What is a Business Concept?

Definition: A business concept is a statement that describes the reach and reason of existence of
a given business idea. In other words, it sums up the crucial elements that define the business.

A concise definition of what a business concept is varies from author to author. The reason for
this is that describing a business is never a formula. There are different ways to communicate
what a business do and why it exists. Nevertheless, there are some key elements that must be
explained by a business concept for it to be considered useful and informative. First of all, the
product or service being offered must be easily understood.

This means that whatever the company is offering must be clearly communicated through the
business concept. On the other hand, the target market should also be mentioned in this concept.
This market will be the segment that the business is looking to serve.

Finally, the company’s overall competitive advantage should conclude the statement, to describe
how this proposal differs from what already exists. Business concepts are employed regularly in
the business world, most commonly to present new business ideas to potential investors and also
as institutional information displayed to the public to transmit the essential qualities and
elements behind a given business.

Example

For example, Calories Watch is a mobile app designed to track the amount of calories being
burned during an exercise routine. The app calculates an estimate by inputting the nature of the
training and the time spent on it. The company’s founder Mr. Puller is preparing a business
document to potential investors where he will explain his idea and how it can make money for
them. In order to do this, he needs to come up with a business concept that is both appealing and
informative for these individuals.

As we previously discussed, a business concept explains the reason of existence and reach of a
given product or company. In this case, a business concept for Calories Watch might be the
following: “Calories Watch is a mobile app designed for fitness enthusiasts to help them track
their progress while they are training. This app measures the amount of calories being burned by
using innovating calculation methods that no other app is currently able to provide”.

What are the Nature, Components and Scope of Business?

Most people think that the scope and nature of the business are very wide. It covers almost all
activities associated with the production and distribution of goods and services from a source
(the production place) to the destination (consumers) and aims to earn the profit.
There are two types of business activities or Business Components. These components actually
define the scope of a business to us. Let’s enlighten the scope of a business organization with the
help of these components.

Role of Business Components in the Scope of Business Organization

Following business components play an important role in the scope of business:

Industry

The word “Industry” refers to the business activities which are linked with the extraction and
production or manufacturing of products. The product formed by an industry is either used by the
vital consumers or again by the industry. If the product is used by the consumer it is called
consumers’ goods such as clothes.

If the product is used again by the industry it is called the producer’s goods or capital goods. In a
case when a product produced by the industry is further processed into finished products for
other purposes they are called intermediate goods. e.g. plastic.

The industry is further divided into types on the basis of business activity:

 Extractive Industries

The industries which extract, raise and manufacture raw materials from above or under the
Earth’s surface are known as Extractive Industries and they include mining, fisheries, forestry
and agriculture, etc.

 Genetic Industries

The industries which are involved in reproducing and multiplying certain species of animals and
plants and sell them in the market to earn a profit are named as Genetic Industries. These
industries include cattle breeding farms, poultry farms and plant market, etc.

 Constructive Industries

The industries which are involved in the construction of building, canals, bridges, dams and
roads, etc. are called Constructive Industries.

 Service Industries

The industries which are involved in manufacturing the intangible goods which cannot be seen
but felt such as services of professionals like doctors, lawyers are examples of Service Industries.
Commerce

The second component of the scope of business is Commerce. It involves the buying and selling
of goods and all the activities which are associated with the transfer of goods from the
production source to the ultimate consumers or destination. The ranges of activities related to
Commerce take place through:

 Trade

The process of buying and selling goods is called Trade. It is the process of exchanging goods
and services amongst the buyers and sellers and both of them earn profits. Trade can be
classified into two types; internal and external.

1. Internal Trade: The process of buying and selling goods within a country is called internal
trade. The internal trade can be either wholesale trade or retail trade.

2. Wholesale Trade: In wholesale trade, the goods are purchased in bulk from the producers
and sell them to the retailers. These retailers then sell these goods to the final consumers.

3. Retail Trade: In the retail trade, the retailer sells goods and services to the final consumers.

4. External Trade: The process of buying and selling goods between the two countries is
called external trade. The external trade has two types; import trade and export trade.

The elements which help in the purchasing of goods and services are called aid to trade. There
are certain constituents that are essential for the progress of the trade and are as follows:

 Transport

By using different ways of transport, the goods are transported from industry to the consumers. It
includes railways, ships, airlines, etc.

 Insurance

Insurance is very important to aid to trade. Insurance reduces the risk of damage to goods due to
fire, flood or earthquake, etc. by paying a good amount in this regard.

