"Business is an organization engaged in producing goods and services to make a profit"
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| Introduction to Business |
Meaning of Business: In the literary sense, the word 'business' means 'the state of being busy'. Technically, the term 'business' means all those activities which are related to the production and distribution of goods and services to make a profit. For example, the farmer who cultivates land, the fisherman who catches fish, the manufacturer who converts raw material into value add products any more.
IMPORTANCE OF BUSINESS
Since the Industrial Revolution, there is a tremendous growth in the productivity of business. There is an all round improvement in the activities directed towards production and distribution of goods and services. The man of today is well off and enjoys a much higher standard of living due to the business efficiency in the various sectors of the economy. We now briefly discuss the importance of activities undertaken by business for profit and service objectives.
Production of useful goods: The raw material producing industries such as agriculture, mining, forestry, etc.., provide raw material for the manufacturers of consumer and producer goods . For instance, agriculture provides food such as grains, vegetables. Mines provide metals which are used in factories and firls.. Coal another product of mine is a very useful source of power . Factory, provide us timer timber which is needed in the construction of building, furnitures, paper etc.
Manufacturing uses the raw materials of agriculture, mining, forestry, fishing, etc., and makes a variety of consumer and capital goods which are needed by the consumers. Without manufacturing the business will stand idle. There would be no auto-mobiles no roads, no aeroplanes, no electric power, etc. To sum up, the industrial occupations which are concerned with the fro growing, extracting and manufacturing of material goods are cornerstone of business.
Distribution aspect of business: The distribution aspect of business is very complex. The goods which are produced should reach the consumers at the right place, right time and at right price also. Business due to self-interest of earning profits, provides goods to the people both within and outside the country. The transport industries facilitate the movement of goods from one place to another where they are wanted. Finance, banking and insurance greatly contribute commerce and industry would not have developed on an extensive scale.
Business supplies services: Services occupy an important place in business life. Though the service organization do not contribute directly in the production of goods but they facilitate in the production and distribution of goods to the customers. The major services which are growing in importance with each passing year are banking and finance, insurance, medical and health, legal, engineering and other professionals, hotels, domestic servants, education, auto-mobiles repairs, etc., All the services which perform simple or difficult tasks for earning money are regarded an important part of business.
Business has helped in raising standard of living: Business has helped people to earn a living either as owners of business or as employees. The mass production of standard goods, specialization, automation has increased the incomes of those who are directly engaged in business. Higher incomes have led to the increase in the standard of living of the people. Business also pays a large share of taxes to a government.
Reduction in employment: The more the production the higher will be the employment rate. Higher production also results in lowering overhead costs that brings the prices down. Low prices increase demand for the product. Higher demand and consumption pushes up the production resulting in greater number of workers.
Criticism of business: There is no doubt that modern business has developed a material standard of living but it has also created discontentment with the economic and social system. The main criticisms directed towards business are as under:
Deals in goods and services: Every business whether it is carried on a small or a large scale deals in goods and services. The goods may be consumer goods like cloth, shoes, pens, etc., or producer goods like machinery or it may take the shape of services like the supply of electricity, water, gas, transportation of goods etc.
Economics Activities: The activities which are involved in the production or distribution of goods and services for economic motive are a part of business. Any activity undertaken for personal consumption or are exchanged free, fall outside the scope of business. For instance, if a shoemaker makes a pair of shoes and wears himself, it will not be a business. However, if he makes shoes and sells them to the customers for money, it is then his business. So business covers only economic activities.
Series of Deals: When a film takes up manufacturing or distribution of goods or providing of services for profit motive, there should be series of deals in it. it should be performed over and over again. A student, for instance, selling his books to the shopkeeper will not be a doing a business. However, if he purchases the books and sells them in his spare time regularly to seek profit, it does constitute a business.
Profit: The primary aim of business is to earn profit. If an enterprise is to exist for a longer period, it must yield profit. Profit thus is the driving force of every business activity.
