The essential features of ‘Business’
a) There must be an Entrepreneur:
To establish a business there must be someone to take the responsibilities. The person who takes responsibilities to establish a business is known as entrepreneur. Here, we may call him as ‘Businessman’. The entrepreneur visualises a business, combines various factors of production and puts them into an operating state.
b) Business Activities are Economic Activities:
Business includes only economic activities. All those activities relating to the production and distribution of goods and services are economic activities. Business is carried on to earn a profit. Activities undertaken without economic consideration will not form a part of business. So, business covers only economic activities.
c) There are Exchanges of Goods and Services:
Business involves exchange of goods and services. The goods to be exchanged may be produced either by the businessman himself or by any other. But the services to be exchanged are generally produced by the businessman himself. Exchange of goods and services is undertaken with profit motive. Production or purchasing of goods and services for personal consumption do not constitute business. The purchase of goods by retailer constitutes business while the purchase of goods by consumer is not a business. The purchase of goods should be to sell them again. The same principle is applicable to services. If a person cooks his food at home, it is not business, but if the same person cooks at a restaurant, it is business, because he exchanges his services for money.
d) Earning of Profit is the Primary Objective:
The object of starting a business is to earn profit. The profit motive is the important element of business. Any activity undertaken without profit motive is not business. A business tries to earn profits out of the business activities. Profit is necessary for the continuity of the business. This does not mean that there will not be any losses in business. The object of starting a business is to earn profit, though there may be losses.
e) There are Risks and Uncertainties in Business:
The business involves larger element of risk and uncertainty. In fact, a businessman tries to foresee the future uncertainty and plan his business activities accordingly. The factors on which business depends are never certain, so the business opportunities will also be uncertain. There may be a shift in demand, strike by employees, floods, war, fall in prices, fluctuations in money market etc. If a businessman is able to foresee future uncertainties and is also able to bear them, then he will be successful, otherwise he may be forced out of business. The risk element in business keeps the businessman vigilant and he tries to execute his policies properly.
f) Continuity of Transactions:
In business, only those transactions are included which have regularity and continuity. An isolated transaction will not be called business, even if the person earns profit from that deal. For example, a person builds a house for himself, but later on he sells it for profit, we will not call it business. On the other hand, if a house building society builds houses and sells them, this will be called business. So, the transaction should have continuity and regularity, otherwise they will not be a part of business.
g) Creation of Utility:
The goods are provided to the consumer as per their likings and requirements. Business creates various types of utilities so that consumer may use them. The utility may be form utility, place, utility, time utility, etc. When raw materials are converted into finished goods, it creates form utility. The goods are transported from the places of production to the ultimate consumers; it creates place utility. In the present industrial system, production is not only for the present but it is undertaken for the future also. The process of storing goods when they are not required and supplying them at a time when they are needed is called creation of time utility. So the business creates many utilities in goods so that consumers may use them according to their preferences and needs.
h) Organisation:
Every enterprise needs an organisation for its successful working. Various business activities are divided into departments, sections, and jobs. An organisation creates the framework for managerial performance and helps in co-ordinating various business activities. A proper organisation is helpful in the smooth running of the business and helps to achieve its objectives.
i) Finance:
Business enterprises cannot move a step without finance. The finances are required for providing fixed and working capital. The availability of other factors of production also depends upon the availability of finance. After estimating its financial requirements, the business tries to find out the sources from which these requirements will be met.
j) Consumer Satisfaction:
The ultimate aim of business is to supply goods to the consumers. The goods are produced for the consumers, if the consumer is satisfied, then he will purchase the same thing again, otherwise he will go for alternative goods. The businessman should try to satisfy the consumers to maintain the demand for his products. The existence and expansion of business depends upon the likings of the consumers for the products of that business. The businessman should try to produce goods according to the likings and tastes of consumers. The commodities should also be made available when they are needed.
Satisfying Social Needs:
The business should aim at serving the society. The business is a socio-economic institution. Now a days, a great emphasis is laid on the social aspect of business. It is only the public, which needs business, but business also needs public support. So, the business enterprises must serve public purpose.