THE CONCEPT OF BUSINESS

Karimu (1992) defines Business as “the sum of all the activities involved in the creation and distribution of goods and services for private profit”.

Business is therefore any legal means of satisfying human wants with the motive of profit.
When people engage in illicit deals and make abnormal income it is not business.
When people engage in criminal and fraudulent activities to enrich themselves it is not business.

Business must be seen as rendering legal services or producing goods at a cost.

Likewise, the major essence or purpose of business is the supply of goods and services in order to satisfy the societal needs (Isimoya, 2005)

Economic Systems
An economic system describes how a given society distributes its resources to produce goods

and services.

There are basically three types of economic systems found in the world today. These are
Communism, Socialism, and Capitalism.

Communism by Karl Marx (1818-1883) was first described as a society in which the people,

without regard to class, own all the nation’s resources. In this type of economy, the people (through the government) own and operate all business and factors of production. Central government planning determines what goods and services satisfy citizens’ needs, how the goods and services are produced, and how they are distributed.

Socialism is closely related to communism. Socialism is an economic system in which the
government owns and operates basic industries such as postal service, telephone, utilities,
transportation, health care, banking, and some manufacturing, but individuals own most businesses.

Capitalism or free enterprise is an economic system in which individuals own and operate
the majority of businesses that provide goods and services. Competition, supply, and demand
determine which goods and services are produced, how they are produced, and how they are
distributed.

Aside from the generally accepted profit motive of private business, Isimoya (2005) states that there are other objectives of business and this include:
i. Innovation: introduction of new products or services
ii. Productivity: Business aims at enhancing productivity i.e. the ratio of input to output.
An increase in productivity can be measured in terms of output per labour employed, and output per capital employed, which show the extent to which the business is able to effectively utilize a set of resources to achieve the highest possible value of output.

iii. Employees’ satisfaction: Business seeks to enhance employees’ satisfaction, so as to optimize contributions to business well-being.
iv. Shareholders’ Satisfaction: increase in dividends and reduction in business risk exposures.
v. Social responsibility: Business aims at identifying with the locality in which it operates.
vi. Stakeholders’ Satisfaction: Apart from employees and shareholders who are directly
involved in the running of business, there are other stakeholders every business outfit strives to satisfy, such as:

- Consumers: These are people who buy the goods and services produced.
- Suppliers: They supply the inputs to business
- Distributors: They distribute the goods produced by business
- Government: The government legally regulates the business operations so that individual’s rights would not be infringed upon.
- Pressure Groups/General Public: They are the recipients of all that the business produces and assess the positive and possible negative impacts on the society.

Businesses can be classified by industry characteristics thus:
i) Extractive Industry: This is a group of business firms whose primary activities involve mining, fishing, forestry, farming, quarrying, drilling, etc.
ii) Manufacturing Industry: This is composed of businesses whose primarypurpose is to convert items (goods) in the crude state to a more useful state. The manufacturing group gets the inputs (raw materials) from the extractive industry, and then processes either by reshaping or refining them to enhance their utility.
iii) Construction Industry: This comprises businesses involved in building infrastructure like roads, bridges, houses, office blocks, seaports and airports, stadia, to mention but a few.
iv) Commercial Industry: The activities engaged in these organizations serve as facilitators of business. Examples are the banks, insurance companies, wholesale and retail trade organizations, real estate companies, transportation firms, etc.
v) Service Industry:  Examples are entertainment and recreation, hotels and lodging, laundry and general cleaning, engineering and other professional services, as well as automobile repair.

Posted by: Monday Desmond