Fundamentals of business

A business is an organisation that combines resources such as labour, capital and enterprise to produce goods or services that satisfy customer needs, usually with the aim of earning a profit. Goods are tangible products you can touch, such as a bicycle or a loaf of bread. Services are intangible activities, such as a haircut, a bus trip or preparing a tax return. Many businesses supply both: a cafe sells food (goods) and table service (a service).

The purposes of business activity include earning profit for owners, providing employment, meeting community needs and, for some organisations, achieving social or environmental goals.

Businesses are grouped into sectors by the stage of production they perform. The primary sector extracts raw materials (farming, fishing, mining). The secondary sector manufactures or builds (food processing, car assembly, construction). The tertiary sector provides services to consumers and other businesses (retail, hospitality, transport). The quaternary sector deals in knowledge and information (research, software consulting, data analytics).

The quinary sector covers the highest level of decision making and the services that support human wellbeing (government leadership, education, health and community care).

Every business operates within an environment. The internal environment is made up of factors the business controls directly: its owners, employees, culture and resources. The micro (operating) environment includes customers, suppliers, competitors and intermediaries such as wholesalers and agents; the business can influence these groups but cannot control them. The macro environment is made up of broad forces the business cannot influence: political, economic, social, technological, legal and environmental factors.

The business life cycle describes the stages a business passes through. In the seed stage the idea is researched and tested. In start-up the business launches, sales are low and cash is tight. Growth brings rising sales and market share, but the business needs more staff, stock and finance. At maturity sales level off, competition is strong and efficiency becomes the priority. In post-maturity the business either declines or renews itself with new products, new markets or restructuring.

Businesses do not always move in a neat order, and a renewed business can re-enter growth.