Introduction to Business

Chapter # 01
For Bba 1st semester

By
Muhammad Bilal
Lecturer in Management Sciences
Concept of Business
 In the literary sense the term business means
the state of being busy.
 Technically the term business is defined as all
the commercial and industrial activities that
provide goods and services to the people and
are undertaken for profit.
 So we can say that business combines human,
material, technological and financial resources
for profit.

2
Activities excluded from
business
 Social service activities:
 All the activities for sake the social service, not for profit
like setting up free hospitals, free educational services,
etc
 Personal consumption activities
 Religious and other activities:
 Like offering of prayers, taking family members to dinner.
 Illegal activities:
 Only legal economic activities should be included in
business.

3
Definitions and characteristics
of business
 According to Urwick and Hunt.
 Business is any enterprise which makes, distributes or provide
any service which other members of the community need and are
within to pay for it.
 In the words of Davis
 “Business may be define as an activity in which different persons
exchange something of value whether goods or services for
mutual gain or profit.
 Ronald defines business
 “ As an organization that produces or sells goods and services to
make profit”.

4
Characteristics of
Business
1. Entrepreneur:
 An entrepreneur is a person who combines the factors of
production to produce goods and services for profit.
2. Deals in goods and services
3. Involves production or exchange of goods
4. Series of deals
 Business consists of producing or purchasing and selling
of goods on continuous and regular basis.
5. Desire to earn profit
6. Involves element of risk
7. Creation of utilities (place, form and time utility)

5
Importance of Business
 Mass production of goods :
 Business today is making the best use of scarce
resources for producing goods and services on a large
scale. Use of new procedures has lowered the cost of
production.
 Expansion of market:
 Satisfying the customers need within and outside the
country
 Innovations:
 Today businesses are busy in making improvements.

6
 Fast means of communication and transport:
 Help traders to serve the customers at right time.
 Provision of credit by the bank
 Insurance:
 various types of business risk can be insured now.
 Employment
 Business supply services:
 Like banking, finance, insurance, medical and
health care services

7
Criticism on Business

 Vast inequalities in wealth:

 It has widened the gap between poor and
rich segments of society
 Environmental pollution
 Ignorance of human welfare:
 Indulging in unethical activities like hoarding,
black marketing, dumping of products

8
Objectives of business

Objectives can be classified as

 Economic objectives
 Social objectives
 Human objectives
 National Objectives

9
Economic objectives
 Earning of profit
 In the words of Petter F.D Rucker “the problem of any
business is not the maximization of profit but the
achievement of sufficient profit to cover the risk of
economic activities and thus to avoid losses”
 Creation of market
 The more customers are created, the wider will be the
market for goods and larger the profits.
 Innovation
 Technological improvements
 Best possible use of resources

10
Social objectives

 Supply of standard quality of goods

 Avoidance of anti social practices like
smuggling, overcharging, hoarding etc
 Provision of more employment
 Cooperation with govt.

11
Human objectives

 Employees working in a business should

be fairly rewarded
 Healthy climate or environment should be
created for developing of new skills
 Employees satisfaction

12
National objectives
 Every business whether operating on small or
large scale must have an obligation towards nation
also. It should help in achieving national goals
such as:
 Social justice
 Increasing value added goods for exports
 Finding out better and cheaper substitutes for
imports
 Should help to increase the foreign exchange
reserves to meet the import bills.

13
Division of Business or
Components of Business
 Business activities can be divided into
two parts

 Industry or industrial activities

 Commerce or commercial activities

14
Meaning of industry
 The term industry refers to that part of business activity
which is concerned with the extraction, production or
fabrication of products.
 Consumer goods:
 Goods produced by an industry which are used by the final
consumers are called consumer goods.
 Capital goods:
 Goods produced by industry and is used for further wealth
generation by other company like plant, machinery
 Intermediate goods:
 Good produced by an industry are further processed into
finished products by another company like plastic etc

15
Types of industry
 Extractive industry:
 industries which extract or produce raw
material from above or below the surface of
earth like mining, forestry, agriculture are
examples of extractive industries.
 Genetic industries:
 Related with animals and plants, cattle
breeding farms, poultry farms, plant
nurseries.

