This document provides an overview of business concepts including: 1. It defines business as an organization engaged in commercial activities like production, services, or retail for earning a livelihood. 2. It discusses different types of business organizations like sole proprietorships, partnerships, and corporations. 3. It explains key concepts around the economic, political, legal, social, and competitive environments that influence businesses.

1. MBA IInd Sem
Dr Zubair Ahmad
JIT Barabanki

2. Business
 Meaning: An organization or economic system where
goods and services are exchanged for one another or
for money. Every business requires some form of
investment and enough customers to whom its output
can be sold on a consistent basis in order to make a
profit. Businesses can be privately owned, not-for-
profit or state-owned.

3. Nature and Scope of Business
 I n your day-to-day life you may be engaged in several
activities. However, when some one asks you as to what you
want to become in your life or what you want to do in
future, your answer may be – “I want to join a suitable job
or I want to become a doctor, an engineer, a dancer or a
musician”, or you may say, “I want to do my own business”.
But why do you want to do any of such activities?
Obviously, it is mainly to earn your livelihood. Broadly
speaking, every human activity in which one is engaged for
the purpose of earning one’s livelihood is known as
economic activity. In this lesson we shall learn about all
such activities, their categorisation and some other related
aspects.

4. Types of Business Organisations
 Sole Proprietorship: A sole proprietorship is a business
owned by only one person. The sole proprietorship form is
usually adopted by small business entities.
 Partnership
 A partnership is a business owned by two or more persons
who contribute resources into the entity. The partners
divide the profits of the business among themselves.
 Corporation
 A corporation is a business organization that has a separate
legal personality from its owners. Ownership in a stock
corporation is represented by shares of stock.

5. Business
 A business is an organization or enterprising entity
engaged in commercial, industrial or professional
activities. A company transacts business activities
through the production of a good, offering of a service
or retailing of already manufactured products

6. Business Environment
 Meaning: The term 'business environment' connotes
external forces, factors and institutions that are beyond the
control of the business and they affect the functioning of
a business enterprise. These include customers,
competitors, suppliers, government, and the social,
political, legal and technological factors etc.
 Characteristics:
 (a) Business environment is the sum total of all factors
external to the business firm and that greatly influence
their functioning.
 (b) It covers factors and forces like customers, competitors,
suppliers, government, and the social, cultural, political,
technological and legal conditions.

7. Characteristics of Business
Environment
 (c) The business environment is dynamic in nature,
that means, it keeps on changing.
 (d) The changes in business environment are
unpredictable. It is very difficult to predict the exact
nature of future happenings and the changes in
economic and social environment. .
 (e) Business Environment differs from place to place,
region to region and country to country. Political
conditions in India differ from those in Pakistan. Taste
and values cherished by people in India and China
vary considerably.

8. Significance of BE
 Determining Opportunities and Threats
 Giving Direction for Growth
 Continuous Learning
 Image building
 Meeting Competition
 Identifying Firms strength & Weaknesses (Significance
points)

10. Scope of Business Environment

11. Unit- II- Economic, Political, Legal
Environments
 Legislature: a body of persons having the power
to legislate; specifically : an organized body having the authority to
make laws for a political unit. For example: Our legislature passed a law
requiring people to wear safety belts.
 Executive: the part of a government that is responsible for
making certain that laws and decisions are put into action
 Judiciary: The judiciary (also known as the judicial system or court
system) is the system of courts that interprets and applies the law in
the name of the state. The judiciary also provides a mechanism for
the resolution of disputes. In some nations, under doctrines
of separation of powers, the judiciary generally does not make law
(which is the responsibility of the legislature) or enforce law (which is
the responsibility of the executive), The Judiciary is often tasked with
ensuring equal justice under law.

