All the activities related to the production, distribution, selling of goods and services with a profit motive in order to satisfy human needs and wants can generally be defined a business. There are businesses which fulfil the needs and wants without a profit motive. Accordingly a business is any economic activity which fulfils human needs and wants. The physical and mental conditions which are compulsory to be fulfilled by humans are known as needs. Food, clothes, house, education, health, communication, transport, safety are some of the needs. Wants are the different ways of fulfilling the needs. Rice, bread, string hoppers, tea are some of the examples of wants which fulfil the need of food.Essential for survival, common to all, limited are some of the characteristics of needs. Unlimited, varies from person to person , can be created by businesses, subjective are some of the characteristics of wants.Anything offered to the market which fulfils human needs and wants are known as “Products”. Products can be catergorized mainly as goods and services.Human needs and wants are fulfiled by products. Market is any situation where buyers and sellers meet or connect. Goods and services are obtained from the market to fulfil human needs and wants. The characteristics of a business are Exchange or selling takes place, Transaction of goods and services take place, Continuous transactions will take place, Motivated by profit, Has a risk, Creates wants and An economic activity.
Characteristics of business
1. Exchange or selling takes place.
All the businesses sell or exchange goods and services for monetary value, buying or selling of a goods and services at a price is an essential factor of the business. If there is no such selling or exchange then there is no business activity. For example cooking food for family members at home is not considered as a business whereas cooking food to sell is considered as a business.
2 Transaction of goods and services takes place.
All the businesses produce or purchase goods and services in order to sell others. They can be consumer goods or industrial (business) goods. Goods which are bought for final/end consumption such as bread, clothes, shoes are known as consumer goods. Goods which are bought for the production of consumer goods such as raw materials, machinery are known as industrial / business goods. Intangibles such as electricity, insurance, banking services are some examples for services.
3 Continuous transactions take place
If the transaction of goods and services are done continuously for a long period of time, it is known as a business. If only one transaction takes place it is not considered under business. For example if a person sells his old scooter which was used by him is not a business. But if he sells the scooters on a continuous basis it is a business.
4 Motivated by profit/ benefits
The basic goal of a business is to earn money and acquire wealth. A profit earned in terms of rupees and cents, an income more than the expenditure, building business relationships, generating business opportunities and providing social welfare are included in profit. Accordingly, there are profit motive businesses as well as businesses with non profit motive but motivated by benefits. Therefore profit in the business field is essential for the expansion of a business.
5 Has a risk
There are risks in the businesses due to the uncertainty in earning profit and the possibility of incurring a loss. Since the future of a business is uncertain, changes in the business environment, the inability to control the following facts which affect profit will create an uncer- tainty for a business.
• Changes in consumer taste, design and demand.
• Changes in production technology and machinery.
• Increase in market competition.
• Scarcity of raw material, power failure and shortage of fuel.
• Employee problems and strikes.
• Fire, theft, burglary and accidents.
• Incorrect management decisions on using the business resources.
Businesses always face risks. Having such risks is a characteristic of a business.
6 Create wants
Businesses produce goods and services to satisfy human wants. Some businesses turn raw materials into finished goods to satisfy human wants. Some businesses satisfy human wants by transporting products from a place to a place where there is a high demand for the product. Some businesses satisfy human wants by storing at the time of harvesting in order to provide at the time of scarcity. Accordingly, every business creates human wants by providing goods and rendering services.
7 An economic activity
Businesses are essentially considered as economic activities since they produce goods and services using limited resources and engage in distribution activites. It is money oriented. Businesses are economic activities since they sell goods and services and use limited resources.
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