business organisation.pptx

7/29/2019 business organisation.pptx

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Concept of Businessbusiness literally means to be busy

.however the meaning of business more specifically is that of

being busy to earn income . Thus business includes all

occupations in which people are busy earning income eitherby production or purchase and sale of exchange of goods

and services to satisfy the needs of other people.

Definition of Business- according to H . Haney , business

may be defined as humane activity directed towards

producing or acquiring wealth through buying and selling

goods .

Objectives of Businessgenerally , business men followsmultiple objectives . These objectives may be classified as

follows

(1)Economic objectives

(2)Social objectives


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(1)Economic Objectives-There are following economic objectives

(a)Earning profits

(b)Creation of customers

(c)innovation

(d)Optimum utilization of resources

(a)Earning profits- the major economic objective of a business is to

earn sufficient profits . Profits are needed for adequate reward to

the entrepreneurs and to provide funds for future capital. This isnecessary because of the following factors.

Return on investors

Means of livelihood

Reward for risk taking

Survival of business

Growth and expansion

Reputation


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(b)Creations of customers- the business can survive only if

there is demand for its goods and services. So it must aim at

satisfaction and winning of customers . Customers are

created through advertisement and sale promotionalactivities.

(c)Innovations- innovation is the soul of business in

modern times. Business cannot succeed without

innovations . Innovation means research and development.

The business should devise new methods to keep pace with

changing business scene.

(d)Optimum utilization of resources- business requires theuse of men, machines and materials which are considered

to be scarce resources. Every business is expected to make

the best use of these resources .


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(2)Social objectives- A business is a part of the society . It

should follow the ethical and moral norms of the society. A

business should tend to achieve the following social

objectives (a) To provide better quality products at reasonable prices

to the customers

(b) To create employment opportunities

(c) To develop healthy relations with the workers and their

unions.

(d) To work for the welfare of the workers.

(e) To pay taxes to the government honesty

(f) To develop healthy relations with the workers and their

unions.


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Characteristics of Business- the nature of

business can be described in terms of the

following characteristics (a)Economic activity

(b)Production or exchange

(c)Dealing in goods and services

(d)Regularity and continuity in dealing

(e)Profit motive

(f)Creation of utility


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(a)Economic activity- Business is an economic activity oroccupations it consist of producing and purchase and sale of goods

and services to earn income in the form of profits.

(b)Production or exchange- Every business is concerned withproduction and exchange of goods and services for value. Thus,

goods produced or purchased for personal consumption or for

presenting to others as gifts do not constitute business because there is

no sale or transfer for value. (c)Dealing in goods and services-Business deals in goods and

services .goods produced and sold may be (i)consumer goods such as

bread, cloth, cold drink, and sugar or (ii) capital goods such as tools

and machines. Services include supply of water , electricity and gasinsurance transportation etc.

(d)Regularity and continuity in dealing-regularity of economictransactions is the essence of business. There should be continuity or

regularity of exchange of goods and services for money.


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(e)Profit motive - The chief objectives of a business

is to earn reasonable profits. The survival of a

business depends upon its ability to earn profits .

Every businessman wants to earn profits to receive

interest on his capital and to reward himself for his

services.

(f)Creation of utility -All business activities createutilities for the society. Form utility is created when

raw materials are converted into finished goods and

services.


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(a) Extractive Industries- Extractive industries are those whichinvolve extraction of something from natural resources such asminerals from earth, fish from rivers and seas , timber from forest etc.the products of extractive industry can be directly used as raw material

for other industries.

(b) Genetic Industries -The industries involved in the activitiesof rearing and breeding of living organism i.e. birds, plants, animals

etc are known as genetic industry.

(2) Secondary Industries-Secondary industries make use ofproducts which are extracted and produced by primary industries astheir raw material and produced finished products . Secondaryindustries are further classified into two categories.

(a) Manufacturing Industries (b) Construction Industries (a) Manufacturing Industries- These industries are engaged in

the process of conversion of raw materials or semi finished goodsinto finished goods. Timber is converted into furniture , iron into steeletc. manufacturing industries are of the following types


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(i)Analytical Industry

(ii) Processing Industry

(iii) Synthetic Industry

(i)Analytical Industry- Under this , the basic raw materials areanalyzed and separated into different finished products. For example, separating refined crude oil into kerosene ,petrol, diesel, andlubricating oil, etc.

