What is business? 

What images come to your mind when you think of business?

Many people probably think of business executives flying in corporate jets to exotic places to "seal deals" for their companies.   Others might envision corporate board rooms and polished managers making sales and market share presentations.  Still others might think about local mom and pop stores that have anchored the economies of communities for years.

All of these images are parts of business--they are results of good business.  In reality, the core concepts of business are quite simple.  A business is a person or group of people who offer something "for sale" to others outside the organization.  Businesses exist to exchange the things they specialize in with others outside the organization for money.  By specializing in a few of the total number of things needed by people in a society, businesses and business people are able to develop expertise and offer their services or products to others (who specialize in other things) in a common marketplace.

The key to business success is to offer something that is wanted by people in the marketplace and to charge prices for the "thing" that cover costs and provide profit.  If their are not enough people who regularly trade with you for your service, or your costs are too high in relation to the amount of money that you can earn from your offering, you might not be able to continue the business.   When the amount of money that you make from your venture is less than what you could make working somewhere else, it might be to your advantage to close the business and work somewhere else. 

Products and Services

Businesses exist that offer products and services to others.  Products are tangible (you can touch them).  They can be produced, shipped, inventoried, and sold in different locations from where they were made.   Products tend to be rather standardized in their production (many products are identical or nearly identical).  Examples of products include: lightbulbs, automobiles, lawnmowers, clothes, computers, soft drinks, pencils, etc.

Services are not tangible.  They are things that are provided to and for others.  Services cannot be shipped and inventoried--they are produced and consumed at the same times.  They are provided in the presence of the consumer and they are customized for the consumer.  Examples of services include: haircuts, legal advice, medical services, pool cleaning, lawn care, etc.

Some businesses provide hybrid product-service offerings.   Restaurants prepare and serve customers food--the food is a product and the preparation and serving is a service.

Luxuries and Necessities

Products and services can be necessities or luxuries.   Necessities are those things that are "needed" by people in a marketplace.  When prices of necessities increase, the demand for those things usually changes very little.  When staple food prices change, the consumption of those foods change very little.  Because the things are needed, people must pay the prices that are charged.  Basic clothing and shoes, food, and transportation are things that are needed in our society.

Luxuries are things that go above and beyond what is needed.  Manicures and massages, opulent cruises and vacations, and jewelry are examples of luxuries.  Automobiles, clothing, and food can also be luxuries--when they exceed what is considered necessary.  Expensive sports cars do fulfill basic transportation needs, but they also probably fill ego and esteem needs that extend beyond the basic necessities.  Fine dining and extravagent clothing likewise provide benefits to the consumer that extend beyond basic needs.  Luxury products and services tend to be more price sensitive than necessities.  When the prices a luxury increase, demand for the luxury tends to drop to a greater degree than for necessities.

Business Opportunities are Everywhere

Anything that is wanted or needed by people in a society can be the source of a viable business--there just has to be a big enough market and costs need to be covered.  Some businesses provide glamorous goods and services, others do not.  Selling luxury automobiles and jewelry might be profitable opportunities, but so too can providing janatorial services and septic tank cleaning.  Again, anything that is wanted or needed by people in a society can be a business opportunity--where entrepreneurs can make money by filling the needs of society.

Conclusion

Business is about exchanges with others in the marketplace.  When businesses offer things that are desired by people in the marketplace (and can provide the things where people want to consume them and at prices that are deemed attractive in the marketplace--and that cover costs and provide an acceptable return), they can be successful.  Corporate jets, board room meetings, and mom and pop shops will not exist if they don't have ongoing and profitable exchanges with others outside their organizations.

Opportunities for businesses exist throughout society (from caring for people before they are born to helping their grieving families after they die--and everything in between).  Businesses can offer products and services and luxuries and necessities.  Entrepreneurs can start businesses by improving the ways that products and service are currently provided or they can develop and offer new products and services that have not before been offered in the marketplace.   Either way, business people can be successful if they plan properly, effectively manage their operations, and adapt to changes in the marketplace.