BCom Business Studies Unit 1 and 2 Notes

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: BCOM Second Semester
Name of the Subject:
Business Studies
Unit-1

What is Business
• A business is usually defined as a commercial enterprise
• Some are run by only one person who carry out all of the
required functions
• Others employ thousands of people and provide goods and
services to people all over the world
• Each business can be defined or described by its type of
ownership, the goods produced or services offered,
the types of jobs provided, or the functions
it performs in a community

What do Businesses do?
• Businesses are started by entrepreneurs who see a need,
recognize the opportunity, and go into business to meet that
need
• Business and people need each other – there are many
stakeholders – we depend on businesses for products and
services, but also for employment
• Buy inputs – raw materials, labour, machinery and
equipment, and land
• Produce outputs – goods and services
• Focus on efficient use of resources

Business Objectives
• Profit Earning
• Production of goods
• Creating Markets
• Technological improvement

Scope of business.
• Entrepreneur
• Economic activities
• Deals In Goods And Services
• Risk
• Profit
• Production
• Sales

• “ A company’s micro environment consists of elements that
directly affect the company such as competitors, customers and
suppliers.”
• Thus, Micro Environment consists of all those factors which directly
affect its functioning. It includes :
1. Suppliers
2. Competitors
3. Laborers
4. Business Associates
5. Customers

• Macro Environment includes all those factors which indirectly
influence the business.
• It includes :
1. Economic Environment
2. Political Environment
3. Socio-Cultural Environment
4. Demographic Environment
5. Natural Environment
6. Technological Environment
7. International Environment

BUSINESS ENVIRONMENT
• Environment refers to all external factors which have a
bearing on the functioning of the business.
• It refers to those aspects of the surroundings of business
enterprise and circumstances of business unit which affect or
influence its activities and operations and decides its
effectiveness.

COMPONENTS OF THE BUSINESS
ENVIRONMENT
• Different environmental variables exist internally and externally to the
business enterprise
• Environmental variables have a positive or negative influence on the
enterprise
• Business environment consists of two sub-environments:
– Internal (micro) environment
– External environment
• Market environment
• Macro environment
• Mutual relationships exist between these environments

ENVIRONMENTAL SCANNING
• Identification and forecasting phenomena in the environment
• Ongoing environmental scanning is essential for strategy formulation
• Enterprises continuously engage in identifying and forecasting
opportunities and threats
• Enterprises need to proactively or reactively respond to changing
conditions in the environment
• Various sources of information are available to assist with scanning

ANALYSIS OF THE BUSINESS
ENVIRONMENT
• SWOTs analysis
• Environmental conditions may be favourable or unfavourable:
– Opportunity
Represents favourable (positive) conditions in
micro, market, macro environments
Advantageous to firm

ANALYSIS OF THE BUSINESS ENVIRONMENT
 SWOTs
• Threat
Represents unfavourable (negative) conditions in
micro, market, macro environments
Detrimental to firm

Business Ethics and Social Responsibility
The standards of conduct and moral values governing actions and decisions in
the work environment.
– Social responsibility.
– Balance between what’s right and what’s profitable.
– Often no clear-cut choices.
– Often shaped by the organization’s ethical climate.

Business Studies
Unit-2

• Process through which entrepreneurs create
and grow enterprises
Entrepreneurship

Entrepreneurship is a mindset
–Opportunity-focused
–Innovative
–Growth-oriented
Can you add additional
Characteristics and/or Attributes…

The Entrepreneurial Process
Opportunity Resources
Team
Communication
Business Plan
Fits and Gaps
Creativity
Leadership
Capital Market ForcesUncertainty
Ambiguity
Exogenous Forces

Characteristics of Entrepreneurs
persistent
creative
responsible
inquisitive
independent
self-demanding
self-confident
risk-taking
restless
action-oriented
enthusiastic
goal-oriented

Major Forms of Business
Organization

Sole Proprietorship
• Business Owned by One Person

Partnership
• Business owned and managed by a
small group, often not more than
two or three people, who become
partners.

Franchise
• Written contract granting
permission to sell someone else’s
product or service in a prescribed
manner over a certain period of
time and in a specified territory.

