CBSE Class 9 Elements of Business Unit I: Fundamentals of Business Activities

Unit I: Fundamentals of Business Activities:

(a) Characteristics of business Activities
(b) Business as an activity – How it differs from (i) Profession (ii) Employment
(c) Characteristics of vocational activities
(d) Factors affecting business (i) Economic (ii) Social (iii) Political

(a) Characteristics of Business Activities:

The term business has been derived from the word “busy”. In a specific sense business refers to an occupation which engages people regularly in activities related to purchase, production and/or sale of goods and services with a view to earning profit. Business activities are economic activities which may consist of production and purchase of goods or supply of services to satisfy the needs of other people. Non-economic activities like housewife cooking food for her family or a free eye camp are not business activities. The characteristics of business activities are:

1. An economic activity:

The motive and outcome of business activity are earning money or livelihood. It is not undertaken out of love, affection or sympathy. This is true irrespective of the scale of the business. It is equally applicable for a small trader or a large enterprise.

2. Production and procurement of goods and services:

Before being offered for consumption, the goods must either be manufactured or procured. Goods may consist of consumer items like rice, pulse, clothes or capital goods like machinery etc. Economic activities also include facilities offered to consumers, business firms and organisations in the form of transportation, banking, electricity etc.

3. Sale or exchange of goods and services:

Business involves transfer or exchange of goods and services, directly or indirectly, for value. If goods are produced not for value but for personal consumption it cannot be called business. This implies that there must be a seller and a buyer in a business activity.

4. Regularity of deals:

Business involves dealings in goods and services on a regular basis. One single transaction, therefore, does not constitute business. Thus, if someone sells one of his belongings as a one-off transaction, it cannot be termed as business. Regularity is a primary condition of business.

5. Profit factor:

The most important purpose of business is to earn profit as income. The survival of the business depends on it. This is why businessmen strive their best to maximise profit.

6. Uncertainty factor:

Business profit is the reward of risk taking. Mere investment of a certain sum of money does not ensure profit. There are so many unknown factors that a businessman has to deal with before the real picture unfolds. Risk factors like losses are always present. Possible business risks are increased competition, strikes or lockouts, slump in market, technological obsolescence, natural calamities etc. A businessman has to navigate through many uncertainties to achieve the best possible results.

(b) Business as an activity – How it differs from (i) Profession (ii) Employment

Difference between Business activity and Profession/Employment

Criteria	Business	Profession	Employment
1. Mode of establishment	Decision of the entrepreneur and other legal formalities	Membership of a professional body and certificate of practice	Appointment letter and service agreement
2. Nature of work	Providing goods and services to people	Rendering specific professional service	Performing duties as per service contract
3. Qualification	No minimum qualification needed	Expertise and skill imparted by professional body	Qualification as required by the employer
4. Reward or Return	Profit earned	Professional fee	Salary or Wages
5. Capital Investment	Investment required is business/industry specific	Cost of training and small fees	None
6. Risk	Profits are uncertain and risk of loss is there	Fee is a kind of regular income though certain professional risk is there	Fixed and regular pay with little or no risk
7. Transfer of Interest	Transfer possible with some legal formalities	Not possible	Not transferrable
8. Code of conduct	No code of conduct is prescribed	Professional code of conduct must be followed	Code of conduct like maintenance of business secrecy is laid down in employment contract

Goal: The aim of business activity is to earn profit whereas employment or profession fetches salaries or fees.

Control: Business is controlled by people who have invested money in it. An employee does not have the power to influence the conditions of his service, he takes orders. So, business is an independent profession while employment follows the goals set by the employer.

Income: Business owners can earn salary as well as profit from a business. An employed person does not earn anything but a salary. Professionals can earn fees but do not expect profit unless it is an extra incentive.

Risk: Profit is the reward of risk taking. So, businessmen earn profit because they stake their investment in business where profitability is uncertain. In case of employment, the risk factor is not present as there is an assurance of fixed salary.

Skill: Business owners may not necessarily be technically skilled, but only qualified and capable persons get opportunities for employment.

(c) Characteristics of Vocational Activities:

Vocational activities involve learning a skill or trade to pursue it as an independent career. It is about learning a specific kind of work like car repairing, plumbing, welding etc. Industries need skilled workers. So, vocational activity can also be industry specific. India, in future, is gearing up to become a chip manufacturing hub needing highly specialised trained workers. So, a resource base of industry ready personnel trained in specialised functions relating to chip manufacturing is required. Vocational activities not only help provide employment-ready workforce to industries, but also
creates self-employment opportunities.

Objectives of Vocational Activities:

1. Practical skill-oriented profession to meet industry needs. It is always a problem for industries to find properly trained people.
2. Competency based skill with focus on hands-on training.
3. Industry specific training to produce job ready workforce.
4. Vocational activities for creating self-employment opportunities, for example:
1. Welding
2. Plumbing
3. Auto repairing
4. Wood working
5. Apparel designing
6. Jewellery designing
7. Hardware training for computers
8. GST consultancy etc.

(d) Factors affecting business:

The modern business world is extremely complex and competitive. There has to be meticulous planning before a business venture can be undertaken. For example, to start a factory, locational advantages have to be considered, sourcing of raw materials and the logistics have to be worked out. Availability of labour and proximity to market are other important factors. These factors contribute to what is called business environment and a positive business environment attracts investment and business. We will discuss the following factors that affect business:

i) Economic: Among the most important factors considered by businessmen is the economic stability of a country or a region and the monetary policies followed. Uncertain economic policies do not attract investment. The key issues would be:

a) Inflationary trends – a rising price index reduces purchasing power of people which would reduce demand for goods. This is why businesses prefer to invest in areas where people have sufficient purchasing power.

b) Financial system – Business and industries prefer free market economy without much of government restrictions. A highly developed banking system is another requirement.

ii) Social: Businesses prefer a vibrant and progressive society to work with. Social infrastructure like schools, colleges, hospitals must be available. The literacy level is also an important factor as it helps build up human resources more easily.

iii) Political: Political stability of a country or a particular region is very important. In its natural course, a business has to take many risks like uncertainties of market and has to face logistical challenges. These problems get aggravated by political unrest. Any business would not be willing to invest in a similar situation. Peaceful environment is always given a priority.

CBSE Class 9 Elements of Business Unit I: Fundamentals of Business Activities – Completed

The following topics have been completed in Unit I: Fundamentals of Business Activities: