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BUSINESS HISTORY NOTES
UNIT-1
BUSINESS
A business (also known as enterprise orfirm) is an organization engaged
in the trade ofgoods, services, or both to consumers.[1] Businesses are predominant
in capitalisteconomies, where most of them areprivately owned and administered
to earnprofit to increase the wealth of their owners. Businesses may also be not-
for-profit orstate-owned. A business owned by multiple individuals may be
referred to as a company, although that term also has a more precise meaning.
CLASSIFICATION OF BUSINESS
Agriculture and mining businesses are concerned with the production of raw
material, such as plants or minerals.
Financialbusinesses includebanks and other companies that generate profit
through investment and management ofcapital.
Information businesses generate profits primarily from the resale
ofintellectual property and include movie studios, publishers and
packagedsoftware companies.
Manufacturersproduceproducts, from raw materials or component parts,
which they then sell at a profit. Companies that make physical goods, suchas cars or pipes, are considered manufacturers.
Real estatebusinesses generate profit from the selling, renting, and
development of properties comprising land, residential homes, and other
kinds of buildings.
Retailers and distributors act as middle-men in getting goods produced by
manufacturers to the intended consumer, generating a profit as a result of
providing sales or distribution services. Most consumer-oriented stores and
catalog companies are distributors or retailers.
Service businesses offer intangible goods or services and typically generate
a profit by charging for labor or other services provided to government,other businesses, orconsumers. Organizations ranging from house
decorators to consulting firms, restaurants, and even entertainers are types of
service businesses.
Transportationbusinesses deliver goods and individuals from location to
location, generating a profit on the transportation costs.
http://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Business#cite_note-0http://en.wikipedia.org/wiki/Capitalismhttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Private_propertyhttp://en.wikipedia.org/wiki/Profit_(economics)http://en.wikipedia.org/wiki/Wealthhttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Government-owned_corporationhttp://en.wikipedia.org/wiki/Companyhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Mininghttp://en.wikipedia.org/wiki/Financialhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Intellectual_propertyhttp://en.wikipedia.org/wiki/Movie_studiohttp://en.wikipedia.org/wiki/Software_companieshttp://en.wikipedia.org/wiki/Manufacturerhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Raw_materialhttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Carshttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Landhttp://en.wikipedia.org/wiki/Homehttp://en.wikipedia.org/wiki/Retailhttp://en.wikipedia.org/wiki/Distribution_(business)http://en.wikipedia.org/wiki/Service_Sectorhttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Restauranthttp://en.wikipedia.org/wiki/Transporthttp://en.wikipedia.org/wiki/Transportationhttp://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Business#cite_note-0http://en.wikipedia.org/wiki/Capitalismhttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Private_propertyhttp://en.wikipedia.org/wiki/Profit_(economics)http://en.wikipedia.org/wiki/Wealthhttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Government-owned_corporationhttp://en.wikipedia.org/wiki/Companyhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Mininghttp://en.wikipedia.org/wiki/Financialhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Intellectual_propertyhttp://en.wikipedia.org/wiki/Movie_studiohttp://en.wikipedia.org/wiki/Software_companieshttp://en.wikipedia.org/wiki/Manufacturerhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Raw_materialhttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Carshttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Landhttp://en.wikipedia.org/wiki/Homehttp://en.wikipedia.org/wiki/Retailhttp://en.wikipedia.org/wiki/Distribution_(business)http://en.wikipedia.org/wiki/Service_Sectorhttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Restauranthttp://en.wikipedia.org/wiki/Transporthttp://en.wikipedia.org/wiki/Transportation -
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Utilitiesproduce public services such as electricity or sewage treatment,
usually under a government charter.
TYPES OF GOVERNMENTAL SYSTEM
Command system DictatorshipFree market system Make their own decisionMixed economy Combination of both
Types of market
1. Pure competition
2. Pure monopoly
3. Monopsony
4. Monopolostic competition
5. Oligopoly6. Oligopsony
7. Price discrimination
-These market structures are discussed below.
