What's a business?
Generally, business is seen as legal activities people engage in to earn a living and/or make a profit. In more detail, a business is a social or legal activity people do to earn profit. It involves the buying and selling of goods and the rendering of services to the community.
By social activities, we mean the activities of philanthropists and governments who make provisions for certain goods and services without the goal of making a profit. Other organizations, on the other hand, goals are profit-motivated.
A business is formed to solve a problem. When there are no problems, there will be no need to form a business. For example, if humans do not have the need to eat food, then there will be no need for farming and other forms of business that take care of hunger. Also, there will be no voluntary organisation trying to solve the world's hunger.
The activities that businesses do are to solve a problem. An entrepreneur can set up a car wash because he/she notices that people are busy and have less time to wash their vehicles. Also, accounting consultancy activities strive because entities need the consultant to prepare quality financial statements without having a professional accountant in-house.
8 Importance of businesses
Eight lists of businesses and their explanations are as follows:
Human needs and wants
The main importance for business is to meet human needs and wants. Humans crave goods and services either for healthy living or for enjoyment. Therefore, there is a need for individuals to engage in activities that will satisfy these needs and wants.
Ensure that natural resources are converted to goods and services
Another important aspect of an entity is the conservation of natural resources for goods and services. Dangote refinery in Nigeria is a good example. Nigeria had issues of fuel scarcity and regular hikes in fuel prices despite having the third-largest deposit of crude oil. Mr Aliko Dangote believed he could solve the problem and formed Dangote Refinery Limited to convert crude oil to fuel, and his efforts can be seen in Nigeria.
Helps in the creation of satisfying human needs
Economists claim that human wants are unsatisfiable. This is right, as humans want are unsatisfiable. Businesses are established to satisfy these wants. From food production to the entertainment industry, entities the world over are providing solutions to them.
Provide employment to individuals
In today's exchange economy getting a job is necessary. Unlike during the Barter area where everyone makes their goods and services by themselves, the exchange economy makes it possible for people to focus on one area of production. As a result, employment opportunities are available to various individuals with specific specialization.
It research improves the living standard of the populace
Research by business organisations and professionals has helped men improve their standard of living. The invention of the phone and the current innovation in 5G and Artificial Intelligence are making life easy for the populace.
This leads to the creation of wealth
Businesses create wealth both for the business owners and the employees. It also creates wealth for the government. The output of every business is added to the gross domestic product of a country. Note that GDP is used to measure the level of growth of a country. It also tells how wealthy a nation is.
Encourage competition in the business environment
A competitive environment in business helps to keep prices of goods and services fairly stable. It also ensures that entities produce only high-quality goods and services.
Ensure proper allocation of economic resources
Companies usually locate in areas where the economic resources can be found. Most companies are located in Lagos because of the seaport. Therefore, they can import raw materials at a cheaper price. Many of the downstream oil and gas entities are located in the south-south region of the country since that is where the crude oil can be found.
