IMPORTANCE OF BUSINESS

Importance of Business By Various Types: 

1). Production Of Goods:

             It is the only business that gave rise to production on commercial basis. In the olden days man produced goods for his own consumption. Things were not bought and sold. He milked cow, churned butter and spun yarn and sewed clothes for his use only. He used home remedies for treating the disease. He, however, could not produce complex and sophisticated goods like cars, TVs, airplanes, computers, ships and carryout large scale manufacturing that are the fruits of business. 

2). Distributing Goods:

             Business activity is not confined to production. It includes distribution and goes even beyond it in the form of guarantee or warranty, after sales services and making available spare parts.
       Distribution helps the manufacture reach customers directly or through middlemen as wholesalers, retailers, brokers. For reaching customers air, sea and land transportation is used. Warehousing and advertising too play  a pivotal role in the distribution of goods produced on large scale. The whole distribution system is a part of marketing.

3). Satisfying Consumer Needs:

                 It is the blessing of business that human needs are satisfied easily. You just name a thing and get it no matter it was produced in as far as the U.S. right from convenience goods to specially goods are all easily available to satisfy consumer's needs.

4). Success Of Invention and Innovations:

             The success of inventions count on business. New inventions are speedily coming up. Today's invention gets obsolete tomorrow. Drop business, they all will fail. Today's luxury and comfortable life is the outcome of new discoveries, creations and innovations. Satellite programs, LCD TVs' remote control systems, computers are just to name a few. The motivating factor working behind them is nothing but business.

5). Success Of Industrial Revolution:

          The success of Industrial Revolution that began in the late seventeenth century can be attributed only to business. The main theme of the revolution was some new inventions in the textile sector and got succeeded because they were successfully traded on local and international markets. 

6). International Business:    

                     Business activities developed international business. Today goods and services are traded across the border around the word worth trillions of dollars. Any barriers to import and export around the world will cease to exist in 2005 under the agreement of the World Trade Organization. International business has made it possible to buy anything no matter where it was produced and with the help of shipping industry and insurance international business has made the world a global village. To boost foreign trade economic and trade blocks as SAARC, ASEAN, OPEC, EU, NAFTA, SAFTA, SAPTA have been formed by trading countries.

7). Standard Of Living And Wealth:

                 Business creates wealth that increases standard of living. In the past life was difficult because the consumer had to make things on his own and could not produce everything. Business made it possible for the consumers to get desired products on the market. Business has created  competition, made goods available in abundance, increased income, reduced cost of production and hence prices, all necessary factors to raise standard of living.

8). Employment:

          The more the production the higher will be the employment rate. Higher production also results in lowering overhead costs that brings the prices down. Low prices increase demand for the product. High demand and consumption pushes up the production resulting in greater number of workers.

9). Growth Of Higher Education:

                      Today's business has become rather complex. Business complexities have emerged from competition, development of new production and marketing techniques, compound promotional activities and increased human faculty. An average and ordinarily educated person cannot analyze the situation. understand and solve problems, forecast the future, innovate and update his business and lead his firm to a yellow brick road and prosperity. To survive in the complicated environment one must have higher education in business administration. Even the doctors and engineers are going in for business administration to enrich their professional degrees. 

10). Change In Status:

                          Business has made it possible to break with the poor past. Until Industrial Revolution change in the status was not possible. The poor was always poor. Poverty in the family ran through generations. But now with the help of quality education one can get a career job with high salary and attractive perks and fringe benefits in a large local or multinational company. 

SCOPE OF BUSINESS(BUSINESS FUNCTIONS)

The scope and range of commerce can be determined from the fact that it includes production, marketing, banking, finance, transporting, warehousing, increase and information. These factors or elements of commerce are discussed in the lines follow:

1. Production

              Business function starts with the planning for the production which is conversion of material from one form to another. It requires the purchase of raw material, machinery and equipment and hiring different classes of laborers. Production, which is a commercial activity, has four factors without it cannot take place. They are land, labor, capital and entrepreneurship.

Better production depends on paper and timely planning, effective quality control, subtle selection of power, minimization of cost, continuous research, right and quality materials, modern plant, machinery and equipment, knowledge of customer taste and market trends and best possible combination of ingredients.

2. Banking/Finance

Banking and Finance are part and parcel of commerce. By performing this service, commerce is able to finance the needs of the business firms. Through banking producers and middlemen get the needed funds. Banking caters to the financial needs of business.

Most of the loans are provided by the banking system. Specialized banking exists in the areas of industry, savings, agriculture, commerce, exchange, etc. Commercial banks help businessmen in advancing loans, issuing letters of credit, discounting bills of exchange, transferring of money and other agency and utility services. They offer facilities to open current and saving accounts. Industrial banks provide long-term loans to enable industries to purchase plant, machinery and equipment. On the other hand, agricultural banks provide funds to purchase seeds, fertilizers, pesticides tractors and warehousing facilities. Loans may also be obtained from the general public and are referred to as bonds payable.

