In this Articles we explain the Commerce Topic Economic Activities, Non-Economic Activities, Concept or Characteristics of Business and Essential Elements for Good business. That Notes very helpful for Commerce student at any Level (I.com, B.com, ACCA etc).
Table of Contents
Economic Activities:
These include all commercial and industrial activities which are connected with the production and or acquisition of wealth. These are also known as productive activities.
Economic activities can be classified into three types:
- Business:
All economic activities connected with production and exchange of goods and services to earn profit or as a source of income.
- Profession:
When a person provides his services to society on the basis of his specialized knowledge and experience in a particular field is known as profession (e.g.) doctors, professors, engineers, accountants etc.
- Employment:
When a person provides his services to another person or any institution on the basis of predetermined terms and conditions (fixed salary) is known as employment.
This may be of three types:
- Government Service
- Semi Government Service
- Private Service
Non-Economic Activities:
These activities are done for personal satisfaction and not to earn profit or income. These are also known as non-productive activities. These activities are done due to following reasons:
- Religious
- Parental
- Patriotic
- Social
Concept and Characteristics of Business
Definition of Business:-
“Any legal activity undertaken or performed for the purpose of earning profit is called Business”.
Characteristics of Business
- Goods and Services:
Every business deals with sale, purchase, production and exchange of goods or services for some consideration. For this purpose, there are many factories, banks, doctors and lawyers etc. are in working.
- Profit Motive:
Earning of profit and acquiring of wealth are the primary objectives of every business. Moreover, if a business does not earn profit then it cannot survive for long.
- Element of Risk:
Hence, a business cannot run without some elements of risk. Such as change in demand, taste, fashion and degree of competition etc.
- Management:
Management is the backbone of a business. Every business, irrespective of its size and nature, has management to manage and control the various factors of production.
- Capital:
Capital is a basic and essential part of every business. In case of shortage of funds, the owners may obtain loan from their friends, relatives and financial institutions.
- Employment:
A business is not only a good source of self-employment for its owners but also offers variety of jobs to other people like agents, transporters and bankers etc.
- Regular Transactions:
A business involves a series of dealings. For instance, if a student sells his book to shopkeeper or to a student, it is not a business. On the other hand if he regularly purchases and sells books in his spare time, then it will be considered as his business.
- Creation of Utility:
A business creates utility in different goods and services, which deliver satisfaction to entire society.
- Transactions for a Price:
In business, goods and services are produced or exchanged for some consideration (price).
- Exchange of Ideas:
The experts of different departments exchange their views for the smooth working and promotion of business. Sometimes, the traders and customers also share their ideas for the growth of business.
- Culture
The culture and civilization cannot be ignored during the process of production of goods and services.
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Essential Elements for Establishing a New Business
For Doing Business
- Nature of Business:
Before starting a new business, its nature is always decided. A business may be engaged in trading, manufacturing or rendering services.
- Restrictions:
It must be taken into consideration before the establishment of business that the government imposes no restriction to conduct this particular business.
- Size of Business:
It is important to decide the volume, scale or size of the business. A business may be of small, medium or large scale.
- Organizational Structure:
The form of business organization may be sole proprietorship, partnership or Joint stock company.
- Selection of Place:
Success or failure of the business is mostly based on location or the site selected for it. The following requirements while deciding the site for business:
- Availability of raw-material.
- Outlet (market) for the goods produced.
- Availability of auxiliary services.
- Availability of experts and labourers.
- Government Incentives:
Some areas are declared as tax free zones or interest free loan is provided for particular business.
Running Business
- Management:
It must be decided before the start of business that how the affairs or working of business shall be managed. Moreover it is also decided that either owners will take part in management or not.
- Availability of Capital:
Every business transaction or activity depends upon it (e.g.) purchase of land, building, machinery, raw material and payment of wages etc. No business can be started or run without capital.
- Availability of Machines:
Proper planning is required to make the machines available according to nature of the business.
- Availability of Raw Material:
Availability of standard and cheap raw material is essential to produce the goods of better quality at lower cost.
- Power Resources:
Power resources like water, oil, coal, gas and electricity must be easily available.
- Means of Transportation:
Fast and cheap means of transportation play vital role in making the raw material available and sending the finished goods to the markets.
Result of Business
- Future of Business:
New inventions, innovations are continuously coming up. So, the businessman should make the careful analysis of business conditions, both local and abroad.
- Chances of Expansion:
With the expansion in business, more capital, space and power resources etc. may be required.