UNIT 2

What Is Business?
Activity seeking profit
Provides goods/services
Satisfy standard of living-

quality of life
Nonprofit
organizations

Objectives of Business
Survival

Growth

Profit

Social
Responsibility

Business?
Business is an Economic activity which
involves regular production and or exchange
of goods and services with the main purpose
of earning profits through the satisfaction of
human wants.

Familiar the meaning OF

Business?
1.business involves production and exchange of
goods.
2.Its main aim is to earn profit.
3.It must satisfy human wants.
These activities are organised and performed
under the framework of an institution known as
business organisation /firm/enterprise.

According to B.O Wheeler, Business is an

institution organised and operated to provide
goods and services to society under the incentive
of private gain.

Business ?
Business pervades all human activities

directed towards earning profits or economic

gains.

Industry,trade,Banking,Transport,Insurance
,warehousing,advertising etc are integral
part of modern business.

TYPES OF ECONOMIC
ACTIVITY
ECONOMIC ACTIVITIES

BUSINESS

TRADE
INDUSTRY
BANKING
TRANSPORTATION
INSURANCE
WAREHOUSING
ADVERTISING ETC.

PROFESSION

MEDICAL
LEGAL
CHARTERED ACCOUNTANT.

EMPLOYMENT

MANAGER
FOREMAN
CLERK
SALESPERSON
WORKER,ETC...

Definition of Business

Business refers to all those activities

which are concerned with the production and /or

purchase and sale of goods or services with the
purpose of selling them at a profit.

Characteristics/Features of
business
Economic Activity
Production or procurement (acquisition of goods for the purpose

of sale)
Dealing in goods and services;( goods are consumer goods
and capital goods)
Satisfaction of consumer wants
Regular dealings (continuous supply of goods and services)
Profit motive
Uncertainty.
Risk element
Creation of utility

Objectives Of Business
Business objectives as the purpose or the reason

for the existence of the business in the society.

Business activities

Business activities broadly divided in to three;

They are,
a) Economic objectives,
b) social objectives
c)Human objectives

TYPES OF BUSINESS ACTIVITY

ECONOMIC
OBJECTIVES

1)EARNING OF PROFIT
)CREATION OF CUSTOMERS
3)INNOVATION
)EFFECTIVE UTILISATION
OF RESOURCE

SOCIAL
OBJECTIVES

1)BETTER QUALITY PRODUCTS

2)FAIR TRADE PRACTICES
3)GENERATION OF EMPLOYMENT
EMPLOYEES WELFARE
4)COMMUNITY SERVICE
5)PROTECTION OF EMPLOYMENT

HUMAN
OBJECTIVES

1)GOOD SERVICE AND

FAIR DEALINGS
2)TREATING EMPLOYEES
AS PARTNERS
3) DEVELOPMENT OF EMPLOYEES
SKILLS
4) JOB SATISFACTION OF
EMPLOYEES

NECESSITY OF PROFITABILITY
OBJECTIVE
ACCORDING TO PETER. F. DRUCKER

A BUSINESS MUST ACHIEVE SUFFICIENT

PROFITS TO COVER THE RISKS OF ECONOMIC
ACTIVITY AND THUS TO AVOID LOSS

A BUSINESS MUST EARN ADEQUATE

PROFITS BECAUSE OF THE FOLLOWING
REASONS;
MEANS OF LIVELY HOOD
RETURN TO INVESTORS
REWARD FOR RISKS
SOURCE OF FINANCE FOR GROWTH AND

EXPANSION
INDICATOR OF EFFICIENT WORKING
GOODWILL OR REPUTATION

Can profit be the sole objective of

a Business

A lay man may say that business is carried on for

profit only. But a good business man cannot

afford to keep profits as his sole objective.
earning of profits cannot be the objective of a
business any more than eating is the objective of
living

The argument against the profit

maximisation are;
Profit maximization ignores the interests of

labour,customers,and the society.

Unfair means such as hoarding, black marketing or
adulteration may be followed to maximize profits.
Long term interest of the business may be ignored to
maximize profits in the short run.
In the present day environment, a business can't be
effective with the sole objective of profit
maximisation.It must also set objectives in areas like
customer satisfaction, employee welfare, community
development, environment protection etc..

