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    Chapter 3 Ob & Essential of Business

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    Chapter 3 Ob & Essential of Business

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    Essential for Business.

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    46 views10 pages

    Chapter 3 Ob & Essential of Business

    Uploaded by

    Metoo Chy
    Essential for Business.

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    © All Rights Reserved
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    ’ Ls Vos ae ae 3 Objectives and Essentials of Business Learning Objectives: After reading this chapter you will be able to: 1. Classify the objectives of modern business. 2. Explain the organic, economic, social, human;and national objectives. 3, Describe the role of profit motive in business. 4 Enumerate the essentials of a successful business. 5, List the qualiti s of a successful businessmen: ‘According to the cl: { cconomists profit maximisation is the sole objective of pusiness, Tt ‘aid that business is an economic institution and economic results are the true eritertion for measuring its success. Milton Friedman, the most prominent supporter of capitalism observes, “in-a free enterprise private property system, a corporate excculive is an employee of the owncrs of business. He has direct respon- sibility to his employers. That responsibility is to conduct the business in accerd with their desires, which generally will be to make as much money as possible”. Even today a layman believes that money making is the only objective of business. There is some justification for this widespread impression. Quite a few businessmen in their lust for money indulge in anti-social and unethical practices hoarding, adulteration, exploitation of labour, tax evasion, pollution of the environment, efc,. However, profit making, is not the only objective of business. Gujees has several objectives which may be classified as follows: iii of Modern Business 1. Organic objectives 2. Economic objectives 3, Social objectives = 4, Human objectives, and i 5. National objectives. ‘Ofganic Objectives As an organic entity, a business ent has its own stages of infancy, turity. Like a hunvair being, the first ensure its survival, When the enterprise is cone u rise is to . assure Il aim at growth and expansion. To accomplish this [empt to win prestige, recognition and goodwill from the society stoperates. In order to passt rough these stages in time and with strength, a business unit.uses several methods, ¢.8 ploughing back a par prolits. altaining optimum size to avail of the economies of scale, etc. Organic objectives are the foundation for achieving all other objectives of business. ‘ Survival, First of all a business enterprise trics to maintain its existence. Survival’Or stability objective implies the maintenance of a firm’s competitive cee or carning capaicty or market standing, Un'¢ss an enterprise survives no ther objective can be accomplished, : ‘owth Growth and: diversification is one-of the major objectives of | \ | Growth may be measured in terms of size, investment, market share, etc. \ arog weuenpesy — Suuuryg fees — uonesS2uy jouoney ‘Sseuisng jo sangoalag ou, $1 ‘Bis song ssoursng — seonoerg Tepos—noy Jo 2ouepiony — wowkoydug Buiprosy — | s10ysoauy | uont3000y aT yo AyenD—} oy wmay steg— vonesouuy— pue odnsazg —, saasnpuy | sqis | | IBIS TEMS Jo IMOID jo youdsnvog. =| i quowdojaaq | sokoduy | srownsuog uoneaytsraaiq jeuorday paoureg — uonedionseg — o1eaq meq — | Jo uonedig — puE WNOID — i | ua | soueqoy | | eg ye spoo “319s SMMOU0sg — uonorssnes gor—| Ajend jo ‘addng — | SureY-Wolg — yeauung — I | | soanoelqgQ. soannelgg soanalqo, saannoalc soanral HO3IqO NoaIqQ¢ wove peu a Eola area SAALLOafaO SSANISNA aoe Ser "e NATURE AND SCOPE OF BUSINESS Market sharo which a business enterprise commands reflects its standing in the » market . A busine: enterprise may identify new customers, new products or new markets or increase its market share in the present market. Growth brings higher = profits, economic and social power, ct <3, Prestige and recognition, 3 © and recognition help to ensure the survival and growth of a firm. A business cnterprise with good image or goodwill can easily attract customers, investors and competent employees. The organic objectives of business are depicted in Fig, 1.6. aL Fig. .6 Organic Objectives of Business Business is an economic activity and, therefore, its major objectives are “ econothic. Economic objectives refer to those goals which determine a person’s conduct in the business part of life. Economic objectives of business are as follows: ii isk.is inherent in business and profit is the\reward for - undertaking risk. A business must earn profits in order to stay in business and to maintain intact the wealth-producing capacity of its resources. Often the common man believes that profit-making is the sole objective of business. This is far from rise uses various factors of production and it can only when every factor is given its due reward. Profit is the reward for entrepreneurship and, therefore, profits cannot be ‘the only goal of business. Profit-making is an acceptable and essential objective of business. There is nothing bad or immoral about it. But there is a controversy over the quantum of profits that business should earn. According to the: classical economists business should be run on the principle of profit-maximisation, But in reality adequate or reasonable Profits is the true goal of business. The goal of maximum profits may result in profiteering which endangers the very survival of business. "The business that is felly and solely motivated by the making of money seldom fares well in the long a 4s it neglects the very source of profits, namely, the provision of quality goods to Hewes at ‘reasonable prices produced through well-paid labour". According tae Ford "mere money chasing is not business’. Ford could build up the worl SUppiie 24 Motor Company because he aimed at earning reasonable profits by Upplying a People’s car. Profits through service rather than maximum profits is — LA. Appley: Management in Action, p. 214, ' LIVES AND ESSENTIALS Ss 2 ORIEC| * BUSINE the objective of business, A busin not survive for long if it aims solely at the the obivent of is owners, According to Drucker, ‘profit is not an objective but ent that has to be objectively determined in respect to the ind! its strategy, its need: isks n of customer, Business can carn profits only when it provides goods or people are able and willing to buy. Every busi sc is {s of public. A business requirem whic Jof interms ofa product or service that meets the need prise cannot survive unless there nough people to buy the products and offered by it. Customer is the generator of revenuc for business. By paying for wad services, customers determine what shall be produced and how much? In only one valid definition of business purpose: to create ess is... The customer is the servic goods c the words of Drucker, "there is customer, Itis the customer who determincs-what a bi foundation of business and keeps it in cxistence.... and itis to supply the customer that society entrusts Wealth-producing resources to a business enterp! 