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1. National Institute of
Business Management
Master of Business
Administration (MBA)
Business Environment

2. Chapter Title Page No.
I Business 5
II Objectives of Business 28
III Business Environment 53
IV Objectives and Social Responsibilities of Management 75
V Dynamics of Organizational Structure in India 94
CONTENTS
CONTENTS
CONTENTS
CONTENTS
CONTENTS

3. 5
CHAPTER - I
BUSINESS
OBJECTIVE
Business is the social science of managing people to organize and maintain collective
productivity toward accomplishing particular creative and productive goals, usually to generate profit.
The etymology of “business” refers to the state of being busy, in the context of the individual
as well as the community or society. In other words, to be busy is to be doing commercially viable
and profitable work.
The term “business” has at least three usages, depending on the scope — the general usage
(above), the singular usage to refer to a particular company or corporation, and the generalized usage
to refer to a particular market sector, such as “the record business,” “the computer business,” or “the
business community” — the community of suppliers of goods and services.
The singular “business” can be a legally-recognized entity within an economically free society,
wherein individuals organize based on expertise and skills to bring about social and technological
advancement.
In predominantly capitalist economies, businesses are typically formed to earn profit and
grow the personal wealth of their owners.
The owners and operators of a business have as one of their main objectives the receipt
or generation of a financial return in exchange for their work — that is, the expense of time and
energy — and for their acceptance of risk — investing work and money without certainty of success.
Notable exceptions to this rule include some businesses which are cooperatives, or
government institutions.
However, the exact definition of business is disputable as is business philosophy; for example,
some Marxists use “means of production” as a rough synonym for “business”; however a more
accurate definition of “means of production” would be the resources and apparatus by which products
and services are created.
Control of these resources and apparatus results in control of business activity, and so, while
they are very closely related, they are not the same thing.

4. 6
Socialists advocate government, public, or worker ownership of most sizable businesses.
Some advocate a mixed economy of private and state-owned enterprises.
Others advocate a capitalist economy where all, or nearly all, enterprises are privately
owned.
MEANING
The term “business” typically refers to the development and processing of economic values
in society. Normally, the term is applied to that portion of economy whose primary purpose is to
provide goods and services for society in an effective manner. It is also applied to economic and
commercial activities of institutions having other purposes, such as the business office of a film,
association.
“Business comprises all profit-seeking activities and enterprises that provide goods and services
necessary to an economic system. It is the economic pulse of a nation, striving to increase society’s
standard of living. Profits are a primary mechanism for motivating these activities.”
“Business is any enterprise which makes, distributes, or provides any article or service which
other members of the community need and are able and willing to pay for. “
Business may be defined as “the organised effort by individuals to produce goods and services
to sell these goods and services in a market place, and to reap some reward for this effort.”
Functionally, we may define business as “Those human activities, which involve production
or purchase of goods with the object of selling them at a profit.” In essence, business represents an
organised effort by an individual or individuals engaged in making a living. Each firm furnishes goods
and services to others, and each operates with the aim of furnishing some return to its members.
CHARACTERISTICS OF BUSINESS
Business possesses the following characteristics:
1. It is the business of “business” to provide goods and services to the people. It provides
the public with the things it needs and wants in order to survive, enjoy life, and improve in a

5. 7
material sense. From the point of view of the consumer, business is the satisfier of needs and
desires. What the customer demands is what business should provide.
2. Goods, which have been produced or procured for sale in return for price, enter the realm of
business. This activity of selling results in the production of wealth for the society. In satisfying
demand, business uses the resources of land, labour, and capital. These resources when taken
separately have little value; but business combines, structures, and refines the resources to
produce useful goods and services, which are an addition to the value of society. Further,
business employs people who exchange their talents for wages and salaries. These people, in
turn, exchange their compensation for the desired goods and services.
3. Business is a profit-seeking activity. It supplies goods and services to satisfy demand and
adds to society’s value by earning a profit. Profit is the biggest stimulus for maintaining the
continuity of business and its future development. Society permits business to earn this profit as
a reward for assuming the risks of operating a business.
4. Business is also a participant in society. In satisfying demand, supplying goods and services,
and earning profits, business is deeply involved in the most fundamental activities of society.As
a result, society looks to business for something more than products, services, and profits. It
looks to business for leadership and direction in helping to achieve society’s objectives. It expects
business to assist in the establishment of a better society.
COMPONENTS OF BUSINESS
Business includes the total enterprise of the country in industry and commerce. Business
activity has two branches:
(i) the production of goods and services required in the market. This activity is referred to as
“Industry”, and
(ii) exchange or distribution of goods and services to the customers. This is called “Commerce”.

