Commerce, Economic Activity, Non-Economic Activity, Primary sector, Secondary sector, Tertiary sector, The difference between trade and Industry, the comparison between Business, Profession and Employment.

1. Chapter-1, Topic -2
for PLUS ONE
Professor & Lawyer
Puttu Guru Prasad
Business Studies
VIVA - VVIT
Nature & Purpose of
Business

2. Professor & Lawyer.
Puttu Guru Prasad,
B.Com., M.Com., M.Phil., M.B.A., PGDFTM., AP.SET.,
M.Phil., DRMS., L.L.B., ICFAI TMF., DIRM., L.L.M.,
Pre PhD (PhD)from JNTUK.,
“Diploma in Psychology from YALE
University”
MHRDI’s IIC Ambassador
NSS Certified Program Officer, (A.U)
Senior Faculty for M.S & M.E.F.A.,
BOS-Chairman, Management Studies,
Bhagavad Gita Program Coordinator,
S&H Department, VVIT, Nambur,
My Blog: puttuguru.blogspot.in
My Web Site: https://gurublogs.wixsite.com/guru

3. VIVAINTERNATIONAL
SCHOOL
WelcomesyoutoXI
Business Studies -class

4. Chapter– 1
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
i. Appreciate the development of trade and
commerce in historical past;
ii. Understand the role of indigenous banking system
in trade and commerce;
iii. Explain the concept and objectives of business;
iv. Discuss types of industries;
v. Explain the activities relating to commerce;
vi. Describe the nature of business risks and their
causes; and
vii. Discuss the basic factors to be considered while
starting a business.

5. Introduction
All human beings, wherever they may be, require
different types of goods and services to satisfy their
needs. The necessity of supplying goods and services
has led to certain activities being undertaken by
people to produce and sell what is needed by others.
Business is a major economic activity in all modern
societies concerned as it is concerned with the
production and sale of goods and services required by
people. The purpose behind most business activities
is to earn money by meeting people’s demands for
goods and services. Business is central to our lives.

6. Whatisbusiness?
Howwe identify it is abusiness?
Dowe need a permanent place tostartthe
business ?
Whatistheultimate aim behind business?
Find some business organization aroundyour
Locality?

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

8. Business Functions at Enterprise Level
 Business includes a wide variety of functions performed by
many different kinds of organizations called business
enterprises or firms.
 Financing, production marketing and human resource
management are the four major functions which are
performed by business enterprises to carry on business.
 Financing is concerned with mobilizing and utilizing funds
for running a business enterprise.
 Production involves the conversion of raw materials into
finished products or generation of services.
 Marketing refers to all those activities which facilitate exchange of goods
and services from producers to the people who need them, at a place they
want, at a time they require and at a price they are prepared to pay.
 Human resource management aims at ensuring the availability of
working people who have necessary skills to perform various tasks in
enterprises.

9. Familiarthe meaning of Business?
1.business involves production and
exchangeof goods.
2.It’s mainaimis to earn profit. 3.It
mustsatisfy humanwants.
“These activities are organised and
performed under the framework of an
institution knownasbusiness organisation
/firm/enterprise.”

10. “According to B.O Wheeler,
Businessis aninstitution organisedandoperated
to providegoodsandservices to society under
the incentive of private gain.”

11. Business?
• Businesspervadesall human activities
directed towards earning profits or
economicgains.
Industry,trade,Banking,Transport,Insurance,
warehousing,advertisingetcareintegralpartof
modernbusiness.

12. TYPES OF ECONOMIC ACTIVITY
ECONOMIC ACTIVITIES
BUSINESS PROFESSION EMPLOYMEN
T
TRADE
INDUSTRY BANKING
TRANSPORTATION
INSURANCE
WAREHOUSING
ADVERTISING ETC.
MEDICAL
LEGAL
CHARTERED ACCOUNTANT.
MANAGER
FOREMAN CLERK
SALESPERSON
WORKER,ETC...

13. Definition of Business
• Businessrefers to all those activities
which are concerned with the production
and/or purchase andsale of goodsor
services with the purpose of selling them
at a profit.

14. The takeaways from the last class
• You have submitted the answers for 5 question on
Business.
• You have actively participated in the case study about
china’s abnormal economic growth.
• We discussed about the main functions of the Business-
Financing, Production, Marketing, H.R. Management.
• Ultimate activities of business-Production and exchange of
goods and services, to earn profits, and must satisfy the
human wants.
• Various types of Businesses--Industry, Trading, Banking,
Transport, Insurance, Warehousing, Advertising, E-
Commerce Portals, Crypto Currency, Stock Markets,
Derivatives, Hedge funds, Mutual funds, Call money
markets, Over the counter exchanges etc. are integral part
of modern business.
• Finally we discussed about the difference between
Business, Profession and Employment.

