BUSINESS

ORGANISATION
UNIT – 1 INTRODUCTION
Business – Concept, Nature and Scope, Business as a system, Business
objectives, business and environment interface, distinction between
business, commerce and trade, business ethics, social responsibilities
of business, CSR.
Definition
 Business is an economic activity which involves regular
production and exchange of goods and services with the
main purpose of earning profits through the satisfaction
of human wants.
 A Business Organization is an establishment formed to
carry on commercial enterprise.
Business = Industry + Trade + Commerce

 The term business includes trade, commerce and industry.

 Industries – It implies all those processes, which are responsible for the extraction and
production of goods which are sold for either ultimate consumption or for further
production.
 Trade - The process of buying and selling of goods, is called Trade.
- Domestic Trade - Activity that carried on within a country.
- Foreign & International Trade – Activity that carried on between two different countries.
 Commerce – To help trade, some facilities are needed, such as storing, grading, financing,
transporting and insuring.
MOTIVES OF BUSINESS

Ambition to earn

MOTIVES OF BUSINESS
profits

Market share

Ambition to provide
service

Survival
NATURE OF BUSINESS
 Dealing in goods and services for value - Business provides goods and
services to society. The goods may be for consumption or for production.
 Recurring nature of transactions – Transaction which occurs at regular
intervals. A single transaction of sale or purchase or any dealing casually does
not amount to a business transaction.
 Risk element - Business is full of risks. Most of the business decisions relate
to future and future is full of uncertainties. Some of these risks can be passed
on to others by means of insurance while some risks have to be borne by
businessman.
 To earn Profits - Profit is essential for the livelihood of the entrepreneur as
well as survival and expansion of the business.
 Social Obligations - It has some social duties, such as making openings for
work, managing authorized items and so forth.
Objectives of Business

 Economic objectives – 1. Profit making

2. Creation of customers
3. Increasing market share
4. Innovation

 Human Objectives – 1. Fair Return to Owners

2. Learning and Development Programs
3. Employee Welfare
4. Job Satisfaction
5. Fair wages for employees
 Social objectives – 1. Creation of employment opportunities
2. Producing and supplying high-quality goods and services
3. Fair remuneration to employees
4. Protection of environment

 National objectives – 1. Production as per national priorities

2. Proper Utilization of Natural resources
3. Payment of taxes and debts on time
4. Promote national self-sufficiency and exports

 Global Objectives – 1. Promotion of Equality

2. Exporting goods
Scope of Business / Component to Business
 Industry
 The process of extraction, production, conversion, and processing of products are described as industry.
 Types of Industries
1. Extractive Industries: These industries extract and draw out various products from natural resources.
Examples are Farming, mining, quarrying, hunting.
2. Genetic Industries: Genetic industries are engaged in breeding or reproduction of plants and animals.
Examples are Birds poultry farming, Cattle breeding, Fisheries.
3. Manufacturing: These industries are concerned with conversion and transformation of raw material into
finished or semi- finished goods.
4. Construction industries: These type of industries are engaged in construction of various projects like
construction of bridges, roads, buildings, etc.
5. Assembly Industry: The assembling industry brings together several component pieces to create a new product,
such as a television, automobile, or computer.
6. Service Industry: A service industry renders work or intangible services to consumers. Service industries are
used almost every day by the common person. A few examples of service industries include education, healthcare,
hospitality, and marketing.
Trade & Commerce

 Commerce - The process of buying and selling and all those activities which
facilitate trade, such as storing, grading, packaging, financing, insuring,
transporting are called commerce.

 Trade - Trade is the fundamental state of business activity and involves the sale
and purchase of goods and services.

