Nature and Purpose of Business and Business Activities Introduction All of us live in families and depending on the income,

we have different standards of living. We require various types of goods and services to satisfy our needs and wants. Some members in your family have to work to earn and provide for the needs of the family. Thus, people engage in different activities which are known as economic activities. In ancient times, people had limited wants to satisfy. In modern times however, we need a large variety of goods and services to satisfy our needs and to raise our standard of living. n the one hand the supply of goods and services has led to various activities. n the other hand, activities of different types are undertaken by people to earn sufficiently to fulfill their increasing wants. Thus we find large numbers of people engaged in business, industry, and profession. Such economic and business activities satisfy various needs and demands for goods and services. Nature of Business !usiness may be understood as the organi"ed efforts of enterprise to supply consumers with goods and services for a profit. !usinesses vary in si"e, as measured by the number of employees or by sales volume. !ut, all businesses share the same purpose# to earn profits. The purpose of business goes beyond earning profit. There are# It is an important institution in society. !e it for the supply of goods and services $reation of %ob opportunities ffer of better quality of life &ence, it is understood that the role of business is crucial. Society cannot do without business. It needs no emphasis that business needs society as much. 'odern business is dynamic. If there is any single word that can best describe today(s business, it is change. This change makes the companies spend substantially on )esearch and development *) + ,- to survive in the market. 'ass production and mass marketing are the norms followed by business enterprises. The number of companies with an annual turnover of )s..// crore each was only $ontributing to the economic growth of the country.

three in .01023/.The figure has gone up by hundreds these days. Today(s business is characteri"ed by diversification, which may be# Concentric Diversification - It refers to the process of adding new, but relates products or services. Horizontal Diversification - Adding new, unrelated products or services for present customers is called hori"ontal ,iversification. Conglomerate Diversification - It refers to adding new and unrelated products or services. 4oing international is yet another trend followed by modern business houses. !usiness houses are e5posed to global competition, which argues well for consumers. Also occupying a ma%or role is science in the global economic scenario. Purpose of Business Profit 2 'aking profit is the primary goal of any business enterprise. Growth - !usiness should grow in all directions over a period of time. Power - !usiness houses have vast resources at its command. These resources confer enormous economic and political power. mplo!ee satisfaction and development 2 !usiness is people. $aring for employee satisfaction and providing for their development has been one of the ob%ectives of enlightened business enterprises. "ualit! Products and #ervices 2 6ersistent quality of products earns brand loyalty, a vital ingredient of success. $ar%et &eadership - To earn a niche for oneself in the market, innovation is the key factor. Challenging - !usiness offers vast scope and poses formidable challenges. 'o! of creation 2 It is through business strategies new ideas and innovations are given a shape and are converted into useful products and services. #ervice to societ! - !usiness is a part of society and has several obligations towards it. Classification of Business Activities !usiness activities are undertaken to satisfy human wants by producing goods or rendering services. We may classify business activities on the basis of functions into two broad categories *a- Industry and *b- $ommerce.

Industr! is concerned with the production and processing of goods. This type of business units is called (industrial enterprises) which produce consumer goods as well as machinery and equipments. n the other hand, 7commerce) includes all those activities which are necessary for the storage and distribution of goods. Such units are called (commercial enterprises) which include trading and service activities like transport, banking, insurance and warehousing. 8et us e5amine the characteristics of industry and commerce. Industr! and its *!pes Industry means production of goods for sale by the application of human or mechanical power. In other words, industr! refers to economic activities which are connected with raising, producing and processing of goods and services. Characteristics of Industr! The main characteristics of industry are as follows#2 Industry refers to the productive aspect of business. 6roduction is done by the application of human or mechanical power. It creates form utility to natural or partly processed goods. It is concerned with the production of both producer and consumer goods. Industrial activities are regulated by different laws. It involves continuous operation. *!pes of Industries Industries are divided into two broad categories# 6rimary industries Secondary industries. Tertiary industries. Primar! industries include all those activities which are connected with e5traction, producing and processing of natural resources. These industries may be further sub2divided into two types# *a- e5tractive and *b- genetic. Secondary industries are concerned with the materials which have already been produced at the primary stage. 9or e5ample, mining of iron ore is a primary industry, but manufacture of steel is a secondary industry.

a+ ,tractive Industries:5tractive industries are concerned with the e5traction of materials from the earth, sea and air such as mining, farming, fishing and hunting etc. 6roducts of these industries are used either directly for consumption such as food grains, fruits and vegetables or as raw materials such as cotton, sugar2cane, etc. .+ Genetic Industries4enetic industries include activities connected with rearing and breeding of animals and birds and growing plants. )eproduction and multiplication is the main activity in these industries, such as, agriculture, animal husbandry, dairy, poultry, pisciculture etc. 'ain products are milk, wool, butter, cheese, meat, egg, fish, seeds of plants, etc. #econdar! industries may also be of two types# *a- manufacturing, and *b- construction. a+ $anufacturing IndustriesIndustries engaged in the conversion of raw materials or semi2finished products into finished product are called manufacturing industries. $otton is converted onto te5tiles and iron one is converted into in these industries. It creates a form utility of the product.

