BBA-103 (G2)-SM02 Business and Technology Unit-1 PDF

Business and Technology UNIT-1 BUSINESS The term business refers to an organization or enterprising entity engaged in commercial, industrial, or professional activities. The purpose of a business is to organize some sort of economic production of goods or services. The term business refers to th...

Business and Technology UNIT-1 BUSINESS The term business refers to an organization or enterprising entity engaged in commercial, industrial, or professional activities. The purpose of a business is to organize some sort of economic production of goods or services. The term business refers to the efforts and activities undertaken by individuals to produce and sell goods and services for profit. Definitions According to Professor Derek F. Abell: Understanding business is vital to answering the questions, “What is our Business? Who are our customers? What technology we should use to serve our customers?” Vision and mission statement can use the ideas generated through the process of understanding and defining business. He suggested a three-dimensional model, with the following three axes: i. Served customer groups. Categories of customers, (who) ii. Served customer functions. Customer needs, (what) iii.Technologies utilized. The way that the needs are being satisfied, (how) An organization must define its business in three contexts: 1. Customer segment – (Location, behaviour, how to reach). 2. Product –What does the customer buy? 3. Technology –What does the customer consider value? Classification of Business Activities Industry: Industry implies the economic activities that are associated with the conversion of raw materials into consumable goods. This involves production, processing, mining of goods. The industry is further divided into three broad categories; primary industry, secondary industry and tertiary industry. Commerce: Commerce refers to the buying and selling of goods for value, and includes all those activities which facilitate the transaction. Commerce further encompasses two types of activities, trade and auxiliaries to trade. Characteristics of Business Economic Activity: Business is an economic activity, as it is conducted with the primary objective of earning money, i.e. for an economic motive. Production/purchase of goods and services: Goods and services are produced or procured by business entities, so as to add value and sell them to the consumer. Goods are either manufactured by the company or procured from the supplier, with the aim of selling it further to the consumer, for profit. Selling of goods and services: Business must involve the transfer of goods to the customer for value, through selling, meaning that if the goods are acquired for personal consumption, then the transaction will not amount to business activity. Continuity in dealings: Every business requires regularity in transactions, i.e. an isolated transaction of exchange of goods or services will not be considered as business. So, to constitute business, the dealings must be carried out on a regular basis.  Profit earning: The basic purpose of business is to make the profit from its activities. It is the spine of business, which keeps the business going, in the long term. Element of risk: Risk is the key element of every business, concerned with exposure to loss. Efforts are made to forecast future events and plan the business strategies accordingly. However, the factors that affect business are uncertain and so does the business opportunities, which can be a shift in demand, floods, fall in prices, strikes, lockout, money market fluctuation, etc. Uncertain return: In business, the return is never predictable and guaranteed, i.e. the amount of money which the business is going to reap is not certain. It may be possible that the business earns a huge profit or suffer heavy losses. Legal and Lawful: No matter, in which type of business the company is engaged, it should be legal in the eyes of the law, or else it will not be considered as business. Consumer satisfaction: The aim of business is to supply goods and services to consumers, so as to satisfy their wants, as when the consumer (final user) is satisfied, he/she will purchase the goods or services. But, if they are not, there are chances that they will look for substitutes. Importance of Business Revenue Generation: It is the key to revenue generation for the business owner since it brings in profit and proves to be a source of income for the owner. Economic Growth: It is essential for the economic growth of a country since high revenue means higher tax collection. Improves Standard of Living: A country with more industrial units and companies experience a higher rate of employment and better living standards. Bulk Production: Manufacturing units involve large-scale production, which ultimately reduces the cost of production, and people get a continuous supply of goods at a reasonable price. Innovation: It involves brainstorming and generation of new ideas which opens up the way for innovation and creativity. Generates Employment: It is a long-term process which requires the human resource to function correctly. Therefore, it creates job opportunities. Market Expansion: A good strategy and high customer satisfaction lead to a strong customer base aiming at market expansion. Types of Business Service: An activity performed to earn money through customer satisfaction is known as a service. It involves professional skills and expertise. E.g. A professional teacher earns money by taking tuition classes. Merchandising: Merchandising means procurement of goods from manufacturers or wholesalers, at a low price and selling it at a higher price to make a profit. It is also known as a retail business. E.g. Retailers. Manufacturing: Making profit through production or creation of goods from raw material in such a way that it derives some utility to the consumer is known as a manufacturing business. E.g. Processing of sugarcane in a sugar mill to get fine sugar. Hybrid: A business which involves all the three activities, i.e. manufacturing of goods, merchandising of products and delivering service falls under the hybrid category. E.g. A furniture seller, who manufactures furniture, buys old furniture and sells it at a higher price after repairing and also provides services for polishing old furniture. Business Purpose The business purpose is the core rationale behind establishing a company. A well-crafted business purpose aligns business goals with societal needs, providing direction and significance. It becomes a driving force for innovation and strategy. Key aspects of business purpose include: Mission Statement: Crafted to express the fundamental reason for the company’s existence. Values: Reflect the principles and beliefs that guide the organization. Vision Statement: Describes the desired future state the company aims to achieve. Social Impact: Considers the company’s role in society. Stakeholder Consideration: Addresses the needs and interests of various stakeholders. Differentiation: Defines how the company stands out from competitors. Employee Engagement: Aligns employees with the company’s purpose. Types of Businesses: For-Profit Organizations: These businesses aim to generate profits for their owners or shareholders. Examples include corporations, sole proprietorships, and partnerships. Non-Profit Organizations: These entities fulfill charitable missions or further social causes. They do not distribute profits to owners but reinvest them in their mission. Business Structures: Common business structures include: i. Sole Proprietorships: Owned by a single individual. ii. Partnerships: Owned by two or more individuals. iii. Limited Liability Companies (LLCs): Provide liability protection for owners. iv. Corporations: Separate legal entities with shareholders.