Study Session 3: Characteristics of Business, Social, Economic and Legal characteristics of business and Objectives of Business Expected Duration: 1week or 2 contact hours Introduction In the previous study sessions we have discussed business and its purposes and the relationships between business and administration. Now, we will be looking into business unique features, social, economic and legal characteristics of business; and the objectives of business. There should be some compensation for the efforts you make as a businessperson after meeting peoples’ needs and wants. The businessperson will always want his/her efforts to result in profit i.e. excess of return on his/her investment after taking some risks through investing his money, time and other resources into the business. Also, businesses do warrant some physical, mental and emotional efforts which do combine to determine the level of success one records in them. 3.0 Learning outcomes for study session 3 When you have studied this session you should be able to:. 3.1 List the characteristics of business (SAQ 3.1) 3.2 Explain economic characteristics of business (SAQ 3.2) 3.2. What are the aims of engaging in business? (SAQ 3.3) 3.1 Characteristics of Business Box 3.1 List five characteristics of business 1. 2. 3. 4. 5. Profit motive Social activity Risky Customer satisfaction Exchange a) Buying and selling b) Transfer of goods and services. For every business there must be exchange of goods and services for money. c) Economic activities: For every organization that is business oriented, it must produce goods and services. d) Profit motive: Every business activities it is for profit making. But profitable organizations and some corporation they are established to provide services. e) Risk and uncertainty: Every business undertaking must take risk and there is always uncertainty. Uncertainty may arise as a result of competition, wrong decisions unethical. f) Continuous process: A business undertaking must always be in business and not on and off. g) Customer satisfaction: Businesses must always be designed in a way that the needs/wants of their target customers are met through ensuring value is added to the customer in terms of the functionality of the product. h) Social activity: Business is a social activity as it involves interactions of the parties involved. It is an exchange process where two or more people are involved. i) Creative and dynamic: Ability to innovate and break into new grounds remain the strengths of businesses. In addition to this is the capability to adjust and blend to new changes in the market environment. j) Optimal use of resources: Efficient utilization of available resources. k) Government control: All business must adhere to the rules and regulations of government through the regulatory authorities. This is put in place not only to ensure sanity in the business environment but also to ensure businesses operate within stipulated laws in the interest of the society. In – Text Questions (ITQs) 3.1 1.List five characteristic of businesses. 2.Explain the customer satisfaction characteristic of a business In – Text Answers (ITAs) 3.1 1. Five characteristics of businesses include: 1. Profit motive 2. Social activity 3. Risky 4. Customer satisfaction 5. Exchange 2. Customer satisfaction characteristic of a business means businesses must always be designed in a way that the needs/wants of their target customers are met through ensuring value is added to the customer in terms of the functionality of the product. 3.2 Social, Economic and Legal characteristics of business a. Social characteristics of business No business can operate in isolation. Business does interact with its environment which is seen as the totality of the factors, events and influences that surround and affect it. Interactions with social groups and other business organisations are very important and remain the determinant of a business survival. The level of interconnectedness with the social environment through understanding the trends and incorporating them into its operations and activities and taking them into consideration will go a long way to determining the success of the business. The businessman should be aware of the social environment, the family structure, social concerns, attitudes and morals to able to make the best of choices among investment alternatives. Social characteristics of business include: Contributions from corporate social responsibility: Originally conceived as ethics and moral obligations, related to altruistic or philanthropic motives, but it has moved to be considered by many as social investments and plain good business. Non-profit management: Non-profit organizations (NPO) and management are studied in and include an array of names and institutions, such as nongovernmental organizations, charitable organizations, philanthropic foundations, cooperatives, civil society organizations, and so on. Social entrepreneurship: It consists of innovative social value creation by organizations from public, private, civic and hybrid sectors. SE is a source of social change, particularly when the organization can be replicated in other environments. Inclusive business: The main idea is to alleviate poverty by integrating lowincome citizens as consumers, employees, producers, suppliers, distributors, retailers and entrepreneurs in the value chain of large companies. b. Economic characteristics of business Business is an economic activity and its activities include production, distribution and consumption. While production entails conversion of raw material inputs into products and rendering of services to make profit, distribution entails the transfer of goods and services from the source to consumers through a supply network and consumption involves the usage of the finished goods and services to meet daily needs. Business as an economic activity engages in buying and selling and making use of human and material resources for transformation of inputs and the distribution of the finished goods. c. Legal characteristics of business The law recognizes a business as a voluntary association of individuals who make monetary contributions and capital investments to float a business for the purpose of making profit. Where there is no law there is no sin, the agreement reached by floating the business is binding on all. The law serves the role of checking the excesses of members and any deviation from agreed principles, policies, rules and regulations binding the parties. Meanwhile, in the eye of the law, a business is recognised as: 1. An artificial person i.e. a separate legal personality 2. Perpetual succession i.e. continuity 3. Transferable shares (in case of listed companies) 4. Limited liability of its shareholders The stability of the legal terrain of an environment assures businessmen of sanity and assurance that they can always get a fair deal in their investments and financial interactions. Note that all these are not applicable to small unregistered businesses In – Text Questions (ITQs) 3.2 1. Explain social characteristics of business. 