 Warehousing

Warehouses are used to keep the goods and are released and are delivered to the market when
demanded. Thus, warehousing plays an important part to overcome the barrier of time and helps
the goods reach the consumers in a short span of time.
 Banking

Commercial banks play an important role in financing trade activities. They provide funds to the
traders for stock holding and transporting the goods. They also support the producers in
purchasing and receiving at both national and international levels. The banks also offer credit
facility in the form of cash credit, overdrafts and loans to the traders.

 Advertisements

Advertisements play an important part in selling the good to the consumers. The advertisement is
either shown on television or printed in newspaper or magazines etc. and help the consumers to
choose their desired product. Thus, advertisements are very important for the seller as well.

Meaning of Business System:

The system helps the business organisations to achieve their goals.

A business system is a combination of policies, personnel, equipment and computer facilities to

co-ordinate the activities of a business organisation.

It establishes the rules and procedures of that organisation, which are to be governed.

Business system decides how data must be handled and is methodically processed. It also
controls the procedures of the processed data and the results to be displayed. For e.g. a system
may automatically order parts for an inventory, monitor future corporate profits or post credit
card sales to the on line customer accounts. The overall nature of the business system will reflect
the efficiency of its designers.

Objectives of Business System:

The objectives of business system are:

1. To meet the user and customer needs.

2. To cut down the operating costs and increase savings.
3. To smooth the flow data through various levels of the organisation.
4. To speed up the execution of results with the reliable data available in a system.
5. To handle data efficiently and provide timely information to the management.
6. To establish the most desirable distribution of data, services and equipment’s throughout the
organisation.
7. To define a proper method of handling business activities.
8. To eliminate duplicated, conflicting and unnecessary services.

Types of Business Systems:

There are five major types of business systems (Fig. 13.6).

1. Payroll business system

2. Personnel business system

3. Accounts receivable system

4. Accounts payable system

5. Inventory system.
1. Payroll Business System:

A payroll system consists of all forms, procedures, files, equipment’s, personnel, and computer
support necessary to completely process the payment of employees. A payroll system fully
handles all tax deductions, personal deductions, and the update of payroll data related to each
employee.

It provides for the actual payment of employees, a record of that payment, the modification of all
payroll records, and the preparation of payroll reports. The payroll system must also generate all
tax documents to include pay-cheques, W-2 statements, 941 quarterly reports, and a wide range
of state and municipal employment tax filings.

Another payroll responsibility is the accurate reporting of all personal deductions to include
bonds, medical and life insurance, profit sharing plans, stock options, credit union deductions,
and the garnishing of an employee’s salary by a creditor.

These accumulated totals must be reported accurately to both the recipient of these movies and
the individuals from whose salaries these amounts were deducted. The computer’s support
makes it possible to accurately and promptly process a payroll, providing the input data are
properly handled on a timely basis.

2. Personnel Business System:

Personnel system describes varied aspects of an organisation’s work force. The outputs
generated by personnel systems are frequently used in compiling central & state labor power
reports. Retail organisations are major users of accounts receivable systems, since these systems
detail monies that are owed to an organisation.
Conversely, accounts payable systems focus on the monies that are owed to an organisation.
These two systems parallel to each other, requiring the continued maintenance of files, their
update reporting on movies due and owed, providing customer statements and invoices, and
recording payments made.

3. Accounts Receivable System:

An account receivable systems are monitors the flow of money. An accounts receivable system
monitors the people who owe money to a business. It provides the means to process all data for
credit cards and other kinds of charge accounts.

The files contain the individual customer data, including names, addresses, financial charges
like, payments received and current charges. The information is issued as monthly statements of
each customer and also provides useful information for management’s use.

4. Accounts Payable System:

Accounts payable system monitors the organisation to which money is owed. The file structures
and input/output (I/O) formats are similar as the accounts receivable system. It contains the
accounts of vendors to whom money is owed. Input will have goods and services received by the
company while outputs include issue of payments and management reports.

5. Inventory System:

Inventory system monitors the status of items held in an inventory. These systems report on the
quantities of goods on hand, as well as when items should be purchased to replenish stock and
what critical items are needed. Inventory systems are crucial to organisations that maintain large
and costly inventories.

What is a business objective?

A business objective is a measurable result an organization is aiming to accomplish. Many

business professionals form objectives using the SMART goal method, which stands for specific,
measurable, achievable, relevant and time-based.

