Q.What do you mean by 'Business' ? Explain its economic objectives.
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Start your 14-day free trial to unlock the full solution →Business is an economic activity (production, purchase/sale of goods, or rendering of services) carried on regularly to earn profit; its chief economic objectives are earning profit, creating and retaining customers, and continuous innovation. In the OR alternative, Industry (production), Commerce (distribution), and Trade (buying-selling within commerce) are three interconnected but distinct components of business.
Part 1 - Meaning of Business and its economic objectives
Meaning. Business is any human activity directed towards producing or acquiring wealth through the purchase and sale of goods, or rendering of services, carried on regularly with the object of earning profit, and involving an element of risk. Examples: a textile factory, a grocery shop, a transport company.
Economic objectives of business:
- Earning profit - profit is the reward for taking risk and is essential for the survival, growth and expansion of a business.
- Creation of customers - a business exists because it serves customers; attracting and retaining customers through quality goods/services at reasonable prices is a core economic objective.
- Innovation - continuously improving products, processes and methods to stay competitive, reduce costs and better satisfy changing customer needs.
- Optimum/efficient utilisation of resources - making the best use of the limited capital, material, labour and managerial resources available to the business.
Part 2 (OR) - Distinguish between Trade, Commerce and Industry
| Basis | Industry | Commerce | Trade |
|---|---|---|---|
| Meaning | Concerned with the production/processing/conversion of goods (extraction, manufacture, construction, genetic) | The entire system of distributing goods, consisting of trade plus the aids to trade (transport, banking, insurance, warehousing, advertising) | The actual buying and selling of goods and services, within a country (internal) or between countries (external) |
| Scope | Narrowest - concerned only with creation/production of goods | Widest - covers trade AND the auxiliary services that assist it | Narrower than commerce - only the exchange/sale part |
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