16
Types of industry
 Manufacturing industry:
 Which are concerned with converting the raw
material to finished products. Like textile
industry, automobile industry
 Constructive industry:
 They are engaged in the construction of
building, canals, bridges, dams etc.
 Service industry:
 They are engaged in creating intangible goods
which cannot be seen or touched like services
of doctors, lawyers, teachers etc
17
Commerce

 Commerce is concerned with the buying

and selling of goods. It includes all
activities which are related to the transfer
of goods from the place of production to
the final consumer.
 Scope of commerce
 Trade
 Aids to trade
18
Scope of Commerce

Commerce

Trade Aids to Trade

Trade
 Buying and selling of goods, it includes exchange of goods and
services among buyers and sellers in which both the parties are
benefited.
 Types of trade
 Internal trade:
 The trade within the boundaries of the country
 External trade:
 Purchase and sale of goods b/w two countries called foreign
trade.
 Wholesale trade
 To purchase goods in large quantities for resale to retailers.
 Retail trade
 Activities related sale of goods and services to the final
consumers.

20
Aids to trade
 The activities which facilitate in the purchase of
goods and services are called aids to trade.

 Essentials aid for business expansion are follow

 Transport
 Insurance
 Warehousing
 Banking
 Advertisement
 Mercantile agents (sells good of the company to
consumers for commission)

21
 Functions of a Modern
Business
 Production function:
 Producing goods and services that satisfy human
wants and sell them at profit.
 Financial function :
 Secure finances to operate the business
 Management function:
 Getting things done through planning, coordinating,
motivating and controlling the efforts of others to
achieve the business objectives.
 Innovation function:
 organizations need new ideas.
 Organizational function:
 Modern business should have a sound organizational
structure. Use of specialized talents.
22
 Controlling function:
 Purpose of controlling is to examine the past and present activities.
 Motivating function:
 To motivate the employees
 Risk taking function:
 Every business faces risks and uncertainties.
 Marketing function:
 Business function that direct the flow of goods and services from
producers to consumers.
 Social responsibility function:
 Business should take care of the society like environmental pollution
should be reduced.

23
Role of profit in business

 Source of income
 Continuity of business
 Expansion of business
 Reward of risk bearing
 Profit and economic development
 Profit acts as a measure of efficiency

24
Qualities of a Successful
Businessman
 The modern business is very complex due
to scientific and technological developments
fast changes are taking place in every
business field. As the business world
changes the businessman has to acquire
the basic developing skills for effective
organization of the business units.
 Some qualities of a successful businessman
are mentioned below.

25
Qualities of a Successful Businessman

 Knowledge of business
 Ability to plan and organize
 Foresight
 Ethical standard:
 There should be no cheating or fraud in a
business activities.
 Initiative and creativity:
 Businessman should have the ability to take
initiative by producing new thing and new
methods of marketing the products.

26
Qualities of a successful businessman

 Adaptability to change
 Industrious (hardworking, active)
 Sound financial management
 Technical skill
 Team spirit
 Honest
 Conceptual skills:
 He should be able to coordinate and integrate both the
technical and human skills. When new production decision are
taken the executives of production, finance, marketing,
research should be involved for the achievement of common
objectives.

27
Problems before establishing
a new business
 Selection of business

 Demand for the product

 Size of business unit

 Provision of capital

 Location

 Selection of physical facilities (land, building,

machinery)

28
 Plan layout:
 Setting up of machines and equipment of the factory
because it facilitates the flow of work and there will be
effective utilization of men, material and machines.

 Selection of staff:
 Right persons should be selected for the right job.

 Office equipment
 Chairs, tables, computers, calculators , air conditions
etc
 Fulfillment of legal requirements