In the name of Allah Almighty

the most Merciful

and
the most Beneficent

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 CURRENT BUSINESS AFFAIRS
SPRING SEMESTER 2011
 
MBA-IV

CREDIT HOURS: 3
CONTACT HOURS: 48

INSTRUCTOR
CAPTAIN MUNAWWAR AHMAD PN – VISITING FACULTY
E-Mail: munawwar1965@gmail.com
Contact number: 0301-5299895

DEPARTMENT OF MANAGEMENT SCIENCES

  BAHRIA UNIVERSITY ISLAMABAD 2
 Course Description

• To introduce the participants to the concepts

and methods used in establishing and
managing businesses.
• It familiarizes the students with a range of
business approaches used in the discipline of
business administration with an emphasis on
approaches commonly used in practical
settings.

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 Course Objectives
• To prepare the students to think critically about
theory and practice surrounding basic business
concepts, business models and their application.
• To study various means of managing local and
international businesses.
• To appreciate the global and local business
governance mechanisms.
• To analyze the impact and role of current business
environment.
• To understand the emerging business models and
future business trends.
• To comprehend the process of designing,
developing and launching new businesses.
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 Learning Outcomes
On the successful completion of this subject students should be
able to:
• Evaluate the theoretical and practical aspects of effective
business.
• Understand the basic business concepts, business models and
their application.
• Study various means of managing local and international
businesses.
• Appreciate the global and local business governance
mechanisms.
• Analyze the impact and role of current business environment.
• Understand the emerging business models and future business
trends.
• Comprehend the process of designing, developing and
launching new businesses. 5
 Teaching Approaches
• A variety of teaching approaches will be
utilized including lectures, case studies,
presentations, self readings, quizzes and
assignments.
• The method employed for the course is
substantially interactive.
• Lecture will be delivered using power point
presentations and discussions.
• Students will be required to do essential
readings for each lecture before hand which
will be intimated for each week in the class.
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 Miscellaneous
• Discipline – Needs no emphasis – 5 minute rule
• Attendance – Minimum 80%
• Examinations
– Midterm week-9 : 25 Marks
– Final exam week-18 : 40 Marks
• Quiz – 3 (2 prior midterm exam and one after
midterm exam) : 5 Marks each
• Assignments – 2 (one prior midterm and one
after midterm in the form of case presentation)
: 10 Marks each
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 Course Schedule
Week 1
• Introduction to course goals, objectives, expectations and material.
•  Introduction to subject
•  History of Business
•  Basic concepts and definitions

Week 2
• Evolution of Multinational Corporations (MNCs).
•  Role/Influence of MNCs in global economy
•  Motivation to Internationalization
•  Internationalization to transnationalization

Week 3
• Building Strategic Capabilities
•  Goals and means
•  Multinational, International, Global and transnational strategies
•  Case presentation by instructor - Ingvar Kampard and IKEA
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 Course Schedule
Week 4
• Quiz- 1 and Assignment-1
• Global Financial Crises & Political Issues (Enron, WorldCom, Tyco, AIG, Lehman
brothers)
• Models of Corporate Governance STANFORD Graduate School of Business (Larcker &
Tayan report)

Week 5
• Doing business in emerging markets - Barclays Bank case
• Reading: Rethinking emerging market strategies
• Introduction to Theories related to Business Approaches
• Game Theory, Agency Theory, Stewardship Theory, Institutional Theory, RBV Theory,
TCE Theory

Week 6
• Rise of India and China as dominating business players
•  Reading: China opts for quantity over quality
•  Reading: China still manufacturing star
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 Course Schedule
Week 7
• Quiz-2
• Local Business Governance Mechanism
• Manual of Corporate Governance
• Companies Ordinance 1984

Week 8
• Global Business Governance Mechanisms – OECD
Report
• Corporate business ethics and values in modern
world
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 Let the fun begin

What do you understand by CBA?

