Concept and Characteristics of Business

Concept of Business

The term 'business ‘refers to all the economic activities carried out by people and organization for generating incomes. It is concerned with producing and distributing goods and services for earning a profit. It is a regular process of exchanging goods and services which involve risk and uncertainty. In fact, business is an economic activity aimed to fulfill the need and wants of customers through the supply of goods and services for their satisfaction.

According to L.H Haney, "Business may be defined as a human activity directed towards producing or acquiring wealth through buying and selling of goods."

According to James Stephenson, “Economic activities performed for earning profits are termed as the business."

From the above definitions, it is clear that the business is the economic activity of individuals and organizations aimed to earn profit through the production and distribution of goods and services.

Generally, there are two concepts of business:

• Traditional Concept: The traditional concept explains that the purpose of business is to earn profit through production and marketing of products. Products may be different types. For example physical goods, services, ideas and information etc. The main motto of business is to maximize profit only as per traditional concept.
  
  
• Modern Concept: Consumer satisfaction is the central point of the modern concept of business. Profit can be earned by maintaining social responsibility. It strives to include every aspect of human civilization. It views the modern business as a socio-economic institution which is always responsible towards the society.

Business Activities

Every human being performs different types of activities to gain his/her wants and desires. Many of these wants and desires are inherent, as they are biological compulsions and instincts for their survival whereas other types of wants and desires are boundless and provide full satisfaction. So, all human beings must perform different types of activities for their survival and satisfaction.

Human Activities

All the activities that the human beings perform can broadly be classified into the following two activities:

Economic Activities

The activities through which the human beings can earn income and generate wealth are known as economic activities. They are basically concerned with production and distribution of goods and services which are used to satisfy human wants/needs. For example, a clerk works in an office, a worker works in a factory, a shopkeeper sells goods in his shop etc.

There are three essential features of economic activities:

• Objective of economic gain
• Creation of utilities through provision of goods and services and
• Satisfaction of other people's needs

Non-economic Activities

The human activities which are carried out to satisfy social, psychological and emotional needs are called non-economic activities. These activities are performed for personal satisfaction and are inspired by pleasure, affection, love, charity and other similar sentiments. Such activities are not concerned with earning money.

Differences between Economic and Non-Economic activities

Characteristics of Business

Some of the characteristics of the business are as follow:

• Human Activity:
  Business is a human activity, No business can be performed without human efforts. The stakeholders of business such as workers, manager,ownersetc. play an important part in the business.
• Economic Activity:
  It is an activity that involves exchange of goods and services for money. It does not include non-economic activities which are not directed towards generating income.
• Enterprise:
  Business is an enterprise of a person who generates an idea, bears the risk, produces new products or services and sell them to the consumers. The owner or entrepreneur generates the idea of business.
• Production and Distribution:
  Business involves production and distribution of goods and services. The production and distribution of goods and services are carried out to fulfill the satisfaction of the customers.
• Customer Satisfaction:
  Every business activity is centered on customer service and their satisfaction. No business can exist over a long period of time without satisfying the needs and wants of the customers.
• Continuity in Dealing:
  Business must be regular and continuous in its dealings. It must continuously and regularly produce and sell goods and services to customers. One time dealing cannot be termed as a business.
• Risk and Uncertainty:
  Every business activity involves risk and uncertainty to some extent. The risk of loss is always present in every business activity. Hence, there is no certainty that the business activity always results in profit.
• Profit Motive:
  Profit is an essence of business. The activities related to production and distribution of goods and services are carried out with the aim of earning profit.
• Finance or Capital:
  Business need capital to acquire production and distribution of goods and services that can be produced and marketed. Thus, capital is said to be the lifeblood of business. No business ever can be started and successfully run without adequate finance.
• Ownership and Employment:
  Every business is owned by an individual or a group of individuals. The owner contributes capital to start and run the business. Business may be sole trading, partnership, joint stock or a cooperative. Except sole trading, other forms of business need employees for the day to day activities.

References:

Khanal, Soma Raj, Surendra Thapa Aslami and Sitaram Dhakal. Business Studies. Kathmandu: Taleju Prakashan, 2067.

Pant, Prem R., et al. Business Studies. Kathmandu: Buddha Academic Publishers and Distributors Pvt. Ltd., 2010.