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Introduction to Business

INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE Next >>>
 
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Introduction to Business ­MGT 211
VU
Lesson 01
INTRODUCTION
CONCEPT OF BUSINESS
Literally, the word "business" means the state of being busy. Generally, the term business
includes all human activities concerned with earning money. In other words, business is an
activity in which various persons regularly produce or exchange goods and services for mutual
gain or profit.  The goods and services produced or purchased for personal use are not
included in "business".
DEFINITION
1.
According to L. H. Haney
"Business may be defined as human activities directed toward providing or acquiring
wealth through buying and selling of goods."
2.
James Stephenson says that:
"Every human activity which is engaged in for the sake of earning profit may be called
business."
3.
In the words of B. W. Wheeler
"An institution organized and operated to provide goods and services to the society,
under the incentive of private gain" is business.
Structural Diagram
CHARACTERISTICS
Buying and
Selling
Business
Following are the essential characteristics of
a good business:
1. Capital
Capital  is  the  lifeblood  of  every
business.  It is the most essential and
important element of business. In case of
Buying and
deficiency, loans can be taken from various
Wealth
Selling
financial institutions.
2. Creation of Utility
Utility is an economic term referring to that characteristic of a
certain commodity, which
can satisfy any human need. Business creates utility, which gives benefit to the entire society
as well as the businessmen.
3. Dealing in Goods and Services
Every business deals with sale, purchase, production and exchange of goods and services for
some consideration.
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Introduction to Business ­MGT 211
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4. Employment
Business is a good source of employment for its owners as well as for other people, for
example, employees, agents, transporters etc.
5. Islamic Process
Business is an Islamic way of earning living. Income from business is known as profit, which
is Rizq-e-Halal. The Holy Prophet Muhammad himself did prosperous business.
6. Motive
The motive of business is to earn profit. Otherwise it will not be termed as business.
7. Organization
Every business needs an organization for its successful working. A proper organization is
helpful in the smooth running of business and achieving the objectives.
8. Productions or Purchase of Goods
A businessman deals in production or purchase of goods. These goods are supplied to the
people. So, it is necessary that more goods should be produced so that demand of people
may be fulfilled.
9. Regular Transaction
Business has a nature of regular dealings and series of transactions. So, in business, only
those transaction s included which have regularity and continuity.
10. Risks and Uncertainty
Business involves a large volume of risk and uncertainty. The risk element in business keeps
a person vigilant and he tries to ward off his risk by executing his policies properly.
11. Sale or Transfer for value
Another characteristic of business is the sale or transfer of goods for value.
12. Social Welfare
Business does not only satisfy the producer, but also the consumer when products are offered
for sale at low prices in markets.
NATURE OF BUSINESS
The following points state the nature of business in brief:
1. Economic Activity
Business is an economic activity as it is concerned with creation of wealth through the
satisfaction of human wants.
2. Human Activity
Business is an economic activity and every economic activity is done by human beings. Thus,
business is one of the most important human activities.
3. Social Process
Business is run by owners and employees with the help of professionals and customers.
Thus, business is a social process.
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Introduction to Business ­MGT 211
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4. System
Business is a systematic arrangement of various elements, which leads to the attainment of
particular objective, according to a well-established plan.
Components and Scope of business
BUSINESS
The word "Business" includes all human activities concerned with earning money. In other
words, business is an activity in which various persons regularly produce or exchange goods
and services for mutual gain or profit.
COMPONENTS OF BUSINESS
Business bears the following components:
Industry
Commerce
Business
Industry
Commerce
INDUSTRY
Industry is connected with the production and preparation of goods and services. It is a place
where raw material is converted into finished or semi-finished goods, which have the ability to
satisfy human needs or can be used in another industry as a base material. In other words,
industry means that part of business activity, which is concerned with the extraction,
production and fabrication of products.
KINDS OF INDSTRY
1.
Primary Industry
2.
Secondary Industry
Industry
Primary Industry
Secondary Industry
(a) Extractive
(a) Construction
(b) Genetic
(b) Manufacturing
(c) Services
1. PRIMARY INDUSTRY
Primary industry is engaged in the production or extraction of raw materials, which are used in
the secondary industry. Primary industry can be divided into two parts:
a)
Extractive Industry
b)
Genetic Industry
(a) Extractive Industry
Extractive industries are those industries, which extract, raise or produce raw material from
below or above or above the surface of the earth. For example, fishery, extraction of oil, gas
and coal etc.
