SCHOOL OF ENTREPRENEURSHIP AND MANAGEMENT
INTRODUCTION TO BUSINESS
SESSION: 1
Title
Introduction to Business
Details
Literally, the word “business” means the state of being busy. Generally, the term business
includes all human activities concerned with earning money. In other words, business is an
activity in which various persons regularly produce or exchange goods and services for
mutual gain or profit. The goods and services produced or purchased for personal use are not
included in “business”.
According to L.H Haney, “Business may be defined as human activities directed toward
providing or acquiring wealth through buying and selling of goods”.
Structural Diagram:
Bussiness
Buying &
Selling
Buying &
Selling
Wealth
Characteristics:
1. Capital
2. Creation of Utility
3. Dealing in goods & Services
4. Employment
5. Motive
6. Organization
7. Production or Purchase of Goods
8. Regular Transaction
9. Risks and Uncertainty
10. Sale or Transfer for value
11. Social Welfare
Nature of Business:
1.
2.
3.
4.
Economic Activity
Human Activity
Social Process
System
Components & Scope of Business:
Business bears the following components:Industry
Commerce
Business
Industry:
Industry is connected with the production and preparation of goods and services. It is a place
where raw material is converted into finished or semi-finished goods, which have the ability
to satisfy human needs or can be used in another industry as a base material. In other words,
industry means that part of business activity, which is concerned with the extraction,
production, and fabrication of products. Two types of Industry are;
1. Primary Industry:
2. Secondary Industry
Primary Industry:
It is engaged in the production or extraction of raw materials, which are used in the
secondary industry. It can be divided into two parts:1. Extractive Industry: - These are those industries, which extract, raise or produce raw
material from below or above the surface of the earth. Eg: fishery, extraction of oil, gas
and coal, etc.
2. Genetic Industry: - These industries are engaged in reproducing and multiplying certain
species of animals and plants. Eg: Poultry farm, fishing farm, dairy farm, etc.
Secondary Industry:
These industries use raw materials and make useful goods. Raw materials of these industries
are obtained from primary industry. It has 3 parts;
1. Constructive Industry: - All kinds of constructions are included in this industry. Eg:
buildings, canals, roads, etc.
2. Manufacturing Industry: - In this industry, material is converted into finished or semifinished goods. Eg: textile mill, sugar mill, etc.
3. Services Industry: - These are engaged in providing services of professionals such as
lawyers, doctors, teachers, etc.
Commerce:
The term “commerce” includes all activities, functions and institutions, which are involved
in transferring goods, produced in various industries, from their place of production to
ultimate consumers.
Scope of Commerce can be explained as;
1. Trade
2. Aids to Trade
Trade: Trade is the whole procedure of transferring or distributing the goods produced by different
persons or industries to their ultimate consumers. In other words, the system or channel,
which helps the exchange of goods, is called trade. 2 types of trade are: Trade
Home
Trade
Foreign
Trade
a. Home trade: - The purchase and sale of goods inside the country is called home trade. It is
also known as ‘domestic’ or internal trade’. Home trade has 2 types;
i.
Wholesale trade: It involves selling of goods in large quantities to shopkeepers,
in order to resale them to the consumers. A wholesaler is like a bridge between
the producers and retailers.
ii.
Retail trade: Retailing means selling the goods in small quantities to the
ultimate consumers. Retailer is a middleman, who purchase goods from
manufacturers or wholesalers and provide these goods to the consumers near
their houses.
iii.
Foreign trade: Trade or exchange of goods and services between two or more
independent countries for their mutual advantages is called foreign trade. It is
also called international trade. 2 types;
 Import trade: When goods or services are purchased from
other country.
 Export trade: When goods or services are sold to any other
country
Aids to Trade: 1.
2.
3.
4.
5.
6.
7.
8.
Banking
Transportation
Insurance
Warehousing
Agents
Finance
Advertising
Communication
FACTORS OF PRODUCTION
1. Labour
2. Capital
3. Entrepreneurship
4. Physical resources
ECONOMIC SYSTEM
Economic Environment: Conditions of the economic system in which an organization operates.
 Economic Growth:
1. Business Cycle: Pattern of short term ups and downs (expansion and contraction) in an
economy.
2. Aggregate Output: Total quantity of goods and services produced by an economic system
during a given period.
3. Standard of living: Total quantity and quality of goods and services that a country’s citizens
can purchase with the currency used in their economic system.
 Gross Domestic Product
 Gross National Product
DEMOGRAPHIC ENVIRONMENT
It is the study of characteristics of population such as size of population, population growth rate and
population distribution on the basis of gender, age, income level, level of education, geographic
location, family structure, etc. These factors influence the size of demand, buying pattern, liking and
attitude of customers.
POLITICAL AND LEGAL ENVIRONMENT
Legal and political factors include legal and governmental system organizations operate. Political and
legal environment strongly affect the business decisions. Aspects considered are the preferences and
priorities of the government, political stability in the country, laws/rules and regulations, taxation
policy and attitude of the government towards business.
SOCIO CULTURAL ENVIRONMENT
This includes the societal values, attitude, customs, religion, beliefs, habits and preferences, etc.
NATURAL ENVIRONMENT