Concept of Business: Business activity has been conceptualized by many business persons, business managers and academicians in the field of business management, ever since business emerged as an organized activity. Therefore the concept of business has changed over the years of history of the business. Traditional and Modern Concept of Business, Business is an economic activity aimed to fulfill the need and wants of customers through the supply of goods and services for their satisfaction.
What is the different Concept of Business? Discussion with Definition and Assumptions.
The term “business” refers to all the economic activities carried out by people and organization for generating incomes. It is concerned with producing and distributing goods and services for earning a profit. It is a regular process of exchanging goods and services which involve risk and uncertainty.
Definition of Business:
The following definitions below are;
According to L.H Haney,
“Business may define as a human activity directed towards producing or acquiring wealth through buying and selling of goods.”
According to James Stephenson,
“Economic activities performed for earning profits are termed as the business.”
From the above definitions, it is clear that the business is the economic activity of individuals and organizations aimed to earn profit through the production and distribution of goods and services.
Generally, there are two concepts of the business:
- Traditional Concept: The traditional concept explains that the purpose of business is to earn profit through production and marketing of products. Products may be different types. For example physical goods, services, ideas, and information, etc. The main motto of business is to maximize profit only as per the traditional concept.
- Modern Concept: Consumer satisfaction is the central point of the modern concept of business. Profit can earn by maintaining social responsibility. It strives to include every aspect of human civilization. It views the modern business as a socio-economic institution which is always responsible towards society.
So far, the following concept of business has emerged:
- Profit Oriented or Traditional Concept, and.
- Customer Oriented or Modern Concept.
Now, explain each;
Profit Oriented or Traditional Concept of Business:
In the early age of the business, it was conceiving to be a profit-making economic activity. Any human activity directed towards the acquisition of wealth or earning profit through production or exchange of goods was treated to be a business. The profit-oriented concept also knows as the traditional concept of business.
When people start doing business by forming organizations, the business was conceiving as an organization, organize and operate to produce and provide goods and services to society under the motive of private gain or profit. The traditional concept states that the objective of the business is to earn profit through production and marketing of products.
Products can be:
- Goods: They are physical goods. They can own. They are tangible and can touch. Examples are books, computer, clothes, etc.
- Ideas: They are ideas based on knowledge. Examples are environment protection, human rights, consumer welfare, etc.
- Services: They cannot own. They are intangible and cannot touch. Examples are a class lecture, banking service, etc.
- Places: They are specific places such as the USA, London, Delhi, etc.
- Persons: They are celebrities, such as politicians, movie stars, sportspersons, etc.
- Information: They are data-related activities. Examples are research, newspapers, internet, etc.
- The sole objective of the business is to earn profit by production and distribution of goods.
- Customers will buy the products that are available in the market at the most competitive rates.
- There is hardly any need to think for customer service and satisfaction for running a business.
Customer Oriented or Modern Concept of Business:
This concepts came into existence around the 1950s and gained momentum during the 1960s and 1970s. The business organization began to think that business should earn profits through service and satisfaction of the customers. The organization was forced to regard customer as the king of the market.
The modern concept states that business earns profit through customers satisfaction. Business without consumers is not business. It develops long term relations with customers. The business should earn profit with social responsibility.
It should care about the welfare of society and consumers. it must work within the law. Business encompasses all economic activities involving production and marketing of products to earn profit and wealth through satisfaction of human needs.
The main points in the concept of business are as follows:
- Business money-Oriente organizes economic activity.
- The business produces and markets products.
- The business makes a profit to acquire wealth.
- Business satisfies customers needs by creating utilities.
- Business behaves legally with social responsibility, and.
- The business works within the law.
- Business organizations should produce and provide the goods and services that are need by customers.
- The products and services provided by the business should satisfy the needs of the customers.
- The business should earn profits through the service and satisfaction of the customer.