CHAPTER – 1

BUSINESS CONCEPTS

Glimpse of Chapter

• Introduction
• Meaning of Business
• Definitions of Business
• Motives for Business
• Objectives of Business
• Business Activities
• Functions of Business
• What is Organisation?
• Questions

1.1 Introduction

The ordinary meaning of the word business is busyness, i.e., any activity in which a man is busy. A man may be busy in two kinds of activities: economic and non-economic. An economic activity denotes work or effort directed towards the production of wealth. In other words, economic activity is aimed at profit. The economic activity of a man is called business. Business, therefore, means the production or purchase of goods with a view to selling them at profit. Besides, if services are rendered on payment to others, they shall be included in the business. A business may be defined as a human activity directed towards producing or acquiring wealth through buying and selling goods and services. The term business includes trade, commerce, and industry. The process of buying and selling goods is called Trade. Such an activity may be carried on within a country when it is called home or domestic trade. It may be called foreign or international trade when it is carried on between two different countries. To help trade, some facilities such as storing, grading, financing, transporting and insuring are needed, these are called Commerce. Industry implies all those processes, which are responsible for the extraction and production of goods which are sold for either ultimate consumption or for further production. So, we may say that Business = Industry + Trade + Commerce. Business Provides Services. There are service enterprises, which provide services like domestic services and financial services, etc., to individuals and business enterprises. Take the example of cinemas or hotels, they render services to the community at large.

1.2 Meaning of Business

The most ordinary meaning of the word business is being busy, i.e., any activity in which a man is busy. Business is a combination of all resources, institutions and organisations, engaged directly or indirectly in the production and distribution of goods and services desired by consumers. Business is an ongoing economic activity, which is related to the continuous and regular production and distribution of goods and services for satisfying human wants.

1.3 Definitions of Business

According to L.H. Haney -“Business may be defined as human activity directed towards producing or acquiring wealth, through buying or selling goods.”

According to Lewis Henry – “Human activity directed towards producing or acquiring wealth through buying and selling of goods.”

According to Person and Plowman –“Business is an activity in which different persons exchange something of value, whether goods or services, for mutual gain or profit.”

On the basis of the above definitions, a business may be described as an economic activity, it refers to the organised production and exchange (national or international) of goods and services, undertaken with a view of earning profits. Such production and exchange take place for satisfying human needs.

1.4 Motives for Business

Following factors provide motives to business:

1. Profit Motive: Personal gain is one of the supreme motivating forces. Business is that sphere of a man’s activity where the amount of effort determines the size of profit. It is needless to say that greater personal effort brings in greater monetary reward. This single factor has resulted in the establishment, running and expansion of business by individuals or groups of individuals.

2. Psychological Factors: It is an old saying that a man does not live by bread alone. It is equally true in business. An entrepreneur may not work solely for amassing a fortune. He may be guided by the ambition to build up a business empire. The biographer of William Lever, the founder of Lever Bros, Charles Wilson quotes Lever, who once said “My happiness is my business.” To grow and become big and to find an industrial empire has been a valid psychological factor for business.

3. Service Motive: It is also a great motivating force. Many people are motivated to render some service to their community. Henry Ford, the founder of Ford Motors stated that “Money chasing is not business”.