Nature of Business and Characteristics of Contemporary Business

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Nature of Business
1. Economic activity:
Business is an economic activity of production and distribution of goods and services. It provides
employment opportunities in different sectors like banking, insurance, transport, industries, trade etc. it is
an economic activity corned with creation of utilities for the satisfaction of human wants.It provides a
source of income to the society. Business results into generation of employment opportunities thereby
leading to growth of the economy. It brings about industrial and economic development of the country.
2. Buying and Selling:
The basic activity of any business is trading. The business involves buying of raw material, plants and
machinery, stationary, property etc. On the other hand, it sells the finished products to the consumers,
wholesaler, retailer etc. Business makes available various goods and services to the different sections of
the society.
3. Continuous process:
Business is not a single time activity. It is a continuous process of production and distribution of goods
and services. A single transaction of trade cannot be termed as a business. A business should be
conducted regularly in order to grow and gain regular returns.Business should continuously involve in
research and developmental activities to gain competitive advantage. A continuous improvement strategy
helps to increase profitability of the business firm.
4. Profit Motive:
Profit is an indicator of success and failure of business. It is the difference between income and expenses
of the business. The primary goal of a business is usually to obtain the highest possible level of profit
through the production and sale of goods and services. It is a return on investment. Profit acts as a driving
force behind all business activities.Profit is required for survival, growth and expansion of the business. It
is clear that every business operates to earn profit. Business has many goals but profit making is the
primary goal of every business. It is required to create economic growth.
5. Risk and Uncertainties:

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Risk is defined as the effect of uncertainty arising on the objectives of the business. Risk is associated
with every business. Business is exposed to two types of risk, Insurable and Non-insurable. Insurable risk
is predictable.
Predictable factors are controllable to some extent, such as:
a) Taxes
b) Change in the volume of expected sales
c) Cost of supplies and equipment
d) Overhead costs
e) Salaries
f) Cost of goods and services offered
Unpredictable factors include:
a) Changes in trends and tastes of customers.
b) Impact of the local economy on customer base.
c) Any unexpected action taken by your competitors.
The calculation and management of the risk is vital to ensure the success of a business firm. Insurance
and Risk management helps in minimizing the risk associated with the business.
6. Creative and Dynamic:
Modern business is creative and dynamic in nature. Business firm has to come out with creative ideas,
approaches and concepts for production and distribution of goods and services. It means to bring things in
fresh, new and inventive way.One has to be innovative because the business operates under constantly
changing economic, social and technological environment. Business should also come out with new
products to satisfy the growing needs of the consumers.
7. Customer satisfaction:

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The phase of business has changed from traditional concept to modern concept. Now a day, business
adopts a consumer-oriented approach. Customer satisfaction is the ultimate aim of all economic
activities.Modern business believes in satisfying the customers by providing quality product at a
reasonable price. It emphasize not only on profit but also on customer satisfaction. Consumers are
satisfied only when they get real value for their purchase.The purpose of the business is to create and
retain the customers. The ability to identify and satisfy the customers is the prime ingredient for the
business success.
8. Social Activity:
Business is a socio-economic activity. Both business and society are interdependent. Modern business
runs in the area of social responsibility.Business has some responsibility towards the society and in turn it
needs the support of various social groups like investors, employees, customers, creditors etc. by making
goods available to various sections of the society, business performs an important social function and
meets social needs. Business needs support of different section of the society for its proper functioning.
9. Government control:
Business organisations are subject to government control. They have to follow certain rules and
regulations enacted by the government. Government ensures that the business is conducted for social
good by keeping effective supervision and control by enacting and amending laws and rules from time to
time.
Some important acts framed by the government include:
i. The Competition Act, 2002
ii. Foreign Exchange Management Act, 1999
iii. The Environment Act, 1986
iv. Indian Companies Act, 1956
v. Consumer protection Act
10. Optimum utilisation of resources:

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Business facilitates optimum utilisation of countries material and non-material resources and achieves
economic progress. The scarce resources are brought to its fullest use for concentrating economic wealth
and satisfying the needs and wants of the consumers.
Characteristics of Contemporary Business
1. Size of the Business
Bulk production and marketing have become integral parts business. Economies of bulk production is an
objective. This has been made possible by producing more goods with the existing infrastructure. Bulk
production is possible only when machines can replace the manual labour. Sophisticated machines have
replaced the labour force considerably, thereby adding to the speed in production activity.
Distribution channels have also got narrowed down so that the ultimate consumer is in a position to get
the required commodity quickly. Turnover has enormously increased due to the establishment of
departmental stores, super markets, chain stores, mail order houses etc.
Thus the bulk production is considerably taken care of by the distribution channels.
2. Diversified field of activity
Any businessman would not like to stick to one field of activity. Diversification is the order of the day.
Godrej group, a reputed business organisation, has units producing soaps and detergents, furniture, etc.
Birlas have units manufacturing vehicles, optic fibers, jute, aluminium etc.
Even the introduction of different brands of goods in the same product line is seen now a days. For eg.,
Philips has introduced various types of bulbs, tube lights, etc., into the market.
3. Change in fashion and tastes due to technological advancement
There is a famous saying that "You better pay attention to your future because you are going to spend a
lot of time there".
Self service stores in place of small retailer outlets, motor vehicles in place of cycles and bullock carts,
ballpoint pens in place of ink pens, tube railway system in place of conventional railway system,
polythene covers in place of ordinary covers are only few examples.
The present day businessman has to equip himself for the changes lest he may not survive in this
competitive world.
4. Liberalisation and Globalisation
Modern business units have become a global entity. Thanks to liberalisation in the early 90s. This gave
way to curtailment of restriction on economic activities. The impact of the same was felt all over the
world. Liberalisation led to advancement in the field of transportation, communication, warehousing and