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 Timeline of World History
• 3500 BC : The wheel is used in Mesopotamia,
modern day Iraq.
• 3100 BC : Work begins on Stonehenge in England
• 2575 BC : Work begins on the Great Pyramid at Giza
in Egypt
• 2000 BC : Bronze age culture
• 1200 BC : Greece enters a 400 year "Dark Age";
writing was forgotten; cities abandoned.
• 1185 BC : Trojan War
• 1130 BC : Iron used for weapons and tools
• 1120 BC : Magnetic compass invented
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 Timeline of World History
• 1100 BC : Phoenicians develop alphabetic script
• 1000 BC : Chinese develop gunpowder
• 776 BC : Olympic games start in Greece.
• 650 BC : Earliest coins appear
• 559 BC : Cyrus the Great becomes king and will lead
Persia to form a great empire that will stretch from
Egypt to India
• 431-404 BC : Peloponnesian War between Athens and
Sparta
• 399 BC : Death of Socrates
• 386 BC : Plato starts "The Academy" in Athens
• 347 BC : Death of Plato 15
 Timeline of World History
• 343-339 BC : Aristotle tutor of Alexander the Great
• 335 BC : Aristotle starts "The Lyceum" in Athens
• 332 BC : Alexander the Great conquers Egypt. The
Greeks bring coinage into Egypt for the first time
• 44 BC : Julius Caesar assassinated
• 5 BC-6 AD : Jesus born
• AD : Anno Domini; The number of years since the
time of Jesus Christ
• ~ 30 AD : Jesus is crucified
• 550 AD : Persians use windmills to power irrigation
pumps.
• 570 AD : Mohammad (PBUH) is born.
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 Timeline of World History
• 710 : Mohammad Bin Qasim invades Sindh and
Punjab through Indus River starting from Debel
• 1009 : An army led by Caliph al-Hakim destroys
the church of the Holy Sepulchre in Jerusalem. This
desecration will be a rallying point for the Crusades to
come.
• 1024 : The Chinese issue the first paper money
• 1095 : Pope Urban II calls for the First Crusade to
protect the Christian pilgrims from attack. In 1099 they
succeed.
• 1144 : Second Crusade started
• 1149 : Oxford University is founded in Oxford,
England
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 Timeline of World History
• 1206 : Genghis Khan leads the Mongol armies building
the largest known land empire, stretching from the Pacific
Ocean to the Black Sea
• 1498 : Captain Vasco da Gama becomes the first
European to travel to India via sea.
• 1526 : Babur invades India; Birth of Mughal Empire
• 1602 : United East India Company (Verenigde Oost-
Indische Compagnie ), or the VOC founded. This was the first
multinational joint-stock company, a landmark in economic
development (Spice trade)
• 1848 : Karl Marx and Fredrick Engels publish a little
pamphlet, The Communist Manifesto
• 1869 : Suez Canal opens
• 1903-04 : Russo-Japanese War
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 Timeline of World History
• 1914-1918 : Germany declares war on France
starting the "war to end all wars". WW-I
• 1929-37 : US Great Depression
• 1939-45 : World War-II
Emergence of Capitalists and Socialists
blocks
• 1944 : Bretton Woods Accord : Birth of IMF
• 1947 : Division of Sub-Continent

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 Bretton Woods Accord-1944
• The Bretton Woods Accord was established in 1944, towards
the end of World War II.
• The United Nations Monetary Fund convened in Bretton
Woods, New Hampshire, with representatives from the
United States, Great Britain, France and 41 other allied
nations.
• The Bretton Woods Accord established the policy of pegging
currencies against the U.S. dollar in order to stabilize the
global economy.
• It set fixed exchange rates for major currencies and
subsequently established the International Monetary Fund
(IMF).
• Up until WWII, the British Pound was the dominant world
currency by which most currencies were compared.
• During World War II the Nazis undertook a major
counterfeiting effort against the British Pound, and thus
damaged it’s standing. 20
 Bretton Woods Accord-1944
• In contrast, WWII transformed the U.S. dollar from a failed
currency after the stock market crash of 1929 to benchmark
currency by which most other international currencies were
compared.
• The U.S. economy was thriving, and the United States
emerged as a world economic power.
• The first element of the Bretton Woods Accord was to peg the
U.S. dollar to the price of gold at $35.00 an ounce, using the
Gold Standard.
• With this benchmark anchoring the U.S. dollar, other major
currencies were pegged to it and allowed to fluctuate no more
than 1% on either side of the set standard. When a currency’s
exchange rate would approach the limit on either side of this
standard the respective nation’s central bank would intervene
to bring the exchange rate back into the accepted range.
• The Bretton Woods Accord governed currency relationships
until the early 1970′s when a floating exchange rate system
was adopted. (TradersLog, 2010 at www.traderslog.com) 21
 Capitalism Vs Socialism
• Capitalism : An economic and social system in which private
individuals or business firms maximizes their profits by owning the means
of production through a complex network of prices and markets.
Examples are USA, Canada, Japan, South Korea, UK, France, Germany etc
(pal, 2010 at www.authorstream.com)
 
• Socialism : An economic system in which the basic means of
production are primarily owned and controlled collectively, usually by
government under some system of central planning. Example are Cuba,
Libya, North Korea , Myanmar etc (pal, 2010 at www.authorstream.com)
 
• The ideology behind former is competition with priority on profit making
with unregulated economy. Whereas, on the other hand the ideology is
cooperation with precedence for protection of society truly incorporating
the concept of equality while regulating the economy.

