Business Concept and Nature

Presented By: Raghvir Kaur

Economic Activities
Economic activities are concerned with production, exchange

and distribution of products and services.

Performed to satisfy the economic needs of the people. Objectives are to earn livelihood and to acquire wealth.

Examples: A manufacturer, a doctor, an agriculturist, a teacher and a labourer working in a factory are all doing economic activities.

Non-Economic Activities
Non-economic activities are performed by human beings

because of social, religious and psychological sentiments.

Performed to derive personal satisfaction which is intangible in

nature.
Element of profits, income and wealth generation are absent

from this. Examples: A person engaged in social work, a teacher teaching his child are non-economic activities.

Human Occupation
Economic Activities Non-Economic Activities
Social, Cultural and Religious Motives

Economic Motives

Generation of Income and Wealth

Generation of Personal Satisfaction

Output measurable in terms of money

Not measurable in terms of money

Business Types of Economic Activities

Profession

Employment

Concept of Business
Business is an economic activity which involves regular production and/or exchange of goods and services with the main purpose of earning profits through the satisfaction of human wants. Organized activities Performed under a framework of an organization Main objective is to earn living/ Profits To satisfy human wants May have other secondary objectives such as welfare of society, work force. Examples: Industry, trade and other activities like insurance and banking

Nature of Business
Deals in goods and services: consumer and capital Production and exchange

Creation of Utility: Form, place and time

Regularity and continuity in dealings

Profit Motive: Survival and Growth

Risk and Uncertainty

Types of Risk Exposure

Changing Technology Changing consumers taste and demand

Increased competition
Shortage of resources Faulty Management Disputes between labour and management Change in Government policies

Meaning of Profession
an occupation which involves rendering of professional services
of a specialized nature based on professional knowledge, education and training.
o Specialized knowledge and training o Membership of a professional body o An established code of conduct o Responsive to the needs of society o Enjoyment of social status o Charge of fee

Examples: Lawyers, Accountants, Doctors

Employment or Service
a person is said to be in the employment of an organization when he undertakes to render personal services under a contract of employment or service.
o Works in an organization : public or private
o Receives salaries or wages and other benefits o Work under a contract o Duties assigned by employer o May be a professionally qualified

Basis Establishment

Business Entrepreneurs decision and legal formalities Production and exchange Profits No formal qualification

Profession Professional body and practice certificate Professional services Earning Income Professional education and training

Employment Appointment letter and service agreement Job given by employer Salaries and wages Required by employer

Nature Motive Qualification

Investment
Return Risk Code of conduct

Capital as per size and nature of business

Profits Present No

Limited capital
Professional fee Present Yes

No capital
Salary Absent Norms laid down by employer

Scope of Business
The whole complex field of commerce and industry, the basic, processing and manufacturing industries, the network of ancillary services: distribution, banking, insurance, transport and so on, which serve and inter-penetrate the world of business as a whole are business activities.

Business Activities Industry Commerce

Trade

Aids to Trade

Meaning of Industry
A business undertaking which deals with growing, extracting, manufacturing, converting , processing and construction is called an industry. An industrial products may fall under three categories :

Industrial Goods

Consumer Goods

Producers Goods

Intermediate Goods

Classification of Industry

Industry

Primary

Secondary

Extractive

Genetic

Manufacturing

Construction

Extraction Industries: Extract and draw out products from natural resources. Products are used by manufacturing and construction companies. e.g. farming, mining, hunting and fishing Genetic Industries: Engaged in breeding plants and animals for their use in future reproduction. e.g. nurseries, poultry farms, cattle breeding farms and fish hatchery Construction Industries: Concerned with the making or construction of roads, bridge, buildings and dams. Theses industries use the products of manufacturing industries. Products are taken to market for sale but produced and constructed at fixed sites.

Manufacturing Industries: Engaged in the creation of form utility, conversion of raw materials or semi finished products into finished products. Use the products of the extractive industry as raw material.
Analytical: Material is analyzed and separated into no. of products.

e.g. Petroleum refining

Synthetic: Two or more material are mixed together to obtain new

product. e.g. Soaps, cosmetics and paints

Processing: Raw materials are processed through a series of

manufacturing operations. e.g. textile, sugar and steel

Assembly line: Finished products of other industries are assembled

together to form one product. e.g. televisions, automobiles, watches and bicycles

Meaning of Commerce
an organized system for the exchange of commodities and distribution of finished products. James Stephenson It is the some total of all those activities which are required for the smooth distribution of goods and services from production point to consumption point to satisfy human wants. Hence it is not only concerned with trade but also aids to trade (i.e. services which facilitate trade) bridge the gap between producers and consumers.

Role/ Functions of Commerce

Hindrance of Person: Traders serve as link between producers

and consumers. Wholesalers, retailers and mercantile agents operate to remove this hindrance.
Hindrance of Exchange: Money as a common denominator

for the valuation of goods and services removes the hindrance of exchange.
Hindrance of Finance: This problem is solved by bank and

other financial institutions.

 Hindrance of Place: The barrier of distance between place of

production and market is removed by the means of transport. Services of insurance, storage and packaging are aimed to remove the hindrance of place.
Hindrance of Time: Function of storage is performed by

warehouses which removes hindrance of time by balancing time lag between production and consumption, thus create time utility.
Hindrance of Knowledge: Advertising and salesmanship plays

an important role to remove this barrier.

Hindrance of Risk: Insurance companies perform risk covering

functions to remove hindrance of risk.

Commerce

Trade

Aids to Trade

Home Trade

Foreign Trade

Wholesalers Mercantile Retailers Agents Import Export Entrepot

Transport Warehousing (Distance) (Time)

Insurance Risk

Bank (Credit)

Advertising (Information)

Kinds of Trade
Home/Internal Trade: Within the boundaries of a

country
Wholesale Trade: Specific type of variety in bulk Retail Trade: a link between wholesalers and consumers. International /Foreign Trade: exchange between two or

more countries. Involves foreign exchange

Import Export Entrepot

Aids to Trade

Inter-relationship between Trade, Commerce and Industry

Industry

Commerce

Trade