Unit 1

The concept of business

Concept is the idea or image or understanding about a
thing, activity, or a person that emerges in the mind of a
person. According to the
Webster’s new collegiate dictionary. “A concept is an
abstract idea generalized from particular instances.”
(1) By far the following concepts of business have emerged:
profit- oriented concept of business. in the early age of the
business, business was conceived to be a wealth producing or
profit making economic activity.
(2) Customer- oriented concept of business: customer-oriented
concept came into existence around the 1950s and gained
momentum during the 1960s and 1970s. Business
organization began to think about customer service and
satisfaction.
 Societal or modern eclectic concept of
business:
During the 1980s, societal concept of business began to
criticize the customer-oriented concept of business
began to emerge. People began to criticize customer-
oriented concept of business. It was alleged that the
customer-oriented concept laid aphasics, only on profit
through satisfaction of the customer but neglected the
social responsibility of business.
 Meaning and definition of business
Business refers to all economic activities which are
carried on to provide goods and services to the
customers with a view to improve the well-being of
society and as a result to earn the profit.
1. Wealth producing economic activity.
2. Profit making activity
3. Exchange of utilities for price.
4. Want satisfying activity.
5. Social and economic institution.
6. Complex field of commerce and industry
7. Contribution of economic value.
8. Getting and using resource to generate profit
 Feature or characteristics of business
1. capital: finance is must for running a business.
2. creation of utilities: business creates utilities which
satisfy wants.
3. Entrepreneurship: entrepreneurship is the essence
of business.
4. Risk and uncertainty: business is a game of risk. In
involves the possibility of loss.
5. dealing in goods and services: every business
comes into existence to provide goods or services to
society.
6. Economic activity: business is an economic
activity in the séance that it involves the use of
resources which are scare relative to ends.
7. Human element: business is a human institution.
8. legality: business should be lawful.
9. innovation: it is the foremost characteristics of
today’s business.
10. Profit motive: every business is carried on to
earn money and to acquire wealth.
11. Regularity in dealing : dealing in goods and
services constitute business only when they are
carried on regularly.
12. Sale transfer or exchange: business is an
exchange of goods and services for a price.
 Modern characteristics of business
 The customer is the business: the modern business is customer-oriented.
 Modern business can not be profit oriented: a business cannot be
defined or explained in terms of profit.
 Modern business can not be profit oriented: a business cannot be
defined or explained in term of profit. This applies to modern business.
Both arts and science: traditional business was on guesswork, hunches and
institution.
Keen competition: keen competition is another feature of modern
business. Competition is increasing day-by-day.
 Social concern: the social aspects of business have also come to the force
in the recent past.
 Dynamic nature: today’s business enterprise are dynamic and thrive on
change.
 Knowledge resource: in modern times, the one and only distinct resource
of any business’s knowledge. What does make a business distinct and what
is its peculiar resource is its ability to use knowledge.
 Importance of business organization
1. Contribute to the prosperity of nation: the economist and management
experts consider business organization as the catalyst of growth.
2. Balanced economic development: a nation remains underdeveloped if it
lacks in balanced economic development. All parts of the country must be
filly developed.
3. Encourage capital formation: formation of capital takes place in every
country. But the rate of capital formation is higher in the development
countries than the developing countries
4.Create employment opportunities: business organization are capable of
creating employment opportunities for the people of the country.
5. Proper utilization of natural physical resources: every nation has
plentiful natural physical resources such as land, forests, rivers, minerals,
livestock etc.
6. Contribute to national planning: economic development through
planning is the order of the day in almost all the nations.
7. Help increase productivity of resources: business organization invest
huge amount of money in R&D and innovative activity.
8. Benefit all section of public: modern business
organization are realizing their responsibilities
towards all the section of society/public.
9. Provide career opportunities: business
organization not only generate employment
opportunities for the public but also provides better
career opportunities.
10. Promote social upliftment: developing societies
face many problem. These include the problems of
poverty, starvation, unemployment, injustice towards
minority groups, women or economically weaker
section etc.
 Objective of business
1. Economic objective: economic objective of business refer to
the objective of earning profit and also other objectives that
are necessary to be pursued to achieve the profit objective,
which includes creation of customers, regular innovations and
best possible use of available resources.
(a) Profit earning: profit is the lifeblood of business, without
which no business can survive in a competitive market.
