1. Economic Activities Activities which are under taken by people with the object of earning money are known as economic activities. e.g., production of goods in 8 factory, distribution of goods by a wholesaler or retailer.
2. Types of Economic Activities Economic activities can be divided into three categories
3. Non-Economic Activities The activities which are undertaken by an individual with a motive of getting psychological satisfaction are known as non-economic activities e.g., going to temple, charily, social service etc.
4. Concept of Business Business is a wide term. It includes all occupations in which people are busy in earning income either by production or purchase and sale or exchange of goods and services to satisfy the needs of other people with the main objective of earning profit.
According to Lewis H Honey. “Business is a human activities directed towards producing or acquiring wealth through buying and selling goods”.
5. Characteristics of Business Activities
- An Economic Activity Business is considered as an economic activity as it is undertaken with the aim of earning looney.
- Production or Procurement of Goods and Services Every business enterprise either produce or procures goods or services from producers.
- Sale or Exchange of Goods and Services Directly or indirectly, business involves transfer of exchange of goods and services for value.
- Dealings ill Goods and Services on a Regular Basis Business involves dealings in goods or services on a regular basis. One single transaction of sale or purchase, therefore, does not constitute business.
- Profit Earning One of the main purpose of business is to earn income long without by way of profit. earning profit. No business can survive for
- Uncertainty of Return There is always a possibility of losses being incurred, in spite of best efforts put into the business.
- Element of Risk Risk is the uncertainty associated with an exposure to loss.
6. Comparison of Business, Profession and Employment
- Business refers to those economic activities which are connected with the production, purchase, sale or distribution of goods and services with the main aim objectives of earning profit. Profession refers to the activities which require special knowledge and skill to be applied by an individual in his work to earn a living.
- Employment refers to an activity in which an individual work regularly for another person and gets remunerated in return.
7. Classification of Business Activities
Various business activities may be classified into two broad categories
(i) Industry Industry refers to an activity which converts raw material into useful products. Industry includes activities related to production and processing as well as activities related to rearing and reproduction of animals 01′ other living species.
Industries may be divided into three broad categories namely primary, secondary and tertiary.
(a) Primary Industry These includes all those industries which are concerned with extraction of natural resources and reproduction of living species.
These industries can further be classified into two categories
- Extractive Industries
- Genetic Industry
(b) Secondary Industry The secondary Industry makes use of products which arc extracted and produced by primary industry as their raw materials and produce finished products. e.g., meaning of iron ore is done in primary industry but steel manufacturing is done in secondary Industry.
There are two kinds of Secondary Industry
- Manufacturing Industries These industries are engaged in the process of conversion of raw materials or semi- finished goods in to finished products.
- Construction Industry These industry are concerned with the construction of buildings, dams. roads etc.
(c) Tertiary 0r Service Industry It is concerned with providing services with facilitate a smooth flow of goods and services. The various types of services provided by Tertiary Industry are Transport, Banking. Insurance, Warehousirrs. Advertising.
(ii) Commerce Commerce refers to all those activities which help directly or indirectly in the distribution of goods to the ultimate consumer.
(a) Functions of Commerce
- Helps in Removing the Hindrance of persons.
- Helps in Removing the Hindrance of place.
- Helps in Removing the Hindrance of time.
- Helps in Removing the Hindrance of Exchange.
- Helps in Removing the Hindrance of Risk.
(b) Classification of Commerce
- Aids to Trade
8. Trade Trade is an integral part of commerce. It refers to buying and selling of goods and services.
Trade can be classified into two types
(i) Internal Trade Internal Trade refers to buying and selling of goods or services with in the geographical boundaries of a country. It is also known as Home Trade.
The internal trade of two types.
- Whole sale trade
- Retail trade
(ii) External Trade It refers to the buying and selling of goods and services beyond the geographical limits of the country. It is also known as trade between two or more countries.
External trade is of following types
- Export trade
- Import trade
- Entrepot trade
9. Aids or Auxiliaries to Trade
- Transport and Communication Transport refers to the movement of goods from one place to another. Communication helps in exchange of information between producers, consumers and traders etc.
- Banking and Finance Bank and financial institutions provides credit facility, loan etc. to provide finance for smooth now of business activities.
- Insurance Businessmen have to bear various types of risks, Insurance provides protection from SOme kinds of risk such a risk of loss due to fire, theft, accident etc.
- Ware Housing Ware housing helps to businessmen to over come the problem of storage. Ware houses are constructed keeping in mind the nature of goods.
- Advertising Practically It IS impossible for a manufacturer and trader to contract each and every customer. Advertisement helps to over come this problem.
10. Objectives of Business Objectives are needed in every area that influences the survival and prosperity of business. The main objectives are
- Market standing
- Physical and financial resources
- Earning profits
- Manager performance and development
- Worker performance and attitude
- Social responsibility
11. Business Risk Business risk refers to the probability of losses or inadequate profits due to uncertainties or unexpected events, which are beyond control.
12. Nature of Business Risk
- Business risk arises due to uncertainties
- Risk is an essential part of every business
- Degree of risk depends upon the nature and size of business
- Profit is the reward for bearing the risk
13. Causes of Business Risk
- Natural Causes The natural causes are such type of uncertain factors that human being cannot make any preparation against.
- Human Causes Human Causes are related to a chance of loss due to human beings or employees of the organisation.
- Economic Causes Economic Causes are related to a chance of loss due to change in market condition.
- Other Causes These are unforeseen events like political disturbances, mechanical failures such as the bursting the boiler.
14. Starting a Business-Basic Factors
- Selection of line of business
- Size of the firm
- Choice of form of ownership
- Location of business enterprises
- Financing the proposition
- Physical facilities
- Plant layout
- Competent and Committed worked force
- Tax planning
- Launching the enterprise