Characteristics of Business:

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Characteristics of Business:

Business possesses the following characteristics:

1.      Human Activity: Business is a human activity performed by an economic man. We know that all the activities that are performed by an economic man to earn a living or to earn a profit are economic activities. All such activities are performed by business other factors just cooperates human beings to carryout business.

2.      Creative activity: Goods, which have been produced or procured for sale in return for price, enter the realm of business. This activity of selling results in the production of wealth for the society. According to Peter Drucker, “Business is the wealth creating and wealth producing component of the society.”  All business activities are economic activities but not all economic activities are business activities.

3.      Exchange of Goods and Services: Another important characteristic of business is that it involves exchange of goods services or money. In other words, production and distribution is done to satisfy the demand and earning profit. Thus, Production is done to sell goods to others and earn profit. In other words, business depends upon the exchange of goods. The produced goods may be of daily use consumption goods or durable goods. It may be immovable property house or a commercial building, or services like banking, insurance, and transport. The goods produced must be limited in supply and should have value in exchange. Produced goods must have utility for its users and their supply should be limited or less than the demand so that people are ready to pay price for them.

4.      Profit Motive: Business is a profit seeking activity. Every entrepreneur starts business to earn profit and takes risks. Profit is the biggest stimulus for maintaining the continuity of business and its future development. The profit is the reward for taking risks of business. The transaction takes place because it is in the interest of the buyers as well sellers. It s essential that business is done on regular basis isolated deal is not business.

5.      Business involves risks and Uncertainty; Economic activity of production and distribution involves some decision-making and assumption regarding future and that future ios always uncertain. Business risks may of many types. Risks may involve fluctuations in demand and supply conditions, behaviour of the competitors, climate, trade cycle, etc. Generally, the profit element is related to the risks involved in business. Higher the risks higher may the profit.

6.      Entrepreneurship: Business requires entrepreneurship. The purpose of business goes beyond earning profit. It is an important institution in the society. Without accepting the risks of production and distribution, business cannot be established. The profit is always uncertain and cannot be determined in advance. It is a residual term. Entrepreneur creates jobs for others and contributes to the economic growth of the country.

7.      Dynamic: Modern business is dynamic. If there is only single word that can best describe today’s business, it is change. The change makes companies to spend substantially on Research and Development (R&D) to survive in the market.

8.      Creation of Utility: The main thing for doing any business is to create utility. A carpenter creates utility by making a table or as chair from the furniture wood supplied to him. Utility may  also be created by changing place, time or ownership.

9.      Diversification: Modern business is characterised by diversification which may be : (i) concentric diversification- i.e. adding new but related products and services, (ii) Horizontal diversification- i.e. adding new un-related products or services for present customers, and (iii) Conglomerate diversification- i.e. adding new and un-related products and services. Going international is yet another trend followed by modern business houses.

10.  Legal Activity: Business is essentially a legal activity. The economic activities that are prohibited by the government of the country are not included in the definition of the business, no matter they may earn profit for the owner or may be growing fast in all directions over a period of time.

11.  Knowledge: Business environment changes as per the conditions prevailing in the country at a given time. In other words business environment changes with change of time. During recent times, excessive use of computers and networking the business has changed its forms such as BPO/KPO type of business. Another major change that has taken place during recent times is the institutional framework of business. During the earlier times business was considered to be an individual or a family project Now  a days we see more corporate structure rather than single proprietorship or partnership firms.

12.  Fast Growth of Service Sector: During earlier times, business was considered an activity related to sale and purchase of commodities. It requires large capital investment. Now service industry is coming-up fast. Many service undertaking such as telephone, data processing, software development entertainment, hotel, health clinic, banking, insurance etc. are emerging as fast growing fields. It does not mean that capital is not required in service undertakings. Capital of course is needed for establishing office, providing networking and other such modern equipments.

13.  Concentration of Economic Power: we all know that in a market or free enterprise economy the economic power concentrates in the hands of a few. During earlier years of planning government, control over business was excessive and the laws like MRTP, FERA were in operation. However, during recent years government is adopting liberal laws and reducing regulatory control.

14.  Consumerism: Consumer is the pivotal around which the capitalist society revolves. Consumer is considered a king or a sovereign and his satisfaction is the only goal. Only those business survive whom consumers accept. The government enact such laws that protect consumers from malpractices and exploitation. Consumer Protection act 1986 protects consumers from the malpractices and enable them to secure speedy and inexpensive redressal of their grievances.

15.  Managerial Characteristics of Business: Modern business has the following managerial characteristics:

(i)                 Modern business are established and run by entrepreneurs and managed by professional managers.

(ii)               Innovators and entrepreneur play important roles in business.

(iii)             Modern business is not evaluated only from the economic point of view, but they also have to fulfil their social obligations.

(iv)             The importance of retail chain is increasing and in place of individually owned shops we see a chain of departmental stores.

(v)               Increasing use of division of labour, specialisation, standardisation and automation in capital-intensive industries or business can be seen in modern business.