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marketing techniques etc. This helped in the movement of goods from one place to other place throughout
the world easily and quickly.
Modern economies are open economies. Import and export of goods is the common feature. There are
foreign collaborations and flow of foreign financial aid and loans. Every country has got its economic
interest in other countries. Modern big industries have assumed global status. The impact of globalisation
is visible from the following:
1) Formation of International Monetary Fund (IMF)
2) Foreign collaborations and Joint Ventures, financial aid and assistance
3) Permission to start foreign companies and banks in our country.
4) Globalisation of marketing through cable TV network and satellite links.
5) Introduction of internet facilities - e-mail and e-commerce services.
The effects of globalisation are :
1. Development of social consciousness. Because of globalisation, there is a change in the style of living
and standard of living. People expect the businessmen to supply useful and good quality goods. Business
should fulfil social obligations.
2. Technological Revolution. New and novel products are available in the market. Manufacturing takes
place in large quantities. Advertisement has become integral part of business. Use of computers, internet,
e-mail, net phone, teleconferencing etc. has become the order of the day. Market is flourishing with
foreign engineering and electronic goods.
3. Global form of modern business. Modern business has now become global. International trade has
become very common. This has led to decrease in the balance of payments position and increase in the
Forex reserves, which has crossed the $100 billion limit. .Many multinational companies have entered our
market. Our industries have also been entering the foreign market. AH these changes force the business to
become a dynamic global entity.
All the above effects of globalisation have led to sustained development in the growth rate of our country.
5. Revolution in the field of science
Improvement in science and technology has brought tremendous impact on business. Launching of
satellites and fuel economic vehicles, fast moving trains and planes, decision making by using
mathematics and data bank, diagnosis of disease with the help of a computer, compact disks in place of
tapes etc., have made business more complicated and competitive.

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The businessman has to take care of the latest know how to survive in the market for long.
6. Communication and information
Now-a-days the businessman would like to communicate the information to his customer at the earliest.
There is a continuous flow of information which has to be taken note of. In the earlier days information
was sent by post, telephone, telegraph, hand mail, etc. At present the information transfer is done at a very
great speed with the help of computers, for eg. LAN (Local Area Network) where information can be
accessed with the help of computers by every person and department, within an organisation
continuously; WAN (Wider Area Network), where information can be sent from one place to another, one
country to another country in less than a fraction of second with the help of computers; and satellite,
electronic mailing, courier service, speed post, transfer of software from one country to another through
satellites, etc.
7. Expectation of immediate returns
The present day businessman aims at getting faster result thereby to earn back the investment as early as
possible. In the earlier days the businessman used to aim at a marginal return, but the times have changed
and everyone expects windfall profit. Customer interests, environmental protection, social well being,
business ethics are not given due importance. Businessmen take all short cut methods like supplying
inferior quality goods, tax evasion, customs and excise evasion and selling goods at inflated prices to
fulfil his greed.
8. Competition
We should not forget that we are living in a competitive world where not only individuals but also large
establishments are competing with one another to capture the market. This kind of competition in
business is in a way advantageous to consumer, because as a result of this competition among trading
concerns, consumers in general can get a better deal with regard to superior commodities at a reasonably
competitive price.
Business Objectives
All the business activities are performed with some objectives. The objectives of
business may be classified as:

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Economic Objectives
Economic objectives 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.
Profit Earning
Profit is the lifeblood of business, without which no business can survive in a competitive
market. Thus, profit making is the primary objective for which a business unit is brought into
existence. Profits help businessmen not only to earn their living but also to expand their business
activities by reinvesting a part of the profits. In order to achieve this primary objective, certain
other objectives are also necessary to be pursued by business, which are as follows:
i) Creation of customers
A business unit cannot survive unless there are customers to buy the products and services.
Again a businessman can earn profits only when he/she provides quality goods and services at a
reasonable price. For this it needs to attract more customers for its existing as well as new
products. This is achieved with the help of various marketing activities.
ii) Continuous innovations

