Meaning and definition of business essentials

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 Meaning and Definition of Business Essentials

Business denotes a state of being busy – any activity in which one keeps oneself engaged. However, in economic terms, business refers to the work, efforts, and activities of people involved in the production, purchase, and sale of goods and services with the primary objective of earning profit.

According to Urwick and Hunt, “Business is any enterprise which makes, distributes or provides any service which other members of the community need and are willing to pay for it.”

Nature of Business

Business is fundamentally an economic activity that involves utilizing scarce resources to satisfy human wants. It includes several key characteristics:

  • Production or Acquisition of Goods
    • Definition: Every business, regardless of scale, deals with goods and services which may be produced, manufactured, or procured. The business activity involves producing, manufacturing, or acquiring goods and then supplying them for a price to those who need them.
    • Example: A factory producing electronics or a retailer procuring goods from manufacturers to sell to consumers.
  • Profit – The Basic Motive of Business
    • Definition: Profit is the essential motivation for any business activity. It serves as a stimulus and guarantee for the continuation and survival of the business. The efficiency and success of a businessman are often measured by the profit generated.
    • Example: A business owner invests in a new product line expecting to earn profits, which in turn enables further business expansion and improvement.
  • Risk – Uncertainty of Future
    • Definition: Every business activity involves risk and uncertainty because it focuses on future operations. The unpredictable nature of future events means that businesses must constantly manage and mitigate risks.
    • Example: A business investing in new technology faces the risk of the technology becoming obsolete quickly due to rapid advancements.
  • Dealing in Goods and Services
    • Definition: Business involves dealing in goods (either consumer goods like clothes, books, electronics or producer goods like machinery and tools) and services (like courier or transport services) with the intent to supply them to those who need and are willing to pay for them.
    • Example: A grocery store selling food products (goods) and a logistics company offering delivery services (services).
  • Regular Dealings
    • Definition: One of the essential characteristics of business is regularity and recurrence in dealings. Business activities must be continuous and not just a single transaction. Regular transactions constitute the ongoing nature of business.
    • Example: A person selling furniture as a one-time event is not engaging in a business, but if they regularly buy and sell furniture, they are running a business.

Summary

  • Production or Acquisition of Goods: Involves producing, manufacturing, or acquiring goods and services to supply them for a price.
  • Profit: The primary motivation and reward for engaging in business activities.
  • Risk: The inherent uncertainty associated with future business operations.
  • Dealing in Goods and Services: Involves supplying consumer goods, producer goods, and services to those who need them.
  • Regular Dealings: Business activities must be regular and recurrent to constitute a business.

Conclusion

Understanding the essentials of business helps in recognizing the core functions and objectives of any business activity. These characteristics are fundamental to the establishment, operation, and growth of businesses across various industries.

 Meaning and Definition of Business Organization

A business organization is an entity where an entrepreneur combines various factors of production, such as land, labor, capital, and machinery, to engage in productive activities. These activities ultimately result in goods and services that reach consumers through various channels. Business organizations involve a structured framework of duties and responsibilities assigned to different individuals to achieve common business goals efficiently and effectively.

Importance of Business Organization

Business organizations are essential for coordinating various activities and resources to achieve efficiency and reduce production costs while increasing profitability. Proper organization ensures that the right tasks are performed by the right people, leading to the accomplishment of predetermined business goals.

Definitions of Business Organization

  • Louis Allen
    • Definition: "Organization is the process of identifying and grouping work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives."
    • Explanation: Allen emphasizes that organization involves structuring work, assigning duties, and delegating authority to achieve business objectives efficiently.
  • Wheeler
    • Definition: "Internal organization is the structural framework of duties and responsibilities required of personnel in performing various functions within the company. It is essentially a blueprint for action resulting in a mechanism for carrying out function to achieve the goals set up by company management."
    • Explanation: Wheeler views organization as a framework that outlines duties and responsibilities, serving as a blueprint for achieving business goals.
  • Koontz and O’Donnell
    • Definition: "The establishment of authority relationships with provision for coordination between them, both vertically and horizontally in the enterprise structure."
    • Explanation: This definition highlights the importance of establishing authority relationships and ensuring coordination among different levels and functions within the organization.
  • Oliver Sheldon
    • Definition: "Organization is the process of combining the work which individuals or groups have to perform with the facilities necessary for its execution, that the duties so performed provide the best channels for the efficient, systematic, positive, and coordinated application of the available effort."
    • Explanation: Sheldon stresses the combination of work and necessary facilities to ensure efficient and coordinated efforts within the organization.
  • Spriegel
    • Definition: "In its broadest sense, organization refers to the relationship between the various factors present in a given endeavor. Factory organization concerns itself primarily with the internal relationships within the factory such as responsibilities of personnel, arrangement and grouping of machines, and material control. From the standpoint of the enterprise as a whole, organization is the structural relationship between the various factors in the enterprise."
    • Explanation: Spriegel provides a comprehensive view of organization, focusing on internal relationships and the coordination of various factors to achieve enterprise objectives.
  • George Terry
    • Definition: "Organizing is the establishing of effective authority relationships among selected work, persons, and workplaces in order for the group to work together efficiently."
    • Explanation: Terry emphasizes creating effective relationships among work, people, and workplaces to enhance efficiency.
  • C.H. Northcott
    • Definition: "The arrangement by which tasks are assigned to men and women so that their individual efforts contribute effectively to some more or less clearly defined purpose for which they have been brought together."
    • Explanation: Northcott highlights the purpose of organization as coordinating individual efforts to achieve clearly defined goals.
  • L.H. Haney
    • Definition: "Organization is a harmonious adjustment of specialized parts for the accomplishment of some common purpose or purposes."
    • Explanation: Haney describes organization as the harmonious adjustment of activities to achieve common goals.

Key Points of Business Organization

  • Coordination of Activities: Ensuring that all business activities are aligned and coordinated towards achieving common goals.
  • Delegation of Authority: Assigning specific duties and responsibilities to individuals or teams to enhance efficiency.
  • Structural Framework: Creating a structural framework that defines roles, responsibilities, and authority relationships.
  • Efficiency and Effectiveness: Enhancing the efficiency and effectiveness of business operations through proper organization.
  • Goal Achievement: Focusing on the attainment of business objectives and goals through organized efforts.

Summary

A business organization involves organizing various production factors and activities to achieve efficiency and profitability. It requires a structured framework that defines roles, responsibilities, and authority relationships. Various definitions emphasize the importance of coordination, delegation, and efficient utilization of resources to achieve business goals. Proper organization is crucial for the smooth functioning and success of any business entity.