What is Business? - Meaning, Definitions &Nature of Business

 What is Business? -  Meaning, Definitions &Nature of Business

Meaning and Definitions

The term "Business" refers to commercial activities relating to production
and distribution of goods and services for economic gain i.e. profit.

Business like any other institution is a group effort of producers, distributors institutions (like banks, insurance companies)etc., who directly or indirectly contribute their valuable services to satisfy consumer wants. Therefore it can be stated that the true business of every company is to make customers, keep customers and maximise value to the customers.

We define business as:

"Business is a organized activity to identify or anticipate customers' requirements; and to produce and supply goods and services to satisfy customer and to produce and supply goods and services to satisfy customers and to serve the interest of all other stakeholders."

Nature of Business 

The nature of business refer to the overall activities of a company in their quest to create, market, and sell a service or a product. Essentially, the main focus for what a company does in a particular sector or industry is known as that company's nature of business.

1.Organised Activity:

      Business is an organised activity concerned with identification and satisfaction
of customer requirements, and thereby gaining profit Therefore, a business firm must undertake the following activities:

• Identify requirements of the customers.
• Produce and offer products to customers.
• Obtain feedback on customer satisfaction.

Modify and innovate products to enhance company's growth and goodwill.

2. Profit Motive:

    The primary objective of any business is to earn profit. Profit is the reward for the effort undertaken by a business firm.

In today's business world, a firm can gain profits through cost- cutting measures and by delivering superior value to customers.

Every firm makes effort to maximise its profits. Profits can be utilised for:

• Building reserves.
• Rewarding the shareholders with higher dividends.
• Rewarding the employees through profit sharing
• Corporate social responsibility (CSR) activities.

3. Quality Focus:

    Now-a-days, professional firms place focus on quality of products to gain competitive advantage. For this purpose, business firms conduct:

• Customers 'feedback, 
• Research and Development,
• Dealers' Surveys, etc.

4. Regularity in Dealings:

   Business involves production and distribution of goods and services. To be considered as business, a firm or an individual must be engaged in business 

activity on a regular basis. A single or rare act of buying and selling cannot be called as business activity.

5. Risks and Uncertainties:

    Business is subject to risks and uncertainties. A business may be affected or may suffer a loss an a account of risks and uncertainties. The risks may be due to the following events:

• Market recession.
• Change in fashion and preferences of customers.
• Change in government policies.
• Change in technology.

A business firm can reduce the impact of risks through insurance of insurable risks like loss by fire, theft, etc. However, certain risks are non-insurable in fashions, changes in government policies, etc., which can be minimized through proper planning and preparedness.

6. Societal Interest: 

    Now-a-days, business firms place emphasis on 'societal concept' of business. Business firms make efforts to promote customers' and society's well-being.

 

Business units try to achieve a balance between: Profit + Consumer Satisfaction + Public Interest. Therefore, increasing effort are made produce eco-friendly products.

7.  Business Functions:

     Business involves a number of activities right from production to distribution of goods and services. The main business function include:

• Production activities, such as product research & development, quality control, inventory management, and so on.
• Marketing activities, like marketing research, pricing, promotion, distribution, after-sale-service, and so on.
• Finance activities, which include obtaining funds from right sources, and proper application of funds. 
• Human Resource (Personnel) activities, which include human resources planning, selection, training, placement, performance appraisal, promotion, etc.

8.Social Responsibility:

   Now-a-days, professional business firms are conscious of their social responsibility. The firms try to fulfill their social responsibility. The firms try to fulfill their social responsibility towards various stakeholders such as:

• Employees - provision of good wages, working conditions, welfare facilities.
• Customers - provision of quality goods at right prices.
• Government - payment of taxes and duties ,as applicable.
• Shareholders- wealth maximisation.
• Competitors- adoption of fair business practices.
• Society- sponsorship of education, sports, culture.

9. Customer Satisfaction:

Now-a-days, professional business firms adopt customer-oriented approach. Business firms place emphasis not only on profit motive but also on customer 

satisfaction. Customers would be satisfied only when the product performance matches with their expectations.

For instance, customers expect timely and efficient after-sale-services in the case of durables, and when the company provides the same; the customers would be satisfied.