Business is basically the activity of earning money or creating value by creating or purchasing and selling goods. Simply put, in business, it’s “any venture or activity entered into for gain.” It may also be used to define any relationship involving exchange of services, goods or information for a financial benefit.
In any venture, profit and loss are the two sides of the same equation. For instance, if you purchase something from a firm and later realize that the value of the product has decreased because of poor quality, you have incurred a loss. The firm has therefore incurred a loss in profits. The difference between the present value of the loss and the total revenue minus expenses is your profit.
Business is not merely activity or a process but involves processes and systems. Hence, to define a firm, we should consider the key terms that affect its functioning and those that define the firm. Key points of business activities include product development, marketing, sales and service and research and analysis. The following key points describe how these key points affect an effective organization. These are the essential elements that make up a firm.
Market and customer are the two most important and influential key terms that affect the performance of a firm. Marketing is another important term that defines the sale of goods or services to the market. The key terms of product development, research and analysis, and marketing reflect the inter-relationship between these three aspects. Marketing is used to promote the sale of goods or services to the market. It is an important instrument in the marketing process that is utilized to improve the value of the goods or services offered by a firm. A firm can use the marketing process to reach out to potential consumers and establish a reputation in the market.
The firm’s revenue growth is also affected by their market research. The business evaluation of the firm determines the demand for the firm’s goods and services. This enables the firm to establish the price of its goods or services to be sold to customers. A firm’s sales are further improved through better distribution of goods and services. Sales force, better quality products, and improved customer relations are some other benefits gained through the efficient use of sales and marketing.
A firm’s ability to realize profits also depends on how well the management implements effective strategies. Capitalizing on opportunities and threats is one good way of maximizing profits in the business. A firm can invest in certain assets and accounts receivable to expand its scope of business activity. Capitalizing on opportunities such as expansion in customer base or market share is a good strategy. Other means of increasing profits include using surplus production capacity and reducing costs.