INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE

ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:THE ECONOMIC ENVIRONMENT >>

Introduction to Business MGT 211

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

According to L. H. Haney

"Business may be defined as human activities directed toward providing or acquiring

wealth through buying and selling of goods."

James Stephenson says that:

"Every human activity which is engaged in for the sake of earning profit may be called

business."

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.

Introduction to Business MGT 211

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.

Introduction to Business MGT 211

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

Primary Industry

Secondary Industry

Industry

Primary Industry

Secondary Industry

(a) Extractive

(a) Construction

(b) Genetic

(b) Manufacturing

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:

Extractive Industry

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.

Introduction to Business MGT 211

(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:

Constructive Industry

Manufacturing Industry

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:

Trade

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.

Introduction to Business MGT 211

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

Introduction to Business MGT 211

(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.

Introduction to Business MGT 211

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.

Introduction to Business MGT 211

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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