6. 8
BUSINESS
INDUSTRY
SERVICES
COMMERCE
PRIMARY
SECONDARY
DOMESTIC
AESTHETIC
HEALTH
TEACHING
TRANSPORTY
INSURANCE
ETC.
COMMERCE
TRADE
EXTRACTIVE
GENETIC
FISHING
MINING
COLLECTION
HUNTING
FRUIT
GATHERING
LUMBERING
AGRICULTURE
WHICH
REQUIRE
GREATER
APPLICATION
OF
HUMAN
SKILL
IN
PRODUCTION
AGR.
HORT.
DAIRYING
AFFORESTATION
FISH
CULTURE
MANUFACTURING
CONSTRUCTION
CONTINUOUS
ASSEMBLY
ANALTICAL
SYNTHETICAL
OF
BRIDGES
RLY
LINES
DAMS
BUILDING
ROADS
CANALS
ETC
INTERNAL
OR
HOME
OR
DOMESTIC
EXTERNAL
OR
HOME
OR
INTERNATIONAL
WHOLESALE
RETAIL
IMPORT
EXPORT
ENTREPORT
Fig:
1
Components
of
Business
8

7. 9
1. Industry
Industry is concerned with the production of goods and rendering of services to the final
consumer or the industrialist for further production of goods and services. Industries are generally
subdivided into five main categories:
a. Extractive industries, which are engaged in raising from the soil resources or extracting from
the bowels of the earth various forms of resources (wealth), e.g., hunting, fishing, mining, fruit-
gathering, agriculture, etc.
b. Genetic industries, which require for their raising better human skill and knowledge such as
poultry, and dairy farming, cattle-breeding, breeding plants, horticulture, pisciculture, seri-culture,
arbori-culture, etc.
c. Manufacturing industries, which are engaged in the conversion and processing of raw
material—through separation, combination and transformation—to finished goods for direct
consumption by the consumer or to be used as raw material for other industries, such as
machinery and plants of all types, iron and steel, sugar, paper, cotton cloth, electrical appliances,
zinc ore, paper-pulp, water power, etc.
d. Construction industries are concerned with the construction of roads, railways, dams, canals,
buildings, bridges, etc. They are mainly concerned with the manufacture of non-movable items.
e. Tertiary or Service industries, which produce intangible goods—those which cannot be seen
or touched. Included in this category are banking, transport, insurance, communication and
services of a professional nature such as of lawyers, doctors, dentists, management consultants,
advertisers, chartered accountants, engineers, etc.
Industries produce goods and services for sale or exchange at a price.
2. Commerce
It is a process by which resources of the society are channelised in a particular direction
and the goods and services are made available to consumers at a time when they want it, at a price
they can afford to pay, and of a quality which they consider suitable to satisfy their needs. The role of
auxiliary services (such as transport, warehousing, banking, financing, advertising, etc.) is outstanding
in the total process. Commerce is concerned with the way in which businessmen conduct their affairs.
“Commerce” has been defined as “the sum total of those processes which are engaged in
the removal of the hindrances of persons (trade), place (transport and insurance), and time
(warehousing) in the exchange (banking) of commodities.
In other words, it is that branch of business which facilitates exchange of goods by removing

