Question No.1 Define Business? What are the main components of the business? OR What is mean by business? Explain the scope of business?

(Last Updated On: February 18, 2018)

Question No.1 Define Business? What are the main components of the business? OR What is mean by business? Explain the scope of business?

Question No.1 Define Business? What are the main components of the business? OR What is mean by business? Explain the scope of business?

INTRODUCTION

            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. In addition to this the purchase and sale of goods on whole sale or retail basis by individuals and firms for earning profit are economic activities and included in business. Besides goods business also provides direct services. These may be health services or legal services etc. business only includes lawful human activities for profit. So, it does not include smuggling, gambling, robbery, self-help, self-consumption and gifts etc.

DEFINITIONS

BUSINESS

Business includes all the commercial and industrial activities that provide goods and services to the people with and objective to earn profit.” (R.N. Owen)

OR

“Business means human activity directed towards producing or acquiring wealth through buying and selling of goods.” (L.H. Haney)

OR

“Business is a legal activity that satisfies the human need and wants by providing goods and services for private profit.” (Prof. Bittel)

OR

“Every human activity which is engaged in for the sake of earning profits may be called business.” (James Stephenson)

OR

“Any and all of those activities connected with the production and exchange of goods and services and the financial affairs connected with these activities.” (Clark and Gottfried)

OR

“Business means buying and selling, commerce and trade.” (Oxford Dictionary)

OR

“Any business enterprise which makes, distributes or provides any article or service which other members of a community need, able and they willing to pay for it.”(Prof. Urwick)

SCOPE OF BUSINESS OR COMPONENTS OF BUSINESS

The scope of business is very wide. It covers activities related to production, distribution of goods and services with an aim to earn profit. The business activities are usually divided into parts.

Question No.1 Define Business? What are the main components of the business? OR What is mean by business? Explain the scope of business?

(A)- INDUSTRY

The word “industry” comes from the Latin word “industria” which means diligence. It is the place where human energy. Natural resources and technologies are combined to produce goods and services in a modern economy. In other words “Industry” refers to that part of business activity which is concerned with the extraction, production or fabrication of products, habitual employment or industry is that part of business where raw material/semi-finished goods are converted into finished goods.

Question No.1 Define Business? What are the main components of the business? OR What is mean by business? Explain the scope of business?

  1. Primary Industry

Primary industry is engaged in the production or extraction of raw materials, which are used in secondary industry. Primary industry can be divided into two parts:

(a)  Extractive Industry:

In this industry, natural resources below or above the surface of the earth are extracted or obtained. Such as extraction of natural resources like minerals (coal, gas, oil, gold, silver and iron etc.) from natural storages, timber from forests, fish from rivers and seas etc. this industry is also known as exhaustive industry.

(b) Genetic Industry:

Genetic industries are the industries engaged in the reproduction or multiplication of plants and animals. Plant nurseries, poultry grams, dairy farms, fish farms, and cattle breeding farms (animal husbandry) are the main examples of genetic industries.

  1. Secondary Industry

These industries use raw material to make useful goods. This industry also contributes by making goods more profitable and useful by completing semi-finished and incomplete goods or by changing their former design. Raw material for these industries is obtained from primary industry. It can be divided into three parts:

(a)  Manufacturing Industry:

This industry is concerned with the processing or transformation of raw materials and semi-finished products into finished products. Such industry changes the shape and form of materials produced by genetic and extractive industries. Manufacturing industry is of the following types:

(i)                Synthetically:

Analytical industry is engaged in producing many products out of one product. For example, an oil refinery where crude oil is refined and several petroleum products (petrol, diesel, gasoline etc.) are obtained.

(ii)             Analytical

Under this industry many raw material are mixed to produce more useful products. For example, factories where cosmetics, soap, cement, fertilizer, and paint, etc. are prepared.

(iii)           Processing

Processing industry includes those industries where useful goods are manufactured by making the raw material pass through different production process. For example, cotton textile industry where cotton passes through the ginning, spinning, weaving, dyeing, bleaching and printing processes.

(iv)           Assembling

In this industry different parts manufactured by different industries are assembled to produce new and useful product. For example, manufacturing of radios, computers, TV sets, cars, buses, watches and automobiles etc.

(b) Constructive Industry:

This industry is engaged in the construction of building, bridges, roads, dams, etc. it utilizes the products of manufacturing industries such as bricks, steel, cement, etc. the distinctive feature of this industry is that its products remain fixed at one place and cannot be taken physically to the market for sale.

(c)  Service Industry:

Business provides not only goods but also service. Services industries do not produce tangible goods. It is engaged in providing intangible elements such as services to the public. Hotels, railways, shipping companies, transport companies, insurance companies etc. are some example of service industry. It is also known as tertiary industry.

(A)- COMMERCE

The word “Commerce: is the combination of two Latin words “COM” means together and “Merx” means goods. Commerce is the very important part of business. It is concerned with the buying and selling of goods. It includes all those activities which are related to the transfer of goods from the producer to ultimate consumer or end use.

DEFINITIONS

“Commerce includes those activities which remove the hindrances of time, persons, and places in the exchange of goods” (James Stephen)

OR

“Commercial occupations deal with buying and selling of goods. The exchange of commodities and the distribution of the finished goods” (Prof. Thomas)

OR

“Commerce includes all the activities which transfer business products (goods and services) from place of production (producer) to place of consumption (Consumer)”

SCOPE OF COMMERCE

Following is the scope of commerce in the recent era of business world.

