Welcome

Business Perspectives

 Ravikeerthi JV

Associate Professor
1. Business Perspectives (BMA) 2. Business Mathematics & Analytics

BE (Electrical): RV College of Engineering MBA: Canterbury Christ Church University (London) M Phil: Sri Vinayaka Mission University

DIM, DHRM (IGNOU)

Age: Nearing 50 years

What is Business ?

What is Business?
Business is an activity

intended to obtain profit

What is Business ?
A business (also known as a company,

enterprise, and firm) is a legally recognized organization designed to provide goods or services, or both, to consumers, businesses and governmental entities normally for profit.

Types of Businesses
One of the most common

focuses on the primary profitgenerating activities of a business: 1. Manufacturers produce products, from raw materials or component parts, which they then sell at a profit. 2. Service businesses offer intangible goods or services and typically generate a profit by charging for labor or other services provided to

3. Agriculture and mining businesses 4. Financial businesses 5. Information businesses 6. Real estate businesses 7. Retailers and Distributors

8. Transportation businesses
9. Utilities produce public services, such

as heat, electricity, or sewage treatment, and are usually government chartered.

Indian companies listed in the Forbes Global 2000 ranking for 2009 (47). World Rank Company Industry 1. 121 Reliance Industries Oil & Gas, Petrochemicals 2. 150 State Bank of India Banking 3. 152 Oil and Natural Gas Corporation Oil & Gas Operations 4. 207 Indian Oil Corporation Oil & Gas Operations 5. 317 NTPC Electricity generation 6. 463 Tata Steel Steel 7. 508 Bharti Telecommunications 8. 582 Steel Authority of India Limited Steel 9. 689 Reliance Communications

What are the Objectives of the study of the course of Business Perspectives ? The course aims to provide basic concepts and knowledge with regard to a business enterprise, its various functional areas and its Environmental Interfaces.

Business Perspectives

Module no.

Topic

Module 1

Concept, Nature & scope of Business enterprise;

Forms of Business enterprise; Business objectives, Business as a system

Business and Environment Interface; Business objectives, Business ethics & values

Business code of conduct and corporate governance

Module 2

Key indicators of economic perspectives; GDP;Sectoral shares

Agricultural output; Electricity generation, Rate of inflation; money supply.

Foreign trade, Foreign reserves,

Exchange rates

Economic infrastructure, Social indicators

Module 3

Industrial & regulatory perspective of business;

Regulatory role of government impact of political environment on business.

Industrial policy and performance, public sector, privatization, government & business interface

Industrial production, Industrial diversification, SMEs policy & development,

Incentives for SSIs, Industrial sickness,

Role of BIFR & status of entrepreneurship in India

Module 4

Social & technological perspectives, Social responsibilities of business, environmental cost audit

Technology policy, technology transfer, energy recourse management, R&D environment.

Incentives for technologyical research, information system for technology development.

Module 5

Monetary & fiscal perceptives, Monetory policy, Impact on business, Instruments of monetary policy Fiscal policy,

Union budget, State budget,

Finances of union & state, Finance commissions

Module 6

Global environment, Meaning & levels of globalization,

Factors influencing globalization, effects of globalization,

Concept of MNCs & TNCs International business salient, features of Exim policy

International business risk, recent growth trends in major industrial segments.

Nature and Scope of Business

The etymology of "business" relates to the state of

being busy either as an individual or society as a whole, doing commercially viable and profitable work. Businesses are predominant in capitalist economies. Most businesses are privately owned. A business is typically formed to earn profit that will increase the wealth of its owners and grow the business itself. The owners and operators of a business have as one of their main objectives the receipt or generation of a financial return in exchange for work and acceptance of risk. Notable exceptions include cooperative enterprises and state-owned enterprises. Businesses can also be formed not-for-profit or be state-owned.

Forms of business enterprise

There are many types of business entity

defined in the legal systems of various countries. These include corporations, cooperatives, partnerships, sole traders, limited liability company and other specialized types of organization. Some of these types are listed below, by country.

Basic forms of ownership

I.
i. ii. iii. iv.

Public Sector
Ministry Departmental undertakings Central boards Limited companies

II Private sector enterprises

1.

