Unit 1: Business Concept, Meaning, Features PDF

**Unit 1:** **Business: Concept, Meaning, Features, Stages of development of business and importance of business. Classification of Business Activities. Meaning, Characteristics, Importance and Objectives of Business Organization.. Difference between Business & Profession, Modern Business and their...

**Unit 1:** **Business: Concept, Meaning, Features, Stages of development of business and importance of business. Classification of Business Activities. Meaning, Characteristics, Importance and Objectives of Business Organization.. Difference between Business & Profession, Modern Business and their Characteristics**. \-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-- 1. **Business Definition** Business is an economic activity that involves the exchange, purchase, sale or production of goods and services with a motive to earn profits and satisfy the needs of customers. Businesses can be both profit or non-profit organizations that function to gain profits or achieve a social cause respectively. A business is a commercial activity which involves providing goods or services with a primary motive of earning profits. Business in Action Ch1 \| PPT Concept of Business ------------------- The business concept is the fundamental idea behind the business. The [business model](https://www.feedough.com/what-is-a-business-model/), plan, vision, and mission are developed based on this concept. Example : 1.  Uber, for example, was started on the concept of aggregating taxi drivers and providing their services on demand under one brand. Every other [business strategy](https://www.feedough.com/business-strategy-definition-levels-examples/) was developed based on this concept. 3. **Characteristics of Business** 4. **Stages of development of business** Every business, whether it's big or small, goes through the 4 stages of business growth:  - - - - **Stage 1: Startup Business** The first stage of the business lifecycle---the startup or development stage---tends to be the riskiest. This is the stage when a business concept turns into reality. Many important things happen during the startup stage. This is when it's crucial to obtain new customers, onboard employees, build a brand identity, refine your products or services, and stabilize your cash flow.  Here are a few essentials to ensure rapid growth for your startup: - Develop a detailed business plan. - Focus on hiring the best talent possible. Make sure to hire employees whose goals and values align with your business.  - Have a set of established goals and well-defined timelines to accomplish them.  - Ensure you clearly understand your customer demographics. This will require some research, along with trial and error.  - Continue carrying out market research to identify growth opportunities.   **Stage 2: Business Growth** Businesses enter the second phase once they've established a strong customer base, tangible profits, healthy cash flow, and increased market share. The growth stage typically occurs after a year or two of operations. At this stage, companies should have established standard procedures to encourage business growth.  What steps are necessary to ensure the growth stage is successful? Here are a few tips that can help:  - Create a strategy to recalibrate your business plan and match current needs. - Conduct an in-depth analysis into what drives profits and focus on developing those areas.  - Continue to carry out market research to create realistic, accurate demand forecasts. - Outsource repetitive, time-consuming, and non-core activities.  - Continue to explore [business growth opportunities](https://www.jec-llc.com/how-we-help-businesses-grow-the-growth-to-goal-model/). - Delegate authority and responsibilities to trusted employees within the company. ### Phase 3: The Maturity Stage The maturity phase of growing a business will feel different from the first two stages in the lifecycle. The maturity stage is characterized by stability and steady cash flow. A mature business has control over its customer base, so you've likely established a solid market share in your industry. You are also somewhat protected from the [risk of competition](https://hbr.org/2013/03/how-competition-strengthens-start-ups) with similar startups. During the maturity stage, you must focus on continuing to drive growth. Stagnation and lack of growth are the biggest threats to your business during this phase. Here are a few tips taken from successful business leaders: - Continue to explore new markets. Can your company offer products and services similar to your current catalog? Is there a demand you're currently not meeting?  - Focus on research and development to create new products or services for customers or improve what you currently offer.  - Build on customer loyalty to increase profitability and secure cash flow.  - Consider the benefits of selling the business or merging with another established company. ### Phase 4: The Renewal or Decline Stage The final part of the four-stage business lifecycle is the renewal or decline phase. To ensure business renewal, it's important to demonstrate strong leadership skills and flexibility to adapt to changing circumstances. This may require upgrading your technology, pursuing new opportunities, developing new products or services, or learning new skills to boost your competitive edge. There are a few warning signs that signal the risk of decline. However, there's still time to reverse your organization's weakening market share. Here are some common red flags that can lead to business decline if not addressed:  - Employee turnover is increasing. Are employees leaving for jobs at other companies?  - There are online complaints and poor reviews about your products or services.  - Clients are paying their bills late or later than usual.  - Teams are finding it difficult to collaborate.  - Management is showing a lack of innovation, organization, and leadership. - Your company's market share is decreasing, and competitors are producing better products. 5. **Importance of business:** Business is a self-employment opportunity for a person to become self-independent and master of his ideas. It is not only beneficial to the owner but also makes an impact on society. To get a detailed understanding of the importance of trading activities to the owner and the society, let us go through the following points: - - - - - - - 6. **Classification of Business Activities.