Business and its environment

Business studies study module

By the end of the topic, the learner should be able to:

  1. Explain the meaning and purpose of a business
  2. Identify various business activities
  3. Identify various types of business environments
  4. Explain how the various business environments influence a business.

Meaning of a business

This refers to any activity carried out an individual or an organization with the aim of making a profit.

Profit is what the business earns above what it spends in providing goods and services to the people who need them.

The term business also refers to firms or organizations that provide goods and services to make a profit.

Purpose of business (Reasons for the existence of businesses)

Business is important in any society because it is not possible for people to provide themselves with all what they need without direct or indirect aid from others. Some of the main reasons why businesses exist are:

  • To provide goods and services-Businesses exist to satisfy the needs and wants of buyers providing them with goods and services. Buyers include individual consumers, other businesses and the government.
  • To create employment-Businesses provide job opportunities through which members of society can earn money, which can be used to buy goods and services for the satisfaction of their needs.
  • To earn profit-Profit is the primary goal of carrying out business operations. It is earned the people who put their resources and effort in business
  • As an outlet of new innovation-Some businesses provide unique goods and services which may not be existing in society e.g. plastic fencing poles that are now replacing wooden poles.
  • To be as own boss-Some people run businesses so as to be in full control of the operations and make all the decisions regarding the business without need of reference to people.
  • To utilize extra resources-Some people go into business to make use of money or property which is not being put to profitably use at a given time.
  • To offer special services-Some businesses provide services that raise the living standard of people e.g. government enterprises that provide public utilities such as health care and water.
  • To utilize spare time-Some people run businesses in order to make use of extra time at their disposal and in the process make some extra money. A large number of formally employed people have small business which they run during their free time in order to earn more money.

NB: Whatever purpose a business fulfills, it has to earn a reasonable return on the invested money to survive.

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