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(b) Genetic Industry
Genetic industries are those, which are engaged in reproducing and multiplying certain
species of animals and plants.  For example, poultry farm, fishing farm, diary farm, plant
nurseries etc.
2. SECONDARY INDUSTRY
These industries use raw materials and make useful goods. Raw material of these industries
is obtained from primary industry. Secondary industry can be divided into three parts:
a)
Constructive Industry
b)
Manufacturing Industry
c)
Services Industry
(a) Constructive Industry
All kinds of constructions are included in this industry. For example, buildings, canals, roads,
bridges etc.
(b) Manufacturing Industry
In this industry, material is converted into some finished goods or semi-finished goods. For
example, textile mills, sugar mills etc.
(c) Services Industry
These industries include those industries, which are engaged in providing services of
professionals such as lawyers, doctors, teacher etc.
COMMERCE
Commerce is the second component of business. The term "commerce" includes all activities,
functions and institutions, which are involved in transferring goods, produced in various
industries, from their place of production to ultimate consumers.
In the words of Evelyn Thomas:
"Commercial occupations deal with the buying and selling of goods, the exchange of
commodities and distribution of the finished goods."
In simple words, "trade and aids to trade" is called commerce.
SCOPE OF COMMERCE
The scope of commerce can be explained as:
1.
Trade
2.
Aids to Trade
Commerce
Trade
Aids to trade
1. TRADE
Trade is the whole procedure of transferring or distributing the goods produced by different
persons or industries to their ultimate consumers. In other words, the system or channel,
which helps the exchange of goods, is called trade.
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Introduction to Business ­MGT 211
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TYPES OF TRADE
There are two types of trade:
(a)
Home trade
(b)
Foreign Trade
Trade
Home Trade
Foreign Trade
(i) Wholesale Trade
(ii) Import Trade
(ii) Retail Trade
(ii) Export Trade
(a) Home Trade
The purchase and sale of goods inside the country is called home trade. It is also known as
`domestic', `local' or `internal trade'. Home trade has two types:
(i)
Wholesale Trade
(ii)
Retail Trade
(i) Wholesale Trade
It involves selling of goods in large quantities to shopkeepers, in order to resale them to the
consumers. A wholesaler is like a bridge between the producers and retailers.
(ii) Retail Trade
Retailing means selling the goods in small quantities to the ultimate consumers. Retailer is a
middleman, who purchase goods from manufacturers or wholesalers and provide these goods
to the consumers near their houses.
(b) Foreign Trade
Trade or exchange of goods and services between two or more independent countries for their
mutual advantages is called foreign trade. It is also called international trade. Foreign trade
has two types:
(i)
Import Trade
(ii)
Export Trade
(i) Import Trade
When goods or services are purchased from other country it is called import trade.
(ii) Export Trade
When goods or services are sold to any other country it is called export trade.
2. AIDS TO TRADE
Trade mans biting and selling of goods, whereas, aids to trade means all those things which
are helpful in trade.
(a)
Banking
(b)
Transportation
(c)
Insurance
(d)
Warehousing
(e)
Agents
(f)
Finance
(g)
Advertising
(h)
Communication
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(a) Banking
In daily business routine, commercial banks and other financial institutions help the seller and
the buyer in receiving and the buyer in receiving and making payments.
(b) Transportation
The goods which are manufactured in mills and factories, reach the consumers by different
means of transportation like air, roads, rails, seas etc.
(c) Insurance
The transfer of goods from one place to another is not free from risk of loss. There is a risk of
loss due to accident, fire, theft etc. The insurance companies help out the traders with this
problem through insurance policy.
(d) Warehousing
The manufacturers today, produce goods in large quantity. Therefore, a need for warehouses
arises in order to store the manufactured goods.
(e) Agents
They are the persons who act as the agents of either buyer or seller. They perform these
activities for commission.
(f) Finance
A large amount is needed to set up an industry.  Financial institutions provide long-term
finance to the producers. The producers alone are unable to manufacture goods without
financial help.
