Business is an economic activity of human beings performed for production and distribution of goods and services. Its main objective is to earn profits. It consists of three elements namely, production, distribution and sale of goods and services to earn profit. However, the term business is also often used colloquially (but not by lawyers or by public officials) to refer to a company. A company, on the other hand, is a separate legal entity and provides for limited liability, as well as corporate tax rates. But, a company structure is more complicated and expensive to set up, but offers more protection and benefits for the owner. For example, elements are-
- Production: Production of automobiles in the factory/assembling different parts by companies like TATA, Maruti, Hyundai, Ford etc.
- Distribution: Transporting of automobiles from place of production to the point of sale.
- Sale: Sale of automobiles to retail customers by showrooms, dealers etc.
Figure: Concept of business
Some of the functions of its are –
- Firstly, it is an economic activity as it generates income and involves exchange of goods/services with money.
- Secondly, business involves buying and selling of goods/services among retail customers, wholesalers, distributors etc.
- Further, it is continuous process of production and distribution of goods and services.
- Finally, business consists of risks like market risk, risk of loss, fire theft, competition, etc.
Functions of business
1. Production function :
Firstly, production is the creation of goods and services with the help of certain processes. The production of goods depends essentially on the organization of men, money, materials, and facilities into a smoothly operating business.
2. Marketing function:
Secondly, marketing is the process of getting goods and services into the hands of the consumer with a view to satisfying the needs and desires of consumers and producers.
3. Finance function:
Finance function is basically responsible for three decisions-
(i) investment decisions (financial planning, capital budgeting, etc.)
(ii) Financial decisions (capital structure—fixed and working; short and long-term and
(iii) lastly, dividend decisions.
4. Human Resource (HR) function:
Further, the HR function deals with the human side of organization. It is concerned with increasing the effectiveness of human performance in any organization. The HR function aims at obtaining arid maintaining a capable and effective workforce, motivating the employees individually and in groups to contribute their maximum to the fulfilment of organizational goals.
5. Information function:
Finally, it is being increasingly recognized that the modern business cannot be managed without the assistance of efficient information function.