expectation in society. Some of the major social objectives of business
are:
1.
Supply quality food:
It provides better quality of goods and services by charging
reasonable price. It provides right product at right time in right place. It
involve in fulfillment of social objective.
2.
Utilizing resources:
A business house can’t continue its operation without utilizing
the resources available in the society. But there must be proper utilization of
resources and no any destruction in name of utilization. Maintenance of
environment is must.
3.
Providing employment:
There are many people in the society. Human needs are the basic
need for operation of business. Many personnel are require dot fulfill the job
of a business. Therefore a business house without nepotism and favoritism must
employ the human from the society and provide employment opportunities to the
optimum level.
4.
Avoiding social stigma:
Big industries are the cause of environmental pollution.
Constant noise, smoke from the industries produces noise and air pollution.
This is the social objective of the business to control pollution and wastages.
There must be establishment of industries far from residential areas.
3.
Human objectives
Human objectives are performed by different human activities. It
is related with satisfaction of employees, investors and other personnel. Some
of the major human objectives are
1.
Satisfaction of employees:
The success of business depends on employees’ performance. It
provides better working environment to satisfy the employees. It provides
salary, bonus, provident funds and job security. It also provides financial and
non financial supports.
2.
Payment to creditors:
Creditors means supplier who supply goods and services. It is
the objective to make duly payment. Satisfaction of creditors helps in further
expansion of business.
3.
Satisfaction of customers:
Production of goods and services are to be done according to the
customer demand and desired. Supply of commodities is also to be done according
to needs of customer. It provides better quality of goods and services by
charging reasonable price
4.
Satisfaction of shareholder:
It returns to investors the amount they have invested in
business in the name of profit earn. They should be given reasonable returns of
their investments. The objectives are to provide reasonable rate of return to
shareholder. It also provides the information about plan of business.
Importance
of business:
1. Economic development:
Business is important for economic development. Concept of true
business is used in industries and commerce. Industries use men, money,
materials, methods and machines and help to create employment. Commerce is the
concept of exchange goods/services at national and international levels. It
helps to earn foreign currency by export business too. Therefore, business
helps in economic development
2. Utilizing natural resources
Every country has diverse natural resources. Business must be
directed towards proper and efficient utilization of resources. Business
utilizes the resources like water, minerals, ores and so to achieve
its own goals. But resources must be utilized without exploitation.
3. Creation of utility:
Business creates place and time utility. It helps to satisfy the
needs of human beings. Financial utility is to be maximized.
4. Employment:
Business helps to provide job to people. It provides various
types of managerial or technical job. Many types of business houses like
hotels, industries, and transport companies are established for business which
helps to solve the unemployment problem.
5. Revenue generation:
Business is the source of revenue generation. It pays taxes,
royalties, fees, custom duties, and other things which help to generate
government revenue.
6. Earning foreign currency:
It is the source of earning foreign currency. Business can earn
foreign currency through exporting the goods and services.
7. Development of country:
Development of industries helps to utilize natural resources,
create time and place utility, provide employment opportunities, help in
revenue generation and earning foreign currency. All these things help in the
development of the economy of the country and the economic development is the
major factor that can develop the nation to a wider sense.
8. Provide investment opportunities:
Establishment of new industries and commercial fields are the major
source of investment. Further the profit owned by the investors after the
successful operation of business helps to ensure larger amount of saving which
can be invested in the newer future for pension of current business or
establishment of newer business. Thus business helps in providing investment
opportunities.
9. International relations:
Business is the medium for development of national and
international relationship. It helps to maintain harmonious relation among the
various countries. There can be mutual understanding and better diplomatic
relationship among the countries. Import and export is the major base for
international relationship.
10. Self sufficiency:
It helps in achieving countries and individuals self
sufficiency. It also helps in improving the living standard of people by
reducing the dependency.
Social responsibility of business
The major responsibilities of business are:
A. Employees
I. Provides better working environment to satisfy the employees
Ii. . It provides salary, bonus, provident funds and job
security.
Iii. It also provides financial and non financial supports.
Iv. Enriches employees’ performance.
V. Provide training to develop their skills.
Vi listen and handle their complaints and issues
B. Creditors:
I. Make duly payment
Ii .satisfaction of creditors with proper relationship
Iii. Helping them to create their own market.
Iv. Entrusting the right of proper selling of goods and services
of their goods
V. Copyright and other legal rights.
C. Customers/consumers:
I. Better quality of goods and services by charging reasonable
price
Ii. Supply of commodities is also to be done according to needs
of customer
Iii. Helps to achieve needs and wants
Iv. Provide right goods at right place in right time.
V. Provide proper pre-sale and post sale information
Vi. Provide proper information about new products
D. Investors:
I. True information about earning power of business
Ii. The objectives are to provide reasonable rate of return to
shareholder.
ii. Provide the information about plan of business.
Iv. Ensure safe investment
V. Promote utilization of resources without leakage
Vi. Ensure transparency of business activities
E. Government
I. Increase in tax i.e. Increase in government
revenue
Ii. Fulfill demand of government
Iii. Non violation of rules and regulation of government.
Iv. Avoid unfair trade
V. Provide essential information to the government.
Vi. Solve national problems like natural calamities.
Vii. Avoid malpractice like black marketing, adulteration,
smuggling
F. Society
I. Good environment
Ii. Employment opportunities generation.
Iii. Socio cultural understanding
Iv. Apply anti pollution measures.
No comments:
Post a Comment