The purpose of this unit is to assist students in gaining knowledge and comprehension of the fundamental principles of business studies, as well as to gain an understanding of how businesses operate.

1. Arjun Paudel 1
LEARNING OUTCOMES
At the end of the session you will be able to describe:
 What is business and the important elements in business.
 Explain the different types of business
 Main business functions and the different types of business with both
advantages and disadvantages.
 Importance of a growth of a business and how to measure the growth by
specifying the growth indicators.
 Distinguish between a prime function and a mission statement

2. Arjun Paudel 2
UNIT OUTLINE
 What is Business ?
 The role of a business
 The classification of a business
 The prime function and mission statement

3. Arjun Paudel 3
What is Business ?
Business is a system that involves combination of activities such as commerce,
occupations, and resources to produces and distributes the goods and services for
profit, while simultaneously creating value for individuals within society
Commerce
Occupations
Resources
=

4. Arjun Paudel 4
Requirements to start a business
Finance /Money Labor / People Customers Suppliers
Premises &
equipment Management &
Organizational Structure
Product or
Service

5. Arjun Paudel 5
Business Aim & Objective
Business objectives are the goals of business – what the business wants to achieve.
All businesses have their own objectives .
Examples for Common types of business objectives:
• Survival,
• Profit Maximization,
• Growth,
• Sales Revenue Maximization,
• Image and Social responsibility.

6. Arjun Paudel 6
Business Process
Business Process definition
A process specifies the transformation of inputs to outputs
Process
Customers
Suppliers
Resources
Inputs Outputs

7. Arjun Paudel 7
classification of business
Business activities may broadly be classified into two categories namely
(A) Industry (Industry involves production of goods and services )
(B) Commerce (whereas commerce is concerned with the distribution of
goods and services.)

8. Arjun Paudel 8
Industry Sector
Primary Secondary Tertiary
This industry extracts and
utilizes natural resources from
the earth. These resources are
then processed into raw
materials that can be used by
other businesses to
manufacture or produce other
goods and services
This industry manufactures
goods using the raw materials
provided by primary sector.
This industry also know as
service sector, which provides
intangible goods and services
for the consumer and
business .
Provides the raw materials
needed in other industries
activity that involves the
production and manufacturing
of finished goods.
Covers everything that is not
included in primary and
secondary industries
Examples of primary sectors
are.....
a) Farming
b) Coal mining
c) Oil drilling
Examples of secondary sectors
are .....
a) Aircraft and car
manufacturing
b) Restaurants
c) Construction
Examples of tertiary sectors
are ....
a) Transport and
communication
b) Banking & Internet
c)Trade and commerce

9. Arjun Paudel 9
Industry Sector
• Commerce refers to the exchange of goods, services, or commodities
between individuals, businesses, or countries.
• It involves the buying and selling of goods and services, as well as the
transfer of money or other assets in exchange for those goods and
services.

10. Arjun Paudel 10
Business Functions
Marketing
Production
HRM
Finance
IT
R & D

11. Arjun Paudel 11
External Factors Affecting Business

12. Arjun Paudel 12
Organizational Structure
Work specialization
A component of organization structure that
involves having each discrete step of a job
done by a different individual rather than
having one individual do the whole job
Principles/ Structure variables
• Chain of command
• Span of control
• Authority
• Power
• Responsibility

13. Arjun Paudel 13
Organizational Structure
A chart that shows the structure of the
organization including the title of each
manager’s position and, by means of
connecting lines, who is accountable to
whom and who has authority for each area

14. Arjun Paudel 14
Organizational Structure
Tall vs. Flat Organizations
• Tall organizations: more management layers and more hierarchical controls.
• Flat organizations: fewer management layer and decision making closer to the
customer.

15. Arjun Paudel 15
Types Of Business
SOLE TRADER
Is a person that owns & runs their own
business
• one person provides all the money(capital)
• one person makes all the decisions
• one person keeps all the profit
Characteristics
• Easy to set up (no legal documents)
• Keep all the profits
• Make all the decisions
• Personal contact with customers
Advantages

16. Arjun Paudel 16
Types Of Business
PARTNERSHIP
Two (2) to Twenty (20) people collaborating
together to run the business as partners
• Capital provides by partners
• Collaborative decision making
• Partnership Agreement
Characteristics
• Share Profits , losses and risk
• Making shared decisions
• Less legal procedure
Advantages

17. Arjun Paudel 17
Types Of Business – cont. …
Private Limited Company
A business that is owned by 2 to 50 people
• 2 to 50 owners called shareholders.
• Shares (part ownership) cannot be bought
by the general public.
• Shareholder’s receive a vote for every share
they own
• Must have Ltd. After it’s name.
• Shareholders receive a share of the profits
called a dividend.
Characteristics

18. 18

19. Arjun Paudel 19
• Limited liability - If the business fails you
can only lose the money that you invested
in the company. Your own personal wealth
cannot be touched.
• Business continues even when an owner
dies.
• Easier to raise finance as you have up to 50
shareholders.
Advantages
Types Of Business – cont. …
• Legal Documents are needed
to set up a co.
• More costly to set up.
• Decision making and profits
are shared
Disadvantages