Finance is the lifeblood of business. Every commercial activity requires capital and loans. Funds can be obtained through the following sources: 

i. Capital

ii. Loans or bonds

iii. Retained earnings

3. Transportation

Transportation is so important activity that no business can be performed without it transporting starts immediately after production. It refers to moving goods from the point of production to the point of consumption. It helps the producer dispose of their goods to the far and needy markets. It creates place utility. Quick and modern means have made it possible to send goods is any part of the globe in a very short period.

Today millions of dollars goods go across the world annually the credits of which goes to transportation.

There are many of transportation that includes three routes three routes, viz., land, air and sea. Most commonly used means is marine transport which is the lowest in cost and used for shipping heavy or voluminous goods. Most of the world trade takes place by sea. 

The other significant means is air transport which is quick but costly. The goods, light and compact are dispatched by air, especially, when time is important.

              The third means is road transport which is vital for inland trade. Landlocked countries are compelled tp undertake foreign trade by land. Land transport requires an efficient network of roads, motorways, highways, carriage ways and trucks. The means of lands transport covers railways carriages, trucks and animals cart.

It is the blessing of transportation that a product manufactured in one country can be made available anywhere across the world.

4. Storing/Ware-housing

Without storing a commercial function cannot be imagined. Goodsmust be stored before they are sold. It is needed at once after production. It refers to holding the goods when they are produced until they are consumed. Storing creates time utility. There are many kinds of stores and warehouses, where surplus goods are stocked awaiting their demand. 

It allows seasoning, aging, ripening and converting raw material into work-in-process into finished goods. The place where goods are held are known as a store or a warehouse. Shop, show-rooms, granaries, cupboards are all different forms of stores or storerooms. Cold storage, a type of warehouse, increase the life of perishable goods. Storage is also necessary when goods are in surplus or out of season awaiting demand in future.

Business houses use the facility of different types of stores and warehouses, some of which are bonded warehouse, public warehouse, private warehouse and cold storage.

5. Information

Commerce extends to getting information from various sources and media. It requires information at every stage. In production, in buying, in selling and in research one needs exacts and latest information. Well-informed activity of commerce also includes advertising without which a major business activity cannot be successful.

Like finance information is also life-blood of business. The businessman has to gather, classify and analyze information to make sound decisions. The quality and soundness of decisions depends on having the latest and relevant data.

It is the key to success and no business can thrive without having right and up-to-date information. It provides a charismatic basis for sound decisions leading the business to a great success and voluminous profits. It can be classified as follows: 

i. Primary information: It is first-hand information received through research, study, analysis, observation, experimentation and experience.

ii. Secondary information: It is obtained through the other sources that include libraries, books, newspapers and data collected by others.

Large business houses resort to their own research and analysis in establishing primary information. Advertising is also a significant means of providing and receiving information and helps sell the product.

The modern and fairly large companies use management information system(MIS) with the help of computers. MIS provides information on time, informs of risks well ahead of time, helps face extraordinary challenges, interprets market information and aids in preparing policies etc.

6. Insurance(Risk)

Risk is inherent to business. Business risks include theft, fire, sinking of the ship, change in prices, government policies and restrictions, strikes, lockouts, change in fashion, inventions, changing taste of consumers, drop in sales.

        Risks may be classifies as:

a). Insurable risks.

b). Uninsurable risks.

              Those risks which can be covered under an insurance policy are referred to insurable risks and entail theft, fire and hazards.

Risks that cannot have insurance cover are known as uninsurable risks. They include unfavorable changes in prices, fashions, consumer taste and competition. These risks arise out of marketing activities and can only be minimized by better and effective management.

For insurable risks the services of insurance companies are hired against the payment of premium.

7. Grading and Standardization

Standardization refers to bring the goods and services to a certain criterion, measurement established model or accepted norms or values. It creates uniformity and facilitates buying, selling, storing and transporting. Standards may take the form of brands , weights, heights, volumes, qualities and varieties. Standards are used for industrial and man-made goods and grades are used for classifying agricultural produces.

8. Trade(Buying and Selling) 

Trade has a pivotal role in business. Trade refers to buying and selling. It also covers imports, exports, retailing, wholesaling and brokerage. 

            Business and trade are compulsory to each other. In fact trade is a branch of business. Business requires acumen of the businessman. Before buying he has to take in to account quality, variety, price, design, terms of sale, guarantee and services offered by the seller. In selling, he has to locate customers, advertise his products, determine channel of distribution, prepare promotional materials and fix selling prices. He must also be aware of customers' taste, trends and preferences.

