1
CHAPTER 1
SCOPE OF BUSINESS
UNDERSTANDING BUSINESS
The definition of business covers various types of economic activity and can be applied to
various types of organizations or entities. It is an integral part of a country's economic structure
and has a significant impact on growth, employment, as well as the overall well-being of society.
Business, in a general context, refers to economic or commercial activities that involve the
production, exchange, or sale of goods or services with the aim of making a profit or profit.
Businesses can take many forms and scales, from small businesses owned and run by individuals
to large corporations operating internationally.
Here are some key elements in business understanding:
1. Production or Provision : Business involves the production or provision of goods or services
that can satisfy consumer needs or desires. These can be physical goods such as electronic
products or services such as professional consultations.
2. Profit Goal : The main goal of a business is to create profit or financial gain. This profit is
earned by selling a product or service at a price higher than the cost of producing or
providing it.
3. Market or Consumer: A business operates within an existing market or creates a new market
for its products or services. Focusing on consumers or potential customers is the key to
business success.
4. Competition: Businesses operate in a competitive environment. Competition with other
businesses in the same or similar industries is common.
5. Management: Effective management is important in business. It involves decision making,
planning, organizing, and controlling resources to achieve business goals.
6. Risk: Business always involves risks, such as financial, operational, or market risks. Good
risk management is an important part of managing a successful business.
7. Capital: Businesses often require initial capital to start or expand their operations. This
capital can come from business owners (own capital), investors, or loans.
8. Ownership: A business can be owned by one individual (individual business), several
individuals (joint business), or shareholders in a company listed on a stock exchange.
9. Business Goals: Business goals can vary, including achieving growth, meeting consumer
needs, providing value to shareholders, creating jobs, or contributing to society or the
environment.
10. Legal and Ethical Compliance: Businesses must operate within the applicable legal
framework and adhere to ethical principles in their activities.
MAIN STAKEHOLDERS IN THE BUSINESS
Every business enters into transactions with people. Those people suffer the consequences
because of the business. Therefore they have an interest in it. They can are called the main
stakeholders
or
people who have an interest in the business. Five types of stakeholders involved
in business:
1. Owner. Every business begins as a result of an idea from one or more people regarding goods
or services, called entrepreneurs
,
who organize, manage and assume the risks faced from
the start of the business. An entrepreneur who creates a business initially operates as a sole
proprietor. However, as the business grows it may require additional funds beyond what the
sole proprietor can provide. As a consequence, a sole owner will allow other people to invest
capital in his company and become co-owners there.
Many
large companies sell shares to
investors who want to become shareholders of the company. Large companies such as
ExxonMobil, IBM and General Motors have millions of shareholders. Their shares can be
sold to other investors who want to invest their capital in this company. If a company's
performance improves, the value of its shares also increases, as reflected in a higher share
price.