Sole proprietorship: A sole proprietorship is a business owned by one person. The owner may operate on his or her own or may employ others. The owner of the business has personal liability of the debts incurred by the business.
Partnership: is a form of business in which two or more people operate for the common goal which is often making profit. In most forms of partnerships, each partner has personal liability of the debts incurred by the business. There are three typical classifications of partnerships: general partnerships, limited partnerships, and limited liability partnerships. May have 250 shareholders; shares are held privately and can not be offered to public. HUF (Hindu Undivided Family) - businesses owned by a joint family belonging to Hindu religion. Even though Jain and Sikh families are not governed by the Hindu law, they can still form a HUF. Private Limited Co. Public limited Co. : A business corporation is a for-profit, limited liability entity that has a separate legal personality from its members. A corporation is owned by multiple shareholders and is overseen by a board of directors, which hires the business's managerial staff. Cooperative: Often referred to as a "co-op", a cooperative is a limited liability entity that can organize for-profit or not-for-profit. A cooperative differs from a corporation in that it has members, as opposed to shareholders, who share decision-making authority. Cooperatives are typically classified as either consumer cooperatives or worker cooperatives. Cooperatives are fundamental to the ideology of economic democracy.

2.

3.

4. 5.

6.

 III Special type of companies:

1. Licensing 2. Franchising

 Concept of business as a system;

Business as a System
External Forces
Materials Capital Products

Inputs

Human Resource Technology

Conversion Process

Services
Cust. Satisfaction

Outputs

Profit

Internal Forces

Business objectives
Vision:

General explanation of why the firm exists and where it is trying to lead It may be the best product, best service or a greatest sense of achievement. Where do we go from here ? Mission: Outlines the fundamental purpose of the organisation. What is our business ?

 Vision :In a caring and positive environment, Presidency will provide

education to empower our students to recognise and optimise their full potential; to achieve personal standards of excellence in academic work as well as in supportive areas of physical, cultural and social development, inculcating civic and human values.
Mission :Presidency's mission is to empower each student to recognise

and optimise their full potential; by fostering a family environment where education, social and emotional needs are addressed through a holistic program, offered by the partnership afforded by staff, students and the community at large.
Objectives 1. To mould the minds of the young and create in them a desire to live a

full life in the modern society as honourable and worthy citizens. 2. To develop a passion for learning and academic excellence. 3. To build a solid foundation for the future leaning of all students.

objectives
Mission statements are more specific than vision

statements. Objectives render mission statements more concrete. Objectives represent the operational side of an organisation Objectives may be more than one They may vary with passage of time

Objectives which are common to a typical business are as below:

1. Profit: Primary goal. It enables to realise other objectives. The profit should not be the end but the beginning It should promote well-being of all Over emphasising on profit may bring early death to an enterprise.

2.Growth: Business should grow in all directions. Adding more products, diversify into new areas, integration-forward or backward, increase market share, merger or acquisitions expand markets, increase productivity, etc.

3. Power: The vast resources confer enormous economic and political power on owners and managers 4. Employee satisfaction: Caring for employees is an important objective of management.

5. Quality products and services: Those who insisted and persisted on quality survived competition and stayed ahead of others in the market. The business which believe in short cuts to make quick money will not survive for long.

6.Market leadership: Through innovation in product, advertising, distribution, finance, etc. 7. Challenging: The worth of an individual is tested more in business than in any other profession.

 8. Joy of creation:
It is through business, new ideas and innovations

are given a shape and converted into useful products and services for the benefit of public. 9. Service to society: Main objective of non-profitmaking enterprise 10.Good corporate citizenship: Business complies with rules of the land, pay taxes etc.

Business and Environment Interface:

External environment 1. Political 2. Economic 3. Social 4. Technological 5. People 6. Culture 7. International 8. Natural

1.

2.
3. 4. 5. 6.

Internal Environment People Culture Ethics and Values Customers Competitors Suppliers

Social/Cultural Environment
The Social/cultural environment, or even cross

cultural environment, may place new or certain demands on a multinational enterprise in countries with several cultures.

Technological environment
Technological environment hold new

technological innovation, new products, the state of technology, the utilization of technology for maximum inputs and outputs, the obsolescence of technology and the dynamic changes that frequently occur in technologies which enable firms to get a competitive advantage Availability of electric power, natural gas, drinking water, sewage collection, telecommunications, roads and highways, postal service, garbage collection, and public transport.

