The important characteristics of business are as follows:
(1) Entrepreneur: There must be someone to take initiative for establishing a business. The person who recognizes the need for a product or service and bears the whole risk is known as entrepreneur. He visualizes a business, combines various factors of production and puts them into a going concern. He is the main figure and promotes business. A business is not possible without an entrepreneur.
(2) Production, Distribution and Exchange: All business activities are directly or indirectly concerned with the production, distribution and exchange of goods and services. Production of goods and services for personal consumption do not constitute business. Hence, if a person cooks his food at home is not business because it does not involve any exchange.
(3) Regular Dealings: Business includes only those transactions which have regularity and continuity. Even if the person earns profit. A person builds a house for himself, but later sells on profit. This is not called business. Hence in business the exchange of goods or services should be undertaken regularly.
(4) Profit Motive: The main objective of business is to earn reasonable profit. It makes continuity in the business. The survival of business depends upon its ability to earn profits. Every businessman wants to earn profits to earn profits. Every businessman wants to earn profits to receive interest on his capital and to reward himself for his services. Any activity undertaken without profit motive is not business. However, service motive is also essential for the progress for the business.
(5) Element of Risk: Risk means the possibility of loss. The business involves some degree of risk. A risk arises due to uncertainties of future. The element of risk exists due to variety of factors, which are outside the control of business enterprise. The risks associated with business are change in technology, change in consumer tastes and fashion, strike by employee, shortage of raw materials, increase in competition, natural calamities, etc. Hence, all business involve some element of risk and uncertainties.
(6) Creation of Utility: Creation of utility is the main feature of the business. Business creates various types of utilities in goods so that consumer may use them. The utilities may be form utility, place utility, time utility, etc. When raw materials are converted into finished goods, it creates form utility. The goods are transported from the place of production to the ultimate consumers, which creates place utility. The process of storing goods when they are not required and supplying them at a time when they are needed is called creation of time utility.j
(7) Satisfying the Consumers: The ultimate aim of business is to supply goods or services to the consumers. The business should try to satisfy the consumers so that the demand for his product is maintained. Hence the business should try to produce goods according to the liking and tastes of consumers. Goods should be made available where and when the consumers require. Without the satisfaction of consumers business cannot exist.
(8) Finance: Business cannot exist without proper financial arrangements. Finance is required for providing fixed and working capital. The availability of other factors of production also depends upon the availability of finance. A proper capital structure is essential for the success of the business.
(9) Organization: Business should be done in a planned way and to execute the plan, an organization is essential. A proper organization is helpful in the smooth running of the business and helps to achieve its objectives.
(10) Human Economic Activities: Business is an activity which can be executed only by human beings. Thus, in business we include human economic activities. Economic activities are engagement in production, distribution, and exchange of goods and services with profit motive. Non-economic activities are not included in the business.
In conclusion, we can say that business is an human economic activity which involves regular exchange of goods and services with the aim of earning profit through the satisfaction of human wants.
(1) Entrepreneur: There must be someone to take initiative for establishing a business. The person who recognizes the need for a product or service and bears the whole risk is known as entrepreneur. He visualizes a business, combines various factors of production and puts them into a going concern. He is the main figure and promotes business. A business is not possible without an entrepreneur.
(2) Production, Distribution and Exchange: All business activities are directly or indirectly concerned with the production, distribution and exchange of goods and services. Production of goods and services for personal consumption do not constitute business. Hence, if a person cooks his food at home is not business because it does not involve any exchange.
(3) Regular Dealings: Business includes only those transactions which have regularity and continuity. Even if the person earns profit. A person builds a house for himself, but later sells on profit. This is not called business. Hence in business the exchange of goods or services should be undertaken regularly.
(4) Profit Motive: The main objective of business is to earn reasonable profit. It makes continuity in the business. The survival of business depends upon its ability to earn profits. Every businessman wants to earn profits to earn profits. Every businessman wants to earn profits to receive interest on his capital and to reward himself for his services. Any activity undertaken without profit motive is not business. However, service motive is also essential for the progress for the business.
(5) Element of Risk: Risk means the possibility of loss. The business involves some degree of risk. A risk arises due to uncertainties of future. The element of risk exists due to variety of factors, which are outside the control of business enterprise. The risks associated with business are change in technology, change in consumer tastes and fashion, strike by employee, shortage of raw materials, increase in competition, natural calamities, etc. Hence, all business involve some element of risk and uncertainties.
(6) Creation of Utility: Creation of utility is the main feature of the business. Business creates various types of utilities in goods so that consumer may use them. The utilities may be form utility, place utility, time utility, etc. When raw materials are converted into finished goods, it creates form utility. The goods are transported from the place of production to the ultimate consumers, which creates place utility. The process of storing goods when they are not required and supplying them at a time when they are needed is called creation of time utility.j
(7) Satisfying the Consumers: The ultimate aim of business is to supply goods or services to the consumers. The business should try to satisfy the consumers so that the demand for his product is maintained. Hence the business should try to produce goods according to the liking and tastes of consumers. Goods should be made available where and when the consumers require. Without the satisfaction of consumers business cannot exist.
(8) Finance: Business cannot exist without proper financial arrangements. Finance is required for providing fixed and working capital. The availability of other factors of production also depends upon the availability of finance. A proper capital structure is essential for the success of the business.
(9) Organization: Business should be done in a planned way and to execute the plan, an organization is essential. A proper organization is helpful in the smooth running of the business and helps to achieve its objectives.
(10) Human Economic Activities: Business is an activity which can be executed only by human beings. Thus, in business we include human economic activities. Economic activities are engagement in production, distribution, and exchange of goods and services with profit motive. Non-economic activities are not included in the business.
In conclusion, we can say that business is an human economic activity which involves regular exchange of goods and services with the aim of earning profit through the satisfaction of human wants.
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