Business Definition, Types, Classification and Features
The word business can be split in two, busi-ness which would mean the act of being busy. It means any purposeful activity being carried out with the aim of achieving a desired purpose. Generally speaking, the most common activity usually associated with the word “business” is usually commercial activity. A commercial activity usually encompasses economic transactions from the most basic level right up to the most complex.
Business, in the economic context forms the sum total of all economic activities engaged in by people, with the increase of wealth as its driving force. Meeting the needs of others in exchange for rewards, especially financial rewards are what business encompasses.
Features of Business
The feature or characteristics of business are very wide and diverse, for the purpose of this article we will be covering some of the most basic features of business, without which, an activity cannot qualify as a business enterprise. They include the following;
- The Quest for Profits
This is a key factor for the establishment of any economic activity. This is the reward for business. Without profits as a motivating factor, there will virtually be no business activities. People pull resources together to ensure they provide needed services with the hope of realising a profit at the end of the transaction. Profits are usually the surplus value gotten after payment for services rendered.
The realisation of a profit fuels continuity in any business endeavour. There is no business activity that does not strategies on ways of realising profits. Hence, this basic human activity has continued to exist along the ages because of the human nature of wanting to acquire.
2. A Recurring Nature
This is a feature of every business transaction. They do not just happen once, but have a continual reoccurrence that ensures that there is always the exchange of services for economic/financial rewards. Consumables like food and drinks for instance are not needed once, but have a frequent demand from consumers due to their essential nature. This is also true of other products and services, hence, supplies have to always produce to meet up with demand. Every business activity therefore always has regularity in the way it is carried out.
3. The Act of Production and Distribution
Every business activity has at its centre, production, manufacture and distribution of goods. There can never be production, manufacture and distribution of goods and services without a corresponding demand for such goods and services.
Hence, production, manufacture and distribution are all aimed towards the satisfaction of a demand. To take delivery of the supplied goods or services, a price tag is attached to such goods and services by the producer or service provider.
Distribution is only complete after full payment for the products or services must have been made by the consumers.
4. The Presence of Risk
As with every human activity, the economic aspect of human activities also bears considerable risks. However, while operating in the midst of these risks, calculated risks are taken by participants to ensure they minimize the likelihood of being adversely affected by these risks. Because all business transactions bear considerable risks, taking calculated risk is essential to the survival of every business endeavour.
5. Sole Aim of Every Business: Goods and Services
The central aim of every business activity is to produce goods and services. A lot of goods or products are usually tangible, but there are also intangible products that may include software, mp3 files and videos sold online among a wide variety of goods/products.
Businesses are also driven by the provision of critical services that are needed in exchange for pay. Such may include professions like teaching, where the teacher provides a service of enlightenment to the student, domestic cleaning services like Aire-Master among several other services.
6. A Quest to Satisfy Human Wants
This is what drives every business concern. Human needs are generally insatiable, business come up with ways of satisfying some human wants through producing desirable products or services that will match such wants and needs.
Classification of Businesses
Businesses usually fall into different categories, each satisfying specific human needs. Generally, they can be classified into two broad areas which include commerce and industry.
This generally deals with the product processing and production. Under the industrial system, the production of consumer goods and also the manufacture of machineries and equipment is the major activity. The production of these products may either be done manually or through the use of machines. It deals mainly with the production and the processing of goods and services.
Types of Industry
There are two main types of industries which include primary and secondary industries. For primary industries, they mainly consist of the processing of natural resources and can be further divided into extractive (consisting of such products as tin ore, iron, crude oil etc) and genetic industries (the production of animals and birds etc).
Secondary industries usually deal with the addition of value to already extracted products from the secondary primary industry.
Commerce on the other hand covers the entire process involved in the production of a product, including its final arrival at the consumer’s presence. Such may include marketing, trade, transport, and insurance, warehousing and also banking among several other factors involved.
There are several other details attached to commerce that requires detailed study for maximum exposure.
A business is an outfit where people or institutions exchange goods and services for money. A business needs capital as an investment and also enough market where it goods can be exchanged consistently so that profit can be made. Whether it is privately or state-owned, every business requires some form of investment and enough customers to whom its output can be sold on a consistent basis in order to make a profit.
What Are The Characteristics (Features) Of A Business?
==> involves exchange of good and services for money
==> deals in monetary transactions
==> core objective is profit
==> needs necessary skills for success
==> involves taking risk and planning for uncertainties
==> connects a buyer and a seller with a product/service
==> involves marketing and distribution
==> growth hinges on satisfaction of human wants.
CLASSIFICATION OF BUSINESS
Financial business such as banks, discount and investment institutions, insurance and loan facilities etc. Financial businesses include banks and other companies that generate profits through investment and management of the capital.
Information businesses are involves in the sales and distribution of intellectual properties such as movies, music, books and magazines, software etc.
Internet businesses are involved in provision of digital goods and virtual services over the internet. Blogging, affiliate marketing, bulkSMS, social media marketing, web design and development are examples of online businesses.
Manufacturing businesses produce commodities from raw materials and components. They manufacture tangible products such as cars, paints, pipes, soap, clothing, hair creams, cement, phones etc. They are referred to as manufacturers.
Service businesses make money from the provision of intangible services, charging client for effort and labour. Example include entertainers, consulting firm, home cleaning business, laundry services, event planning and interior decoration etc.
Transportation and haulage businesses help convey goods and people from place to place for a stipulated fees. Examples include intra-state and inter-state commercial transport, goods and petroleum haulage business, ferrying services, cargo importation and shipping etc.
Utility businesses produce public services such as sewage disposal, provision of pipe-borne water, electricity generation, road maintenance services etc. They are often run in partnership with the government.
This article has answered the question of what a business means, its features and the classifications of such business activities. Further studies should be made if detailed information is required to ensure total understanding of the concept of business and its associated components. This article however has made a good attempt of briefly answering what a business means.
Well, I hope I have been able to answer that popular question What Is A Business? Feel free to share this post with others if you find it helpful.