(ii) Processing Industry- The raw materials pass through various

processes to become a final product . The finished product of aprocess becomes the raw material of the next process and so on.

(iii) Synthetic Industry- The raw materials are combined togetherin the manufacturing process to make the final product . Plant soap,

plastics, yarn, cement, etc. (b) Construction Industries- These are concerned with creation

of infrastructure essential for orderly and efficient conduct of maineconomic activities . It involves construction of buildings, roads,dams, bridges, and canals.


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(3) Tertiary Industry- these are concerned with providing

services which facilitate smooth flow of goods services .

That is why it is also known as services industry. The

various types of services provided by tertiary industries are (a) transportit facilitates movement of goods from one

place to another.

(b) Banking- it provides credit facility to industrial and

trading firms

(c) Insurance- provides coverage from various types of

risks.

(d) Warehousing- it facilitates storage of goods produced byprimary and secondary industries.

(e) Advertising- it provides information about the goods and

services to the consumer


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(2)Commerce Industry- It is a link between producers, distributorsand consumers . It includes all those activities which are concerned with thetransfer of goods from the place of their production to the place of theirconsumption. Commerce industry classified into categories

(1) Trade (1) Trade- trade means purchase and sale of goods with profit motives .it

involves exchanges of goods and services between buyers and sellers.

Types of trade- Trade may be classified into

(a)Internal Trade (b)External Trade or International Trade

(a)Internal Trade- home trade or internal trade means buying andselling with in the boundaries of a country . Both the buyer and sellerbelong to the same country . Home trade may further be divided into

(i)Whole sale trade

(ii) Retail Trade

(i)Whole sale tradeit involves buying and selling in large quantities

(ii) Retail Trade- it involves buying and selling in small quantities.


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(b)External Trade or International Trade-foreign trade orexternal trade or international trade refers to trade between two

nations. It implies buying and selling of goods between two or more

countries. Foreign trade can be of three types.

(I)Import Trade

(II)Export Trade

(III) Entrepot Trade

(I)Import Trade-when the trader of one country buys the goodsfrom foreign countries it is known as import trade.

(II)Export Trade- when the trader of a country sells goods to aforeign country , it is known as export trade . E.g. , if Indian tea sells

tea to U.S.A. , it is export trade.

(III) Entrepot Trade- it involves import of foreign goods with aview to re export them and making a profit in the process . For

example , an Indian may import certain commodities from European

countries and Export them to Bhutan.


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Introduction

Social responsibility is a doctrine that claims that an entity whether it

is state, government, corporation, organization or individual has a

responsibility to society. This responsibility can be "negative," in thatit is a responsibility to refrain from acting, or it can be "positive,"

meaning a responsibility to act.

It can also imply that corporations have an implicit obligation to give

back to society.
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Social Responsibility

A businesss collective code of ethical behavior towards theenvironment, its customers, its employees, and its investors.

Ethical obligations to customers, employees, and the generalcommunity

The responsibility of a responsible agent who chooses toparticipate in a society and acquire the benefits thereof.

The responsibility to profitably serve employees andcustomers in an ethical and lawful manner. An organization's obligation to maximize its positive impact

and minimize its negative impact on society. The concern for the consequences of a person's or institution's

acts as they might affect the interests of others, including the

environment and involuntary customers. The concept that businesses should be actively concerned with

the welfare of society at large.
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"social responsibility" in his capacity as businessman?

he is to refrain from increasing the price of the product in

order to contribute to the social objective of preventing

inflation, even though a price in crease would be in the best

interests of the corporation.

he is to make expenditures on reducing pollution beyond the

amount that is in the best interests of the corporation or that is

required by law in order to contribute to the social objective of

improving the environment.

at the expense of corporate profits, he is to hire "hardcore" un-employed instead of better qualified available workmen to

contribute to the social objective of reducing poverty


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Social Responsibility Principal

Principle 1: Managers should acknowledge and actively monitor the

concerns of all legitimate stakeholders, and should take their interests

appropriately into account in decision-making and operations.

