What do you mean by Business?

what is business

What is Business?

Business is the exchange of goods, services, or money for mutual benefit or profit. Business needs people as owners, managers, employees, and consumers. People need business for the production of goods and services and the creation of jobs.  

Business objectives

Business must achieve their objectives to remain in operation. Lists of business objectives generally include such factors as profit, survival, growth, and social responsibility.

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Survival, Growth, and Social Responsibility

Survival is an obvious objective. Other objectives can be accomplished only if the business enterprise survives.

Growth is an objective because business does not stand still. Market share increase, personal and individual development, and increased productivity are important growth objectives. The growth of Compaq computer and Wal-Mart to multi billion dollar enterprises is often used as an example of business success accomplished through growth.

In recent years, meeting social responsibilities has been recognized as an important objective. Businesses like each person in society must accept their responsibilities in areas such as pollution control, eliminating discriminatory practices, and energy conservation.

Profit- Two Views:

Although survival, growth, and social responsibility are important objectives, the profit objective plays the major role in business. Profit, however, means different things to different people because of their values, attitudes, and perceptions.

Business Profit: Typically, a business person calculates profit by subtracting all the costs, including taxes, from the revenue received for selling a product or service in the market. The difference is referred to as business profit. Successful business organizations earn a profit because their goods and services effectively meet customers’ needs and demands. Basically, profits reward a business enterprise for effectively conducting a number of activities.

Risk Taking: The business may earn a profit when it takes risks by entering a new market or by competing head on with another business.

Evaluation of Demand: Business organizations that evaluate consumer needs and demands and then move efficiently onto a market can earn substantial profits.

Efficient Management: A major cause of business failure is improper or inadequate management of people, technology, materials, and capital. Efficient planning, organizing, controlling, directing, and staffing can earn satisfactory profits.

Economic Profit: The economist, like the business person, subtracts expenses from income to find profit. But the economist also considers opportunity cost, the cost of choosing to use resources for one purpose while sacrificing the next best alternative for the use of those resources. Economic profit is what remains after expenses and opportunity costs are subtracted from income.

Social Responsibility:

Business firms conduct activities to produce goods and services and to generate profits. These activities greatly affect our society. Social responsibility is the awareness that business activities have an impact on society and the consideration of that impact by firms in decision making. Besides emphasizing profits, firms concerned with social responsibility voluntarily engage in activities that benefit society.

A social responsible firm makes deliberate, regular efforts to increase its positive impact on society while reducing its negative impact.

Social Responsibility concern of Business:

Many firms practice social responsibility in various ways and to varying degrees. Most managers today regard social responsibility as a necessary part of doing business.

Social responsibility raises many challenging questions for business firms. To whom are we responsible? How far should we go to satisfy our customers and achieve organizational objectives? Will our decisions affect any segments of society that we have not considered? Business activities have an impact on consumers, employees, the environment and those investing in the firm. Social responsible firms weigh the consequences of their decisions on these different concerns.

Responsibility to Consumers:

When you make a purchase, you cast a vote for a product and indicate your approval of the product and the company providing it. If you are satisfied with the product, you will buy and use it again and maybe recommend it to your friends.

Firms trying to succeed provide products that satisfy the needs of their customers, since dis-satisfied customers eventually take their business else-where. But a company also needs to consider how customers view the firm itself.

Pressure from consumers and special-interest groups has promoted many business firms to adopt socially responsible policies. Consumerism includes the activities of individuals, groups, and organizations aimed at protecting consumer rights.

The Foundation of Business: (Economics)

Understanding economics is essential to understanding business. Economics is the study of how a society (people) chooses to use scarce resources to produce goods and services and to distribute them to people for consumption. This definition raises certain issues that are key to understanding economics: (i) resources (ii) goods and services, and (iii) allocation of both resources and products.

Business ethics

Ethics: The principles of behavior that distinguish between right and wrong or fair.

Business Ethics: The evaluation of business activities and behavior as right and wrong.

Social responsibility requires individuals engaging in business endeavors to behave in an ethical manner. Ethics are principles of behavior that distinguish between right and wrong. Ethical conduct conforms to what a group or society as a whole considers right behavior. People working in business frequently face ethical questions. Business ethics is the evaluation of business activities and behavior as right and wrong. Ethical standards in business are based on commonly accepted principles of behavior established by the expectations of society, the firm, the industry, and an individual’s person values.

With unethical business practices often receiving publicity, the public sometimes believes that people in business are less ethical than other society. But ethical problems challenge all segments of our society, including government, churches, higher education.

Most business leaders realize their firms cannot succeed without the trust of customers and the goodwill of society. A violation of ethics makes trust and goodwill difficult to maintain. In thousands of companies, executives and employees act according to the highest ethical standards. Unfortunately managers in some firms behave unethically. Personnel executives say the major reason managers behave unethically is to obtain power and money. In this section, we examine the various factors influencing ethical behavior and discuss how firms can encourage ethical behavior.

Factors Influencing Ethical Behavior:

Present several factors that affect individual’s behavior in business.

  • The business environment.
  • Organizational Factors.
  • An individual’s personal philosophy.

The Business Environment: Almost daily, business managers face ethical dilemmas resulting from the pressures of the business environment. They are challenged to meet sales quotas, cut costs, increase efficiency, or overtake competitors. Managers and employees may sometimes think the only way to survive in the competitive world of business is by cheating.

Conflict of interest is another common ethical problem stemming from the business environment. Often an individual has a chance to further selfish interests rather than the interests of the organization. To gain favor with people who make purchasing decisions for their companies, a seller may offer special favors or gift, ranging from a meal to clothing to trips. Some offer a kickback for putting through a contract or placing orders with a company. Others offer bribes. Such illegal conduct will damage the organization in the long run.

The Organization: The organization itself also influences behavior. Individuals often learn ethical or unethical behaviors by interacting with others in the organization. An organization can also use rewards to influence the behavior of its members. If an individual is rewarded or is not punished for behaving unethically, the behavior will probably be repeated.

The Individual: A person’s own moral philosophy also influences his or her ethical behavior. A moral philosophy is the set of principles that dictate acceptable behavior. These principles are learned from family, friends, co-workers, and other social groups and through formal education. The connections quiz will help you evaluate your moral philosophy.

Encouraging Ethical Behavior:

Many organizations take positive steps to encourage ethical behavior and culture. Some offer courses in ethics and include ethics in training programs in the firm. Most courses and training seminars focus on how to analyze ethical behavior. The emphasis is on understanding why individuals make the decisions they do rather than on teaching ethics or moral principles.

A basic way for a company to encourage ethical behavior is to establish a code of ethics. A code of ethics is a statement specifying exactly what the organization considers ethical behavior. Employees of an organization can also encourage ethical behavior by reporting unethical practice. 

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