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CONCEPT OF BUSINESS

Meaning and definitions


The term Business refers to commercial activity related to production and distribution of goods and
services for economic gain that is profit. Business like any other institution is a group effort of producers,
distributors, institutions (like banks and insurance companies) etc., who directly and indirectly
contribute their service to satisfy wants of consumer. Therefore it can be stated that the true business
of any company is to make customers, keep customers, and maximize value of the customers.

Business is an institution organized and operated to provide goods and services to society under the
incentive of private gains- B. O. Wheeler
Business is an organized effort by individuals to produce goods and services, to sell these goods and
services in market place, and to reap same reward for this effort- Keith Davis.
Business is a human activity directed towards producing or acquiring wealth through buying and selling
activities- L. H. Haney.
The above definition are traditional definitions, as they place emphasis only on the profit aspect of
business. A definition on business should focus not only on profit motive, but also on customer
satisfaction and societal interest.
We define business as
Business is an organized activity to identify, anticipate, and to produce and supply customer
requirement efficiently and profitably in the interest of all those who are connected with it.

NATURE OF BUSINESS
The nature of business is explained with the help of its district features, which are as follows;
Organized activity; Business is an organized activity concerned with identification and satisfaction of
customer wants, and thereby gaining profit. Therefore a business firm must undertake a the following
activities.
Identify the requirement of the customer.
Produce and offer product to customer.
Obtain feedback on customer satisfaction.
Profit motive; The primary objective of any business is to earn profit. Profit is the reward undertaken by
a business firm. In todays business world, a firm can gain profit only by cost cutting measures and by
delivering suprerior value to customer. Every firm make effort to maximize profit. Profit can be utilized
for;
Transferring to reserve and surplus.
Returns to shareholders.
Profit sharing with the employee.

Degree of scale; Business can be undertaken at varied degree of scale. Some firm such as sole trading
concerns may undertake business on a small scale and that too on a local area. However some firm such
as joint stock company may undertake business on a large scale, even at a global level.
The degree of scale of business varies depending on factors like availability of finance, capacity to bear
risk, business policy of the firm, competition in the market and so on.

Regularity in dealing; Business involves production and distribution of goods and services. To be
considered as a business, a firm an individual must be engaged in business activity on a regular basis. A
single and rare act of buying and selling cannot be called as business activity.
Regularity in dealing is a relative term and depends upon the nature of activity, times and many factors.
For example. A construction firm may fairly take a long time to construct and sell building and flats, as
compared to a retailer who may buy and sell goods every day. Both these activities may be termed as
business.
Risk and uncertainties ; Business is a subject of risk and uncertainties. A business may be affected or
suffer a loss on account of risk and uncertainties. The risk may be due to the following events;
Market recession.
Changes in fashion, tastes and preference of customers.
Changes in government polices.
Changes in technology.
Damage to goods/property due to fire, natural calamities, civil riots,etc.