Study Session 1: Concept of Business (Definitions and Scope of Business and types of business) Expected Duration: 1week or 2 contact hours Introduction In this session, we shall be introducing learners to the course, introduction to business, defining the term “business” from different perspectives. You will get to know the different views of scholars about the concept of business in relation to when we say somebody is in business, what is expected of a business and what it does offer to businesspersons or group of people who have contributed money to engage in it and the benefits the society and other stakeholders stand to gain from being part of the activity. 1.0 Learning outcomes for study session 1 After studying the session, you should be able to; 1.1 Define business. (SAQ 1.1); and 1.2 Explain the scope of business. (SAQ 1.2) 1.3 Mention types of business (SAQ 1.3) 1.1 Business Box 1.1 What is Business? Business is any human activity that is directed at identifying needs and wants of individuals and group of people and satisfying those needs and wants in anticipation of profit. A business is any human activity that provides goods or services to consumers in anticipation of profit, and it includes selling goods and services. Everyone else involved in the process of creating the products and getting it across to the customer is into business or is said to engage in business activity. Whenever we refill our 12kg gas cylinder at a gas filling station, we are completing a process that started with an oil exploration firm detecting an oil deposit, continued with a drilling firm extracting crude oil. And then went through many stages of transportation, refining, and distribution before it finally got to your gas cylinder. A number of people conducted business to fill the gas cylinder. Business, like other management science has not got a precise and universally accepted definition. The term business has been applied to many diverse activities. In fact, different people define business in different ways which makes the definition to be as many as there are authors on the subject. Business, for example, is defined as what individuals for the purpose of making money. In this definition, the term business is viewed as an activity which people primarily do in order to make money. In this regards, we can say that, the food we eat, the cloths we wear, the cars we drive and the books we read are product of business activities. This is because the products mentioned above are produced by people in order to make money. Business in the context of transaction is considered to be a system of events which take place between two or more persons (ie the seller and buyer). Business is any commercial or economic activity that tends towards business profit. The primary, objective of business organizations is to make profit, grow and survive in the environment in which it operates (Eruemegbe, 2015). Transactions such as trade by barter practiced in the ancient times, for instance, could be seen as business. Business can also be defined as organization to make profit. In this definition, it can be observed that any entity that attempts to make profits is considered to be a business organization. From the foregoing definitions, it could be deduced that the tern business can be said to be an activity; a system and an entity. According to Nickels, McHugh & McHugh (2019), a business is any activity that seeks to provide goods and services to individuals, group of people and organizations while operating at a profit. For an organisation to arrive at profit, a business must offer desired goods, services, jobs to people and other businesses. Also, Business is a broad term, with a typical dictionary definition covering a wide range of meanings. For instance, the Merriam Webster dictionary includes the idea that business is a commercial activity, a commercial or industrial enterprise, or economic transactions (Crane, Henrigues, Husted & Matten, 2015). In view of these three distinct dimensions, commercial activity by a non-profit or government organization constitutes a business as well as an economic transaction between two users, but not involving a company (e.g. product sharing) and also, illegal transactions or informal enterprises activities that do not take place in the formal economy. Business activities are usually carried out by people referred to as entrepreneurs. Entrepreneurs are people who seek out for unsatisfied or partially satisfied needs and invest their resources by way of satisfying the needs adequately. The activities of the entrepreneurs or business as they are otherwise called; are termed as business activities and are normally carried out in organizations referred to as business organizations or business enterprises. In – Text Questions (ITQs) 1.1 1. Define business? 2. What does business entail? In – Text Answers (ITAs) 1.1 1.. Business is any activity that seeks to provide goods and services to individuals, group of people and organizations while operating at a profit. 2. Business entails identifying needs and wants of individuals and group of people and satisfying those needs and wants at a profit. 