Business Definition | 15 Vital Features of Business

Business Definition & Features of Business:

       In this article, I wrote on, all the time trending concept, Business. Starting a startup or establishing a business is becoming a trend among the youth nowadays.

Business Definition and Business Meaning:

       There are many Business Definition by various authors. To understand Business Meaning precisely, we should understand the Features of Business properly. Products and services vary from business to business but Nature and Business Definition i.e. purchase and sell would be the same.

     In simple terms, business means any activity consists of purchasing and selling of goods or services with the basic motive to earn the profit. No business in this world runs for the loss.

       Every businessman has a primary motive to earn as much profit as he can. The business running not to earn any profit is actually not a business it is a social welfare organization. Even social welfare organizations charge minimal profit to run the organization effectively.

          There are two important factors in any business i.e. Risk and Return. These factors vary from one business to another. In any business, higher the risk factor more the return and vice versa. The Entrepreneur has to take some risk in the business by understanding some factors i.e. market situations, business environment etc.

   To be a businessman, one must have skills such as communication skills, convincing skills, risk-taking power, leadership skills, motivation, knowledge about product market etc.

          For a newly established business unit, it requires a lot of hard work, patience, and struggle to make it successful. For a new business unit, there are various sources of finance, options available for acquisition and investment in the business.



          As we all know, finance or money plays important role in any business it is also necessary to acquire and manage the finance in the business efficiently. Financial sources such as Issue of Equity & Preference Shares, Taking a Loan from creditors or bank, Money collection from debtors etc. are available to businessmen.

         Business meaning is very simple and easy to understand and business also has a wide scope as compared to the job. The trend of business is increasing day by day.

          Entrepreneurship also helps in increasing employment in society. Businessmen become not only self-employed but it also provides employment and reduces unemployment in the society.

         Nowadays, youths prefer to become the owner of a business and become independent rather than doing a job and work for others. Here, with the independent ownership and great profits there, comes great responsibilities to the employer or entrepreneur.

          According to one research, it is believed that 95% of business startups close down within 5 years of its establishment. This figure is really shocking. The main reason for the failure of startups is the lack of proper planning and improper implementation of business ideas by an entrepreneur.

         When a business uses all the available resources effectively and reduces various costs with some techniques, then the chances of achieving success in that business will increase.

     If above-mentioned resources are utilized effectively, the chances of achieving organizational goals will be increased. These 5 m's of the management revolves around various activities in the organization.

           Many people ask: What is Business? So, here is the simple definition of business and also the Business Definition by Authors.

Business Definition Economics:

            Business definition according to economics, "Business is an economic system where products or services are manufactured and supplied to the market for its consumption."

Simple Definition of Business:

           The simple definition of Business, "Business is a legal entity, an organization where goods & services are exchanged for the primary motive to earn money."

Business Definition by Authors:

           "Business is an organization that provides goods or services in order to earn the profit"

(1996) Griffin and Ebert -

         "Business is an institution which produces goods and services demanded by people."

Brown and Petrello -

        "Business is all those activities involved in providing the goods and services needed or desired by people."

Stenford -

       So, from the above Definition of Business i.e. Simple Definition of Business, Business Definition Economics and Business Definition by Authors, it is clear that Business is any legal entity exists in the society to supply various commodities demanded by people.

             By considering business definition by authors i.e. Griffin & Ebert, Brown & Petrello and Stenford, we can answer the meaning of business in simple terms as, 

Business is an organization, exists in society to produce the goods or services by considering the needs and wants of the consumers in order to make money.



       The concept of business and Business Definition can be understood more thoroughly by studying some Vital Features of Business.

List of Vital Features of Business:

Here is the list of some of the vital features/characteristics/natures of business:

1.  Economic activity
2.  Legal entity
3.  Risk factor
4.  Deals in goods or services
5.  Profit motive
6.  Production & Exchange
7.  Purchase & Sell
8.  Continuous process
9.  Innovative & Dynamic
10.  Government control
11.  Self-Employed
12.  Consumer satisfaction
13.  Optimum use of available resources
14.  Marketing & Distribution of product or service
15.  Social activity

Elaboration of listed Features of Business:

        So, here is the explanation of above-mentioned vital features of the business or entrepreneurship:

1. Economic activity:

        Business is an economic activity, which means it consists of production and distribution of products or services. In a business organization, product or service is produced according to the demand of the purchaser or consumer.

     Business fulfill human wants. It also helps in generating employment in various sectors of society. Hence, business is an economic activity.

2. Legal entity:

         Business is a legal entity exists in society to serve the purpose of fulfilling needs of people, according to law. A business is an organization having a legal identity in the eyes of law.

      Any purchase and sale activity which is not legal is not considered as a business organization in the eyes of law. Because, according to law, the business consists of transactions which are legal.

3. Risk factor:

     The risk is the factor undertaken by an entrepreneur or businessmen to earn the profit and achieve other organizational goals. Higher the risk in business, chances of earning more return be increased.

        Risks & uncertainties are the two main reason behind some people prefer job over starting own business. The businessmen take risks by analyzing various factors in the business unit.

       A company can reduce the risk factor in a business organization with help of management process (POSDCORB) A business must plan & control different business activities to avoid the risk factor.



           For a newly established company, acquiring funds by issuing equity shares is the best option. Because in the case of equity or ordinary shares, the dividend amount is distributed to the shareholders only when the company made a great profit. 

