The nature of business is a professional method of describing the overall purposes and existence of a company within a market sector. Generally, the nature of business has to do with the type of services rendered and products sold by a company. Also, it refers to the market sector in which the company carries out operations and the overall characteristics of the business.
Key Takeaways
- The four major categories of nature of business are by-product or service, by organizational setup, by organizational structure, and by business type
- The government sector, military sector, the technology sector, public sector, merchandising sector, private sector, etc. are some common examples of the nature of business
- The two major industry-standard business classifications are the Standard Industrial Classification (SIC) and the North American Industry Classification System (NAICS)
- The nature of the business statement must include regular processes, economic activity, utility creation, etc.
Categories Of Nature Of Business
We’ve provided the major categories of nature of business. Let’s check them out! When you own a business, it will operate in a particular market sector, and this is normally referred to as the business type. Nature of business categories includes; government sector, military sector, the technology sector, public sector, merchandising sector, private sector, international sector, the non-profit sector, and service sector. There may be certain subcategories within each of these sectors.
Business Classification
The industry classification of a business can be used to consider its nature. Besides, every business is classified into different categories by the government. The government then uses this classification for statistical and research purposes to track the development and actions of a business in the economy. There are two major business classifications in the industry. They include; the Standard Industrial Classification (SIC) and the North American Industry Classification System (NAICS). The U.S. Department of Labor uses the Standard Industrial Classification, while three neighborhood countries “Canada, Mexico, and the United States” use the North American Industry Classification System.
Nature Of Business Examples
To present a better description, let’s take a look at the examples of the nature of business by type of business.
Service Business
This is the type of business that delivers intangible services that meet the needs of the customers. Let’s look further into the sub-division of service business. They include; Law enterprises, Accounting companies, Public relations corporations, Medical practitioners, Software professionals, Marketing specialists, Banks, Salons, and Repair stores.
Merchandising Business
This is one of the most popular types of business that involves buying products at wholesale price and selling them at the retail price to make some profits. Examples of merchandising businesses can be grocery marts, convenience shops, distributors, and resellers.
Manufacturing Business
This is another business that focuses on combining different products to produce something new and unique to the market. What these businesses do is process raw materials into manufactured goods, which are then repackaged and marketed to the customers. Some manufacturing businesses purchase wood as raw material to manufacture chairs and other furniture.
Elements Of The Business That A Nature Of Business Statement Should Address
The following elements of the business should be addressed properly by the nature of the business statement.
Regular Process: One of the elements that distinguish a functioning business from mere hobbies is the regular process. In order to deliver the same result, businesses repeat a working procedure concurrently. Through this process, the business will maintain profitability while also providing great services or products.
Economic Activity: Generating massive income is one of the elements that every businesses or company have in common.
Utility Creation: For a company or business to consistently meet the needs or solve the problem of consumers, it has to deliver the right services and products at the right time and place. There’s no good reason for providing services or products that can’t be accessible to the consumers.
Capital Requirement: Every business needs credible capital to run efficiently. You’ll have to invest some money to employ workers, to get working equipment and other goods. These are the essentials required by a company to deliver top-notch services or products to customers.
Goods And Services: Every business provides something unique and credible to society to either meet a need or solve a problem. Not all businesses deliver the same services or products. Some deliver intangible services like computer and technology repairs, while others deliver tangible goods like cars and clothes.
Anticipated Risk: As a functioning business, the anticipated risk is something that can’t be avoided. Every business needs some level of investment of money and time. One common thing about running a business is that there are sometimes that you’ll make tons of money and other times, you lose some money. That’s how it works.
Profit-earning Motive: Every business owner’s primary aim is to make money while running the business.
Satisfaction Of Consumers’ Needs: Supply and demand are two factors that help businesses operate better. One of the reasons why you started a business was to meet the demands of your customers. Your business should meet and satisfy the needs of your customers consistently.
Social Obligations: The society in which a business finds itself should be impacted by it positively. A flourishing business will have positive impacts on its community at large. Take, for example, some businesses give back to the community through philanthropic measures or empowerment agendas.
FAQs
For a better understanding of the subject matter, we’ve composed a list of the frequently asked questions and answers. Let’s check them out!
What Are The Types Of Nature Of Business?
There are four major types of nature of business in today’s market, and they include; Limited Liability Company (LLC), sole proprietorship, corporation, and partnership.
How Do You Write The Nature Of A Business?
You need to follow our simple suggestions to come up with a simplified, complete description of your business. Firstly, you need to describe the legal establishment and ownership of the business. Then, identify the nature of your company. The next thing to do is compose a problem statement and describe your business operations.
What Is The Nature And Purpose Of Business?
Business activities are required to satisfy the endless needs and wants of humans. One of the purposes of business is to provide the world economy and society with the services and goods needed to flourish. All financial, marketable, and trading activities are part of a business.
Final Verdict
The nature of business means the purpose of a company is to deliver services and products to meet the needs of customers on the market. It refers to the market sector in which the business carries out procedures and the across-the-board peculiarities of the company. We’ve come to the end of this blog post. Hopefully, it helped you have a better understanding of the nature of business.
References:
1. https://opentextbc.ca/businessopenstax/chapter/the-nature-of-business/
2. https://theinvestorsbook.com/business.html
Last Updated on October 5, 2022 by Magalie D.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.