2. Explain economic characteristics of business. In – Text Answers (ITAs) 3.2 1. Social characteristics of business involves Contributions from corporate social responsibility which originally conceived as ethics and moral obligations, related to altruistic or philanthropic motives; Non-profit management such as nongovernmental organizations, charitable organizations, philanthropic foundations, cooperatives, civil society organizations, and so on; Social entrepreneurship which consists of innovative social value creation by organizations from public, private, civic and hybrid sectors. SE is a source of social change, particularly when the organization can be replicated in other environments.; and Inclusive business which entails alleviating poverty by integrating low income citizens as consumers, employees, producers, suppliers, distributors, retailers and entrepreneurs in the value chain of large companies. 2. Economic activities include production, distribution and consumption. While production entails conversion of raw material inputs into products and rendering of services to make profit, distribution entails the transfer of goods and services from the source to consumers through a supply network and consumption involves the usage of the finished goods and services to meet daily needs. 3.3 Objectives of Business i. ii. iii. iv. v. vi. vii. viii. ix. Service to consumer. Consumers are well satisfy as another objective of any business concern. Profit. The aim of an organization is to make profit Employee’s welfare. Business must maximally want to take care of its workers Survival. Every business must have as a goal to continue to survive or exist. Growth. A business must not only survive, but it must have as goal to be the biggest. Market share. Every business concern must be able to carry out its market share to control, aid sale its product to. Productivity. It must continue to produce. Innovation. Business must try to see that it’s the first and best to bring up new ideas. Social responsibility. Apart from doing 1-8 it must do to other things that people around the business must benefit. In – Text Questions (ITQs) 3.3 1. List five objectives of business In – Text Answers (ITAs) 3.3 i. Service to consumer: Consumers are well satisfy as another objective of any business concern. ii. Profit. The aim of an organization is to make profit. iii. Employee welfare: Business must maximally want to take care of its workers iv. Survival: Every business must have as a goal to continue to survive or exist. v. Growth: A business must not only survive, but it must have as goal to be the biggest. Summary of the Study Session 3. Some of the characteristics of business include: a) Buying and selling: Transfer of goods and services. For every business there must be exchange of goods and services for money. b) Economic activities: For every organization that is business oriented, it must produce goods and services. c) Profit motive: Every business activities it is for profit making. But profitable organizations and some corporation they are established to provide services. d) Risk and uncertainty: Every business undertaking must take risk and there is always uncertainty. Uncertainty may arise as a result of competition, wrong decisions unethical. e) Continuous process: A business undertaking must always be in business and not on and off. 2. Social characteristics of business involves Contributions from corporate social responsibility which originally conceived as ethics and moral obligations, related to altruistic or philanthropic motives; Non-profit management such as nongovernmental organizations, charitable organizations, philanthropic foundations, cooperatives, civil society organizations, and so on; Social entrepreneurship which consists of innovative social value creation by organizations from public, private, civic and hybrid sectors. SE is a source of social change, particularly when the organization can be replicated in other environments.; and Inclusive business which entails alleviating poverty by integrating low income citizens as consumers, employees, producers, suppliers, distributors, retailers and entrepreneurs in the value chain of large companies, while economic activities include production, distribution and consumption. While production entails conversion of raw material inputs into products and rendering of services to make profit, distribution entails the transfer of goods and services from the source to consumers through a supply network and consumption involves the usage of the finished goods and services to meet daily needs and legal activities guarantee curtailment of the excesses of members and any deviation from agreed principles, policies, rules and regulations binding the parties. 3. Objectives of business include: a) Service to consumer. Consumers are well satisfy as another objective of any business concern. b) Profit. The aim of an organization is to make profit. c) Employee’s welfare. Business must maximally want to take care of its workers d) Survival. Every business must have as a goal to continue to survive or exist. e) Growth. A business must not only survive, but it must have as goal to be the biggest. f) Market share. Every business concern must be able to carry out its market share to control, aid sale its product to. Self-Assessment Questions (SAQs) for Study Session 3 SAQs 3.1 (Tests Learning Outcomes 3.1) 1. List five characteristic of businesses. 2. Explain the customer satisfaction characteristic of a business SAQs 3.2 (Tests Learning Outcomes 3.2) 1. Explain social characteristics of business. 2. Explain economic characteristics of business. SAQs 3.3 (Tests Learning Outcomes 33) List five objectives of business Glossary of Terms 1. Exchange is an act of taking one thing in return for the other i.e. when you make payment in return for a product. 2. Risk is whatever serves as a threat to a business i.e. the potential for harm. 3. Uncertainty is an event that is not predictable and can bring negative fortune on the business. 4. Target customers are the audience you intend to engage and satisfy their needs in the market. 5. Customers are individuals or organisations that patronize your business and buy from you or your organization. 6. Innovative means been creative and it is the ability to find new ways of addressing a problem. 7. Philanthropic motives is the aim of giving and promoting others welfare.