15. Characteristics of business
• Economic Activity
• Productionorprocurement(acquisition of goodsfor the purposeof sale)
• Dealingingoodsandservices;(goodsareconsumergoodsand
capital goods)
• Satisfactionof consumerwants
• Regulardealings(continuoussupplyof goodsandservices)
• Profit motive
• Uncertainty.
• Risk element
• Creationof utility

16. Objectives Of Business
• Businessobjectives asthe purpose or the
reason for the existence of the business
in the society.

17. Businessactivities
Businessactivities broadly divided in to
three;
They are,
a) Economic objectives,
b) social objectives
c) Human objectives

18. TYPES OF BUSINESS ACTIVITY
ECONOMIC
OBJ ECTI VES
HUMAN
OBJ ECTI VES
SOCIAL
OBJ ECTI VES
1)EARNING OF PROFIT
CREATION OF CUSTOMERS
3)INNOVATION
)EFFECTIVE UTILISATION
OF RESOURCE
1)GOODSERVICEAND FAIR
DEALINGS 2)TREATING
EMPLOYEES AS PARTNERS
3) DEVELOPMENTOFEMPLOYEES
SKILLS
4) JOB SATISFACTION OF
EMPLOYEES
1) BETTERQUALITY PRODUCTS
2) FAIR TRADE PRACTICES
3)GENERATION OF EMPLOYMENT
EMPLOYEESWELFARE 4)COMMUNITY
SERVICE
5)PROTECTIONOFEMPLOYMENT

19. NECESSITY OF PROFITABILITY
OBJECTIVE
• ACCORDING TO PETER. F.DRUCKER
“ABUSINESS MUSTACHIEVE SUFFICIENT PROFITS
TO COVERTHE RISKS OF ECONOMICACTIVITY
AND THUS TO AVOID LOSS”

20. Peter Ferdinand Drucker (November 19, 1909 –
November 11, 2005) was an Austrian-born American
management consultant, educator, and author, whose
writings contributed to the philosophical and practical
foundations of the modern business corporation. He was
also a leader in the development of management
education, he invented the concept known as
management by objectives and self-control, and he has
been described as "the founder of modern
management".

21. A BUSINESS MUST EARNADEQUATE
PROFITS BECAUSEOFTHE FOLLOWING
REASONS;
• MEANS OF LIVELY HOOD
• RETURN TO INVESTORS
• REWARD FOR RISKS
• SOURCE OF FINANCE FOR GROWTHAND
EXPANSION
• INDICATOR OF EFFICIENT WORKING
• GOODWILL OR REPUTATION

22. ABUSINESS MUST EARNADEQUATE PROFITS BECAUSEOF
THE FOLLOWING REASONS:-
• 1. Interest on Capital – 30%
• 2. Business expenses – 20%
• 3. Salaries to the employees--- 30%
• 4. Shop Electricity and Maintenance Expenses— 10%
• 5. GST, Income tax, Corporation Tax and other etc - 25%
• 6. Profit sharing to partners or Share holders---- 20%
• 7. Capital savings for future expansion of Business— 25%
• 8. Insurance expenses for Risk Coverage--- 20%
• 9. Health insurance , Pension, Gratuity, Retirement benefits and
perks to the employees—20%
• 10. Advertisement expenses---20%
• 11. Stock points, Transportation , Octroi Tax expenses– 20%
• 12. Discounts and Bumper Offers (1+1) to the customers--- 15%
• 13. Pilferage , Damage, obsolete, evaporation , ware and tear --15%
• 14. Renovation expenses– 20%
• 15. Contingency expenses – 30%
• TOTAL = 300% So if you sell a product you have to add all these expenses to the
cost , If the cost of the product Rs.100 you have to add 300% as margin. The sale
price is 100+300= Rs.400.

23. Can profit bethe sole objective
of aBusiness
• A lay manmaysaythat business is carried
onfor profit only.But agood business man
cannot afford to keep profits ashis sole
objective.
• “earningof profits cannot be the objective
of abusiness anymorethan eating is the
objective of living”

24. The argumentagainst the
profit maximisationare;
• Profit maximization ignores the interests of
labour,customers,and the society.
• Unfair meanssuch ashoarding, black marketing or
adulteration maybe followed to maximize profits.
• Longterm interest of the business maybe ignored to
maximizeprofits in the short run.
• In the present dayenvironment, abusiness can't be
effective with the sole objective of profit
maximization.
• It mustalso set objectives in areas like customer
satisfaction, employeewelfare, communitydevelopment,
environmentprotection etc..