Economic environment
The economic environment consists of the

demand dynamics, supply situation, pricing factors, degree of competitiveness, and impact of profitability. It includes the fiscal policy, monetary policy and the taxation policy, the FDI norms, the investment criterion and financing decisions Global economy (Macroeconomics) Local economy (Microeconomics) Monetary policy

Political environment
The political environment includes regulatory

burden and red tape, taxes, levels of political corruption, public works services, labor market regulation, policy predictability, property rights, contract enforcement, regulations controlling startup and bankruptcy, competition law, and entry to finance and infrastructure markets. The legal environment plays a very important role. The laws of the country, the judicial system, and the laws which affect business are important.

Ethics

Ethics refers to a system of moral principles- a

sense of right & wrong and goodness and badness of actions Business ethics refers to the application of ethics to business That is, Business ethics refers to the application of good & evil, right & wrong, just & unjust actions of business.

General Business ethics

Business ethics is a form of applied ethics

that examines ethical principles and moral or ethical problems that arise in a business environment. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws

List of of applied ethics

Bioethics Medical ethics Neuroethics

Business ethics

Hospitality ethics Environmental ethics (e.g. global warming) Human rights issues (e.g. / sexism, classism, racism, Capital punishment) Animal rights issues Legal ethics Computer ethics Media ethics / journalism ethics Research ethics
Marketing ethics

Education ethics Sports ethics Military ethics (e.g. just war theory) International ethics (e.g. world hunger) Public administration ethics

 Professional ethics Professional ethics covers the myriad practical ethical

problems and phenomena which arise out of specific functional areas of companies or in relation to recognized business professions. Ethics of accounting information Creative accounting, earnings management, misleading financial analysis. Insider trading, securities fraud, bucket shops, forex scams: concerns (criminal) manipulation of the financial markets. Executive compensation: concerns excessive payments made to corporate CEO's. Bribery, kickbacks, facilitation payments: while these may be in the (short-term) interests of the company and its shareholders, these practices may be anti-competitive or offend against the values of society.

 Ethics of human resource management The ethics of human resource management (HRM) covers those

ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee. Discrimination issues include discrimination on the bases of age (ageism), gender, race, religion, disabilities, weight and attractiveness. See also: affirmative action, sexual harassment. Issues surrounding the representation of employees and the democratization of the workplace: union busting, strike breaking. Issues affecting the privacy of the employee: workplace surveillance, drug testing. Issues affecting the privacy of the employer: whistle-blowing. Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery, indentured servitude, employment law. Occupational safety and health.

 Ethics of sales and marketing Marketing which goes beyond the mere provision of information

about (and access to) a product may seek to manipulate our values and behavior. To some extent society regards this as acceptable, but where is the ethical line to be drawn? Marketing ethics overlaps strongly with media ethics, because marketing makes heavy use of media. However, media ethics is a much larger topic and extends outside business ethics. Pricing: price fixing, price discrimination, price skimming. Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains. See: anti-competitive practices, antitrust law. Specific marketing strategies: bait and switch, shill, viral marketing, spam (electronic), pyramid scheme, planned obsolescence. Content of advertisements: attack ads, subliminal messages, sex in advertising, products regarded as immoral or harmful Children and marketing: marketing in schools. Black markets, grey markets.

 Two theories are pertinent when one talks

about the nature of ethics. Theory of moral unity advocates the principle that business actions should be judged by the general ethical standards of society. Theory of amorality argues that actions of business men need not be guided by the general ethical standards but can be amoral.

Sources of business ethics

Managers in every society are influenced by three

repositories of ethical values: religion, culture, and law. Ethical restraints are more effective than cruder controls such as police, law suits or economic incentives

 Religion is the oldest source of ethical

inspiration. Despite certain procedural differences all religions converge on the belief that ethics is an expression of divine will that reveals the nature of right and wrong in business and other areas of life. They preach the necessity for an orderly social system and emphasis social responsibility for general welfare.

 Culture refers to a set of values, rules and

standards transmitted among generations and acted upon to produce behaviors that fall within acceptable limits. Civilasation itself is a ccumulative cultural experience which have passed three phases corresponding to the economic and social arrangements in human history. Age of Hunting, Agriculture, Industrial

 Legal system : Laws are rules of conduct approved

by legislatures, that guide human behaviour in any society. They codify ethical expectations and keep changing as new evils emerge. Society expects business to abide by law and obeying law is presumed to be ethical behhaviour But many a times business causes misery to the society by damaging the environment, desragrding the rules, maintaining poor quality, unduly charging high prices etc.

