Business Management

1. BUSINESS
Organization and Management
Presentation By
Dr. Darshan Subherwal
Prepared By Dr. Darshan Subherwal

2. Economic and Non-Economic
Activities
• Human Beings perform certain activities.
• Activity may be economic or non-economic.
• Economic activities are those through which
we earn our livelihood.
• Non-Economic activities are those activities
which are not undertaken with profit motive.
E.g Social service.
• All economic activities are termed as
Occupation
Prepared By Dr. Darshan Subherwal

3. Business, Profession and Employment
Business Profession Employment
It is an economic activity
which involves exchange of
goods and services in
consideration of money.
It implies a certified and
paid occupation carried out
by any person usually after
undergoing prolonged
training and a prescribed
qualification.
In employment, one person
(employee) is hired by
another (employer) to
perform work or provide
services, as per the terms of
the contract signed
between the two parties,
for an agreed remuneration,
i.e. salary or wages.
To commence a business, a
person needs to invest some
money in the form of
capital, and complete the
legal formalities.
To start a profession
requires membership of the
concerned professional
body, plus Certificate of
Practice (COP)
To start the employment,
appointment/joining letter
is necessary, the employer
and employee sign the
employment agreement.
It requires big Capital
Investment.
It requires limited capital
investment.
No capital is required
Prepared By Dr. Darshan Subherwal

4. Business, Profession and Employment
Business Profession Employment
It involves high risks. The risk is comparatively
low.
It involves no risk.
There is no minimum
qualification to start a
business.
It requires a person to
acquire the requisite
professional degree and
training in the concerned
discipline.
The qualification of an
employee depends upon
the nature of the job, and
it is decided by the
employer.
A businessman earns profit
out of his business.
A professional gets
professional fee in return.
An employee earns salaries
or wages.
In business, no code of
conduct is prescribed as
such
A professional code of
conduct is applicable.
The employer lays down
the behaviour norms which
are to be followed by the
employees.
It involves exchange of
goods and service.
It involves rendering of
professional and
specialized services.
The working is as per the
terms and directions of the
employer.
Prepared By Dr. Darshan Subherwal

5. What is Business ?
• Business means-Being busy in some activity.
• Business is an economic activity.
• It is carried on with the intention of earning
money.
• It involves production or exchange of goods and
services.
• All human activities relating to the production of
goods or services for satisfying human wants are
called ‘Business’.
Prepared By Dr. Darshan Subherwal

6. Definition of Business
• Business is an institution organized to provide
goods and services to the society under the
incentive to gain. [ B.O. Wheeler]
• Business is a form of activity pursued primarily
with the object of earning profits for the
benefit of those on whose behalf the activity is
conducted. [L. R. Dicksey]
• Business means activities relating to producing,
marketing and exchanging products and
services with the purpose of earning profits.
Prepared By Dr. Darshan Subherwal

7. Characteristics of Business
• An Economic Activity
• Production of Services and Goods
• Exchange or Sale of Goods /Services for the
Satisfaction of Human Needs
• Regularity in dealings
• Profit Motive
• Uncertainty of Return
Prepared By Dr. Darshan Subherwal

8. Objectives
Economic
• Earning Profits
• Creating Customers
• Optimum Utilization of Resources
Social
• Providing utility through goods or services
• Producing Quality Products at reasonable Rates
Human
• Economic Well Being of Employees
• Development of Human Resources
• Uplifting Socially & Economically Backward or Under-Privileged Persons
Prepared By Dr. Darshan Subherwal

9. Objectives
National
• Creation of Employment Opportunities
• Promotion of Social Justice
• Production according to the need of citizens
• Contribution towards the Revenue of the Country
• Contribution in making Nation Self-reliant
• Revenue Generation through Export Promotion
Global
• Help in Raising the Standard of Living of People
• Reducing Costs to make Goods/Services Globally Competitive
Prepared By Dr. Darshan Subherwal

10. Significance
Business is important for
Creation of Utility
Economic Development
Optimum Utilization of Resources
Creation of Employment Opportunities
Revenue Generation
Source of Foreign Currency Earnings
Growth & Development of Country
Investment Opportunities
Maintaining International Relations
Making country Self-Reliant
Prepared By Dr. Darshan Subherwal

