Basic Functions of the Business World

Defined business as all those activities involved in providing the goods and services needed by people: In order to provide goods and services, businesses must first acquire raw materials; then use them to manufacture products; and then distribute products to consumers who desire them. Thus, it's clear that the most basic functions of business are:

1.  Acquiring raw materials
2.  Manufacturing raw materials into products
3.  Distributing products to consumers

          Some examples will illustrate these three basic functions of business. For instance, before we can buy a pair of tennis shorts, raw material - either natural or synthetic - have to be acquired; the raw materials have to be manufactured first into cloth and then into tennis shorts; and then the shorts have to be distributed to our local stores. Or consider automobiles. Before we can buy one from our local dealer, raw materials must be gathered and manufactured into steel, aluminum, plastic, glass, and so on; then these materials must be manufactured into an automobile; and then completed car must be shipped to local dealers.
          This analysis of the basic functions of business applies to services as well as to material products. For example, the raw material that produces doctors, engineers, lawyers, and accountants is their education; they convert that education into services by opening offices to the public; and from those offices they distribute their services to those who need or desire them.
          These examples show that the production of people or services is not necessarily all done by a single firm. Cloth may be manufactured by one firm and then sold to another firm that manufactures tennis shorts. Automobile companies buy finished steel and other products from manufacturers that have already converted raw materials, such as basic ore, into usable products. And even the services of a doctor require a series of steps - from one school to another, from one area of training to the next - until the final service is "manufactured" and made available to patients. In all these examples, the three basic functions of business are carried on until a final product is made and is delivered to consumers.
          But the basic functions don't tell the whole story. Even though every type of business can be identified with achieving the main goal of providing goods and services needed or desired by people, we still must identify the key segments of the business word in order to get an overview of its total operation.