1.
2. 3. 4. 5. 6.

Some of the acts are, The FERA 1973 The Companies act 1956 The MRTP act 1969 The consumer protection act 1986 The environment protection act 1986 The essential commodities act 1955

 Professional ethics Professional ethics covers the myriad practical ethical problems

and phenomena which arise out of specific functional areas of companies or in relation to recognized business professions. Ethics of accounting information misleading financial analysis. Insider trading, securities fraud, bucket shops, forex scams: concerns (criminal) manipulation of the financial markets. Executive compensation: concerns excessive payments made to corporate CEO's. Bribery, kickbacks, facilitation payments: while these may be in the (short-term) interests of the company and its shareholders, these practices may be anti-competitive or offend against the values of society.

 1.

2.
3.

Difficulties in decision making About nine reasons why decision making becomes difficult. Suggestions for making Ethical decisions Moral Idealism Intution Utilitarianism

 Ethics of human resource management The ethics of human resource management (HRM) covers those ethical

issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee. Discrimination issues include discrimination on the bases of age (ageism), gender, race, religion, disabilities, affirmative action, sexual harassment. Issues surrounding the representation of employees and the democratization of the workplace: union busting, strike breaking. Issues affecting the privacy of the employee: workplace surveillance, drug testing. See also: privacy. Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery, indentured servitude, employment law. Occupational safety and health.

Ethics of sales and marketing Marketing which goes beyond the mere provision of information about (and access to) a product may seek to manipulate our values and behavior. To some extent society regards this as acceptable, but where is the ethical line to be drawn? Marketing ethics overlaps strongly with media ethics, because marketing makes heavy use of media. However, media ethics is a much larger topic and extends outside business ethics. Pricing: price fixing, price discrimination, price skimming. Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains. See: anti-competitive practices, antitrust law. Content of advertisements: attack ads, products regarded as immoral or harmful Children and marketing: marketing in schools. Black markets, grey markets.

 Ethics of production This area of business ethics deals with the duties of a company to

ensure that products and production processes do not cause harm. Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility, or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk. Defective, addictive and inherently dangerous products and services (e.g. tobacco, alcohol, weapons, motor vehicles, chemical manufacturing, bungee jumping). Ethical relations between the company and the environment: pollution, environmental ethics, carbon emissions trading Ethical problems arising out of new technologies: genetically modified food, mobile phone radiation and health. Product testing ethics: animal rights and animal testing, use of economically disadvantaged groups (such as students) as test objects.

 Ethics of intellectual property, knowledge and skills Knowledge and skills are valuable but not easily "ownable" as objects.

Nor is it obvious who has the greater rights to an idea: the company who trained the employee, or the employee themselves? The country in which the plant grew, or the company which discovered and developed the plant's medicinal potential? As a result, attempts to assert ownership and ethical disputes over ownership arise. Patent infringement, copyright infringement, trademark infringement. Even the notion of intellectual property itself has been criticised on ethical grounds: see intellectual property. Employee raiding: the practice of attracting key employees away from a competitor to take unfair advantage of the knowledge or skills they may possess. The practice of employing all the most talented people in a specific field, regardless of need, in order to prevent any competitors employing them.

 International business ethics While business ethics emerged as a field in the 1970s,

international business ethics did not emerge until the late 1990s, looking back on the international developments of that decade. Many new practical issues arose out of the international context of business. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. Other, older issues can be grouped here as well. Issues and subfields include: The search for universal values as a basis for international commercial behaviour. Comparison of business ethical traditions in different countries. Comparison of business ethical traditions from various religious perspectives.

 Theoretical issues in business ethics Conflicting interests Business ethics can be examined from various

perspectives, including the perspective of the employee, the commercial enterprise, and society as a whole. Very often, situations arise in which there is conflict between one or more of the parties, such that serving the interest of one party is a detriment to the other(s). For example, a particular outcome might be good for the employee, whereas, it would be bad for the company, society, or vice versa. Some ethicists see the principal role of ethics as the harmonization and reconciliation of conflicting interests.