** What Are Business Activities? ----------------------------- Business activities include any activity a business engages in for the primary purpose of making a profit. This is a general term that encompasses all the economic activities carried out by a company during the course of business. Business activities, including operating, investing, and financing activities, are ongoing and focused on creating value for [shareholders](https://www.investopedia.com/terms/s/shareholder.asp). ### Operating Business Activities The first section of the cash flow statement is cash flow from [operating activities](https://www.investopedia.com/terms/o/operating-activities.asp). These activities include many items from the income statement and the current portion of the balance sheet. The cash flow statement adds back certain non-cash items such as [depreciation](https://www.investopedia.com/terms/d/depreciation.asp) and [amortization](https://www.investopedia.com/terms/a/amortization.asp). ### Investing Business Activities [Investing activities](https://www.investopedia.com/articles/financial-theory/11/cash-flow-from-investing.asp) are in the second section of the statement of cash flows. These are business activities that are capitalized over more than one year. The purchase of long-term assets is recorded as a use of cash in this section. Likewise, the sale of real estate is shown as a source of cash. The line item \"[capital expenditures](https://www.investopedia.com/terms/c/capitalexpenditure.asp)\" is considered an investing activity and can be found in this section of the cash flow statement.  ### Financing Business Activities The cash flow statement\'s final section includes [financing activities](https://www.investopedia.com/terms/c/cashflowfromfinancing.asp). These include initial public offerings, secondary offerings, and debt financing. The section also lists the amount of cash being paid out for dividends, share repurchases, and interest. Any business activity related to financing and fundraising efforts is included in this section of the cash flow statement. 7. **Business Organization..** - The term business organization describes how businesses are structured and how their structure helps them meet their goals. - **business organization**, an entity formed for the purpose of carrying on commercial enterprise. - These organisations are based on the systems of law that governs contract and this exchange, property rights, and incorporation.   ### Meaning of Business Organisation Business organisation is defined as an entity which is structured for the purpose of carrying on the commercial system of enterprise. The organisation is governed under principles and laws governing contract and exchange of goods and services.   9. **Forms of Business Organisation** The four-prior types of business organisation are: 1. Sole Proprietorship 2. Partnership 3. Corporation 4. Limited Liability Company   ### Sole Proprietorship ### Partnership  ### There are two types of partnership: ### Corporation ### Limited Liability Company (LLC) 10. **Common Features or Characteristics of Business Organizations** The most common features of business organizations are; structure, processes, relationships, authority and responsibility, performance and behavior of individuals and groups. ### **1. Structure** An organization is a structure which is used to arm people with specific relations and authority. Within the structure, people work to achieve the desired objectives.   It is the skeleton around which an organization is built. Structure has a formal character.   It is an arrangement and formulated for grouping tasks, jobs, delegating authority, allocating responsibility and accountability, along with the number of persons involved in the managerial hierarchy and at the shop-floor level.   ### **2. Process** An organization is an operation within the structure.   It is just like a body structure where the functions of each organ of the body are defined and specifically performed.   An organization like the human body is an ongoing process of structure.   It is a process of managerial function.   It aims at organizing work, arranging people and systems, developing technology, designing communication and providing an organizational climate. The organization is concerned with the organizing process, including the decision of the course of action, division of various activities, assignment of tasks to proper persons, delegation of authority and responsibility, coordination of the various tasks and the decisions of the management.  ### Steps in Organisation Process**3. Relationships** The organization sets up certain forms of relationship to enable workers to perform their jobs harmoniously. Relationships are defined and designed as per the needs of the organization. Functional relations are developed to perform the activities of the organization. An established relationship is useful for training and development of human resources. The organizational relationship is established on the basis of process, geography, department and product.   The relationship is developed in such a way that there is a scope of adaptability to the changing environment to avoid complacence, stagnation and inefficiency. An organization is a group wherein people work.   **4. Authority and Responsibility** The [structural relationship](https://www.mbaknol.com/management-principles/principles-of-organizational-structure/) becomes effective with [the allocation of authority and responsibility](https://www.mbaknol.com/management-principles/span-of-management/).    The authority and responsibility is ultimately vested with the top management.   Since the Chief Executive cannot perform all the jobs, he has to decide what part of his work will be entrusted to his subordinates and what part of the job will be retained by him. Organizational structure has well-defined [authority and responsibility](https://www.mbaknol.com/management-principles/span-of-management/), explicit or implicit.  MP Board Class 12th Business Studies Important Questions Chapter 5 Organization -- MP Board Solutions ### **5. Performance** The organizational structure and process are designed to [achieve the goals and objectives through effective performance](https://www.mbaknol.com/human-resource-management/performance-management/) which is possible with [human resource development](https://www.mbaknol.com/management-information-systems/human-resource-development-systems/).   