20. Arjun Paudel 20
Types Of Business – cont. …
Public Company
a company that has more than 50 shareholders and whose shares are offered for
public subscription.
• their shares listed on the stock exchange
• A company that sells shares in itself to the
public to raise capital. When a previously
privately owned company offers shares, it is
said to “go public.”
• The members of a public company are free
to transfer their shares to anyone else
without any restriction.
• A company is managed by the elected
representatives of its members.
Characteristics

21. Arjun Paudel 21
• Able to raise capital for expansion by selling
additional shares
• Higher status than a public limited company
so will benefit from more publicity.
• Share prices listed on the stock exchange so
shareholders can work out the value of
their shares. They can buy or sell shares.
• Limited liability for shareholders.
Advantages
Disadvantages
They suffer from continued political
interference and have to act according to the
wishes of the political masters.
Misuse of power
lot of legal formalities required for forming a
public limited company. It is costly and time
consuming.
Public Limited companies are huge in size and
may face management problems such as slow
decision making and industrial relations
problems.
Original owners lose control and ownership of
the business.
Must disclose all main accounts to the public.
These are often greatly publicized by the
media.
Company can be taken over if a majority of
shareholders agree to bid.

22. Arjun Paudel 22
Types Of Business – cont. …
FRANCHISING
Franchising is a form of business organization in which
a firm that already has a successful product or service
(franchisor) licenses its trademark and method of
doing business to another business or individual
(franchisee) in exchange for a franchise fee and an
ongoing royalty payment.

23. Arjun Paudel 23
Types Of Business – cont. …
• Good work ethic.
• Ability to follow instructions.
• Ability to operate with minimal supervision.
• Team oriented.
• Experience in the industry in which the
franchise competes.
• Adequate financial resources and good
credit history.
• Ability to make suggestions without
becoming upset if the
• suggestions are not adopted.
• Represents the franchisor in a positive
manner.
Why Franchise?

24. Arjun Paudel 24
• You don't necessarily need business
experience to run a franchise. Franchisors
usually provide the training you need to
operate their business model.
• Franchises have a higher rate of success
than start-up businesses.
• You may find it easier to secure finance for
a franchise. It may cost less to buy a
franchise than start your own business of
the same type.
• Franchises often have an established
reputation and image, proven management
and work practices, access to national
advertising and ongoing support.
Advantages
Types Of Business – cont. …
• Buying a franchise means
entering into a formal agreement
with your franchisor.
• Franchise agreements dictate
how you run the business, so
there may be little room for
creativity.
• There are usually restrictions on
where you operate, the products
you sell and the suppliers you
use.
• Buying a franchise means
ongoing sharing of profit with the
franchisor.
• relatively high start up costs.
Disadvantages

25. Arjun Paudel 25
Growth of a Business
Size of business measures in :
• Sales turnover(sales revenue)
• Number of employees
• Share capital
• Market share
• Number of outlets (market
capitalisation)
Reasons for growth
Survival

26. Arjun Paudel 26
The prime Function
• Is the main activity in which a business is involved.
• may change over time, as the business adapts and diversifies.
• The prime function, like any business, is to make a profit.
• The goods and services it provides are strategies to obtain that goal.
• It should be obvious that these will vary with location, competition,
customers, etc.
“it's not a bakery unless it provides freshly baked bread.”

27. Arjun Paudel 27
Mission Statement
The mission statement:
is a statement that defines the main purpose and goals of a company.
Why do we need mission statements:
• Gives the business its direction
• Keeps its employees focused on the prime function
• Describes the public image that the business wants to convey
• It tells core purpose and what it stands for.

28. Arjun Paudel 28
Mission Statement creation and guidelines
Mission statement guidelines
some basic guidelines in writing a mission statement:
• A mission statement should say who your company is, what you do,
what you stand for and why you do it.
• An effective mission statement is best developed with input by all the
members of an organization. It should not just be something written
by the Managing Director and then circulated to everyone.
• The aim is to create a succinct definition that people can relate to.

29. Arjun Paudel 29
Mission Statement Examples
The following represent a list of mission statements for a number of well
known companies.
Google‘s mission is ‘to organize the world’s information and make it
universally accessible and useful’.
Starbucks’ mission statement is to “Establish Starbucks as the premier
purveyor of the finest coffee in the world while maintaining our
uncompromising principles while we grow.”
eBay’s mission statement is to “provide a global trading platform where
practically anyone can trade practically anything.“
Amazon’s mission statement is – “to build a place where people can
come to find and discover anything they might want to buy online.”

30. Arjun Paudel 30
Social Responsibility
Social Responsibility definition:
Management philosophy that highlights the social and economic effects
of managerial decisions.
Or
The management’s acceptance of the obligation to consider profit,
consumer satisfaction, and societal well-being of equal value in
evaluating the firm’s performance.

31. Arjun Paudel 31
Task 1.4: Group Work
Define the term Prime function. Then select two –well
known company and describe its prime function and
mission statement.
What do the mission statements tell you about the
goals of those companies?

32. Arjun Paudel 32
Recommended Readings
• GAC012: Business Studies 2017
• Management : An Introduction by Boddy, D – 4th Edition {ISBN : 9780273711063}
• Management Theory & Practice by Cole, G.A – 6th Edition { ISBN: 9781844800889}