BUSINESS STUDIES NOTES

GRADE 11

Classification of Activities
1. Economic Activities: Economic activities are any activities that are carried out with the
goal of earning money and livelihood. For example, a worker working in a factory , a teacher
teaching in school.
It is majorly of three types:
 Business
 Profession
 Employment.

2. Non Economic activities: Activities which are performed out of love, affection, sympathy,
etc , and without the aim of earning profit are called non-economic activities. For Example
social work, religious activities etc.

Business
Any economic activity that is undertaken regularly and continuously to satisfy the societal
needs as well as to earn profit through the mechanism of sale and purchase of goods and
services is called a business.

Characteristics of Business Activities

1. An economic activity: Business consists of sale or exchange of goods and services
with the primary objective of earning money. Hence it is an economic activity.
2. Sale or exchange of goods and services for creating value: In business there should
be transfer or exchange of goods or services for value. Production of goods for the
purpose of personal consumption is not termed as business.
3. Regularity in dealings: To constitute a business there should be dealings in goods
and services on regular intervals. Doing one single transaction does not constitute
business. For example selling your old books, or furniture and purchasing a new one
is not termed as business.
4. Production or procurement of goods and services: In every business enterprise
before the consumption, production takes place. As a result, a business either
manufactures the goods on its own or purchases them from producers, and then sells
them to end customers.
5. Profit earning : The primary objective of every business is to earn more and more
profit. No business can survive without earning profit. Hence all the efforts of the
businessman are directed towards the earning of sufficient profit.
6. Uncertainty of return: It’s not certain how much profit a business is going to earn, as
there is a possibility of losses as well because of the changing environment. Every
business has to handle both losses as well as profits.
 7. Risk: Every business is exposed to certain risks, these risks can either be due to
natural factors, human factors, financial factors, or personal factors. Therefore, both
profit and losses walk hand in hand and every business has to take some risk in order
to survive.

Profession:
Any economic activity which is carried out by a person with specialised knowledge and skills
in order to serve society is called profession.

Employment
Any economic activity which involves doing work for someone else in consideration of
money is termed as employment.

Comparison of Business , Profession and Employment

Basic Business Profession Employment

Establishes after
Mode of fulfilling some A certificate of practice Starts after receiving
establishment required legal required. an appointment letter.
formalities.

Work is as per the

Selling and buying of Rendering specialized
Nature of work contract and the rules
goods and services. services
of service.

Formal qualification and

Qualification
No minimum training from a
Qualification requirements differ
qualification required. professional body is a
with job type.
must.

Reward or Wages or salary

Profit Professional fee
return earned

It is dependent upon
Capital
the type and size of Limited capital needed. No capital.
investment
business.

High uncertainty and

Risk Little or limited risk No risk
risk.

Transfer of
Possible Not possible Not possible
interest

Rules set by the

Code of No code of conduct is Professional code of
employer are to be
conduct prescribed. conduct is there.
followed.

Example A person having his Chartered Accountants, Jobs in banks,

 Lawyers, Doctors are all
shop, factory etc. companies etc.
professionals.

Classification of Business Activities

The business activities are mainly classified into:
 Industry
 Commerce
o Trade
o Auxiliaries to Trade

A. Industry
It is basically concerned with the production of goods and services for an economic motive. It
is further divided into following categories:
 Primary
 Secondary
 Tertiary

1. Primary Industry:
It includes all those activities which are concerned with the extraction and production of
natural resources and development of plants, etc.
It is further divided into two parts:
a. Extractive industries: These industries provide some basic raw materials that are
mostly products of the natural environment. It includes farming, mining, etc.
b. Genetic industries: These industries do breeding of plants and animals for their use
in further reproduction. Example- cattle breeding, poultry farms.

2. Secondary Industries
These industries are concerned with further processing of the material extracted at the
primary sector so as to convert them into a finished product. Example, Mining of iron ore.
It is further divided into two parts:
a. Manufacturing industries: These industries engage in producing goods through
processing of raw materials and creating utilities.
It is further divided into four parts:
Analytical industry: These industries separate and bifurcate different elements from the
basic material, so as to produce various by-products from the same element. For example,
petrol, diesel etc all are made from one basic material that is crude oil
Synthetical industry: These industries bring together materials and ingredients from varied
sources and combine them to form a new product. For example, the cement industry.
Processing industry: These industries are involved in the extraction and processing of
resources and raw materials, so as to produce semi-finished or finished products. For
example, the sugar industry, paper industry, textile industry etc.
Assembling industry: These industries bring together different components of various firms
to form a new product. For example, different components of various industries are brought
together to assemble them and convert it into a television, computer, car etc.
a. Construction industries: These industries are involved in the construction sector, and it
involves constructive works such as building dams, bridges , buildings,etc.

