Introduction to Business ( Business Studies Notes )


Introduction to Business

Concept of Business:

A business is an economic activity that deals with the production and distribution of goods and services to society. It helps to make profits by serving and satisfying members of society. Simply, the term business refers to the business or state of being employed for the purpose of making a profit or generating wealth.

The real business concept is to create customers by providing them with the satisfaction they expect. Customer satisfaction is the main basis for the exchange of goods and services. Therefore, a business can only generate profit through adequate services to its customers.

Business involves the regular and recurring purchases and sales of goods and services with the purpose of earning profit through the satisfaction of human needs. Generally, there are two types of the concept of business:

A)  Traditional concept: The traditional concept is a product-oriented concept, which emphasizes the sale of goods produced by the sales organization rather than meeting the needs, interests, and wishes of customers. In the past, the soul and sole purpose of the business were to maximize profit at all costs. Therefore, the classic or traditional concept still focuses on the monetary assets of the business.

B)  Modern concept: The modern concept is a customer-oriented concept, e.g. warranty, warranty, free service, etc. Therefore, companies produce goods and services by studying and identifying the needs and wants of customers. He claims that companies make profits from the satisfaction of their customers. Business without customers is not possible. Businesses must make profits with social responsibility. They should clarify the welfare of society and consumers.

Characteristics/features of Business are:

1.    Creation of utilities: Business creates utilities of goods and services to fulfill the needs and expectations of customers. Business involves many components and each component creates utility such as form, place, time, risk, finance, etc

2.     Production, distribution, and exchange: The production, distribution, and exchange of goods and services are part of commercial activity. Manufacturing organizations involve the production of goods and services from raw materials. likewise, business organizations distribute goods and services to end consumers.

3.    Continuous process: Business is an ongoing process. it is not a one-time financial asset. A business organization must regularly process goods and services. for example, if a person sold their old motorbike to buy a rough one, it should not be considered a business.

4.    Risk and uncertainty: It is known that ‘there is no business if there is no risk.’ In business, there is the risk of loss due to an uncertain future. There ae many factors that may affect on business activities of an organization like the introduction of a new product of similar nature; change in consumer taste, habit, fashion, and desire; shortage of raw material, natural calamities changes in government policy, etc.

5.    Profit Motive: As an economic activity, the main objective of the company is to make profits and maximize wealth. Profit is essential to the survival and growth of a business. It is the reward to investors in return for their investment in the business, measured by its earning capacity.

6.    Consumers satisfaction: In the competitive market economy, consumer satisfaction is considered one of the important requirements of businesses. Business organizations produce and deliver goods and services to consumers and only get a return if they are satisfied. For consumer satisfaction, trade organizations must supply the right quantity and the right quality of products.

Components and scope of business:

1.    Industry: Industry involves the production of goods and services through the use of raw materials. some industries are involved in the production of industrial products whereas others in the production of consumers' goods. on the basis of the nature of the product, the industry may be sub-classified into the following four types:  

i.       Genetic Industries: The word genetic means heredity. Genetic industries involve the production of goods from plants and animals. They collect various types of plants from the forest or nurseries, which are required for the production of medicines, scents, perfumes, etc.

ii.      Extraction industries: These industries are involved to extract mineral resources from land, water, and air. They involve for collection or extraction of materials required for the production of finished goods. Generally, they supply raw materials for the production of finished goods.

iii.      Construction industries: These industries involve in the construction of infrastructure development work such as the construction of roads, bridges, buildings, dams, canals, etc. Each construction industry is specialized in certain development work. They use products of manufacturing industries in construction work like cement, rod, bricks, stones, etc.

iv.       Manufacturing industries: Manufacturing industries creates form utility of goods and services. These industries produce finished goods from raw materials and semi-finished goods through some specific process. Generally, they collect raw materials from genetic and extraction industries to produce finished products.