          New businesses also have high-risk factor due to its newness in the market and people are not aware of their products or services.

4. Deals in goods or services:

       Business transactions or deals are either on goods or in services. The business carries out various transactions i.e. purchase and sell, with the suppliers or with its customers.

             Mainly, goods are divided into two:

• Consumer goods
• Producer goods

           Consumer goods mean the goods which are used by the final consumer to satisfy its current needs and the goods cannot be used to produce another product. It includes milk, butter, bread & other food items, items of clothing etc.

         Producer goods are not used by consumers. Producer goods are the types of goods used in producing other goods or services. The main difference between consumer goods and producer goods is consumer goods satisfy human needs directly and producer goods satisfy human needs indirectly. It includes tools, machinery, equipment etc.

        The business also deals with different services like telecom, banking, transportation, insurance etc.

5. Profit motive:

          Earning more and more profit every year is the foremost and main intention or motive of any business unit. This is an important feature of a business. The survival and growth of business are possible only when it makes a desirable profit every year.

        In modern times, customers and profit both are given the same priority. Due to cut-throat competition, marketers always try to sustain their loyal customers even at the less profit margin. Hence, profit is the primary motive of any business.

6. Production & Exchange:

         Production is the process of converting raw materials or semi-finished product into a final product. Business transactions are carried out only when the final product is produced and is ready for consumption.

        The production process carried out and goods are produced for the self-consumption, such activity is not treated as a business. Business Definition completes only when the exchange of final goods is made after its production. Exchange means the exchange between businessmen and customer i.e. exchange of money and product or service.

7. Purchase & Sell:

    The concept of business accomplished only when it has, purchasing and selling activities. A company purchase raw materials or semi-finished goods and converts it into a finished product through the production process and finally, sells the final product to the marketers or its customers. Hence, purchase & sell is one of the important features of any business.

8. Continuous process:

           Business is a continuous process. The transactions carried out in a business i.e. purchase & sale, must be regular and continuous. The purchase and sale activities which are irregular is not treated as a business. For example, a person sold his house, it will not be treated as a business because business transactions have regularity.

9. Innovative & Dynamic:

Earlier, business was limited to earning more and more. But nowadays, due to cut-throat competition in the market and also due to awareness among the consumers, profit margins in modern businesses reduced and competition increased.

In modern times, a businessman must bring a creative and dynamic approach to its business. In today's world, entrepreneurs use various creative ideas for marketing & development of his unit.

10. Government control:

Government is a legal body which has authority and power in the society. A business organization must follow rules and regulations framed by the government.

Government frames rules and regulations by considering the welfare of society. Government ensures that the business conducted for social well being and does not harm the society or group of society in any way.

For example, the Government of India implemented a new taxation system for businesses, (GST) Goods & Services Tax. After implementing this taxation system, every businessman in the country has followed the structure.

11. Self-Employed:

The entrepreneur is self-employed (works for himself) rather than working for any other employer and he is independent, not dependent upon any other employer. Self-Employment is one of the vital features of business as well as it is important advantages of the business.

Instead of depending upon other employers, the businessmen can also provide job opportunities to some people in the society. So, a business also helps in reducing unemployment of the country.

12. Consumer satisfaction:

Nowadays, customer or consumer is considered as the king of the market. If a customer is not satisfied, there is no chance of having long-term business relations.

To build a good business relationship with any customer, one must identify his/her needs and fulfill it by providing the product or services. A businessman also needs to take care of the services provided to his customer.

Earlier, the concept of business was limited to earn the profit. Businessmen had a solo motive to earn more and more profit anyhow, by hook or by crook.

But as time passed away, awareness among the consumers increased and competition in the market also increased so it was difficult for the businesses to exploit its customers. Hence, a customer is the king and businessmen should make a product by considering the needs of its customers.

13. Optimum use of available resources:

A company achieves its organizational goals easily only when it uses all the available resources efficiently. If the company fails in doing so, there would be wastage of time, money and energy. It also depends upon the type of employer, his/her capabilities to make use of available resources properly.

Mainly, there are five important resources used by the company for the production and its business. They are known as 5 m's of management:

1. Men              (Manpower or workers) 
2. Money          (Finance or fund) 
3. Methods       (Techniques or operating procedure)       
4. Machinery    (Machinery or tool used for production)  
5. Material        (Raw materials or semi-finished product)

14. Marketing or distribution of a product or service:

Marketing management is one of the important functional areas of management. If a product is of great quality produced by the company and price of that product has been set less, what if there are no steps taken on the marketing of that product? It becomes useless, right?

There are thousands of way for marketing of a product or services, directly and indirectly. Marketing and distribution of product allows the product to reach into right hands (consumers)

Marketer decides Distribution Channel by considering the type of the product. If a marketer fails in choosing the proper channel of distribution, there is a possibility of increment in costs. Mainly, the distribution channel is of two types:

• Direct distribution channel
• Indirect distribution channel

15. Social activity:

A business is a socio-economic activity which means it is economical as well as social activity too. Earlier, businesses were profit-oriented, businessmen were only focused on making more profit anyhow.

In the modern business era, the situation is totally changed. Nowadays, businessmen also focus on social responsibilities because business and society both are interdependent.




Conclusion:

So, from the above nature/characteristics of the business, we can conclude that nowadays the competition in the business market is increased and modern businesses replaced almost all the old-school techniques in the business organization. Here, we have seen What is Business, Simple meaning of business, Business Definition and Vital Features of Business.


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