13. Legal Framework in India
 Rules and Regulations which facilitate Business
 Rules and Regulations which restricts the Business
 A modern Legal Framework:
 Intellectual Property: Paris Convention and TRIPS
 Modern IP laws: Copyright Act 1957, Patents Act
 Trademarks Act 1999, Designs Act 2000
 IP owners entitled to civil and criminal remedies
 Employment Laws: Laws mainly regulate blue collar sector,
white collar sector: contractual
 Generally not as strong as European Employment laws but
in particular PSUs has strong labour representation

14. Legal Framework in India
 Competition law Competition Act 2002 replaces MRTP
Act
 Merger control rules in force
 Dispute resolution developed by court system

15. Economic System
 Communism: Form of government based on the concept of
the classless society where all the major factors of
production are owned by the government and shared by all
the people rather than profit seeking enterprises for the
benefit of the society.
 Socialism: A form of government where basic and heavy
industries are operated by the government so as to ensure
social welfare objectives wherein small businesses may be
privately owned
 Capitalism: An economic system which provides complete
freedom of private ownership of productive resources and
industries

16. Economic Policies- New Economic
Policy
 It refers to ongoing economic liberalization or relaxation
started in 1991 of the countries economic policies
 It was introduced with the goal of making the economy
more market oriented and expanding the role of the private
and foreign investment
 Branches of New Economic Policy
 i). Liberalization ii). Privatisation iii). Globalisation
 Liberalization of an economy means removing or relaxing
government controls and restrictions on economic
activities Example: Relief of foreign investors, revaluation
of Indian currency, new industrial policy, new trade policy,
import technology

17. New Economic Policy
 Privatization: Disinvestment, selling of govt. equity,
partially or wholly, to private parties, Mergers,
acquisition.
 Globalization: Outsourcing, reduction in trade
barriers, free flow of technology, free movement of
labour capital among different countries.
 Positive Effects of New Economic Policy: Increase in
per capita income, Increase in foreign trade (Import,
Export, FDI, FII, Merger)

18. Impact of Liberalization
 Positive Effects: Increase in Foreign investment.
 Increase in production, technological advancement,
 Increase in GDP growth rate
 Negative Effects: Increase in Unemployment, Decrease
in tax receipt
 PRIVATIZATION: According to world bank
Privatization is the transfer of state owned enterprises
to the private sector by sale of going concerns or by
sale of assets following their liquidation. Increasing
inefficiency on part of public sector led to
privatization

19. Concept of Capitalism
 Capitalism is the name given to the economic system
in which the principal means of production,
distribution and exchange are in private (individual or
corporate) hands.
 Private ownership creates following rights of the
owner: Rights of Control, Claim to value produced,
Right to Exclusivity, Right to transfer ownership

20. Concept of Socialism
 A theory or system of social organization that
advocates the vesting of the ownership and control of
the means of production and distribution of capital,
land etc.
 Means of production are publicly owned
 Based on Co- op social relations and self management
 There is an attempt to distribute income equally
 Personal freedom do exist but to lesser than market
economy

21. Mixed Economy
 Mixed Economy is an Economy system in which both the
state and private sector direct the economy reflecting
characteristics of both market economies and planned
economies.
 One main characteristic of a mixed economy is the
ownership of goods by both private and government/state-
owned entities. Monopolies have the potential to occur in
this type of economy, but the government closely monitors
this. For the economy to be mixed, the government can
control some parts but not all. For example, the
government may control health care and/or welfare in
some mixed economy countries.‘

22. Impact of business on Private
Sector
 Private economic units generally operate as individual
enterprises within an industry or sector in an economy with
specific business conditions. This setup can be separated into
four levels: (i) Individual enterprises. (ii) All enterprises within
an industry. (iii) All enterprises within an economy. (iv) Business
conditions within which private enterprises are created and
operate.
 Employment Generation: Private sector plays a dominant role for
generating employment opportunities inside the country. A huge
number of large scale, small scale, cottage scale units are under
the control of private sector. It proves that small scale and
cottage scale industries contribute four times more employment
in compare to large scale industries. According to 2001-02
statistics, as far as employment is concerned, the share of private
sector was 51.2% against 44.3% of the public sector.

