CONCEPT OF BUSINESS 

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In every society, people undertake various activities to satisfy their needs. These activities may be broadly classified into two-

• ECONOMIC ACTIVITY
• NON- ECONOMIC ACTIVITY

ECONOMIC ACTIVITIES - Economic activities are those activities by which we can earn our livelihood. These activities may be further divided into three categories-Business, Profession and Employment.

NON-ECONOMIC ACTIVITIES - Those activities which are performed out of love, care, passion, sympathy, affection, patriotism, sentiments, e.tc. 

For an example - A man cooking food for his family on weekend is a non- economic activity but if he cooks and sells food in a restaurant to earn money will be known as an economic activity. 

A woman teaching the kids of a slum because she wants to do something good for society will be termed as a non-economic activity. But if that woman teaches in a school to earn her livelihood, then it will be termed as an economic activity.

CONCEPT OF BUSINESS -

Business word literally means 'being busy'. But do we really call being busy a business activity? We can keep ourselves busy by performing various activities like by cooking food, making paintings, writing poetries and stories, but these activities will not be called as business. But If we say that, I cook and put up a food stall to earn money and profit, I sell my paintings at a fair and own a painting store to earn profit, I publish my stories and poetries and sell them at a book store, then it will be known as business. 

Every Individual has some needs and to satisfy those needs, certain goods and services are produced and then we sell those goods and services to the people who needs them to earn profit and to satisfy their needs. A simple formulae of business is -

E- ECONOMIC ACTIVITY

P - PRODUCTION/PURCHASE OF GOODS & SERVICES

S- SALE OF GOODS AND SERVICES

P- PROFIT EARNING

S- SATISFYING THE NEEDS OF CUSTOMERS

So, Business may be defined as an economic activity involving the production and sale of goods and services undertaken with a motive to earn profit by satisfying the needs of customers.

CHARACTERISTICS OF BUSINESS -

A Business has certain features which distinguish the business from other activities. These characteristics are defined below-

1. AN ECONOMIC ACTIVITY- Any activity which is economic will generate money. So, Business is an economic activity that is conducted with the motive of earning money and livelihood. These activities can be undertaken either on a small or individual level (e.g. purchase and sell by a shopkeeper) or in a more formal and organized way at a large scale (eg. purchase and sale of goods by an enterprise, cooperative society, or a company)

2. PRODUCTION OR PROCUREMENT OF GOODS AND SERVICES - Without the production or procurement of goods and services, it is not possible to satisfy the need of humans in society. So before goods and services are offered to people, these must be either produced or obtained from producers by a business enterprise. Goods may consist of consumer goods that are used on daily basis like Ghee, Soap, Toothpaste, Sugar, Spices, etc. or Capital goods like machinery, furniture, equipment, devices, etc.. Services may include facilities offered to consumers like banking, insurance, transportation, hospitality, medical, legal, etc. 

3. SALE OR EXCHANGE OF GOODS AND SERVICES- Producing goods for own personal consumption will be not termed as a business activity. It is necessary to trade and exchange those goods and services. There should be a sale and exchange of goods and services between buyer and seller.

4. DEALINGS IN GOODS AND SERVICES ON A REGULAR BASIS - For an e.g. I had a bike and I sold it to some other person after few days of purchase, I also earned some money out of it, but that would be not called as a business activity because it is not happening on a regular basis. But if I say, I own a bike showroom and I deal in sale or exchange of bikes on a regular basis, then this activity will be characterized aa a business activity. So the transactions of purchase and sale should be conducted on a regular basis in a business.

5. PROFIT EARNING - The main purpose of any business is to earn profit. Without earning a profit, we cannot run any business successfully. That is why, while running a business, one should work on reducing the cost and expenses and increasing the sales and profit.

6. UNCERTAINTY OF RETURN -  Every business invests money with a motive to earn a profit, but it is very difficult to predict the exact amount of profit a business is going to earn. Also, there is always a possibility of losses being incurred, despite the efforts put into the business. There are certain internal and external factors that control business activities.

7. ELEMENT OF RISK - There is a risk in every business you run. It is an uncertainty associated with an exposure of loss. There are some undesirable and unfavourable events that are associated with business activities that develop risk. No business can altogether do away with risks. Small risks can be calculated and managed like fire, theft, termination of an employee. But there are certain risks that are very uncertain like any pandemic occurs, natural calamity, change in fashion and trends, change in consumer taste, new and advanced technology implemented by a competitor, etc.

In case of doubt, leave a comment :)

Thanks

Isha Sareen