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Business is highly dynamic and an enterprise can continue to be successful only by adopting
itself to change in its environment. Innovation means changes, which bring about improvement
in products, process of production and distribution of goods. Reduction in cost and increase in
sales gives more profit to the businessman. Use of power looms in place of handlooms, use of
tractors in place of hand implements in farms etc. are the results of innovation.
iii) Best possible use of resources
As you know, to run any business you must have sufficient capital or funds. The amount of
capital may be used to buy machinery and raw materials, to employ men and have cash to meet
day-to-day expenses. Thus, business activities require various resources like men, materials,
money and machines. This objective can be achieved by employing efficient workers, making
full use of machines and minimizing wastage of raw materials.
Social Objectives
Social objectives are those objectives of business, which are desired to be achieved for the
benefit of the society. No activity of the business should be aimed at giving any kind of trouble
to the society. Social objectives of business include production and supply of quality goods and
services, adoption of fair trade practices and contribution to the general welfare of society and
provision of welfare amenities.
(i) Production and supply of quality goods and services
Since the business utilizes the various resources of the society, the society expects to get quality
goods and services from the business. The objective of business should be to produce better
quality goods and supply them at the right time and at a right price. They should charge the price
according to the quality of the goods and services provided to the society.
(ii) Adoption of fair trade practices
In every society, activities such as hoarding, black-marketing and overcharging are considered
undesirable. Besides, misleading advertisements often give a false impression about the quality
of products. The business unit must not create artificial scarcity of essential goods or raise prices
for the sake of earning more profits. All these activities earn a bad name and sometimes make the
businessmen liable for penalty and even imprisonment under the law. Therefore, the objective of
business should be to adopt fair trade practices for the welfare of the consumers as well as the
society.
Human Objectives
Human objectives 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. The human objectives of business may thus include economic
well-being of the employees, social and psychological satisfaction of employees and
development of human resources.
(i) Economic well being of the employees
In business employees must be provided with fair remuneration and incentives for performance,
benefits of provident fund, pension and other amenities like medical facilities, housing facilities
etc. By this they feel more satisfied at work and contribute more for the business.

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(ii) Social and psychological satisfaction of employees
It is the duty of business units to provide social and psychological satisfaction to their
employees. This is possible by making the job interesting and challenging, putting the right
person in the right job and reducing the monotony of work. Further, grievances of employees
should be given prompt attention and their suggestions should be considered seriously when
decisions are made. If employees are happy and satisfied they can put their best efforts in work.
(iii) Development of human resources
Employees as human beings always want to grow professionally. Their growth requires proper
training as well as development. Business can prosper if the people employed can improve their
skills and develop their abilities and competencies in course of time. Thus, it is important that
business should arrange training and development programmes for its employees.
(iv) Well being of socially and economically backward people
Business units being inseparable parts of society should help backward classes and also people
those are physically and mentally challenged. This can be done in many ways. For instance,
vocational training programme may be arranged to improve the earning capacity of backward
people in the community. Business units can also help and encourage meritorious students by
awarding scholarships for higher studies.
National Objectives
Being an important part of the national economy, every business must have the objective of
fulfilling national goals and aspirations. The following are the national objectives of business.
(i) Creation of employment
One of the important national objectives of business is to create opportunities for gainful
employment of people. This can be achieved by establishing new business units, expanding
markets, widening distribution channels, etc.
(ii) Promotion of social justice
As a responsible citizen, a businessman is expected to provide equal opportunities to all persons
with whom he/she deals. She/he is also expected to provide equal opportunities to all the
employees to work and progress. Towards this objective special attention must be paid to weaker
and backward sections of the society.
(iii) Production according to national priority
Business units should produce and supply goods in accordance with the priorities laid down in
the plans and policies of the Government. One of the national objectives of business in our
country should be to increase the production and supply of essential goods at reasonable prices.
(iv) Contribute to the revenue of the country
The business owners should pay their taxes and dues honestly and regularly. This will increase
the revenue of the government, which can be used for the development of the nation.
(v) Self-sufficiency and Export Promotion
To help the country to become self-reliant, business units have the added responsibility of
restricting import of goods. Besides, every business unit should aim at increasing exports and
adding to the foreign exchange reserves of the country.
Global Objectives

