Introduction to Business : Business Studies

Unit I
Introduction to
Business

What is a Business?
 Business is an organized activity where people work together to
make and provide things that other people need or want, and in
return, they earn money.
 It includes activities related to production, marketing,
distribution, trading and exchange of goods and services to
satisfy the needs of people so as to earn income or profit.
 Business refers to the economic activity, primarily pursued with
the objective of earning profits.
 Creates a win-win situation.

Definition of Business
 According to Brown and Petrello (1976), “Business is an
institution which produces goods and services demanded by
people”.
 According to L.H. Haney (1913), “Business may be defined as
human activity directed towards producing or acquiring wealth
through buying and selling goods”.

Evolution of Business
Pre-Industrial Era (Before the 18th Century)
 Early business activity began with bartering.
 Goods were made by hand.
 Small markets were developed where people could trade items like
food, tools, and clothing.
Industrial Revolution (18th - 19th Century)
 Factories were set up with new machines, goods could be produced in
large quantities.
 Mass production led to cheaper products, and the growth of large
companies.

 It also shifted many people from farming to factory jobs.
 Businesses needed more capital (money) for expansion.
Post-Industrial Era (Mid-20th Century)
 Focus shifted from manufacturing to service sector (banking,
healthcare, education).
 Massive growth was seen in technology and innovations like
computers and telecommunications changed how businesses operated.
 Businesses expanded internationally, connecting markets worldwide.
Digital and Information Age (Late 20th - 21st Century)
 Easy access to internet led to emergence of online businesses and
digital services.

 Technology replaced manual jobs with automated machines.
 Businesses started using data to understand customer behavior
and making data driven decisions.
Modern Era: Sustainability and Innovation (21st Century)
 Focus shifted towards ESG (Environmental, Social and
Governance Issues)
 Startups and small businesses are thriving.
 Technology enables people to work remotely.
 Artificial Intelligence (AI) and automated technology is
transforming industries with smarter solutions.

Characteristics of Business
1. Economic Activity
 Business involves the production, distribution and sale of goods and
services to earn a profit.
 It focuses on meeting human needs in exchange for money.
 It contribute towards the economic growth of it’s suppliers, employees,
distributors, retailers, and the nation along with its own growth.
2. Goal Oriented
 Every business has two goals:
 Profit Maximization
 Wealth Maximization

3. Continuous Process
 Business is an ongoing activity.
 It involves regular production, buying, and selling of goods
and services, it is not a one time operation.
4. Exchange or Transfer of Goods and Services
 Business involves the exchange of goods or services for
money.
 Without exchange, an activity is not considered a business.

5. Customer Satisfaction
 Customer is King.
 The main objective of business is to meet customer’s need and
satisfy them.
6. Resource Utilization
 Business utilize the resources to produce goods or to provide
service.
 These resources are: Human Resource, Natural Resource,
Physical Resource, Financial Resource, Technological
Resource.

7. Organized and Structured
 Businesses typically operate within an organized structure with
roles, responsibilities, and hierarchical systems for smooth
functioning.
8. Risk and Uncertainty
 Business involves risk due to factors like political, economic,
social, technological, environmental and legal.
 Profit is often seen as a reward for taking these risks.

Objectives of Business
1. Profit Maximization
■ Businesses wants to make profit.
■ Every business wants to earn more money than it spends.
2. Growth and Expansion
■ Businesses aim to grow by increasing their market share, opening new
locations, or offering new products and services.
■ 3. Customer Satisfaction
■ Satisfied customers are blessings for any business.
■ They not just repetitively use the same product/service but also recommend
it to others.

4. Employee Welfare
■ Employees are the human resource of the organization and
without them business cannot function as it mobilizes all other
resources.
■ So, business aims to provide good working condition, fair
wage, growth and development opportunities to its employees
in order to attract and retain skilled employees.
5. Wealth Maximization
 Businesses also aim to create wealth for their owners,
shareholders, and investors by maximizing the value of a firm.

Considerations before Staring a New Business
1. Business Idea
 Analyze the market, study competitors, customer needs, and
trends.
 Ensure your business idea solves customer’s problem.
 Then determine the unique value proposition (UVP) of your
business which is what makes your product or service stand out
from competitors

2. Business Plan
■ Decide what you want to achieve and set clear, achievable
objectives.
■ Estimate cost, revenue, and profit margin.
■ Outline daily operations, including staffing and production.
3. Legal Structure and Requirements
■ Choose a business structure (sole proprietorship, partnership, or
company)
■ Register your business and obtain necessary licenses and permits.
■ Comply with local, national, and industry laws.

