business-meaning-and-importance

Business : Meaning, Definition and objectives

by

BUSINESS

The word business comes from the word busyness, Thus business means doing things. It works on a regular basis. Business is an economic activity involved in the production, purchase, sales, transfer, and exchange of goods and services on regular basis undertaken with the motive of earning profit with an element of Risk by satisfying human needs in the society. A business should be Lawful. Every business requires some investment in cash or kind or both.

Characteristics of Business

DEFINITION OF BUSINESS

According to B. O. Wheeler- “Business is an institution organized and operated to provide goods and services to society under the incentive of private gain.”

According to James Stephenson– “Business is the sum total of those processes which are engaged in the removal of hindrances of persons (trade), place (transport and insurance) and time (warehousing) in the exchange (banking) of commodities”.

According to L.H Haney– “Business means human activity directed towards producing or acquiring wealth through buying and selling of goods”.

According to Peterson and Plouman, “Business may be defined as an activity in which different persons exchange something of value, whether goods or services for mutual gain or profit”.

CHARACTERISTICS / FEATURES OF BUSINESS

1.An Economic activity: It means an activity aimed at earning money. Business is also aimed at earning money or livelihood by satisfying human needs.

2.Production and procurement of goods and services: Every business enterprise must either manufacture the goods or it acquires from producers. Goods may be consumer goods or Capital goods. Services means facility offered to consumers like banking, insurance,Transportation etc.

3.Sale,Transfer or exchange of goods and services: Business involves sale, transfer or exchange of goods and service for consideration.

4.Dealing in goods and services on a regular basis: It should be a regular activity. One time sale, transfer or exchange will not be considered as business. One single transaction of purchase and sale does not constitute business.

  1. Profit earning: Business always aims at earning profit. Profit is essential for every business. Profit is essential to cover costs and risks of business. Profit is the reward of risk.

 6.Uncertainty of earning: There is always a possibility of less amount of profit or even loss in business.

7.Element of Risk: There is always a possibility of Uncertainty of earnings.

8.Creation of Utilities: An important characteristic of business is the creation of utilities is goods so that consumers may use them. … When raw material is converted into finished goods, it creats form utility. When it is stored and brought into the market when needed, then time utility is created.

  1. Profits are uncertain and irregular; risk is present.
  2. Business should be Lawful.

Read: Bill of Exchange

IMPORTANCE OF BUSINESS

  • Improves the standard of living- Business improves the standard of living of the people by providing better quality and large variety of goods and services at the right time and at the right place.
  • Generates employment – Business provides opportunities to work and earn a livelihood. Thus, it generates employment in the country, which in turn reduces poverty.
  • Utilises the scarce resources- Business utilises the scarce resources of the nation and facilitates mass production of goods and services.
  • Improve national image- Business improves national image by producing and exporting quality goods and services to foreign countries. By participating in international trade fairs and exhibitions it also demonstrates the progress and achievements of its own country to the outside world.
  • Good quality of the product- It enables the people of a country to use quality goods of international standard. This is possible by way of importing goods from foreign countries or by producing quality goods in the country by applying modern methods of production.
  • Batter return on capital-It gives better return to the investors on their capital investment and also provides opportunities to grow and expand the business.
  • Social Welfare-It promotes social interest by providing tourist services, sponsoring cultural programmes, trade shows etc. in the country, which enable people of different parts of the country to exchange their culture, traditions and practices. Thus, it promotes national integration.
  •  It also facilitates exchange of culture among the people of different nations and thus, maintains international harmony and peace.
  • Development of science and technology- Business helps in the development of science and technology. It spends large amount of money on research and development in search of new products and services. Hence a number of innovative products and services are developed through industrial research.

Objective of Business

OBJECTIVES OF BUSINESS

ECONOMIC OBJECTIVES

  1. Profit Earning.
  2. Optimum utilization of resources.
  3. Creating customers
  4. Innovation
  5. Survival and growth

SOCIAL OBJECTIVES

  1. Supplying Desired goods at a reasonable price.
  2. Fair remuneration to employees
  3. Employment generation
  4. Fair return to the investor.
  5. Social Welfare.
  6. Payment of government dues.
  7. Avoidance of anti-social and unfair trade.

HUMAN OBJECTIVES

  1. Labour Welfare.
  2. Developing human resources.
  3. Participative management.
  4. Labour management.

NATIONAL OBJECTIVES

  1. National Self-reliance.
  2. Development of small-scale industries.
  3. Development of backward areas.
  4. Pollution control
  5. Development and Growth

ROLE OF PROFIT IN BUSINESS

  1. Survival : Profit helps an organization to replace old assets and increases the capacity of an organization to survive.
  2. Future Growth and Expansion :Extra profit earned can be utilized for expansion purpose. Entry in new areas helps an enterprise to grow.
  3. Incentive : Profit is an incentive for businessmen who put hard work. Profit motivates the businessmen to put maximum efforts.
  4. Prestige : Profit making organizations can afford to give higher wages/salaries and other facilities to their employees. This can retain employees and attract highly competent persons to join the enterprise. So profit making concern enjoys goodwill in the society.
  5. Achievement of Goals : Only a profit making concern can achieve the goals of an enterprise because the achievement of economic objectives requires expenditure.
  6. A measure of Efficiency: The success of an organization can be evaluated by looking at its profit. So profit is an index of success in business. It measures the efficiency of the business.
  7. Means of Livelihood to Businessmen: Profit is a regular income to the family of business persons.