Business Fundamentals Overview
1.1 Basic Concepts about Businesses
Business Concept
As human social existence evolved, individual needs expanded. Producing all their own
needs became impractical, leading to the production of surplus goods exchanged through
the 'Barter System'. Today, individuals fulfill their needs and wants through businesses,
making businesses crucial in modern society.
Definition: A business is an economic activity that manufactures or provides goods and
services to fulfill human needs. While most firms are profit-oriented, some, especially in the
government sector, operate on social welfare motives.
Modern Business Practices:
● Transition from manual to technologically advanced production.
● Increased use of electronic media for transactions.
● Global village concept due to advancements in information and communication
technology.
Activity: List the goods you consume in a day and note their countries of manufacture.
Business Objectives
Businesses have specific objectives to satisfy stakeholders including owners, managers,
employees, customers, government, and the community.
Common Objectives:
1. Earning Profits: Essential for providing returns on investment.
2. Increasing Customer Satisfaction: Key for business survival.
Sub-Objectives:
● Quality Improvement: Providing quality goods at reasonable prices.
● Employment Generation: Creating job opportunities from laborers to managers.
● Employee Welfare: Providing additional facilities like food, accommodation,
transport, and medical care.
Consumer Needs and Wants
Needs: Essential for existence (food, clothing, shelter). As society evolves, needs expand to
include education, health, security, etc.
Characteristics of Needs:
● Essential for existence.
● Common to all individuals.
● Arise naturally, not created by businesses.
● Limited in number.
Wants: Various ways to satisfy needs.
Examples:
● Food: String hoppers, ice cream, cake.
● Clothes: Sarees, uniforms, shoes.
Characteristics of Wants:
● Not essential for existence.
● Diverse and vary by socio-economic conditions.
● Created by businesses.
● Complex and unlimited.
Activity: List different ways to satisfy needs like food, clothing, housing, education, health,
safety, transportation, communication, and entertainment.
Comparison Activity: Compare goods and services used to fulfill needs in the past versus
the present.
1.2 Stakeholders of Businesses
Stakeholders
Individuals or groups affected by business activities and having interests in the business.
Objectives of Stakeholders
Stakeholders have various objectives based on their relationship with the business. Owners
seek profits, employees desire job security and welfare, customers expect quality products,
governments look for compliance and community benefits.
Manufacturing Businesses
Commodity Manufacturing Businesses
Tangible and physically existing items are known as commodities. Establishments producing
these commodities to fulfill human needs and wants are called commodity manufacturing
businesses. They consider consumer tastes, income levels, and social status to produce
goods that satisfy a single need and ease lifestyles.
Examples:
● Processed food, automobiles, electric ovens, mobile phones, washing machines,
furniture
Activity:
1. List the goods you consume daily that are produced within your area.
2. Using goods with different brand names to fulfill the same need can be seen in the
market. List the brand names of goods you consume at home under each category
and compare with friends.
Service Providing Businesses
Activities or processes rendered to consumers by businesses to fulfill their needs and wants
are known as services. These businesses are called service providing businesses.
Examples:
● Wholesale businesses, retail businesses, insurance institutions, banking institutions,
beauty salons, educational institutions
Activity: List different services provided by businesses in your area that ease work at home.
Factors of Production
Businesses require various resources, known as factors of production, to produce goods and
services. These factors include:
Land
Natural resources available on and beneath the land.
Examples: Minerals, forests, soil
Labour
Mental and physical contributions by individuals in a business.
Examples: Workers in mines, sanitary laborers, accountants, managers
Capital
Man-made resources that facilitate the manufacturing process.
Examples: Machinery, buildings, motor vehicles, money
Entrepreneurship
The role of organizing land, labour, and capital for production. Entrepreneurs take risks,
create innovations, and make business decisions.
Activity:
1. Select a business in your area and list the resources it uses.
2. Categorize these resources into land, labour, capital, and entrepreneurship.
3. Explain the entrepreneurial roles carried out within that business.
1.2 Stakeholders of Businesses
Overview
Stakeholders are the various parties interested in business activities and operations, each
aiming to fulfill different objectives.
Key Stakeholders
Owners:
● Role: Provide resources to the business.
● Types: Can be a single person or a group.
Managers:
● Role: Conduct business operations and implement owner decisions.
● Types: Includes roles like finance manager, marketing manager, etc.
Customers:
● Role: Buy goods and services either for reselling or personal use.
Suppliers:
● Role: Provide raw materials, transport facilities, etc.
Competitors:
● Role: Other businesses producing or selling similar goods or services.
Financial Institutions:
● Role: Provide loans, consultancy services, etc.
Employees:
● Role: Perform business operations.
Government:
● Role: Propagate policies for economic growth.
Community:
● Role: Population outside the business, including journalists, environmentalists, and
pressure groups.
Future Investors:
● Role: Individuals or institutions willing to invest.
Objectives of Stakeholders
Owners:
● Security of investment
● Earning sufficient profits
● Business growth
Managers:
● Making decisions to achieve objectives
● Implementing decisions
Employees:
● Job satisfaction
● Fair wage or salary
● Job security
Customers:
● Reasonable product prices
● Quality products
Suppliers:
● Securing continuous orders
● Timely payment
Financial Institutions:
● Collecting loans and advances
● Providing more financial support
Government:
● Collecting taxes
● Generating employment
● Increasing domestic production
Competitors:
● Pricing products effectively
● Facing competition
Community:
● Ensuring environmentally friendly business practices
● Contributing to social welfare
Future Investors:
● Making informed investment decisions
Contributions Expected from Stakeholders
Owners:
● Contributing adequate capital
● Being dedicated to business activities
Managers:
● Supervising activities
● Implementing business plans
● Making correct decisions
Employees:
● Completing tasks efficiently
● Increasing labor productivity
Suppliers:
● Providing quality raw materials consistently
● Timely delivery of materials
Government:
● Providing business-friendly incentives
Activities
Activity 09: Identify the stakeholders of your school. Prepare a table showing their
objectives and expected contributions towards the school.
Activity 10: Identify the stakeholders of the following local institutions:
1. A commercial bank
2. A factory
