The Nature Of Business – Business 101
Published March 18, 2021
Business is broad. If we’re going to talk about it, it will take hundreds of pages to discuss the nature of business. What about you? What comes into your mind when asked the definition of business?
In this article, we will only present its nature and business types. Plus, discuss a bit on the importance of trade. Be sure to read this article to shed light on the essential facts. Here are the basic things you need to know about business if you’re planning on building your empire soon.
Going Through The Points Of The Nature Of Business
There are several points we need to consider in business and its nature. Let’s first deliberate on the precise definition of trading. Then, we go into the nature of business.
Definition of Business
How do experts define business? “It is the organized effort of individuals to produce and sell, for a profit, the goods, and services that meet society’s needs.”
It’s an organization that pursues to make an income—and employing individuals working toward common goals.
Yet, the purposes of a business depend on its strategy and type of business. Any business strategy must still provide a product, service, or good that sustains society’s needs somehow.
So, whether it’s an occupation, profession, trade, or any commercial activity, as long as it involves delivering goods or services in exchange for profits, it is business. Take note that not all profits in business are money. It can be in any form that the industry (entity) recognizes involved in the business (activity).
Some activities do not fall into the category of business. Such doings are:
- Selling of prohibited drugs
- Mother teaching her child
Business And Its Nature
The inclusive activities of an organization are the nature of trading. It’s the business’s pursuit to produce, promote, and sell a product or a service. The main goal for what the organization does in a specific industry is the nature of the enterprise.
So, to better understand the concept of business, we need to go through some essential points.
- Regular process – performing an activity to produce income.
- Economic activity – From the word financial, its primary goal is to increase wealth.
- Creates Utility – The products or services must be such that it generates:
- Form utility – switch of products in a consumable form
- Time utility – making the products and services available when needed.
- Place utility – availability of products or services wherever required, for the consumers.
- Capital Requirement – Any enterprise involves funds varying in type and size.
- Deals in Goods and Services – It’s the producing and offering goods for catering, services, and sale.
- Risk – All businesses have the risk factors of loss or failure.
- Profit Earning Motive – The primary motive of an entrepreneur is to gain profits out of his business.
- The satisfaction of Consumer’s Need- The goal is to fulfill the customers’ needs and demands.
- Involves Buyer and Seller – The customer and the merchandise are the two major parties involved.
- Social Obligations – A business has some social responsibilities to create job opportunities. As to do business with licensed goods is also a social obligation.
Types Of Business
Any business has to do with products or services or even both. So, a future entrepreneur must think about the type of business he wants to begin operating.
A service business is a type of company that delivers intangible products that have no physical form. They offer expertise, professional skills, advice, and other products alike.
Examples of service businesses:
Salons, law firms, repair shops, accounting firms, schools, banks
This merchandising is the type of business that buys and sells. Merchandising companies purchase products at their wholesale price. Then sell them at retail price.
Their profits come from selling the products at a higher price than the buy costs. More so, the product doesn’t change form either.
Examples of merchandising business:
grocery stores, other resellers, and distributors
Manufacturing businesses buy the products for the enterprise. These products become raw materials in manufacturing a new product.
So, there’s a transformation of the products purchased. This type of business has a production process in raw materials, labor, and overhead costs. The finished manufactured products are then for sale for the customers.
These enterprises classify into more than one type of business. For example, a restaurant mixes ingredients to create a delicious recipe (manufacturing). And it sells a can of soda (merchandising) and takes customer orders (service).
Importance Of Business
Source Of Revenue
A business pays a considerable share of taxes to the government, so it’s supplying income to the state. That’s why the government preserves law and order. They also have to carry out a defense and sustain the welfare and development activities.
Business is indispensable to the economic growth of a country. It’s because a higher revenue means higher tax collection as well.
Standard of Living Gets Better
There are higher rates of employment when there are more enterprises and industrial units. Furthermore, there’s a progressing living standard.
Mass Production Of Goods
There are many benefits with increasing automatic machines—also, new processing methods and new materials. One of them is reducing the cost of production of goods.
Plus, it’s valuable for the producers. More so in manufacturing goods in anticipated quality and quantity. People get a continuous supply of goods at a fair price.
Businesses think of new ways to make improvements through brainstorming. More so in breeding new ideas as well. The goal to introduce new products or services opens new gateways to creativity. Thus, innovation also grows.
Business always provides a large scale of employment in the rural and urban areas.
The business manufactures goods to meet the demands of the customers. Companies strive hard to gratify customers across the globe. It is by breeding products that meet the customers’ purchasing power and needs.
That’s why there’s the market expansion due to increased consumption of goods. It’s also because of the rapid growth of the number of customers worldwide.
Providing Of Credit By Bank
The traders get credit facility provision from Commercial banks. Also, they get similar benefits in other specialized financial institutions. They call this provision for doing business and producing goods on a large scale.
Communication And Transport
Technology in communication and transport supports the traders. How? That is in delivering goods to the customers at the right price, times, and places.
Business Supplies Services
Services have an essential role in business. There’s an increase in significant benefits worldwide in insurance and banking and finance in education, medical and health, and domestic servants. More so are in the legal, engineering, and other professionals as well. Everyone has an integral part of the business.
Everything mentioned plays an essential role in the nature of business. Because there is mass production and distribution of goods, the comforts of life are growing.
Business is all about springing income out of selling goods and services. Risk is a primary part of any business. Yet, when you have the right decision at the right time, all you have in your hands is the need to achieve your business.
About The Author
Miel Reyes is a writer and part-time tutor who is passionate about storytelling and education. Her goals are to help people in everyday life with answers to complex and difficult topics.