Multiplicity objectives of a
Business

According to peter f Drucker remarked To

manage a business is to balance a variety of

needs and goals. And this requires multiple
objectives
He suggests 8 areas where objectives must be
set.

Multiplicity objectives of a
Business
1 market share (eg; Bata)
2 Innovation (eg; Hero Honda)
3 productivity(

It is the ratio b/w output and inputs in production

process. it is considered as the efficiency of the enterprises.)

4 Human organization-workers

attitude and performance

5 Physical and financial resources

6 managarial performance
7 social rresponsibility
8 profitability-reasonable rate.

Classification of business
activities
Business activities are classified on the basis

of 3 criteria,ie,
1 size
2 ownership
3 functions

Classification of business
activities
On the basis of size business activities are

classified as
1 small scale
2 large scale
Small scale the investment does not exceed
Rs 100 lakhs.
Large scale means the investment exceed 1
Crore

Classification of business
activities

On the basis of OWNERSHIP business activities

are classified as
Public sector under the govt. control
pvt sector-under private control
Joint sector both govt. and private

Classification of business
activities
Public enterprises may be organized as
Departmental undertaking
Government company
Statutory corporation etc
But pvt.enterprises are like;
Sole trader,
Joint Hindu family
Partnership
Joint stock company
And co-operative society.

Classification of business
activities
On the basis of functions business activities are

classified in to two;
Industry
and commerce
Commercial activities are again classified as ;
trade
and aids to trade

BUSINESS ACTIVITIES

INDUSTRY

COMMERCE

Trade
1 EXTRACTIVE
2 GENETIC
3 MANUFACTURING
4 CONSTRUCTION

Home trade;
1)Retail trade
2) wholesale
trade

Aids to Trade

Foreign trade
1 import
2 export
3 Entrepot

Transport
Warehousing
Insurance
Banking
advertising

A brief review of the various types of

Business activities
1 Industrial activities or Enterprise;
It includes mining ,breeding,costruction of roads
building,etc....(manufacturing,mining,constructions )
.

2 Commercial activities;
commercial activities involve exchange of goods and services
like...transport, ware housing,banking,insurance and advertisement.

.3

Trading activities or firms;

it refers to purchase and sale of goods to earn profits by

the business men known as traders. They engaged in a) Home
trade - includes wholesale and retail
b) foreign trade- import-export and entreport

A brief review of the various types of

Business activities
Service activities or enterprises;

These include those services which

facilitate smooth trade and also serve as the back
born of modern industry.
banking,insurance,transportation,warehousing,
insurance, packaging.

Types
of
industries
Primary industry; it includes extraction
,producing and processing of natural resource
(extractive+ Genetic)
Secondary industry are concerned with
processing materials which have already been
produced at the primary stage.
Manufacturing and construction industry is
under secondary industry.

Manufacturing industry may

assume the following forms

Analytical industry;petrolium refining is an

example of analytical industry.

Synthetic industry; two or more materials are
mixed together in the manufacturing operations to
obtain some new products.like soap,cement etc

Manufacturing industry may

assume the following forms
Processing industry;

raw materials are processed through a

series of manufacturing operations making
use of analytical and synthetic method)-textile
sugar and steel.
Assembly line industry;
in assembly industry, the finished products
can be produced only after various
components have been made and then
brought together for final assembly.
automobile watches,telivision are examples

Construction industry may

assume the following forms
They are concerned with making of

roads,bridges,dams and canals.

Definition of trade

Trade is that branch of commerce which deals

with exchange of goods and services in terms of

money between different persons known as
traders

Types of trade
Trade may be classified on the basis of 1)

Geographical area covered

2) volume of trade transaction
On geographical basis trade may be
classified in to two like internal trade and
external trade.
On volume of trade basis trade is divided in to
two
Wholesale & retail trade

Internal or home trade

It refers to purchase and sale of goods within

the boundaries of a country.

Wholesale trade; purchase and sale of goods
in bulk quantity and sell to retailers at small
quantity.
Retail trade; selling of goods by the retailer to
the customer

External or foreign trade

Import trade

Export trade
& Entrepot trade

AUXILIARIES TO TRADE
Transportation and communication

Banking
Insurance
ware housing
Advertising
And packaging

Differentiate between industry, trade

and commerce
industry

commerce Trade