As the organization grows, it's important to regularly form new business objectives to effectively
track employees' performance and ensure the business is progressing and improving.

Business objectives are also a great way for you and your team members' employees to identify
your strengths and areas of improvement. Once you determine these, you can implement new
strategies to help enhance your own performance, which contributes to improving the
organization's efficiencies overall.
Why are business objectives important?

Creating a strong business objective is important for your organization because it:

 Keeps employees focused on growth

 Strengthens key elements of the business

 Motivates you and/or team toward a goal

 Helps structure tasks and responsibilities

 Can increase your market share

 Drives team cooperation and collaboration

 Builds better working relationships

 Can promote better cost control and budgeting

The four main objectives of a business

While every business might have specific goals according to their specific industry, team,
product, financial standing, business objectives often fall into four main categories:

 Economic

 Human

 Organic

 Social

1. Economic objectives

Most businesses cite financial growth as an overarching goal or business objective, but
depending on your business’s unique financial needs, your economic objective could be:

 Survival: While the ultimate goal is to make enough money to pay for all overhead costs
and also make a profit, small businesses or new businesses might be focused on simply
making enough revenue to cover the costs so that they can stay in business.

 Profit earning: Beyond business survival, owners want to earn enough to have a salary
and/or be able to grow the business.
  Growth: Most business owners consider growth: how they will grow, what actions they
will take when demand outpaces production and how short- and long-term growth will
affect their business.

2. Human or individual objectives

The motivation of human objectives in a business is to find ways to meet the needs of your
employees, so that they feel valued and supported. Common examples of human or individual
objectives include:

 To pay competitive salaries

 To offer employee perks, like unlimited vacation or team appreciation events

 To provide safer and more health-conscious working environments

 To provide personal growth and development opportunities

 To provide incentives to motivate employees

3. Organic objectives

Organic business objectives are goals that incorporate all aspects of the business: its
development, survival, progress and outlook. Common examples include:

 To use profits to raise capital or strengthen the business

 To use growth models to contribute to business’s success

 To drive innovative ideas through focused activities

 To improve brand and reputation

 To grow production size to meet demand

4. Social objectives

Social business objectives are created to help or give back to society in some way. Businesses
often set social goals:

 To ensure better quality products for customers

 To ensure fair prices for customers

 To ensure fair trade practices

 To ensure fair employment practices (anti-discriminatory)

  To protect the environment by taking reasonable steps to limit corporate carbon footprint

 To serve the community (schools, charities, social programs etc)

Common types business objectives

As you establish your business objectives, try to work with your team to determine strengths and
opportunities for improvement. Determine what kind of time, commitment and resources your
short- and long-term objectives will require, and start formulating how you meet them. To help
brainstorm, we’ve included some of the more popular objectives business’s use to succeed:

1. Increase your product or service's market share

Improving the number of products or services you sell to customers involves increasing overall
market share. Create and use your list of clients and contacts to find even more prospective
customers. The more customers using the products, the higher your market share.

If the sales team targets other businesses, have them extend their reach by asking them who they
might know who could benefit from this product. If you work for smaller businesses, consider
reaching out to community members or other nearby organizations that could potentially find the
product valuable.

2. Provide opportunities for teams to improve their leadership skills

Strong leaders motivate and encourage their teams to improve. Whether leadership training
opportunities are offered to lower-level employees or executive staff members, an organization
can greatly benefit from these skills.

3. Reduce employee turnover and increase satisfaction

Employees are typically more likely to contribute valuable projects and ideas if they enjoy
working at a company. So, to reduce employee turnover, your business objective should focus on
improving employee satisfaction. Consider offering team members value through competitive
salaries, growth opportunities, education reimbursement programs, unique perks or flexible work
schedules.

4. Reach out to more community members

Being active and engaged in the community is a great way to connect with potential local
customers and can help you establish stronger relationships, build trust and boost brand
recognition. with potential customers. This is especially effective for newer businesses, as it's a
great way for them to get to know community members and build lasting connections.

5. Maintain or increase profits

Especially with start-up businesses, maintaining a steady profit can be challenging over the first
few years. Setting an objective with supporting goals for maintaining profits is an effective way
to ensure a business remains financially stable.

If your business is already established, consider having a comprehensive objective for increasing
profits by brainstorming and implementing new methods and strategies to sell more products and
keep building revenue.