1.Pure competition:
The market consist of buyers and sellers trading in a uniform commodity such
as wheat, copper, or financial securities. No single buyer or seller has much effect
on the going market price. A seller can not change more than the going price,
because buyer can obtain as much they need at the going price. In a purely
competitive market, marketing research, product development, pricing, advertising,
and sales promotion play little or no role. Thus, sellers in these markets do not
spend much time on marketing strategy.
2.Pure monopoly:
In economics, an industry with a single firm that produce a product, for which
there are no close substitutes and in which significant barriers to entry prevent
other firms from entering the industry to compete for profit is called pure
monopoly.
Example: When the City Cell mobile service company first started their businessin Bangladesh, they were the only mobile service provider then. Before the
Grameen Phone came into the market, they enjoyed pure monopoly.
There are two types of pure monopoly:
1. Regulated monopoly
2. Nonregulated monopoly
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Regulated monopoly: The government permits the company to set rates that
will yield a fair return. Example: Power Company.
Nonregulated monopoly: Company is free to price at what the market will
bear. Example: City Cell ( When it first introduced mobile service in
Bangladesh).
3.Monopsony:
This is the market situation where there is only one buyer in the market. When
City Cell first introduced mobile service network in Bangladesh, they were the
only mobile phone and its accessories buyer from Nokia and Motorolla in
Bangladesh.
4.Monopolistic competition:
In economics, the market consist of many buyers and sellers who trade over a
range of prices rather than a single market price is called monopolistic competition.A range of price occurs because sellers can differentiate their offers to buyers.
Sellers try to develop difference by using customer segments, and in addition to
price, freely uses branding, advertising, and personal selling to set their offers
apart.
5.Oligopoly:
In economics, the market consist of few sellers who are highly sensitive to
each others pricing and marketing strategies. There are few sellers because it is
difficult for new sellers to enter the market. Each seller is alert to competitors
strategies and move.
6.Oligopsony:
In economics, oligopsony is a market where there is a small number of buyers
for a product or a service. In this market structure, buyers have power over the
seller. Because as there are small number of buyers, if they are united and pressure
the seller to sell the product or service in a reasonable and affordable price, the
seller must have to consider that.
7.Price discrimination:In economics, if one product or service has different price for different buyers
which is provided by the same provider, then we call that price discrimination
market strategy. A good example of this strategy could be the airlines
company-Emirates. It has offered different prices for different category of
passengers for the same destination. Such as, it has Student package for the
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students, Honeymoon package for the couples which are of lower price than their
regular one.
BUSINESS ENVIRONMENT
Meaning: - The term Business Environment is composed of two words Business
and Environment. In simple terms, the state in which a person remains busy is
known as Business. The word Business in its economic sense means human
activities like production, extraction or purchase or sales of goods that
are performed for earning profits.
On the other hand, the word Environment refers to the aspects of surroundings.
Therefore,Business Environment may be defined as a set of conditions Social,
Legal, Economical, Political or Institutional that are uncontrollable in nature
and affects the functioning of organization. Business Environment has
two components:1. Internal Environment
2. External Environment
Internal Environment: It includes 5 Ms i.e. man, material, money, machinery and
management, usually within the control of business. Business can make changes in
these factors according to the change in the functioning of enterprise.
External Environment: Those factors which are beyond the control of business
enterprise are included in external environment. These factors are: Government
and Legal factors, Geo-Physical Factors, Political Factors, Socio-Cultural Factors,
Demo-Graphical factors etc. It is of two Types:
1. Micro/Operating Environment
2. Macro/General Environment
Micro/Operating Environment: The environment which is close to business and
affects its capacity to work is known as Micro or Operating Environment. It
consists of Suppliers, Customers, Market Intermediaries, Competitors and Public.
(1) Suppliers: They are the persons who supply raw material and
required components to the company. They must be reliable and business must
have multiple suppliers i.e. they should not depend upon only one supplier.