Principle 2: Managers should listen to and openly communicate with

stakeholders about their respective concerns and contributions, and

about the risks that they assume because of their involvement with the

corporation. Principle 3: Managers should adopt processes and modes of behavior

that are sensitive to the concerns and capabilities of each stakeholder

Principle 4: Managers should recognize the interdependence of efforts

and rewards among stakeholders, and should attempt to achieve a fairdistribution of the benefits and burdens of corporate activity among

them, taking into account their respective risks.

P i i l 5 M h ld k ti l ith th titi


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Principle 5: Manages should work cooperatively with other entities,both public and private, to insure that risks and harms arising fromcorporate activities are minimized and, where they cannot be avoided,appropriately compensated.

Principle 6: Managers should avoid altogether activities that might

jeopardize inalienable human rights (e.g., the right to life) or give riseto risks which, if clearly understood, would be patently unacceptableto relevant stakeholders.

Principle 7: Managers should acknowledge the potential conflicts

between (a) their own role as corporate stakeholders, and (b) theirlegal and moral responsibilities for the interests of stakeholders, andshould address such conflicts through open communication,appropriate reporting and incentive systems, and, where necessary,third party review.


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Business environment-the term business environment refers to allforces which are external to a business and beyond its control .

Business environment may be defined as all those conditions and

forces external to a business unit under which it operates..these

include customers, creditors competitors ,suppliers, government ,

socioculture organization, political parties, international

organizations etc.

Some of the forces environment which have considerable influence

on the business policies and practices are as follows

Frequent changes in government economic policies i.e. licensing

policy , monetary policy, taxation policy etc

Rapid technological changes as in computer industry introduction of

new models.

Political uncertainty e.g. unstable government , change in leadership

of the ruling party.

Increased competition in the market with the entry of multinational

brands in the country.

f b i i


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Nature of business environmentbusiness environment consistof the external forces which affect the functioning of a business

enterprise . These forces may be divided under two categories

.namely

General environment

Specific environment

General environment- general environment forces exercise their

influence on a business unit in an indirect manner , i.e. these includeeconomic , political, social, technological , and global it is also called

remote environment.

Specific environment- specific external environment forces influence

the working of a business firm directly these include customers ,

owners, and investors, suppliers, creditors, employees, trade unions,

competitors, government.


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Elements of a business environment-the

elements of contemporary business

environment can be grouped under thefollowing headings---

Economic environment

Politico environment

Sociocultural environment

International environment


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BUSINESSENVIRONMENT

ECONOMIC

ENVIRONMENT

POLITICOLEGAL

ENVIRONMENT

SOCIO CULTURAL

ENVIRONMENTINTERNATIONAL

ENVIRONMENT

E i i t i i t f t th


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Economic environment-economic environment refers to thenature of economy (capitalist , socialist, or mixed) economic policiesof the government , markets for material , lab our , capital etc .Business firms and institutions such as banks, insurance companies ,

transport companies and level of income of the people. The economic environment is greatly influenced by the government

through fiscal policies , economic controls , industrial policy andimportexport policy. for instance , if the government announces acut in the excise duty on the refrigerators, the sales of business firms

manufacturing refrigerators will go up. The main components of economic environment include the following

Planned outlay in private and public sectors.

Agriculture and industrial production trends

Service sector trends. Rates of growth of GDP and per capita income

capital market trends

Balance of payment and foreign exchange reserves.

Socio culture environment i lt i t i


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Socioculture environment- socio culture environment isshaped by social factors such as attitudes of people , cultural ,heritage, beliefs and customs of people , education system , consumersorganizations trade unions and other non government organizations.

For instance the nature of goods and services in demand dependsupon peoples attitude ,custom socio culture value , . In India theattitudes of people have changed with respect to food and clothing asa result of industrialization , employment of women in factories andoffices in increased level of education

The important elements of socio cultural environment in India includethe following

Share of working population in the total population

Caste and occupational structure

Family structure vs. nuclues families. Population shifts from rural to urban area.

Education system and literacy rates

Life styles of different segments of population

Customs , beliefs , values and attitudes of people

P liti l l i t li i l i i


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Politico legal environment-political environment comprisespolitical parties and their idology , type of government ,stability of

government policy towards business , government policy regarding

international business and multinational corporations.

For instance the operations of an MNC coca cola company were

discounted in the company , were discounted in India in the late 1978

because of the government policy restricting the growth of

multinational companies in the countries.

The important components of politicolegal environment include the

following

Prevailing political system in the country

Political institutions like government and allied agencies

Nature of political leadership and profile of political leaders.