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Earlier India had a very restricted business relationship with other nations. There was a very rigid
policy for import and export of goods and services. But, now-a-days due to liberal economic and
export–import policy, restrictions on foreign investments have been largely abolished and duties
on imported goods have been substantially reduced. This change has brought about increased
competition in the market. Today because of globalisation the entire world has become a big
market. Goods produced in one country are readily available in other countries. So, to face the
competition in the global market every business has certain objectives in mind, which may be
called the global objectives. Let us learn about them.
(i) Raise general standard of living
Growth of business activities across national borders makes available quality goods at reasonable
prices all over the world. The people of one country get to use similar types of goods that people
in other countries are using. This improves the standard of living of people.
(ii) Reduce disparities among nations
Business should help to reduce disparities among the rich and poor nations of the world by
expanding its operation. By way of capital investment in developing as well as underdeveloped
countries. It can foster their industrial and economic growth.
(iii) Make available globally competitive goods and services
Business should produce goods and services which are globally competitive and have huge
demand in foreign markets. This will improve the image of the exporting country and also earn
more foreign exchange for the country.
Components of Business Environment
(i) Economical Environment:
Economic Environment consists of Gross Domestic Product, Income level at national
level and per capita level, Profit earning rate, Productivity and Employment rate,
Industrial, monetary and fiscal policy of the government etc. The economic
environment factors have immediate and direct impact on the businessman so
businessmen must scan the economic environment and take timely actions to deal with
these environments. Economic environment may put constraints and may offer
opportunities to the businessman. After the new economic policy of 1991, lots of
opportunities are offered to businessmen. The common factors which have influenced
the Indian economic environment are
(a) Banking sector reform has led to many attractive schemes of deposits and lending
money. The Banks are offering loans at very nominal rate of interest and with minimum
formalities to be completed.
(b) Recent changes in economic and fiscal policy of country have encouraged NRIs and
foreign investors to invest in Indian companies.

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(c) Lots of economic reforms are taking place in leasing and financing institutions. The
private sector is allowed to enter in financial institutions; as a result customers are
gaining.
Some Aspects of Economic Environment:
1. Role of Private and Public sector
2. Rate of growth of GDP, GNP, and Per Capita Income
3. Rate of Saving and Investment
4. Balance of Trade
5. Balance of Payment
6. Transport and Communication System
7. Money Supply in the Economy
8. International Debt
(ii) Social Environment:
Social Environment consists of the customs and traditions of the society in which
business is existing. It includes the standard of living, taste, preferences and education
level of the people living in the society where business exists.
The businessman cannot overlook the components of social environment as these
components may not have immediate impact on the business but in the long run the
social environment has great impact on the business.
For example, when the Pepsi Cola Company used the slogan of “Come Alive” in their
advertisement then the people of a particular region misinterpreted the word “Come
Alive” as they assumed it means Coming out of Graves. So, they condemned the use of
the product and there was no demand of Pepsi Cola in that region. So, the company had
to change its advertisement slogan as it cannot survive in market by ignoring the
sentiments of the people.
In India also, there are many Social reforms taking place and the common factors of
Indian Social Environment are:
(a) Demand for reservation in jobs for minority and women
(b) Demand for equal status of women by paying equal wages for male and female
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(c) Demand for automatic machines and luxury items in middle class families
(d) The social movements to improve the education level of girl child.
(e) Health and Fitness trend has become popular.
Some Aspects of Social Environment:
1. Quality of life
2. Importance or place of women in workforce
3. Birth and Death rates
4. Attitude of customers towards innovation, life style etc.
5. Education and literacy rates
6. Consumption habits
7. Population
8. Tradition, customs and habits of people
(iii) Political Environment:
Political environment constitutes all the factors related to government affairs such as
type of government in power, attitude of government towards different groups of
societies, policy changes implemented by different governments etc. The political
environment has immediate and great impact on the business transactions so
businessman must scan this environment very carefully.
The businessman has to make changes in his organisation according to the changing
factor of political environment. For example, in 1977 when Janata Government came in
power they made the policy of sending back all the foreign companies. As a result the
Coca Cola Company had to close its business and leave the country.
The common factors and forces which have influenced the Indian political environment
are:
(a) The government in Hyderabad is taking keen interest in boosting I.T. industry, as a
result the state is more commonly known as Cyber bad instead of Hyderabad.
(b) After the economic policy of liberalisation and globalisation, the foreign companies
got easy entry in India. As a result the Coca Cola which was sent back in 1977 came
back to India. Along with Coca Cola, Pepsi Cola and many other foreign companies are
establishing their business in India.
Some Aspects of Political Environment:
1. Present political system
2. Constitution of the country

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3. Profile of political leaders
4. Government intervention in business
5. Foreign policy of government
6. Values and ideology of political parties
(iv) Legal Environment:
Legal environment constitutes the laws and various legislations passed in the
parliament. The businessman cannot overlook the legislations because he has to
perform his business transactions within the framework of legal environment.
The common legislation passed which has affected the business transactions are Trade
Mark Act, Essential Commodity Act, Weights and Measures Act, etc. Most of the time
legal environments put constraints on the businessman but sometimes they provide
opportunities also. The common instances of Indian legal environment which have
influenced business transactions recently are:
1. Deregulation of capital market has made it easy for businessman to collect capital
from primary market.
2. Removal of control from the foreign exchange and liberalisation in investment is
encouraging foreign investors and NRIs to invest in Indian capital market.
3. Advertisement of alcoholic product is prohibited.
4. Compulsory to give statutory warning in Tobacco production.
5. Delicencing policy of industries.
Some Aspects of Legal Environment:
1. Various laws and legislative acts.
2. Legal policies related to licensing.
3. Legal policies related to foreign trade.
4. Statutory warnings essential to be printed on label.
5. Foreign Exchange Regulation and Management Act.
6. Laws to keep a check on Advertisements.
(v) Technological Environment:
Technological environment refers to changes taking place in the method of production,
use of new equipment and machineries to improve, the quality of product. The
businessman must closely monitor the technological changes taking place in his
industry because he will have to implement these changes to remain in the competitive
market.

