Objectives and Classification of Business
Business plays a major role in our society. It is a creative and competitive activity that continuously contributes to the shaping of our society. By satisfying the needs and wants people cannot satisfy themselves, businesses improve the quality of life for people and create a higher standard of living. An institution or organization or economic system which or where goods and services are exchanged for money called a business.
The business objective is a goal, i.e. where the business wants to reach in the future. For example, a business wants to set up its franchise in another state in the next 3 years or it wants to increase its workforce in the coming months.
Business needs objectives, without objectives the business is like a car without headlights. Objectives of business are the purpose for which the business is established and performed. We can call objectives the cornerstone of every business.
Objectives are needed in every area where performance and results directly affect the survival and prosperity of a business. The right choice of objectives is critical for the success of the business. The objectives of a business can be classified into two main categories, which are
1. Economic objectives
2. Social objectives
Economic Objectives of Business
We learned in the previous topic that business is an economic activity. Hence, its purpose is to show economic results. Let’s understand the economic objectives of the business. They are as follows:
1] Profit Earning
Business is a set of activities undertaken with the prospect of sale for the purpose of earning a profit. Profit is the extra income over expenses. The main objective of any business is to earn a profit. Just as a plant cannot survive without water, similarly a business cannot sustain itself without profit.
2] Market Share / Creation of Customers
In the long run, the survival of the business completely depends upon the market share captured by the business. The creation of goods and satisfaction of the needs of the customer is a crucial purpose of the business. So to generate profit and demand, the business must supply premium quality and give value for money products.
3] Innovation & Utilization of Resources
Innovation normally means to change processes or creating more effective processes, products and ideas. Nowadays, business is ever-changing and dynamic. To keep up with the growing competition a businessman has to introduce efficient design, latest trends, upgraded machinery, new techniques, etc.
4] Increasing Productivity
Productivity is a scale to measure the efficiency of the business activity. It is usually the last objective but just as important because productivity is measured by the output given by the activities. It is the end result of any business activity. Each business must go for more prominent productivity – to guarantee its survival and development. This goal can be accomplished by decreasing wastages and making proficient utilization of machines and supplies, HR, cash and so forth.
Social Objectives of Business
According to Dayton Hudson “The business of business is serving society, not just making money.” Business is one of the pillars on which society stands. Therefore, it is a part of society. In fact, it cannot thrive without the resources from society. The business earns its income from the sale of products and services to society. It is mandatory on the part of the business to take care of the social factors. The necessary social objectives of a business are as follows:
1] Providing Goods & Services at Reasonable Prices
Business exists in the first place to satisfy the needs of society. It’s the first and major social objective of the business. Products and services ought to be of better quality and these ought to be provided at sensible costs. It is additionally the social commitment of business to keep away from misbehaviors like boarding, Black promoting, and manipulative advertising.
2] Employment Generation
One of the major problems of today’s generation facing is unemployment. The business generates employment. Therefore, it is the social objective of a business to give chances to beneficial employment to individuals of society. In a nation like India, unemployment has turned into a critical issue.
3] Fair Remuneration to Employees
The business does not run on its own but the people are responsible for the success and failure of the business. The people on the inside of the business are more valuable i.e. employees. They are an asset of the business and make a ground-breaking contribution to the business. They must be given reasonable pay for their work.
4] Community Service
Business must give back something to society. As a result, the Library, dispensary, educational foundations and so on which a business can make and help in the advancement of society are created.
There are three major types of businesses(Classification of Business):
1. Service Business
A service type of business provides intangible products (products with no physical form). Service type firms offer professional skills, expertise, advice, and other similar products.
Examples of service businesses are salons, repair shops, schools, banks, accounting firms, and law firms.
2. Merchandising Business
This type of business buys products at wholesale price and sells the same at retail price. They are known as “buy and sell” businesses. They make a profit by selling the products at prices higher than their purchase costs.
A merchandising business sells a product without changing its form. Examples are grocery stores, convenience stores, distributors, and other resellers.
3. Manufacturing Business
Unlike a merchandising business, a manufacturing business buys products with the intention of using them as materials in making a new product. Thus, there is a transformation of the products purchased.
A manufacturing business combines raw materials, labor, and factory overhead in its production process. The manufactured goods will then be sold to customers.
Written by Palak Maheshwari
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