Non-Profit Organizations
• Examples:
• Towns or Municipal Corporations
• Private Colleges and Universities
• American Red Cross
• Future Business Leaders of America

Labor Unions
• Work for its members’ interests in various
employment matters.
• Use collective bargaining – negotiating for
benefits, working conditions, etc. between
management and labor representatives.

Government
• Link between consumers and resources.
• Directly produce and distribute certain goods and
services to consumers.
– Tennessee Valley Authority
– National Defense
• Indirectly acts as regulator with things such as public
utilities, Social Security, etc.

Startups
• startup company ("startup"): A company, partnership, or temporary
organization designed to search for a repeatable and scalable business
model.
– became very popular during dot-com bubble
– often a company poised for rapid growth
• must be able to reach many people, and make money from them
– a new/small company != a startup, ... but most are
– often based on technology
• low cost to enter market
• easy to reach many people
• high risk, high reward

Venture capital
• venture capital ("VC"): Financial
resources given to early-stage companies.
– given to startups by VC firms (groups)
– VC firm gets % of profits or equity (stock)
– different from bank loans; does not need to be paid back
• stages of VC financing:
– seed funding: initial minimal funds; often given by angels
– start-up: early funds from VC firm for marketing/dev
– growth ("series A"): large investment ($1-2M) for preferred stock
– second round: company is successful, but not profiting
– expansion ("mezzanine"): $ given to a newly profitable company
– exit/bridge: VC firm sells stock once company matures

Business Studies
Unit-3

Financial Planning
Financial Planning is an ongoing process
to help you make sensible decisions
about money that can help you
achieve your goals in life

It’s a six step process…
1. Establish
your goals
2. Gather
data
2. Evaluate
your
current
position
4. Develop
a plan
5.
Implement
your plan
6. Monitor
and
regularly
review

SOURCES OF FINANCE
• Different ways a business can
obtain money

Sources of Finance
• Sources of finance can be classified into:
– Internal sources (raised from within the
organisation)
– External (raised from an outside source)

Internal Sources
• There are five internal sources of finance:
– Owner’s investment (start up or additional capital)
– Retained profits
– Sale of stock
– Sale of fixed assets
– Debt collection

External Sources
• There are five internal sources of finance:
– Bank Loan or Overdraft
– Additional Partners
– Share Issue
– Leasing
– Hire Purchase
– Mortgage
– Trade Credit
– Government Grants

Money Markets
The trade in short-term loans
between banks and other financial
institutions

Money Market Instruments
•Treasury Bills
•Commercial Paper
•Bankers Acceptances
•Certificates of Deposit
•Federal Funds
•Repurchase Agreements

CAPITAL MARKET
 The market where investment instruments
like bonds, equities and mortgages are
traded is known as the capital market.
 The primal role of this market is to make
investment from investors who have
surplus funds to the ones who are running
a deficit.

(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)Slide 40
Capital Market Instruments
• Stocks
• Equity claims
• Represent ownership of net income and assets of corporation
• Preferred stock
– Pays fixed dividend; in event of bankruptcy, preferred stock
owners entitled to be paid first
• Common stock
– Pays variable dividend depending on profits left over after
» preferred stockholders have been paid
» retained earnings set aside

Capital Structure
• The value of a firm is defined to be the sum of
the value of the firm’s debt and the firm’s
equity.
• V = B + S

Factors Affecting Capital
Structure:
• Business Risk
• Debt’s tax deductibility
• Ability to raise capital under adverse terms
• Managerial decisions:
– Conservative vs. Aggressive
– Minimize WACC
• Lowering risk
• Increasing CFs
• Maximize Op. Profits
• Growth Business
• Reduce Taxes

Securities and Exchange Board of India
• Securities and exchange Board of India (SEBI) was first established in the
year 1988 AQF as a non-statutory body for regulating the, securities
market. It became an autonomous body by The Government of India on
12 May 1992 and given statutory powers in 1992 with SEBI Act 1992 being
passed by the Indian Parliament. SEBI has its headquarters at the business
district of Bandra Kurla Complexin Mumbai, and has Northern, Eastern,
Southern and Western Regional Offices in New
Delhi, Kolkata, Chennai and Ahmedabadrespectively. It has opened local
offices at Jaipur and Bangalore and is planning to open offices
at Guwahati, Bhubaneswar, Patna, Kochi and Chandigarh in Financial Year
2013 - 2014.

