MGT211 Combined by Asfand Yarr

Lecture 1 · INTRODUCTION · CONCEPT OF BUSINESS

Literally, the word “business” means the state of being busy. Generally, the term business includes all human activities concerned with earning money. In other words, business is an activity in which various persons regularly produce or exchange goods and services for mutual gain or profit. The goods and services produced or purchased for personal use are not included in “business”.

DEFINITION

1.

According to L. H. Haney

“Business may be defined as human activities directed toward providing or acquiring wealth through buying and selling of goods.”

2. James Stephenson says that: “Every human activity which is engaged in for the sake of earning profit may be called business.”

3.

In the words of B. W. Wheeler

“An institution organized and operated to provide goods and services to the society, under the incentive of private gain” is business.

Structural Diagram · Business · Buying and · Selling · Buying and · Selling · Wealth · CHARACTERISTICS

Following are the essential characteristics of a good business:

1.

Capital

Capital is the lifeblood of every business. It is the most essential and important element of business. In case of deficiency, loans can be taken from various financial institutions.

2.

Creation of Utility

Utility is an economic term referring to that characteristic of a certain commodity, which can satisfy any human need. Business creates utility, which gives benefit to the entire society as well as the businessmen.

3.

Dealing in Goods and Services

Every business deals with sale, purchase, production and exchange of goods and services for some consideration.

4.

Employment

Business is a good source of employment for its owners as well as for other people, for example, employees, agents, transporters etc.

5.

Islamic Process

Business is an Islamic way of earning living. Income from business is known as profit, which is Rizq‐e‐Halal. The Holy Prophet Muhammad (SAWW) himself did prosperous business.

6.

Motive

The motive of business is to earn profit. Otherwise it will not be termed as business.

7.

Organization

Every business needs an organization for its successful working. A proper organization is helpful in the smooth running of business and achieving the objectives.

8.

Productions or Purchase of Goods

A businessman deals in production or purchase of goods. These goods are supplied to the people. So, it is necessary that more goods should be produced so that demand of people may be fulfilled. 9.

Regular Transaction

Business has a nature of regular dealings and series of transactions. So, in business, only those transactions included which have regularity and continuity.

10.

Risks and Uncertainty

Business involves a large volume of risk and uncertainty. The risk element in business keeps a person vigilant and he tries to ward off his risk by executing his policies properly.

11.

Sale or Transfer for value

Another characteristic of business is the sale or transfer of goods for value.

12.

Social Welfare

Business does not only satisfy the producer, but also the consumer when products are offered for sale at low prices in markets.

NATURE OF BUSINESS

The following points state the nature of business in brief:

1.

Economic Activity

Business is an economic activity as it is concerned with creation of wealth through the satisfaction of human wants.

2.

Human Activity

Business is an economic activity and every economic activity is done by human beings. Thus, business is one of the most important human activities.

3.

Social Process

Business is run by owners and employees with the help of professionals and customers. Thus, business is a social process.

4.

System

Business is a systematic arrangement of various elements, which leads to the attainment of particular objective, according to a well‐established plan.