11. Components of Business
• Business covers all the activities relating to
Industry and Commerce.
Prepared By Dr. Darshan Subherwal

12. Components of Business
• Industry is an economic activity, concerned with
the procurement and processing of raw materials
and converting them into finished products, that
reaches the customer.
• Commerce includes two types of activities, viz., (i)
trade and (ii) auxiliaries to trade.
– Trade: Buying and selling of goods.
– Auxiliaries to Trade: Services that are essential to
facilitate the purchase and sale of goods are called
services or auxiliaries to trade and include transport,
banking, insurance, communication, advertisement,
packaging and warehousing. Commerce, therefore,
includes both, buying and selling of goods i.e., trade, as
well as, auxiliaries, such as transport, banking, etc
Prepared By Dr. Darshan Subherwal

13. Components of Business
Source: https://keydifferences.com/difference-between-industry-and-commerce.html
Prepared By Dr. Darshan Subherwal

14. Components of Business
Types of Industry
 Primary industries: These include all those
activities which are concerned with the extraction
and production of natural resources
(a) Extractive industries:
– extract or draw products from natural sources.
– supply some basic raw materials that are mostly
products of geographical or natural environment.
(b) Genetic industries:
– engaged in breeding plants and animals for their use in
further reproduction. Examples are:-Seeds and nursery
companies, cattle breeding farms, poultry farms, and
fish hatchery.
Prepared By Dr. Darshan Subherwal

15. Components of Business
• Secondary industries: These are concerned with using
materials, which have already been extracted at the
primary state.
(a) Manufacturing industries: producing goods through
processing of raw materials and, thus, creating form
utilities.
• Analytical industry: e.g. oil refinery.
• Synthetical industry: e.g. cement.
• Processing industry: e.g. sugar and paper.
• Assembling industry: e.g. television, car, computer, etc.
(b) Construction industries: These industries are involved
in the construction of buildings, dams, bridges, roads
as well as tunnels and canals.
Prepared By Dr. Darshan Subherwal

16. Components of Business
• Tertiary industries: These are concerned with
providing support services to primary and
secondary industries as well as activities
relating to trade. As business activities, these
may be considered part of commerce because
as auxiliaries to trade these activities assist
trade.
• Examples are: transport, banking, insurance,
warehousing, communication, packaging and
advertising etc.
Prepared By Dr. Darshan Subherwal

17. Functions
Functions
of
Business
Procurement
Production
Marketing
& Sales
Management
Finance
Accounting
Prepared By Dr. Darshan Subherwal

18. Social Responsibility
Enjoy the wealth by Renouncing it
• This concept is based on the principles of
trusteeship.
• For business the philosophy of trusteeship
emphasizes that owners of money or property
should hold them in the trust of the society.
• Businesses should use nation’s resources for
larger social good.
• Social Responsibility means that
businesspersons must consider public interest.
Prepared By Dr. Darshan Subherwal

19. Social Responsibility
• According to Bowen, “Social Responsibilities are
obligations (of businessmen) to pursue those
policies, to make those decisions or to follow those
lines of action which are desirable in terms of the
objectives and values of our society.”
• According to Peter F. Drucker: Social Responsibility
requires businessmen to consider whether their
action is likely to promote the public good, to
advance the basic beliefs of our society, to
contribute to its stability strength and harmony.
Prepared By Dr. Darshan Subherwal

20. Case For Social Responsibility
• Long term self interest of business: For business to prosper in long run
it must serve as a social organ.
• Ensuring Law and Order: Social Responsibility is a preventive measure
against social disorder.
• Maintenance of Free Enterprise: The concept of social responsibility
reduces the need for government regulation and control. Strict govt.
controls and regulations reduces the flexibility of decision making in
business.
• Contribution towards making a better society: Business is a part of the
society so should be responsive to the social demands.
• Profitable opportunities: Business can meet the social problems and
challenges by providing solutions as profitable opportunities
• System Interdependence: Business system and Social system are
interdependent. Society provided inputs to the business and business
provide goods and services to the society so business should meet the
social needs and expectations.
Prepared By Dr. Darshan Subherwal