3. Tertiary Industry
These industries provide support services to primary and secondary industries so that they
can perform their work without any hindrances. For Example, banking industry,
transportation industry, communication industry, etc.

B. Commerce
Commerce includes all the activities which are required for the exchange of goods and
services. It also involves all the activities that assists in removal of hindrances of people,
place, time, finance, risk, information faced during the exchange of goods and services.
It includes two types of activities:
 Trade
 Auxiliaries to Trade

Trade
The buying and selling of goods and services with an aim to earn profit is termed as trade.
The people who are involved in trade are referred to as traders.. Trade can be bifurcated as:

a. Home Trade: It involves buying and selling within the domestic country. It can be:

I. Local Trade: Buying and selling within a local area.

II. State Trade: Buying and selling within a single state. That is intra-state trade.
III. National Trade: Buying and selling between the states. That is Inter-state trade.

b. Foreign Trade: It involves buying and selling of goods and services outside the domestic
borders of a country. it involves:

I. Imports: It refers to the purchase of goods and services from other countries.
II. Exports: Selling goods and services to other countries.
III. Entreport: Importing goods and services from one country and exporting to some
third country

Auxiliaries to Trade
Auxiliaries to trade assists the buying and selling of the goods and services by removing the
hindrances of place, people, time, finance, risk and information.
The auxiliaries to trade are:

a. Transport and Communication: Transportation helps in the movement of raw

material and finished products from the place of production to the place of
consumption. Communication enables easy interaction by one party with the another
who are far away from each other. It assists in removal of the hindrance cause due to
place.
b. Banking and finance: It helps business activities to overcome the problem of finance
by lending loans and credit facilities since business can't survive if funds are not
available for procuring material. It assists in removal of the hindrance cause due to
finance.
c. Insurance: It provides protection to businesses from various types of risks such as
due to fire, theft etc. It assists in curbing hindrances of risk.
d. Warehousing: It helps business firms to overcome the problem of storage and
facilitates the availability of goods. It assists in curbing hindrances of time.
e. Advertising and Public Relations: It helps them to increase the sales and widen the
customer base by promoting business products or services at a wide spectrum. It is a
tool to influence customers. It assists in curbing hindrances caused due to information
f. Middlemen: These people act as mediators between the producer and consumers.
These include wholesalers, retailers etc. It assists in curbing hindrances of persons.

Objectives of Business
1. Market standing: For every business, goodwill is the most important aspect to stand
out from its competitors. Every business must give quality products at reasonable
prices to earn better goodwill.
2. Innovation: It means developing new products or modification in existing products.
Every business in order to survive in a competitive environment should innovate its
products or develop new ideas to tackle competition.
3. Productivity: It is a measure of efficiency. Every business must aim at increasing its
productivity through the efficient use of resources.
4. Earning profit: Every business objective is to earn more and more profit in order to
survive and also for growth purposes.
5. Physical and financial resources: Every business enterprise must acquire physical
resources like land,plant and financial resources like funds according to their
requirements and use them efficiently.
 6. Social responsibility: Every business must work in a socially desirable manner and
contribute some resources for solving social problems.

Business Risk
The risk caused due to inadequate profits or losses as a result of uncertainties or unexpected
events is called business risk.

Nature of Business Risks

 Risk is an essential part of every business. It can only be reduced but not eliminated in
full.
 It arises due to uncertainties like natural calamities such as earthquakes, floods etc.,
which are unavoidable.
 The extent of risk depends upon the nature and size of business.
 ’No risk, no gain’ is applicable to every business. Hence, profit is the reward for risk
taking.

Causes of Business Risks

 Natural causes: These are due to natural causes such as floods, earthquakes, etc.
Every person has little control or no control over these causes.
 Human causes: These causes include unexpected events caused by man, such as
negligence of employees, power failure, employee’s or customer’s dishonest practices
etc.
 Economic causes: The economic causes involve the changes and variations taking
place in the economy such as uncertainties due change of technology and method of
production,political disturbances, change in prices, tax rates etc.
 Other causes: All those causes which cannot be considered under the above causes
are the other causes, such as exchange rate fluctuations etc.

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