2 Customers can be created only when business supplics them what they want and at the price, place and time they desire, Business earns profits by satisfying the need: of the customers. Therefore, creation and satisfaction of customers is an important objective of business. Creating customers amounts to ing the market for goods and services. 3.1 tion. Modern br highly dynamic and an enterprise can 10 be successful only by adapting itself to changes in its environment. A successful firm has not only to adjust ‘self to changing environment, it must on its ‘own create conditions favourable to survival and growth, The highly competitive nature of modern business puts a premium on innovation and creativity which implies the introduction of new and better products, improved means of produc- tion and distribution, new technology, new methods and procedures of manage- ment, ctc. To resist change is to court disaster. Profits are the result of efficient performance in marketing, innovation and productivity. Innovation results in better and cheaper products and more employment for the society. Innovation is essential for the survival and growth of business. It is through innovations that business firms perform dynamic functions of growth, diversification and change in the economy. The most progressive or excellent companies allocate large amounts of moncy on research and development for achieving the objective of innovation. business carns profits by creating utilitic: yjectives : Fee economic objectives of business can be realised only by serving the society. usiness is an organ of society and it draws its resources from-the- society. Therefore;it must s. fy the wants and aspirations of society. A business enterprise vive and grow only when it caters to the necds of the society. A really successful business can be built on the foundation of social service. If'a business enterprise serves the various sections of socicty, profits will flow automatically. Pi polisarc; 18 other words, the reward which business reccives by serving society. ‘There is no conflict between profit-motive and service to society. It is through service that busit it a usiness-towards rs, supplit ernment and the general public. The Profitot business represents a social surplus in which all stakeholders must Se toll rtion to their contributions, The social objectives of business are 2 Peier F. Duteker: The Practice of Management, pp. 38-39, ma NATURE AND SCOPE OF BUSINESS 4, Quality goods at fair prices. The first and foremost social objective of pusiness is to provide regularly the goods and cs of proper quality and wantity (0 conse vt reasonable prices. Today consumers are conscious of athe wality of goods they buy. When goods are of sub-standard quality or adul- terated, they stop atronising the enterprise and the enterprise faces eventual closure. Therefore, usiness units must always maintain a continuous and adequate supply of articles of standard quality, Businessmen who keep their customers tisticd are likely to carn profits. sai'y, Providing employment. Anot! zr social objective of business is to create opportunities for gainful employment of the people. Sometimes this objective may conflict with the economic objective of cutting down costs and imy proving profits py introducing mechanisation or automation. Ina country like India, mechanisa- tion may have to be deferred or implemented gradually into stages without causing Joss of job to anyone, : . 3, Avoidance of profiteering and anti-social practices. It is legitimate for a business enterprise to work for legitimate profit. But it must not overcharge the customers or indulge in profiteering at their cost. It is the social obligation of a business concern not to indulge in hoarding, black-marketing, adulteration and other anti-social practices. In times of scarcity it should ensure fair and equitable distribution. Moreover, business enterprise is expected to adopt socially respon- sible and ethical behaviour with the suppliers, competitors, and other interacting groups of people. It should respect the ethical and moral values of the society. It should be fair in its dealing with all these groups. J A business enterprise is an institution carried on by people (entrepreneurs and managers), through people (employees) and for people (consumers and public). Therefore, human factor pervades all business activities. Business is not an end in itself but a means towards human welfare. People are the most valuable asset of business and their wellbing is is main concern. The success of a business depends upon the quality of people working in it. In order to win the co-operation of employees, business must fulfil their expectations. The human objectives of business arise from these expectations. The important human objectives of busi- ness are given below. ‘he first human objective of business is to pay fair wages, salaries and incentives to the employees at different levels, Fair working and living conditions and security of service are necessary for securing the whole- hearted efforts of the employees. Employce welfare is no less important than Customer satisfaction, tis the obligation of a business enterprise to make the jobs and challenging so that employees may get job satisfaction while staple their jobs. Selection of right man for the right job and reducing 4 ie ‘asantness of| ‘jobs help to offer job satisfaction which in turn ensures retention obese ‘ec on the job for a long period, A business enterprise fulfils its human ive wi gnises the dignity of labour, given an n. Workers will put forth their best efforts only when they are Workery portunity to participate in making decisions which affect them. icky a Parti pation in management facilitates redressal of employee grievances ih cir lepine the lowest possible level. Recognition of worker representative and ate anit Yor {SECO f 7 7 industrial relatigatiities helps tomaintain healthy trade union Practices and sound inter Performing OBJECTIVES AND ESSENTIALS OF BUSINESS 1.25 4, Development of human resources. Business can accomplish its economic objectives of innovation and productivity only when the employees are given adequate opportunities for developing new skills and capabil ics. Business should create a prop’ ed to grow and er climate wherein the talents of workers are allow mature. jonal Objectives Presentday business is expected to serve as an instrument for the fulfilment of national needs and a ions and implementation of national plans and policies in accordance with the accepted prioritics. \

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