8. 10
various hindrances, namely, those of persons through trade; of exchange through banking; of place
through transport as well as packing and insurance; of time through salesmanship and advertising. By
removing these hindrances, commerce ensures a free and smooth flow of goods and services from
producers to consumers.
Hindrance of persons, when two individuals (the producers and consumers) are situated
at different places, is removed by means of “trade”—which establishes contact between the sellers
and the consumers. Persons engaged in this activity are known as wholesalers, retailers,
mercantile agents, etc.
Hindrance of exchange is removed by bringing two buyers and sellers together who are
willing to buy and sell the needed goods at a price agreed upon by them. Banking institutions facilitate
this payment.
Hindrance of place, i.e., the barrier of distance between the place of production and market,
is removed by different means of transport—trucks, railways, boats etc. The risk involved in
transportation of goods can be covered by insurance, so also the loss incurred during storage and
packaging and damage and pilferage.
Hindrance of time. Goods are produced in anticipation of demand and, therefore, they
have to be stored before use. So creating of storage and warehousing facilities removes this hindrance
and insurance removes the risk of loss or damage through fire or theft during storage.
Hindrance of knowledge. The consumer may not be aware of the goods produced, of
their quality and price, but this hindrance is removed by such activities as advertising and salesmanship
undertaken by the sellers.
3. Trade
It means sale, transfer or exchange of goods and services, through certain ancillary functions,
such as packaging, warehousing, banking, transportation, insurance, and advertising.
Trade may be (i) home or domestic, it may be local or regional or inter-state: or (ii)
external or foreign popularly known as international trade, and may comprise export, import,
entrepot or re-export trade.
GOALS OF BUSINESS
Peter Drucker has emphasized that the only one valid purpose/goal of business is to “create
a customer.” In support of this statement, he argues that “Business enterprise aims to earn profits
through serving the customer demand. It thinks more in terms of profitable sale rather than more sales
volume for its own sake. Today, marketing in the firm begins and ends with the customers. First, we

9. 11
have to identify customers, then we offer our output of goods and services primarily to secure
continuous customer satisfaction. Repeat sales are possible only on customer satisfaction. The firm’s
profits, indeed its very survival, are linked to the satisfaction of customer need and wants.”
Modern business performs a large number of activities to achieve the set objectives. It first
acquires the necessary inputs (men, money, machinery, materials, motive power etc); then evolves an
optimum combination and utilisation of these resources by planning, directing, and controlling business
activities, i.e., to transform the inputs of resources into outputs of desirable goods and services, which
are then finally placed, through some marketing channel, in the hands of the customers to satisfy their
various needs and wants.
In other words, the business undertakes to fulfil the following economic and social goals:
I. Economic Goals
These comprise:
1. High Standard of Living, which means an abundance of goods and services available for
consumption by the people and a substantial amount of leisure, which such abundance makes
possible. This goal requires the achievement of high productivity.
2. Increase in Productivity and Efficiency, which goal indicates that good businessmen are aware
of the fact that they have an overriding obligation “to be a productive and creative force in
society”; and that they “must build, expand and put forth goods and services in abundance.”
To achieve these expansions, they undertake research and development (R & D) programmes,
invest profits in the purchase of new tools and equipments; adopt aggressive sales promotion
schemes, provide extra incentive and motivation to workers, and lower prices by the use of
modern production techniques.
3. Economic Progress, which can be achieved by making an optimum utilisation of the material
and non-material resources of capital by developing inventiveness, administrative skills,
craftsmanship, education and training of workers; and conserving energy of the employees so
that the natural resources are properly utilized.
4. Economic Stability, which is and can be achieved by framing and adopting economic and fiscal
policies, making accurate sales forecasts, preparing production schedules, diversifying products.,
and stimulating sales in off-season so that frequent fluctuations in economic activity, prices and
cost of living are restricted.
5. Discipline in Economic Life, which requires the regular flow of goods and services to the
market, the systematic equalization of demand and supply in the market and the absence of
industrial strifes.