The extent and nature of government intervention in business

Government policies related to imports and exports.

I t ti l i t i i l i i


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International environmentinternational environment is verysignificant for the firm engaged in imports and exports and also for

the firms having manufacturing operations in other countries .

International environment includes trade policies of foreign

governments, international organisations such as world trade

organisation(WTO) , international monetory fund(IMF) ,world bank

etc. and multinational corporations .

World Trade Organization


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World Trade Organization

WTO is the international organization dealing with the global rules of

trade between nations.

Its main function is to ensure trade flows as smoothly, predictably &

freely as possible

Heart of the systemknown as the multilateral trading systemis the

WTOs

Agreements, negotiated and signed by a large majority of the worlds

trading nations, and ratified in their parliaments.

Goal is to improve the welfare of the peoples of the member countries.

The basic purpose of the WTO is to promote international trade

without any discrimination-1

st

Jan, 1995 The World Trade Organization came into being in 1995. One of the

youngest of the international organizations, the WTO is the successor

to the General Agreement on Tariffs and Trade (GATT) established in

the wake of the Second World War.

F ti f WTO


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Functions of WTO

WTO shall facilitate the implementation, Administration

and operation of the plurilateral trade agreement.

WTO shall provide a forum for the negotiation among itsmembers concerning their multilateral trade relations

WTO shall administer the understanding on rules and

procedures governing the settlement of disputes WTO shall administer the trade policy review mechanism

and

WTO shall co operate as appropriate with IMF AND IBRD

and with the affiliated agencies

International Monetary Fund


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International Monetary Fund

IMF is a post war international monetary institution.

It came into existence to promote economic and financial cooperationamong member countries

The International Monetary Fund (IMF) is an international organization

that oversees the global financial system by following the macroeconomicpolicies of its member countries, in particular those with an impact onexchange rates and the balance of payments.

It is an organization formed to stabilize international exchange rates andfacilitate development.[2]

It also offers financial and technical assistance to its members, making it aninternational lender of last resort.

Its headquarters are located in Washington, D.C., USA.

The International Monetary Fund was created in 1944 [1], with a goal tostabilize exchange rates and assist the reconstruction of the world'sinternational payment system.

Countries contributed to a pool which could be borrowed from, on atemporary basis, by countries with payment imbalances. (Condon, 2007)

The IMF describes itself as "an organization of 185 countries (Montenegrobeing the 185th, as of January 18, 2007), working to foster global monetarycooperation, secure financial stability, facilitate international trade, promote

high employment and sustainable economic growth, and reduce poverty".

Objectives of IMF
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Objectives of IMF

Avoid the competitive devaluation and exchange control

Establish and maintain currency convertibility with stable exchange

rate

To promote international monetary cooperation

To facilitate balance growth rate

To lend confidence to members by making the funds resources

available

International Bank for Reconstruction and Development


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p

IBRD was established to provide long term assistance for the reconstruction anddevelopment of economies of the economies of the member countries

The International Bank for Reconstruction and Development (IBRD) is institutionsthat comprise the World Bank Group.

The IBRD is an international organization whose original mission was to finance thereconstruction of nations devastated by World War II.

Now, its mission has expanded to fight poverty by means of financing states.

Its operation is maintained through payments as regulated by member states.

It came into existence on December 27, 1945 following international ratification ofthe agreements reached at the United Nations Monetary and Financial Conference

ofJuly 1 to July 22, 1944 in Bretton Woods, New Hampshire. The IBRD provides loans to governments, and public enterprises, always with a

government (or "sovereign") guarantee of repayment subject to general conditions(pdf).

Commencing operations on June 25, 1946, it approved its first loan on May 9, 1947($250m to France for postwar reconstruction, in real terms the largest loan issued

by the Bank to date). The IBRD was established mainly as a vehicle for reconstruction of Europe and

Japan after World War II, with an additional mandate to foster economic growth indeveloping countries in Africa, Asia and Latin America. Originally the bank focusedmainly on large-scale infrastructure projects, building highways, airports, andpower plants.
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Functions of IBRD

To assist in the reconstruction and development and

development of its member countries

To promote private foreign investment by means of

guarantees

To promote long range balanced growth of internationaltrade and the maintenance of equilibrium in the BOP of

member countries

International Finance Corporation (IFC)


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International Finance Corporation (IFC)

The International Finance Corporation (IFC) promotes sustainableprivate sector investment in developing countries as a way toreduce poverty and improve people's lives.

