Chapter 1- Nature, Scope and Importance of Business

by • 09/06/2011 • B.COM PART 1 Introduction to BusinessComments (18)3059

Q1-Define the following

Business:It is the wide term and it included all the activities carried out for mutual gain or profit and where exchange of something valuable(goods or services) takes place.

Commerce: It is a branch of business. It may be defined as:

“It is the aggregate of all the activities which take place between the producer and the consumer. All those occupation which affect the exchange of goods and services between producer and consumer stand within the scope of commerce”.

Trade:Trade stands within the scope of commerce. It may be defined as:

“It is concerned with buying and selling of goods”

Trade includes foreign and home trade, wholesaling, retailing and the alike.

Q2- Discuss in details the qualities of a good businessman?

Qualities Of Good Businessman

A businessman must possess certain qualities if he has to stay in the market, no matter, how much capital or funds he owns. According to economists a business is survived if the input of four factors of production, viz, land, labor, capital, and entrepreneur are in the best possible proportion. However, in discussing the qualities of a good businessman we will concentrate only on entrepreneur leaving other factors. The reason Is that the successful use of land, labor, an capital wholly depends on the entrepreneur who is the organizer of the business.

The businessman must possess the following qualities which are minimum requirements for the success of his business.


Risk Assuming:The business is full of risk of various types and they always stay as long as the business exists. Risk is the chance of loss, damage, or injury. Decline in or loss of sales or profits, fire ,damage to goodwill of the firm, death of a key employee , competition, inventions, various government policies and sudden chances in them all pose a threat to the success of business. The businessman had to meet all these challenges.

Goal-Oriented: Before starting a business he should set goals or objectives of his firm, and continue establishing new and appraising the old ones. Goals may be profit, image and goodwill, growth, service, leading the customer etc. The business cannot survive without goals.

Well Informed: It is the millennium and century of information technology. The businessman should be well informed of the business conditions, competition, changing environment, national and international affairs. To be well aware he should be able to make use of latest information technology tools.

Performance Oriented: The businessman is the manager of his business and hence he must plan, organize, and control his business effectively. He has to set objectives, make policies, set procedures, establish rules, prepare programs, and make budgets. He has to hire team of workers, divide work among them, and departments and measure their performance.

Unbeliever Of Mystical Forces: The businessman should have scientific approach to his business and not depend on and leave things to chances, fate, luck, fluke, or drift. He should be able to determine his own course, plan it, organize things, and control the results. God helps those who help themselves.

Rational, Not Emotional: Emotional persons cannot succeed in their lives. The businessman should not only be courageous, ambitious, dynamic, sharp witted but also rational, wise, and base his decisions on reasoning.

Fair Dealer: Fair dealing Is the spirit and secret of business. The businessman should be fair to his employees. Selections, wages, transfers, promotions all should be fair. He should be fair to his customer. He should sell right product at the right rate.

Dynamic And Steadfast: The businessman can only be successful when he is dynamic and steadfast. Being energetic and forceful, devoted, he will help the business come over all difficulties, hurdles, and bottlenecks on the way to success.

Experienced:He must be experienced and should know the finesse and art of running the business. The experience will help him understand the product, market, customer, management, competition, financial matters, pricing, storing, storage merchandizing, and government policies.

Q3-What are the objectives on business?


What do you know about the scope of business?


Describe in details business functions?


The scope and range of commerce can be determined from the fact that it includes production, banking, finance, transporting, warehousing, insurance, and information. These factors or elements of commerce are discusses in the lines to follow.

Production: Business function starts with the planning for production which is conversion of material from one form to another. It requires the purchase of raw material, machinery, and equipment, and hiring different classes of laborers. Better production depends on proper and timely planning, effective quality control, minimization of cost, continuous research , right and quality material, modern plant, machinery and equipment, knowledge of customer taste and market trends, and best possible combination of ingredients.

Banking/Finance: Banking and finance are part and parcel of commerce. By performing this service, commerce is able to finance the needs of the business firms. Most of the loans are provided by the banking system. Specialized baking exists in the areas of industry, saving, agriculture, commerce, exchange etc. Commercial banks help businessmen in advancing loans, issuing letter of credit, discounting bills of exchange, transferring of money, and other agency. They offer facilities to open current and saving accounts.

Transportation: Transportation is so an important activity that no business can be performed without it. Transportation starts immediately after production. It refers to moving goods from the point of production to the point of consumption.

There are many means of transportation. Most commonly used means is marine transport which is the lowest in cost and used for shipping heavily goods. The other significant means is air transport, which is quick but costly.

Storing/Warehousing: Without storing commercial functions can not be imagined. Goods must be storied before they are sold. It is needed at once after production. It refers to holding the goods when they are produced until they are consumed. The place where goods are held are known as a store or warehouse. Business houses use the facility of different type of stores and warehouses, some of which are bonded warehouse, public warehouse, private warehouse, and cold storage.

Information: commerce extends to getting information from various sources and media. It requires information at every stage. In production, in buoying, in selling, and in research one needs exact and latest information. It the key to success and no business can thrive without having right and up to date information.

Information can be classified as follows

1-Primary Information: It is first-hand information received through research, story, analysis, observation, and experience.

2-Secondary Information: It is obtained through the other sources that include libraries, books, newspapers and date collected by others.

Insurance(Risk): Risk is inherent to business. Business risks include theft, fire, sinking of the ship, change in prices, government policies, and restrictions, strikes, lockouts, change in fashion, drop in sales

Risk may be classified as:

1-Insurable Risk

2-Uninsurable Risk

1-Insurable Risk:

Those risks which can be covered under an insurance policy are referred to insurable risks and entail theft, fire, and sea hazards.

2-Uninsurable Risk:

Risks that cannot have insurance convert are known as uninsurable risks. They include unfavorable change in prince, fashions, consumer taste, and competition.

Grading and Standardization: Standardization refers to bring the goods and services to a certain measurement, established model, or accepted norms or values. It creates uniformity and facilities buying, selling, storing, and transporting. Standards are used for industrial and man made goods, and grades are used for classifying agricultural produces.

Trade(Buying And Selling) : Trade has a pivotal role in business. Trade refers to buying and selling. It also covers imports, exports, retailing, wholesaling, and brokerage. Before buying a businessman has to take into account quality, variety, price, design, terms of sale, and services offered by seller. In selling he has to locate customer, advertise his products, determine channel of distribution, prepare promotional materials and preferences.

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