We explain what business is and some characteristics of this term. Also, how can you classify based on your activities?
What is business?
The term business owes its etymology to the Latin negotium, that is to say, a negation of leisure: the occupation carried out by people for profit. This etymological character is quite particular because it defines the word in a different way from the greater use that we give it today.
We do not understand by business the labor activity of any person, but particularly those people who are dedicated to the trade of goods and services. However, it is a meaning recognized by the RAE that understands the term as a way of calling any occupation that people do.
The circuit of the production of goods has different determined phases. From the mere obtaining of raw materials, its most precarious transformation, its travels, and the additions of added value, they perfect the object until it reaches the one that is believed to respond to the needs of consumers. This process is justified by the business, as a method to obtain money from users in exchange for the provision of a service or the delivery of some good.
Businessmen are entrepreneurs or business administrators, who strive to keep some variables balanced in the best possible way: they will seek to have high prices but are accepted by buyers, and they will seek to have a good quality that does not demand an amount of money that forces prices to increase, and they will seek to reduce expenses as much as possible, to increase the profit margin.
Wherever people have a need or desire, there will be someone interested in satisfying it and making a profit from it. Some businesses will have runaway successes, while others may suffer dismal failures.
To analyze the performance of a business, it must be analyzed what the expenses were, and compare them with the income obtained. The Disney company began its activity with 230 dollars in 1923, and today it invoices around 16 billion dollars each year. Russia sold the territory of Alaska to the United States for just 7.2 million, later discovering that it was a territory with a large number of metals, including gold, and also a lot of oil.
The business concept can also be classified according to the activity from which the profit is obtained:
- extraction business. Those who take advantage of natural resources, having simply bought a portion of territory, or having invested money in elements that enhance nature ( seeds for planting, animal grazing ). The existence of an extraction business is the guarantee of subsequent production businesses.
- product businesses. They are the ones that, as was said, add value to raw material and transform it until it is in a position to meet the needs to which people allocate part of their income. Without these businesses, only things found in nature could be marketed.
- Service businesses. They are those who lend some intangible good to people, based on the possession of some good or some ability. In these cases, the business does not come from a production chain, you simply have something whose effects are demanded by people (who do not own it).
- Wholesale business. They are the ones that obtain a large number of ready-made products, and without transforming them or adding anything of value, they have a storage capacity that allows them to be distributed by retail businesses. They act as intermediaries.
- Businesses for sale to the public. They are the ones who buy the goods wholesale, to sell them directly to people. In some Latin American countries, this type of activity is directly known by the term ‘business’, since they are the reason why all the previous ones are founded. The production chain is abruptly cut when it is consumed by a person, who supports all the value incorporated and feeds back into the circuit.