Element of Risk and Uncertainty: There is an element of risk and uncertainty involved in every business. If an organization is not able to foresee or control or minimize the risk involved in business, it suffers losses. The main risks involved in business are:
Creation of utilities: An important characteristic in business is the creation of utilities. The businessmen transports goods from a place where it is less needed to a place where it is more required. He also converts raw material into semi finished and finished goods in order to make them useful for the consumers. The businessmen, consumers and the society all benefit by the creation of place, form and time utilities in goods. In short, business combines, human, material, technology and financial resources for profit.
Distribution aspect of business: The distribution aspect of business is very complex. The goods which are produced should reach the consumers at the right place, right time and at right price also. Business due to self-interest of earning profits, provides goods to the people both within and outside the country. The transport industries facilitate the movement of goods from one place to another where they are wanted. Finance, banking and insurance greatly contribute commerce and industry would not have developed on an extensive scale.
Business supplies services: Services occupy an important place in business life. Though the service organization do not contribute directly in the production of goods but they facilitate in the production and distribution of goods to the customers. The major services which are growing in importance with each passing year are banking and finance, insurance, medical and health, legal, engineering and other professionals, hotels, domestic servants, education, auto-mobiles repairs, etc., All the services which perform simple or difficult tasks for earning money are regarded an important part of business.
Business has helped in raising standard of living: Business has helped people to earn a living either as owners of business or as employees. The mass production of standard goods, specialization, automation has increased the incomes of those who are directly engaged in business. Higher incomes have led to the increase in the standard of living of the people. Business also pays a large share of taxes to a government.
Reduction in employment: The more the production the higher will be the employment rate. Higher production also results in lowering overhead costs that brings the prices down. Low prices increase demand for the product. Higher demand and consumption pushes up the production resulting in greater number of workers.
Criticism of business: There is no doubt that modern business has developed a material standard of living but it has also created discontentment with the economic and social system. The main criticisms directed towards business are as under:
- Business of today has become too much profit oriented. The employees are usually exploited by the owners.
- Business is guilty of polluting air and water which directly affects the health of the people.
- Human values and worker comforts are ignored by business.
- Business, due to self-interest, often ignores the welfare of the consumers and supplies adulterated goods.
- The communication media such as television, radio, magazines, newspapers, etc.., attempt to sell their goods or services by appealing to base human emotions. People due to the influence of communication media are losing sight of spiritual values. They are becoming too much materialistic minded and have lost peace of mind.
Characteristics of Business
The activities termed 'business' has the following characteristics that are also part of INTRODUCTION TO BUSINESS.
Deals in goods and services: Every business whether it is carried on a small or a large scale deals in goods and services. The goods may be consumer goods like cloth, shoes, pens, etc., or producer goods like machinery or it may take the shape of services like the supply of electricity, water, gas, transportation of goods etc.
Economics Activities: The activities which are involved in the production or distribution of goods and services for economic motive are a part of business. Any activity undertaken for personal consumption or are exchanged free, fall outside the scope of business. For instance, if a shoemaker makes a pair of shoes and wears himself, it will not be a business. However, if he makes shoes and sells them to the customers for money, it is then his business. So business covers only economic activities.
Series of Deals: When a film takes up manufacturing or distribution of goods or providing of services for profit motive, there should be series of deals in it. it should be performed over and over again. A student, for instance, selling his books to the shopkeeper will not be a doing a business. However, if he purchases the books and sells them in his spare time regularly to seek profit, it does constitute a business.
Profit: The primary aim of business is to earn profit. If an enterprise is to exist for a longer period, it must yield profit. Profit thus is the driving force of every business activity.
Element of Risk and Uncertainty: There is an element of risk and uncertainty involved in every business. If an organization is not able to foresee or control or minimize the risk involved in business, it suffers losses. The main risks involved in business are:
- Competition
- Change in taste
- Outmoding of the product
- Theft
- Flood
- Earthquake
- Fire
- Marketing misjudgement
- Customer disliking of the product
- Strikes, etc
Creation of utilities: An important characteristic in business is the creation of utilities. The businessmen transports goods from a place where it is less needed to a place where it is more required. He also converts raw material into semi finished and finished goods in order to make them useful for the consumers. The businessmen, consumers and the society all benefit by the creation of place, form and time utilities in goods. In short, business combines, human, material, technology and financial resources for profit.
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