Any organization that uses resources to meet the needs of customers through the provision of a product or service that they demand is a business.
Finished goods pass several stages which involve value addition to resources like raw materials or semi-finished goods to make them more desirable by the purchaser.
Businesses play an important role by identifying the needs of consumers or firms and then use inputs or resources to produce outputs – goods and services that satisfy consumers’ needs, usually with the intention of making a profit.
Inputs of the business also known as the factors of production are human, physical and financial resources required by the business to produce goods or services.
The inputs combination by a firm depends on the size of the business and what will be produced.
The four main inputs are:
Land: this is a general term that includes not just land but all renewable and non-renewable resources of nature like oil, timber, coal, water, copper and coal.
Labour: this is the workforce of the business including skilled and unskilled labour. Some businesses such as cleaning services are labour intensive with a high proportion of labour inputs compared to other factors of production.
Capital: this is made up of the finance required to start a business and pay for its continuing operation as well as all man-made resources used in production. These include offices, machinery, vehicles, factories, computers, and tools like hammers.
Entrepreneur: this is the person who combines all other inputs – land, labour and capital, to earn profit. An entrepreneur is the driving force of business and is a risk-taking individual. This input is essential as it provides a managing, decision-making and coordinating role.
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Business activity exists to produce goods or services. These can be classified in several ways: consumer goods, consumer services and capital goods.
Consumer goods: also called final goods are sold to the consumers for their use or enjoyment. It can be classified into durable consumer goods – can be used for more than three years, such as television, washing machine, cars or non-durable consumer goods – can be used for less than three years such as drinks, foods.
Consumer services: these are non-tangible products sold to the public including insurance services, medical services, hotel accommodation, transport services.
Capital goods: these are physical goods used by industries for the production of other goods and services such as raw materials, tools, commercial vehicles and machines.
Capital goods are not finished goods, instead, they are used to make finished goods, unlike consumer goods which are finished goods with no future productive use.
It is important to note that the same good can be either consumer or capital good depending on how it is used.
Ifunanya Ikueze is an Engineer, Safety Professional, Writer, Investor, Entrepreneur and Educator.