Introduction to Businesses

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Concept of business

In the ancient era, people’s needs and wants were simple. Therefore, ancient people tried to produce what they needed by themselves.  When a person produces what he needs by himself or herself, we call it a direct production or self-production. Growing vegetables and fruits in the home garden for own use is one of the examples for direct production.

Barter System

When society started to develop, people’s needs and wants also started to become more complex and diverse.  Consequently, it was difficult for them to produce all the goods they needed by themselves. As a result, people tended to produce in large quantities of what they could produce better. Then they exchanged the excess/ surplus of their goods with others to obtain other goods they needed and goods that they could not produce. As a result, the “Barter System” came in to place. The barter system is the system of exchanging goods. The trade began with the barter system.

Use of money

Later, people started to use money as a medium of exchange to avoid the limitations of the Bater System. So today the goods and services are exchanged for money. Then the business activities are carried out in a more organized and systematic way as a result of using money as an exchange medium. Eventually, different types of businesses came into place. Today’s businesses tend to exist as virtual businesses as a result of information and communication development. Consequently, people tend to do transactions using electronic cash (e-cash) instead of coins and notes.

What is a business?

Businesses are created due to the unlimited and complex requirements of people. Therefore, every business exists to fulfill human needs and wants. Businessmen manufacture and provide different goods and services to fulfill human needs and wants. Hence, businesses play a significant role in contributing to the economic development of a country. The business has become a social need now. Therefore, a business is an economic activity which manufactures or provides different goods and services in order to fulfill human needs.

Objectives of a business

Businesses fulfill human needs and wants while achieving their business objectives. The following are some of the business objectives.

  1. Earning profits
  2. Increasing customer satisfaction
  3. Increasing the quality of goods and services
  4. Generating employment opportunities
  5. Employee welfare

Businessmen invest their money in businesses with the expectation of obtaining economic returns. Most businesses are profit-oriented. However, some businesses are welfare-oriented. Then, increasing customer satisfaction is a vital business objective. This is because customer satisfaction is directly linked to business survival. Customer satisfaction means how happy the customers are with the goods and services of the business.  Therefore, every business attempts to increase customer satisfaction.

Businesses intend to provide quality goods and services to ensure their customer satisfaction. Thus, increasing the quality of goods and services has become another business objective. Another objective of businesses is to create job opportunities for the community. Today, most businesses find that ensuring employee welfare as another key requirement for the development of business performances. Businesses provide different facilities to employees in addition to salaries and wages. Food, accommodation, transportation, insurance, and medical facilities are
some examples of such welfare facilities.

Manufacturing Businesses

There are two types of businesses according to the nature of the product produced by the business. A product is anything provided to the market in order to satisfy needs and wants. However, the two main types of products are goods and services.

  1. Commodity manufacturing businesses
  2. Service providing businesses

Commodity manufacturing businesses are the businesses that manufacture commodities to fulfill human needs and wants. Commodities refer to things that are tangible and physically existing. In simple terms commodities mean goods.

E.g. processed food manufacturing businesses, automobiles manufacturing businesses

Service providing businesses are businesses that provide services to fulfill human needs and wants. A service is any activity or a process rendered to a consumer.

E.g. Wholesale businesses, Retail businesses, Insurance companies, Banks, Schools

Categories: Accounting


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