Private Equity
• Private equity is capital that is not listed on a public exchange.
Private equity is composed of funds and investors that directly
invest in private companies, or that engage in buyouts of
public companies, resulting in the delisting of public equity.
Institutional and retail investors provide the capital for private
equity, and the capital can be utilized to fundnew technology,
make acquisitions, expand working capital, and to bolster and
solidify a balance sheet.

Loan Syndication
• Loan syndication is the process of involving several
different lenders in providing various portions of a
loan. Loan syndication most often occurs in
situations where a borrower requires a large sum of
capital that may be too much for a single lender to
provide or outside the scope of a lender's risk
exposure levels. Thus, multiple lenders work
together to provide the borrower with the capital
needed.

Semester: : BCOM Second Semester
Business Studies
Unit-4

• Small Business
– A company that is independently owned and
operated, is not dominant in its field, and
employs fewer than 500 people (although this
number varies by industry)

Government policies in business
• From the technical perspective, the following
policies of a government can impact business
directly or indirectly: (a) taxation, (b)
subsidies, (c) interest rates, (d) exchange
rates, and (e) public-private partnerships. The
government policy of a country depends upon
its political culture.

Small Industries Development Bank of India
• Small Industries Development Bank of India (SIDBI) is a
financial institution which is headquartered in Lucknow, India.
It was established in 1990 on April the 2nd and is mainly
responsible for promotion and development of micro, small
and medium-scale enterprises (MSMEs). These small
enterprises contribute about 45% to manufacturing output
and about 40% to total exports, directly and indirectly. SIDBI
started as a wholly owned subsidiary of Industrial
Development Bank of India (IDBI) & is currently owned by 33
different institutions which are either controlled or owned by
government of India. Its official website is www.sidbi.in

Multinational Corporation
• An enterprise operating in several countries
but managed from one (home) country.
Generally, any company or group that derives
a quarter of its revenue from operations
outside of its home country is considered a
multinational corporation.

Transportation network company
• A transportation network company (TNC),
sometimes known as a mobility service
provider (MSP), is an organization that
pairs passengers via websites and mobile
apps with drivers who provide such services.
Transportation network companies are examples of
the sharing economy and shared mobility.

International business risk
• It is the possibility of loss due to same
uncertain future occurrence. International
business risk may be defined as the possibility
of loss caused by some unfavourable or
undesirable event in international
business operations

Federation of Indian Chambers of
Commerce & Industry
• The Federation of Indian Chambers of Commerce and
Industry (FICCI) is an association of business organisations
in India. Established in 1927, on the advice of Mahatma
Gandhi by GD Birla and Purushottam Das Thakurdas, it is the
largest, oldest and the apex business organisation in India.[1] It
is a non-government, not-for-profit organisation. FICCI draws
its membership from the corporate sector, both private and
public, including SMEs and MNCs. The chamber has an
indirect membership of over 250,000 companies from various
regional chambers of commerce.

Confederation of Indian Industry
• The Confederation of Indian Industry (CII) is a
business association in India.
• CII is a non-government, not-for-profit, industry-led
and industry-managed organization. Founded in
1895, it has over 9,000 members, from the private as
well as public sectors, including SMEs and MNCs, and
an indirect membership of over 300,000 enterprises
from around 265 national and regional sectoral
industry bodies

ASSOCHAM
• The Associated Chambers of Commerce and
Industry of India (ASSOCHAM) is one of the
apex trade associations of India. The organisation
represents the interests of trade and commerce in
India, and acts as an interface be issues and
initiatives. The goal of this organisation is to promote
both domestic and international trade, and
reduce trade barriers while fostering conducive
environment for the growth of trade and industry of
India.

BCom Business Studies Unit 1 and 2 Notes

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BCom Business Studies Unit 1 and 2 Notes