(2) Customers: - Customers are regarded as the king of the market. Success of
every business depends upon the level of their customers satisfaction. Types ofCustomers:
(i) Wholesalers
(ii) Retailers
(iii) Industries
(iv) Government and Other Institutions
(v) Foreigners
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(3) Market Intermediaries: - They work as a link between business and final
consumers. Types:-
(i) Middleman
(ii) Marketing Agencies
(iii) Financial Intermediaries
(iv) Physical Intermediaries
(4) Competitors: - Every move of the competitors affects the business. Business
has to adjust itself according to the strategies of the Competitors.
(5) Public: - Any group who has actual interest in business enterprise is termed as
public e.g. media and local public. They may be the users or non-users of the
product.
Macro/General Environment: It includes factors that create opportunities and
threats to business units. Following are the elements of Macro Environment:
(1) Economic Environment: - It is very complex and dynamic in nature that keepson changing with the change in policies or political situations. It has three
elements:
(i) Economic Conditions of Public
(ii) Economic Policies of the country
(iii)Economic System
(iv) Other Economic Factors: Infrastructural Facilities, Banking, Insurance
companies, money markets, capital markets etc.
(2) Non-Economic Environment: - Following are included in non-economic
environment:-
(i) Political Environment: - It affects different business units
extensively. Components:
(a) Political Belief of Government
(b) Political Strength of the Country
(c) Relation with other countries
(d) Defense and Military Policies
(e) Centre State Relationship in the Country
(f) Thinking Opposition Parties towards Business Unit
(ii) Socio-Cultural Environment: - Influence exercised by social and cultural
factors, not within the control of business, is known as Socio-CulturalEnvironment. These factors include: attitude of people to work, family system,
caste system, religion, education, marriage etc.
(iii) Technological Environment: - A systematic application of scientific
knowledge to practical task is known as technology. Everyday there has been vast
changes in products, services, lifestyles and living conditions, these changes must
be analysed by every business unit and should adapt these changes.
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(iv) Natural Environment: - It includes natural resources, weather, climatic
conditions, port facilities, topographical factors such as soil, sea, rivers, rainfall etc.
Every business unit must look for these factors before choosing the location for
their business.
(v) Demographic Environment :- It is a study of perspective of population i.e. its
size, standard of living, growth rate, age-sex composition, family size, income
level (upper level, middle level and lower level), education level etc. Every
business unit must see these features of population and recongnise their various
need and produce accordingly.
(vi) International Environment: - It is particularly important for industries
directly depending on import or exports. The factors that affect the business are:
Globalisation, Liberalisation, foreign business policies, cultural exchange.
SECTORAL DIVISIONS OF BUSINESS
FORMS OF ORGANISATIONS
While establishing a business the most important task is to select a proper form
of organisation. This is because the conduct of business, its control, acquisition of
capital, extent of risk, distribution of profit, legal formalities, etc. all depend on
the form of organisation.
The most important forms of business organisation are as follows:
Sole Proprietorship
Joint Hindu Family Business
Partnership Joint Stock Company
Co-operative Society
Sole Proprietorship
Meaning
When the ownership and management of business are in control of one individual,
it is known as sole proprietorship or sole tradership. It is seen everywhere,
in every country, every state, every locality. The shops or stores which you see
in your locality the grocery store, the vegetable store, the sweets shop, thechemist shop, the paanwala, the stationery store, the STD/ISD telephone booths
etc. come under sole proprietorship. It is not that a sole tradership business must
be a small one. The volume of activities of such a business unit may be quite
large. However, since it is owned and managed by one single individual, often the
size of business remains small.
Characteristics:
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1. Ownership : The business enterprise is owned by one single individual,
that is the individual has got legal title to the assets and properties of the
business. The entire profit arising out of business goes to the sole proprietor.
Similarly, he also bears the entire risk or loss of the firm.
2. Management : The owner of the enterprise is generally the manager of
the business. He has got absolute right to plan for the business and
execute them without any interference from anywhere. He is the sole22 ::
Commerce (Business Studies)
decision maker.
3. Source of Capital : The entire capital of the business is provided by the
owner. In addition to his own capital he may raise more funds from outside
through borrowings from close relatives or friends, and through loans from
banks or other financial institutions.
4. Legal Status : The proprietor and the business enterprise are one and the
same in the eyes of law. There is no difference between the business assetsand the private assets of the sole proprietor. The business ceases to exist
in the absence of the owner.