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Technological changes always bring quality improvement and more benefits for
customers. The recent technological changes of Indian market are:
1. Digital watches have killed the prospects and the business of traditional watches.
2. Color T.V. technology has closed the business of black and white T.V.
3. Artificial fabric has taken the market of traditional cotton and silk fabrics.
4. Photo copier and Xerox machines have led to the closure of carbon paper business.
5. Shift in Demand from vacuum tubes to transistors.
6. Shift from steam locomotives its diesel and electric engine.
7. From typewriter to World Processors.
Some Aspects of Technological Environment:
1. Various Innovations and Inventions.
2. Scientific Improvements.
3. Developments in IT sector
4. Import and Export of Technology.
5. Technological Advances in Computers.
Forms of Business Organization
Sole Proprietorships
This is the simplest way to set up a business. A sole proprietor is fully responsible for
all debts and obligations related to his or her business. A creditor with a claim against a
sole proprietor has a right against all of his or her assets, whether business or personal.
This is known as unlimited liability.
This type of business comes under provincial jurisdiction. If the proprietor chooses to
carry on a business under a name other than his/her own, he/she must register with
the province. Your business name registration, or renewal of registration, will be valid
for a certain number of years. Call your local Canada Business service centre to
determine when business name registrations need to be renewed in your jurisdiction.
If a sole proprietor establishes a business in his/her own name, without adding any
other words, it is not necessary to register the business.
Note: In Newfoundland and Labrador, only incorporated businesses are required to
register with the Provincial Registry of Companies and Deeds.
Partnerships

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A partnership is an agreement in which two or more persons combine their resources in
a business. In order to establish the terms of the business and to protect
partners/shareholders in the event of disagreement or dissolution of the business, a
partnership/shareholders agreement should be drawn up with the assistance of a
lawyer. Partners share in the profits according to the terms of their agreement.
General Partnership
All members share the management of the business and each is personally liable for all
the debts and obligations of the business. This means that each partner is responsible
for and must assume the consequences of the actions of the other partner(s).
Limited Partnership
Some members are general partners who control and manage the business and may be
entitled to a greater share of the profits, while other partners are limited and contribute
only capital. Limited partners take no part in control or management and are liable for
debts to a specified extent only. A legal document, outlining specific requirements,
must be drawn up for a limited partnership.
Note: In Newfoundland and Labrador, only incorporated businesses are required to
register with the Provincial Registry of Companies and Deeds.
Corporations
A corporation is a legal entity that is separate from its owners, the shareholders. No
shareholder of a corporation is personally liable for the debts, obligations or acts of the
corporation. This type of business can be incorporated at either the federal or provincial
level.
A corporation is identified by the terms "Limited", "Ltd.", "Incorporated", "Inc.",
"Corporation", or "Corp.". Whatever the term, it must appear with the corporate name
on all documents, stationery, and so on, as it appears on the incorporation document.
Private Corporation
A private corporation can be formed by one or more people. A majority of its directors
must be Canadian residents. If none of the directors reside in the province in which it
does business, the corporation must appoint a Power of Attorney who reside in the
province. A private corporation cannot sell shares or securities to the general public.
Public Corporation
A "public corporation" is one that issues securities for public distribution. Besides filing
incorporation documents, a public corporation must file a prospectus with the
appropriate Securities Commission in the province, must employ outside auditors and
must distribute semi-annual financial statements.

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Federal Corporations
Private and public corporations may be incorporated federally under the Canada
Corporations Act. A firm operating nationally or in several provinces may find this
advantageous. A federally incorporated business must still register in each province in
which it does business.
Cooperatives
A co-operative is a corporation organized and controlled by its members, who pool
resources to provide themselves and their patrons with goods, services, or other
benefits. A cooperative business structure provides:
democratic control based on one member one vote;
open and voluntary membership;
patronage dividends.

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ADVANTAGES AND DISADVANTAGES OF EACH FORM OF BUSINESS
ORGANIZATION
Sole Proprietorship
Advantages
relatively low start-up costs;
greatest freedom from regulation;
owner in direct control of decision
making;
minimal working capital required;
tax advantages to owner;
all profits to owner.
Disadvantages
unlimited liability;
lack of continuity in business organization
in absence of owner;
difficulty raising capital.
Partnership
Advantages
ease of formation;
relatively low start-up costs;
additional sources of investment
capital;
possible tax advantages;
limited regulation;
broader management base.
Disadvantages
unlimited liability;
lack of continuity;
divided authority;
difficulty raising additional capital;
hard to find suitable partners;
possible development of conflict between
partners.
Corporation
Advantages
limited liability;
specialized management;
ownership is transferable;
continuous existence;
separate legal entity;
possible tax advantage;
easier to raise capital.
Disadvantages
closely regulated;
most expensive form to organize;
charter restrictions;
extensive record keeping necessary;
double taxation of dividends;
possible development of conflict between
shareholders and executives.