BUSINESS AND OBJECTIONS

The practice of business has been controversial over a long time. Around  2500 years back Plato did not favor business. His pupil, Aristotle, also disliked it dubbing it an amoral and asocial activity. His main objection was on profit making. He favored activation relating to art, culture and economics. About 200 years ago, Napoleon Bonaparte disliked English people as a nation of shopkeepers. It should be born in mind that the French have always been acknowledged as the lovers of art, culture, lifestyle, customers of good taste. Even Adam Smith, the founder of modern economics disliked businessmen. He would say they were rival to one another and would not like to sit together. But when happened under certain pressing needs to do so they would disperse having hatched a conspiracy against consumers.

In the modern era, surprising in the U.S., there is a section of young men according to whom business is the favorite field for only those with little or limited talent. In other words, gifted and talented people go in for research, management, engineering and medical disciplines. In a survey in the country, only twelve percent young men preferred business. A big majority disliked it on the plea that the businessmen exploit customers, enslave employees, stress managers to bring profits at any cost and are always in the mad run for wealth.

Despite all these business has its universal importance.

INDUSTRY

Industry has been defined as follows:

i. It is any systematic economic activity.

ii. Industry is any branch of manufacture and trade.

iii. An industry is a commercial undertaking that provides services as catering, hotel, tourist, entertainment etc.

Industry has also been defined as all those business and economic activities which result in the creation of goods and services.

Industry can be described in two ways:

1. By Manufacturing:

Through industrial activity raw material are converted into a new shape which is different  from its previous characteristics and becomes more useful. For example, cotton is converted in to yarn, and yarn converted into cash.

2. By Group:

Industry may refer to any branch of productive, manufacturing enterprises collectively. Textile is the group of several textile mills.

Kinds Of Industries:

Industry may be classified as follows:

I. By Size: 

    Industries may be heavy or light.

i. Heavy Industries

They are ones which are basic and produce heavy goods and machinery which in return develop light industries. Example are steel, shipping and coal mining industries. In short, Heavy industries produce industrial goods.

ii. Light Industries

        These industries produce light goods which are mostly consumer goods. Electronic, glassware, paper etc. are light industries.

II.By Production Process:

                            By production process the industry may be divided as follows:

1. Extracting Industry.

2. Analytical Industry

3. Synthetic Industry

4. Fabricating Industry

1. Extracting Industry

It refers to mining by which coal, gold, diamonds are extracted from under the ground. The industry includes drilling process through which oil and petroleum products are extracted. Taking things out of the sea is also a part of extracting industry. Fishing, mining, quarrying, forestry, farming all fall under the extracting industry.

2. Analytical Industry

Under this process a product is broken down into its parts. By the anatomy of oil we produce diesel, different qualities of petrol, kerosene etc. Distilling, oil refining, meat packing and lumber milling come under this industry.

3. Synthetic Industry 

Here two or more elements or parts are combined to produce a new product. Examples are iron, glass, yarn, crockery, glass fiber are the result of synthetic processes. Assembling plant is a type of this industry.

4. Fabricating Industry 

It is the industry when cutting, weaving, treating, pressing, finishing or dyeing process is also referred to as a manufacturing industry.

WHAT IS FINANCE?

Finance refers to money resources, income, capital, loans, and retained earning. It also refers to managing fund, capital, money, revenue and cash. In broader terms it includes economics, accounting, banking, commerce, investment and business because they are all concerned with money.

Finance is the life blood of any business organization. Financial needs can be from capital(owners equity), loans, and retained earnings. which are accumulated profits over the previous years. The success of financial aspects of business depends on the following.

a. Best possible proportion of capital, loans and retained earnings invested in the business.

b. Proper utilization of financial resources.

c. Effect financial management.

Difference Between COMMERCE And BUSINESS

            Business and Commerce though two different words, have identical meaning and concept and can be used alternatively. Americans prefer to use the term 'Business', while Britishers like to employee the word 'Commerce', but in the same meaning.

There are some other Business terms also differently used by both the nations in the same context.

Britishers                                   Americans

                                      Debenture Bond

Company Corporation

Limited Incorporated

Shareholder Stockholder

Is Business different from Commerce?

Are really Business and Commerce different activities? No, as already mentioned. They are one and the same in meaning and concept. In fact, the misunderstanding derives from some Commerce books, which try to differentiate between the two terms. Pakistani authors follow the suit but in vain. Trying to create a distinction between the two words only creates confusion and does not serve the cause of students, teachers, businessmen and others.

            In fact, trying to make a difference between the words Business and Commerce, some authors define Commerce in the sense of or as a marketing activity, which starts after manufacturing.

For example, some authors define Commerce as follows:

"Commerce is concerned with the exchange of goods. It includes all those activities which are related to the transfer of goods from the place of production to the ultimate consumers."

               It is clear from the above definition that it can only be applied to the definition of marketing.

In short, Business or Commerce is the sum of the following activities:

1. Manufacturing activities

2. Marketing (exchange, distributions, finance etc.)

Hence, 'Business and Commerce are used in the same sense in most parts of the World and being understand same all  as is the fact.'