Business forms a core part of human existence. It consists of producing, buying, and selling goods or providing services to make profits. Business has its defining characteristics too. Economic activity, profit motive, risk and uncertainty, customer satisfaction, regularity in transactions, and legal compliance are features of business. Business operates in different forms such as sole proprietorships, partnerships, and corporations. Understanding such characteristics can help analyze the way businesses function in different industries.
What is Business?
Business is the activity of producing, purchasing or selling goods and services to make a profit. The economy will be made prosperous through the provision of employment opportunities, facilitation of trade, and provision of essential products. Businesses operate in various sectors, including agriculture, manufacturing, retail, and approved service.
| Type of Business | Example |
| Manufacturing Business | Toyota produces cars and sells them worldwide. |
| Retail Business | Walmart sells groceries, clothing, and electronics. |
| Service Business | A hair salon provides haircut and styling services. |
| E-commerce Business | Amazon sells products online across various categories. |
| Agriculture Business | A farmer grows wheat and sells it in the market. |
Features of Business
Each business is characterized by unique features representing its true form and operation. Business features show how it plays a role in the economy. For example, here are some eight very important features of business.
Economic Activity
Business is an economic activity because it has a monetary value against goods or services. It is the approach through which a person could earn a livelihood or generate income through monetary gains as involved in every business transaction.
Thus, a farmer grows wheat and sells it in the ‘mandi.’ Money is involved here, as production and trade will contribute significantly to overall economic growth.
Profit Motive
The profit motive is mainly a profit accumulation for any business. The business invests cash, labor, and other resources to generate more than it spends. Profit, in this case, means the growth, expansion, or survival of a business against cut-throat competition.
Risk and Uncertainty
Businesses have to face risks due to changes in market conditions, competition, and economic conditions. Risks occur in case of sudden loss, price change, or due to legal issues. The companies manage risks through planning and careful decision-making. For instance, according to them, toy manufacturers will lose money if the customers do not prefer toys but instead prefer something new in trend. So, companies should always change and adapt to survive in changing market conditions.
Customer Satisfaction
Customer satisfaction is the ultimate success of a business. To satisfy customers’ needs, companies need to provide high-quality products and services that meet the expectations of their customers. Thus, more satisfied customers would return for a future purchase, thus ensuring longevity. Like- An electronics retailer would have repeat customers at its outlet because of its effective service post-sales.
Continuity of Transactions
Transactions must be integrated into the organization’s ongoing activities to maintain its status as a business. Indeed, no single sale makes any activity a business enterprise. All businesses have repeating events every day, on a weekly or monthly basis, to keep them in continuous operation. A grocery shop, for instance, has customers every day and assures a constant flow of revenue as a result, builds businesses.
Legal Compliance
Every business organization must comply with laws and regulations laid down by the government. Businesses require licenses, tax registrations, and permits to conduct business legally. The smooth functioning of an organization is also guaranteed with this form of compliance. If a restaurant wants to serve food legally, it must follow certain health and safety regulations, and any violation puts it at risk of fines or closure.
Requirement of Capital
Money is required to start a business and run it. Capital is needed to buy raw materials, pay employees, and market products. It is through loans, investments, or personal savings that businesses raise funds. Before commencing operations, a small bakery owner will need approximately $10,000 for ovens, ingredients, and furniture.
Adaptability to Changes
Business organizations must adapt to market trends and conditions, technological changes, and customer likes and dislikes shifts. Failing to innovate is usually tantamount to losing a competitive edge. For instance, traditional bookshops now sell e-books to meet the changing reading habits of consumers. Businesses that adapt quickly survive in the long run.
| Feature of Business | Example |
| Economic Activity | A farmer sells wheat in the market for money. |
| Profit Motive | A bakery sells cakes at a higher price than production cost to earn profit. |
| Risk and Uncertainty | A toy company may face losses if customer preferences change. |
| Customer Satisfaction | A mobile phone company offers good after-sales service to retain customers. |
| Regularity in Transactions | A grocery store operates daily to serve customers. |
| Legal Compliance | A restaurant follows health and safety regulations to avoid fines. |
| Capital Requirement | A startup raises funds to buy equipment and hire employees. |
| Adaptability to Changes | A bookstore sells e-books to meet changing reading habits. |
Types of Business
Different businesses exist based on ownership, size, industry, etc. Knowing the type of a business can help you select the suitable structure for an enterprise.
Sole Proprietorship
A sole proprietorship is a business owned by one person and operated by that person. This is very simple to start and involves minimal legal procedures. However, the enterprise’s owner makes all the decisions and receives all profits. For example, a small bakery run by one individual is a sole proprietorship. The owner manages sales, production, and all finances independently.
Features
- Simple setup and easy management
- Complete control of decisions
- Profits entirely to the owner
Disadvantages
- Unlimited liability (all debts are the responsibility of the owner)
- Lower expansion ability
Partnership
A partnership is formed when two or more persons join a business to share profits and responsibilities. Partners contribute capital, skills, and labor in their way. For example, partnerships are more common in law firms and consultancies.
Advantages
- More capital and resources
- Shared responsibilities and expertise
Disadvantages
- Disputes between partners
- Unlimited liability in some cases
Corporation
The corporation is a large business run as a legal entity itself. The owner is a shareholder to invests the amount in the company. The corporation has legal rights and liabilities separate from those of its owners. For instance, companies like Apple or Microsoft are corporations with all their shareholders and professional management teams.
Advantages
- Limited liability for owners
- Ability to raise a large amount of capital
Disadvantages
- Complex legal requirements
- Higher taxes than other types of business
Co-operative Society
A co-operative society refers to owning and running a business by collective individuals having a common interest. The members work jointly to derive benefits from each other and then share the profits among themselves. For example, cooperative dairy farmers would converge their milk and become directing profit as a cooperative society.
Benefits
- All members get equal participation.
- Benefits for all members.
Limitations
- Limited profits compared to private businesses.
- Slow decision-making process.
Franchise Business
Franchise business refers to a company licensing a person to use its brand and products and its business model to pay fees. The franchisee does his operation according to the franchisor’s guidelines. For example, McDonald’s restaurants are run through its franchises, and every outlet is managed and owned individually under the McDonald’s brand name.
Advantages
- Established brand and customer base.
- Support from the franchisor.
Disadvantages
- High initial investment.
- Limited operational freedom.
Features of Business FAQs
What are the features of business?
The features of the business, in brief, are its economic activity, profit motives, risk and uncertainty, customer satisfaction, regularity in transactions, legal compliance, capital requirement, and capacity to adapt to changes.
What is the significance of business?
most businesses create jobs for the populace and provide goods and services for consumption while promoting overall economy-giving wealth and improving living standards through satisfying needs.
What is the feature of the business cycle?
Expansion, peak, contraction, and trough are the defining constituent features of the business cycle. They represent the natural rise and fall, which becomes clear over time with the rises and falls of economic activities due to demand and supply.
What is then a business organisation?
It is nothing else than an organization willing to do any commerce, industry, or professional activity, including sole proprietorships, partnerships, corporations, and cooperatives.
Why is customer satisfaction important in business?
Customer satisfaction can help guarantee that people keep buying again to some extent, which will also lead to overall success. Happy customers would get better popular word of mouth, which would help the business grow and remain profitable.
