Class 11 Business Studies

Nature and Purpose of Business

Business Profession Employment

For starting a business the decision of entrepreneur and other legal formalities are required.For starting a profession one needs the certificate and membership of a professional body.Appointment letter and service agreement are necessary to start employment.
Business activity involves provision of goods and services.Nature of work involves rendering personalised and expert services.An employee has to perform work as per contracts or rules of service.
No minimum qualification is necessary for starting a business.For a profession; expertise and training in the related field is necessary.Salary or wages is the reward of an employment.
Profit earned is the reward of business.Professional fee is the reward of a profession.No capital investment is required to start working as an employee.
Capital investment is as per the size of the business.Limited capital is needed for starting a profession.Transfer of interest is not possible because of intangible nature of an employee's expertise.
Transfer of interest is possible in business; with some formalities.Transfer of interest is not possible because of intangible nature of professional expertise.There is fixed and regular income and hence there is no risk in empployment.
Profits are uncertain and irregular in a business and risks are always involved.Risk is least as fee is generally regular.An employee needs to follow the norms of behaviour laid down by the employer.
No prescribed code of conduct is necessary for a business.Professional code of conduct needs to be followed in a profession.

Importance of Profit for Business

  1. It is a source of income for business persons
  2. It can be a source of finance for meeting expansion requirements of business
  3. It indicates the efficient working of business
  4. It can be taken as society’s approval of the utility of business
  5. It builds up the reputation of a business enterprise.

Market Standing

Position of a business enterprise vis-à-vis its competitors is called market standing. Market standing gives strong footing and better business compared to competitors. A brand leader is in a position to earn more profit.


An innovative product gives an edge to a business enterprise. No business enterprise can survive in the market for long without innovation. Apple’s products are very good examples of innovation. The iPad launched by Apple was nothing but an MP3 players which was already existing in the market. Apple made intuitive design and interface for its MP3 player and created an altogether new niche for this product. All of this could be possible because of innovation.


Productivity means taking maximum output from available resources. A higher productivity can lead to a higher profit. As mentioned earlier, a higher profit indicates better productivity of a business organization. This can be achieved by various means; like better resource utilization, better human resource management and better marketing strategies.

Physical and financial resources

A business enterprise always needs physical and financial resources at regular intervals. A part of profit always needs to be ploughed back into the business to acquire these resources.

Earning profit

Profit earning is very important to continue the business in the long run. No business can survive for long term in the absence of profit.

Manager performance and development

Big businesses cannot be run by a single person, rather needs managers to manage different aspects of business. Managers’ performance and development are important goals of the business. Continuous management development is the key for sorting out succession issues in an organization.

Worker performance and attitude

Workers need to perform to increase productivity in the business. Worker’s attitude is also important for business.

Social responsibility

A business organization does not work in vacuum. It has some social responsibilities as well. For example; protection of environment and employment generation are important social responsibility of a business organization.