Origin of Business

The origin of business can be traced back to the days of the origin of the world. In those days, the cave
man produced goods, which he wanted. Later, he realized that he could not produce each and
everything needed by him. He thought that he should specialize only in the work which was best suited
to him and should utilize the service of others producing more commodities than those required for his
own consumption. Then he exchanged the excess of his commodity with other’s commodities, which he
required for his use. This system known as “charter system” was the origin of business.

With the passage of time, human wants became more and more. Now the consumer wants and expects
numerous articles in order to lead a comfortable life. The commodities, which were all considered as
luxurious yesterday, have become the necessaries of today.

Definition of Business

L J. Gordon rightly remarked business as below:

“The modern middle class family lives more luxuriously than the royalty of old. Yet modern middle class
families are not satisfied and economists contended that they never will reach a stage of complete
satisfaction“.

This makes the business field a complex one. Hence, the concept of business activities becomes an
independent field of study, grown in various dimensions with several branches. In the light of the above
discussion let us proceed to discuss what is “Business”.

What is Business?

The term Business Organization is a composite of two terms “Business” and “Organization“. In order to
understand the term it is relevant to deeply look into the meaning and the components of the terms
business and organization. Clear understanding of these two terms will enable us to grasp the economic
basis of modern social organization.

Meaning and Definition of Business

The word business simply means “The state of being busy“. It confines its study only to those human
activities in relation to exchange of goods and services for money.

The purpose of exchange of goods and services is to satisfy human wants. A number of authors and
authorities have attempted to define the term business in so many ways. However, all definitions focus
their attention on one particular aspect i.e., “satisfaction of human wants“.

Of the above definitions, the comprehensive definition of L.B. Dicksee is given below:

“Business refers to a form of activity pursued primarily with the object of earning profits for the benefit
of those on whose behalf the activity is conducted. The term is used to cover the whole complex field of
commerce and industry — the basic industries and the net work of ancillary services, distribution,
banking, insurance, transport and so on which serve and interpenetrate the world of business as a
whole“.

Characteristics of Business

The important characteristics of business are given below:

1. Sale, Transfer or Exchange of Goods and Services for Value

Business is concerned with sale, transfer / sale of goods and services for a value. Production or purchase
of goods or services for personal consumption is obviously outside the scope of business because, there
is no sale or transfer for value. Therefore, production or purchase for one’s own consumption is not a
business activity. On the other hand, if he produces for others it is considered as a business activity.

2. Continuity of Dealings

The exchange of goods and services should be undertaken continuously. A casual transaction does not
constitute business. If a person sells his Television set and gains some profit thereon, it does not
constitute business. But if he regularly deals with T.V. sets, then such an act is treated as business.

3. Profit Motive

Profit is the ultimate aim of any business. It may have other motives also. But if this motive is absent, it
is not a business activity at all.

4. Uncertainty and Risks

Profit for any business depends not only on the factors over which the businessman has control but also
on factors over which he has no control or less control. Thus, all activities of business carry some
element of risk and uncertainty in respect of business success.

Scope of Business

Scope of Business

The Scope of “Business” is wider than that of the terms “Trade” and “Commerce“. The terms trade and
commerce are often used synonymously. This usage is not correct.

Trade is one of the branches of commerce. It is concerned with exchange of goods and services. It
performs the function of acting as an intermediary and thereby it transfers goods from the producer to
the consumer. On the other hand, commerce is a wider term. It includes “Trade” as well as, Aids to
trade i.e. the various activities which facilitate trade.

The term business may be classified into Industry and Trade and commerce. Industry is referred to as
production of goods and materials while Trade and commerce refers to distribution of goods and
materials manufactured. The image below gives a clear-cut picture of the nature and scope of business.