23. Public Sector
 The government owned associations are termed as public
sector undertakings (PSUs) in India
 In a PSU majority (51% or more) of the paid up share
capital is held by central government or by any state
government or partly by the central government and partly
by one or more state governments.
 Arms and Ammunition, Atomic Energy, Railway transport,
Air transport come under PSUs.
 Role of Public Sector Undertakings: Public sector banks
play a crucial role in pushing the agricultural economy
Example of a Pulic setor undertaking are ONGC, BHEL etc.

24. Joint Sector
 Joint sector industries are owned jointly by the
government and private individuals who have
contributed to the capital
 The concept of joint sector matches with the concept
of joint economy. Joint sector is the combination of
both private and public sector.
 In joint sector financial participation is 26% from the
govt. , 25% from private enterprise and 49% from
public and financial institutions.
 Example: Amul India, Indian Coffee house, Lijjat
papad.

25. MRTP Act
 Monopolies Restrictive Trade Practices: This act checks the any
monopolies, restrictive, unfair trade practices. This act came into
existence in the year 1969
 It controls the practices: Monopolies trade Practice (MTP),
Restrictive Trade Practices (RTP), Unfair Trade Practices (UTP)
 The activities of MRTP act are controlled by MRTP commission.
Competition Act 2002 replace MRTP act
 Example of MTP: Preventing or reducing competition, limiting
technical development
 Example of RTP: To maximize profit and market power traders
often attempts to indulge in certain trade practices which tends
to obstruct the flow of capital into the stream of production the
flow of capital into the stream of production. UTP: Misleading
advertisement and false representation.

26. FEMA- Foreign Exchange
Management Act
 The Foreign Exchange Regulation Act 1973 as amended by
the foreign Exchange Management Act 1999 forms the
statutory basis for exchange control in India
 FEMA: Consolidate and amend the law relating to foreign
exchange, facilitating external trade and payments,
promoting the orderly development and maintenance of
foreign exchange market in India, 49 sections in the act.
 Important Terms: Authorized Person: Authorised under
the act to deal in foreign exchange, Capital account
transaction: alters the assets or liability, Currency:
Currency notes, money order, Cheques, drafts, etc.,
Currency notes: Coin and bank notes, Currency account
transaction: Transaction other than capital account
transaction, Indian currency: Indian rupees

27. FEMA
 Export: Goods and services from India to Outside
 Foreign currency: Other than Indian currency
 Foreign Exchange: Means foreign currency
 Foreign Security: Security expressed in foreign currency
 Import: Goods and services from outside to India
 Security: Shares, Stock etc. as defined in the public debt act of 1994.
 Repatriate to India: Realized Foreign exchange to India
 Service: Banking, Financing, insurance etc.
 Transfer: Sale, purchase, Exchange etc.
 Non Resident Indian (NRI): Citizen of India residing outside
 Overseas Corporate body (OCB): A company firm etc. Owned at least
60% by NRI
 Covers three categories: Person, Person resident in India, Person
resident outside India

28. Monetary Policy
 Monetary policy deals with the Credit.
 The process by which the monetary authority of a country
controls the supply of money
 Two functions of Monetary policy Expansionary and
Contractionary. It means increases the total supply of
money in the economy more rapidly than usual. Expands
the money supply more slowly than usual or even shrinks
it.
 Problem: Unemployment, deflation, inflation Remedy:
Induce an Expansion in the supply of money and therefore
spending by reducing the interest rate. Means: Buy bonds
in the open market

29. Fiscal Policy
 It deals with the revenue collection. Revenue collects through
taxes.
 Fiscal policy governed by Union budget makes by the Central
govt. in Delhi.
 Sources of Revenue for the State: Land revenue, including the
assessment and collection of revenue, the maintenance of land
records, Taxes on Agricultural income, Estate duty in respect of
agricultural land, Taxes on land and buildings, taxes on the
consumption or sale of electricity
 Concurrent List: Stamp duties other than duties or fees collected
by means of judicial stamps but including rates of stamp duty.
 Fees in respect of any of the matters in this list but no including
fees taken in any court.