5. Liability : The liability of the sole proprietor is unlimited. This means that,
in case the sole proprietor fails to pay for the business obligations and
debts arising out of business activities, his personal property can be used
to meet those liabilities.
6. Stability : The stability and continuity of the firm depend upon the capacity,
competence and the life span of the proprietor.
7. Legal Formalities : In the setting up, functioning and dissolution of a sole
proprietorship business no legal formalities are necessary. However, a few
legal restrictions may be there in setting up a particular type of business.
For example, to open a restaurant, the sole proprietor needs a license from
the local municipality ; to open a chemist shop, the individual must have a
license from the government.
Joint Hindu Family Business
Meaning
The Joint Hindu Family ( JHF) business is a form of business organization found
only in India. In this form of business , all the members of a Hindu undividedfamily own the business jointly. The affairs of business are managed Forms of
Business Organisation by the head of the family, who is known as the KARTA .
A Joint Hindu Family business comes into existence as per the Hindu Inheritance
Laws of India. In a joint Hindu family business only the male members get a
share in the business by virtue of their being part of the family. The membership
is limited up to three successive generations. Thus, an individual, his sons(s), and
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his grandson(s) become the members of a Joint Hindu Family by birth. They are
also called Co-parceners. The term co-parceners implies that such an individual
has got the right to ask for a partition of the Joint Hindu Family business and to
have his separate share. A daughter has no right to ask for a partition and is,
therefore, not a co-parcener.
Characteristics :
1. Legal Status : The Joint Hindu Family business is a jointly owned business
just like a jointly owned property. It is governed by Hindu Law. It can
enter into partnership agreement with others.
2. Membership : There is no membership other than the members of the
joint family. Inside the family also, it is restricted only to male members
who are co-parceners by birth.
3. Profit Sharing : All co-parceners have equal share in the profits of the
business. In the event of death of any of the co-parcener, his wife can
claim share of profit.4. Management : The management of a joint Hindu family business is in the
hands of the senior-most family member who is known as the karta. He
has the authority to manage the business and his ways of managing can
not be questioned by the co-parceners.
5. Liability : The liability of each member of the Joint Hindu Family business
is limited to the extent of his share in the business. But the liability of the
karta is unlimited as, it extends to his personal property.
6. Fluctuating Share : The individual share of each co-parcener keeps on
fluctuating. This is because, every birth of a male child in the family adds
to the number of co-parceners and every death of a co-parcener reduces
the number.
7. Continuity : A Joint Hindu Family business continues to exist on the
death of any co-parcener. Even on the death of the karta, it continues to
exist as the next seniormost family member becomes karta. However, a
Joint Hindu Family business can be dissolved any time either through
mutual agreement between members or by partition.
Partnership
MeaningA partnership form of organisation is one where two or more persons are
associated to run a business with a view to earn profit. Persons from similar
background or persons of different ability and skills, may join together to carry
on a business. Each member of such a group is individually known as partner
and collectively the members are known as a partnership firm. These firms are
governed by the Indian Partnership Act, 1932.28 :: Commerce (Business Studies)
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Characteristics:
1. Number of Partners : A minimum of two persons are required to start a
partnership business. The maximum membership limit is 10 in case of banking
business and 20 in case of all other types of business.
2. Contractual Relationship : The relation between the partners of a
partnership firm is created by contract. The partners enter into partnership
through an agreement which may be verbal, written or implied. If the
agreement is in writing it is known as a Partnership Deed.
3. Competence of Partners : Since individuals have to enter into a contract
to become partners, they must be competent enough to do so. Thus, minors,
lunatics and insolvent persons are not eligible to become partners. However,
a minor can be admitted to the benefits of partnership i.e. he can have a
share in the profits.4. Sharing of Profit and Loss : The partners can share profit in any ratio
as agreed. In the absence of an agreement, they share it equally.
5. Unlimited Liability : The partners have unlimited liability. They are liable
jointly and severally for the debts and obligations of the firm. Creditors can
lay claim on the personal properties of any individual partner or all the
partners jointly. Even a single partner may be called upon to pay the debts
of the firm. Of course, he can get back the money due from other partners.
