Business refers to an enterprise or an entity that engages in commercial, manufacturing, or professional activities. Additionally, the word “business” refers to the coordinated efforts and activities of individuals involved in producing and selling products and services for profit.
Business includes the entire dynamic field of commerce and industry, including the fundamental industries, production and manufacturing industries, and the network of special arrangements such as distribution, banking, insurance, and transportation. If we were to describe a business in far more precise terms, we might conclude that it is “any occupation that involves all activities associated with the manufacture or purchase of products for sale and adds a profit margin to those costs in order to resell them to the consumer to meet their needs.”
Characteristics of Business
1. Economic Activity
Business, by definition, must be an economic activity. However, what is an economic activity? Economic activity is described as any activity that generates a monetary profit. For instance, if your friend’s father picks you up and drops you off at college each day, he acts kindly. However, if he starts a transportation service that charges for pick-up and drop-off, that is an economical operation.
2. Production of Goods and Service
If a business wishes to sell a product, it must either produce it or buy it, add a profit margin, and resell it. Business is concerned with any operation that involves the manufacture or acquisition of products for resale, which makes it one of the most critical characteristics of a business. Transportation, housekeeping, and security are all available for purchase. In comparison, commodities are mostly consumable objects.
3. Exchange of Goods and Services
After manufacturing or procurement, the third and most critical business feature is to sell the product for profit. The way to sell a product or service is to introduce it to the market or make it available for purchase. Between the seller and the buyer, a sale or trade must occur.
4. Profit Earning
The prime objective of business is profit maximisation. Profit growth is necessary for a business to survive in a market. If a company is unable to generate profit, the financial decline is anticipated. As a result, the businessman employs all available strategies to increase profits, whether by rising sales volume or decreasing costs.
5. Uncertainty of Returns
Entrepreneurs invest significant resources in their businesses in order to support and benefit from them. As mentioned previously, the amount of profit gained is highly uncertain. Frequently, there are circumstances in which there is no benefit to be made. There is always a possibility of failure in business operations.
Different forms of Business Organisations
All businesses must adopt some legal framework that determines the rights and responsibilities of individuals in the ownership, control, personal responsibility, lifetime, and financial structure of the company. You must understand the advantages and drawbacks of each type of business organisation to make the best choice for your new venture.
1. Sole Proprietorship
This is the simplest and most straightforward method of getting started. Simply choose a name and begin using it. A sole proprietorship is not limited in terms of jobs, asset acquisition, intellectual property registration, or bank account opening. There is no paperwork required to signify the venture’s formation. It necessitates minimal paperwork and legal enforcement. The issue is that this framework is not growth-friendly.
2. Partnership Firm
A partnership firm may be formed by two or more individuals. It is necessary to prepare a partnership deed, which must be signed by both partners, indicating the partnership’s formation. This deed must explicitly state the firm’s name, the partners’ names, the capital invested by each partner (currently and in the future), the benefit or loss share ratio between partners, the partnership’s company, and each partner’s responsibilities, rights, powers, and obligations.
3. One-person company
The one-person company (OPC) concept would promote the corporatisation of entrepreneurship. The OPC should be registered as a private corporation with at least one director and one member.
4. Limited Liability Partnership
In an LLP, the company is fully responsible for its properties, but individual partners’ liability is minimal. Thus, partners’ personal properties are also shielded from harm resulting from the actions of other partners or staff who are not directly under their control.
Categories of Business
A manufacturer is an individual or business that creates finished products from raw materials through the use of various machines, machinery, and processes and then sells them to customers, wholesalers, distributors, retailers, and other manufacturers for the creation of more complex goods.
A distributor is a middleman who facilitates the distribution of products and services across the business network. The dealer acts as an agent for the manufacturer, stocking and trading the commodity with retailers in various regions and locations.
A supplier is a person or entity that acts as a source for products and services. A supplier collaborates with manufacturers and wholesalers to ensure that they receive the products they need.
A retailer is an individual or company from whom you buy products. Usually, retailers do not make their own products. They acquire products from a manufacturer or a wholesaler and resell them in limited quantities to customers. Retailing is the mechanism by which a store acquires products or services and then sells them to consumers for use.
Business services is a broad concept that refers to work that assists a business but does not result in the production of tangible goods. IT is a critical business service that underpins several other business functions such as sourcing, distribution, and finance.
An investor is an individual who invests money in a company or another organisation in order to earn a profit. Any investor’s primary objective should be to minimise risk while maximising reward. In comparison, a speculator is someone willing to invest in a risky asset in the hope of making a greater profit.
Examples of Business Industries
The transportation industry is one of the most diverse business sectors. This business is concerned with the transportation of people, items, and animals through a variety of modes of transport. Air, land (Road and Rail), and water are the primary modes of transportation. Transportation accounts for the lion’s share of every country’s economy.
Agriculture is one of the oldest business sectors. Agriculture is the process of cultivating soil, plants, and breeding animals in order to produce food and other necessities for life. This industry is critical to the economic health of every nation. Agriculture underwent modernisation in the late twentieth century, dubbed the “Green Revolution.”
The food industry is responsible for the manufacturing, storage, conversion, and preservation of consumable products. Agriculture provides the raw material for the food industry. As a result, the food industry is reliant on agriculture. The food sector has expanded exponentially over the last decade as people’s lives have become more hectic and demand ready-to-go food.
4. Health Care
The health care sector provides patients with curative, diagnostic, preventive, rehabilitative, and rehabilitation services. The primary objective of this industry is to restore and preserve people’s health. This is a lucrative business sector for people in business and entrepreneurs. Every country’s government invests heavily in this business.
The entertainment industry is a multibillion-dollar company. It encompasses an infinite number of sub-sectors of entertainment. This industry is entirely dependent on entertainers and viewers. Since ancient times, entertainment has been an integral part of human culture, but it has recently become commercialised. This industry has evolved at a breakneck pace over the last century.
The technology sector refers to items involved in the study, production, or distribution of technologically advanced products and services. This sector includes businesses engaged in electronics, software development, computer design, and information technology-related products and services.