Business Enterprise: Meaning, Types & Examples | StudySmarter

What’s the difference between an organisation that provides goods or services for commercial purposes and one that gives them for free? What are some of the main functions of a business enterprise? What makes a business enterprise, and what types of business enterprises are out there? Read on to find the answers to these questions and more as we probe the topic of business enterprise.

Business enterprise meaning

To understand the meaning of the term business enterprise, you first have to understand the difference between a social enterprise and a business enterprise.

An enterprise can be defined as undertaking an activity that requires a lot of effort to develop.

A social enterprise involves helping others without receiving a commercial benefit in return. On the other hand, a business enterprise consists of producing goods or services in exchange for commercial and financial benefits.

Examples of business enterprises include all the companies you pay to receive a good or service from. These may include your local shop or your Netflix subscription, both of which are business enterprises.

A business provides goods and services to what we call customers. Goods refer to physical goods that usually go through a production process. This may involve bicycles, chocolate, or whatever item you pay to receive.

Other businesses provide services instead of physical goods; this involves intangible products, such as a private lesson from a math teacher or personal trainer.

All these goods and services are delivered to customers. A customer refers to anyone who purchases these products. Consumers use the product or service but do not necessarily buy them.

For instance, if your parents pay for your Netflix subscription, you are the consumer and your parents are the customer. If they also watch Netflix with you, they become consumers and customers simultaneously.

The business enterprise depends on customers, goods, and services for its very existence. These three components are intrinsically linked to the meaning of business.

Types of business enterprises

There are many types of business enterprises providing a wide variety of services or products. Business enterprises can be classified into three main categories, according to the production stage:

Business Enterprise: Primary sector

The primary sector involves businesses that are at the beginning of the production processes. These businesses make sure that the raw materials are created and produced to be used later by other companies.

Primary companies are mostly made of business-to-business (B2B) models, where you have one business supplying to the other. For example, oil exploration companies produce oil that retail companies sell, or other businesses use for production processes. Restaurants use agricultural goods produced by this sector to provide meals to their customers.

Primary sector example – Oil Pump, Wikimedia Commons

Business Enterprise: Secondary sector

The secondary sector consists of business enterprises at the second step of the production process. These businesses use raw materials produced from the primary sector to develop into new goods and services. For example, car manufacturers use raw materials to build new cars, which they later supply to customers.