Business means various activities carried out by an individual or company, such as commercial and non-business activities. The word “Business” is derived ultimately from the Latin word consilium, “a gathering together”, from the word consoli, “a meeting”. In modern times the term business is used to refer to the practice of making a profit through any of the several means either by commerce or by acquirement, with or without the help of others. In business the main objective is to earn a profit by obtaining new customers and selling goods and services to them. For this objective, a firm needs to have a working capital that can be easily converted into cash.
Every business follows certain general principles that are shared by all businesses. The most important of these principles is that all businesses aim at creating and generating profits by buying goods and providing good service to their customers at a reasonable price. All businesses also seek to make their costs less and maximize their profits by using their knowledge, skill, resources and innovation to provide goods and services which are not available for free in the market. A main article of business is the purchasing and selling of goods and services, and in this main article, two types of businesses exist namely retail businesses and wholesale businesses.
The profit that a firm makes is referred to as its profit margin. The profit margins of both wholesale and retail businesses are derived primarily from the price discounts and other factors such as taxes, overhead, and marketing expenses. The main article of business is therefore determined by the profitability of a business enterprise. There are two factors that affect the profitability of a business enterprise namely demand and supply. Since demand is always increasing while supplies are decreasing, it follows that the profits that a firm can fetch are also limited.
Another factor that affects profitability is access to raw materials and labor. Most businesses have to purchase raw materials at a fixed rate. If the rate of raw materials is too low, the firms will not be able to maintain the required rate of profit because they will not be able to maintain prices of their goods and services that are sufficiently low enough to attract buyers. As for labor, if the workers are not paid and if there is no contract that ensures a regular monthly income, businesses will not be able to sustain the overhead cost of employing these people. In short, both supply and demand have a great bearing on profits and these are very important factors in determining the profitability of a business. It is essential that all businesses pay attention to both supply and demand because this is how all business is established and sustained.
Every business is motivated by profit, and the best possible use of every business expenditure is made. Therefore, a business must always consider whether it has made the most of its available resources to earn the maximum amount of profit. Social objectives are a part of business objectives, which are meant to improve the quality of life for all. The social objectives of every business should be just as well considered as the profit motive, although profit is considered by most as the ultimate motivator.
The efficiency of a business can be improved through the application of strategies. There is no question that these strategies have an effect on the earning profit of the business but the question is whether these strategies are being put to the best possible use. Most business owners would agree that the best possible use of their strategies involves applying the objectives of the business to improve the quality of life.