25. Multiplicity objectives of aBusiness
• According to peter f Drucker
remarked “To manageabusiness is to
balance avariety of needs andgoals.
And this requires multiple objectives”
• He suggests 8 areas where
objectives must be set.

26. Multiplicity objectives of a
Business
1 Market standing (e.g.; Bata)
2 Innovation (e.g.; Hero Honda)
3 Productivity (It is the ratio between output and
inputs in production process. It is considered as
the efficiency of the enterprises.) - JIO
4 Human organization-workers attitude and
performance -ITC
5 Physical and financial resources-- UNILEVER
6 Managerial performance- TATA SONS
7 Social responsibility- WIPRO
8 Profitability-Reasonable rates. -MARUTHI

28. COMPARISON OF BUSINESS, PROFESSION AND
EMPLOYMENT

29. Take away from the last class
•A BUSINESS MUST EARNADEQUATE
PROFITS!
• C
a
nprofit bethe sole objective of aBusiness?
• The argumentagainst the profit maximisation ?
•Multiplicity objectives of a Business
• ComparisonbetweenBusiness,ProfessionandEmployment

30. Classification of business activities
• Business activities are classified on the
basis of 3 criteria,
1 Size
2 Ownership
3 Functions

31. Classification of business activities
On the basis of size business activities are
classified as
1. Small scale
2. Large scale
3.Small scale the investment does not
exceed Rs 100 lakhs.
4.Large scale means the investment exceed
1 Crore

32. Classification of business activities
• On the basis of OWNERSHIP
business activities are classified as
• Public sector –under the govt. control
• Pvt sector-under private control
• Joint sector –both govt.andprivate

33. Public enterprises may be organized as
Departmental undertaking-ISRO,DRDO
Government company-Indian Gas
Statutory corporation etc-SBI
But private enterprises are like;
Sole trader, Joint Hindu family,
Partnership, Joint stock company
And co-operative society.
Classification of business activities

34. Classification of business activities
On the basis of functions business
activities are classified in to two;
1. Industry
2. commerce
Commercial activities are again
classified as;
Trade and aids to trade

35. BUSINESS ACTIVITIES
INDUSTRY COMMERCE
Trade
1 EXTRACTIVE
2 GENETIC
3 MANUFACTURI NG
4 CONSTRUCTION
Aidsto Trade
Hometrade;
1)Retail trade
2) wholesale
trade
Foreigntrade 1
import
2 export
3 Entrepot
Transport
Warehousing
Insurance
Banking
advertising

36. 1. Industrial activities or Enterprise:
It includes mining, breeding, construction of roads building,
etc.... (manufacturing, mining, constructions)
2 Commercial activities:
Commercial activities involve exchange of goods and
services like...transport, ware housing, banking, insurance
and advertisement.
3 Trading activities or firms:
It refers to purchase and sale of goods to earn profits by the
business men known as traders. They engaged in
a) Home trade - includes wholesale and retail
b) foreign trade- import-export and entrepôt
A brief reviewof thevarioustypesof Business
activities

37. A brief reviewof thevarioustypes of
Businessactivities
Service activities or enterprises;
These include those services which facilitate smooth
trade and also serve as the back born of modern
industry.
Banking, Insurance, Transportation, Warehousing,
Financial Advisers packaging, Hotels, Hospitals,
Auditors, Doctors, Lawyers, Engineering consultancy,
Tourism, IT enabled Services, Management Consultants
Psychologists , Economists , E-Commerce

38. Typesof industries
Primary industry: it includes extraction,
producing and processing of natural resource
(extractive+ Genetic)
Secondary industry is concerned with processing
materials which have already been produced at the
primary stage.
Manufacturing and construction industry are under
secondary industry.

45. Manufacturing industry
may assumethe following forms
(a) Analytical industry: In analytical industry, the raw material is
broken down into several useful materials. For example, an oil
refinery separates crude oil into kerosene, gasoline, diesel oil, and
petrol, etc. Petroleumrefining is anexampleof analyticalindustry.
(b)Synthetic industries: are those industries which
combines various ingredients and make a new
product. For example. Cement, fragrance industry
etc. Two or more materials are mixed together in the manufacturing
operationsto obtain somenewproducts.like soap,cement etc

46. ANALYTICAL INDUSTRY

47. Petroleum Refinery
Cement Industry
Mysore Sandal Soap Industry
SYNTHETIC INDUSTRY

48. Manufacturingindustry mayassumethe
following forms
Processing industry:
Raw materials are processed through a series of
manufacturing operations making use of analytical and
synthetic method)- textile, sugar and steel.
Assembly line industry:
in assembly industry, the finished products can be
produced only after various components have been made
and then brought together for final assembly.
Automobile, watches, television are examples