21. Case Against Social Responsibility
• Dilution of Profit Maximisation concept
• Loss of Incentive
• Business lacks skills to tackle social Problems
• Burden on Consumers
• Distortion of Market mechanism: Market runs on
the assumption of allocating scarce resources to
alternative uses that provide minimum costs and
maximum benefit or profit. When market price of a
commodity include costs for social actions it does
not reflect true cost of production. It will distort the
market mechanism.
Prepared By Dr. Darshan Subherwal

22. Social Responsibility
• Social Responsibility of Business means
commitment of Business towards different groups
of Society
• Responsibility of Business towards various
stakeholders:
– Employees
– Shareholders
– Creditors & Suppliers
– Financers
– Customers
– Government
– General Public
Prepared By Dr. Darshan Subherwal

23. Business Ethics
• Ethics means issues relating to morals and
principles that guide right or wrong
• Business ethics means application of principles
defining acceptable conduct in business
• Business ethics are the set of practices and
policies that companies use to guide them
through decisions about finances, negotiations
and deals, corporate social responsibility etc
Prepared By Dr. Darshan Subherwal

24. Business Ethics
• Business Ethics are important because they:
– Affect Reputation: Ethics are not the laws that businesses have to follow,
but they are a set of guiding principles that organizations should follow if
they want to build a good reputation. Consumers proudly feel that a
brand belongs to them too, if that business organization adhere to
business ethics.
– Set the Tone for Employee Behavior: Leadership sets an example for
employees. If the CEO of a business organization indulges in immoral
practices( giving kickbacks) to secure a contract and it’s a well-known
company secret, it can signal to other employees that financial
misbehavior is OK. On the other hand, when leaders display a strong
moral behaviour, it encourages others to do the same.
– Helpful in Negotiations: When a company has a positive reputation, it
encourages other businesses to negotiate with it.
– Impact the Bottom Line (net income): When an organization is unethical,
its reputation is tarnished and its consumers may find an alternative
source for the products it sells and sales decline resulting in decline in
profits.
Prepared By Dr. Darshan Subherwal

25. Business Ethics
• Basic principles or core values:
– Avoid Exploitation of Consumers − Do not cheat and
exploit consumer, not indulge in artificial price rise
and adulteration.
– Avoid Profiteering − Avoid unscrupulous business
activities such as hoarding, black-marketing, selling
banned or harmful goods.
Prepared By Dr. Darshan Subherwal

26. Business Ethics
– Encourage Healthy Competition − A healthy
competitive atmosphere must be encouraged.
– Ensure Accuracy − Accuracy in weighing, packaging
and quality of supplying goods
– Pay Taxes Regularly − Taxes and other duties to the
government must be honestly and regularly paid.
– Get the Accounts Audited − Proper business records,
accounts must be managed. All authorized persons
and authorities should have access to these details.
– Practice Fair Business − Businesses should be fair,
humane, efficient and dynamic to offer certain
benefits to consumers.
Prepared By Dr. Darshan Subherwal

27. Business Ethics
– Fair Treatment to Employees − Fair wages or salaries,
facilities and incentives must be provided to the
employees.
– Keep the Investors Informed − The shareholders and
investors must know about the financial and other
important decisions of the company.
– Avoid Injustice and Discrimination − Avoid all types of
injustice and partiality or discrimination based on
gender, race, religion, language, nationality, to
employees.
– No Bribe and Corruption − Do not give expensive gifts,
commissions and payoffs to people having influence.
Prepared By Dr. Darshan Subherwal

28. Business Ethics
– Avoid Monopoly − No private monopolies and
concentration of economic power should be practiced.
– Fulfill Customers’ Expectations − Adjust your business
activities as per the demands, needs and expectations of
the customers.
– Satisfy Consumers’ Wants − Satisfy the wants of the
consumers as the main objective of the business is to
satisfy the consumer’s wants. All business operations
must have this aim.
– Respect Consumers Rights − Honor the basic rights of
the consumers.
– Accept Social Responsibilities − Honor responsibilities
towards the society.
Prepared By Dr. Darshan Subherwal

29. Business Ethics
– Fair Treatment to Employees − Fair wages or salaries,
facilities and incentives must be provided to the
employees.
– Keep the Investors Informed − The shareholders and
investors must know about the financial and other
important decisions of the company.
– Avoid Injustice and Discrimination − Avoid all types of
injustice and partiality or discrimination based on
gender, race, religion, language, nationality, to
employees.
– No Bribe and Corruption − Do not give expensive gifts,
commissions and payoffs to people having influence.
Prepared By Dr. Darshan Subherwal