6. Strengthen customer service

To ensure customers and clients have a positive experience with your team, create an objective
that motivates by offering incentives to both your employees and your customers.

Also, communicate how important an outstanding customer experience is every time you interact
with customers. Doing so will inspire your team to meet those challenges and your customers to
value your company for it.

7. Install tools and systems to increase productivity

Several tools are available to help improve productivity for your business.. For instance, you
might use human resources tools to help your HR and management teams complete basic tasks
like recruitment and hiring, time management, onboarding and training and learning and
development. Productivity tools can streamline many tasks to allow you and your team to focus
on larger-scale goals.

8. Grow the organization

There are several ways to set objectives to grow an organization, including expanding the
number of current customers, working in a larger office area or hiring more employees. If a
company is growing, this typically means it's seeing more success and is performing well.

9. Establish the brand message and voice

A company's brand is what customers often associate its product or service with and
differentiates one company from its competitors. To create a new brand or strengthen an existing
one, consider collaborating with the sales or leadership teams to brainstorm. Work to keep brand
voice and messaging consistent in all of your sales and marketing materials.

10. Improve company value

Reputation and profits are important factors that can classify the overall value of a company. As
the business’s value grows, shareholders' interest and commitment to the company will increase.
This can often guarantee that a business remains more financially stable and supported by its
shareholders.
11. Enhance the quality of a business's product or service

When a business increases the quality of its products or services, it should experience fewer
complaints and more positive feedback from customers and clients. This can also drive
customers to recommend your product, which leads to a strong business reputation, an increase
in customer retention and better brand awareness.

12. Become a thought-leader in the industry

A great way to meet larger business objectives is to become a thought-leader in your industry.
Regularly crafting content like blog posts, white papers or eBooks with topics related to the
industry adds value to your customer experience by educating them. The more quality content
you create, the more trust you'll build and more potential customers you’ll acquire.

13. Sell a more reliable product

A great objective for managers and leadership teams is to increase product reliability. Start with
your product development team. Initiate quality and troubleshooting goals to catch opportunities
for improvement. With this information, you’ll be able to consistently provide enhancements and
updates according to customers' needs.

The Interface between Business and Various Types of Business Environment

The important points that explain the interface between business and various types of
environment are as follows:

Both the environment and business are interrelated and interdependent on each other for its
survival and growth. Both cannot- exist without each other. Business to run successfully has to
adjust with the changing environment.

Both business and environment are closely related concepts.

The interface between business and various types of environment can be briefly explained with
the following points:

1. Business and Demographic Environment:

Demography is the study of human population with reference to their age, gender, status,
occupation, income, education etc. The demographic environment differs from country to
country and has significant implications on business.

On the other hand business firm also affect the demographic pattern of a country. Due to
diversified demographic environment, a business is compelled to adopt different functional and
marketing strategies.

For example:
Business undertakes various social welfare programmes like health camps, awareness, and
literacy programmes etc. In the same way rise in the income level of consumers helps in rise in
demand for products.

The business undertakes research activities to turn the potential customers into final customers
with reference to their age, gender, income, status, qualification etc. for undertaking production,
marketing and promotional activities. The business firm has to adjust with the changing
demographic pattern of the country.

2. Business and Economic Environment:

The economic environment of a country comprises of the structure of the economy, economic
resources, level of income, economic policies etc. Any change in the economic policy can have a
positive or negative impact on the working of the business.

Business organisation has to consider the various economies prevailing in the country like import
policy, industrial policy, taxation policy etc. which can have a great impact on the business.

Economic policies like liberalisation, privatisation, and globalisation had a considerable impact
on the business-.

Changes in the economic policy ultimately affect the business. For example: change in the
income structure of the consumers will ultimately affect their purchasing power and sale of the
organisation.

Increase in the income well result into growth of organisational sale and vice versa. Favourable
economic environment helps in rise in the national income and increase in the standard of living.

Favourable economic environment also facilitates increase in foreign direct investment and
growth of industrial sector resulting into growth of economy as a whole.

The business should study the economic environment to understand the market conditions,
international events, to analyse investment policies, competitor’s policies, economic policies of
government etc.

3. Business and Technological Environment:

Technology refers to the set of process in an organisation to transform raw material of resources
into finished goods and services. Technology includes tools- both machine (hard technology) and
way of thinking (soft technology).