Organization development programs maximize work motivations and creativity.   [Job enrichment](https://www.mbaknol.com/human-resource-management/job-enrichment/), job enlargement and [job satisfaction](https://www.mbaknol.com/human-resource-management/performance-management-process/) also come under [organizational performance](https://www.mbaknol.com/management-concepts/organizational-performance/).   Specialization in particular is the core of an organization. ![PDF\] Impact of Business Environment on Organizational Performance in Nigeria- A Study of Union Bank of Nigeria \| Semantic Scholar](media/image11.png) ### ### **6. Behavior of Groups** An organization is a composition of people. The success of an organization depends upon the behavior of the people and the group.  Individual groups and structures are the bases of group behavior. Relationships on a person-to-person level and subordinate-to-subordinate as well as with the superior are established in a group.   Formal and informal organization helps in developing proper behavior of a group. Group behavior has given birth to team work which has been accepted as the most effective form of organization. Types of Groups - Formal and Informal Group \| Group Behavior and Team Development ### ### Importance of business organization ### **Importance of Business Organization  ** 1. **Products Growth.** All business activities directed towards the production of goods and services in the betterment of the [**business organizations**](https://www.businessstudynotes.com/others/discuss-the-scope-and-importance-of-business-organization/). 2. **Efficient Use of Resources.** Organizations play a vital role in the efficient use of factors of production and other resources and thus reduced the cost of production of goods. 3. **Technological Improvements.** A good organization provides for the optimum use of technological improvements. 4. **Creative thinking.** It stimulates independent creative thinking in various departments of production. 5. **Use of skilled salesman.** ** **Another importance of business organization is that it is very useful in providing skilled salesmanship for satisfying the various needs of the customers. 6. **Quick decisions.** The business organization makes it easy to take quick decisions. 7. **Recognition of the problem** The recognition of the problem, selection of the solution, issuing of the necessary orders can be taken at the right time. 8. **Fixing of responsibility** One of the most important things of business organization is that fixing of responsibility can easily be pinpointed. 9. **Feedback** An organization makes it possible to take decisions at the right time about production and thus may take feedback. Before making any decision organizations always research the market and combine the facts. 10. **Minimum cost** The organizations always try to attain the goals and objectives of the business at the minimum cost. 12. **The four main objectives of a business** While every business might have specific goals according to their specific industry, team, product, financial standing, Business objectives often fall into four main categories: 1. Economic objectives 2. Human objectives 3. Organic objectives 4. Social objectives 1\. Economic objectives: Most businesses cite financial growth as an overarching goal or business objective, but depending on your business's unique financial needs, economic objective could be: Survival: While the ultimate goal is to make enough money to pay for all overhead costs and also make a profit, small businesses or new businesses might be focused on simply making enough revenue to cover the costs so that they can stay in business. Profit earning: Beyond business survival, owners want to earn enough to have a salary and/or be able to grow the business. Growth : Most business owners consider growth: how they will grow, what actions they will take when demand outpaces production and how short- and long-term growth will affect their business. 2\. Human or individual objectives: The motivation of human objectives in a business is to find ways to meet the needs of your employees, so that they feel valued and supported. Common examples of human or individual objectives include: - To pay competitive salaries - To offer employee perks, like unlimited vacation or team appreciation events - To provide safer and more health-conscious working environments - To provide personal growth and development opportunities - To provide incentives to motivate employees 3\. Organic objectives: Organic business objectives are goals that incorporate all aspects of the business: its development, survival, progress and outlook. Common examples include: - To use profits to raise capital or strengthen the business - To use growth models to contribute to business's success - To drive innovative ideas through focused activities - To improve brand and reputation - To grow production size to meet demand 4\. **Social objectives**: Social business objectives are created to help or give back to society in some way. Businesses often set social goals: - To ensure better quality products for customers - To ensure fair prices for customers - To ensure fair trade practices - To ensure fair employment practices (anti-discriminatory) - To protect the environment by taking reasonable steps to limit corporate carbon footprint - To serve the community (schools, charities, social programs etc) **Business & Profession** **[Meaning of Business]** Business is a commercial activity which involves **providing goods or services in exchange for profits.