BUSINESS ORGANISATION

BUSINESS ORGANIZATION
Meaning: Art of establishing effective coordination, technique of efficient operations, concerned with the study of methods and procedure, purpose of earning profits, covers different functions of business Objective: Efficiency Division of work Delegation

Functions: Production Marketing Finance Personnel Significance: Facilitates administration Ensures specialization Facilitates growth & diversification

Social Responsibility: Causes: Public opinions Trade union movement Consumerism Education Public relation Managerial resolutions Rationale: Long term self-interest of business Ensuring law & order Maintenance of free enterprise Creation of society Moral justification Profitable opportunities System interdependence

Areas: Utilization & conservation of national resource Promoting the interest of various groups in society To work within the framework of the laws Environmental planning Philosophy of the Country Responsibility Internal: Shareholders Workers External: Consumers Suppliers Government Community

PROMOTION OF BUSINESS
Meaning: Promotion begins when, an idea is conceived, preliminary & detailed investigation, feasibility of the idea, provision of funds & resources Entrepreneurial decisions: Choice of form of business Financing preposition Selection of line of business Project report Location of business Size of unit Machines & equipments Labour force

Promoters: conceives the business idea Sole Proprietorship: Individual introduces his own capital Absolute freedom Advantages: Ease of formation & dissolution Direct motivation & incentive Quick decision & prompt action Secrecy Flexibility in management Minimum cost of management

Disadvantages: Limited capacity of an individual Difficulties of outside finance Unlimited liability Responsibility for decisions Company: Promotion Incorporation or Registration Floatation or Capital Subscription Commencement of Business

Advantages: Limited liability Ease in management with a team Better reputation Disadvantages: High regulation formalities Late decisions Partnership: Combination of capital Labour & specialized skill or managerial talent Two or more persons Carry on business jointly

Advantages: Facility of formation Scope of individual ability Protection of minority interest Disadvantages: Limited resources Limitation on capital & organizing power Risks of implied authority Lack of public confidence Types: Partnership at will Particular partnership Joint venture Limited partnership

Kinds of Partners: Active or working partner Sleeping or dormant partner Nominal partner Partner in profits only Sub-partner Limited partner Partner by estoppels or holding out Rights of Partners: Take part in management Be consulted in business matters Have access to & to inspect & copy any of books of the firm Share profit & losses Entitled to get 6% interest on capital p.a. in any loan to firm To retire To act in emergency

Duties of Partners: Must observe good faith towards other partner Indemnify the firm for any loss by his fraud and willful conduct Bound to attend diligently to his duties To hold & use the property of the firm for the purpose of business only Jointly & severally liable for all debts To act within his authority

COMPANY
Complex form of business organization, permanent existence, limited liabilities, common seal to authorize Advantages: Large recourses Limited liabilities Continuity of existence Efficient management Transfer of share Democratic set up

Disadvantages: Difficult in formation Separation of ownership & management Speculation of share Lack of secrecy Fraudulent management Delay in decision making Classification : On the basis of incorporation: Incorporated Un-incorporated

On the basis of liability: Limited liability Unlimited liability Nationality: Indian Foreign On the basis of number of members: Public Private Independence: Independent Holding Subsidiary

Ownership: Government Non-Government Co-operative Organization: Limited means Profit not a motive Voluntarily Common interest Features: Voluntary Equal voting rights Democratic management Importance to service motive Sales on cash basis Distribution of dividend

Advantages: Open membership Service Motto Cheaper rates Democratic management Low management cost Surplus shared by members Disadvantages: Lack of capital Lack of unity among members Political Interference

PUBLIC ENTERPRISE
Concern owned & managed by the state or any public authority, social interests, nationalized or socialized industry, government undertaking, known as Public Sector Advantages: Growth of key & heavy industries Avoidance of uncertainty Planned progress Greater Better & cheaper products Prevents the concentration of wealth Strengthens the defense measures Helps in distribution of essential goods

 No exploitation of labour capital or management Preservation of national wealth

Disadvantages: Greater Better & cheaper production is a myth Top heavy administration Nepotism and favoritism Delay in decision Importance: Creation of the social basis facilitates balanced economic growth Speed up the pace of industrialization Remove regional economic imbalances Equitable distribution of wealth

SIZE OF BUSINESS UNIT

Refers to scale of its organization operations Size of Business: Scale of organization depends on nature of business & market Combination of recourses Measures of Size: Net worth Total Assets Employees Power & materials used Value of output

Industrial Location: Development of industry at specific place depends on needed means of industry Factors affecting location: Physical Factors: Availability of raw material, Power Climatic conditions Economic Factor: Labour Transport Capital Sale centers Banking

Political Factor: Peace & security Government policy Webers theory of Location: enunciated by Prof. Alfred Weber of Germany in 1909, causes influence location Primary: Cost of land Building Power labour Transport Secondary: Deviation from transport cost

Criticism: Unrealistic approach More selective than deductive Study of only transport and labour Rest factors not included More importance to technical aspects Florences theory of Industrial Location: Approach of theory: Localization coefficient Localization multiple

Criticism: Incapable of explaining industrial location, No significance of quantity produced No attention toward the local characteristics Difficult to calculate the tendency on the basis of multiples Plant Layout: Plan of installing of plant & machinery Objectives: Best production on minimum cost Maximum utilization of movable & immovable property Providing best services Safety against accidents

Factors affecting Plant Layout: Weight of materials & products Form of the machines Checking Prospective needs of the factory Minimum shifting Type of Plant Layout: Line (product) layout, (Process) functional Product process layout Techniques of Plant Layout: Process flow chart Process flow diagram Machine data cards Template Scale model layout

Business Combination: Combination of various units for common objects Objects: Reduction in the cost Development of mutual co-operating feeling Large scale production Regulating the market Reasonable return of investment Advantages: Economy & finance Economy in administration Economy in distribution Economy in production Maintaining selling price

Advantages: Rise of big business Over capitalization Exploitation of labour Unequal distribution Kinds of Combination: Horizontal Vertical Lateral Circular Diagonal

Cause of Combination: Elimination of competition & Price War Economics of large scale business Effects of trade cycles Rise of joint stock companies Technical progress