30. Social Environment
 The social environment, social context, socio-cultural
context or milieu refers to the immediate physical
and social setting in which people live or in which
something happens or develops. It includes the culture that
the individual was educated or lives in, and the people and
institutions with whom they interact.
 The social aspects cover the shape of the community of
which we become members, and the norms and standards
that we accept as our folkways, mores and customs.
Graham Wallas states that, after socializing himself, man
takes to his social heritage so closely and intently that, if he
were to be removed from it, he would perhaps perish.

31. Cultural Environment
 Cultural Environment refers to the country’s
environment in respect of its value system For example
in Saudi Arabia the liquor and cosmetics products are
not suitable for business So any company not to go for
this type of business in these countries
 So in accordance to the community we have to do a
business there.

32. Social Audit
 One important issue related to Social responsibility of business
is how to evaluate the social performance. Bauer and Fenn Jr.
define social audit as a commitment to systematic assessment of
and activities on some meaningful, definable domain of the
company’s activities that have social impact.
 In other words social audit involves:
 Identification of the firms activities having potential social
impact
 Assessment and evaluation of the social costs and social benefits
of such activities
 Measurement of the social costs and benefits
 Reporting that is presenting in a proper format and manner the
social performance of the firm

33. Corporate Governance
 Corporate governance is concerned with holding the
balance between economic and social goals. The
governance framework is there to encourage the
efficient use of resources and equally to require
accountability for the stewardship of those resources.
The aim is to align as nearly as possible the interest of
individuals, corporations and society

34. Social responsibility of Business
 Responsibility to Shareholders
 Responsibility to Employees
 Responsibility to Consumers
 Responsibility to the Community
 Responsibility to the Government

35. Competitive Environment
 A Competitive environment is the dynamic external
system in which a business competes and functions.
The more sellers of a similar products or service the
more competitive the environment in which you
compete. For example: Fast Food Restaurants- there
are so many to choose from, the competition is high.

36. Porter’s Five Forces Analysis
 Supplier Power
 Buyer Power
 Competitive Rivalry
 Threat of Substitution
 Threat of New Entry

37. INNOVATION
 In the business context, Innovation may be defined as
Technical, Industrial, Commercial steps which lead to
the marketing of new manufactured products and to
commercial use of new technical processes and
equipment. Innovation Types:
 Radical Innovation
 Incremental Innovation

38. Technological Leadership and
followership
 Technological leadership means- A firm seeks to be
the first to introduce technological changes that
support its generic strategy. Leadership can be
established in technologies employed in any value
activity.
 Technological followership refers to a conscious and
active strategy in which a firm chooses not to be the
first on innovations

39. Sources of Technological Dynamics
 Customer needs and Expectations
 Demand Conditions
 Suppliers offerings
 Integration of product and process technology
 Technology Advancements (Process improvement)
 Managing technology at the boundary/ border of the firm
(Collaboration and Coordination with supply chain
partners and customers
 Performance measurement of new technology (e.g.
technology assessment, technology audit and feedback)

40. Technology Transfer
 Technology transfer is the process by which
commercial technology is disseminated. The
transaction may or not be a legally binding contract
but it will involve the communication by the transferor
of the relevant knowledge to the recipient.
 Forms of T.T. Internalised form: refers to investment
associated TT where control resides with technology
transferor
 Externalised form: Joint ventures with local control,
licensing, strategic alliances etc.

41. Status of Technology in India
 The Annual sale of two wheelers in India is 17% of global
sales
 India exports of automobiles is 5% of the total sales
 Electronics industry is 6%
 Present import content by value in automobile industry is
about 7%
 STATUS:
 Highly skilled and technical resource available
 Minimum wage structure follows
 Service quality and operational efficiency
 Setting up of tech parks and implementation of E-
governance projects

42. Management of Technology
 MOT is concerned with development, planning,
implementation and assessment of technological
capabilities to shape and accomplish the strategic and
operational objectives of an organisation or central
planning goals and priorities
 At two levels:
 At National Level
 At Enterprise level