Business is an essential part of modern world civilization. The main purpose of business is to provide welfare to the people and make profit through production and distribution of goods and services. Generally, Business refers to a set of organized activities for production and exchange of goods and services with an objective to earn profit. You can read my “what is business?” article to know more about business. There are different types of business depending on the place, time and situation. However, the following elements are generally observed in all businesses, regardless of their shape or nature.
Organizational Structure: Business is a social process. Anywhere in the world, business requires an organizational structure to ensure the proper use of the components of production as well as to perform all the functions of the business. Without organizational structure a business can’t be formed since there are different types of organization, structures vary from company to company. Basically, organizational structure is a system that describes how particular activities are directed in order to achieve the objectives of an organization. Rules, roles, and responsibilities etc. are the part of these activities. Organizational structure is seen in all businesses, and it can not be thought of without organizational structure.
Specific Place: In the current era of globalization, business activity and movement has spread worldwide. However, no matter how small or large the business, a certain space is required to run the business properly. Activities need to be centralized in a specific place so that the parties involved in the business can easily communicate. Although many businesses are operating online nowadays, but the acceptability increases when you have a specific place.
Capital: Capital is the lifeblood of any business. Without it, business cannot be formed and run. To run business smoothly, we need capital. There are two types of capital, working and fixed. Working capital is required to run the day-to-day business activities, and fixed capital is needed for business expansion and start-up. Since no business can be formed without capital, it is considered as a basic element of business.
Land: Another basic element of production is land. Since production has a deep connection with business, it is considered as a basic element of business. To run the business properly it needs to build office, operate production activities, also distribution etc. and for that business needs land.
Labor: No business activities can be conducted without labor. Labor is considered as a basic element of business, as it requires at every level of business. It can be physical or mental. From the production of goods and services till the delivery to the consumers, labor is considered an essential element at every level of business. Utilizing the labor efficiently can increase the success rate of the company. Thus, labor is a basic and most important elements of the business.
Production: The relationship of production with business is very deep. Through business, the needs of the consumers are met. Traders often have to produce goods in order to supply goods according to the demand. Therefore, production is considered as basic element of business.
Distribution: Distribution is the process of delivering manufactured goods to the consumers according to the demand. In order to make profit, goods and services have to be sold to the consumers. Since distribution activities and profit making are inextricably linked, distribution is considered a fundamental element of business.
Profit Earning Motive: Businesses are formed, operated and regulated for the purpose of making profit. Because the owner trades with infinite risk, only for profit. Without the purpose of profit, business activities would not be seen. No activity can be termed as business without the desire to make a profit, thus it is essential elements of the business.
Risk: Risk is deeply involved in every business. Businessman has to make decisions on various issues by anticipating unknown future. The future is always uncertain. There is possibility of either gain or loss. All organizations, large and small, have to deal with all these risks and uncertainties. If there is no risk in the transaction, it can not be called business. As risk exists at every level of business, it is considered as a fundamental element of business.
Legal Validity: Legal validity is an essential element of every business. No illegal activity can be called business. So every act of business must be valid according to law of society and country.
At the end of the article, it can be said that the above elements can be considered as fundamental important elements of business.
