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What is Business?

Meaning
Human beings are continuously engaged in some activity or other in order to satisfy their unlimited wants. Every day we come across the word 'business' or 'businessman' directly or indirectly. Business has become essential part of modern world.

Image Credits Mohddeeb.

Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human wants. All of us need food, clothing and shelter. We also have many other household requirements to be satisfied in our daily lives. We met these requirements from the shopkeeper. The shopkeeper gets from wholesaler. The wholesaler gets from manufacturers. The shopkeeper, the wholesaler, the manufacturer are doing business and therefore they are called as Businessman.

Definitions of Business
Stephenson defines business as, "The regular production or purchase and sale of goods undertaken with an objective of earning profit and acquiring wealth through the satisfaction of human wants." According to Dicksee, "Business refers to a form of activity conducted with an objective of earning profits for the benefit of those on whose behalf the activity is conducted." Lewis Henry defines business as, "Human activity directed towards producing or acquiring wealth through buying and selling of goods."

Thus, the term business means continuous production and distribution of goods and services with the aim of earning profits under uncertain market conditions.

Features of Business
Characteristics or features of business are discussed in following points :-

1. Exchange of goods and services


All business activities are directly or indirectly concerned with the exchange of goods or services for money or money's worth.

2. Deals in numerous transactions


In business, the exchange of goods and services is a regular feature. A businessman regularly deals in a number of transactions and not just one or two transactions.

3. Profit is the main Objective


The business is carried on with the intention of earning a profit. The profit is a reward for the services of a businessman.

4. Business skills for economic success


Anyone cannot run a business. To be a good businessman, one needs to have good business qualities and skills. A businessman needs experience and skill to run a business.

5. Risks and Uncertainties


Business is subject to risks and uncertainties. Some risks, such as risks of loss due to fire and theft can be insured. There are also uncertainties, such as loss due to change in demand or fall in price cannot be insured and must be borne by the businessman.

6. Buyer and Seller


Every business transaction has minimum two parties that is a buyer and a seller. Business is nothing but a contract or an agreement between buyer and seller.

7. Connected with production


Business activity may be connected with production of goods or services. In this case, it is called as industrial activity. The industry may be primary or secondary.

8. Marketing and Distribution of goods


Business activity may be concerned with marketing or distribution of goods in which case it is called as commercial activity.

9. Deals in goods and services


In business there has to be dealings in goods and service. Goods may be divided into following two categories :1. Consumer goods : Goods which are used by final consumer for consumption are called consumer goods e.g. T.V., Soaps, etc. 2. Producer goods : Goods used by producer for further production are called producers goods e.g. Machinery, equipments, etc. Services are intangible but can be exchanged for value like providing transport, warehousing and insurance services, etc.

10. To Satisfy human wants


The businessman also desires to satisfy human wants through conduct of business. By producing and supplying various commodities, businessmen try to promote consumer's satisfaction.

11. Social obligations

Modern business is service oriented. Modern businessmen are conscious of their social responsibility. Today's business is service-oriented rather than profit-oriented.

Types of Business Objectives


There are five types of business objectives, viz., 1. 2. 3. 4. 5. Economic Objectives, Social Objectives, Organic Objectives, Human Objectives, and National Objectives

These types of business objectives are depicted in the following picture.

Objective gives direction to the business. It motivates the owners, managers and employees to work hard. It helps in planning and decision-making. It is used to evaluate (measure) the performance of the employees.

Definition of Objectives
According to Louis Allen,

"Objectives are goals established to guide the efforts of the company and each of its components." According to Dalton E. McFarland, "Objectives are the goals, aims or purposes that organisation wish to achieve over varying period of time."

Nature Characteristics of Business Objectives


The features or characteristics of business objectives are depicted below.

1. Multiplicity of Objectives
Business objectives are multiple in character. That is, a business does not have only one objective. It has many or multiple objectives. This is because a business has to satisfy different groups, i.e. shareholders, employees, customers, creditors, vendors, society, etc. The business has to fix different objectives for each group.

2. Hierarchy of Objectives
Hierarchy means to write down the objectives according to their importance. The most important objective is written first, and the least important objective is written last. All objectives are important. However, some objectives are more important than others. Some objectives need immediate action while others can be kept aside for some time.

3. Periodicity of Objectives

Based on period, business objectives can be classified into two types, viz., 1. 2. Short-term objectives, and Long-term objectives.

The short-term objectives are made for a short-period, i.e. maximum one year. Short-term objectives are more specific. The long-term objectives are made for a long-period, i.e. for five years or more. Long-term objectives are more general. They are like a Master Plan.

4. Flexibility of Objectives
The business is flexible. Therefore, the business objectives must also be flexible. If the objectives are rigid, the business will not survive. This is because the business environment keeps on changing. There are continuous changes in the technical, social, economic and political environment. The business has to change its objectives according to the changes in the business environment. The hierarchy of objectives must also be changed from time to time.

5. Qualitative and Quantitative Objectives


There are two types of objectives, viz., Quantitative and Qualitative objectives. 1. 2. Quantitative objectives are easy to measure. It is expressed in numbers. For e.g. in Dollars, Rupees, Percentage, etc. Quantitative objectives are visible, tangible and countable. Qualitative objectives are not easy to measure. It is not expressed in numbers. For e.g. Employee performance, employee satisfaction, etc. These objectives cannot be measured. Qualitative objectives are invisible, intangible and uncountable. Today modern methods are used to measure qualitative objectives. A business must have both quantitative and qualitative objectives.

6. Measurability of Objectives
The objectives must be clear and specific. It must be easy to measure. For e.g. Each salesman must sell 100 units of water purifier per month. This is a clear and specific objective. It is easy to measure the performance of the salesman. If a salesman sells 200 units of water purifier in a month then his performance is good. He can be given bonus and promotion. However, if a salesman sells only 10 units of water purifier in a month then his performance is bad. He needs more training. Measurable objectives motivate the employees to work hard. This is because they know their target clearly. Their performance can also be measured easily.

7. Network of Objectives

Network means an interconnection between different objectives. A business has many different objectives, viz., corporate objectives, departmental objectives, sectional objectives and individual objectives. It also has objectives for shareholders, customers, employees, etc. All these objectives must be interconnected. They must support each other. They must not clash with each other. They must move in the same direction. If not, the business will not survive. Similarly, the objectives of all the departments, must support each other. They must not clash or conflict will each other.