A business is defined as a company or organized group acting for the benefit of others. A business can be either for-profit or non-for-profit entities that carry out to meet a social cause or further an educational charity. However, in the United States, a business exists only for profit. This means that, unlike the country’s government, a company has no power to tax it. On the other hand, a corporation is subjected to certain taxation and the same laws apply to businesses.
All business activities are essentially transactions involving two parties. The first party is the seller of the goods or services, while the second is the buyer. The terms ‘commerce’ and ‘profit’ refer to the processes involved in converting the sales of goods or services into the generation of profits.
The sale and purchase of goods and services take place at the buyer-seller table. Goods are the objects that individuals working in businesses must regularly buy to maintain their existence and acquire material items that contribute to the welfare of society. Goods include food, lodging, clothing, technology, and financial assets like bank accounts. Services cover health care, education, and transportation. The role of businesses must combine these two functions to ensure that societal need is fulfilled and the organization as a whole is economically and financially viable.
Businesses require two essential key points to function efficiently. The first key point is capital. A firm’s capital is comprised of cash and accounts receivable. Firm’s assets consist of land, building, machinery, and inventory. These factors allow businesses to operate with a finite amount of capital. In order for a business activity to have a productive outcome, it is critical for it to always have sufficient funds.
The second key point essential to the operation of any business venture is profit. Profit represents the income obtained from the total value of a firm’s goods and services sold or purchased. Profits can be reinvested in the production of new goods and services or can be saved for some period of time. In most cases, firms will use the profits they have acquired to either expand their organization or to reduce overhead.
The three core stakeholders of any enterprise system are customers, suppliers, and fellow businessmen. Clients represent the potential buyers of the products and services of a firm. Suppliers on the other hand are firms that provide raw materials, working equipment, and other important employments needed by a firm to produce its products and services. While the supply of a firm’s resources may be unlimited, the ability to produce and sell it at a profit is dependent on how well each of these three stakeholders plan and perform their own vital tasks in the firm.
The third fundamental aspect that all businesses must take into account is societal need. Societal need refers to the basic requirements of people as a basic requirement for economic survival. Business enterprises must come up with ways to make the products and services they offer competitively affordable to the general public. While some businesses may provide extra services or offer goods and services which are beyond the capacity of individuals working in their firms, others must cater to the needs of society at large. If they fail to do so, the customers they have served will suffer in its entirety.
To effectively conduct business activities, businesses must be oriented towards achieving profit maximization. They must also have a keen sense of what motivates and separates competitors from their fellow businessmen. Having a keen sense of competition helps business owners pinpoint the weaknesses of competitors and work on ways to overcome such weaknesses. They must also develop effective mechanisms that will allow them to increase profitability without necessarily changing their business models. To achieve maximum profitability, businesses must work diligently towards achieving appropriate profit maximization.