Social Responsibilities of Business

In 1965, the then Prime Minister of India presided over a national meeting that issued the following declaration on the Social Responsibilities of Business:

..[Business has] responsibility to itself, to its customers, workers, shareholders and the community ... every enterprise, no matter how large or small, must, if it is to enjoy confidence and respect, seek actively to discharge its responsibilities in all directions ...and not to one or two groups, such as shareholders or workers, at the expense of community and consumer. Business must be just and humane, as well as efficient and dynamic

 Social responsibility is an ethical or ideological

theory that an entity whether it is a government, corporation, organization or individual has a responsibility to society. It is voluntary; it is about going above and beyond what is called for by the law (legal responsibility).

Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large. Corporate governance is a multi-faceted subject. An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principalagent problem. Principles Key elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization.

Corporate Governance
Corporate governance is the overall control of

activities in a corporation The structure includes board of directors, top management, share holders, creditors, etc. A board of directors often plays a key role in corporate governance. It is their responsibility to endorse the organisation's strategy, develop directional policy, appoint, supervise and remunerate senior executives and to ensure accountability of the organisation to its owners and authorities.

 Impact of Corporate Governance

The positive effect of good corporate

governance on different stakeholders ultimately is a strengthened economy, and hence good corporate governance is a tool for socio-economic development. Economic health of a nation depends substantially on how sound and ethical businesses are.

 Codes and guidelines Corporate governance principles and codes have

been developed in different countries and issued from stock exchanges, corporations, institutional investors, or associations (institutes) of directors and managers with the support of governments and international organizations. As a rule, compliance with these governance recommendations is not mandated by law, although the codes linked to stock exchange listing requirements may have a coercive effect.

1.

2. 3.

Effective corporate governance is crucial for competitiveness and success in the long run. Lack of corporate governance has been highlighted in academic circles. Three reasons have been quoted: Since 1991, the country has moved to liberalised economy. Some norms of behaviour to ensure responsive are required. Both domestic and foreign investors have become more demanding. Interests of non-promoter shareholder and those of small investors are increasingly being undermined.

1.
2. 3. 4.

Factors influencing corporate governance. The ownership structure of a corporation Its financial structure The structure and functioning of the company boards and The legal , political and regulatory environment within which the company operates.

Mechanisms of Corporate governance: 1. The Companies Act 1956 2. The Securities and Exchange Board of India (SEBI) Act 1991. 3. A market for corporate control 4. Participation of block shareholders in the governance of companies 5. Statutory audit 6. Code of conduct.

 The code of conduct is basesd on checks

especially at the level of the board of directors and CEO. It has four sections: Role of board of directors Role of non-executive directors Executive directors Financial reporting and controls: to a properly constituted audit committees of the board

1. 2. 3. 4. 5.

Corporate governance will become more and more relavent and a more acceptable practice working towards honest business practices. This would be further strengthened by the following forces: Deregulation economic reforms Disintermediation. Institutionalisation Globalisation Tax reforms

Social responsibility models

Two basic approaches
1. 2.

Micro level Individual companies Macro level Government

Ackermans three stages of social responsibility.

Organisation al Level
Chief executive

Phases of Organisational Involvement

Phase I
Issue: Corporate Obligation Action: Write and Communicate policy Outcome: Enriched purpose, increased awareness

Phase II
Obtain knowledge Add staff specialists

Phase III
Obtain organisational commitment. Change performance expectations. Provoke response from operating units. Apply data system to performance measurement.

Staff specialists

Division management

Issue: Technical problem Action: Design data system and interpret environment Outcome: Technical and informational ground work

Issue: Management problem Action: Commit resources and modify procedures Outcome: Increased responsiveness

Carrolls Four-part model

Economic Legal Ethical Discretionary Responsibilities Responsibilities Responsibilities Responsibilities

Arguments for Social responsibility

Changed public expectations of business

Better environment for business

Public image Avoidance of Govt regulations Balance of responsibility with power Business has the Resources

Arguments against Social responsibility

Profit maximisation

Society has to pay the cost

Lack of Social skills Business has enough power

Social overhead cost

Lack of accountability Lack of broad support

Friedman & Levitts views

Arguments for Social responsibility

Let business try

Prevention is better than cure

Moral responsibility Citizenship argument Duty of gratitude

Barriers to Social responsibility

The individual manager

The organisation
The industry The division

 Business Ethics and Values:

 Code of Conduct

 Corporate Governance.