Understanding Business: Concepts, Characteristics, and Industries

Concept of Business

Business refers to those economic activities involving the purchase, production, and/or sale of goods and services with a motive of earning profit by satisfying human needs in society.

Characteristics of Business

• An Economic Activity: Business is considered an economic activity as it is undertaken with the objective of earning money.
• Production or Procurement of Goods and Services: Business includes all the activities concerned with the production or procurement of goods and services for sales. Services include transportation, banking, insurance, etc.
• Sale or Exchange of Goods and Services: There should be a sale or exchange of goods and services between the seller and the buyer.
• Dealing in Goods and Services on a Regular Basis: There should be regularity of dealings or exchange of goods and services. One single transaction of sale or purchase does not constitute business.
• Profit Earning: The main purpose of business is to earn profit. A business cannot survive without making profits.
• Uncertainty of Return: Every business invests money with the objective of earning profit. However, there is always a possibility of losses.
• Element of Risk: All business activities carry some elements of risk because the future is uncertain and the business has no control over several factors like strikes, fire, theft, change in consumer taste, etc.

Types of Industries

1. Primary Industry

The primary industry includes those activities through which natural resources are used to provide raw materials for other industries. Primary industries are of two types:

1. Extractive Industry refers to those industries under which something is extracted out of the earth, water, or air (e.g., coal, iron, gas, etc.).
2. Genetic Industry refers to those industries under which the breed of animals and vegetables are improved and made more useful (e.g., poultry farms, agriculture, dairy farming, tree planting, etc.).

2. Secondary Industry

Under this industry, new products are manufactured by using previously produced things. For example, producing cotton is a primary industry, and manufacturing cloth out of cotton is a secondary industry.