4. Financing and Capital
■ Assess funding needs and determine how much money you
need to start and run the business.
■ Identify the sources of funding such as personal savings,
loans, investments, or grants.
■ Plan for unexpected expenses.
5. Location
■ Choose a suitable location or set up a digital platform.
■ Make sure that the location is appropriate to access the
resources.

6. Marketing Strategy
■ Identify your target customers.
■ Plan which marketing technique to follow to promote the
product/service.
■ Set competitive and profitable prices.
7. Risk Assessment
■ Identify potential risks related to finance, operations,
environment etc.
■ Prepare strategies to handle unexpected challenges and have
backup solutions ready.

8. Build a team
 Hire people with the skills you need.
9. Technology Needs
■ Choose the right tools and technology to make work easier.
■ Keep customer and business information safe.
10. Be Ethical and Sustainable
■ Do the right thing: Treat customers and employees fairly.
■ Think green: Use practices that protect the environment.

Social Responsibilities of Business
 Social responsibility refers to a business's duty to contribute positively to
society while minimizing negative impacts.
 It involves acting ethically and considering the interests of various
stakeholders, including customers, employees, communities, and the
environment.
 They include:

1. Economic Responsibility
■ Business is responsible for creating jobs contributing to the
economic growth and development of the society and nation as
a whole.
■ Business should increase government’s revenue by paying fair
taxes.
2. Legal Responsibility
■ Comply with all local, national, and international laws.
■ Avoid fraud, corruption, and other illegal activities.

3. Ethical Responsibility
■ Treat employees, customers, and suppliers with honesty and
respect.
■ Make sure the products and practices don’t harm people or
society.
4. Environmental Responsibility
■ Reduce environmental pollution by adopting eco friendly
practices.
■ Use resources responsibly.
■ Support initiatives to protect natural resources and biodiversity.

5. Philanthropic Responsibility
■ Donate money and support a cause.
■ Provide scholarships to needy students and conduct skill
development trainings to promote employment.

Profession
 A profession is an occupation that requires specialized
knowledge, education, and training.
 Focused on providing expert services rather than profit alone.
 Requires certificate, degree or license (e.g., lawyers, doctors,
accountants).
 Example: Law, teaching, and engineering.

Employment
 Employment refers to a formal agreement where an individual
(employee) works for another (employer) in exchange for wages
or salary.
 Different types of employment are Full-time, Part-time,
Temporary/Contract, Freelance

Difference
Basis of
Difference
Business Profession Employment
Objective Profit
Providing
expert services
Earning a salary or wages
Risk High Moderate Low
Qualification
Not always
required
Essential Depends on the role
Investment Required
Not usually
(except for
setup)
Not required
Regulation
Government
policies
Professional
bodies
Labor laws

Business Structures
1. Sole Proprietorship
 A business owned and operated by a single individual.
Advantages:
 Easy to establish and dissolve.
 Minimal regulatory requirements.
 Direct control over decisions and profits.

Disadvantages:
 Unlimited personal liability.
 Limited access to capital.
2. Partnership
 A business owned by two or more individuals who share
management, profits, and liabilities.

Advantages:
 Easy to establish.
 Shared resources and expertise.
 Flexible management structure.
Disadvantages:
 Unlimited liability (for general partners).
 Potential for disputes.
 Profits must be shared.

3. Corporation
 A separate legal entity distinct from its owners (shareholders).
Advantages:
 Limited liability protection.
 Easier access to capital.
 Perpetual existence.
Disadvantages:
 Complex to set up and manage.
 Double taxation (for C-Corps).
 Extensive regulatory compliance.

4. Limited Liability Company (LLC)
 A hybrid structure combining the benefits of a corporation and a
partnership.
Advantages:
 Limited liability protection.
 Fewer formalities than a corporation.
Disadvantages:
 Can be more complex than a sole proprietorship.
 Varying regulations by jurisdiction.

Introduction to Business : Business Studies

More Related Content

What's hot

Similar to Introduction to Business : Business Studies

Recently uploaded

Introduction to Business : Business Studies