Amity College of Commerce & Finance

Business

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 Amity College of Commerce & Finance

Definition of Business
•
Business is an economic activity that involves the exchange,
purchase, sale or production of goods and services with a motive to
earn profits and satisfy the needs of customers. Businesses can be
both profit or non-profit organizations that function to gain profits or
achieve a social cause respectively.
• According to B. O. Wheeler, “Business is an institution organised and
operated to provide goods and services to society under the incentive
of private gain.”

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 Amity College of Commerce & Finance

Features of Business

1. An Economic Activity
• A business is an economic activity which includes the purchase &
sale of goods or rendering of services to earn money.
• It is not concerned with the achievement of social and emotional
objectives.
Example: Wholesaler sell goods to the retailers and retailers sell goods
to the customers.

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2. Manufacturing or Procurement of Services

and Goods
•Before offering goods to the consumer for consumption it should be
manufactured or procured by businesses.
•Business enterprise converts the raw material into finished goods.
•Organizations also procure finished goods& services from the producers
to meet the needs of the customers in the market.
•Goods can be a Consumer good like sugar, pen, ghee, etc. capital goods
include machinery, furniture, services like transportation, banking, etc.
Example: Individual retailer buys the toffees from wholesalers in a
specific quantity and sells it to the ultimate consumer.

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 Amity College of Commerce & Finance

3. Exchange or Sale of Goods and Services for

the Satisfaction of Human Needs
•Every business activity includes an exchange or transfer of
services and goods to earn value.
•Producing goods for the goal of personal consumption is not
included in business activity.
•So, there should be the process of sale or exchange of goods
or services exits among the seller and the buyer.
Example: A lady who bakes pastries and cakes at home and
sells it to the pastry shop is a business activity.
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4. Dealings With Goods and Services on a

recurring Basis
•Every business, rendering either services or goods should
deal on a recurring basis.
•A one-time sale is not considered a business activity.
Example: If a person sells his old car through OLX even at a
profit will not be considered as a business activity. But if he is
engaged in regularly trading of cars at his showroom will be
considered as business activity.

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5. Profit Earning
•No business can last for long, without making a
profit.
•The purpose to conduct the business is to earn profits
and minimise the cost.
Example: A business house tries to reduce the cost of
production and the cost of raw material to earn high
profits.

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 6. Uncertainty of Return

•The possibility of earning profit or loss is very uncertain
and can’t be anticipated by the entrepreneur.
•Hence, no business can totally do away with risks.

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Stages of development of Business

• The life cycle of a business, much like that of a human

being, goes through many stages. Just as a person is born,
grows to maturity and dies, business entities pass through
the same stages. Although business experts disagree on the
number of distinct stages in a business life cycle, they
typically agree on what occurs during each critical stage

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 Amity College of Commerce & Finance

1. Start-Up Stage

• The start-up phase represents the "birth" of the business.

The entrepreneurs, much like expectant parents, devote
massive amounts of time, money and emotional investment
in launching their new venture. At this early stage, the
owners use much of their energy to establish a sizable
customer base, purchase inventory, open bank accounts and
hire employees. As with parenting, the start-up phase brings
many sleepless nights from a combination of worries about
the future and expectations for developmental milestones.
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2. Growth Stage
• After the start-up stage, a successful business often achieves
a level of expanded capabilities. The company establishes a
reputation, encounters increased demand and stabilizes its
business practices. This growth phase has its share of both
issues and opportunities. The company may require an
infusion of capital, either through taking on debt or selling
off equity, to meet increased demand. The company also
usually encounters higher sales totals and better profit
margins as it builds its visibility in the market.

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3. Maturity Stage
• Just as a young person reaches adulthood, a prosperous
business also reaches a more mature stage during its life
cycle. The increased capabilities encountered during the
growth phase lead to the company achieving a stable
presence in its industry. At this stage, the owners no longer
need to pour their energy into every aspect of the company.
They can choose either to stay with the business or allow
new management to take over its operations.

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4.Decline Stage
• Every year, thousands of businesses close their doors for the last time.
The "death" of these businesses can be attributed to many factors,
including poor management, government regulation or changes in the
industry. During this stage, businesses often see declining sales,
decreased profits or steep losses. The company may fall out of favor
with its customers, carry high debts or encounter cash flow issues.
Any of these issues can lead to the company's eventual decline and
closure.

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Importance of Business
• Business is a self-employment opportunity for a
person to become self-independent and master of
his ideas. It is not only beneficial to the owner but
also makes an impact on society.
• To get a detailed understanding of the importance
of trading activities to the owner and the society, let
us go through the following points:

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•Revenue Generation: It is the key to revenue generation for

the business owner since it brings in profit and proves to be a
source of income for the owner.
•Economic Growth: It is essential for the economic growth of
a country since high revenue means higher tax collection.
Improves Standard of Living: A country with more
industrial units and companies experience a higher rate of
employment and better living standards.
•Bulk Production: Manufacturing units involve large-scale
production, which ultimately reduces the cost of production,
and people get a continuous supply of goods at a reasonable
price.
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•Innovation: It involves brainstorming and generation

of new ideas which opens up the way for innovation
and creativity.
•Generates Employment: It is a long-term process
which requires the human resource to function
correctly. Therefore, it creates job opportunities.
•Market Expansion: A good strategy and high
customer satisfaction lead to a strong customer base
aiming at market expansion.

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