Business Meaning Nature Scope and Importance

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The word “BUSINESS” means the state of being busy.
Generally, an organization (combination of resources) entity engaged for making profit.
In other words all Legal and Economic Activities undertaken towards achieving organizational objective of an enterprise referred to Business.

1.1 Definitions of Business

Different authors define business in their own context; however, central idea is same:

Every human activity which is engaged in for the sake of earning profit may be called business.
Business may be defined as human activities directed toward providing or acquiring wealth through buying and selling of goods.
An institution organized and operated to provide goods and services to the society, under the incentive of private gain is business.

Concluded that, the term business includes all legal human activities concerned with earning money or it is an activity in which produce or exchange goods and services for mutual gain or profit. The goods and services produced or purchased for personal use are not included in business.

1.2 Forms of Business

Business can be classified into different types under different basis by different authors.
Some forms under some basis are discussed below:

1.2.1 Classification by Operational Activity

From operational activities point of view business can be classified into three main classes of activities. These activities are as follows

1.2.1.1 Merchandising Activity:

This type of business does not change the shape of the goods rather by adding their profit.
Business received goods in finished form and sell to customers as it is.

1.2.1.2 Manufacturing Activities:

The enterprises which are involved in manufacturing activities, start their activities from purchase of raw material and put labor and factor overhead on the raw material and develop products.
Produced products are looks entirely different from raw material.
Hence we can say that in this type of business value addition is carries out.

1.2.1.3 Services Activities:

The organizations involve in providing service like banking, education, insurance, management development and training are called services activities

1.2.2 Classification by Sector

Basically there are two sector public and private.
The public sector business organizations, for profit or non-profit, are the ones controlled by the government. For instance Pakistan Railways and WAPDA.
The firms owned by private entrepreneurs are private sector organizations like Bestway Cement etc.

1.2.3 Classification by Legal Structure

In terms of the legal structure, firm can be categorized into the following four categories

1.3 Characteristics of Business

The activities termed “Business” possess the following characteristics:

1.3.1 Production of goods

Since it is the business of “Business” to provide goods to people for a price, it is necessary that there are goods to be supplied.
They must therefore be either manufactured or produced so that they can be sold and supplied.

1.3.2 Sale or transfer of goods

Goods which have been produced or procured for sale in return for price enter the jurisdiction of business. This activity of selling results in the production and acquisition of wealth.
Goods produced or acquired for personal consumption, however, do not fall within the scope of business.

1.3.3 Dealings in goods and/or services

Business means dealing in goods and services. The goods may be consumer goods, such as cloth, bread, jeans, jams, shoes, watches, etc. or producer goods such as machinery and tools.
Services consist of activities or intangibles, such as transport services.

1.3.4 Regularity of dealings

There must be regularity and recurring nature of buying and selling of goods or services which ensures continuity of transactions.
A single transaction involving buying and selling does not become business.
For instance, if a person sells his motor car and makes profit, it does not amount to business. On the other hand, if he keeps a stock of cars and sells them to customers, that would be business.

1.3.5 Profits as reward

Business is an activity by which owners make their living or earn a profit.
Making profit is an essential characteristic of business. Profit is the biggest stimulus for maintaining the continuity of business.
In other words, profit is essential for survival and development of a business. The hope of making a good profit attracts people to business.

1.3.6 Uncertainty or risk

Economic activity focuses on the future: and one thing is certain about the future, its uncertainty, hence its risk.
It is through risk – taking that any businessman earns his profit.
The conduct of in business always involves a certain amount of risk and uncertainty of return to the entrepreneur.

1.3.7 Entrepreneur

An entrepreneur is a person who combines the factor of production to produce goods and services for profit.
The presence of an entrepreneur is essential in any business which may be operated on a small or large scale.

1.4 Objectives of Business Organizations

Objectives of a business organization would be:

1.4.1 To Make Profit

This is the prime objective of any business organization.
In fact this notion of profit differentiates business organization from non-business organizations.
Non business organizations such as government agencies may not have profits as their major motive.
Business profits can be used by the business to pay dividends to the shareholders. They may also be used to expand the business, and in promoting its products and services, extending charitable donations to society etc.

1.4.2 To Grow

Every business organization aspires to become bigger in size.

1.4.3 To Develop

This implies the aspiration of a business to become better.
This is normally achieved by providing quality goods and services, being prompt to customer’s tastes and preferences etc.

1.4.4 To Survive

Every business strives to stay in business. In order to survive in a business must adapt to the environment.
A business environment is quite competitive. Businesses have to look for strategies to enable them cope and stay in business.

1.4.5 Creating Market

Every business tries to create customers for its product and services.
The more customer are created, the wider will be market for goods and services, hence larger profit

1.4.6 Supply of standard quality of Product

One of social responsibilities of business is to produce quality product.

1.4.7 Provision of more employment

Business provides jobs to people.
It helps to increase standard of living of society

1.4.8 Cooperation with Government

The business community should adopt a positive approach towards the polices of government
They should pay all taxes and dues in time to the government.
All business activities should be carried within the legal framework of the country.