Business is both an economic activity and a way of life. Without business, the material side of life would not be possible.
It is business which manufactures and distributes goods that customer need. Businesses avail goods and services when customers require them.
In essence, therefore there are many integrated activities which constitute business.
These activities of business bridge the gap between the manufacturer and the ultimate customers or users.
We have also referred to business as a way of life. This is for those who choose business as a career.
Such people may feel intrinsically rewarded by owning and running a business.
1.2 Meaning of business
We may refer business in many ways, such as
a) Business refers to all profit- producing activities that provide goods and services to customers.
b) Business means work effort and act of people, which are concerned or connected with the production of wealth.
c) A business is any enterprise, which makes, distributes, provides a product or a service, which other members of the community need and are able and willing to pay for.
In essence, therefore business is concerned with producing and selling for profit.
From the above definition, it would be said that business is an economic activity whose aim is to make profit by satisfying customer’s needs.
1.3 Characteristics of Business
The activity termed “business” posses the following characteristics:
a) Production and acquisition of goods. Since is it 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.
b) Sale or transfer of goods. Goods which have been produced or procured for sale in return for profit enter the realm 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.
c) Dealings in goods and services. Business means dealing in goods and services.
The goods may be consumer goods, such as cloth, bread, jeans, jam, shoes, watches, etc or such items as machinery and tools.
Services consist of activities or intangibles, such as transport services.
d) Regularity of dealings. There must be regularity of 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 a 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.
e) Profits as a reward for service rendered. Business is an activity by which owners make their living or earn a profit.
Making a profit is an essential characteristic of business. Profit is the biggest stimulus for maintain 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.
In fact, profit is, in a sense, a reward for the individual ability or efficiency in managing an enterprise and also for the service that he renders to the community.
f) Uncertainty or risk about the future. Economic activities focus on the future: and one thing is certain about the future, is its uncertainty, hence its risk.
It is through risk- taking that any businessman earns his profit. The conduct of any business always involves a certain amount of risk and uncertainty of return to the entrepreneur.
1.4 Objective of Business Organization
Objective of business organization would be:
a) To make profit- This is the prime objective of any business organization. In fact this notion of profit differentiates business organizations from non business organizations.
Non business organizations such as the government agencies may not have profit as their major motive.
Business profit can be used by the business to pay dividends to the shareholders. It may be used to expand the business, and in promoting its products and services, extending charitable donations to society etc.
b) To grow- Every business organization aspires to become bigger in size.
c) 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 taste and preference etc.
d) To survive- Every business strive to stay in business. In order to survive a business must adapt to the environment.(A study of business environment is to be discussed later).
A business environment is quite competitive. Businesses have to look for strategies to enable them cope and stay in business.
Note
Among others, the business objectives are to make profits, to grow, to develop as well as to survive.
All these four objective discussed seem to cut across all business organizations.
Other business objectives would be:
e) To attain a certain market share- This is the proportion of the total market that the business aspires to achieve.
f) To increase sales turnover by a certain percentage
g) To double its output of new products.
h) To launch an advertising campaign for the new range of goods and services within a certain period of time etc.
The types of objective of course would depend on the types and size of the business organization.
Note
All profit- making organizations are termed business. The profit motive differentiates business organizations from non- business organizations.
Beside the economic objective we have mentioned here a business would have social objectives too. (Social responsibility of a business will be discussed later)
However some of the social responsibility of business would be the:
Satisfaction of human wants through the supply of quality goods at reasonable prices, paying fair wages to the workers etc.
1.5 Scope and Nature of Business
We may classify business into two broad categories: namely Commerce and Industries.
a) Industries-is concerned with production of goods or provision of services.
b) Commerce (including trade) is concerned with distribution of what is produced.
Below is a brief description of each.
Industry. This embraces the processes of extraction, production, conversion,
processing or fabrication of products.
The outputs of the industry are sold either for further transformation into finished goods or for ultimate consumption.
The goods used by final consumer are called consumer goods, and those that are used in the production of other goods are described as producer goods.
For instance an enterprise manufacturing Cloths, jam, edible oils produces consumer goods.
On the other hand, a steel mill which may make steel for further fabrication into variety of articles, such as tools, machinery, which are used for further production of other goods would be said to be engaged in producer of capital goods.
1.6 Types of industry
Broadly, an industry is either Primary or Secondary. Primary industry may be either extractive or genetic, and secondary industry is either manufacturing or construction.
1.6.1 Primary Industry
Extractive industries. Are those industries that are engaged in supplying commodities which are extracted or raised from the earth, sea and air with comparatively little help from man.
The products of such industries are generally used by manufacturing and construction industries for fabricating finished goods.
Fishing, mining, fruit gathering, agriculture and afforestation are some of the example of extractive industries.
Genetic industries: These fall under the category of primary industries.
These industries, though dependent upon nature, require a greater application
Of human skill in their production.
The enterprises engaged in agriculture, forestry and fish culture are example of genetic industries.
By way of distinguishing extractive industry from genetic industries we may give these examples:
Though agriculture is dependent upon the quality of the soil and climatic conditions, success in this line will very much depend upon the application of human skill and knowledge.
Intensive cultivation is possible with greater amount of capital and lager numbers of workers.
Similarly, cultivation of forests is necessary for securing supply of timber for various purposes.
1.6.2 Secondary Industries
These include:-
a) Manufacturing Industries. Manufacturing Industries are concerned with the working of raw materials or partly finished materials into finished products
Manufacturing processes are carried on chiefly in factory enterprises and constitute a very large part of the total business activity.
Among the manufacturing industries we may mention milk processing plants, spinning and weaving mills, flour mills, the making of machinery etc.
b) Construction Industries. These are concerned with the making or constructing of buildings, bridges, dam, road, canal etc.
The process of laying out, fitting and connecting materials which have been already prepared is also included in this category.
c) Service Enterprises. Businesses provide not only goods but also services. At every point in the economic system an infinite variety of services are furnished.
Example of such businesses include; hair dressing and beauty therapy, vehicle repair, hotel accommodation, transport, insurance etc.
Activity 1.1
Enumerate ten industries you are familiar with and classify them into primary or secondary industries.
1.6.3 Classification of Manufacturing Industries.
Manufacturing Industries may either be a continuous or an assembly type.
A continuous industry may be either analytical or synthetic.
Assembly industry is also of two types. One with similar components and the other with dissimilar components.
The following is a brief account of each type:-
Continuous Industry. It is an industry in which all the material is received at one point and from which successive operations turn these material into a finished product.
Examples are the manufacturing of sugar, paper, cloth, etc.
Assembly Industry. In an assembly industry the finished product can be produced only after various components have been made and then brought together for final operations, such as manufacturing of shoes and automobiles.
Analytical Industry. This is a type of a continuous industry. In this industry the basic material is analysed and separated into several parts so that the final product emerges separate and distinct from the, mass of original material.
All refining industries, such as oil fall in this category. The crude mineral oil is analysed and separated into kerosene, diesel oil, lubricating oil, and the final product petrol.
Activity 1.2
Enumerate ten manufacturing industries you are familiar with and classify them into either continuous, assembly or analytical.