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II. Social Goals
Under social goats are included:
1. Justice and Equality, which means business must try to equitably distribute wealth and means
of production and a wide diffusion of opportunity for personal development and economic
growth.All this requires the provision of education, public health services, fairness in distribution
of income, improvement of neighbourhood and family environments and equality of opportunities
for advancement to all, irrespective of caste, creed, colour, sex, age, physical appearance, political
application, or social status.
2. Community of Relations, which means that business should maintain good relations with the
community. Since the company is regarded as a citizen and a neighbour in the community in
which its plants are located, it must fulfill its obligations of a good citizen and neighbour. This
involves participation by officials and employees in community activities—relating to governing
of the activities of the local bodies and looking after the educational, religious, recreational and
financial aspects of these activities—for which a part of the profit of the company is set aside.
3. Community Improvement, which can be achieved by arranging the location of factories and
markets at proper places: disposal of smoke and waste, removing ugly appearance of buildings,
slum clearance, sanitation schemes, etc. so that the living environment of the community is made
healthful and aesthetically satisfying.
4. Conservation-of National Resources, which means that the non-renewable resources of Nature
should not be ruthlessly exploited but utilised economically with an eye to the future requirements.
5. Educational Programmes means that business must carry on a persistent and large-scale
educational programme to help create the kind of public understanding it seeks. In the words
of Paul G. Hoffman, “Businessmen should be torch-bearers of economic literacy.” Education
is directed towards stockholders, employees, consumers, government officials, and the general
public. Education is imparted to achieve these objectives: (a) to quicken the interest of the
shareholders in the company they own and in the enterprise system generally; (b) to achieve
better labour-management relations and greater labour productivity; (c) to develop better public
relations and (d) to develop more favourable attitude towards the individual enterprises.
6. Improve Personal Integrity of Business, which is to maintain high standards of honour in all
economic activities and transactions. This includes truthfulness in advertising and selling, faithful
observance of contract; fairness in relations with competitors; avoidance of questionable financial
manipulations and unfair trade practices; compliance with government policies, honest payment
of taxes and duties; and general adherence to the “rules of game”, both in letter and spirit.

11. 13
7. Development of Individual Person, which means that individual personality should be
developed by providing- (i) a healthy work environment to the employees; (ii) mutual respect
and consideration in the. relationship of individuals (iii) increased opportunities for creative
activities; and personal advancement. As Prof. dark has said: “The individual is so moulded in
body, mind, and character of his economic activities and relations, stimuli and disabilities, freedom
and servitudes that industry can truly be said to make men and women who work in it, no less
truly than the commodities it turns out for the market. “
8. Personal Security, which means that certain contingencies of life which are beyond the means
and control of an individual because of old age, physical disability, illness, accident poverty,
and other hazards of life like unemployment, maternity etc. are provided for by such economic
and social security measures/assistance as provident fund and pension benefits, welfare and
medical facilities, leave with wages for a certain specified period, free hospitalisation, etc.
9. Human Dignity and Relations. This means that businessmen should make efforts to establish
face-to-face relationship and a friendly atmosphere within the company. “The company should
play the role of a warm-hearted human entity” It should accept workers as associates and equal
partners in the productive enterprise rather than as servants. Opportunities are, therefore, to
be provided for personal development of workers by careful job selection, and promotion of
decentralising decision-making and delegating powers commensurate with responsibilities to the
consumers.
The labourers must not be treated as “a commodity of commerce” or a clog in machinery
or a pawn on the chess-board but as a human being and should, therefore, be accorded due respect
and his dignity honoured.
In view of these diverse goals, it has rightly been said that “gone are the days when service
to customers and profit to owners” were the only goals of business. Now, the number of goals has
increased and the management job has, therefore, become more complicated.
In fact, business should not only serve the interests of businessmen alone but must also
maximise the interests of the nation and its economy.
The true goals of business should be the economic goal, viz., to bring satisfaction to the
customer and profits to owners. It should not become a “Big Brother” to society. It is the customer
who determines what business is and it is he who is the foundation of a business and keeps it in
existence and it is to supply the customer the goods of his requirements that society entrusts wealth-
producing resources to business enterprises.

