Nature and purpose of business


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Nature and purpose of business

  1. 1. nature andpurpose of business
  2. 2. Contents:1.1 Concept and characteristics of business1.2 Economic and non economic activities1.3 Comparison between business, profession and employment1.4 Objectives of business1.5 Role of profit in business1.6 Classification of business activities
  3. 3. An economic activity Production or Element procurement of risk Business may be of goods and defined as an services economic activity involving the purchase, production Sale or and sale of goods and exchange of goods andUncertainty services with a motive services for of return of earning profits by the satisfying human needs satisfaction of human needs in society. Dealings in Profit goods and earning services on a regular basis
  4. 4. I said you to start abusiness not to sell my old sarees …….
  5. 5. Busines sProfessi onEmployme Economic activities ntReligiou sSocia Human l activitiesParent al Activities Non EconomicPatriotic
  6. 6. Differentiation between economic and non-economicactivities. Basis Economic Activities Non-economic ActivitiesMeaning Economic activities are those by which we Non-economic activities are can earn our livelihood. those performed out of love, sympathy, sentiments, patriotism etc.Purpose/Moti These activities are under taken to earn These activities areve/Expectatio money and to create wealth. undertaken to satisfy social,n. psychological and emotional needs.Examples • A worker working in a factory. • A housewife cooking food • A doctor operating in his clinic. for her family. • A teacher teaching in a school. • A boy helping an old man cross the road. • A person goes to temple to offer his prayer.Outcome Production, distribution and consumption Mental/psychological of goods and services. satisfaction.Types Business, profession and employment . Religious, social, parental and patriotic activities.
  7. 7. When a teacher isteaching in aschool and getssalary, it is aneconomic activitybut when a teacheris teaching herson/daughter athome, then it is anon-economicactivity.
  8. 8. Comparison of business, profession and employment. Profession • Accounting(C.A) • doctorBusiness Employment• Farming • Workers• banking • employees Economic activities
  9. 9. Basis Business Profession Employment Entrepreneur’s decision Membership of a Appointment letter andMode Of Establishment and other legal formalities, professional body and service agreement. if any. certificate of practice. Provision of goods and Rendering of personalised, Performing work as perNature Of Work services to the public. expert services. service contract or rules of services. No minimum qualification Expertise and training in a Qualification and trainingQualification is necessary. specific field is must. as prescribed by the employer. Profit earned. Professional fee. Salary or wagesReward/Return Required as per size and Limited capital needed for No capital required.Capital Investment nature of business. establishment. Profits are uncertain and Fee is generally regular Fixed and regular pay; noRisk irregular;risk is present. and certain; some risk. risk. Transfer possible with some Not possible. Not possible.Transfer Of Interest formalities. No code of conduct is Professional code of Norms of behaviour laidCode Of Conduct prescribed. conduct is to be followed. down by the employer are to be followed. Profit making To provide services. To earn income byMain Objective/Motive satisfying the employer.
  10. 10. Objectives of business Every business Every business must enterprise must aim earn a reasonable at greater profit to survive and productivity to grow. ensure continuous survival and growth. It refers to the Economic position of an It meansenterprise in relation objectives introduction of to its competitors. new ideas or methods for producing goods and services. Physical & financial resources Business requires physical resources and financial resources to produce goods and services.
  11. 11. Business should A businessman should produce and sell avoid hoarding, black products of proper marketing, over quality to satisfy charging, misleading custmer expectations advertisements etc. Business should generateLarge business units Social employment opportunities to the should undertakecommunity services objectives disadvantaged sections of the like setting up society(e.g. charitable physically dispensaries, handicapped schools etc. people). Welfare of employees Business should provide good working conditions and pay satisfactory wages/salaries to its employees.
  12. 12. Source of income for Source of funds for businessbusinessmen growth• As a source of income for the • Profits can be a source of finance for businessmen, profit provide the meeting growth and expansion means of livelihood for them. requirements of business. Role of profit in businessIndex of performance Reward of risk taking• Profits indicate whether a business is • It is in the hope of earning sufficient being managed efficiently or not. It is profits that a businessman invests a measure of performance and money in business and undertakes success of a business. risks. profit is essential for covering costs and risks of the business.
  13. 13. Industry• Industry refers to economic activities which are connected with conversion of resources into useful goods. Business activitiesCommerce• Commerce includes all those activities which are necessary for facilitating the exchange of goods and services.
  14. 14. industry Secondary Tertiary primary industry industry These industries These industries These industries are connected are concerned provide service with: with : facilities. using the materialsThe extraction Reproduction extracted at the primary stage toand production and development produce goods for final of natural of living consumption of for resources organisms . further processing by other industrial units.
  15. 15. Primary industry Extractive Genetic These industries extract Genetic means heredity or or draw out various parentage. these industries products from natural involve breeding or reproduction resources. of plants and animals. Cattle PoultryFarming Mining Fishing breeding farms pisciculture farms
  16. 16. Secondary industry Manufacturing Construction industry industries These industries are engaged in construction These industries convert raw of buildings, bridges, roads, dams, canals etc materials or semi-finished products using the products of extractive and into finished products. manufacturing industries like bricks, sand, cement, Iron and steel wires etc. Analytical industry: Synthetical industry: Processing industry: Assembling industry: basic raw material is two or more materials involves successive various components oranalysed or separated are combined or mixed stages for parts are brought into a number of together to manufacture manufacturing finished together to produce a products. a new product. products. finished product An oil refinery separates crude Cement, soaps, TV, car, oil into Sugar, pap plastics, paints, computer, kerosene, diesel, fertilizers etc. er watches etc. petrol.
  17. 17. commerce Auxiliaries to trade tradeTrade refers to buying and Activities which are meant selling of goods and for assisting trade areservices with the objective known as auxiliaries to of earning profit. trade.
  18. 18. Types of trade External trade: which takes Internal trade: which takes place between two or more place within a country countries. Wholesale Retail Import Export Entrepot trade trade trade trade tradeWholesale trade refers to Retail trade refers to If goods are If goods and Where goods arebuying and selling of goods buying of goods and purchased from services are sold to imported for export and services in large services in relativelyquantities for the purpose small quantities; and another country, it other countries, it to other countries,of resale or intermediate selling them to ultimate is called import is called export it is called entrepot use. consumers. trade. trade. trade.
  19. 19. Auxiliaries to tradeTransport and Banking and Warehousing Advertisingcommunication finance • It refers to the • Advertising brings• Transport(road,rail or • Business needs funds holding and goods and services to coastal) facilitates for acquiring preservation of goods the knowledge of movement of –raw until they are finally prospective buyers. assets, purchasing materials to the place raw materials and consumed. • With the help of such of production,and –the • It helps business knowledge, consumers meeting day-to-day finished goods from can obtain better value expenses. firms to overcome factories to the place of for their money consumption • Necessary funds can the problem of be obtained by storage of goods and • Thus, advertising helps• Communication to promote the sale of businessmen from facilitates the facilities like postal products like electronic services and telephone commercial banks. availability of goods goods, automobiles, facilities enable • Thus banking helps when needed. soaps etc by providing businessmen to business activities • Warehousing creates information about exchange information overcome the time utility. them. with one another. problem of finance.