1.2. Scope of Business In terms of scope, from the macro point of view, business is covering a wide range of meanings. According to the Merriam Webster dictionary, business includes a commercial activity, a commercial or industrial enterprise, or economic transactions (Crane, Henrigues, Husted & Matten, 2015). In view of these three distinct dimensions, commercial activity by a non-profit or government organization constitutes a business because it is embarked upon to meet society needs, as well as an economic transaction between two users, but not involving a company (e.g. product sharing) and also, illegal transactions or informal enterprises activities that do not take place in the formal economy. In view of this, a business can be interpreted as transactions between two or more people with profit motives or can be said to be an organization set up to accomplish some set targets that are aimed at profit or informal transactions which can either be legal or illegal but end up in benefitting the parties. Also, from the micro point of view, the scope of business can equally be said to be the area in which a company operates, where and what it covers by virtue of its operations and its specific products/services. It may interest you to know that about 90% of businesses in Nigeria are not captured by the Federal Inland Revenue Service and not in the database of the Corporate Affairs Commission because they are operating informally. Also, business encompasses commerce and trade. While commerce implies the series of commercial activities that have taken place for the purpose of producing a product beginning from extraction through refining and distribution to gas station and sale into the 12kg of final consumers. Commercial activities have been experienced along the way before this stage considering the fact that crude oil was sold in bulk to one or more oil companies that had refined and then began to sell to stations all over the place. Trade equally involves exchange of goods and services for something of value between two parties (money) and it is the final transaction in which a seller provides a finished product and a consumer makes payment in respect of the product i.e. it is the last stage of the commercial process which involves selling of the finished product to the consumer. Commerce and trade are subsets of business. BUSINESS COMMERCE TRADE Fig. 1.1: Author’s conceptual;lisation (2024) BUSINESS COMMERCE AIDS TO TRADE TRADE FOREIGN HOME Reta il Wh oles ale Expor t Impo rt Entre port Insur ance Comm unicati on Tour ism War eho usin g Tran spor t Adve rtisin g Fig. 1.2: Adapted from Understanding Business by Nickels, McHugh & McHugh (2019) In – Text Questions (ITQs) 1.2 1. Explain the scope of business? 2. Differentiate between the micro view and macro view of business scope? In – Text Answers (ITAs) 1.2 1.. Business can be defined as transactions between two or more people with profit motives or can be said to be an organization set up to accomplish some set targets that are aimed at profit or informal transactions which can either be legal or illegal but end up in benefitting the parties. Also, business scope can equally be said to be where and what a business covers by virtue of its operations. Business encompasses commerce and trade. 2. While the micro-view of business scope focuses on where and what a business covers by virtue of its operations, the macro-view considers all what business entails in view of transactions between two or more people with profit motives or can be said to be an organization set up to accomplish some set targets that are aimed at profit or informal transactions which can either be legal or illegal but end up in benefitting the parties. 1.3 Types of Business Banki ng You may want to ask what the difference between type and kind of business is. While types of business is the distinct business activity that one invests into with the aim of satisfying customers, kind of business is how to organize a business concern in order to carry out any of the types of business. In business, one can choose to be a producer, a processor, manufacturer, intermediary or operate in the servicing industry rather than manufacturing. 1. A producer (Extractive Industry) is that person who is involved in producing goods and services for distribution. Producers make available the raw materials i.e. in their natural forms. You take an example of a farmer- he is a producer, involve in producing yam, beans, cassava, eggs, Fishing: He goes into the sea and catch fishes for sale to other to use for consumption (Agriculture),. Mining: He dig for minerals like gold, diamond etc. Forestry business: Bringing in timbers into the market to sell to builders etc. All these people are involved in gathering products in their original forms, from natural resources such as land and water. These activities are in the extractive industry. 