49. Processing industry
Assembly line industry:

50. Construction industry may
assumethe following forms
• They are concerned with making of
roads, bridges, dams and canals.
ConstructionINDUSTRY

51. Definitionof trade
• Trade is that branch of
commerce which deals with
exchange of goods and services
in terms of money between
different persons known as
‘traders’

52. TRADERS

53. Stock Market Trading
Share Markets

54. Typesof trade
Trade may be classified on the basis of
1) Geographical area covered
2) volume of trade transaction
On geographical basis trade may be classified
in to two like internal trade and external
trade.
On volume of trade basis trade is divided in to
two 1. Wholesale & 2. retail trade

55. WHOLE SALE
RETAIL

56. Internal or hometrade
• I t refers to purchase andsale of goods
within the boundaries of acountry.
• Wholesale trade: purchase andsale of goodsin
bulk quantity andsell to retailers at small
quantity.
• Retail trade: selling of goodsby the
retailer to the customer

57. External or foreigntrade
• Import trade
• Export trade
• &Entrepottrade:Duty free ports
Duty free ports

58. Duty free ports

59. AUXILIARIES TO TRADE
• Transportation and communication
• Banking
• Insurance
• Ware housing
• Advertising
• And packaging

61. Differentiate between industry, trade and
commerce
industry com
m
erce Trade

62. Methods of Dealing with Risks
Although no business enterprise can escape the presence of
risk, there are many methods it can use to deal with risk
situations.
For instance, the enterprise may
(a)decide not to enter into too risky transaction;
(b)take preventive measures like firefighting devices to
reduce risk;
(c)take insurance policy to transfer risk to insurance
company;
(d)assume risk by making provisions in the current earnings as
is the case of provision for bad and doubtful debts; or
(e)share risks with other enterprises as manufacturers and
wholesalers may do by agreeing to share losses which may
be caused by falling prices.

63. EXERCISES
Multiple Choice Questions
1. Which of the following does not characterize business activity?
(a) Production of goods (b) Presence of risk and services (c) Sale or exchange of goods and
services (d) Salary or wages
2. Which of the broad categories of industries covers oil refinery and sugar mills?
(a) Primary (b) Secondary (c) Tertiary (d) None of them
3. Which of the following cannot be classified as an auxiliary to trade?
(a) Mining (b) Insurance (c) Warehousing (d) Transport
4. The occupation in which people work for others and get remunerated in return is known as
(a) Business (b) Employment (c) Profession (d) None of them
5. The industries which provide support services to other industries are known as
(a) Primary industries (b) Secondary industries (c) Commercial industries (d) Tertiary
industries
6. Which of the following cannot be classified as an objective of business?
(a) Investment (b) Productivity (c) Innovation (d) Profit earning
7. Business risk is not likely to arise due to
(a) Changes in government policy (b) Good management (c) Employee dishonesty (d)
Power failure

64. Projects/Assignments
1. Choose a locally operated trading or business
unit. Find out the kind of risks it faces in business
and the way it deals with them.
2. Select a local business enterprise and find out the
objectives it pursues. Check why it does not pursue
other objectives.

65. Short Answer Questions
1. State the different types of economic
activities.
2. Why is business considered an economic
activity?
3. Explain the concept of business.
4. How would you classify business activities?
5. What are various types of industries?
6. Explain any two business activities which are
auxiliaries to trade.
7. What is the role of profit in business?
8. What is business risk? What is its nature?

66. Long Answer Questions
1. Explain the characteristics of business.
2. Compare business with profession and
employment. 3. Explain with examples the
various types of industries.
4. Describe the activities relating to commerce.
5. Why does business need multiple objective?
Explain any five such objectives.
6. Explain the concept of business risk and its
causes.
7. What factors are important to be considered
while starting a business? Explain.

67. Submit all your answers to the exercises and activities in the TEAMS
only. We have to extensively use the MS TEAMS App. It is our official
VIVA SCHOOL APP. All your performance is recorded in the MS TEAMS
only. It is necessary now that the students should understand the
TEAMS App Properly. Because the latest guidelines by the CBSE
suggests that, Schools have to teach the students in combination of
Online as well as Class room teaching in this period. Modify your
thought process...to New Normal. Continue the process of online and
digital teaching till the resumption of physical classes. Objective Type
Questions will be more in CBSE exam 2020-21.So,the students are to be
conditioned accordingly in Assessments. Online CBSE trainings only, will
be conducted. CBSE has formed committees ,for online assessment and
online teaching. Change into Home based leaning now. Home is school
only, till the Schools open....Opening of Schools is uncertain. Guidelines
for online and digital classes soon to be released by CBSE. Guidelines
will be issued for parents also to accept online classes. Online Classes:
blended approach. Assessment online: small test, project based, inter
group activity