.+ Construction IndustriesThe activities of $onstruction industries include erection of buildings, bridges, roads, railways canals etc. Their output do not consists of movable goods. It makes use of the output of other industries like brick, cement, steel etc. *ertiar! industries are basically concerned with generating or processing of various services and facilitate the functioning of primary industries and secondary industries as well as activities of trade. These include service industries like banking, insurance, transport etc. 9ilm industry which provides entertainment to the individuals produces films; tourism industry which provides services to the individual by facilitating their travel, booking of tickets and hotel rooms etc. are also included in this category. Characteristics of Commerce Commerce is the sum total of all the activities connected with the placing of the product before the ultimate consumer. It provides the necessary link between the producer and the consumer of goods. Commerce is defined 7as activities involving the removal of hindrances in the process of e5change(. $ommerce includes all those business activities which are undertaken for the sale or e5change of goods and services and facilitates their availability for consumption and use 2 through trade, transport, banking, insurance, and warehousing. Thus commerce includes trade and au5iliaries to trade, that is transport, banking, insurance and warehousing. The main characteristics of commerce are as follows# $ommerce is the sum total of activities which facilitate the availability of goods to consumers from different producers. It aims at ensuring proper distribution of goods. It adds different type of utilities to the goods by making goods available at the right time and the right place to the people who need them. It includes trade and au5iliary to trade.

*rade and its t!pes Trade is an integral part of commerce and refers to sale and transfer of goods. It involves actual buying and selling of goods. It means e5change of goods and services for cash or credit. Traders help in directing the flow of goods to the most profitable market. They also bring about equitable distribution of goods on a national and international scale. It is because goods are produced on a large scale and it is difficult for producers to reach individual customers, that trade is said to remove the hindrance of persons through traders. 4oods acquire place utility through trade.

Characteristics of *rade The main characteristics of trade are as follows# Trade is regarded as the primary activity in commerce; It means e5change of goods and services for price; It helps in directing the flow of goods to the most profitable market; It helps to equali"e the supply of and demand for goods in different markets both national and international.

Classification of *rade Trade may be classified into &ome Trade or Internal Trade and 9oreign Trade or :5ternal Trade. i+ Home *rade&ome Trade means trade carried on within the boundaries of a country. The primary ob%ect of home trade is to bring about proper distribution of goods within the country. It may be divided into two types *a- Wholesale Trade and *b- )etail Trade *a- /holesale *rade- Wholesale trade involves buying goods from producers and selling them in small quantities to retailers. The wholesaler generally deals in large quantities of goods of a limited number of varieties. &e serves as a connecting link between the producer and the retail dealer. *b- 0etail *rade- A retail trade consists of selling goods directly to the consumers in small quantities. A retailer usually purchases goods from wholesalers or manufacturers and deals in a variety of goods of different manufacturers. ii+ ,ternal *rade:5ternal trade refers to trade between two countries. It implies buying and selling of goods by traders of two different countries. It creates a very wide market for goods produced in different countries. :5ternal trade involves *a- :5port *b- Import and *c- :ntrepot. :5port is concerned with the sale of goods to foreign countries. Import trade relates to the purchasing of goods from other countries. :ntrepot is concerned with the sale of goods to foreign countries which was purchased from other countries Au,iliaries to trade *ransportIt is one of the most important au5iliaries to trade. Transportation helps trade by facilitating the movement of goods and passengers from one place to another. Transport creates (place utilit!(

of the goods and remove the problem of distance. All kinds of goods can be transported in large quantities over long distances. A business can depend upon a number of modes of transportation < land transport *road, railways, and pipeline-, water transport *inland waterways, coastal and sea- and air transport *domestic and international-. Communication=ow2a2days it is not possible to have business without communication. Communication implies transmission of information1 ideas1 opinions1 etc .etween two or more persons2 It is a systematic and continuing process of telling, listening and understanding. $ommunication may be of two types 2 *i- internal and *ii- e5ternal. Internal communication refers to transmission of information by a person to another of the same organi"ation. :5ternal communication refers to transmission of information by persons to others outside the organi"ation. 'ethods of communication may include face to face, by telephone, postal mail, etc. n the basis of means of communication, there are two types of communication <oral and written. Ban%ing!anking provides safe, efficient and convenient mode of payment for goods in inland trade as well as in foreign trade. !anking helps business firms to overcome the problem of finance by lending money as and when required. !anks accept deposits and lend money. The other services of banks are# discounting of bills, collection of cheques, acting as agent. A bank accepts deposits on various accounts such as fi5ed deposit, savings, recurring deposit, and current. 8oans are granted through over2draft, cash credit, loans and advances, discounting of bills. ther services of banks include collection of payments on cheques, bills, drafts etc., sending money from one place to another, buying and selling securities, payment of insurance premium, issuing traveler(s cheques, providing locker system, and providing information on credit worthiness. !anks are of various types# commercial, agricultural, indigenous, rural, cooperative, e5change, central, etc. In fact banking is the lifeline of business. 3inance9inance is the life blood of business. It implies provision of money at the time it is required by business. 6rovision of funds is essential for every type of trade. 9inance needed by business is

called >Business 3inance?. It means arrangement of cash and credit to carry out business activities. Types of finance required by business are long<term, medium<term and short<term. 8ong<term finance *more than ./ years- is required for buying fi5ed assets; medium<term finance *one to ./ years- is required for moderni"ation and e5pansion of business, and short2term finance *upto one year- is needed for working capital. Sources of finance may be owned funds and borrowed funds. Special financial institutions which provide finance to business are I9$I, S9$s, I$I$I, I,!I, SI,!I, and I)!I. They provide long2term and medium2term finance. /arehousing Warehousing refers to storage of goods which are generally produced on a large scale in anticipation of demand. 4oods have to be stored for some time before transportation by manufacturers, wholesalers and retailers. Thus warehousing creates 7time utilit!(. Insurance Insurance occupies a prominent and valuable place as an aid to business and commerce. Insurance provides security against risks. It makes trade and business secure by making provision against all probable losses. Insurance is based on the principle of 7pooling of ris%s(. Insurance helps the businessman to conduct his business with confidence and peace of mind. There are two ma%or types of insurance coverage 2 *i- insurance of life of people and *iiinsurance of property.