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Co-operatives
Advantages
owned and controlled by members;
democratic control (i.e. one
member, one vote);
limited liability;
profit distribution (surplus
earnings) to members in proportion
to use of service; surplus may be
allocated in shares or cash.
Disadvantages
possibility development of conflict
between members;
longer decision-making process;
participation of members required for
success;
extensive record keeping necessary;
less incentive to invest additional capital.
Classification of Business
1. Primary and Genetic Industry - Genetic industry is related to the re-producing and multiplying of
concern species of animals and plant with the object of earning profits from their sale. Nurseries, cattle
breeding, fish hatcheries, poultry farms are all covered under genetic industry. The plants are grown and
birds and animals are reared and then sold on profit. No doubt, nature, climate and environment play an
important part in these industries but human skill is also important.
2. Extractive Industry – The extractive industry is engaged in raising some form of wealth from the soil,
climate, air, water or from beneath the surface of the earth. These industries are classified into two
categories. In the first category, workers merely collect goods already existing. Mining, fishing and
hunting is covered in this industry. In this category, the goods are to be produced by the application of
the human skill i.e. agriculture and forestry. Extractive industries supply basic raw materials that are
mostly the products of the soil. Products of these industries are usually transformed into many useful
products by manufacturing industries.
3. Construction Industries- This industry is engaged in the creation of infra-structure for the smooth
development of the economy. It is concerned with the construction, erection or fabrication of products.
These industries are engaged in the construction of buildings, roads, dams, bridges and canals. These
industries use the products of other industries such as cement, iron, bricks, and wood, etc.
4. Manufacturing Industry- This industry is engaged in the conversion of raw materials into semi-
finished or finished goods. This industry creates form utility in goods by making them suitable for
human use. Most of the goods which are used by consumers are produced by manufacturing industries.
These industries supply machines, tools and other equipments to other industries as raw materials by
manufacturing industry may be classified as follows-
(a) Analytical Industry- In this industry, one product is analysed and many products are received as final
products. In the processing of crude oil we will get kerosene, petrol, gas, and diesel, etc.
(b) Processing Industry- In this industry a product passes through various processes to become a final
product. The finished product of one process becomes the raw material of the receiving process and the
final process produces the finished goods. In case of cotton textiles, cotton passes through ginning,
weaving, and dying process to become cotton cloth. Sugar industry and paper industry are other example

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of processing industry.
(c) Synthetic industry- In this industry many raw materials are brought together in manufacturing
process to make a final product. In manufacturing cement, rocks, gypsum, coal etc. are required. Soap
making, plastics paints are other examples of synthetic industry.
Environmental analysis
Environmental analysis is a strategic tool. It is a process to identify all the external and
internal elements, which can affect the organization’s performance. The analysis entails
assessing the level of threat or opportunity the factors might present. These evaluations
are later translated into the decision-making process. The analysis helps align strategies
with the firm’s environment.
Our market is facing changes every day. Many new things develop over time and the
whole scenario can alter in only a few seconds. There are some factors that are beyond
your control. But, you can control a lot of these things.
Businesses are greatly influenced by their environment. All the situational factors which
determine day to day circumstances impact firms. So, businesses must constantly
analyze the trade environment and the market.
There are many strategic analysis tools that a firm can use, but some are more common.
The most used detailed analysis of the environment is the PESTLE analysis. This is a
bird’s eye view of the business conduct. Managers and strategy builders use this
analysis to find where their market currently. It also helps foresee where the
organization will be in the future.
PESTLE analysis consists of various factors that affect the business environment. Each
letter in the acronym signifies a set of factors. These factors can affect every industry
directly or indirectly.
The letters in PESTLE, also called PESTEL, denote the following things:
 Political factors
 Economic factors
 Social factors

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 Technological factors
 Legal factors
 Environmental factor
P FOR POLITICAL FACTORS
The political factors take the country’s current political situation. It also reads the global
political condition’s effect on the country and business. When conducting this step, ask
questions like “What kind of government leadership is impacting decisions of the
firm?”
Some political factors that you can study are:
 Government policies
 Taxes laws and tariff
 Stability of government
 Entry mode regulations
E FOR ECONOMIC FACTORS
Economic factors involve all the determinants of the economy and its state. These are
factors that can conclude the direction in which the economy might move. So,
businesses analyze this factor based on the environment. It helps to set up strategies in
line with changes.
economic factors are affecting business given below:
 The inflation rate
 The interest rate
 Disposable income of buyers
 Credit accessibility
 Unemployment rates
 The monetary or fiscal policies
 The foreign exchange rate