The liability of a minor is, however, limited to the extent of his share in the
profits, in case of dissolution of a firm.
6. Principal-Agent Relationship : The business in a partnership firm may be
carried on by all the partners or any one of them acting for all. This means
that every partner is an agent when he is acting on behalf of others and he
is a principal when others act on his behalf. It is, therefore, essential that
there should be mutual trust and faith among the partners in the interest of
the firm.
7. Transfer of Interest : No partner can sell or transfer his interest in the
firm to anyone without the consent of other partners.
8. Legal Status : A partnership firm is just a name for the business as a
whole. The firm means partners and the partners mean the firm. Lawdoes not recognise the firm as a separate entity distinct from the partners.
9. Voluntary Registration : Registration of partnership is not compulsory.
But since registration entitles the firm to several benefits, it is considered
desirable. For example, if it is registered, any partner can file a caseForms of
Business Organisation :: 29
against other partners, or a firm can file a suit against outsiders in case of
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disputes, claims, disagreements, etc.
Joint Stock Company
Meaning:
A Joint Stock Company form of business organisation is a voluntary association
of persons to carry on business. Normally, it is given a legal status and is subject
to certain legal regulations. It is an association of persons who generally contribute
money for some common purpose. The money so contributed is the
capital of the company. The persons who contribute capital are its members. The
proportion of capital to which each member is entitled is called his share, therefore
members of a joint stock company are known as shareholders and the capital
of the company is known as share capital. The total share capital is divided into
a number of units known as shares. You may have heard of the names of joint
stock companies like Tata Iron & Steel Co. Limited, Hindustan Lever Limited,
Reliance Industries Limited, Steel Authority of India Limited, Ponds India Limitedetc.
The companies are governed by the Indian Companies Act, 1956. The Act
defines a company as an artificial person created by law, having separate entity,
with perpetual succession and a common seal.
Characteristics:
1. Artificial Person : A Joint Stock Company is an artificial person in the
sense that it is created by law and does not possess physical attributes of
a natural person. However, it has a legal status.
2. Separate Legal Entity : Being an artificial person, a company has an
existence independent of its members. It can own property, enter into
contract and conduct any lawful business in its own name. It can sue and
can be sued in the court of law. A shareholder cannot be held responsible
for the acts of the company.
3. Common Seal : Every company has a common seal by which it is
represented while dealing with outsiders. Any document with the common
seal and duly signed by an officer of the company is binding on the
company.
4. Perpetual Existence : A company once formed continues to exist as long
as it fulfils the requirements of law. It is not affected by the death, lunacy,insolvency or retirement of any of its members.32 :: Commerce (Business Studies)
5. Limited Liability : The liability of a member of a Joint Stock Company
is limited by guarantee or the shares he owns. In other words, in case of
payment of debts by the company, a shareholder is held liable only to the
extent of his share.
6. Transferability of Shares : The members of a company are free to
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transfer the shares held by them to anyone else.
7. Formation : A company comes into existence only when it has been
registered after completing the formalities prescribed under the Indian
Companies Act 1956. A company is formed by the initiative of a group of
persons known as promoters.
8. Membership : A company having a minimum membership of two persons
and maximum fifty is known as a Private Limited Company. But in case
of a Public Limited Company, the minimum is seven and the maximum
membership is unlimited.
9. Management : Joint Stock Companies have democratic management and
control. Even though the shareholders are the owners of the company, all
of the them cannot participate in the management process. The company is
managed by the elected representatives of shareholders known as Directors.
10. Capital : A Joint Stock Company generally raises a large amount of capital
through issue of shares.
Co-operative Society
Meaning
Any ten persons can form a co-operative society. It functions under the
Cooperative Societies Act ,1912 and other State Co-operative Societies Acts .
