Business
Business is the
creator of modern world. It means the completely complex world of commerce and
industry, export, banking, insurance, transport, agricultural and food
processing and so on which serve and interpenetrate the world of business as a
whole. Now a days’ business has oriented education, religion, ethics and human
values and culture on development path. Modern culture is a business culture.
Business is a must in our society. Only business has the capacity to satisfy
human wants.
Meaning
and Definitions:
According to Davis and Blomstorm[1],
“Business comprises all profit seeking activities and enterprises that provide
goods and services necessary to an economic system. It is the economic pulse of a nation, striving
to increase society’s standard of living. Profits are a primary mechanism for
motivating these activities.” This definition makes it clear that all our activities are
guided by profit motive and many of our present day problems like poverty,
hunger, unemployment etc. can be solved if we develop business. Man is always
busy in doing some productive or unproductive activities. These activities and
their meanings change over time. Accordingly business may be defined into these
different meanings:
Narrow Definitions:
In narrow sense,
earning profit from buying and selling goods is known as business. This is the
oldest meaning. Only trading activities are considered as business in this
sense.
Broad Definitions:
In the broader
sense all commercial activities relating to production and distribution and
their ancillary services banking insurance, communication, transport, publicity
and media, finance and technology services are included in business.
Modern Definitions:
In modern sense
business is the organised activity designed to satisfy peoples wants for goods
and services. Thus, modern definition gives emphasis on creation of utilities
and national assets of productive importance.
Business can be defined as economic activity oriented and satisfaction
oriented. Business may be understood as the organised efforts of enterprise to
supply consumers with goods and services for a profit. Businesses vary in size
as measured by number of employees or by sales volume. But all business shares
the same purpose and that is to earn profit.
Economic Activity Oriented Definitions:
Earlier
definitions of business consider business as an economic activity. Business may
be defined as, “the organised efforts by individuals to produce goods and
services, to sell these goods and services in market place and to reap some
reward for this effort[2].”
Functionally we may define business as, “Those human activities which involve
production or purchase of goods with the object of selling them at profit.”
According to Honey, “Business may be defined as
human activity directed towards producing or acquiring wealth through buying
and selling goods.” According to Hart,
“Business is the production of goods and services coupled with the distribution
of those goods and services through a socially organised system of exchange.”
In essence business represents an organised effort for the production of income
or wealth by an individual or individuals engaged in making of living. Each
firm operates with an object of earning profit from the production of goods and
services.
Satisfaction oriented Definitions: The basis of business is
customer. The fundamental element of business is creation and customer
satisfaction. It is the business of business to provide goods and services to
people to satisfy their needs. It provides the public with the things it wants
in order to survive enjoy life, improve in a material sense. During recent
years, it has largely been accepted by the society that consumerism or consumer
satisfaction is the main aim of business. From the point of view of consumers,
business is the satisfier of needs and desires. The business should provide
what the customer demand. In other words, business should satisfy the consumer
demands. From this point of view the following definitions are important:
According to Peterson and Plowman, “Business is an activity in
which different persons exchange something of valve, whether goods or services
for mutual gain or benefit.”
Urwick and Hunt writes, “Business is any enterprise
which makes, distributes, or provides any article or services which other
members or the community need and are able and willing to pay for it.” Thus,
business satisfies people’s wants for goods and services.
Modern Definitions:
Modern
definitions relate business to the welfare of humankind and fulfilment of
national objectives. Davis and Blomstorm define, “The term business refers to
both private and public institutions which develop and process economic values
in a society.” According to Peter Drucker, “Business can be defined as process
that converts an outside resource, namely ‘knowledge’ into outside results,
namely ‘economic values’.’Thus, business is a social institution that organises
economic activities for the welfare and goodness of the society.
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 is always uncertain. Business
risks may be 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
a 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 equipment.
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 businesses 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.
*****
No comments:
Post a Comment