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S FOR SOCIAL FACTORS
Countries vary from each other. Every country has a distinctive mindset. These
attitudes have an impact on the businesses. The social factors might ultimately affect the
sales of products and services.
Some of the social factors you should study are:
 The cultural implications
 The gender and connected demographics
 The social lifestyles
 The domestic structures
 Educational levels
 Distribution of Wealth
T FOR TECHNOLOGICAL FACTORS
Technology is advancing continuously. The advancement is greatly influencing
businesses. Performing environmental analysis on these factors will help you stay up to
date with the changes. Technology alters every minute. This is why companies must
stay connected all the time. Firms should integrate when needed. Technological factors
will help you know how the consumers react to various trends.
Firms can use these factors for their benefit:
 New discoveries
 Rate of technological obsolescence
 Rate of technological advances
 Innovative technological platforms
L FOR LEGAL FACTORS
Legislative changes take place from time to time. Many of these changes affect the
business environment. If a regulatory body sets up a regulation for industries, for

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example, that law would impact industries and business in that economy. So,
businesses should also analyze the legal developments in respective environments.
I have mentioned some legal factors you need to be aware of:
 Product regulations
 Employment regulations
 Competitive regulations
 Patent infringements
 Health and safety regulations
E FOR ENVIRONMENTAL FACTORS
The location influences business trades. Changes in climatic changes can affect the
trade. The consumer reactions to particular offering can also be an issue. This most
often affects agri-businesses.
Some environmental factors you can study are:
 Geographical location
 The climate and weather
 Waste disposal laws
 Energy consumption regulation
 People’s attitude towards the environment
There are many external factors other than the ones mentioned above. None of these
factors are independent. They rely on each other.
If you are wondering how you can conduct environmental analysis, here are 5 simple
steps you could follow:
1. Understand all the environmental factors before moving to the next step.
2. Collect all the relevant information.
3. Identify the opportunities for your organization.
4. Recognize the threats your company faces.

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5. The final step is to take action.
It is true that industry factors have an impact on the company performance.
Environmental analysis is essential to determine what role certain factors play in your
business. PEST or PESTLE analysis allows businesses to take a look at the external
factors. Many organizations use these tools to project the growth of their company
effectively.
The analyses provide a good look at factors like revenue, profitability, and corporate
success. If you want to take the right decisions for your firm, employ environmental
analysis. The analysis you should conduct depends on the nature of your company.
Porter’s five force model
SUPPLIER POWER
Supplier concentration
Importance of volume to supplier
Differentiation of inputs
Impact of inputs on cost or differentiation
Switching costs of firms in the industry
Presence of substitute inputs
Threat of forward integration
Cost relative to total purchases in industry
BARRIERS
TO ENTRY
Absolute cost advantages
Proprietary learning curve
Access to inputs
Government policy
Economies of scale
Capital requirements
Brand identity
Switching costs
Access to distribution
Expected retaliation
Proprietary products
THREAT OF
SUBSTITUTES
-Switching costs
-Buyer inclination to
substitute
-Price-performance
trade-off of substitutes
BUYER POWER
Bargaining leverage
Buyer volume
Buyer information
DEGREE OF RIVALRY
-Exit barriers
-Industry concentration
-Fixed costs/Value added

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Brand identity
Price sensitivity
Threat of backward integration
Product differentiation
Buyer concentration vs. industry
Substitutes available
Buyers' incentives
-Industry growth
-Intermittent overcapacity
-Product differences
-Switching costs
-Brand identity
-Diversity of rivals
-Corporate stakes
Competitor analysis in marketing and strategic management is an assessment of the
strengths and weaknesses of current and potential competitors. This analysis provides
both an offensive and defensive strategic context to identify opportunities and threats.
Profiling coalesces all of the relevant sources of competitor analysis into one framework
in the support of efficient and effective strategy formulation, implementation,
monitoring and adjustment.
A common technique is to create detailed profiles on each of your major competitors.
These profiles give an in-depth description of the competitor's background, finances,
products, markets, facilities, personnel, and strategies. This involves:
 Background
 location of offices, plants, and online presences
 history - key personalities, dates, events, and trends
 ownership, corporate governance, and organizational structure
 Financials
 P-E ratios, dividend policy, and profitability
 various financial ratios, liquidity, and cash flow
 profit growth profile; method of growth (organic or acquisitive)
 Products
 products offered, depth and breadth of product line, and product portfolio
balance
 new products developed, new product success rate, and R&D strengths
 brands, strength of brand portfolio, brand loyalty and brand awareness
 patents and licenses

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 quality control conformance
 reverse engineering or deformulation
 Marketing
 segments served, market shares, customer base, growth rate, and customer
loyalty
 promotional mix, promotional budgets, advertising themes, ad agency used,
sales force success rate, online promotional strategy
 distribution channels used (direct & indirect), exclusivity agreements, alliances,
and geographical coverage
 pricing, discounts, and allowances
 Facilities
 plant capacity, capacity utilization rate, age of plant, plant efficiency, capital
investment
 location, shipping logistics, and product mix by plant
 Personnel
 number of employees, key employees, and skill sets
 strength of management, and management style
 compensation, benefits, and employee morale & retention rates
 Corporate and marketing strategies
 objectives, mission statement, growth plans, acquisitions, and divestitures
 marketing strategies

