Definition – A Business is any entity or organization which is involved professional, commercial, industrial or charitable activities. Businesses can be both – for profit or not-for-profit. Business involves a regular process of earning a profit by satisfying the needs of target audiences via goods and services.
Different forms of business are there to offer goods or services for example a limited liability company (LLC), a corporation, a sole proprietorship, and a partnership.
Channelization of a business organization revolves around the inter-relation and exchange amongst companies, businessmen, human resources, management, employees, decision making processes, department, etc.
What is a Business?
Businesses are the organizational entities involved in manufacturing, offering, and marketing goods and services.
It refers to individuals’ activities to produce and sell all the services and goods for profit.
A business organization generates revenues by completing the needs of their consumers through the manufacturing of goods, reselling of products, providing services, or carrying out all these activities together for accomplishing the business objectives.
Channelization of a Business Enterprise
Businesses refer is an occupation that requires a set of skills and experience to get out maximum profit from it.
A business enterprise can range from the small operations of goods or services to the large operations of different types of services or production activities in an organization
Also, the main purpose of a business is to maximize the profits to the owner and the stakeholders with the maintenance of corporate social responsibilities.
A business plan’s important purposes are to determine future financial needs, create a strategy for growth, and attract inventors for the business with a proper business plan in managing the organization.
While making a plan for a business enterprise, key components upon which you should pay heed are-
- Executive summary revealing companies mission
- Company description
- Marketing analysis
- Competitive analysis
- Description of management and organization
- Breakdown of the products and services
- Marketing plan
- Sales strategy
- Request for the funding
- Financial projects
Types of Business
As discussed, the business includes both goods and services, and a person has a right to choose the appropriate business about what wants to operate. There are four types of business:
This type of business is an activity to earn money from customers by satisfying their needs.
It also involves experience and sufficient professional skills to get the desired result. For example, a professor teaching in college or schools earns money by teaching in tuition classes to profit.
This type of business is an acquisition of goods from the manufactures or the wholesalers at a low price and then sells at a higher price for their profit.
Another name for merchandising is a retail business, and an example of merchandising is a florist who sells flowers on the streets.
This type of business makes a profit from producing goods from raw materials that get the utility to the consumer by fulfilling their needs.
An example of manufacturing is the processing of sugarcane to get fine sugar manufactured in sugar mills.
This type of business includes all the three activities such as manufacturing of goods, merchandising of products, and delivering service comes in this category.
For example, a furniture seller who manufactures furniture gets old furniture and sells them at a higher price to gain maximum profit.
Businesses follow different structures to organize themselves around some sort of hierarchy or bureaucracy.
Some of the common business structures are-
1. Sole proprietorships
In this type of business structure, a business is owned and operated by a single natural person.
Such sorts of business structures have relationships between two or more people who join to channelize business.
This type of business structure involves a group of people who act together as one entity.
4. Limited liability companies (LLC)
It combines the pass-through taxation benefits of a partnership business structure with the limited-liability benefits of a corporation business structure.
Nature of Business
From production to offering services to optimizing marketing and sales, the nature of businesses depends upon different business processes.
Businesses of different natures use human resources, technology, machines in their own specific ways. Then they function through effective management of organization-activities to accomplish business objectives.
Therefore, let’s discuss different process upon nature of businesses is based upon:
1. Doing Regular Process
To get or generate profit, this process is performed repeatedly in a business organization as an activity in daily life.
2. Performing Economic Activity
The whole process of economic activity in businesses is to maximize wealth.
3. Creating Utility
In this category, the goods and services are in utility form to convert products, time utility that makes the goods and services available when needed, and place utility that avails the goods whenever required.
4. Requiring capital
Any business venture needs funds for the channelization of the management and implementation of business activities and human resources.
5. Dealing in Goods and Services
It gives goods for sale related to manufacturing for the consumers.
6. Profit Earning Motive
The important motive of a businessman is to make a profit from his progress.
7. Ensuring the satisfaction of Consumer’s need
This category is worried about the completion of customer’s demands.
8. Involving buyer and seller
The two major parties are involved in a customer and merchandise business to get maximum benefits.
9. Fulfilling social obligations
In the business’s nature, social responsibilities such as creating job opportunities or dealing with licensed products are involved.
Here is a video by Marketing91 on What is business?
Importance of Business
To understand the importance of business, let us have a look at the following points:
1. Revenue Generation
It is for business owners as it brings profit for the owner of the company.
2. Economic Growth
Economic growth is important for a country’s economic growth because if a company has high revenue, it will be termed as higher tax collection.
3. Improves Standard of Living
The business provides better living standards and styles because a company with more industrial units provides more benefits.
4. Bulk Production
It includes large-scale production of goods and services and then reduces it to an ideal price so that people can buy goods at a reasonable price.
Generate new ideas to open up new ways for creativity and innovation in a company.
6. Generates Employment
This feature creates job opportunities, a long-term process that needs to be worked correctly.
7. Market Expansion
A strong base can be developed by having a good strategy and high customer satisfaction.
Functions of business
There are seven types of functions in business:
1. Purchase Function
Provides finance from financial institutions from various material management techniques and ideas, including economic order quantity, determination of stock level, and perpetual inventory system.
2. Productivity Function
It occupies a dominant position in the business’s activities as it depends on the marketing functions because it allocates funds, which is a beneficial criterion.
3. Distribution Function
The distribution function can increase the enterprise’s benefits by providing higher profit to the customers at a lower cost, which is aimed at bringing inflow of cash.
4. Accounting Function
All the accounting functions and control devices are important in finance policy to record the financial data that can be carried out effectively in the investments.
5. Personal Function
The personal function is useful in business management, as it includes proper wage structure, incentives schemes, promotional opportunities, and human resource development to the employees.
6. Research and Development
The research and Development feature is a productive investment for the business’s growth by balancing the necessary amount.
7. Financial Management and Economics
For theoretical concepts, financial management and economics are both important as they depend on the money and capital markets that impact the economy as a whole for maximum profit.
On the concluding note, we hope you would have understood what is a business, what is the nature of a business organization, and what functions a business may perform.
All in all, businesses are responsible for offering products or services by establishing a relationship amongst employees, business resources, social structures, market trends, sales, customers, etc. All of these factors decide the immaculate channelization of businesses.
Now, it is your turn to define business and its functions?