The following are the ten important characteristics of a business:
1. Economic activity:
Business is an economic activity of production and distribution of goods and services. It provides
employment opportunities in different sectors like banking, insurance, transport, industries, trade etc. it
is an economic activity corned with creation of utilities for the satisfaction of human wants.
It provides a source of income to the society. Business results into generation of employment
opportunities thereby leading to growth of the economy. It brings about industrial and economic
development of the country.
2. Buying and Selling:
The basic activity of any business is trading. The business involves buying of raw material, plants and
machinery, stationary, property etc. On the other hand, it sells the finished products to the consumers,
wholesaler, retailer etc. Business makes available various goods and services to the different sections of
the society.
3. Continuous process:
Business is not a single time activity. It is a continuous process of production and distribution of goods
and services. A single transaction of trade cannot be termed as a business. A business should be
conducted regularly in order to grow and gain regular returns.
Business should continuously involve in research and developmental activities to gain competitive
advantage. A continuous improvement strategy helps to increase profitability of the business firm.
4. Profit Motive:
Profit is an indicator of success and failure of business. It is the difference between income and expenses
of the business. The primary goal of a business is usually to obtain the highest possible level of profit
through the production and sale of goods and services. It is a return on investment. Profit acts as a
driving force behind all business activities.
Profit is required for survival, growth and expansion of the business. It is clear that every business
operates to earn profit. Business has many goals but profit making is the primary goal of every business.
It is required to create economic growth.
5. Risk and Uncertainties:
Risk is defined as the effect of uncertainty arising on the objectives of the business. Risk is associated
with every business. Business is exposed to two types of risk, Insurable and Non-insurable. Insurable risk
is predictable.
Predictable factors are controllable to some extent, such as:
a) Taxes
b) Change in the volume of expected sales
c) Cost of supplies and equipment
d) Overhead costs
e) Salaries
f) Cost of goods and services offered
Unpredictable factors include:
a) Changes in trends and tastes of customers.
b) Impact of the local economy on customer base.
c) Any unexpected action taken by your competitors.
The calculation and management of the risk is vital to ensure the success of a business firm. Insurance
and Risk management helps in minimizing the risk associated with the business.
6. Creative and Dynamic:
Modern business is creative and dynamic in nature. Business firm has to come out with creative ideas,
approaches and concepts for production and distribution of goods and services. It means to bring things
in fresh, new and inventive way.
One has to be innovative because the business operates under constantly changing economic, social and
technological environment. Business should also come out with new products to satisfy the growing
needs of the consumers.
7. Customer satisfaction:
The phase of business has changed from traditional concept to modern concept. Now a day, business
adopts a consumer-oriented approach. Customer satisfaction is the ultimate aim of all economic
activities.
Modern business believes in satisfying the customers by providing quality product at a reasonable price.
It emphasize not only on profit but also on customer satisfaction. Consumers are satisfied only when
they get real value for their purchase.
The purpose of the business is to create and retain the customers. The ability to identify and satisfy the
customers is the prime ingredient for the business success.
8. Social Activity:
Business is a socio-economic activity. Both business and society are interdependent. Modern business
runs in the area of social responsibility.
Business has some responsibility towards the society and in turn it needs the support of various social
groups like investors, employees, customers, creditors etc. by making goods available to various sections
of the society, business performs an important social function and meets social needs. Business needs
support of different section of the society for its proper functioning.
9. Government control:
Business organisations are subject to government control. They have to follow certain rules and
regulations enacted by the government. Government ensures that the business is conducted for social
good by keeping effective supervision and control by enacting and amending laws and rules from time to
time.