• The property is privately owned by individuals in a capitalistic society,

whereas, in socialistic societies it is state owned and controlled.
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 Karl Marx Theory of Historical
Materialism (1818-1883)
• Karl Marx is best known not as a philosopher but as a
revolutionary communist, whose works inspired the
foundation of many communist regimes in the twentieth
century.
• He talks of different stages of human society as how it evolved
step by step.
• He talks of economic evolution and materialism whereas prior
Marx German philosophy was very idealistic.
• Marx turned away from philosophy in his mid-twenties,
towards economics and politics.
• Marx's theory of historical materialism is centered around the
idea that various forms of society rise and fall as they progress
and develop on human productive power.
• Marx sees the historical process as proceeding through a
necessary series of modes of production, characterized by class
struggle which then culminates in communism. 23
 Karl Marx
• Marx's economic analysis of capitalism in his famous series
of writings; Das Capital, is based on his version of the labour
theory of value that includes the analysis of capitalist profit
as the extraction of surplus value from the exploited
people.
• The analysis of history and economics come together in
Marx's prediction of the inevitable economic breakdown of
capitalism, to be replaced by communism.
• However Marx refused to speculate in detail about the
nature of communism, arguing that it would arise through
historical processes, and was not the realization of a pre-
determined moral ideal.
• Prior Marx, the German philosophy revolved around idealist
metaphysics advocated by Hegel in his philosophy. 24
 Karl Marx
• Hegal philosophy talks of Great Spirit, the creator, the
originator of the human society.
• This Great Spirit is not the god but a force that pushes
the non-materialistic force of human beings to interact
with each other.
• Great Spirit is also not brain but instead is the mental
faculties and particularly the faculty of reasoning.
• Hegal says that reasoning is becoming and has not
become perfect. Human beings have great potential of
reasoning and when eventually human beings rational
for reasoning will be realized so they will become perfect
and will become part of Great Spirit.
• This is also similar to Hinduism, where soul becomes
separate from the body and becomes Great Spirit.
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 Karl Marx
• Marx therefore developed the basic concept of
historical materialism in his book, "Die Deutsche Ideologie" (1846,
The German Ideology).
• Marx defined ideology as a set of ideas that people believe in, it is
termed as negative as it tilts people to agree on it. Ideology
therefore needs to be questioned and needs to be get rid off as it
allows stronger elements in the society to exploit the weaker
segment of the society.
• Marx's theory of historical materialism says that one must
understand the history of human society in the materialistic
perspective.
• The basis of human society is the existence of the basic material
needs i.e. food, clothing and shelter.
• Food is required for survival, clothing is used for covering up and
protecting from weather so as to avoid decease and shelter is
required for living purposes. 26
 Karl Marx
• Human beings fulfilled these basic needs by
interacting and exploring the environment.
• They organized themselves into tribes and
distributed the labour for increasing efficiency and
share each other needs. From here emerged the
division of labour.
• Human beings then elaborated their needs and
developed many wants leading to desires, which in
term made the division of labour more complex.
• This complexity gave rise to special cadre of people
resulting into culture and traditions of a society.
• As per Marx the more we have advanced from
subsistence the more we have moved away from
society and heading towards destruction.
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 Karl Marx
• Karl Marx therefore identifies three forces of production as follows:
• Infrastructure; which forms the basis of production and is used by a
community to make goods so as to fulfill the materialistic needs of the society
and constitutes following:
– Natural resources.
– Technology or techniques that have evolved over the period of time.
– Human beings themselves.
• Economic structure or relationship of Production; it is the relationship of
people with people and relationship of people with things that come about
either at the actual site of production or at the site where goods are being
distributed or at that site when people are contesting and disputing for the
acquisition of goods/products.
• Super structure or ideology and social consciousness; all those relationships
of people to people which do not fall into the above two categories. These
are those relationships which one develops or has with his parents, children,
family members, colleagues and deals with love, affection, intimacy, values,
hatred and so on.
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 Karl Marx
• Based on the three forces of production Marx has