(b) b) Creation of customers: a business unit cannot survive
unless there are customers to buy the products and service.
(c) Regular innovations: innovation means charges, which bring
about improvement in products, process of production and
distribution of goods.
(d) Best possible use of resources: as we all know , to run any
business we must have sufficient capital funds.
2. Social objective: social objective are those
objectives of business, which are desired to be
achieved for the benefit of the society.
1. Production and supply of qualitative goods and
service: since the business utilizes the various
resources of the society, the society expects to get
quality goods and services from the business.
2. Adoption of fair trade practices: in every society,
activities such as hoarding, black-marketing and
over- charging and over-charging are considered
undesirable.
3. Contribution to the general welfare of the society:
business unit should work for the general welfare
and upliftment of the society.
3. Human objectives: human objective refer to the objectives aimed
at the well-being as well as fulfillment of expectations of employees
as also of people who are disabled, handicapped and deprived of
proper education and training.
(I) Economic well- being of the employees: in business employees
must be provided with fair remuneration and incentive for
performance benefits of provident fund, pension and other
amenities like medical facilities, housing facilities etc.
(II) Development of human resource: employees as human being
always what to grow. Their growth requires proper training as
well as development.
(III) well-being of society and economically backward people:
business units being inseparable parts of society should help
backward classes and also people those are physically and mentally
challenged.
4. National objectives: being an important part of the country, every
business must have the objective of fulfilling national goal and
aspiration.
I. Creation of employment.
II. Promotion of social justice.
III. Production according to national priority:
IV. Contribution to the revenue of the country.
V. Self sufficient and export promotion.
5. Global objectives:
VI. Raise general standard of living.
VII. Reduce disparities among nations.
VIII.Make available globally competitive.
Classification of business activities
Classification of business activities
INDUSTRY
Industry is concerned about the production or
manufacturing of goods for final consumption or use
by the ultimate consumers, it is called the consumer
goods industry.
There are five main kinds/categories of industries
which are as follow:
(1) Primary industry: primary industry is the industry
that is engaged in production of primary goods
such as food grains, cotton, vegetable, fruits etc.
(2) genetic industry: genetic industry is one which is
engaged in breeding and reproduction of plants,
animals and other creatures on commercial basis.
(3) Extractive industry: extractive industry is one
which is engaged in extraction of materials from land,
sea or air. Extraction of minerals e.g., iron ore, zinc,
gold, gas, stones, fishing and extracting materials
from sea etc.
(4) Construction industry: construction industry is
one which is engaged in construction of road,
building, bridges, fly-over, airports, industrial estates,
railway lines and yards, dams, canals etc.
(5) Manufacturing industry: manufacturing industry
is one which is engaged in the production of goods by
converting raw-material into products for the use or
consumption by ultimate consumers or other
producers.
(I) Analytical industry: analytical industry is engaged in
analyzing some basic material in order to separate
different products associated or mixed in it.
(II) Synthetic industry: synthetic industry is engaged in
synthesizing or mixing two or more material with a
view to manufacture a new product.
(III) Processing industry: processing industry is engaged in
processing of raw material or producer goods through
a series of manufacturing processes in order to
produce some new product.
(IV) Assembly Industry: assembly industry is engaged in
assembling various related parts or components in
order to make a useful product.
II Commerce
The term commerce includes so many activities that help deliver the
right goods to the right persons at the right place at the right
time and at the right price.
According to Stephenson “ Commerce is the sum total of those
processes which are engaged in removal of the hinderances of
persons , place and time in the exchange of commodities.
(1) Trade: trade refers to the lawful buying and selling or exchange
of the goods for a price. Trade can be classified into two
categories:
(a) Internal trade: it refers to the exchange of goods and services for
a price within the boundaries of a country.
The internal trade can be sub classified into two categories:
(b) Wholesale trade: where goods are purchase and sold in bulk, it is
known as wholesale.
(c) retail trade: where goods are sold to consumers or ultimate
customers in very small quantities, it is known as the retail trade.
(II) External or foreign trade: where goods are bought and
sold across the national boundaries i.e., between two or more
countries, it is known as external trade.
The external trade can be sub-classified into three categories:
(a) Import trade: when a trader buys goods in a foreign market and
brings them into his home country, it is said to be import trade.
