What is Business: Definition, Goals, Types, and Ethics

The term “business” is frequently heard and spoken in our daily activities. Generally, people interpret business as an effort or enterprise. However, the definition of business varies.

Similarly, its goals and types are diverse. Additionally, there are ethical considerations in conducting business that anyone aspiring to engage in business should be mindful of.

Let’s explore a comprehensive explanation in this article!

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Definition of Business and Its Meanings According to Experts

What is business? According to KBBI (Indonesian Dictionary), business is commercial activity in the trading world or a field of endeavor. In general, business can be interpreted as individual or group activities aimed at gaining profit.

Activities involved encompass production, sales, and the purchase of goods and services.

Meanwhile, here are definitions of business according to various experts:

1. L. R. Dicksee: According to L. R. Dicksee, the definition of business is an activity primarily aimed at obtaining profit for those who manage or have an interest in that activity.
2. Jeff Madura: Jeff Madura defines business as a company that provides products or services desired by customers.
3. Brown and Pretello: Business is an institution that produces goods and services needed by society and includes various efforts undertaken by both government and private entities, regardless of profit.
4. Hughes and Kapoor: Business is an organized individual activity to produce and sell goods and services to profitably meet the needs of society.
5. Gloss and Baker: Business fundamentally involves individuals working alone or together with the aim of producing and selling goods or services needed by the country.
6. Prof. Y. K. Bhushan: Business can be defined as organized production or sale of goods conducted with the aim of gaining profit through human desires.
7. Prof. Norman Richard Owens: Business means a company engaged in the production and distribution of goods for sale in the market or providing services at a specific price.
8. B. B. Ghosh: Business indicates human activities that generate or acquire wealth through the purchase or sale of goods.
9. Peter F. Drucker: Any organization that sustains itself through marketing products or services is a business.
10. R.H. Hodgetts: Business is an organized approach used by individuals to provide goods and services to humanity for profit.

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Business Goals

In general, the goal of business is to maximize profit with minimal capital. However, there are several other objectives in business, including:

1. Demonstrating prestige and achievement.
2. Enhancing the progress and economic growth of society in general.
3. Demonstrating the long-term existence of a company.
4. Creating job opportunities for the community.
5. Achieving the well-being of the owners of production factors and the community.
6. Providing goods or services needed by the community.

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Business Functions

In line with its main goal, business functions to turn initially valueless goods into valuable ones. There are four business functions:

1. Time utility: Involves storage and marketing functions in business. For example, a product may be considered less useful during a certain period, and it will be released when deemed more useful.
2. Possessive utility: Involves sales functions in business, where the company sells products, both goods and services, to consumers in need.
3. Place utility: Involves distribution functions when a business unit delivers its products, whether goods or services, to the nearest location accessible to consumers.
4. Form utility: Involves production functions where a business unit creates goods or services according to the needs of society.

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Characteristics of Business

Business also has several characteristics, including:

1. Probability of experiencing losses.
2. Aim to seek profit.
3. Strong connection to goods or services needed by society.
4. Can be conducted individually, in groups, by organizations, institutions, and corporations.

Nature of Business

Business has several natures, such as:

1. Economic activity: Its main goal is to maximize profit and improve well-being.
2. Routine process: Activities performed repeatedly to gain profit.
3. Creation of products or services: Producing goods or services beneficial to consumers.
4. Requires capital: Every business, small or large, always needs capital to build and develop.
5. Deals in goods and services: Creating and offering products, whether goods or services.
6. Risk: Every business has its own risks.
7. Profit motive: Generally, the motivation for establishing a business is to gain profit.
8. Customer satisfaction: Involves meeting customer demands and needs.
9. Involves buyers and sellers: Business involves customers and merchandise.
10. Social responsibility: Beyond profit-making, business has social responsibilities, such as creating job opportunities.

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Types of Business

In general, businesses can be categorized into the following types:

• Agricultural: Examples include rice cultivation, oil palm plantations, cultivation of medicinal plants, and organic vegetable farming.
• Extractive: Examples include gold mining, crude oil extraction, natural gas mining, and copper mining.
• Trade: Examples include supermarkets, wholesale stores, clothing stores, and convenience stores.
• Service: Examples include salons, schools, hospitals, banks, financial consultants, and construction companies.
• Manufacturing: Examples include plastic factories, steel factories, textile factories, automotive factories, and furniture factories.
• Services: Examples include therapists who come to homes and private tutors.
• Merchandise: Examples include flower shops, mug manufacturers, printing, and canvas bag manufacturers.
• Hybrid: Examples include a furniture seller who is also a manufacturer, buying old furniture at low prices and refurbishing them for resale at higher prices.

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Forms of Business Ownership

There are four common forms of business ownership:

1. Individual: A sole proprietorship is a business where the owner is one person and is managed directly by the owner. The capital usually comes from personal funds, and the owner is responsible for all company money.
2. Partnership: A partnership is a business owned by two or more people according to an agreed-upon arrangement to obtain joint profit.
3. Corporation: A corporation is a business whose ownership is held by several people and overseen by a board of directors.
4. Cooperative: Finally, a cooperative is a business where members are a group of individuals or cooperative legal entities. Its main goal is to improve the welfare of its members. Its activities are based on cooperative principles and are a people’s economic movement based on the principle of kinship.

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Business Ethics

Running a business should not be arbitrary, especially to the point of breaking rules. There are ethics that business people must follow. Here are business ethics that must be applied:

1. Upholding justice: Although the main goal is to gain profit, justice should always be a top priority for both consumers and employees.
2. Honesty: Honesty is a universal currency anytime, anywhere. It applies significantly in the business world. Don’t resort to any means to gain profit.
3. Autonomy: Business actors must uphold the principle of autonomy, meaning they are free to determine what type of business they want to run based on their vision and capabilities.

In conclusion, from the definition to the ethics of business, it is clear that business is an activity conducted to seek profit. However, the methods used must be ethical and, most importantly, not violate the law.