advanced his theory of historical materialism.
• Accordingly he has divided the evolution of human
society into six distinct phases known as modes of
production.
• He describes that every mode of production has
ingrained germs of destruction for itself.
• It is because of these self destruct mechanisms that
the earlier modes of production have become
extinct and the human society is heading towards
from the capitalist mode towards the last mode of
production and that is the socialist mode of
production.
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 Karl Marx
• Modes of Production
– The Primitive mode of Production
– Ancient mode of Production
– Germanic mode of Production
– Feudal mode of Production
– Capitalist mode of Production
– Socialist mode of Production
• Class (same type of economic resources)
– Haves
– Haves not
• Neo-Marxist Perspective 30
 Indian Trade
• General prosperity, trade and industry since ancient
times due stable political & economic policies
mainly because of Muslim rulers.
• Ibn Batuta (14th century) described teeming markets
of big cities; Delhi, Lahore, Bombay etc.
• India internationally famous for cotton, textiles, silk,
Hardwood furniture with carvings, carpets, ivory,
pearls, tortoise shells, ornamental work on
diamonds, sapphires, rubies.
• During the Mughal era the European traders used to
employ local artisans at the manufacturing centres
set up by them at various places in India. 31
 Indian Trade
• Abundance of rice and sugar
• Well maintained roads
• River routes on Indus and Ganges
• India’s exports far exceeded her imports both in
number and volume
• Imports were ; horses, dry fruits, precious stones,
glassware, satin, raw silk, porcelain, velvets, wines,
perfumes and scented oils, bronze, iron, wool
• Exports were ; silk, gold-embroidered cloth caps, clay
pots, pans, guns, knives, scissors, sugar, indigo, oils,
ivory, sandalwood, spices, diamonds & other
precious gems and coconuts
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 Indian Trade
• 300 ports to facilitate the movement of goods
• Shipbuilding industry flourished in coastal towns
• The Gujarati and Marwari businessmen who
controlled the trade between the coastal towns and
North India were extremely wealthy and spent large
sums for the construction of temples.
• The Multanis who were Hindus and the Khurasanis
who were Muslim foreigners controlled the trade
with Central and West Asia. Many of these Multanis
and Khurasanis settled in Delhi where they lived
luxurious lives.
• Cambay was also home to an affluent mercantile
community.
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 Decline in Indian Trade
• The rise of the British East India Company in the mid 18th
century dealt a fatal blow to the prosperity of the country.
• The victory of the English over the Nawab of Bengal at the
Battle of Plassey in 1757 marked a turning point in the
fortunes of the country.
• The Company imposed heavy duties on both imports and
exports.
• It prevented merchants from Asian countries from coming
to the eastern provinces for trading purposes. The export of
Indian textiles to England was totally banned.
• The Company increasingly monopolised the foreign trade in
India thereby reducing the mercantile community to
bankruptcy.
• Not only did it cripple the indigenous manufactures, but
also it started importing various items such as cloth,
utensils, horses, etc. from England. 34
 World - Time Line
• 1992 : European Union lifted barriers to internal
trade in goods and labour.
• 1994 : The North American Free Trade Agreement (NAFTA)
took effect
• 1994 : The GATT (General Agreement on Tariffs & Trade)
Marrakech Agreement specified formation of the WTO.
• 1995 : World Trade Organization (WTO) was created to
facilitate free trade, by mandating mutual Most Favoured
Nation (MFN) trading status between all signatories.
• 2002: EC was transformed into the European Union (EU),
which accomplished the Economic and Monetary Union
(EMU) in 2002, through introducing the Euro
• 2007 : EC thus created this way a real single market
between 13 member states
• 2005, the Central American Free Trade Agreement was
signed; It includes the United States and the Dominican
Republic. 35
 Business-Definition
• Trade : The activity of making, buying, selling or supplying goods or services
for money. After doing his MBA, he went into business with his brother. She
has set up in business as a hairdresser. It’s been a pleasure doing business
with you.
• Work : Work that is part of your job. Is the trip to Rome business or
pleasure? The amount of work done by a company. Business was bad. The
business was booming. Her job was to drum up (increase) business.
• Company : A commercial organization such as company, shop/store or
factory. They have a small catering business.
• Responsibility : Something that concerns a particular person or organization.
It is the business of the police to protect the community. My private life is
non of your business.
• Important Matters
• a commercial or industrial enterprise and the people who constitute it
• the activity of providing goods and services involving financial, commercial
and industrial aspects
• The occupation, work, or trade in which a person is engaged

