The Nature of Business

A business as an entity is a formal complex organization which produces goods and

services for satisfaction of its customers for profit and satisfaction. However, business
as activity in itself is the regular production or purchase and sale of goods undertaken
with an objective of earning profit and acquiring wealth through the satisfaction of
human wants. Business management are the activities associated with running a
company, such as controlling, leading, monitoring, organizing, and planning.

Characteristics or Features of Business

To be classified as a business, there are certain features that must be present which are
as follows:

Exchange of Goods and Services - all business activities are directly or
indirectly concerned with the exchange of goods or services. In other words,
what is produced must be consumed and this happens when the producer or
the business sells goods and services to consumers in exchange for money.
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
Profit is the main Objective - most businesses are operated for profit even
though many are non-profit making organizations. Therefore, businesses are
motivated by profits.


Risks and Uncertainties - business is subject to risks and uncertainties. Some
risks, such as risks of loss due to fire can be insured by insurance companies.
However, there are some risks such as loss due to change in demand or fall in
price cannot be insured and must be borne by the businessman.


Buyer and Seller - every business transaction has a minimum two parties - a
buyer and a seller.


Production - business activities are connected with production of goods or
services. Production is the process of using inputs to produce output.


Marketing and Distribution of Goods - in order for the profit objective of
the business to be effectively met, businesses must market or distribute their
goods and services to prospective consumers.


Satisfaction of Human Wants and Needs - the success of the business
depends on its products and services being successfully exchanged for money.
This can only happen if these products and services are to the satisfaction of
the targeted consumers.