(g) Advertising
The consumer may sometimes, not know about the availability of goods in the market. The
producer must sell his goods in order to remain in business. Advertisement is an easy way to
inform the large number of customers about the goods.  This can be done through TV,
newspapers, radio etc.
(h) Communication
The producers, wholesalers, retailers, transporters, banks, warehouse-keepers, advertisers
and consumers live at different place. This post office, telephone and other similar media is
very useful for promotion of trade and industry.
What are the qualities of a good businessman?
QUALITIES OF A GOOD BUSINESSMAN
The modern business is very complex.  Due to scientific and technological development,
changes are taking place very fast in every business field. Following are the basic personal
skills or qualities which a good businessman must possess:
1. Ability to Plan
A businessman, if he wants to shine in business, must have the ability to plan and organize it.
2. Activator
He had to activate his workers. If he activates his workers then this is good for business.
3. Bold or Courage
Courage is a great asset of a businessman. A good businessman should be a courageous
and bold person. May be his some angry decisions gave him loss in future, so he has to be
courageous and be bold.
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Introduction to Business ­MGT 211
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4. Cooperation
A good businessman should have to cooperate with his workers. With the help of cooperation
with his workers he can run his business well.
5. Courtesy
Courtesy is to business what oil is to machinery. It costs nothing but wins a reputation. So
businessman has to win the heart of everyone with his polite manners.
6. Decision Making
A good businessman should be a good and quick decision maker.  Quick decision of a
businessman is an important asset of businessman. And businessman has to know that his
quick decision will give him benefit or not.
7. Discipline
A good businessman should have to care about the discipline of the business. If he doesn't
care about the discipline then nobody (who concern to his business) obeys the discipline and
business can't go well.
8. Evaluator
A businessman has to check himself that how he is working.
This thing can make the
business good in progress.
9. Foresight
A good businessman must have the quality of foresight. He must keep in touch with the
business world. He should move about and see what is going on for he has to estimate new
wants and new inventions for creating fresh demands.
10. Honesty
A businessman should be honest in dealing with others. Honesty of a businessman helps him
in his business.
11. Hardworking
A businessman must be hard working. Without have working no business can be successful.
If the owner is not hard working then other workers of the business can't be hardworking.
12. Initiation
The business world is moving at a very fast speed. A businessman should have the ability to
take initiative by producing new things and new methods of marketing the products and
services.
13. Knowledge
A good businessman should have knowledge of his business. It should be supplemented by
the knowledge of trade, finance, marketing, income tax, etc.
14. Leadership
Leaders are not made, they are born; but the businessman has to get some qualities of a
leader. With the help of leadership a businessman can control his business and workers.
15. Negotiator
If a businessman is a good negotiator, then he can run his business well, because without
good communication he can't impress his consumer.
16. Personality
A businessman should have a graceful personality because it can impress his customers. If
his personality is not good or not graceful then his business can't go well.
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Introduction to Business ­MGT 211
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17. Quick Decisions
A businessman has decision-making power. He decides on all matters in the best interest of
the business.  A businessman must have technical knowledge, judgment power and
intelligence to take sound and quick decisions.
18. Responsibility
A successful businessman should have to realize his responsibilities. If he doesn't do his duty
then his business can't go well.
19. Reviewer
A good businessman has to review his mistakes, which he committed in the past, and try his
best never to do it again in his life.
20. Sound Financial Management
Sound financial management is an important factor for successful business. Without it no
business can go well. So a business must possess good financial position.
21. Self-Confidence
A good businessman should have self-confidence. Without self-confidence he can't make
quick decisions and business suffers a lot.
22. Tact
A good businessman should be a tactful person. He has to handle persons or his customers
very tactfully. It helps to earn profit in future.
23. Technical Skills
A good businessman must have the knowledge about technical skills.  He should have
complete command of specialized knowledge in his field, which he has to perform.