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 Business Setup in Pakistan
• There are three main forms of business in
Pakistan, defined as follows:
a. Sole Proprietorship
b. Partnership
c. Company incorporation (Local & Foreign)

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 Sole Proprietorship

In a Sole Proprietorship  business in Pakistan,

an individual on his/her own account carries
out the business or profession. The business
assets of the sole proprietor are legally treated
as his own. No formal procedure or formality is
required for setting up a sole proprietary
concern in Pakistan nor prior registration of it
is required from any government authority or
department.
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 Partnership
• A Partnership in Pakistan is a business entered into by a formal
agreement between two or more persons or corporations carrying on a
business in common. The capital for a Partnership is provided by the
partners who are liable for the total debts of the firms and who share
the profits and losses of the business concern according to the terms of
the partnership agreement.
• Partnership in Pakistan (other than banking companies) are generally
limited in size to twenty partners. The interest of a partner is
transferable only with the prior consent of the other partner(s).
However, a partner’s right to a share of the partnership income may be
received in trust for another person.
• For taxation purposes in Pakistan, partnerships are classified into:
– Registered firms and Un-registered firms.
• The income of the registered firm is subject to super tax before
distribution to the partners. Also the individual income of the partners
is subject to income tax at the usual rates.
• For unregistered firms, income tax is levied on the firm’s income and
the partners are not liable to pay tax on the shares of profit received
from the unregistered firm(s).
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 Corporation
• The most common form of business organization
• Chartered by a state
• Given many legal rights as an entity separate from its
owners
 
• Incorporation; the process of becoming a corporation
– Gives the company separate legal standing from its owners
– Protects those owners from being personally liable in the event
that the company is sued
– Provides companies with a more flexible way to manage their
ownership structure
– Different tax implications for corporations
• In these respects, corporations differ from sole
proprietorships and partnerships.
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 Company
• A legal entity formed under the Companies Ordinance,
1984
• Can have share capital or can be formed without share
capital
• Any three or more persons associated for any lawful
purpose may, by subscribing their names to a
memorandum of association and complying with the
requirements of Companies Ordinance, 1984 in respect
of registration, form a public company
• Any one or more persons so associated may, in like
manner, form a private company
• Limited Company
– Company Limited by Shares
– Company Limited by Guarantee
• Unlimited Company 41
 Company Limited by Shares
• The liabilities of its members in a Company Limited by
Shares  are limited to the extent of their shares in the
paid-up capital of the company. These companies may
further be classified as Public Limited Companies and
Private Limited Companies
• Public Limited Companies in Pakistan can be formed by at
least three persons by subscribing their names to the
‘Memorandum and Articles of Association of the
company. The word ‘Limited’ is used as the last word of its
name.
• Private Limited Companies in Pakistan as above said may
be formed by one or more persons by subscribing their
names to the ‘Memorandum and Articles of Association’
of the company. If only one member forms a Private
Company in Pakistan, it is called a Single Member
Company. 42
 Company Limited by Guarantee
• Company Limited by Guarantee in Pakistan
means a company having the liability of its
members limited by memorandum to such
amounts as the members may respectively
undertake to contribute to the assets of the
company in the event of its winding up.
• A Company Limited by Guarantee  is usually
formed on a ‘non profit basis’.
• Companies Limited by Guarantee in Pakistan use
the words “(Guarantee) Limited” as the last
words of their names.
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 Unlimited Company in Pakistan
• Unlimited Company means a company having
unlimited liability of its members

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 Private company
• A company which, by its articles,
– Restricts the right to transfer its shares, if any
– Limits the number of its members to fifty not
including persons who are in the employment of
the company
– Prohibits any invitation to the public to subscribe
for the shares

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 Public company
 
• A company which has issued securities through
an offering (IPO), and which are now traded on
the open market
• Means a company which is not a private
company

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 Subsidiary
• A company or body corporate shall be deemed to
be a subsidiary of another if that other company or
body corporate directly or indirectly controls,
beneficially owns or holds more than fifty per cent
of its voting securities or otherwise has power to
elect and appoint more than fifty per cent of its
directors; or
 
Holding company
• A company shall be deemed to be another's
holding company if that other is its subsidiary

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