(b) Export trade: when a trader sells his goods to a foreign buyer to
be taken out to his country, it is said be the export trade .
( c) Extrepot trade: when a trader imports goods from other
countries with a view to export them to another country or
countries, it is known as extrepot.
(2) Auxiliaries to trade or aids to trade: the term commerce
includes auxiliaries to trade or service auxiliary to trade. These
activities or services facilitate trade. These services include
transportation, warehousing, insurance, banking, advertising
etc.
 (3) Direct services or service industry: in the recent
decades, the growth of service sector has been
tremendous. Certain occupational services that
were used to be provided by individuals by adopting
as an occupation are now being provided by
business institutions. these services are now being
provided by haircutting salons, health clubs and
beauty parlors, restaurants, hotels, resorts and
catering firms, nursing homes, hospital, medical
institution etc.
Some economic activities look similar to business but
they are in fact different from business. Some such
activities are discussed in the ensuring paragraphs.
1. profession: business is different from a profession.
Business involves risk, capital, entrepreneurship,
production and exchange of goods or services for
profit.
the main characteristics of a profession are as follows:
(I)Risk is negligible in profession
(II) The members of a profession primarily aim at
providing competent and specialized service to their
clients and monetary gain is secondary to them.
(III) Entry into a profession is always regulated by its
association or institute.
(IV) Every profession requires minimum formal
education and tanning.
(V) The profession requires minimum the
relationship of trust and confidence with their
client.
(VI) every profession is founded upon a code of
ethics.
(VII) there must be a formal organization/association
of professionals for the effective working and
regulation of the profession.
(VIII) every profession requires a body of specialised
knowledge.
2. occupation: business is also different from an occupation.
Occupation or vocation is an activity in which an individual
engages himself regularly and earn his livelihood by using his
skill.
The main characteristics of an occupation are as follows:
(I) There is a little risk in an occupation.
(II) Occupation creates contractual obligation of the individual
engaged in occupation with the person for whom he dose
the work.
(III) It dose not require any formal education, specialized skills
and tanning.
3. Employment/ service: employment is also different from
business. Where a person is employed under a contract
by another person or an organization for a specified
remuneration, he is said to be under the employment
for service of that another person.
An introduction to business
organisation
 Features of business organization
1. Dynamic environment: All business organization
exist and operate under a dynamic environment .
They exist and operate in two types of
environments.
2. Incraease trend of combinations: In modern
days, the trend of combinations is rising among
the business organizations.
3. capital intensive: most modern business
organization are capital intensive. They are more
technology and machines than human resource.
4. Effective use of resources: business organization
exist for effective use of society’s resources in the best
interest of the society.
5. Fast growth of service organization: the business
organization that provide services are growing at a
fast rate.
6. production/ distribution of products for a price:
another significant feature of a business organization
is that it is engaged in production and or distribution
of products for a price and for private profit.
7. Recognition of social responsibility: most modern
business organization voluntarily recognize the
concept of social responsibility of business.
 Objectives of business organization
1. Unity of direction: there must be one head and one plan for a
group of activities directed towards the same objective.
2. Functional definition: the duties and authority-relationship of
different individuals must be clearly defined so that there is no
confusion or overlapping.
3. Scalar principle: authority and responsibility should be in a clear
unbroken line from the highest executive to the lowest executive.
4. Continuity: change is the law of nature. The organization should
be so structured as to have continuity of operations.
5. Co-ordination: there should be an orderly arrangement of group
effort and unity of action in the pursuit of a common purpose.
6. Unity of command: each person should receiving orders from
only one superior and be accountable to him
7. Delegation : authority delegated to an individual manager should
be adequate to enable him to accomplish results expected of him .
 Steps in organisation

1. Division of work.
2. Classification of activities.
3. appointing suitable person.
4. Delegation of authority.
5. co-ordianation of various activities.
 Principle of organization
1. Principle of uniformity.
2. Principle of continuity.
3. Span of control.
4. Principle of specialization.
5. Principle of unity of command.
6. Principle of co-ordination.
7. Principle of objective.
8. Principle of definition
9. Principle of authority and responsibility
 Importance of business organization
1. Decision making.
2. Fixed responsibility.
3. Reduce wastages
4. Reduces the cost.
5. Technical development.
6. Distribution.
7. Production of goods.
8. Financial management.
9. Time management