IFC is a member of the World Bank Group and is headquartered inWashington, DC.

It shares the primary objective of all World Bank Groupinstitutions: to improve the quality of the lives of people in itsdeveloping member countries.

Established in 1956, IFC is the largest multilateral source of loanand equity financing for private sector projects in the developingworld.

It promotes sustainable private sector development primarily by:

Financing private sector projects and companies located in the

developing world. Helping private companies in the developing world mobilize

financing in international financial markets.

Providing advice and technical assistance to businesses andgovernments.

Liberalization : Liberalization refers to relaxation of previous
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Liberalization : Liberalization refers to relaxation of previousgovernment restrictions usually in areas of social and economic

policies. Thus, when government liberalizes trade it means it has

removed the tariff, subsidies and other restrictions on the flow of

goods and services between countries.

This has been done by the government through

Freedom in fixing the prices of goods and services

Removal of restrictions on the movement of goods and services

Reduction in tax rates and lifting of unnecessary controls over the

economy.

Simplifying procedure for imports and exports.

Making it easier to attract foreign capital and technology to india

Privatisation: It refers to the transfer of assets or service functions


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Privatisation: It refers to the transfer of assets or service functionsfrom public to private ownership or control and the opening of the

hitherto closed areas to private sector entry. Privatisation can be

achieved in many ways- franchising, leasing, contracting and

divesture Conditions for privatisaton.

Globalisation: Globalisation means integrating the domestic

economy with the world economy. It is a process which draws

countries out of their insulation and makes them join rest of the world

in its march towards a new world economic order. Cases forGlobalisation It is argues that Globalisation of under developed

countries will improve the allocative efficiency of resource, reduce the

capital output ratio and increase labour productivity, help to develop

the export spheres and export culture, increase the inflow of capital,updated technology that gives a boost to the average growth rate of

the economy.

Forms of business organization


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Forms of business organization-

an economic activity involves regular production or

purchase and sale of goods and services with the

object of earning profit through the satisfaction of

humane wants . The different kinds of organisations

as stated.

Sole proprietorship

Joint Hindu family business

Partnership

Co-operative society

Joint stock company

Sole proprietorship-that form of the business organization which


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Sole proprietorship-that form of the business organization whichis started and run by one person who bears profits and losses of it.

Merits of Sole proprietorship- a sole proprietorship firm enjoys the

following benefits

Easy formation- the formation of a sole trader ship concern is easier

as compared to other forms of organizations . A person with small

amount of capital can start the business without undergoing much

legal formalities.

Quick decision making- sole trader ship facilitates quick decision

making and prompt action as the sole trader has exclusive control over

his business.

Secrecy- it is easy to preserve secrecy in business in case of sole

proprietorship . The important clues of business can be kept as closely

guided secrets by the proprietor.

Flexibility- the sole trader is free to carry out any business as the

situation demands . The flexibility is available because the sole trader

is the sole owner and he has invested a small amount of capital.

Demerits of sole proprietorship- there are following drawbacks


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Demerits of sole proprietorship- there are following drawbacks

Limited capital-the capital which a sole trader can raise are limited.

He can either depend on his personal resources or his borrowing

capacity . The borrowing capacity depends on his assets and

creditworthiness .

Lack of managerial skill- all the managerial functions , which are

essential for the successful operation of a business are performed by

the sole trader himself. The individual may not be able to perform all

the managerial functions because of limitations of time ,energy , skill, and imagination.

Unlimited liability- the liability of the sole trader is unlimited. The

business creditors can even recover their debts from the personal

assets of the proprietor.

Limited opportunities- since the scale of operations is relatively

small, the sole trader cannot avail of the benefits of all business

opportunities . Since there is one and the same person who provides

capital and management .

Joint Hindu family business if the business set up by a


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Joint Hindu family business- if the business set up by aperson is carried on by male members of his family after his death , it

is called joint Hindu family business.

The salient features of joint Hindu family business are outlined below

Male members

Membership by birth

Registration

Dissolution of business

Rights

Governed by Hindu law

Continuty


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business organisation.pptx

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