THE NATURE AND SCOPE OF
BUSINESS
Introduction
The term business describes the social institution
which economic efforts are organized. These social institutions are the
arrangements devised to carry out the production, marketing, financing and
other activities that provide goods and services to people. This means that the
term business denotes an economic activities related to production and
marketing of goods and services to the society. Business from whatever perspective
involves organized activities.
Business refers to the organized production and
exchange of goods and services undertaken with the aim to earn profits, mutual
gain or benefit. It is an approach used by individuals for the purpose of
providing goods and services to mankind.
Accordingly, the term business refers to the “whole complete
field of commerce and industry, the basic manufacturing industries and the
network of distribution e.g. banking, transportation etc.
A more practical definition states that business is
a human activity concerned with material things, manufacturing things, erecting
buildings, lending money, trading stores, selling, insurance as well as
distributing goods and services. Another definition by Sir Fredrick Hooper gives
a notion that business is complex and contains alot of different activities
expressed in one general definition. Business is a whole complex field of
commerce, basic industry, processing and manufacturing industry and the network
of auxiliary services, i.e. distribution, banking, insurance, warehousing
transportation etc.
What
is Administration?
Fundamentally, the term administration connotes the
direction of affairs. It refers to the guidance, leadership and control of the
efforts of a group of individuals towards some common goals. Brech in (1970)
defined Administration as “that part of management which is concerned with the
installation and carrying out of the procedures by which the programme is laid
down and communicated and the progress of activities regulated and checked
against plans”. Therefore,
Administration can be said to be a purposive process which involve the setting
of objectives (i.e. formulation), determination of polices and the directing of
group purpose.
Management
This on the other hand is a process of planning,
organizing, leading, controlling, staffing, coordinating, directing and
recruitment, using the available resources to achieve maximum results. Also, management
is a process by which managers create, direct, maintain and operate purposive
organization through systematic, coordinated and co-operative human effort. It
is the means of determining the objectives of a group and putting them into
action.
Difference
between Management and Administration
The term management and administration are synonymous.
They mean virtually the same thing depending on what sector one has in mind
i.e. either private or public sector. Administration is the preferred term in
government agencies while management in business organization. The term
administration is conventionally used to connote administration of government or
public businesses. The difference between administration and management relates
to the type of organization. In business firms, administration refers to the
higher policy determining levels. Those who see a difference between
administration and management argue that administration involves the overall
setting of major objectives, determination of polices, identifying of general
purpose, laying down broad programs and major objectives; while management
refers essentially to the executive function, that is the active direction of
human efforts with a view to getting things done.
KEY
CONCEPTS IN BUSINESS
Business
Firm
A business firm is an economic unit, entity or
organization. It could either be a formal or informal organization or rather an
informal arrangement of people working together in an organization. However,to
succeed, some type of formal organization is usually required. A business firm
must provide goods and services to the public, and to survive it must generate
revenue in excess of cost (i.e. profits). A business firm is also a social
organization which employs different types of people to work together.
The
Industry
Industry consists of a number of firms. The activities of extraction, conversion,
production, processing, and fabrication of products are described as
industries. It is the manufacturing or production of goods. The products of
industry may be classified under these three (3) categories:
a. Consumer goods:
they are goods and services use by final consumers.
b. Producer or industry goods:
they are goods used in production of other goods e.g. Flour, sugar, chemical.
c. Intermediate goods:
these are certain materials which are finished product of one industry and
become the intermediate product of another e.g. in a plastic industry, the
plastic product are used in other industries in manufacturing electricity wire,
toys, and plastic buckets.
Commerce
Commerce is made up of trade and all activities that
make trade possible. It refers to the process of buying and selling, which
could be wholesale, retail, export, import and all other activities which
facilitate buying and selling such as packaging, financing, storing, transporting,
insuring, communicating,or warehousing.
Trade
Trade refers to sale, transfer or exchange of goods
and services and constitutes the central activity around which the ancillary
functions like banking, transportation, insurance, packaging, warehousing and
adverting cluster. It is an exchange of goods and services for money or other goods.
FEATURES OF BUSINESS
Business is generally characterized by the following
features;
a. Profit Motive:
business is undertaking primarily with a view to make profitsi.e. gain revenue
in excess of the costs of production.
b. Exchange:
this is sales or transfer of goods and services for a price. The purpose of all business activities is
concerned with the exchange of goods and services for value or money.
c. Dealing in goods and services: business
involves the production and exchange of goods and services. Goods produce or exchange can be consumer
goods such as bread, oil, shoes etc. or producer goods such as machineries or
tools. Consumer goods are meant for direct consumption while producer goods are
those used for further production.
A service is any act or performance
that one can offer to another that is essentially intangible and does not result
in ownership of anything. Its production maybe or may not tied to a physical
product. Services include the supply of water, electricity, insurance,
warehousing, and transport.
d. Uncertainty or risk: business
activities are characterized by the element of risk or uncertainty. Risk
involves the possibility of loss such as uncertainty of return or investment
made in the business. Business risks are brought about by the following
factors.
1. Change
in consumer demand due to changes in consumer taste and fashion.
2. Intensity
of competition in the market.
3. Faulty
managerial decision.
4. Price
fluctuations and other economic changes.
e. Continuity and regularity in
dealings: A sell of a product does not constitute business
until it is taking frequently. This is the most important characteristic of
business.
OBJECTIVES
OF BUSINESS
All businesses have some goals or objectives which
they seek to achieve. Since business is essentially an economic activity, the
primary objective is that of making profits which is a perquisite for
business survival. The goals that business set for itself are of great
importance to everyone whether he or she is an employee, consumer, an owner
or just member of the general public. For instance, the attainment of
business goals affects the national economic system which affects everyone in
the society. Hence the parties or people who benefit from the economic
objective of profit making include;
i.
Owners
ii.
Employee
iii.
The customers (community or general
public).
i.
Owner:
owners of business must get adequate return on the money they invested in the business
undertaken. This must be in terms of profit or dividend. Thus, for the business
man achieving goals mean maximizing the firm’s potential, failure to do so will
result in the business folding-up.
ii.
Employees:
also benefit from the business’ objective of profit maximizing. They must be
well compensated through fair wages and salaries and also welfare facilities
Such as housing, educational facilities for children, medical care and
retirement benefits. These benefits motivate workers to work harder and make
the organization successful. These however would only be possible if the
organization is able to make adequate profit to cover all expenses.
iii.
Customers
are patrons of the business enterprises and hence their satisfaction is most
important.The enterprises make and sell particular products or provide certain
services against a charge.These goods and services must be made to the
satisfaction of customers otherwise they would not be sold or used, thus
forcing the business out of existence. As long as a firm intends to survive it
has to satisfy its customers and this contributesto the living standard of the
general public.There are however, both internal as well as external
obstacles which may hinder the attainment of goals which enterprises
set for themselves. Internally, such obstacles may be lack of funds, trained
personnel, or even the physical capacities of equipment’s. External obstacles could
be the competitive nature of the economy. Also, problems may arise due to the
extent to which businesses depend on one another.
FUNCTIONS
OF BUSINESS
Business performs a major function of providing
goods and service to society as a whole.
1. It
provides employment opportunity e.g. both white collar job,(i.e. high earning
jobs) as well as manual labour, to improve standards of living.
2. Provision
of raw materials which other business uses to further their production.
3. It
makes production and distribution easier.
4. It
provides services aimed at making life more comfortable.
5. It
contributes to excess revenue to a country.
6. It
improves standard of living by create social facilities.
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