Characteristics of Business Activities

To see how business differs from other activities in society, we look at its distinguishing characteristics:

• An economic activity: Business is an economic activity because it is carried on to earn money or a livelihood, not out of love, affection or sympathy. It can be done at a small, individual level (a shopkeeper buying and selling) or on a large, formal and organised scale (a cooperative society or a company).

• Production or procurement of goods and services: Before goods reach people for consumption, a business must either produce them or procure them from producers. So every enterprise either manufactures the goods it deals in or acquires them to sell onward. Goods may be consumable items of daily use (sugar, ghee, pen, notebook) or capital goods (machinery, furniture); services include transportation, banking, electricity and similar facilities.

• Sale or exchange of goods and services: Directly or indirectly, business involves the transfer or exchange of goods and services for value. Goods made for personal use are not business — cooking food at home for the family is not business, but cooking and selling it in a restaurant is. There must be a sale or exchange between a seller and a buyer.

• Dealings in goods and services on a regular basis: Business means dealing in goods or services regularly. A single transaction is not business — selling one's own radio set once (even at a profit) is not business, but selling radio sets regularly (through a shop or from home) is.

• Profit earning: A main purpose of business is to earn income by way of profit. No business can survive long without profit, so business people try to maximise profit by increasing sales volume or reducing costs. …