Classification of Business Activities


Meaning of Business Activities

Business activities comprise all such activities which all are carried out with the sole purpose of creating profits. It means the economic activities linked directly or indirectly with the creation of goods and services, and making them available to clients. Business activities are performed on daily basis with consistency for raising the value of the enterprise and generating revenue. Entrepreneurs or business owners always make efforts toward optimizing these activities so that expenses can be easily covered, leaving behind a favorable amount of profit. It requires continuity in transactions and therefore no isolated transaction related to the exchange of goods and services will be considered as business activity.

Business activities are generally of three types which are: – operating activities, investing activities, and financing activities. Operating activities are normal operations performed by a company such as the production and sale of goods and services to customers. Investing activities follow the operating activities in their order of importance. They are concerned with the acquisition and disposal of long-term assets like the purchase or sale of equipment, property, and factories. Whereas, financing activities are one which has direct influence over the capital structure of the company. These encompass activities related to the flow of cash and cash equivalents across the business enterprise.

Classification of Business Activities

The business activities are broadly classified into 2 categories: – 

  1. Industry
  2. Commerce


Industry relates to economic activities which are concerned with the conversion of raw materials into beneficiary products. Manufacturing, processing as well as mining of goods falls under this category. An industry creates both capital and consumer goods like bread, butter, sugar, radio, and cloth. The capital requirements of a business are high resulting in a large amount of turnover and involving great risk. 

Industry imparts ‘form utility’ to products. This is because of its nature being involved in changing the form of products at any stage ranging from raw material to finished goods. Industrial goods may be either used as raw material by other enterprises for further manufacturing. They are termed as ‘producer goods’ and include manufacturing of machinery, plant, equipment, etc. On the other hand, when goods produced by industries are directly consumed by people are defined as consumer goods. Examples of consumer goods are bread, groceries, cloth, medicines, and many more.

Industries are further categorized on the basis of goods manufactured, the scale of investment, and the kind of technology utilized.

On the basis of goods manufactured, the industries are of 4 types which are as listed below: 

  • Primary/Genetic Industry- Genetic industry is related to rearing of animals, cattle and birds or growing of plants, vegetarian and flowers in order to make profits by selling them. Poultry farming, fish hatcheries, cattle breeding and nurseries are all termed as genetic industries. Different species of animal and plants are re-produced and multiplied under this industry for selling them on profit.
  • Extractive Industry- Extractive industries are one which draws out product from natural sources like air, water, soil, climate and from below the earth surface. Basically, there are 2 types of extractive industries. In first type, already existing goods are collected are workers such as fishing, mining and hunting of animals. On the hand, human skills are required for extracting goods under the second category of extractive industries. This includes agriculture and forestry where goods are produced by humans using both technology and their skills. 
  • Manufacturing Industry- Manufacturing industry are those industries which are involved in transformation of raw materials into finished or semi-finished products. A form utility is created by this industry in goods in order to make them ready for people use. Manufacturing industries creates the majority of goods which are consumed by people. Machines, tools and several other kinds of equipment are supplied by manufacturing industries. 
  • Construction Industry- Construction industry involves creation of infra-structural facilities across the nation thereby leading to economy development. Construction of roads, dam, buildings, bridge and canals are covered under the construction industry. These industries employ products of other industries like wood, cement, iron and bricks for creating their products. 

On the basis of investment size, industries are of 2 types which are: – 

  • Large-scale Industry- Large-scale industries are those industries as defined by government, which invests more than Rs.3 crores in their set up of plant and machinery, and manufacturing unit. These industries employ large number of workers and carry out production activities on large scale. Large-scale industry utilized the efficient and latest method of production.
  • Small-scale Industry- All those industries which invest an amount of up to Rs. 1 crore in their plant and machinery are termed as small-scale industry. These industries have higher cost of production as compared to large-scale industry due to their demerit of lower production level.

On the basis of technology employed, there are 2 categories of industries.

  • Heavy Industry- Heavy industries are those industries which are involved in manufacturing of heavy products such as machinery, iron, steel and power generation units. Large amount of investment value as well as complex technology in production are much needed by heavy industries.
  • Light Industry- Industries which are involved in production of people consumable goods are defined as light industries. They do not require much investment as well as high-tech machinery.


The term ‘commerce’ is composed of all such activities which are concerned with transferring goods or services from manufacturers to consumers. The main aim of commerce is to regulate a continuous and uninterrupted flow of goods between producers and customers. Commerce is the only one which makes it possible for people to buy goods from any part of the world. Every activity related to distribution as well as the exchange of products comes under the scope of commerce. 

Commerce has mainly two principal heads which ensure its smooth functioning: Trade and Auxiliaries to Trade. 

  • Trade- Trade refers to the channel in between manufacturers and consumers which makes timely movement of good possible. It works toward distribution of good and services. Trade is further categorized into 2 types: Internal trade and External trade. 

Internal trade means trading of product or services internally within the geographical limits of country. It is also called as Domestic trade. External trade is one under which goods are traded outside the geographical confinements of nation. External trade is also defined as foreign trade. 

  • Auxiliaries to Trade- Auxiliaries to trade are additional activities which facilitate the smooth functioning of trade. These are activities that manage and synchronize the buying and selling procedure for both buyers and sellers. Various kind of auxiliaries of trade are warehousing, insurance, communication, advertising, transportation, banking and finance.


Business activities in today’s time play an efficient role in the smooth functioning and development of the economy. The demand for merchandise is rising day by day with the growth in population. The business activities need to be performed in an uninterrupted manner for satisfying the increasing demand of customers.