2.    Commerce: Commerce is one of the important components of doing business. It concerns the purchase, sale, and distribution of goods and services in the market. The business concept is not completed only by the production of goods in a particular region. It is essential to distribute these products to consumers in different locations. In order to distribute products from producers to consumers for exchange, commerce plays a crucial role.

i.        Trade: Trade is concerned with buying and selling of goods and services. It is an important branch of commerce and is engaged in the exchange of commodities between producers and consumers. Trade maybe into the following  types:

·    Home trade

·    Wholesale trade

·    Retail trade

ii.       Foreign Trade: Foreign trade: foreign trade is also known as international trade. Under this trade, buying and selling activities are done with do trading enterprises for customers of foreign countries. Both the buyers and sellers are from two different countries.

·       Export trade

·       Import trade

·       Entry-port trade

3.     Service Enterprises: In addition to sales assistants, many professional organizations are directly involved in the service sector. The development of scientific and technological initiatives to develop the service activity. The emergence of corporate globalization is contributing to the tremendous development of service activity. The service industry covers many areas such as education, hospitals, hotels, travel agencies, trekking agencies, computer software companies, TV and movie entertainment, cable network, etc.

Function of Business:

A business organization is established for a definite objective. For the achievement of a pre-determined objective, it performs various functions which are interrelated and interdependent to each other. The major functions of business are as follows:

1)    Production: Manufacturing organizations are involved in the production of goods and services Generally, they purchase raw material from suppliers, process in manufacturing plants, and produce finished goods. The production functions involve various activities like product planning, procurement of raw materials, storage of raw materials, and proper layout of plant and machinery.

2)    Distribution: The distribution of goods and services is an important function of the business. It fulfills place utility. Trading organizations are involved in the distribution of goods and services from manufactures to final consumers. This function is necessary to fulfill the demands of the customers living in different places. Distribution functions involve various activities like buying, selling, advertising, etc.

3)    Investment: Investment of capital is an important element of business function. It is also known as life-blood of business. It is required for the proper use of human and other physical resources of the business organization. It is the function of business to manage sufficient capital in terms of equity capital or loan and utilize it in systematic manner.

4)    Organizing: Organizing functions is necessary for performing business activities in systematic and effective manners. In every business, organization there should be the system of proper division of work, rule and regulations, working procedures.

5)    Creating employment: Organizing function is necessary for performing and creation of employment opportunity is the main function of business organization. Business organization needs various types of employee like skilled, semi-skilled and unskilled. They need employees both in managerial and in technical jobs. Some business organizations are involved in production and distribution whereas some are in customers’ service functions.

6)    Research and development: Research and development are essential for every business organization to make itself up to date with the changing environment of the market and society. It helps for innovation of new concepts, models, size, design, structure, knowledge, and technology. It contributes to the generation of new products and services.

7)    Human resource management: Human Resource Management involves all the activities necessary for manpower management. It refers to the philosophy, policies, procedures, and practices concerned with the management of employees of the organization. It is the process of acquisition, development, motivation, and maintenance of human resources.

Objective of business:

1.    Economic Objective: Economic objectives focus on meeting and satisfying customer demands by providing goods and services with the aim of obtaining profit. Achieving the economic objective is essential for the survival and growth of the company. The economic objectives of the business are as follow:

·         Economic gain

·         Market standing

·         Innovation

·        Productivity

·        Enhance market share

2.    Social Objectives: A business organization is established with the basic objectives of providing to society. It performs business in society and also grows in society. Therefore, it needs to fulfill social obligations. It needs to consider social tradition, rules, regulation, morals, and ethics while doing business.