** Profits in business are not necessarily money. It can be a benefit in any form which is acknowledged by a business entity involved in a business activity. **[Forms of Business]** There are three main legal forms a business can take: - [Sole proprietorship](https://www.companysuggestion.com/proprietorship-firm/) - [Partnership](https://www.companysuggestion.com/partnership/) - [Corporation](https://www.companysuggestion.com/incorporation-of-a-company/) Each of these legal forms has distinct characteristics as well as advantages and disadvantages. **[Objective of the Businesses]** The business objective is what makes the business go on and conduct its activities in a long run. It is the reason why the business exists. While most of the people argue that profit making is the core objective of every business. Few have come up with the new underlying objective. **According to the traditional concept**, business exists only to **earn profits** by providing the goods and services to the customers. **According to the modern concept**, the underlying objective of every business is **customer satisfaction** as this is what results in most profits. If the customer is satisfied, business excess. **[Meaning of Profession]** A **profession** is a disciplined group of individuals who adhere to ethical standards and who hold themselves out as, and are accepted by the public as possessing special knowledge and skills in a widely recognized body of learning derived from research, education and training at a high level, and who are prepared to apply this knowledge and exercise these skills in the interest of others. **[Characteristics of a Profession]** There are some following characteristics of Profession are: 1. Great responsibility 2. Accountability 3. Based on specialized and theoretical knowledge 4. Autonomy 5. Morality Ethical constraints The following are some differences between business and profession: **Basis for difference** ** ** **Business** ** ** **Profession** -------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------- **Meaning** Business is either an occupation, profession, or trade, or is a commercial activity which involves providing goods or services in exchange for profits.   Profession is a form of economic activities, wherein special skills, knowledge and expertise is required to be applied by the person in his occupation. **Basic objective** Earning profit Rendering services **Qualification** No minimum qualification Specialized knowledge of study is required **Transfer of Interest** Possible Not possible **Reward** Profit Professional fee **Risk factor** Always present Not always present **Modern Business and their Characteristics**. Modern Business Definition -------------------------- "Modern businesses are increasingly relying on [innovation](https://www.entrepreneursdata.com/innovation-process-meaning-stages/), technology, and data to add value for their stakeholders, including customers, employees, and customers themselves. Modern businesses are client-centered, adaptable, and change-responsive. They continually work to better understand the requirements and desires of their clients and are always on the lookout for innovative methods to enhance their offerings. Characteristics of Modern Business ---------------------------------- ### Technology Modern businesses significantly rely on technology to improve production, increase efficiency, and streamline operations. To automate operations, collect and analyze data, and engage with consumers, they make use of digital tools, software, and online platforms. ### 2. Agility and Adaptability(Agility is the ability to be quick and graceful) agility and flexibility are vital qualities for  [modern businesses](https://www.entrepreneursdata.com/modern-business-definition/) . They react quickly to changes in the market, new trends, and changing client expectations. They may take advantage of possibilities and keep a competitive edge by remaining adaptive and flexible. A software development business, for instance, uses agile approaches to adapt quickly to shifting client needs and market dynamics. ### 3. Customer-Centric Approach Understanding and meeting customer needs are priorities for modern businesses. They collect customer information through a variety of methods. including surveys, social media, and market research. Businesses may customize their goods, services, and customer experiences to suit client expectations thanks to this customer-centric approach. ### 4. Innovation and Creativity Today's businesses survive on creativity and innovation. They cultivate a culture that enables the employees to think creatively and independently. Businesses may gain a competitive edge by continually improving their goods, procedures, and business strategies. A technological business that makes research and development investments to release ground-breaking items and upend the market is an example. ### 5. Sustainability and Social Responsibility Modern businesses prioritize sustainable practices and social responsibility. They recognize the importance of minimizing their environmental impact and actively contribute to the betterment of society. This may include adopting eco-friendly manufacturing processes, supporting charitable initiatives, or promoting ethical sourcing. ### 6. Global Perspective Modern businesses operate in a globalized world. They expand their reach beyond domestic markets and embrace the opportunities presented by international trade and globalization. They adapt to different cultures, navigate diverse regulations, and establish global networks to tap into new markets ### 7. Collaboration and Partnerships Modern businesses understand the value of collaboration and partnerships in driving innovation and growth. They actively seek out strategic alliances with suppliers, industry peers, and even competitors to leverage collective strengths and resources. Collaborative efforts can lead to joint research and development projects, shared distribution channels, or the development of new products. For example, automotive manufacturers may form partnerships to co-develop electric vehicle technologies and infrastructure. ### 8. Data-Driven Decision Making A crucial component of modern business decision-making is data. They gather and study information from many different sources, including operational indicators, market trends, and customer behavior. Businesses may see trends, discover opportunities, and improve performance thanks to data-driven insights. ### 9. Continuous Learning and Development Modern businesses foster a culture of continuous learning and development. They invest in employee training and development programs to enhance skills and keep up with evolving industry trends. By nurturing a learning environment, businesses empower employees to adapt to new challenges and drive [innovation](https://www.entrepreneursdata.com/innovation-in-entrepreneurship-definitions/). ### 10. Entrepreneurial Mindset Modern businesses encourage their staff to think like entrepreneurs. They promote innovation, taking chances, and taking the initiative to solve issues. Businesses may encourage people to take responsibility for their work, exercise critical thinking, and look for new possibilities by fostering an entrepreneurial culture. An entrepreneurial attitude fosters innovation and propels corporate expansion.