2. Processors (Manufacturing & Construction): These are businesses for any man that may not be able to produce product from their natural form, what they do is to add value to such product in order to sell it to another buyer. Businesses that change products from their original forms into more finished forms are processors. Take for an example Paper Mills: The paper mills get raw materials from woods, waste paper and produce exercise books, tissue papers - Oil Refineries: Crude oil is gotten from the ground and refine into petrol, diesel, jelly etc - Steel: Raw materials are gotten from various locations and they are turn into steel and steel is produce into another product. These products are transformed into processed goods. Do you consider yam that is turned into yam flour (elubo), cassava that is turned into (Garri). All businesses operating in this fashion are referred to as processors. You may be thinking of manufacturers as the only business people are involved in, when manufacturing is mentioned, but they are not. Manufacturers could combine the activities of producers and processor together to get a finished product. Dangote for instance may have a sugar cane farm, producing sugar cane, Dangote here is a producer: - Sugar cane may be processed into granulated sugar, at this point, he is a processor. A situation where sugar is cubed, packaged makes Dangote a manufacturer and combining all the characteristics of a producer, processor and a manufacturer. Manufacturer therefore turns raw or processed goods into finished goods. Finished goods are those products that are produced and ready for the market. Manufactures are business set up to carry out the activities involved in making finished goods out of processed goods. Other examples of Manufacturers are: Bakery: Producing different types of product of various sizes. Automobile factory: make cars out of processed goods like steel, aluminum, glass, plastic etc. Manufacturers are just involved in producing - Consumer goods- you buy in the shops - Consumables- (food, drink, cigarettes) - Consumer durables, which has a longer life (e.g. Radios, domestic appliances, televisions and cars - Producer goods- include Machinery, raw materials, commercial vehicles wares etc. Manufactures are concern with: Product mix-Range of product and brands they produce. Diversified - making a range of goods which may be sold to different markets. 3. Intermediaries The function of intermediaries is to transport and distribute goods. An intermediary is a business that moves goods from one business to another. These intermediaries are mostly wholesalers and retailers. While a Wholesaler is that business man that buys goods from a manufacturer in large quantity and resell to retailers in a smaller quantity. Wholesaler performs the following functions: Buying Selling Dividing or bulk breaking; Transportation; Ware housing; Financing; Risk bearing; Market information; Management services and advice. A Retailer is that business that buys goods from a wholesale and resell them directly to the final consumer. Retailers like wholesales perform the function of wholesalers but added are: Breaking the bulk; Give credit to customer; Located close to customer. The manufacturer takes decision on either to sell directly or through an intermediary. There are four main methods. a. Direct from the producer to the customers; Is the system mostly used by mail order companies. b. The traditional method is via a wholesaler to a retailer outlets and then to the consumer. c. Many companies deal directly with retailers particularly large retail chain. Manufacturers that produce goods for tradesmen usually distribute them via a specialist merchant. One important aspect of intermediation business is transportation. As a manufacturer you decide on the best method of transporting goods. Factors determining this are the distance involved; Types of goods; Urgency; and Cost. Customers have to decide on any of these medium of transportation e.g. air transport - It is faster than most methods Use for goods that are needed urgently. 4. Quaternary (service-based business): This includes knowledge and information-based economic activities including education, consultation, media and entertainment services. It is that business that is increasing in number very rapidly. In Nigeria, the story is not different since the coming in of Obasanjo’s administration and attention given to tourism, there has been an increase in service industry and more Nigerian have been employed in service industry. Service business provides services instead of goods to consumers. Service industry are into intangible transactions, which you cannot touch. For instance, such service industry include: Car washes; Mechanics; Doctors; Movie theatres etc. Service industries provide: (i). Assistance for Business ; e.g. if you leave your destination to any where in Nigeria with plane you decide to lodge in a hotel before the following morning business discussions, it means that your business has been assisted by service industry. (ii). Banks could equally serve as assistance for business. For instance banks grant credit to business men to carry out their activities. Importer and exporter require bankers to aid them in their businesses. Insurance is another service area that is required to reduce the risk of trading. It covers all standard risk like theft, fire, goods on transit. (iii). Communication is another service area that aid business. It helps because up-to date information is required. This information can be assessed through computers, satellite links and fax machines. (iv) Service industry employ specialist for instance you need advertising agencies to plan a campaign, design of art work etc In – Text Questions (ITQs) 1.3 Discuss types of business In – Text Answers (ITAs) 1.3 Types of business: A producer (Extractive Industry) is that person who is involved in producing goods and services for distribution. Producers make available the raw materials i.e. in their natural forms. You take an example of a