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Table of Contents:
  1. INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE
  2. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:THE ECONOMIC ENVIRONMENT
  3. BUSINESS ORGANIZATION:Sole Proprietorship, Joint Stock Company, Combination
  4. SOLE PROPRIETORSHIP AND ITS CHARACTERISTICS:ADVANTAGES OF SOLE PROPRIETORSHIP
  5. PARTNERSHIP AND ITS CHARACTERISTICS:ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP
  6. PARTNERSHIP (Continued):KINDS OF PARTNERS, PARTNERSHIP AT WILL
  7. PARTNERSHIP (Continued):PARTNESHIP AGREEMENT, CONCLUSION, DUTIES OF PARTNERS
  8. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:ETHICS IN THE WORKPLACE, SOCIAL RESPONSIBILITY
  9. JOINT STOCK COMPANY:PRIVATE COMPANY, PROMOTION STAGE, INCORPORATION STAGE
  10. LEGAL DOCUMENTS ISSUED BY A COMPANY:MEMORANDUM OF ASSOCIATION, CONTENTS OF ARTICLES
  11. WINDING UP OF COMPANY:VOLUNTARY WIDNIGN UP, KINDS OF SHARE CAPITAL
  12. COOPERATIVE SOCIETY:ADVANTAGES OF COOPERATIVE SOCIETY
  13. WHO ARE MANAGERS?:THE MANAGEMENT PROCESS, BASIC MANAGEMENT SKILLS
  14. HUMAN RESOURCE MANAGEMENT:Human Resource Planning
  15. STAFFING:STAFFING THE ORGANIZATION
  16. STAFF TRAINING & DEVELOPMENT:Typical Topics of Employee Training, Training Methods
  17. BUSINESS MANAGERíS RESPONSIBILITY PROFILE:Accountability, Specific responsibilities
  18. COMPENSATION AND BENEFITS:THE LEGAL CONTEXT OF HR MANAGEMENT, DEALING WITH ORGANIZED LABOR
  19. COMPENSATION AND BENEFITS (Continued):MOTIVATION IN THE WORKPLACE
  20. STRATEGIES FOR ENHANCING JOB SATISFACTION AND MORALE
  21. MANAGERIAL STYLES AND LEADERSHIP:Changing Patterns of Leadership
  22. MARKETING:What Is Marketing?, Marketing: Providing Value and Satisfaction
  23. THE MARKETING ENVIRONMENT:THE MARKETING MIX, Product differentiation
  24. MARKET RESEARCH:Market information, Market Segmentation, Market Trends
  25. MARKET RESEARCH PROCESS:Select the research design, Collecting and analyzing data
  26. MARKETING RESEARCH:Data Warehousing and Data Mining
  27. LEARNING EXPERIENCES OF STUDENTS EARNING LOWER LEVEL CREDIT:Discussion Topics, Market Segmentation
  28. UNDERSTANDING CONSUMER BEHAVIOR:The Consumer Buying Process
  29. THE DISTRIBUTION MIX:Intermediaries and Distribution Channels, Distribution of Business Products
  30. PHYSICAL DISTRIBUTION:Transportation Operations, Distribution as a Marketing Strategy
  31. PROMOTION:Information and Exchange Values, Promotional Strategies
  32. ADVERTISING PROMOTION:Advertising Strategies, Advertising Media
  33. PERSONAL SELLING:Personal Selling Situations, The Personal Selling Process
  34. SALES PROMOTIONS:Publicity and Public Relations, Promotional Practices in Small Business
  35. THE PRODUCTIVITY:Responding to the Productivity Challenge, Domestic Productivity
  36. THE PLANNING PROCESS:Strengths, Weaknesses, Threats
  37. TOTAL QUALITY MANAGEMENT:Planning for Quality, Controlling for Quality
  38. TOTAL QUALITY MANAGEMENT (continued):Tools for Total Quality Management
  39. TOTAL QUALITY MANAGEMENT (continued):Process Re-engineering, Emphasizing Quality of Work Life
  40. BUSINESS IN DIGITAL AGE:Types of Information Systems, Telecommunications and Networks
  41. NON-VERBAL COMMUNICATION MODES:Body Movement, Facial Expressions
  42. BUSINESS ORGANIZATIONS:Organization as a System
  43. ACCOUNTING:Accounting Information System, Financial versus Managerial Accounting
  44. TOOLS OF THE ACCOUNTING TRADE:Double-Entry Accounting, Assets
  45. FINANCIAL MANAGEMENT:The Role of the Financial Manager, Short-Term (Operating) Expenditures