The Nature of Business Activity
The Nature of Business Activity
Basic Concepts of Business
- Business activity is about creating wealth and well-being, making profits, and contributing to national prosperity.
- Needs (essential for survival) and wants (desired for satisfaction) drive human activities. They are infinite but resources are finite. Businesses generate wealth by satisfying these needs and wants.
- Every business involves a series of activities like procurement of resources, production, marketing, delivery to consumer and after-sales service.
Business as an Economy's Cornerstone
- The business activity of production of goods and services is the prime force behind an economy's growth.
- It's vital in creating employment opportunities, which helps in reducing poverty and raises living standards.
- Businesses create goods and services using inputs (resources) like land, labour, capital and enterprise. These are collectively known as Factors of Production.
Levels of Economic Activity
- Primary: Involves the extraction of natural resources, e.g. mining, fishing, farming.
- Secondary: Involves manufacturing and construction sector. Converts raw materials into finished or semi-finished goods.
- Tertiary: Involves providing services such as education, transportation, hospitality.
Form of Business Ownership
- Sole Traders: Owned and managed by one person.
- Partnerships: Two or more people, who pool their resources to run a business together.
- Limited Companies: Legal entity separate from its owners. Shareholders have limited liability.
- Cooperatives: Owned and run by the people who work in it.
- Franchises: Run under the brand name of an established business.
What a Business Needs to be Successful
- Clear objectives and good planning.
- Effective marketing to attract customers.
- Satisfied, motivated, and trained employees.
- High-quality products or services.
- Efficient operations and effective financial management.
- Compliance with legal requirements and responsiveness to external factors.
Important Business Concepts
- Profit: The financial gain realised when revenue exceeds the cost of producing goods.
- Loss: Occurs when costs exceed revenue.
- Risk: The potential for loss but also potential for profit.
- Competition: Rival businesses striving for customer's money.
- Demand and Supply: The relationship between the desire for a product and its availability.
- Marketing Mix: Product, Price, Place, Promotion.
- Business Plan: A detailed plan outlining a business's goals and how it will achieve them.