Business Meaning Nature Scope and Importance

Next Lesson:

Business can be divided into two parts:

2.1 Industry

Industry means those activities, which are related with the production of goods or services.
It is a place where raw material is converted into finished or semi-finished goods. Finished goods are used by final consumer and semi-finished goods are used for further production.

2.1.1 Primary Industry

Primary industry is engaged in the production or extraction of raw materials, which are used in the secondary industry. Primary industry can be divided into two parts:

2.1.1 Extractive Industry: Extractive industries are those industries which extract or produce raw material from the earth, mining and agriculture etc.

2.1.2 Genetic Industry: The genetic industries are those which are concerned with the breeding of animals and plants. These industries also provide eggs, chicken and fish in the market.

2.1.2 Secondary Industry

Secondary industry received raw material from primary industry and convert them into useful goods. Secondary industry can be divided into three parts.

2.1.2.1 Construction Industry: All kinds of constructions are included in this industry. For example, buildings, roads, bridges etc.

2.1.2.2 Manufacturing Industry: Manufacturing industries are those which convert the raw material into finish goods. For example textile mills, sugar mills etc.

2.1.2.3 Services Industries: These industries provide the services to the public and do not produce the tangible goods. The examples of service industries are doctors, lawyers, teachers etc.

2.2 Commerce

Commerce includes all those activities which are carried on to transfer the goods from place of production to final consumer. It can be divided into two parts

2.2.1 Trade

Trade means buying and selling of goods. Trade helps in transfer of goods from seller to buyer. A trader purchases goods from producer and sells them to consumer. Trade can be divided into following:

2.2.1.1 Home Trade: Buying and selling of goods inside the country is called home trade. It can be divided into following two parts.

(i) Wholesale Trade: It means to purchase the goods in large quantities from producer and sell them to retailers. A wholesaler is like a bridge between the producers and retailers.

(ii) Retail Trade: It means to purchase the goods from wholesaler and sell them to consumers in small quantities.

2.2.1.2 Foreign Trade

Buying and selling of goods outside the country is called foreign trade. It is also called international trade. Foreign trade has following two types:

(i) Import Trade

It means the purchase of goods from foreign country.

(ii) Export Trade

It means the sale of goods to foreign country.

2.2.2 Aids to Trade

All those activities which provide help in transferring the goods from seller to buyer are called Aids to trade. It includes

(a) Banking

(b) Transportation

(c) Insurance

(d) Agents

(e) Advertising

(f) Communication

2.2.2.1 Banking

Bank assists the traders in receiving and making the payments at the national and international levels. Bank also provide short, medium and long term loan to businessman.

2.2.2.2 Transportation

The goods which are manufactured in mills and factories, reach the consumers by different means of transport like air, roads, rails, seas etc.

2.2.2.3 Insurance

Insurance plays very important role in the expansion of business. Insurance companies compensate the loss of goods due to accident, fire, theft etc.

2.2.2.4 Agents

Agent is a middleman between buyer and seller. He makes a contract between buyer and seller for commission.

2.2.2.5 Advertisement

The consumer may sometimes, not know about the availability of goods in the market. Advertisement is an easy way to inform the large number of customers about the goods. This can be done through TV, newspapers, radio etc.

2.2.2.6 Communication

Post office, telephone and internet are very useful for promotion of trade and industry. New methods of communication bring the buyer and customer very close. Now we can buy anything from all over the world without traveling.

2.3 Functions of Business

The functions of business are mainly categorized into three groups:

Internal functions
External functions
Support functions

2.3.1 Internal Functions of Business

Internal functions consist of all those essential and crucial business activities which help to arrange a business foundation. The main internal functions of business are as follows:

2.3.1.1 Acquisition of Finance

It is a process of acquiring funds (cash) for the establishment of business. The finance is acquired from various sources like banks, investors, and other financial institutions. Once finance is acquired, the funds are then spend for purchasing of fixed assets like land, buildings, machineries, vehicles, and so on.

2.3.1.2 Purchasing of Raw-materials

Purchasing of raw-material is very important function of business. While purchasing raw-materials, purchase manager has to take care of three important things such as quality, price, and delivery time of raw-materials.

2.3.1.3 Hiring of Labor

Labor is required to process the purchased raw-materials into finished goods. Once labor is employed, production manager administrates important factors like labor working hours, labor pay-rate to complete the assigned task or job.

2.3.1.4 Overhead Expenses

All expenses in a factory other than direct material and direct labor are called overhead expenses like electricity, fuel, water, gas, etc. These costs are incurred to run a business smoothly and on a continuous basis.

2.3.1.5 Production of goods

Production of goods involves conversion of raw-materials into finished goods, which are ready for sell. The process of production is very wide and comprehensive in nature.

2.3.2 External Functions of Business

External functions consist of all those activities happening outside the premises (factory) which facilitate the promotion of goods produced by the business. These functions are required to carry on the business at its best in the markets.

The major external functions of business are as follow:

2.3.2.1 Marketing Research

In Market research information about demand of goods and services is collected. This collected researched information is then studied carefully by the top-level of management to ascertain the future scope of the product in the market.

2.3.2.2 Advertisement

Advertisement is a way to inform, educate, and make people aware about any specific goods and services. It helps to attract the consumers to purchase a product.

2.3.2.2 Sales Promotion

Sale promotion means to promote a product in the market. It is a technique whose purpose is to increase the sales of the product. This technique covers activities like providing free samples, offering discounts, giving gifts etc.

2.3.2.3 Appointing of Sales Agent

Sales agent inform and demonstrate various functions of the product and convince the consumers to buy their quality product. They also collect feedbacks from the consumers and report it to their organization.

2.3.2.4 Selling and Distribution

Selling and distribution includes of all those activities which transfer the goods from producer to the consumers. Sales manager is responsible for timely delivery of goods to the consumers. He must also ensure the goods are properly and promptly supplied to all target areas.

2.3.2 Support Functions of Business

Support functions include all those activities, which facilitate and ensure smooth working of both internal and external functions of business. Followings are the main support functions of business:

2.3.2.1 Accounting Operations

Accounting are required for recording the day-to-day financial transactions of business. This includes transactions related to purchases and sales, expenses and incomes, etc. It helps the organization to know about their sales-turnover and profitability.

2.3.2.2 Public Relation Officers

PROs are the authorized (official) representatives of the organization. They link their organization with customers, shareholders, media, government, and others. They also support in providing the correct information with respect to activities like production of goods, selling and distribution, etc. of the organization.

2.3.2.3 Quality control (QC)

It is a process in which the quality of goods and services are continually checked. If there is any deficiency in the quality of goods and services it try to improve it.

2.3.2.4 Business process Outsourcing (BPO)

It helps to outsource (subcontract) the non-productive works of the organization. Generally, this includes taking customers’ complaints, preparing payroll accounts, calculating sales agents’ commission, etc.

2.3.2.5 Human Resource Services

It is a department which hire (appoint) the employees for organization. Their duties also include the training of employees. Appoint of a competent employee is necessary for the success of business.