Nature Of 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 with the object of earning profit. For example, the farmer who cultivates land, the fisherman who catches fish, the manufacturer who converts raw material into semi fished (raw cotton to yam) or finished goods (yarn to cloth) etc with the sole objective to earn profit are engaged in business. In addition to this, the purchase and sale of goods on wholesale or retail basis by individuals and firms, the financing of trade by the bankers, the transporting of goods from one place to another by transporters etc. for earning profit are economic activities and included in business. Besides goods, the services of professionals such as of doctors, charted accountants lawyers, insurance agents etc.! Which are rendered for money is a part of business.

Activities excluded from business:

(1) Social Service Activities

There are certain organizations which do not seek profit as their goal. These organizations are established with the sole objective of rendering social services to the society. For instance setting up a hospital, a university, a library, a government agency, etc, may render service purely for social benefits to society these and such other non-prom organizations having a standard different from the profit-seeking organizations are excluded from the study of business.

(2) Personal Consumption Activities

Similarly, all the activities which are concerned with the production or purchase of goods and services for personal consumption fall outside the scope of business. For instance, a shoemaker making a pair of shoes for personal consumption or a tailor sewing shirts for his own use or a nurse nursing her own child are not business activities because these do not involve in sale or transfer for value. However, if a shoemaker manufactures shoes for sale in the market with a view to earn profit; it will be purely a business activity.

(3) Religious and other Activities

Religious activities like offering prayers, enga for freedom of country or social work etc., which a undertaken not for Earning profit are non-economic activities.

(4) Illegal Activities.

The economic activity must be le Gambling, smuggling etc are done for earning of money but they are not included in Economic activities on account of their being illegal in Pakistan.

Definitions of business:

The term business has been defined by various au some of the Selected definitions are given below.

According to L. H. Haney, ‘Business may be defined as human activity. Directed towards providing or acquiring wealth through buying and Selling’s.

Urwick and Hunt describes ‘Business as an 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 it.”

According RN. Owen, business includes all the commercial and lndustflal activities that provide goods and services to the people with an Objective to earn profit.

Characteristics of business:

The activities termed business has the following characteristics.

1. Deals in goods and services

Every business whether it is carried on a Small or on a large scale deals in goods and services. The goods may be Consumer goods like cloth, shoes, pensetc., or producer goods like machinery or it may take the shape of services like the supply of electricity, water, gas, transportation of goods, etc.

2. Economic 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, fell outside the scope of business. For instance,jf a shoemaker makes a pair of shoes and wears himself, it will not be 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.

3. Series of Deals

When a firm takes up manufacturing or distribution of goods or providing of services for profit motive, there shduld 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 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.

4. 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.

5. Element of Risk and Uncertainty

There is an element of risk a uncertainty involved in every business. If an Sganization is not able to foresee or control or minimize the risk involved fl business, it suffers losses, The main risks involved in a business operation are (1) Competdtion (2) Change in taste (3) Outmoding of a product (4) Theft (5) Flood (6) Earthquake (7) Fire (8) Marketing misjudgments (9) Customers disliking of a product (10) Strikes, etc.

(6) Capital

Every business whether it is small or large cannot operate without capital. Money is required for investment in fixed assets such as land, building, machinery etc. Money is also needed for working capital such as purchase of raw material, payment of wages, electricity, gas bills etc.

(7) Creation of utilities

An important characteristic of business s the creation of utilities. The businessmen transports goods from a place where it is less needed to a place where it is more required place utility through transportation. He also converts raw material into semi finished and finished goods in order to make them useful for the cQnsumers (Form utility through processing). 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, technological and financial resources for profit.