Business Definitions, Trade and Commerce

• The term business can have different meanings depending on the individual's perspective.

Aspects of Business

• Business includes an occupation, trade, or profession.
• Business involves operations of trade or industry
• Business can be defined as a commercial enterprise or establishment.

Definition of Business

• Business is an economic activity that involves producing and selling goods and services to make profit by fulfilling society's needs
• Kibera (1996) defines business as an economic activity organized primarily to produce goods and services at a profit

Important Business Terminology

• Commerce includes activities that address barriers related to person, place, time, risk, finance, and information in the exchange of goods and services.
• Trade is an essential component of commerce, and refers to the sale, transfer, or exchange of goods, and aids in making products accessible to consumers or users.
• Auxiliaries to trade refer to the activities meant to help trade.

Objectives of Business

• Profit is an essential objective of business because:
  • It is a source of income for business people.
  • It meets expansion requirements.
  • It indicates efficiency.
  • It builds the reputation of a business.

Multiple Objectives of Business

• Business objectives define the actions a business will take, and enables analysis and performance improvement

Characteristics of Business Activities

• Business is an economic activity.
• Business involves the production or procurement of goods and services.
• Business includes the sale or exchange of goods and services that satisfy human needs.
• Business involves regular dealings in goods and services.
• Businesses aim to earn a profit.
• Business has an uncertainty of return.
• Business activities have elements of risk.

Industry Types

• Primary industries involve activities related to extracting and producing natural resources including reproducing & developing living organisms and plants.
• Secondary industries use materials extracted by primary industries
• Tertiary industries offer support services to primary and secondary industries, and handle activities linked to trade

Rationale For The Existence Of Business

• Profit maximization serves as the primary rationale for a business's existence.
• Businesses have to make more revenue than their costs for profit.
• Businesses produce and market goods and services that meet human needs and wants.

Business Risks

• Risk refers to the potential for inadequate profits or losses from uncertainties or unexpected events.
• Business risks arise because of uncertainties.
  • Risk is an essential part of business
  • The degree of risk is dependent on the nature and size of the business.

Causes Of Business Risks

• Natural causes.
  • Human causes.
  • Economic causes.

Meaning of Business Environment

• A company's business environment consists of elements that affect its ability to build and keep relationships with customers.
• Scanning' is identifying and interpreting environmental factors.
• Scanning is identifying and interpreting environmental factors.

Why Scan The Environment

• Environmental scanning helps in identifying opportunities like a developing market, strategic partners, and a new marker.
• Environmental scanning helps to identify threats such as a new competitor, price wars with competitors, a competitor's new product or innovation, new taxes, and new government regulations.
• Environmental scanning identifies a firm's strengths, like competitiveness, marketing expertise, new innovations and processes, and new products.
• Scanning identifies a firm's weaknesses such as: lack of information, poor product quality, undifferentiated products, and lack of good planning.

Components of Business Environment:

• The business environment can be divided into micro and macro environments.

Micro Environment

• The micro environment can be divided into the internal and external environment.

Internal Environment

• The internal environment includes:
  • Marketing programs.
  • Financial resources.
  • Research & Development.
  • Manufacturing.
  • Purchasing policies.
  • Human resources.

External Environment

• Suppliers.
• Marketing intermediaries.
• Customers.
• Competitors.
• Publics.
• Institutions.
• Distributors.

Macro Environment

• Demographic factors.
• Political factors.
• Legal factors.
• Economic factors.
• Social cultural factors.
• Technological factors.
• Natural environment.

Demographic Factors

• Demographic factors include:
  • Population size.
  • Geographical distribution.
  • Mobility trends.
  • Age distribution.
  • Life expectancy.
  • Household/ family size and makeup.
  • Income/ wealth distribution

Political Factors

• Political factors considerations:
  • How stable is the political environment?
  • Does government policy influence laws that regulate business?
  • What is the government's position on marketing ethics?
  • What is the government's policy on the economy?
  • Does the government have a view on culture and religion?
  • Is the government involved in trade agreements?

Legal Factors

• Legislations.
• The legal system.
• Fiscal and monetary policies.
• Employment legislation.
• Consumer protection law.
• Foreign trade regulations.
• Environment protection regulation.

Economic Factors

• Economic factors include:
  • Interest rates.
  • Business cycles.
  • Money supply.
  • Investment levels.
  • Balance of payment.
  • The level of inflation.

Technological Factors

• Does technology allow for products and services to be made more cheaply and to a better standard of quality?
• Technologies offer consumers and businesses more innovative products in banking and new generation mobile telephones.
• New technologies have changed distribution of books via the Internet, flight tickets, and auctions, etc.

Social Cultural Factors

• What is the dominant religion?
• What are attitudes to foreign products?
• What are the roles of men and women within society?
• How long are the population living?
• Do the populations have a strong/weak opinion on green issues?
• Changes in consumer values and lifestyles

Explore the multifaceted definition of business. Understand its different aspects as occupation, trade, or a commercial enterprise. Learn the meanings of trade, commerce and auxiliaries to trade.