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Std-11, Commerce, Organization of Commerce, Nature and scope of Business, Module-02

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Let’s see, next module, define business and its features, right. Business state of being busy. It refers to production and distribution of goods and services. Production, conversion of raw material into finished goods. You can see logs of woods being converted into furniture, those are called finished goods. Distribution includes a process in which goods and services are sent to customer. So, manufacturer sends it to distributor and from distributor it goes to us, through maybe courier service or maybe through retailer. You can see here, delivery at door step. Goods and services which are tangible, which you can touch, feel and see. Services which are intangible, you cannot see them as in doctor diagnoses patient, waiter serves at hotel to the customer.

Production of goods means actual making of goods, maybe, agriculture or manufactured. Here the farmer working in the farm, cultivating piece of land and growing tomatoes, from there we get ketchup. We call it as manufactured good, right, tomatoes and from tomatoes we get manufactured goods called as ketchup. So, business process includes advertising, transportation, warehousing as well as actual buying and selling of goods and services. And you can see here, ownership transfers from seller to buyer.

Definition given by Professor Haney:

Business activities are all those human activities which are directed towards the production, what production and procuring wealth, who gave, Professor Haney.

Let’s check features. First one involves production and distribution. So, every business activity is concerned with production of goods, right tomatoes to ketchup. Creation of services, next distribution of goods, correct, distribution of goods and services from factory to us, that is consumers. It involves in dealings in goods and services. Cannot take place in the absence of goods and services. Goods involved in a business transaction maybe capital or maybe consumer. Capital goods which are used for making consumer goods, sewing machine, capital goods and consumer goods all those clothes being made with the help of sewing machine. Here, you can see all those dresses are ready, correct, so those are consumer goods. Involves exchange, either it maybe for money or maybe for goods. So, when goods and services are exchanged with money we call it as monetary exchange. You can see shopkeeper selling cell phone, right, to Mr. A and A is paying for it, we call it as monetary exchange. Another example for barter, goods and services exchanged for goods and services. Mr. A needed wheat and was having excess of rice with another fellow. What he got, he got what he wanted, that is one kg of wheat, but was any money involved, no. So, we call barter. So the process of gifting, donating or personal consumption is not considered as business. I need to gift my niece on her birthday, what, doll. Here the shopkeeper has utilised the product that’s a doll from his shop to gift someone and that’s his niece. So here there is no monetary exchange. It cannot be considered as a business transaction.

Let’s check next, aims at profit. So, basic aim of every business is earning profit. Let’s take more example, right. The customer, ‘good evening, can you show me a beautiful Anarkali dress for wedding’. Shop owner says ‘yeah, sure ma’am, see here is a beautiful black dress it is for just for Rs. 3,999/-. Customer, ‘I really like this dress, pack it’. So what happened, how much is MRP? Cost price plus profit.

Number five, continuity, business involves production and distribution of goods and services on regular basis. Any isolated transaction that is single of buying and selling cannot be treated as business transaction. Let’s take an example, I have many gift items with myself, I think I should sell it. Since she is selling the gifted items for single time, it is not a continuous transaction, it cannot be considered as business.

Next point, risk, every business has a possibility of incurring loss during its operations, which is risk. It maybe natural risks like glaciers melting down, floods or volcano eruption, right. Or it can be different situations in business. Let’s take an example, ‘Hi, I have prepared 150 paper lanterns, right, and 80 are still left.’ ‘Oh, so you keep them and use it for next year.’ What the shop owner says, ‘no, it’s not possible. These are paper lanterns and if these lanterns are not sold then I will suffer huge loss.’ That means risk. Now there are two parties remember, buyer, seller, right. So these people out here on screen you can see, right, one man is milking an animal, cow, and other one is selling milk in bottle, who are they, the seller and the buyer exchange for money, right, kids. There are two parties, easy to understand, students.

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