L esson 1:
Business concepts
Business is a word, which is com-
monly used in many different lan-
guages. But exactly what does it
mean? The concepts and activities of
business have increased in modern
times. Traditionally, business simply
meant exchange or trade for things
people wanted or needed. Today it
has a more technical definition. One
definition of business is the produc-
tion, distribution and sale of goods
and services for a profit. To examine
this definition, we will look at its var-
ious parts.
First, production is the creation of
services or the changing of materials
into products. One example is con-
version of iron ore into metal car
parts. Next, these products need to
be moved from the factory to the
market place. This is known as distri-
bution. A car might be moved from a
factory in Detroit to a car dealership
in Miami.
Third is the sale of goods and ser-
vices. Sale is the exchange of a prod-
uct or service for money. Goods are
products, which people either need
or want; for example, cars can be
classified as goods. Services, on the
other hand, are activities which a
person or group performs for an-
other person or organization. For in-
stance, an auto mechanic performs a
service when he repairs a car. A doc-
tor also performs a service by taking
care of people when they are sick.
Business, then, is a combination of all
these activities: production, distri-
bution and sale. However, there is an-
other important factor. This factor
is creation of profit or economic sur-
plus. A major goal in the functioning
of a business company is making a
profit. Profit is the money that re-
mains after all the expenses are paid.
Creating an economic surplus or
profit is, therefore, a primary goal of
business activity.
1
I. Answer the following questions about the meaning of business:

1. What is the modern definition of business?

The modern definition of business is the production, distribution and sale of goods and
services for a profit.
2. How does this modern meaning of business differ from the traditional one?
Traditional business relies on sales and exchange, but modern business is based on the
production, distribution and sale of goods and services.
3. What factors have brought about these changes? (Cannot be answered directly from
the text. So use your knowledge)
Factors that have brought about these changes are
• Industrial development and industrial renaissance;
• Multiple Products and Services;
• Factories far from the consumer.
4. What does production involve?
Production is the creation of services or the changing of materials into products. So
production involves the service they provide, the raw material as an input and the
goods/products as an output.
5. What example of distribution is given in the text? Can you think of another example?
An example of distribution is car moved from its factory in Detroit to the car dealership
in Miami. Another example is some Korean skin care product being shipped from its factory
in Korea to some cosmetic shop around the world.
6. How do goods differ from services?
Goods are products, which people either need or want, for example: cars, houses.
Services are activities which a person or group performs for another person or organization,
for example: an auto mechanic performs a service when he repairs a car, a doctor performs a
service by taking care of people when they are sick.
7. In addition to production, distribution and sale what other factor is important in
defining business?
The factor is the creation of profit or economic surplus because a major goal in the
functioning of a business company is making a profit.

2
II. Look at the terms in the left-hand column and find the correct synonyms
in the right-hand column. Copy the corresponding in the blanks.

1. Goods A. Moving or transporting

2. Conversion B. Trade
3. For instance C. However
4. Distribution D. Look at
5. Exchange E. Change
6. On the other hand F. For example
7. Examine G. Product

III. Determine which of the following statements are true and which are
false. Then put T or F in the blanks. Rewrite false statements to make
them true.

1. Business is not just one activity but a combination of different operations (T).
2. From ancient to modern times the definition of business has remained the same (F).
3. Moving a truckload of oranges from the orchard to the supermarket is an example of
production (F).
4. A salesclerk provides a service by answering customers’ questions (T).

IV. Complete the sentences with the noun and verb forms provided.

• Sales/ Sells
1. An annual report includes the sales figures of the company for the current fiscal year.
2. An auto dealership sells Cars, trucks, vans, and sometimes recreational vehicles.
• Distribution/ Distribute
1. Some companies hold exclusive distribution rights for specific products.
2. Factory representatives distribute its products to wholesalers and retailers.
• Production /Produces
1. How efficiently a company produces its products will in large measure determine its
success.
2. The production of high-technology instruments is one of the most rapidly growing
industries in 1990.
• Classification/ Are classified
1. Items are classified in order to show the relationship between them.

3
2. Classification means the grouping of items to show the differences between them.
• Conversion / Convert
1. When traveling from country to country, people convert one currency to another.
2. The production process often involves the conversion of the raw materials into finished
products.

V. Match these parts of the business definition to the following real-life

situations.

• Production of goods • Distribution of goods

• Sale of goods • Sale of service

1. Iron ore is made into metal car parts (production of goods).

2. A car is moved from a factory to car dealership (distribution of goods).
3. A 5-star hotel provides executive rooms for guests (sale of service).
4. A language translator translates a business manual in English to Indonesian (sale of goods).
5. A waitress serves you a breakfast (sale of service).
6. A warehouse sends office supplies to bookshops (distribution of goods).
7. A shipment of potatoes is transferred from a boat to a truck (distribution of goods).