Concept and characteristics of business

Characteristics of Business

      Following are the main characteristics of business.

     1. Economic Activity. Business is an economic activity which is undertaken with the object of earning money or livelihood and not because of love, affection, sympathy, or psychological satisfaction.

    2. Production or Procurement of Goods and Services. Business either produces or procures goods and services for offering them to customers. The goods may be consumers' goods or producers' goods. Consumer goods may be for immediate consumption like foodstuffs or for future like clothes, furniture etc. Producers' goods are used for further production of goods like machinery, raw materials etc. The services may be in the form of banking, insurance, warehousing, transportation etc.

    3. Sale or Exchange of Goods and Services for the Satisfaction of Human Needs. Business involves sale or exchange of goods and services. The sale or exchange

Characteristics of Business

for a price is the basic feature of business. Purchase of goods or services for personal consumption is not business. The sale or exchange should be to earn profit only then it will be a business. A housewife cooking food at home for consumption is not business but cooking of food at restaurant for selling it to others for earning profit is business.

      4. Dealing in Goods and Services on a Regular Basis. Dealing in goods and services becomes business only if undertaken on a regular basis. An isolated transaction does not become a business. The sale of an old car for buying a new one, is not business even if the old car is sold at a profit. If a person deals in purchase and sale of cars for earning profit, it will be called a business. 5. Profit Earning. The main purpose of a business activity is to earn profits. The hope of earning profits brings people into business. No business can survive for long without earning profits. This is why, a businessman makes all out efforts to earn more and more profit by increasing volume of sales or by reducing
costs.
      6. Uncertainty of Return. An important feature of business is, the uncertainty of return on investments made. It is not possible to predict how much profit a businessman will earn. There is no certainty that there would be profits also. There may be losses despite of best efforts of the businessman.

7. Element of risk. An element of risk is prevalent in business. Risk implies the uncertainty of reward or the possibilities of loss. Uncertainty is present in every economic activity, but it is more prevalent in business. The factors on which business depends, are never certain. There may be a shift in demand, strike by employees, floods, accident, fire, economic changes, etc. Though a businessman tries to forecast future possibilities but things may not happen in the same way. Risk element keeps a businessman vigilant.

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