A co-operative society is entirely different from all other forms of organization
Forms of Business Organisation discussed above in terms of its objective. The co-
operatives are formed primarily to render services to its members. Generally it also
provides some service to the society. The main objectives of co-operative society
are:
(a) rendering service rather than earning profit,
(b) mutual help instead of competition, and
(c) self help in place of dependence. On the basis of objectives, various types of
co-operatives are formed :
a. Consumer co-operatives : These are formed to protect the interests of
ordinary consumers of society by making consumer goods available at
reasonable prices. Kendriya Bhandar in Delhi, Alaka in Bhubaneswar and
similar others are all examples of consumer co-operatives
b. Producers co-operatives : These societies are set up to benefit smallproducers who face problems in collecting inputs and marketing their
products. The Weavers co-operative society, the Handloom owners cooperative
society are examples of such co-operatives.
c. Marketing co-operatives : These are formed by producers and
manufactures to eliminate exploitation by the middlemen while marketing
their product. Kashmir Arts Emporium, J&K Handicrafts, Utkalika etc.
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are examples of marketing co-operatives.
d. Housing Co-operatives : These are formed to provide housing facilities
to its members. They are called co-operative group housing societies.
e. Credit Co-operatives : These societies are formed to provide financial
help to its members. The rural credit societies, the credit and thrift societies,
the urban co-operative banks etc. come under this category.
f. Forming Co-operatives : These are formed by small farmers to carry on
work jointly and thereby share the benefits of large scale farming.
Besides these types, other co-operatives can be formed with the objective of
providing different benefits to its members, like the construction co-operatives,
transport co-operatives, co-operatives to provide education etc.
Characteristics:
1. Voluntary association : Individuals having common interest can come
together to form a co-operative society. Any person can become a member
of such an organisation and leave the same.2. Membership : The minimum membership required to form a co-operative
society is ten and the maximum number is unlimited. At times the cooperatives
after their formation fix a maximum membership limit.36 :: Commerce (Business
Studies)
3. Body corporate : Registration of a society under the Co-operative Societies
Act is a must. Once it is registered, it becomes a body corporate and
enjoys certain privileges just like a joint stock company. Some of the
privileges are:
(a) The society enjoys perpetual succession.
(b) It has its own common seal.
(c) It can own property in its name.
(d) It can enter into contract with others.
(e) It can sue others in court of law.
4. Service Motive : The primary objective of any co-operative organisation
is to render services to its members in particular and to the society in
general.
5. Democratic Set up : Every member has a right to take part in the
management of the society. Each member has one vote. Generally the
members elect a committee known as the Executive Committee to lookafter the day to day administration and the said committee is responsible
to the general body of members.
6. Sources of Finances : A co-operative organisation starts with a fund
contribute by its members in the form of units called shares. It can also
raise loans and secure grants from the government easily. One fourth of the
profits of the co-operative are transferred to its fund every year.
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7. Return on capital : The return on capital subscribed by the members is
in the form of a fixed rate of dividend after deduction from the profit.
FORMS OF GROWTH OF BUSINESS
Once an entrepreneur understands some of the factors that influence growth
and development, he can choose a suitable way for achieving it. Business
growth can take place in many ways. Broadly, various types of growth can be
divided into two broad categories organic and inorganic growth.
Organic Growth It can also be termed as internal growth. It is growth from
within. It is planned and slow increase in the size and resources of the firm. A
firm can grow internally by ploughing back of its profits into the business
every year. This leads to the growth of production and sales turnover of the
business. Internal growth may take place either through increase in the sales of
existing products or by adding new products. Internal growth is slow and
involves comparatively little change in the existing organization structure. It
can be planned and managed easily as it is slow. The ways used by the
management for internal growth include:
(i)intensification;
(ii) diversification and
(iii) modernization.
Inorganic Growth it can also be termed as external growth. It involves a
merger of two or more business firms. A firm may acquire another firm or
firms may combine together to improve their competitive strength. External
growth has been attempted by the business houses through the two strategies
(a) mergers and acquisitions and (b) joint ventures. Merger again can be of
two types: (i) a firm merges with other firm in the same industry having
similar or related products. This type of merger leads to coordination problem
between the two firms (ii) a firm merges with another firm in altogether
different lines of business and have little common in their products or proceses
such a merger is known as conglomerate merger.
Inorganic growth is fast and allows immediate utlization of acquired assets.