·         Supply of goods in times

·         Supply of quality goods

·          Supply of goods at the proper price

·          Creating employment

·          Maintaining social environment

3.    Human Objectives: The prominent objective of a business organization is to fulfill the interest and expectations of the people directly involved in the business activities of the organization. Along with investors, various stakeholders have an interest in business such as consumers, suppliers, creditors, and the community. Some major human Objectives of business are as follows:

·          Welfare of employees

·           Return to investors

·           Payment to creditors

·           Satisfaction of consumers

·           Welfare to communities

4.    National objective: Business organizations are an indispensable part of the nation. They do business by considering national rules, regulations, norms, and values. They contribute to the development of the socio-economic activities of the country. The main objective of business is to promote the economic development of the country through the proper use of resources. The following are the national objectives of the business

·            Utilization of resources

·            Payment of tax

·            Generation of employment

·            Balance development

·            Develop self-sufficiency

Importance of Business:

Business is one of the important economic activities of human beings. They play an important role in the economic development of the country and in maintaining the standard of living of the people. All of the developed European countries, the United States and Japan are developed today due to the development of their Business is the main source of income and the means of meeting the needs of people. The common importance of business is as follows:

1.      Economic development: Business is playing an important role in the economic development of the nation. The development of industrial activities facilitates the utilization of resources such as human, mineral, agriculture, water, forest, and other natural resources of the country.

2.      Creation of utilities: One of the benefits of business is that it creates utilities of goods and services to fulfill the needs and expectations of customers. Business involves many components and each component creates certain utility such as form, place, time, risk, finance, etc.

3.      Utilization of resources: Business plays an important role in the proper utilization of resources. Some countries are rich in natural resources, some in mineral resources, others in human and science and technology. The proper utilization of resources is necessary for the economic development of the country.

4.      Generation of employment: Generating employment opportunities is one of the importance of business. Business is taken as an important source of employment. Business organizations need skilled, semi-skilled, and unskilled employees both in management and technical jobs.

5.      Earning foreign currency: Business is the main source of earning foreign currency. The development of industry and commerce is helpful for the production of goods and services. Foreign currency can be earned by exporting surplus products and services to foreign countries. The development of export trade brings a favorable balance in payment.

6.      Sources of government revenue: Business is an important source of government revenue. The development of business activities contributes more to maximizing government revenue. Government imposes various taxes on business organizations such as income tax, customs duty, value-added tax, clearing charge, royalty, etc. Government invests such revenue for the betterment of social work.

7.      Development of international relationships: Business is the most important medium for the development of international relations. For the promotion of business activities, many people visit different countries. They share and exchange culture, tradition, knowledge, and technology among the peoples of friendly nations.

Social Responsibility of Business:

1.    Towards Investors: Investors are the owner of the business, They invest capital and bear the risk of loss. They invest fixed capital for the establishment of business and working capital for day-to-day business activities. They also take an active part in the management or through representatives as directors. The main responsibilities of business towards the investors are as follows:

·             Safety of investment: 

·             Fair and regular return: 

·             Correct and regular information: 

·             Participate in decision making

2.    Towards Consumers: Consumers are the main source of revenue for a business organization. In a competitive market environment, consumer satisfaction is the main obligation of the business. Consumers are the key figures in the market for the growth and development of business. A business organization can perform business activities.

·     Supply quality goods

·     Supply goods in time

·     Supply goods at the proper price

·     Provide after-sale service

·     Provide scope of research

3.    Towards Employer: Employers can be managers and workers. Their co-operation is essential to achieve business objectives. Special attention should be given to them to make them happy. Social responsibilities towards employers are:

·     Fair salary and wages

·     Provide security to employment

·     Ensure a safe and healthy working environment

·     Welfare activities

·     Participation in management

4.    Towards Community: Since a business is a social institution. It must be responsible towards its society. Where it exists, grows, and survives. The Social responsibility of business towards the community are as follows:

·    Utilize resources optimally

·    Protect environment

·    Provide employment opportunity

·    Social and cultural value

5.    Towards government: Business is regulated by the government. Its activities are promoted by government regulations. Social responsibility of business towards government are:

·    Comply with government rule and law

·    Tax payment

·     Help to solve national problems

·    Provide essential business information and advice


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