We all require different types of goods and services to safety our needs. This results in appropriate activities by people to produce and sell what is required by certain others.These are part of what we call as human activities.Today we will discuss about Characteristic Of Business
To know the Characteristic Of Business we have to know about these are part of what we call as human activities. All human activities can be divided into two groups viz.(i) Economic activities and (ii) Non -Economic activities.
Difference between ECONOMIC and Non – ECONOMIC Activities:
- Economic Activities : Economic activities are those activities which are performed to earn livelihood. The main aim of these activities is to earn money. The end result of these activities is production of goods and services. For example: A teacher,a carpenter,a doctor,an artist, a labourer etc.
- Non – Economic Activities : Non – Economic activities are those activities which are performed out of love, sympathy, sentiments, patriotism etc.The main aim of these activities is psychological satisfaction.The end result of these activities is mental satisfaction of person performing them. For example: A teacher teaching her own son; a doctor treating poor patients without charging any fees etc.
Types Of Economic Activities :
Economic Activities are further classified into three parts viz.(i) Business ,(ii) Professional, and (iii) Employment.
- Business : Business is an economic activity which is concerned with production , purchase , sales or distribution of goods or supply of services with main aim of earning profit. The main aim behind all business activities is to earn money by satisfying people’s needs for goods and services. Hence, business occupies a central position in our lives.
- Professional : Profession is an economic activity that requires special knowledge and skill to be applied by individuals for earning their living.The individuals engaged in professions are known as professionals.For example, doctors are professionals engaged in medical profession and have to follow the codes of conduct laid down by Medical council of india. Similarly, Chartered Accountants are in accounting profession and are governed by the Institute of Chartered Accountants of India.
- Employment : Employment is an economic activity in which people work for others and get remuneration in return.The people who are employed by others are known as employees and the people or entities that employee them are known as employer.For example,people working in any organization as managers , clerks , peons , assistants , salesmen etc.
Concept Of Business :
The word Business has been derived from the word ‘Busy’. Hence, business refers to being busy; it is an activity which is performed by the people regularly in order to earn profit. For Example, manufacturing, transportation, banking, retailing etc. Business is an economic activity which is concerned with production, purchase, sale or distribution of goods and providing services.Its chief goal is to earn profit by satisfying human needs in society. These enterprises perform four major functions viz. (1)Financing, (2)Production, (3)Marketing and (4)Human Resource Management.
- Financing : Financing refers to obtaining and using funds for running the business.
- Production : Production refers to converting the raw material, components etc. into finished product or generating services.
- Marketing : It is a business activity concerned with transferring goods and services from the producers to the consumers at the right place, right time and right price.
- Human Resource Management : This function involves ensuring availability of people with right profile for performing different jobs in the organization.
Characteristics Of Business:
As discussed earlier, Business is an important economic activity which possesses the following characteristics :
- An economic Activity : Business is an economic activity undertaken with the main aim of earning money or livelihood. Activities done out of love ,affection, sympathy etc do not come under the category of business.
- Production or Procurement of Goods and Services : The business enterprise either produces goods,or procures them from producers, before they are offered for sale to the consumers. These can be ‘consumable goods’ like sugar,pen,clothes etc. Or ‘capital goods ‘ like machinery tools etc and ‘services’ like transportation, banking etc.
- Sales or Exchange of Goods and services for the satisfaction of Human Needs : Business involves sales or exchange of goods and services for money. It can not be termed as a business activity if goods are produced for self consumption and not for sale . For example, if the owner of a stationery shop purchases a pen for his personal use, it is not a business activity. But if he sells the pen to a customer, it is termed as business activity.
- Dealing in Goods and Services on a regular Basis : One single transactions of sale or purchase of goods cannot be termed as business. Thus ,business must involve exchange of goods and services on a regular basis.
- Profit Earning : The main aim of every business is to earn profit.Earning profit is essential for the survival of the business. For this purpose, a businessman always tries to minimise the cost and maximise the revenue.
- Uncertainty of Return : Another important feature of every business is uncertainty of return. A businessman invests money to run the business but he is not certain about the amount of profit that he may earn.
- Element of Risk : The possibility of inadequate profit or even losses due to uncertainties or unexpected events is always associated with the business. Every business is exposed to some amount of risk. The risk can be caused by factors like changes in methods of production , change in fashion, increased competition, fire , theft , strikes etc.