Basic of business and commerce Business: The term business has been taken from word busyness which means being busy. It refers to organized efforts of an enterprise to produce and supply consumers with goods and services for a profit. It refers to any human productive and economic activity which lead to earning profit. Business Activity = Production + Distribution of goods and services for earning profit. Production refers to producing/manufacturing/converting raw material into semi-finished & finished products. Mainly this activity takes place in industry/factory. Distribution= Refers to the placement or delivery of products to customers/ consumers.

1. Basic of Business and
Commerce
Instructor
Mr. Atta Hussain Syed
1

2. Business:
• Business: The term business has been taken from word busyness which means being
busy. It refers to organized efforts of enterprise to produce and supply consumers with
goods and services for a profit.
• It refers to the any human productive and economic activity which lead to earning profit.
• Business Activity = Production + Distribution of goods and services for earning profit.
• Production refers to producing/manufacturing/converting raw material into semi-
finished & finished products. Mainly this activity takes place in industry/factory.
• Distribution= Refers to placement or delivery of products to customers/ consumers.
• Cost of production is paid by producers
• Price of products are paid by customers or consumers
• Profit goes to entrepreneurs.
Price>Cost = Profit
Price<Cost = Loss
Price=Cost= B.E.P.
2

3. 3

4. Factors of Production
• Factors of Production – the technical term economists use for
resources.
• 1 – Land Everything on the earth in its natural state / the earth’s
natural resources. Resources Include: Everything contained in the
earth or found in the sea, Coal and crude oil are examples.
• 2 – Labor All the people who work in the economy
Labor includes: Full and Part-time Workers Both the Public and the
Private sector
4

5. Factors of Production
• 3-Capital The money needed to start and operate a business
The goods used in the production process.
Examples are: Factories, Office Buildings, Computers, Raw materials
that are processed into a more useful form (cotton, cloths)
• 4 – Entrepreneurship: The skills of the people willing to risk their
time and money to run a business. Entrepreneurs organize the other
factors of production to create the goods and services desired in an
economy
5

6. 6

7. Scarcity
• Scarcity; The difference between wants and needs and the resources
available to meet these needs is called Scarcity. Nations have unlimited
wants and needs but limited resources – Scarcity forces the nations to
make economic choices.
• The Basic Economic Questions
Nations must answer 3 basic economic questions when deciding to use
their limited resources. The way nations answer these questions define
their economic system.
• What goods and services should be produced?
• How should the goods and services be produced?
• For whom should the goods and services be produced?
7

8. Economic Problem
8

10. This basic problematic economic question
compel entrepreneurs to utilize resources
wisely and optimally. Which lead
entrepreneurs to organize business activity.
10

11. 11

12. 12

13. Objectives of Business usually meet the
following SMART criteria
• S-Specific: Well defined and Clear to anyone that has a basic
knowledge of the project
• M-Measurable:
• Objectives that have a quantitative value are likely to prove to be more effective
targets for directors and staff to work towards.
• A-Achievable: Objectives should be achievable.
• R-Realistic and relevant:
• Objectives should be realistic when compared with the resources of the company
and should be expressed in terms relevant to the people who have to carry them out.
• T-Time Bounded:
• A time limit should be set when an objective is established-by when does the
business expect to increase profits by 5%? Without a time limit, it will be impossible
to assess whether the objective has actually been met.
13

14. 14

15. 15

16. 16

18. 18

19. Business Objectives
• Profit: Profit is what keeps a company going and is the main aim of most
businesses.
• Increase added value: Value added is the difference between the price and
material costs of a product. E.g. If the price when selling a pen is $3 and it
costs $1 in material, the value added would be $2.
• Growth: Growth can only be achieved when customers are satisfied with a
business.
• Survival: If a business do not survive, its owners lose everything.
• Service to the community: This is the primary goal for most government
owned businesses. They plan to produce essential products to everybody
who need them
19

20. Stakeholders
• Stakeholders are a person or a group which has interest in a business
for various reasons and will be directly affected by its decisions.
• There are two 6 types of stakeholders, and these types can be
classified into two groups with similar interests.
Group 1: Profit/Money
Owners:
• Profit, return on capital.
• Growth, increase in value of business.
Workers
• High salaries.
• Job security.
• Job satisfaction.
Managers
• High salaries.
• Job security.
• Growth of business so they get more power,
status, and salary.
Group 2: Value
Customers
• Safe products.
• High quality.
• Value for money.
• Reliability of service and maintenance.
Government
• Employment.
• Taxes.
• National output/GDP increase.
Community
• Employment.
• Security.
• Business does not pollute the environment.
• Safe products that are socially responsible.
20

21. Types of business activity
• Primary sector: The natural resources extraction sector. E.g. farming,
forestry, mining... (earns the least money)
• Secondary sector: The manufacturing sector. E.g. construction, car
manufacturing, baking... (earns a medium amount of money)
• Tertiary sector: The service sector. E.g banks, transport,
insurance... (earns the most money)
 Industrialization: a country is moving from the primary sector to
the secondary sector.
 De-industrialisation: a country is moving from the secondary
sector to the tertiary sector.
21

22. 22