nature and purpose of business 2

UNIT 2

What Is Business?Activity seeking profitProvides goods/servicesSatisfy standard of living- quality of life

Nonprofit organizations

Objectives of Business

Survival

GrowthSocial

ResponsibilityProfit

Business?Business is an Economic activity which involves regular production and or exchange of goods and services with the main purpose of earning profits through the satisfaction of human wants.

Familiar the meaning OF Business?1.business involves production and

exchange of goods.2.It’s main aim is to earn profit.3.It must satisfy human wants.“ These activities are organised and

performed under the framework of an institution known as business organisation /firm/enterprise.”

“According to B.O Wheeler, Business is an institution organised and operated to provide goods and services to society under the incentive of private gain.”

Business ?Business pervades all human activities

directed towards earning profits or economic gains.

Industry,trade,Banking,Transport,Insurance,warehousing,advertising etc are integral part of modern business.

TYPES OF ECONOMIC ACTIVITY

ECONOMIC ACTIVITIES

BUSINESS PROFESSION EMPLOYMENT

TRADEINDUSTRYBANKING

TRANSPORTATIONINSURANCE

WAREHOUSINGADVERTISING ETC.

MEDICALLEGAL

CHARTERED ACCOUNTANT.

MANAGERFOREMAN

CLERKSALESPERSONWORKER,ETC...

Definition of BusinessBusiness refers to all those activities which are concerned with the production

and /or purchase and sale of goods or services with the purpose of selling them at a profit.

Characteristics/Features of business Economic Activity Production or procurement (acquisition of goods for the purpose

of sale) Dealing in goods and services;( goods are consumer goods

and capital goods) Satisfaction of consumer wants Regular dealings (continuous supply of goods and services) Profit motive Uncertainty. Risk element Creation of utility

Objectives Of Business

Business objectives as the purpose or the reason for the existence of the business in the society.

Business activitiesBusiness activities broadly divided in to three;

They are, a) Economic objectives, b) social objectives c)Human objectives

TYPES OF BUSINESS ACTIVITY

ECONOMICOBJECTIVES

HUMAN OBJECTIVES

SOCIALOBJECTIVES

1)EARNING OF PROFIT2)CREATION OF CUSTOMERS

3)INNOVATION4)EFFECTIVE UTILISATION

OF RESOURCE

1)GOOD SERVICE AND FAIR DEALINGS

2)TREATING EMPLOYEES AS PARTNERS

3) DEVELOPMENT OF EMPLOYEES SKILLS

4) JOB SATISFACTION OF EMPLOYEES

1)BETTER QUALITY PRODUCTS2)FAIR TRADE PRACTICES

3)GENERATION OF EMPLOYMENTEMPLOYEES WELFARE

4)COMMUNITY SERVICE5)PROTECTION OF EMPLOYMENT

NECESSITY OF PROFITABILITYOBJECTIVE

ACCORDING TO PETER. F. DRUCKER

“A BUSINESS MUST ACHIEVE SUFFICIENT PROFITS TO COVER THE RISKS OF ECONOMIC ACTIVITY AND THUS TO AVOID LOSS”

A BUSINESS MUST EARN ADEQUATE PROFITS BECAUSE OF THE FOLLOWING REASONS;

MEANS OF LIVELY HOODRETURN TO INVESTORSREWARD FOR RISKSSOURCE OF FINANCE FOR GROWTH AND

EXPANSIONINDICATOR OF EFFICIENT WORKINGGOODWILL OR REPUTATION

Can profit be the sole objective of a Business

A lay man may say that business is carried on for profit only. But a good business man cannot afford to keep profits as his sole objective.

“earning of profits cannot be the objective of a business any more than eating is the objective of living”

The argument against the profit maximisation are;Profit maximization ignores the interests of

labour,customers,and the society.Unfair means such as hoarding, black

marketing or adulteration may be followed to maximize profits.

Long term interest of the business may be ignored to maximize profits in the short run.

In the present day environment, a business can't be effective with the sole objective of profit maximisation.It must also set objectives in areas like customer satisfaction, employee welfare, community development, environment protection etc..