30. Business Ethics
– Optimum Utilization of Resources − Ensure
optimum utilization of resources to remove poverty
and to increase the standard of living of people.
– Service Motive − Service and consumer's satisfaction
should get more attention than profit-maximization.
– Intentions of Business − Use permitted legal and
sacred means to do business. Avoid Illegal,
unscrupulous and evil means.
Prepared By Dr. Darshan Subherwal

31. Business Organisation
• Business Organisation refers to the art of
establishing effective coordination among
different components of business so as to achieve
its predetermined objectives. It describes how
businesses are structured and how their structure
helps them meet their goals.
• It is involves the study of the methods an
procedures of establishing and operating
business concerns for earning profits while
providing service to the society.
Prepared By Dr. Darshan Subherwal

32. Characteristics
• It defines the aims and objectives of the business.
• It involves the study of methods and procedures of
establishing business.
• It studies the various forms of business ownerships.
• It involves the study of the ways of organising different
elements of business.
• It is a study of the technique of efficient operations of
industrial and commercial activities.
• It covers various functions of business like production,
marketing, finance, personnel etc.
Prepared By Dr. Darshan Subherwal

33. Objectives
• To determine the objectives of the business
• To determine the appropriate form of business
organisation to achieve stated or predetermined
objectives
• To establish authority-responsibility relationships
to achieve functional efficiency
• To design ways and means to achieve
coordination at all levels
• To provide adequate mechanism to achieve
flexibility in order to gain easy adaptability in
changed situations.
Prepared By Dr. Darshan Subherwal

34. Steps of Starting a business
Promotion of Business means steps taken to
establish a new business unit right from starting
with the conception of the business idea,
assembling and coordinating factors of production
and undertaking processes to keep it running.
According to G.W. Gersternberg,
Promotion is defined as the discovery of business
opportunities and the subsequent organization of
funds, property and managerial ability into a
business concern for the purpose of making
profits there from.
Prepared By Dr. Darshan Subherwal

35. Steps of Starting a business
• Stages in Promotion
i. Discovery of Idea
ii. Investigation & Verification
iii. Assembling
iv. Financing the Proposition
Prepared By Dr. Darshan Subherwal

36. Steps of Starting a business
Discovery of Idea
– The first and foremost activity of a promoter is
to identify a business opportunity.
– The opportunity may be in respect of
producing a new product or service or making
some product available through a different
channel.
– Such an idea can be formulated out of
experience of their own or of others.
– The purpose must be meaningful having a
practical basis otherwise all the efforts will be
futile.
Prepared By Dr. Darshan Subherwal

37. Steps of Starting a business
Investigation & Verification
– All identified business opportunities may not
be possible to convert into real projects.
a) Technical feasibility:
– Business opportunities should be investigated to check the
technical feasibility.
– Technical feasibility is the formal process of assessing
whether it is technically possible to manufacture a product
or service.
Prepared By Dr. Darshan Subherwal

38. Steps of Starting a business
(b) Financial feasibility:
• Every business activity requires funds.
• Fund requirement for the identified business
opportunity is determined.
• If the required outlay for the project is so large that
it cannot easily be arranged within the available
means, the project has to be given up.
Prepared By Dr. Darshan Subherwal

39. Steps of Starting a business
(c) Economic feasibility:
• Sometimes project is technically viable and financially feasible but
the chance of it being profitable is very little. So economic feasibility
should be checked.
• The purpose of this effort is to financially model the venture
opportunity and achieve a break-even analysis.
• On the basis of the costs of goods sold, capital costs, and
management and administration, how much revenue generated from
units sold is required to break-even and over what period of time.
Prepared By Dr. Darshan Subherwal

40. Steps of Starting a business
• Assembling: At this stage, Promoter make decisions
about:
 Form of Organization
 Location of business
 Machines and equipments
 Plant size, location and layout
 Labour and human resource requirement
 Capital for fixed and working expenses
• Financing the Proposition: Promoter is ready to
discuss his business project before investors for
financing the project.
Prepared By Dr. Darshan Subherwal