 Aids to Trade – A smooth flow of goods from producers to consumers is made

possible by these auxiliaries to trade.
Inter-relationship between Trade, Commerce and
Industry
 All the three components cannot function in the absence of one another being
closely related to each other.
 Industry provides goods and services which are distributed through commerce.
No commercial activity is possible in the absence of industry and production.
 Commerce helps industry in distribution of product before and after
production through the purchase & sale of materials.
 Trade, involving buying and selling of goods, maintains a smooth flow of
commerce and thereby supports industry.
Difference between Trade, Commerce and Business
Business System

 A business system is a combination of policies, personnel, equipment and

computer facilities to co-ordinate the activities of a business organization.
 The system helps the business organization to achieve their goals.
 Business system decides how data must be handled and is methodically
processed.
 Business system decides how data must be handled and is methodically
processed.
 The meaning of the term ‘system’ can be best understood by taking the
example of human body system which in itself consists of various sub-systems
like digestive system, respiratory system, nerves system etc.
Sub-systems of a Business Organization

Production Finance Marketing

system system system

Research and
Personnel
development
system
system
Business Environment

 A business organization mainly functions under two sets of environment, namely

internal and external.
 The internal environment includes sub-system of production, finance, personnel,
marketing, etc.
 The external environment involves all the factors outside the business namely,
customers, government, state of economy, environmental factors, legal factors, etc.
 Types of Business Environment – 1. Economic Environment
2. Technological Environment
3. Financial Environment
4. Sociological Environment
5. Legislative Environment-
BUSINESS ETHICS

 Ethics literally means appropriate and moral behavior of an entity, that is

generally supported by principle of conduct.
 Business ethics is the appropriate conduct through business practices by the
enterprises while serving the wealth maximization objective. It is the study of
appropriate corporate culture, employee conduct, business policies and
practices regarding corporate business.
 Principles of Business Ethics
1. Integrity - To be honest and do the right thing.
2. Loyalty – Loyal to the company and duty.
3. Honesty – Provide correct Information.
4. Respect and Concern – Kind behaviour.
5. Fairness – Treat everyone equally.
6. Leadership – Able to handle responsibility.
SOCIAL RESPONSIBILITIES
 Social responsibility is the duty an organization has to act in a way that
benefits society and upholds its values.
 Internal social responsibilities are concerned with assuring due process,
justice, equity and morality in employee selection, training, promotion,
increasing employee productivity etc.
 External social responsibilities refer to such actions as stimulating minority
enter premiership, improving the balance of payments or training and hiring
hard core unemployed.
 Need for Social Responsibility
1. Society's expectations
2. Building Reputation
3. Avoidance of Government Action
4. Better Utilization of Resources
5. Long term Self Interest of Business
6. Growth of Consumer Base
Obligations of the business towards different groups
 To itself  To its creditors
1. Insure Stability of Business 1. Term of the Credit should be cleared.
2. Maximize the Output 2. Avoid Wastage of company’s money.
3. Utilization of Resources 3. Details of trade creditors in annual
accounts.
4. Creating Reserve

 To its employees
 To its shareholders
1. Equal-participation by employees
1. Adequate Return
2. Fair Wages
2. Fair Return on Capital Employed
3. Bonus
3. Disclosure of Relevant Information
4. Growth Opportunities
4. Protect the Assets
CORPORATE SOCIAL RESPONSIBILITY
 Corporate social responsibility (CSR) is a management concept that describes
how a company contributes to the well-being of communities and society
through environmental and social measures.
 The law prescribes every private or public limited firm, with a net worth of Rs
500 crore or a turnover of Rs 1,000 crore or net profit of Rs 5 crore, to spend
at least 2% of its average net profit of preceding three financial years on CSR
activities.
 Law further prescribes corporations to setup a CSR committee.
 Features Of CSR
1. Voluntary or mandatory
2. Theoretical and practical
3. Long-Term Interest
4. Goodwill
Components of Social Responsibility or Corporate Social
Responsibility

 Governance/ Legal responsibility - To avoid public punishment, companies should

strive to comply by the societal and governmental norms.
 Economic Responsibility – A business has main function of earning profits. an
under- performing business is a liability to the society as the scarce resource
committed to it is not used effectively and efficiently.
 Voluntary/Philanthropic Responsibility - It is a discretionary and moral
responsibility of the society to transform the valuable resources of the society
into valuable products.
 Ethical Responsibility- This comprises the company's actions that are expected by
society but not regulated by the law.
Important Topics (UNIT-1)
 Relationship between Industry, Trade and Commerce.
 Different Objectives of Business.
 Difference between Trade, Commerce and Business.
 Different types of Business environments.
 Business Ethics & its Principles.
 Corporate Social Responsibility.