MEANING OF BUSINESS
Business means the state of being busy. In essence, business concerns with buying and selling goods, manufacturing goods or providing services in order to earn profit.
FEATURES OF BUSINESS
1. Entrepreneur: There must be someone to take initiative for establishing a business. The person who recognized the need for a product or service is known as entrepreneur. The entrepreneur is a key figure in the progress of economic growth. The quality of entrepreneurship existing in any region determines to a large extent the development of that region. The entrepreneur visualizes a business, combines various factors of production and puts them into a going concern.
2. Creation of Utilities: A business creates utility in goods and services and delivers them to those who need them and are willing to pay the price. It buys raw materials, converts them into goods with the help of processes and delivers them to the users. The products or services are made usable for those who need them. Business earns profits out of this transfer.
3. Goods and/or Services: A business deals with goods and/ or services. Goods may be consumers goods or producers goods. Consumers goods are in the form in which we need them. Consumers goods may be for immediate consumption (like foodstuffs) or future use (like clothes, furniture). Producers’ goods are used for further production of goods (like machinery, building, raw materials). The goods may be produced or manufactured by the business (producers) or procured from others for further sale (traders).
As regards services, they refer to intangible and invisible items. Examples of such items of services may be transport service, supplying of electricity etc. In other words, services consist of such items which are not stored by consumers but are utilized by them.
4. Recurrence of Dealings: As opined by Peter and Plowman, business involves repeated transactions of sale and purchase for sale. The sale of an old residential house for buying a new one will not be a business transaction; it is an isolated transaction even if such sale brings profit.
5. Sale, Transfer or Exchange for value: The sale, transfer or exchange of goods and/or services for a price is the basic feature of business. Purchase for a price is the basic feature of business. Purchase of goods or services for personal consumption is not a business activity. The purchase of goods by a retailer is business because it is for sale on profit while a purchase by a consumer is not business because it is for consumption.
6. Profit Motive: The objective of a business activity is to earn profits. The hope of earning money brings people into business. A business cannot survive for long in the absence of profits. Profits are required not only for survival but also for expansion and development. Even government undertakings are required to earn profits. Profits should be earned through fair means and not by exploiting society.
7. Risk Involved: The element of risk and uncertainty is prevalent in business. Risk implies the uncertainty of reward or the possibilities of loss. Uncertainty and risk are present in all economic activities but it is more prevalent in business. The factors on which business depends are never certain. There may be a shift in demand, strike by employees, floods, war, economic changes etc. Though a businessman tries to forecast future possibilities but things may not happen in the same way. Risk element keeps a businessman vigilant.
8. Economic Activities: Only economic activities form a part of business. These activities are undertaken with a profit motive. Activities related to the production and exchange of goods and services are economic activities. Any activity taken up without a profit motive is not an economic activity and is not a part of business.
9. Organisation: Every enterprise needs an organisation for its successful working. Various business activities are divided into departments, sections and jobs. An organisation creates the framework for managerial performance and helps in coordinating various business activities. A proper organisation is helpful in the smooth running of the business and helps to achieve its objectives.
10. Financing: Business enterprises cannot move a step without finance. Finance is the life blood of the business. Finances are required for providing fixed and working capital. Fixed capital is the capital which is i9nvested in buying assets and is used in long term of business. Working capital is the amount of capital which is required for carrying on the regular operations of the business. The availability of other factors and production also depends upon the availability of finances. After estimating its financial requirements, the management tries to find out the sources from which these requirements will be met. A proper capital structure is a must for the success of the business.
11. Consumer Satisfaction: The ultimate aim of business is to supply goods to the consumers. The goods are produced for the consumers. If the consumer is satisfied then he will purchase the same thing again, otherwise he will go in for an alternative commodity. The businessmen should try to satisfy the consumers so that the demand for his products is maintained. The existence and expansion of business depends upon the liking of the consumers for the products of that business. The businessman should try to produce goods according to the likings and tastes of consumers. The commodities should also be made available when they are needed. Business and consumers exist for each other.
12. Satisfying Social Needs: The business should aim at serving the society at large. The business is a socio-economic institution. It must look to the public good. A great emphasis is laid, now a-days, on the social aspect of business and social obligations of business. It is not only the public which needs business but business also needs public support. So, business enterprise must serve public purpose.
FUNCTIONS OF BUSINESS
The functions of business have grown manifold over a decade. In this competitive business environment a business has to perform many additional functions in order to survive and develop. The modern functions of business are the amalgamation of traditional functions like production and marketing and modern functions like research and development and personnel function etc. Some of the important functions of business are as follows:
1. Production of Goods and Services: Production of goods and services is the primary function of every business. Production means transforming the raw materials into semi-finished and finished products. Production depends upon inputs like labour, capital and machinery.
2. Marketing of Production: After the production of goods, the next important step is to send the goods to the ultimate consumers. Marketing of goods and services means creating new customers, educating them about the product and selling the products to them. Marketing involves decisions like product designing, packaging, branding, pricing, advertising and distribution. Business houses these days lay great emphasis on marketing of their products. For this purpose, they have separate marketing departments.
3. Research and Development: Research and development is also very important function of a business. With the changing technology, it is very important for a business to keep at pace with it. For this purpose, business should lay emphasis on R & D. In modern day businesses we see separate R&D departments in many organizations. Business spends lot of finance on research and development of new products and services.
4. Human Resource Function/Personnel Function: It is the human beings which make a business. The human resource function is concerned with the people at work. One of the important functions of business is to select, recruit, induct, train and develop the personnel of the business. This requires a sound wage policy, incentive plans and effective grievance redressal plans. The human resources of the organisation should be nurtured so as to get the best out of them.
5. Finance Function: Finance is the life blood of every organization it is needed not only to start and maintain the business but also to expand and diversify it. The business has to decide the various sources of finance and also the areas where it can be channelised. For this purpose, budgets are made every year. The control system of the business should be such that there is no wastage of financial resources of the business.
REQUIREMENTS OF SUCCESSFUL BUSINESS
Profit and loss account and balance sheet are not the sole criterion for judging whether the business is successful or not. Modern day business has become very complicated and complex. So, a business has to meet many parameters to be called a successful business. Some of these parameters are discussed below:
1. Sound Organization: In a successful business there is a sound organizational structure where the role and responsibilities of all the employees are properly defined. There is unity in direction in the organization and all the employees aim at improving the health of the business.
2. Well Defined Objectives: In a successful business the objectives of the business are decided well in advance in a democratic manner. The involvement of all employees at all levels of hierarchy acts as a great motivator.
3. Financial Planning and Control: Finance is the most important component of any business and finance is always limited, therefore, a successful business is one which has sound financial planning and control over its finances. The finances are put to best use and all efforts are made to check the wastage of finance in unproductive activities.
4. Coordination amongst all departments: In a successful business there should be total coordination amongst all departments. This leads to uninterrupted production and supply of goods and services and lessens the conflicts among employees.
5. Proper Grievance Redressal System: There may be many disputes between employers and employees, employees and management, consumers and management etc. A successful organization has proper, well established grievance redressal system.
6. Well-developed Research and Development Programme: To keep at pace with fast changing technology, a successful business should always lay emphasis on research and development of newer, cost effective and quality products.
7. Proper Marketing Network: A successful business unit should have a well-knit and coordinated marketing network. It should be sensitive to consumer needs and aspirations and design its products and services accordingly.
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