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Types of Political Systems
Understanding different political systems is important. Each political system has its advantages
and disadvantages. It is worth considering the merits of other political systems, and perhaps
incorporating some of the ideas into your own system. Some of the five more common political
systems around the world include:
1. Democracy
2. Republic
3. Monarchy
4. Communism
5. Dictatorship
Here are some overviews of these five fairly recognizable political systems:
1. Democracy
We often hear the United States referred to as a democracy. Indeed, many refer to the U.S. as a
representative democracy. A democracy in a more traditional sense is a political system that
allows for each individual to participate. There are two rather popular types of democracy:
o Direct Democracy: Many scholars point to Athens as an example of direct democracy.
Technically, every citizen has an equal say in the workings of government. (The qualifications
for being considered a citizen are completely different.) Citizens could show up at a meeting, and
then directly participate in the governing process, and the process of making laws.
o Representative Democracy: In a representative democracy set-up, citizens elect
representatives who actually make the law. The United States operates similarly to this principle.
Citizens elect legislators who, in turn, make laws. In the U.S., even the president isn’t elected

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directly; representatives called electors make the decision (although designated electors usually
vote according to the wishes of the citizens in their states).
Other types of democracy include versions known as deliberative democracy, in which citizens
approach decision making by considering different viewpoints and options, as well as democratic
socialism, in which citizens help make decisions or vote for policies that are socialistic in nature.
There are other types of democracy as well. The defining characteristic is some level of citizen
participation in the political system
2. Republic
In theory, a republic is a political system in which the government remains mostly subject to
those governed. Some scholars define any political system in which the citizens legitimize the
government. As such, some (includingMontesquieu) consider the U.S. a republic. Indeed, there
are those that believe that any form of government that is not based on heritage or authoritarian
governance. In some cases, a representative democracy (or any form of democracy) might be
considered a republic. Some of the types of republics that you might see include:
o Crowned (a constitutional monarchy might be considered a crowned republic)
o Single Party
o Capitalist
o Federal (the United States is often referred to as a federal republic)
o Parliamentary
The main characteristic of a republic is that the government is subject to the people, and leaders
can be recalled. Some even make the argument that an oligarchy, which is rule by a few citizens,
or a group of citizens, is a form of republic, since the government is subject to some of the
wishes of some of the governed.
3. Monarchy
When most of us think of a monarchy, we think of the political systems of medieval European
countries. In a monarchy, a ruler is not usually chosen by the voice of the people or their
representatives. Often a monarch is the head of state until he or she abdicates or until death. In
many cases a monarch is the final word in government. There may be functionaries to make
decisions and run the political system, but the monarch has discretion with the laws, and how
they are enforced.
However, as with other political systems, there are different types of monarchies. The type that
many of us think of as common is the absolute monarchy, in which the monarch truly has the
ultimate say in matters of government. However, most monarchies in political systems today do
not follow this method. Many of them, especially in the developed world, have limits.
Constitutional monarchies fall into this category (and are sometimes considered republics as
well). In this type of monarchy, the ruler is the head of state, but a constitution limits the power,

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and others make laws. The U.K., Denmark, Kuwait, Spain, Sweden, Tuvalu, and many more are
examples of constitutional monarchies.
Other types of monarchies include duchies, grand duchies, elective monarchy (where the
monarch is actually elected), and non-sovereign monarchy.
4. Communism
In most cases, a communist state is based on the ideology of communism as taught by Marx
and/or Lenin. However, some argue that these political systems are not true to the ideals
espoused by these revolutionary thinkers. Communist states are often dominated by a single
party, or a group of people. A planned economy is often part of the governing class, and in many
cases resources are taken and then redistributed to others, at the top of the system. Sometimes
communists call themselves “workers’ states” or “socialist,” but there are very real differences in
their operation. In a lot of cases, citizens are required to do certain jobs, or have some of their life
decisions — especially concerning where they can live and what jobs they can do. Communism
is often considered an authoritarian political system.
5. Dictatorship
Another authoritarian form of government is the dictatorship. Normally, a dictator is the main
individual ruling the country. While there are lackeys and others who work for the dictator, he or
she makes most of the decisions, and usually has enforcers. In some cases, the political system is
run by a small group of people. Dictators are not restricted by constitutions or parliaments. The
governed are usually not consented in any way. Elections held are usually affairs in which the
dictator is the only candidate.
One of the more common types of dictatorship is the military dictatorship, in which a military
organization governs, running the political system. Sometimes, the military just exerts a great
deal of pressure on the government, running the country de facto. In many cases, very few
benefit from the decisions made in a dictatorship.
While authoritarian political systems have the advantage of quick decisions being made, many
citizens prefer other forms of government — those that allow them greater participation in the
political process.

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