12. 14
As Professor Wheeler says:
People do business for:
- earning profit;
- earning a livelihood;
- rendering a public service;
- getting social approval, prestige and goodwill;
- achieving power or satisfying greed for accumulating wealth and property;
- taking a chance or trying his luck to be prosperous within the shortest possible time; and
- protecting an estate or family interest.
Contrary to this, Franklin G. Morse has stated:
“We are in business not for steel making, not for shipbuilding, not for construction of buildings
but for earning profit.”
Decisions of Businessmen are Indicative of their Goals
However, it may be noted that it is on the basis of economic and social goals stated above
that the (social) performance of a business is judged. These are the pivotal points which businessmen
are expected to consider, along with their own interests, when they are making decisions on production,
pricing, selecting personnel, making inventories, and searching for funds and their investments. The
questions a businessman must ask himself while taking a decision are: What all this decision will mean
in terms of the standard of living of the people? Will it increase their income and raise them above the
poverty line to a comfortable level? Is it consistent with the economic policy of the state and progress?
Does it promote economic stability and bring economic discipline among the employees? Is it good
for personal security and bringing about the development of individual personality? Does it help to
preserve and strengthen the law and order situation? Is it just and fair? Does it bring freedom to the
employee? Does it help people toward self-realisation? Is it good for the community? Is it good for
and helpful towards national integrity and security? Is it honourable?
When a businessman decides:
1. whether or not to produce a new product or service, his aim is to decide the range of
products available to the consumers;
2. whether or not to purchase new plant and machinery, his aim is to determine the rate of
economic progress and to influence the level of employment and prices;
3. to build up or reduce inventories, he contributes to inflation or accelerate recession;

13. 15
4. to change his wage or dividend policy, his aim is to influence both the level of employment
and the degree of justice achieved in the distribution of income;
5. to close down a plant or to move it to another location, his aim may be to affect the economic
future;
6. to use the newspaper, radio, television for advertising or public relations, he may be influencing
moral and cultural standards;
7. to introduce new personnel policies, he contributes towards co-operation and understanding
between labour and management or he may be aggravating existing tensions and factions
between them;
8. to transact business in foreign lands, he may be contributing to international tensions or
international understanding;
9. to provide for community services, he may wish to fulfill his social responsibility towards it
or to get its image improved.
In sum, the decision-making function of the businessmen can be justified not if it is good
only for the owners and managers of the enterprises but only if it is good for the entire society. Society
can support the decisions and private control of an enterprise only if it is conducive to the general
welfare by advancing gradually, promoting a high standard of living, and contributing to economic
justice. Its success or failure is judged in terms of public interest and public good served. When
proposals are considered for any modification in the decisions, they are done with the public interest
inmind.
Business, like government, is basically an activity carried on by the people (entrepreneurs
and managers), through the people (workers and employers), and/or the people (consumers, society
and government) at large.
BUSINESS IS A SOCIAL SYSTEM
Abusiness is a complex economic and social entity, which has interactions with other parts
of society. Every action of business is related to the external environment surrounding it and, in turn
everything which occurs in this external surrounding is related to business. If this significant relationship
of business with its environment could be identified, it will be noticed that business is effectively related
with the larger framework known as the “social system”. Through this the contributions which business
and society make to each other can be better understood. Further, by having this knowledge, the
managers may utilize the inputs more effectively for making better judgements. The society also stands
to benefit in so far as it can evaluate whether and how well the objectives of the business have been
achieved.

