Business Activity

Business Acitivity is any action undertaken by individuals or companies, such as buying, selling, marketing, or investing, for the purpose of generating profits or developing economic opportunities.[1]

Classification of Business Activities[2]
Business activities may broadly be classified into two categories namely (A) Industry and (B) Commerce. Industry involves production of goods and services whereas commerce is concerned with the distribution of goods and services.

Business Activity Classification

  • Industry: Industry is concerned with the making or manufacturing of goods. It is that constituent of production which is involved in changing the form of goods at any stage from raw material to the finished product, e.g., weaving woolen yarn into cloth. Thus, industry imparts ‘form utility’ to goods. The goods produced may either be used by other enterprises as raw materials for further production, they are known as “producers goods”. The production of plant, machinery equipment etc. are, examples of producers’ goods. When goods are finally used by consumers they are known as consumers’ goods. The examples of such goods are cloth, bread, groceries, drugs, etc. An enterprise may produce materials which will further be processed by yet another concern for converting them into finished goods. These goods are known as intermediate goods. The examples of this category are—plastics, rubber, aluminium, etc. Industries may be classified as to the types of goods produced, scale of investment and type of technology employed.
    • On the basis of type of goods produced:
      • Primary and Genetic Industry: Genetic industry is related to the re-producing and multiplying of certain species of animals and plants with the object of earning profits from their sale. Nurseries, cattle breeding, fish hatcheries, poultry farms are all covered under genetic industry. The plants are grown and birds and animals are reared and then sold on profit. No doubt nature, climate and environment play an important part in these industries but human skill is also important.
      • Extractive Industry: The extractive industry is engaged in raising some form of wealth from the soil, climate, air, water or from beneath the surface of the earth. These industries are classified into two categories. In the first category, workers merely collect goods already existing. Mining, fishing, and hunting is covered in this category. In the second category’, the goods are to be produced by the application of human skill, i.e., agriculture and forestry. Extractive industries supply basic raw materials that are mostly the products of the soil. Products of these industries are usually transformed into many useful products by manufacturing industries.
      • Construction Industry: This industry is engaged in the creation of infra-structure for smooth development of the economy. It is concerned with the construction, erection or fabrication of products. These industries are engaged in the construction of buildings, roads, dams, bridges, and canals. These industries use the products of other industries such as cement, iron, bricks and wood, etc. Engineering and architectural skills play an important part in construction industry. Engineering and constructing firms are organised for undertaking operations of construction industry.
      • Manufacturing Industry: This Industry is engaged in the conversion of raw materials into semi­-finished or finished goods. This industry creates form utility in goods by making them suitable for human use. Most of the goods which are used by consumers are produced by manufacturing industries. These industries supply machines, tools and other equipment’s to other industries too. The products of extractive industry are generally used as raw materials by manufacturing industry which may be classified as follows:
        • Analytical Industry: In this industry, a product is analysed and many products are received as final products. In the processing of crude oil we will get kerosene, petrol, gas and diesel, etc.
        • Processing Industry: In this industry a product passes through various processes to become a final product. The finished product of one process becomes the raw material of the receiving process and soon the final process produces the finished goods. In case of cotton textiles, cotton passes through ginning, weaving and dyeing processes to become cloth. Sugar industry and paper industry are other examples of processing.
        • Synthetic Industry: In this industry many raw materials are brought together in manufacturing process to make a final product. In manufacturing cement, rocks, gypsum, coal etc. are required. Soap making, paints are the other examples of synthetic industry.
    • On the basis of size and investment:
      • Large Scale Industry: Though there may not be any hard and fast rule for such classification but government has fixed certain limits on investments which differentiate between large scale and small scale industries. At present the industries investing more than Rs. 3 crore in plant and machinery in manufacturing units and in ancillary units are covered in large scale sector. Large scale units are in a position to use latest methods of production and economise on various inputs.
      • Small Scale Industry: The units having an investment upto Rs. 1 crore in plant and machinery are small units. A small scale unit has the disadvantage of lower production and comparatively higher cost of production.
    • On the basis of technology employed:
      • Heavy Industry: The industry engaged in the production of machinery, steel, power generation are called heavy industry. These units need heavy investments and employ complex technology in production.
      • Light Industry: Industries engaged in producing consumer goods etc. arc called light industries. The production technology is simple and machinery used is inexpensive.
  • Commerce: All those activities which are connected with taking goods and services from producers to users come under the purview of commerce. The goal of commerce is to ensure a proper flow of goods and services for the benefit of both producers and consumers. People are able to buy goods produced anywhere in the world with the help of commerce. Commerce activities may precisely be described as follows:
    • Commerce is related to the activities dealing with distribution and exchange of goods and services. These activities relate to trade aspect
    • Commerce covers all these activities which smoothen or help trade. These activities are transport, banking, insurance, warehousing, advertising, etc. These are ancillary services and are called aids to trade.
    • Commerce is a part of business. Business is a wider concept and includes industry too.
    • Commerce is a part of economics. Economics is a study of human beings as consumers and producers and it has a much wider scope than commerce.

See Also

Business-to-Business (B2B)
Business Application
Business Cycle
Business Mission
Business Vision
Business Model
Business Goals
Business Objective


  1. Definition - What does Business Activity Mean? Investorwords
  2. Classification of Business Activities Your Article Library