B U S I N E S S

The business is an organization that combines the inputs of material, capital, labor and management skills to produce useful outputs of goods and service so as to earn the profit. The essence of this definition concerns the relationship between inputs and outputs.

The transformation of inputs into outputs involves with a production process, which can be simple as the tool and technique required to cut hair or as complicate as the vast amount of processing equipment required to refine crude oil into unleaded gasoline.

I-     Key Activities of a Business:

All businesses perform eight basic activities in transforming inputs into marketable outputs;                               

     1- Developing New Idea:

All businesses start with an idea. The idea may concern an improved production, technology or a new product or service to meet the alternation of the consumer assets. Most of successful companies start with the great ideas, they must confirm those ideas year after year.

     2- Raising Start-Up and Operating Capital:

In order to set up a factory or company, we need the start-up capital to purchase the production equipment and inventory. This start-up capital can be obtained from a variety of sources; the owner’s personal money, other investors, stock, banks and international financial institutes such as World Bank, Asian Development Bank… etc.

     3- Obtaining Raw Material, Goods and Services:

     Businesses obtain raw material inputs to produce their products for the market needs. For example; U.S steel International Inc. obtains iron ore from Northern California to produce steel ingots, rolled sheet steel, and then sells to the wholesalers, then the wholesaler sells it to the consumers. In short, the firm obtains a variety of services. Obtaining the right goods and service at the right prices is essential for effective cost control.

     4- Hiring, Training and Managing Employees:

     Many businesses employ only a few people, but others employ thousands, every company needs a goods system for finding the talent people and persuading them to work for the company.

     Effective trading programs develop employee confidence and prepare employees for higher paying positions. The personnel department is usually in charge of both hiring and training the new employees.

     Besides hiring and training new employees, the management also consists of structuring, organizing work flows, directing the employees and works, evaluating their performance, and in general, making a multitude of decisions.

     5- Maintaining Accounting Records:

Firms must also maintain accounting records. The most important number in these records is the one at the bottom,“ the bottom line” net profit or loss. To compute this number, the firms have to keep track of the number of products sold and the amount of money spent on products, salaries, rent, insurance, interest on loan, building repairs and others… etc. All business firms produce accounting information for three basic purposes; internal decision making, financial reporting to the lenders and investors, and tax reporting to the government.

     6- Analyzing Market Opportunities:

     All businesses need to know about their markets, about changing consumer tastes and preferences, and about development in their industries. Marketing is the consumer-oriented activity. The objectives of firm are to develop, produce, and market goods and services that satisfy consumer’s needs. Business Managers can learn more about their markets by conducting marketing research studies, by analyzing government data and industry reports, by talking with their salespeople, and by reading trade publication.

     7- Producing Goods and Services:

     The firms do the business by manufacturing products, buying them for resale, or providing services to other firms or the public. The manufacturer has all problems of doing business-raising money, finding good employees, keeping track of sales and costs.

     8- Marketing Goods and Services:

     In order to encourage the people to buy their products, most of the companies spend 30% - 40% of their budgets on selling, marketing. Marketing Executives make decision in four basic areas: Product Development and Management, Pricing, Advertising and Promotion, and Distribution.

II-       Objectives of a Business:

A business represents different things to different people. Each person or group associated with the business expects certain things from it; that is to say each has certain objectives in relation to the business. The owners have their objectives; the employees have their objectives, and society has still another objective.

III- The Private Enterprise Economy:

Commercial activities in the United States are organized as private enterprise or free market system. Private organization owns the means of production and chooses least-cost methods of production as to earn profit.

Price and output decisions are not made by government decree but by actions of innumerable business firm operating under a variety of market conditions.

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