There is no risk of overproduction as the capacity of the industry as whole 142
remains unchanged. Merger leads to combination of independent units to
control competition, to gain economics of scale and also sometimes, to
modernize production facilities. But merger also leads to social problem of
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monopoly, problem of coordination, strain on capital structure, etc. Thus,
external growth involves problem of reorganization.
GROWTH STRATEGIES
ROLE OF ENTREPRENEURSHIP
Entrepreneurship helps in the process of economic development in the following
ways :
1) Employment Generation :
Growing unemployment particularly educated unemployment is the problem of the
nation. The available employment opportunities can cater only 5 to 10 % of theunemployed. Entrepreneurs generate employment both directly and indirectly.
Directly, self employment as an entrepreneur and indirectly by starting many
industrial units they offer jobs to millions. Thus entrepreneurship is the best way to
fight the evil of unemployment.
2) National Income :
National Income consits of the goods and services produced in the country and
imported. The goods and services produced are for consumption within the country
as well as to meet the demand of exports. The domestic demand increases withincrease in population and increase in standard of living. The export demand also
increases to meet the needs of growing imports due to various reasons. An
increasing number of entrepreneurers are required to meet this increasing demand
for goods and services. Thus entrepreneurship increases the national income.
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3) Balanced Regional Development :
The growth of Industry and business leads to a lot of Public benefits like transport
facilities, health, education, entertainment etc. When the industries areconcentrated in selected cities, development gets limited to these cities. A rapid
development . When the new entrepreneurers grow at a faster rate, in view of
increasing competition in and around cities, they are forced to set up their
enterprises in the smaller towns away from big cities. This helps in the
development of backward regions.
4) Dispersal of economic power :
Industrial development normally may lesd to concentration of economic powers ina few hands. This concentration of power in a few hands has its own evils in the
form of monopolies. Developing a large number of entrepreneurers helps in
dispersing the economic power amongst the population. Thus it helps in weakening
the harmful effects of monopoly.
5) Better standards of living :
Entrepreneurers play a vital role in achieving a higher rate of economic growth.
Entrepreneurers are able to produce goods at lower cost and supply quality goods
at lower price to the community according to their requirements.When the price ofof the commodies decreases the consumers get the power to buy more goods for
their satisfaction. In this way they can increase the standard of living of the
people.
6) Creating innovation :
An entrepreneur is a person who always look for changes. apart from combining
the factors of production, he also introduces new ideas and new combination of
factors. He always try to introduce newer and newer technique of production of
goods and services. An entrepreneur brings economic development through
innovation.
Entrepreneurship also helps in increasing productivity and capital formation of a
nation. In short, the development of the entrepreneurship is inevitable in the
economic development of the country. The Role played by the entrepreneurship
development can be expressed in the following words :
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" Economic development is the effect for which entrepreneurship is a cause "
NEED FOR BUSINESS HISTORY
It is an important tool for understanding human nature and its past
endeavours and can throw light on the present and future in many ways
Historical study increases our understanding of humanity and has lessons for
human aspirations, ambitions and organisations. Eg contemporary
empowerment and subcontracting initiatives were better known in previous
eras as the helper and putting-out systems.
Historical study can develop communication skills (language ability, writing
proficiency), an ability to evaluate evidence and a healthy scepticism to
received opinion and propaganda
It can provide management students with an overview of the development of
the national and international economy and provide key insights intoindustrial structure and the evolution of business strategies.
It can broaden business education by illuminating government-business
relations, technology, corporate culture and business ethics
Business and management history not only encompasses the study of
organisational systems but its breadth of approach provides managers with
insights into human behaviour operating under a variety of constraints and
influences
Modern managers operating in a world of high-speed decision-making need
to be aware of how long-tem changes have affected enterprises.
Business/management history is multi-disciplinary and concerned with long-
term change and offers a more practical focus.
Business/management history supplements management theorys principles
for managing organisations by offering portrayals of reality against which
those principles may be tested and experienced vicariously.
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UNIT 2
GENESIS OF INDIAN BUSINESS : PERSPECTIVES
PREINDEPENDENCE ERA IN INDIAN BUSINESS: PERSPECTIVES
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