NATURE AND SCOPE OF BUSINESS Meaning of business. In the literary sense, the word 'business' means 'the state of being busy'. Technically, the· term 'business' means all those activities which are related to the production and distribution of goods and services with the object of earning profit. For example, the farmer who cultivates land, the fisherman who catches fish, the manufacturer who converts raw material into semi fished (raw cotton to yarn) or finished goods (yarn to cloth) etc with the sole objective to earn profit are engaged in business. In addltlon to this, the purchase and. sale ot goods on wholesale or retail basis by individuals and firms, the financing of trade by the bankers, the transporting of goods from one place to another by transporters etc. for earning profit are economic activities and included in business. Beside goods, business also provides direct services to individuals and to business enterprises. These may be health services like provision of doctor, legal services (provision of a lawyer) insurance services etc. Activities excluded from business: (1) Social Service Activities. There are certain organizations which do not seek profit as their goal. These organizations are established with the sole objective of rendering social services to the society. For instance, a hospital, a university, a library, a government agency, etc, may render service purely for social benefits to society. These and such other non-profit organizations having a standard different from the profit-seeking organizations are excluded from the study of business. (2) Personal Consumption Activities. Similarly, all the activities which are concerned with the production or purchase of goods and services for personal consumption fall outside the scope of business. For instance, a shoemaker making a pair of shoes for personal consumption or a tailor sewing shirts for his own use or a nurse nursing her own child are not business activities because these do not involve in sale or transfer for value. However, if a shoemaker, manufactures shoes for sale in the market with a view to earn profit, it will be purely a business activity. (3) Illegal activities. The economic activity must be legal. Gambling, smuggling etc are done for earning of money but they are
not included in economic activities on account of their being illegal in Pakistan.
Summing up, business means all those economic activities which are performed in the production of goods for sale ~n the market or for renderinqot services for a price on a regular basis. Definitions of business:
The term business has been defined by various authors. Some of the selected definitions are given below.
According to L.H .. Haney, "Business may be defined as human activity directed towards providing or acquiring wealth through buying and sellings."
Urwick and Hunt describes "Business as an enterprise which makes, distributes or provides any article or service which the other members of the community need and are able and willing to pay for it."
According R.N. Owen, business includes all the commercial and industrial activities that provide goods and services to the people with an objective to earn profit. Characteristics of business:
The activities termed 'business' has the following characteristics.
1. Deals in goods' and services. Every business whether it is carried on a small or on a large scale deals in goods and services. The goods may be consumer goods like cloth, shoes, pens, etc., or producer goods like machinery or it may take the shape of services like the supply of electricity, water, gas, transportation of goods, etc.
2. Economic activities. The activities which are involved in the production or distribution of goods and services for economic motive are a part of business. Any activity undertaken for personal consumption or are exchanged free, fall outside the scope of business. For instance, if a shoemaker makes a pair of shoes and wears himself, it will not be a business. However, if he makes shoes and sells them to the customers for money, it is then his business. So business covers only economic activities.
3. Series of Deals. When a firm takes up manufacturing or distribution of goods or providing of services for profit motive, there should be series of deals in it. It should be performed over and over again. A student, for instance, selling his books to the shopkeeper will not be doing a business. However, if he purchases the books and sells them in his spare time regularly to seek profit, it does constitute a business.
4. Profit. The primary aim of business is to earn profit. If an enterprise is to exist for a longer period, it must yield profit. Profit thus is the driving force of every business activity.
5. Element of Risk and Uncertainty. There is an element of risk and uncertainty involved. in every business. If an organization is not able to foresee or control or minimize the risk involved in business, it suffers losses. The main risks involved in a business operation are (1) Competition (2) Change in taste (3) Outmoding of a product (4) Theft (5) Flood (6) Earthquake (7) Fire (8) Marketing misjudgments (9) Customers disliking of a product (10) Strikes, etc. (6) Capital. Every business whether it is small or larqe cannot operate without capital. Money is required for investment in fixed assets such as land, building, machinery etc. Money is also needed for working capital such as purchase of raw material,' payment of wages, electricity, gas bills etc.
(7) Creation of utilities. An important characteristic of business is the creation of utilities. The businessmen transports goods from a place where it is less needed to a place where it is more required. He also converts raw material into semi finished and finished goods in order to make them useful for the consumers. The businessmen, consumers and the society all benefit by the creation of place, form and time utilities in goods. In short, business combines, human, material, technological and financial resources for profit. " . IMPORTANCE OF BUSINESS Since the Industrial Revolution, there is a tremendous growth in the productivity of business. There is an all round improvement in the activities directed towards production and distribution of goods and service. The man of today is well off and enjoys a much higher standard of living due to the business efficiency in the various sectors of the economy. We now briefly discuss the importance of activities undertaken by business for profit and service objectives.