farmer- he is a producer, involve in producing yam, beans, cassava, eggs, Fishing: He goes into the sea and catch fishes for sale to other to use for consumption (Agriculture),. Mining: He dig for minerals like gold, diamond etc. Forestry business: Bringing in timbers into the market to sell to builders etc. 2. Processors (Manufacturing & Construction): These are business for any man that may not be able to produce product from their natural form, what they do is to add value to such product in order to sell it to another buyer. Businesses that change products from their original forms into more finished forms are processors. Take for an example Paper Mills: The paper mills get raw materials from woods, waste paper and produce exercise books, tissue papers - Oil Refineries: Crude oil is gotten from the ground and refine into petrol, diesel, jelly etc - Steel: cigarettes) - Consumer durables, which has a longer life (e.g. Radios, domestic appliances, televisions and cars - Producer goods- include Machinery, raw materials, commercial vehicles wares etc. Manufactures are concern with: Product mix-Range of product and brands they produce. Diversified - making a range of goods which may be sold to different markets. 3. Intermediaries The function of intermediaries is to transport and distribute goods. An intermediary is a business that moves goods from one business to another. These intermediaries are mostly wholesalers and retailers. 4. Quaternary (service-based business): This includes knowledge and information-based economic activities including education, consultation, media and entertainment services. It is that business that is increasing in number very rapidly. Summary of the Study Session 1. In Study Session 1, you have learned that; 1. A business is any human activity that provides goods or services to consumers in anticipation of profit, and it includes selling goods and services. Everyone else involved in the process of creating the products and getting it across to the customer is into business or is said to engage in business activity. 2. Business activities are usually carried out by people referred to as entrepreneurs. Entrepreneurs are people who seek out for unsatisfied or partially satisfied needs and invest their resources by way of satisfying the needs adequately. 3. In terms of scope, from the macro point of view, business is covering a wide range of meanings. According to the Merriam Webster dictionary, business includes a commercial activity, a commercial or industrial enterprise, or economic transactions 4. Business encompasses commerce and trade. While commerce implies the series of commercial activities that have taken place for the purpose of producing a product beginning from extraction through refining and distribution to gas station and sale Trade involves exchange of goods and services for something of value between two parties (money) and it is the final transaction in which a seller provides a finished product and a consumer makes payment in respect of the product Commerce and trade are subsets of business. 5. In terms of types of business, a producer (Extractive Industry) is that person who is involved in producing goods and services for distribution. Producers make available the raw materials in their original forms. Processors (Manufacturing & Construction): are business for any man that may not be able to produce product from their natural form, what they do is to add value to such product in order to sell it to another buyer. The intermediaries is to transport and distribute goods. Intermediaries are mostly wholesalers and retailers; and Quaternary (service-based business) includes knowledge and information-based economic activities including education, consultation, media and entertainment services. Self-Assessment Questions (SAQs) for Study Session 1 Now that you have completed this study session, you can assess how well you have achieved its learning outcome by answering the following questions. You can check your answers with the notes on the selfassessment questions at the end of this study session SAQ I.1 (Tests Learning Outcome 1.1) 1. Define business and discuss what business entails SAQs 1.2 (Tests Learning Outcomes 1.2) Explain the scope of business SAQs 1.3 (Tests Learning Outcomes 1.3) Discuss types of business Glossary of Terms 1. Trade by barter is the exchange of goods and services between two or more parties without involving money. 2. Profit is gain made from business. 3. Industrial enterprise is an enterprise which offers a reasonable likelihood of creating large number of employment opportunities and requires so much to establish. 4. Informal enterprises are unregistered, unincorporated, uncaptured and small enterprises. 5. Entrepreneurs are individuals who take the risk of investing in identified gap for the purpose of satisfying needs/wants at a profit. 6. Formal economy is an economy of which the government is fully aware of. 7. Corporate Affairs Commission is the Nigerian government establishment for the registration of businesses. 8. Finished goods are goods that have been fully transformed into forms that are usable by consumers. 9. Retailer is that businessman that sells goods to the final consumer in relatively small quantities for use. 10 Wholesaler is that businessman who buys in bulk and sell in large quantities to retailers at low prices.