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tOta*OKOKO *o*, KOXOX, 1, NATURE AND SCOPE, OF, BUSINESS, LEARNING OBJECTIVES, After studying this chapter, you should be able to know:, Concept of Business, I Objectives of Business, Business Risk, Commerce, Industry, Aids to Trade, SYNOPSIS, 1. Introduction, 2. Concept of Business, Characteristics / Features of Business, 4. Classification of Economic Activities, 5. Objectives and Importance of Business, 6. Classification of Business Activities, 7. Business Risks, 8. Distinctions, 9. Key Terms, 10. Exercises, Scanned by CamScanner

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People engage in different activities with certain purpose. Some activities are, carried on only with a purpose to earn a livelihood or to acquire wealth. But a few, personal affection or love for the family, society or nation. In other words all, others are carried on for pleasure and entertainment or are motivated by, human activities are consistently directed towards satisfaction of these needs or, wants. Human needs are of several types and are unlimited. However, the means, activities can broadly be divided into Economic Activities and Non-Economic, Activities; we know that human beings satisfy these needs by engaging, 1. INTRODUCTION, activity., Every human being in this world is engaged in some work or some, or resources available are limited. Depending on wants or needs, all hume, themselves in some kind of occupation. The money earned by engaging in some, occupation, utilise for satisfying their physical needs. Therefore, such activities, are known as Economic Activities. The other needs are emotional in nature, They consist of desires like status, love and relationship with others. The, satisfaction of these needs provides a feeling of meaningful and happy life. The, activities undertaken by the people to satisfy these wants are known as Non., Economic Activities., 2., CONCEPT OF BUSINESS, Business literally means to be busy. It is associated with any activity that, one can be busy about. Precisely, the meaning of business is that of being busy, to earn income. Thus, all human activities or occupations concerned with the, earning of money or money value are included under the term 'business'. It is a, wide term and covers a variety of recurring acts like production, or purchase and, sole or exchange of goods or services to satisfy the needs and wants of other, people and earn income., Definition, It will be appropriate here to go through some of the popular definitions of, the term 'business' given by different experts., Lewis H. Hanky : "Business may be defined as human activity directed, towards producing or acquiring wealth through buying and selling of goods"., Robert N. Ownes : "Business is any enterprise engaged in the production and, distribution of goods for sale in market or rendering services for a price"., B.Q. Wheeler : "Business is an institution organised and operated to provide, goods and services to society under the incentive of private gain"., F.C. Hooper: "The whole complex field of commerce and industry, the basic, industries, processing and manufacturing industries and network of ancillary, services, distribution, banking, insurance, transport and so on, which serves and, interpret the world of business as a whole"., Peterson and Plowman: “Business may be defned as an activity in which, different persons exchange something of value, whether goods or services for, mutual gain or profit"., Thus, 'business', may be defined as 'an economic activity, which involves, recurring act of production or exchange of goods or services at a profit'., Business as an Economic Activity, Business is considered to be an economic activity because it is concerned, with the creation of wealth. As an economic activity it involves production,, Scanned by CamScanner

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3, Nature and Scope of Business, 1. The purpose behind every sale or exchange of goods and services is to, carn profit. If a housewife prepares cake for her family, it is not business, of profit. Business is regarded as an economic activity for the following reasons :, on regular basis to earn income in the form of profit, it is termed as, business., 2. Business activities require use of human and physical resources like, land, labour, capital, machinery, material, management etc., 3. Business activities satisfy the needs of businessmen and wants of people., The businessmen produce goods or sender services and people buy them, for money to satisfy their wants., Thus, business activities satisfy all the features of economic activities, it is, regarded as economic activity., What is business ?, 3. CHARACTERISTICS/ FEATURES OF BUSINESS, The salient features of business can be summarised as follows :, 1. Exchange, All business activities involve, which are directly or exchange of goods and, services for a price or value. If there is no sale, transfer or exchange for a price,, then it will not be a business activity. For example, baking cake for personal, consumption is not a business. But baking cake and selling it to others for a, price becomes business., Dealing in goods or services, Business involves buying or selling of goods and services. Goods may be, consumer goods or producers goods. Consumer goods like food grains, cloth,, shoes, soaps, medicines, furniture etc. are meant for direct use by the ultimate, consumers. Producer's goods like building, machinery, tools, raw material etc., are used for production of consumer goods. Producer's goods are also called as, capital goods or tangible assets. Services are invisible or intangible benefits, provided to the customers for value such as transport, insurance, banking,, supply of electricity etc., 3, Minimum two parties, In any business activity minimum two parties are involved, a buyer and a, seller. Business is an agreement between a seller and a buyer., 4. Element of regularity, Business consists of regular or repeated deals. A single deal cannot be, termed as a business. Recurring exchange of goods and services is an essence of, business. For instance, if a person sells his old T.V. set at a profit, it is not, business. But if he keeps stock of T.V. sets and sells on a regular basis, it will, constitute business., 5, Risk or uncertainty, Business involves many uncertainties and element of risk in respect of the, return or profit that the businessman may earn on his investment in the, business. But during the course of business, he may have to suffer the losses, Scanned by CamScanner

