BUSINESS AND ITS NATURE
What is Business?
In daily life, we purchase many products from the
markets. by different businesses operating in the markets. A market is a place
where the seller of a particular product meet and the buyer purchases the product from paying a price. These businesses work in markets to sell different goods
and the consumers by estimating their economic needs and wants for different
prod economic needs is a desire for which a good or service is required. The
different needs of customers include the need for food, clothes, residence, travel,
entertainment, etc. A business exists to fulfill these economic needs of the
customers and earn profits in doing so. We can define business as any legal
activity done for purpose of earning profit by selling different goods or
providing services to a person. The above definition of business has three
main components:
- ·
Legal Activity
- ·
Profit
- ·
Products.
Legal Activity
A business needs to be in the legal form in a country which
requires registering it with the relevant government department. The registration
of business necessary to make its activities legal. For example, the selling of a car by a company is a business activity while the selling of a car by a smuggler
is not considered to be a business activity. Generally, a government decides
which activities are allowed to be conducted in a business and which are not,
dependent on their social and economic utility.
Profit:
Profit is the main objective of a business. The profit is
defined as an amount which a person receives from the consumers after deducting
the expenses. In a simple equation form it can be shown as:
Profit= Sales- Expenses
The profit is calculated by adding the all amounts
received from the consumers and then deducting from it the all expenses
incurred on the production and selling of that product. To increase the profit
a business, a person is required to increase its sales and reduce its expenses.
Products:
A business can be started in the form of selling goods or
providing services to the consumers. For example, a company may start producing
clothes to sell it to the consumers. Another company may serve its customers by
opening a hotel and serving different foods. Every business exists to meet the
economic needs and wants of the customers.
A business is started to supply goods or to deliver
services to the public at reasonable price. The target of all businesses is to
sell more products in the markets by meeting the demands of customers. The
customers of a product include all people who buy the products of that company.
The business of a company involves many steps to produce and deliver the
product to the customer.
Features/Characteristics of Business
Following are some important characteristics of business
Earning Motive
The basic purpose and function of the business is to earn
profit. The profit is the return to the owners of a business who have invested
their capital in the business. A business exists to maximize its profit by
selling the products to the consumers.
Legal Activities
All businesses need to register with the government,
otherwise their activities are regarded as illegal. Further, business that does
not include illegal activities such as smuggling, bribery, and robbery or the
like illegal activities is not covered under the business.
Satisfaction of Human Needs and Wants
The businesses exist in markets to fulfill the different
economic needs and wants of the customers. These wants are served through the
provision of many products in the markets. The good quality of products helps a
business to grow and get more customers.
Benefits for Society
The modern business concept is to serve society in terms
of providing goods and services, providing employment opportunities &
saving time of customers by providing high quality of goods.
Innovation
This means to include new and advanced features in the
production of goods and services. For example, adding a camera in a cellular
phone, including memory card facility and video features etc are categorized as
innovation in the business processes. A business can earn more profit by differentiation
this way, the sales volume is increased which results in higher profits
Employment Opportunities
Business provides employment to oneself and society. In
this way, higher living standards and social progress are achieved. The people
are engaged in different professions through the conduct of business. It
impacts positively upon national income growth, economic development level.
Types of Business
There are many forms of business which exist all over the
world. these forms of business are described below:
- Manufacturing Business: Manufacturing
refers to those business businesses and process it to make a finished include
cement factories, car producing manufacturing companies etc. Manufacturing the
following categories:
a)
Extractive Units is concerned with supplying
commodities, which are extracted from earth, like as oil and metals.
b)
) Genetic Units refers
to the industry under which plants and animals are grown for the purpose of sale to the consumer such as fishing, poultry and fishing farms.
c)
Conversion Units refers to the raw material
through defined processes into the finished goods. At first step the milk is
collected in a dairy form from the cows. At second step the milk is boiled in a
factory and packed. At third step, the milk is distributed through trucks to
the retailers and the restaurants. At fourth step, the consumers buy the milk
from the retailers and use it in their homes or served to the consumers.
- Services Business:
It refers to all those types of businesses which provides
various useful service to the people. The service sector businesses include law
firms, doctors, engineers, advertising agencies, television, radio channels.
Services can be divided into three following categories
a)
Recreational Services refers to the
services provided by a business for the entertainment purpose. These include
movies, theater, tourism, telecom etc.
b)
Personal Services includes
the services provided by business by meeting various individual’s needs. These
include restaurants, retailing, doctor’s clinic ,etc.
c)
Professional Services refers
to different services for supporting other business activities. These include
lawyers, chartered accountants, tax practitioners etc.
- Trading Business:
It refers to the exchange or buying and selling of
commodities; especially the exchange of merchandises on a large scale, between
different places or commodities. Extended trade or traffic includes all those
activities which help directly or indirectly in the distribution of goods to
the end user. Trading activities can be classified into the following categories.
a)
Domestic trade refers to those businesses
which are buying and selling of goods within the boundaries of a country.
b)
Foreign trade refers to those businesses
which are and selling of goods outside the boundaries of a country and is
generally called exporting.
c)
Retail trade refers to those businesses
involved in buying or selling of goods to the general consumers tor the purpose
of businesses. Carrying out such activities are called retailers
d)
Wholesale trade refers to the buying and
selling of goods in bulk quantities to the retailers.
Hybrid Business:
It refers to a form of business in which any of the above
mentioned three types of activities are combined to satisfy the customers. For example,
a hotel may be engaged in the processing of food and then serving it to the consumers
employing the both features of services and manufacturing. The different hybrid
brands exist in Pakistan i.e. Gul Ahmad brand manufactures their clothes then
sells through their own IDEAS stores.
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