PART I
Foundations of Business
CHAPTER 1
NATURE AND PURPOSE OF BUSINESS
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• explain the concept and characteristics of business;
• compare the distinctive features of business, profession and
employment;
• classify business activities and clarify the meaning of industry and
commerce;
• state various types of industry;
• explain the activities relating to commerce;
• analyse the objectives of business;
• describe the nature of business risks and their causes; and
• discuss the basic factors to be considered while starting a business.
3
NATURE AND PURPOSE OF BUSINESS
influence on our daily lives. It,
therefore, becomes important that we
understand the concept, nature and
purpose of business.
1.2 CONCEPT OF BUSINESS
The term business is derived from the
word ‘busy’. Thus, business means
being busy. However, in a specific
sense, business refers to any
occupation in which people regularly
engage in an activity with a view to
earning profit. The activity may consist
of production or purchase of goods for
sale, or exchange of goods or supply of
services to satisfy the needs of other
people.
In every society people undertake
various activities to satisfy their needs.
These activities may be broadly
classified into two groups — economic
and non-economic. Economic activities
are those by which we can earn our
livelihood whereas non-economic
1.1 INTRODUCTION
The conversation among the four
classmates is obviously focused on the
meaning, nature and purpose of
business. All human beings, wherever
they may be, require different types of
goods and services to satisfy their
needs. The necessity of supplying goods
and services has led to certain activities
being undertaken by people to produce
and sell what is needed by others.
Business is a major economic activity
in all modern societies concerned as it
is with the production and sale of
goods and services required by people.
The purpose behind most business
activities is to earn money by meeting
people’s dema