Business Organization: Meaning, Nature, Objectives and Business System Questions

Question 1

Define business.

Accepted Answer

Business refers to regular economic activities involved in the production and distribution of goods and services with the aim of earning profit and satisfying human needs.

Question 2

What is business organization?

Accepted Answer

Business organization means the systematic arrangement and management of resources to carry on business activities continuously to achieve objectives.

Question 3

State any one characteristic of business.

Accepted Answer

Risk and uncertainty is a characteristic of business because business outcomes depend on uncertain factors like demand, prices and competition.

Question 4

State any one economic objective of business.

Accepted Answer

Earning profit is an economic objective of business; it is necessary for survival and growth.

Question 5

State any one social objective of business.

Accepted Answer

Supplying quality goods and services at reasonable prices is a social objective of business.

Question 6

What is business risk?

Accepted Answer

Business risk is the possibility of loss or inadequate profits due to uncertainty in business environment.

Question 7

Explain the characteristics/nature of business.

Accepted Answer

Business is an **economic activity** concerned with production and distribution of goods and services. It involves **exchange** and is generally carried on with **profit motive** as a reward for risk and initiative. Business is carried out with **regularity and continuity** and operates under **risk and uncertainty** due to changing demand, competition, prices and government policies. Modern business also focuses on customer satisfaction and social responsibility.

Question 8

Explain the objectives of business.

Accepted Answer

Business objectives include **economic objectives** such as earning profit, survival, growth/expansion and improving efficiency through innovation. It also has **social objectives** like supplying quality goods at fair prices, generating employment and fair wages, employee welfare and safe working conditions, customer protection and honest dealings, and protection of environment through sustainable practices. Both sets of objectives are important for long-term success.

Question 9

Explain business system and its elements.

Accepted Answer

A business system is a set of interrelated activities that converts inputs into outputs to achieve objectives. Its main elements are **inputs** (materials, labour, capital, technology, information), **process** (operations, management, marketing, finance), **outputs** (goods/services), **feedback** (customer response and performance information for improvement) and **environment** (economic, political, social, technological and legal factors affecting the system).

Question 10

Differentiate between industry and commerce.

Accepted Answer

**Industry** is concerned with production, processing and extraction of goods and creates **form utility** (e.g., manufacturing, mining). **Commerce** is concerned with distribution and exchange of goods and services and creates **time and place utility**. Commerce includes **trade** (buying and selling) and **aids to trade** like transport, banking, insurance, warehousing and advertising.

Question 11

Explain the causes of business risk.

Accepted Answer

Business risk arises due to uncertainty. Major causes include **natural causes** like floods and fire; **human causes** like strikes, accidents, fraud and riots; **economic causes** such as inflation, recession and price changes; **competition** and substitute products; **technological changes** leading to obsolescence; and **government policy changes** in taxation, regulation and trade. These factors may reduce profits or cause losses.

Question 12

Differentiate between business and profession.

Accepted Answer

**Business** involves production/exchange of goods and services mainly to earn profit; it does not necessarily require formal qualifications and involves higher risk and uncertainty. **Profession** requires specialised knowledge and formal qualification (like CA, doctor, lawyer) and follows a professional code of conduct with service motive. In profession, income is in the form of fees and ethical standards are strictly regulated by professional bodies.

Question 13

Define business. Explain the nature/characteristics of business in detail.

Accepted Answer

Business refers to regular economic activities connected with production and distribution of goods and services with the aim of earning profit and satisfying human needs. It includes manufacturing, trading and service activities.

**Nature/characteristics of business:**
1. **Economic activity:** Business is an economic activity because it creates utility through production and distribution.
2. **Exchange of goods and services:** Buying and selling is the basic feature of business.
3. **Profit motive:** Profit is the reward for taking risk and for entrepreneurship; it supports survival and growth.
4. **Risk and uncertainty:** Business operates under uncertainty due to changing demand, competition, prices, technology and government policies.
5. **Regularity and continuity:** Business is carried on regularly; occasional transactions do not constitute business.
6. **Customer orientation:** Modern business focuses on customer satisfaction, quality and after-sales service to retain customers.
7. **Organisation of resources:** Business requires proper organisation of men, money, materials and machines for efficient operations.
8. **Social responsibility:** Business is part of society; it must consider employee welfare, consumer protection and environmental sustainability.

Thus, business is a continuous, profit-oriented economic activity carried on under risk with a growing focus on customer satisfaction and social responsibility.

Question 14

Explain objectives of business. Classify them into economic and social objectives with suitable points.

Accepted Answer

Business objectives are the results which a business aims to achieve through its activities. These objectives guide decision-making and performance.

**(A) Economic objectives:**
1. **Earning profit:** Profit is necessary for survival, risk-bearing and expansion.
2. **Survival:** Maintaining continuity in competitive and changing conditions.
3. **Growth and expansion:** Increasing sales, market share, capacity, diversification and entering new markets.
4. **Efficiency and innovation:** Improving productivity, reducing cost, improving quality and adopting new technology for better performance.

**(B) Social objectives:**
1. **Supply of quality goods/services at fair prices:** Ensuring consumer satisfaction and protection.
2. **Employment generation and fair wages:** Providing job opportunities and fair compensation.
3. **Employee welfare:** Safe working conditions, training, welfare and healthy industrial relations.
4. **Environmental protection:** Pollution control and sustainable use of resources.
5. **Community development (CSR):** Contribution to education, health, sanitation and social welfare.

A modern business cannot focus only on profit; balancing economic and social objectives leads to goodwill, stability and long-term success.

Question 15

Explain industry and commerce. Classify industry and explain trade and aids to trade under commerce.

Accepted Answer

**Industry** refers to activities related to production and processing of goods and extraction of natural resources. It creates **form utility** by converting raw materials into finished goods.

**Classification of industry:**
1. **Primary industry:** concerned with extraction and use of natural resources, such as agriculture, mining, fishing and forestry.
2. **Secondary industry:** concerned with converting raw materials into goods.
   - **Manufacturing industry** (e.g., textiles, steel, food processing)
   - **Construction industry** (roads, bridges, buildings)
3. **Tertiary (service) industry:** provides services that support production and distribution, such as banking, transport, insurance, communication, education and healthcare.

**Commerce** refers to activities that facilitate the distribution and exchange of goods and services. It creates **time and place utility** by making goods available to consumers when and where they are needed.

**Commerce includes:**
1. **Trade:** actual buying and selling of goods.
   - **Internal trade** (within a country): wholesale and retail
   - **External trade** (between countries): import, export, entrepot
2. **Aids to trade:** services that support trade such as transport, warehousing, banking, insurance, advertising and communication.

Thus, industry produces goods, while commerce ensures their smooth movement and exchange in the market.

Business Organization: Meaning, Nature, Objectives and Business System

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