Question No.1 Define Business? What are the main components of the business? OR What is mean by business? Explain the scope of business?

  1. Trade:-

The literary meaning of trade is exchange of goods. In actual practice, trade is the whole procedure of distributing the good is produced by different persons or industries to their ultimate consumers inside the country or outside the country. It is, therefore, said “the trade removes the personal hindrance, in exchange of commodities.”

Trade is an activity of buying and selling of goods for money or other goods.

Trade can be classified into two components:

  1. a)Home Trade:

In home trade, exchange of goods or trade is conducted within the boundaries of a particular country. Seller and buyer belong to the same county. It is also known as domestic, local or internal trade. Home trade has two types.

(I)                 Wholesale Trade:

Wholesale trade means selling of goods in large quantities to shopkeepers in order to resell them in small quantities to the consumers. Wholesaler has specialized dealing in particular items. He purchases in bulk from producer or industrialists and sell them in small quantity to retailers.

                                (ii)          Retail Trade:

Retailing means selling the goods in small quantities to the ultimate consumers. Retailer is a middle man who purchases goods from manufacture or wholesaler and provides these goods to the consumers near their houses.

  1. b)Foreign Trade:

Foreign trade is trade or exchange of goods and services between two or more independent countries for their mutual advantages. It includes import and export of commodities among the producer and consumer countries. Foreign or international trade is an integral part of economy and plays a vital role in economic growth and social welfare of a country. Foreign trade has three types.

(i)                Import Trade:

When a country buys goods and services from other countries, it is known as import trade. For instance, Pakistan buys petrol from Iran.

(ii)             Export Trade:

When a country sells goods and services to other countries, it is known as export trade. For example, Pakistan sells rice to European countries.

(iii)           Interport Trade:

In Interport Trade, goods are imported from various countries with a view to re-export them to other countries. In this type of trade, goods are kept in bounded warehouses till they are re-exported. No import duty is charged on the goods. Crude petroleum products are the examples of Interport trade. For example, England imports goods from South Africa and exports it to other European countries.

Note:

Hong Kong, Singapore and London etc. are the important centers of this trade in the world.

AIDS TO TRADE

The activities/factors which facilitate the purchase and sale of goods and services are called aids to trade. The aids which are essential for the expansion of the trade are:

  1. Transportation

The different means of transport e.g. railways, ships, airlines etc. help in carry the goods from places of production to the centers of consumption. Transport thus ensures movement of goods and services from one place to another. It not only widens the market of goods but also increases the mobility of labour and capital.

Types of Transportation

  1. Road transport
  2. Railway transport
  3. Water transport
  4. Air transport
  1. Insurance:

Insurance is another important aid to trade. The risk of damage of goods due to fire, flood, earthquake or other causes is covered by insurance. The insurance companies compensate the loss of commodities due to fire, floods etc. to the traders or the payments of insurance premiums. Insurance thus helps in the expansion of trade.

III.              Warehousing

Warehousing is a kind of storage. Now a day’s most of the goods are produced in anticipation of demand. They are stored in safe places and are released as and when demanded in the market. Warehousing thus helps in overcoming the barriers of time and creates time utility.

Types of warehouses

  1. Private warehouses
  2. Public warehouse
  3. Bonded warehouses
  1. Banking:

The commercial banks play an important role in financing the various trade activities. They finance the traders for stockholding and transportation of goods. They also assist the buyers and sellers of goods in receiving and making payments both at the national and international level. The finance or credit is provided to the traders in the form of cash credit, Overdrafts and loans.

  1. Advertisement:

Selling of goods is the most important and difficult problem of the manufacturer. Advertisement about the product trough newspaper, magazines, radio, television Etc. has greatly helped the consumers in choosing the goods of their tastes. The consumers come to know about the quality and price of goods in a short time and pick up the product that suits them. Advertisement thus increased the sale of goods.

  1. Middlemen:

There is long chain of middlemen (wholesaler, retailer, and broker) who act as agents between the producers and the consumers. They bring the sellers and buyers of goods together and help them in completing the transactions of goods. These agents act for commission. The mercantile agents thus have greatly helped in distribution of goods from producers to the consumers.

VII.           Communication:

Means of communication provide or convey commercial information to individuals, firms and companies. These consist of people, institutions and processes engaged in spreading the necessary business information between producers and consumers. Radio and television are general communication services but telephone, fax, internet are also important means of communication. In modern era, success of a business depends on the latest, concise and accurate information.

VIII.         Packing

Packing means putting goods in wrappers, containers, etc. Packing helps to protect the goods from damage, spoilage, leakage and breakage etc. during transport of goods. It removes the hindrance of risk by keeping goods safe and free from spoilage. Trade and transport of goods have become easier and safer due to improve in the art and methods of packaging.

Conclusive Remarks

After the industrial revolution of 18th century (1751, from United Kingdom) business has becomes very complex these days. Without understanding above mentioned classification of business no one can understand scope of business and cannot realize the importance of business in the business world. Henry ford is right in saying that “Business is not mere money chasing but it should also aim in serving the community.”

hamzaig

Hi! I am the CEO of www.lahoreeducation.com and i am living in Pakistan(Lahore) and i am teacher of commerce i teach about money, banking, finance, intro of business, economics, accounting and some other subjects of commerce and i write notes of that subjects.

hamzaig has 72 posts and counting. See all posts by hamzaig

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