Multiplicity objectives of a Business

According to peter f Drucker remarked “To manage a business is to balance a variety of needs and goals. And this requires multiple objectives”

He suggests 8 areas where objectives must be set.

Multiplicity objectives of a Business

1 market share (eg; Bata)2 Innovation (eg; Hero Honda)3 productivity( It is the ratio b/w output and inputs in

production process. it is considered as the efficiency of the enterprises.)

4 Human organization-workers attitude and performance

5 Physical and financial resources6 managarial performance7 social rresponsibility8 profitability-reasonable rate.

Classification of business activitiesBusiness activities are classified on

the basis of 3 criteria,ie,

1 size 2 ownership3 functions

Classification of business activitiesOn the basis of size business activities

are classified as 1 small scale2 large scaleSmall scale the investment does not

exceed Rs 100 lakhs.Large scale means the investment

exceed 1 Crore

Classification of business activities

On the basis of OWNERSHIP business activities are classified as

Public sector –under the govt. controlpvt sector-under private controlJoint sector –both govt. and private

Classification of business activitiesPublic enterprises may be organized as Departmental undertakingGovernment companyStatutory corporation etc… But pvt.enterprises are like; Sole trader,

Joint Hindu familyPartnership

Joint stock companyAnd co-operative society.

Classification of business activitiesOn the basis of functions business

activities are classified in to two;Industryand commerce Commercial activities are again classified

as ;trade and aids to trade

BUSINESS ACTIVITIES

INDUSTRY COMMERCE

Trade

1 EXTRACTIVE 2 GENETIC

3 MANUFACTURING 4 CONSTRUCTION

Aids to Trade

Home trade;1)Retail trade2) wholesale

trade

Foreign trade1 import2 export

3 Entrepot TransportWarehousing

InsuranceBanking

advertising

A brief review of the various types of Business activities

1 Industrial activities or Enterprise; It includes mining ,breeding,costruction of roads

building,etc....(manufacturing,mining,constructions ) . 2 Commercial activities; commercial activities involve exchange of goods and

services like...transport, ware housing,banking,insurance and advertisement.

.3 Trading activities or firms; it refers to purchase and sale of goods to earn

profits by the business men known as traders. They engaged in a) Home trade - includes wholesale and retail

b) foreign trade- import-export and entreport

A brief review of the various types of Business activitiesService activities or enterprises;

These include those services which facilitate smooth trade and also serve as the back born of modern industry.

banking,insurance,transportation,warehousing,

insurance, packaging.

Types of industriesPrimary industry; it includes extraction ,producing and processing of natural resource (extractive+ Genetic)

Secondary industry are concerned with processing materials which have already been produced at the primary stage.

Manufacturing and construction industry is under secondary industry.

Manufacturing industry may assume the following forms

Analytical industry;petrolium refining is an example of analytical industry.

Synthetic industry; two or more materials are mixed together in the manufacturing operations to obtain some new products.like soap,cement etc

Manufacturing industry may assume the following formsProcessing industry; raw materials are processed

through a series of manufacturing operations making use of analytical and synthetic method)-textile sugar and steel.

Assembly line industry; in assembly industry, the finished

products can be produced only after various components have been made and then brought together for final assembly. automobile watches,telivision are examples

Construction industry may assume the following forms

They are concerned with making of roads,bridges,dams and canals.

Definition of trade Trade is that branch of commerce which

deals with exchange of goods and services in terms of money between different persons known as

‘traders’

Types of trade Trade may be classified on the basis of

1) Geographical area covered 2) volume of trade transaction On geographical basis trade may be

classified in to two like internal trade and external trade.

On volume of trade basis trade is divided in to two

Wholesale & retail trade

Internal or home trade It refers to purchase and sale of goods

within the boundaries of a country.Wholesale trade; purchase and sale of

goods in bulk quantity and sell to retailers at small quantity.

Retail trade; selling of goods by the retailer to the customer

External or foreign tradeImport trade Export trade & Entrepot trade

AUXILIARIES TO TRADETransportation and communicationBanking Insurance ware housingAdvertising And packaging

industry commerce

Trade

Differentiate between industry, trade and commerce