It includes not only the knowledge and method but also the entrepreneurial expertise that
enhances the competitiveness of a nation. Technology can greatly influence business decisions. It
helps in minimizing cost, reducing wastage and brings higher efficiency in the production
process. Information technology has brought about revolutionary changes in the world of
business environment.

On the other hand business is responsible for technological up gradation as a huge amount is
spent on Research and Development to introduce new products and concepts in the business.
This technological revolution became a compelling reason for inter-nationalization and
Globalisation. Quick adoption of latest technology will help the business to gain competitive
advantage and facilitates overall industrial efficiency.

4. Business and Natural Environment:

Both natural environment and business are closely related and have influence over each other.
Natural environment is also termed as physical environment Business depends on the nature for
supply of resources like raw material, water etc.

The business has to adjust with the environment to ensure its survival. Ecological factors have
recently assumed great importance. The excessive use of these resources, environmental
pollution and the disturbance of ecological balance has caused great concern. One cannot take
the environment granted.

The business should give due consideration for the conservation of natural resources. Similarly
geographical factors affect the location of industries. Availability of natural resources is the
fundamental factor in the development of industries.

Weather and climatic conditions affect the demand pattern. Manufacturing the most important
aspect of business depends upon physical environment. Thus natural environment has a great
influence on the economic activities. Similarly environment is also depended upon the business.
Business should produce pollution free products and service to keep the environment pollution
free and maintain the ecological balance.

5. Business and Cultural Environment:

Culture refers to values, attitude, belief, morals, customs and traditions. Culture is a critical
component of business environment. Proper understanding of cultural dimension is very
important for product development, promotion, human resource management etc.

Business and culture are closely associated with each other. Culture is the powerful element to
shape the business. The business should come up with various cultural events, thereby promoting
and preserving the rich culture of a country.

Business should be well versed with the culture, language, traditions shared by different
community to meet their wants. Understanding of culture is very essential in the formulation of
business strategies. As culture influence business activities, business also should influence our
culture by promoting festivals and cultural events in the country.

What are the difference between Business, Trade and Commerce

Business:

We may define the term business in the following words :

” As an institution organized by person or group of persons to produce or distribute goods or

services within incentive of earning profit through the satisfaction of human wants. The element
of risk is also involved in it.”

Following are the main characteristics of a business :

1. Every business deals in goods and services.

2. The profit motive in the business is essential.

3. Element of risk is also involved in business.

4. In a business there should be a series of deal.

5. People should do the business for money. Free consumption of goods is not included in
business.

Industry:

Industry is a branch of a business. Industry is concerned with the production of goods and
preparation of goods.

All those activities which produce the goods, or convert the raw material into finished goods or
intermediate goods are included in industry. To produce agricultural goods and mining is also
included in industry. Anyhow the term industry refers to that pan of business activity which is
concerned with the extraction, production or preparation of products. Following are the main
kinds of industry.

1. Primary industry: It may refers to agriculture and forestry.

2. Extractive industry: It includes mining and fishing.
3. Manufacturing industry: It includes the changing of raw material into a more useful form.
4. Constructive industry: The construction of buildings, dams and roads includes in this
industry.
Commerce:

Commerce includes all those activities which are helpful in transferring goods from the place of
production to the consumer. For example purchases, sale, transportation’s, banking, insurance,
storage and advertisement are the activities which come within the scope of commerce.
Manufactured goods do not reach directly from the producer to the consumer. For example
wholesaler purchases the goods from producer and uses the transportation to transfer these to his
store. He also hires the services of bank and insurance company. Then he sells the goods to
retailer. A consumer purchases the goods from retailer. So there are many obstacles in the way of
producer or a consumer.

Mr. James Stephon has rightly stated that” Commerce includes those activities which remove the
hind ranees of time, person and places in the exchange of goods.”

Trade:

Trade is an important part of commerce. All those activities are included in the trade which are
helpful for the exchange of goods between the producer and consumer. The exchange of goods
can be direct or indirect. Those factors which removes the obstacles in the exchange of goods are
included in the scope of trade. Trade can be carried out inside and outside the country. Within
the country trade has two kinds.

Whole sale retail: Trade with the foreign countries is either in the form of exports or in the form
of imports.

Profession:

It means vocation which a person adopts after getting specialized training. The professional man
provides the services of specialized nature to the people. Some people adopt the particular
profession only for the profit motive but others provide the services only. The doctors,
accountants and professor fall in the category of professional. These are performing very useful
service to the society because they have a specialized knowledge particular field. The
professionals who rend free services are very negligible.