Characteristics of Business
- Sale, Transfer or Exchange: The foremost characteristic of business is the exchange or transfer of goods and services for price or value. Production or Purchase of goods and services for personal use or for presenting as gifts to others does not constitute business as no sale or transfer for value is involved. For example, a farmer who keeps cows to obtain milk for his family is not running a business. But if he keeps a number of cows to sell the milk obtained from them it becomes business provided the other conditions are also satisfied.
- Dealing in Goods and Services: Dealing in goods and services is another distinguishing feature of business. Every business enterprise comes into existence to provide goods or services to society. The goods or services may be procured by an enterprise through production and/or purchase. The goods such as bread, rice, cloth, shoes, etc. or producers goods like tools, components, machinery, raw materials, etc. The consumer goods are meant for direct consumption in the original or processed form, Producer’s goods or capital goods are used for producing other goods. Services are intangible and invisible goods, e.g., electricity, gas, insurance, transportation, banking, etc.
- Continuity in Dealings: Dealings in goods and services constitute business only when they are carried on regularly. A single transaction like sale of old newspapers by a housewife or the sale of one’s old scooter is not business through Recurring sale rather than an isolated deal is the hallmark of business.
- Profit Motive: Every business is carried on with one purpose of earning money and acquiring wealth. It is the hope of making money that induces people to go into business. No business can survive for long without earning profits. Even government enterprises are expected to earn profit or surplus. However, profits must be earned through legal and fair means or by serving the society and not by exploiting it. It is because of this reason that making of money through gambling, cheating, smuggling and black-marketing cannot be called business.
- Risk or Uncertainty: Risk implies the uncertainty of reward or the possibility of loss. The element of risk is present in almost all economic activities but it is more significant in business. Though business aims at profits. Losses are quite possible and common. Before an activity can be called business there must, therefore, exist not only the goal of profit but the risk of loss. Risk or uncertainty arises because the future is unknown and businessmen have practically no control over several factors affecting profits. These factors include:
a) Changes in consumer’s tastes, fashions and demand;
b) Changes in technology resulting into obsolescence of plant, machinery and techniques of production ;
c) Increase in the degree of competition in the market ;
d) Shortage of raw materials, power, fuel, etc.
e) Labour trouble in the form of strikies,lockouts, gheraoes, etc.
f) Faulty managerial decisions concerning the use of capital and other resources ; and
g) Fire, theft, and other natural calamities which can be insured against.