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Business Organization - (B.Com. - I) - (Nag, Uni, due to changes in prices, fashions, changes in government policies, loss by fire, etc., 6. Profit motive, The main purpose of business activity is to earn profit and acquire wealth, Profits are required for the growth, expansion and survival of business. The ,, business that does not earn profit cannot survive for long, it must earn prof, cannot survive for long, it must earn profit by serving the society., Creation of utilities 34i t, The purpose of any business is to create various types of utilities such o, form, place, time and possession utilities. Business creates various types of, utilities in goods, so that consumers can use them. For example, when rau, materials are converted into finished goods, it creates form utility. Similarly., when goods are transported from the place of production to the place of demand, by the consumers, it creates place utility., Business organization, Any business enterprise requires an organisation for its successful, functioning. A businessman should have a special knowledge and skill to run the, business, which helps, in smooth running of the business and achieving the, required goals., 7., 8., Consumer satisfaction, The main aim of the business is to supply goods and services to consumers., The goods supplied should satisfy the consumers which helps in maintaining the, demand and thereby the continuity of the business., 10. Satisfying social needs, The business serves as a socio-economic institution. The business should, serve the society at large and should not involve in exploiting it. The dependence, of business and society on each other is the soul of economic activity., Explain the main features of business., 4. CLASSIFICATION OF ECONOMIC ACTIVITIES, These are the activities, which are performed for money or money's worth., There is a consideration for these activities. Such activities are related to, production and exchange of goods and services. A doctor treats his patients and, charges fees. A teacher teaches and gets a salary. A worker works in a factory, and gets wages. The basic objective of economic activities is to earn and, accumulate wealth., Economic activities are classified into three categories as given below :, 1. Profession,, 2. Employment,, 3. Business (i.e. Industry and Commerce).., 1. Profession, It is an occupation carried out by professional people like doctors, lawyers,, architects etc. It involves rendering of services., Features, i) The services rendered by professionals are specialised requiring skill and, expertise., Scanned by CamScanner

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iii) The professionals charge fees for the services rendered., Nature and Scope of Business, 8,8,8, etc., skills to start their practice., v) Companies may hire the services of professionals., 2. Employment, signed by him with his employer. The agreement contains rules and regulationns, governing the employment. The person who employs is called an employer and, the person employed is called an emplovee. An employee receives salary for uie, services rendered by him., 3. Business, Business = Production + Distribution., The term business literally means a state of being busy., The Webster's dictionary defines business as "Buying and selling of, commodities and services and connotes-profit motive". 31A lla, Stephenson defines it as "The regular production or purchase and sale of, goods undertaken with the object of earning profits and acquiring wealth through, the satisfaction of human wants"., Dicksee defines it as "a form of activity performed with the object of earning, profits for the benefit of those on whose behalf the activity is conducted"., From the above, it becomes clear that business is any activity conducted with, view to earn profit.., Features of Business Activities, i) Exchange Every business transaction is concerned with transfer of, goods or services for cash or credit. The word exchange relates to buying, or selling., ii) Two parties : Every business transaction has a minimum of two parties,, a buyer and a seller. Business is nothing but an agreement between, these two parties., iii) Dealing in goods or services : Business involves an exchange of goods, or services., a) Goods can be of two types : (i) consumer goods like food grains,, soaps, medicines, furniture etc. or (ii) Producers goods which help in, the production of consumers goods like machines, instruments, tools, etc., b) Services are intangible but can be exchanged for value like provision, of transport, warehousing etc., iv) Series of activity : The term 'business' implies not one isolated, operation or transaction, but a series of successive activities undertaken, with the object of earning profit. For instance, if a person sells his old, scooter, it is not business even if he earns some profit or incurs loss. But, if he keeps a stock of scooters and regularly deals in scooters, it is a, business., v) Risk or uncertainty : Business involves many uncertainties. It has an, element of risk. A businessman generally aims at earning profit, but he, may have to suffer losses arising from changes in prices, changes in, Scanned by CamScanner