Introduction to Business
Faizan Shahzad
Abasyn University Peshawar
Concept of Business
In Layman terms, business means to get something at
low cost and sell it at a higher cost, meanwhile, the margin
produced between that is the profit.
Business’s only purpose is profit, it is driven by it.
Business is derived from the word ‘busyness’ meaning
engaged in an activity.
Definition of Business
If we were to define business in much finer terms, we
can say that
“Business is any occupation which includes all activities
which are connected with production or procurement
of goods for sale and adding a profit margin to that
costs for further selling it to the customer for the
satisfaction of their needs.”
Definition of Business Cont.
In a word,
“Business means creation of utility”. From the
functional point of view, the business is related to
all kinds of legal works of producing , marketing
and exchanging products and services with the
intention to earn profit .
Functions of Business
Important functions for running a business includes
Planning : To make a plan is so essential for
production, distribution and investment. Without
planning any business can’t achieve their destiny.
Production : Production or creating utility is the
primary function. By producing goods and delivering
services business organizations try to fulfill the needs of
the people.
Functions of Business
Purchase : To continue the process of production
businessmen purchase raw-materials from the suppliers.
Sale : Sale means transfer of the ownership of goods
and delivery services to another person.
Insurance : In business there are many types of risks
such as deflation , price falling, fire and accident etc .
For that reason should take insurance policy.
Market research : By market research businessmen get
the information about the customer’s need , demand ,
purchasing power , expectation.
Functions of Business
Grading & Standardization : Grading means to
classify the products according to their criteria ,
quantity, value and nature. Standardization means to
divide the product according to the quality.
Advertisement & Publicity : Business organization
should make advertisement and publicity to create
customer and inform them about the shape ,size , quality
and price of production.
Characteristics of Business
1. Economic activity:
Business provides a source of income to the society. Business
results into generation of employment opportunities thereby leading
to growth of the economy. It brings about industrial and economic
development of the country.
2. Buying and Selling:
The basic activity of any business is trading. The business involves
buying of raw material, plants and machinery, stationary, property
etc. On the other hand, it sells the finished products to the
consumers, wholesaler, retailer etc. Business makes available
various goods and services to the different sections of the society.
Characteristics of Business Cont.
3. Continuous process:
Business is not a single time activity. It is a continuous process of production
and distribution of goods and services. Business should continuously involve
in research and developmental activities to gain competitive advantage. A
continuous improvement strategy helps to increase profitability of the business
firm.
4. Profit Motive:
Profit is an indicator of success and failure of business. It is the difference
between income and expenses of the business. The primary goal of a business
is usually to obtain the highest possible level of profit through the production
and sale of goods and services.
Characteristics of Business Cont.
5. Risk and Uncertainties:
Risk is defined as the effect of uncertainty arising on the objectives of the
business. Risk is associated with every business.
6. Creative and Dynamic:
Modern business is creative and dynamic in nature. Business firm has to
come out with creative ideas, approaches and concepts for production and
distribution of goods and services.
7. Customer satisfaction:
The phase of business has changed from traditional concept to modern
concept. Now a day, business adopts a consumer-oriented approach. Customer
satisfaction is the ultimate aim of all economic activities.
Characteristics of Business Cont.
8. Social Activity
Business is a socio-economic activity. Both business and society are
interdependent. Business has some responsibility towards the society and in
turn it needs the support of various social groups like investors, employees,
customers, creditors etc. by making goods available to various sections of the
society, business performs an important social function and meets social
needs.
9. Government control:
Business organizations are subject to government control. They have to
follow certain rules and regulations enacted by the government. Government
ensures that the business is conducted for social good by keeping effective
supervision and control by enacting and amending laws and rules from time to
time.
Business Goals
• Profitability
• Social responsibility
• Efficiency
• Effectiveness
Profitability
• Profit represents amount remaining after all
costs are deducted from revenues
• Financial reward for risk, innovation and
effort
• Provides financial base for future growth and
development
• ‘Not for profit’ organisations do not have profit
as an objective
– Aim to provide goods and services to particular
people within the community
– E.g: Red Cross
Social Goals
• Community service
• Providing employment
Efficiency = getting the most output from the least
amount of inputs
“doing things right”
concern with means(ways) of getting things done
Efficiency
Efficiency and Effectiveness
Effectiveness = do those work activities that will help
the organization reach its goals
“doing the right things”
Effectiveness
concern with ends(result) of organizational goal
achievement
Efficiency and Effectiveness in Management
Efficiency (Means) Effectiveness (Ends)
Resource Goal
Usage Attainment
Low Waste High Attainment
Management Strives for:
Low Resource Waste (high efficiency)
High Goal Attainment (high effectiveness)