14. 16
“System” and “Social System”
Before we know what a “social system” is, it is better to understand what a “system” is. It
is a combination of any activity or collection of facts, ideas or principles, which are so arranged as to
present a united whole and which operate in a balanced, co-ordinated and integrated manner to achieve
its goal.
The Oxford English Dictionary defines “system” as: “A set or assemblage of things connected
or interdependent, so as to form a complex unit; a whole composed of parts in orderly arrangement
according to some scheme or plan.” In other words, it is a combination of inter related parts
operating as a whole; and the inter-related parts individually form a “sub-system” of the
system.
A system conveys the idea that everything is inter-related and interdependent. The human
body can be said to be the best example of a system, which consists of a number of body organs or
parts or sub-systems, which act together as a system to perform a certain bodily action. One system
provides oxygen; another the sense of touch, yet another acts according to the directions received
from the nervous system. Each system is not an independent system in the body but rather dependent
on the orderly functioning of other sub-systems for its harmonious and continuous action.
The system becomes a “social system” when it relates to people.A social system involves
people and/or their organisations in relationship consisting of some observable whole. It normally aims
at seeking certain human objectives such as running a business for profit and for providing social services
to the community. The basic operation of such a system is that it receives inputs from its environment,
processes them in some way, and then releases the outputs to the environment. Business is a social
system having production, marketing, financing, personnel, R and D, and its sub-systems.Aproduct
must be produced, and this is accomplished by the production function (or the production sub-
system). The product must be sold and distributed, and the marketing sub-system performs this
function. Each of these sub-systems, in turn, is composed of sub-systems. It is a wheel within wheel
concept. For example, the marketing sub-system would have advertising, marketing, and sales research,
inventory, consumer relations sub-systems. For, each of these sub-systems goes to make the whole
system of marketing, which is an integral and necessary part of the total overall system of the operating
firm. For a firm to function successfully, each of its sub-systems must operate in a co-ordinated,
balanced and integrated fashion because if any of the sub-systems does not operate in a balanced
and integrated manner, the whole system will suffer.
Chief Characteristics of Business As a Social System
1. Sub-systems make an Inter-related Whole. Business is here seen as a “whole “, each part
of which has its own function, i.e., “doing its own thing. It can be compared to a human body

15. 17
in which the eyes perform the function of seeing while the hands do work. But the parts in the
system are interrelated, affecting each other in various ways through their inputs and outputs
among themselves. Similarly, business is also a part of a larger system, which again is a part of
an even larger system, and so on until all related parts have been joined in terms of the largest
known system. Thus, something is a “whole system” from one point of view, but a sub-system”
from a larger point of view. The “sub-system” is also called a “lower-order system” compared
with a “higher order system” . Systems exist in hierarchies from the lower order to a higher
order.
2. Dynamic and Stabilising Tendencies: The social system is not static but dynamic. This
dynamism is due to the fact that people are living, thinking and active beings. This characteristic
of theirs adds to the variability and uncertainty making social systems a difficult challenge for
the managers. However, with this dynamism is also found a certain degree of accommodation
and harmony both among its parts and its external environment, i.e., it operates in some degree
of equilibrium. Keith and Blomstrom compare this equilibrium with a quiet ocean filled with
moving sea life and waves-all of which operate in a balanced manner. If and when a typhoon
builds towering waves that are destructive or the water becomes so polluted that sea life begins
to die, disequilibrium occurs. Similarly, a business needs to maintain satisfactory equilibrium
both internally and externally, in order to survive and make reasonable progress to achieve
its objectives. If internal parts or external factors do not work in the same direction, disequilibrium
in business results leading to its partial or total failure in achieving its objectives.
Therefore, business maintains an effective equilibrium by keeping a co-operative relationship
between the internal and-the external factors and by remedying the inconsistencies. This tendency
of self-correction has been termed “homeo-statis” by Davis and Blomstrom This situation is
essential for a business to keep itself in existence for a long time.
3. Viability. This implies the “drive to live and grow” “to accomplish a probable potential
objective”, and “to achieve all that a living system is capable of becoming”. This drive for growth
is accomplished by improving the quality and quantity of services it renders and by meeting
competition through a better sales campaign
4. Business Viability. This means adaptability to change when circumstances so demand.
Improvement in technology, working conditions and international development are instances
whose viability has been more easily responded. To be a viably entity, business must contribute
its share of forces to its environment rather than merely adjust itself to out side forces. Every
business needs a drive and spirit all of its own to make it a positive actor on the societal stage
rather than a reactor or a reflector.”

16. 18
5. Public Visibility. This refers to the extent that an organisation’s activities are known to persons/
public outside the organisation. The activities of the organisation may be directly observed, such
as polluted atmosphere when smoke is seen coming out of a mill-chimney or a smokestack or
purchase of a product which is adulterated or of short weight or measure. Incidentally, these
activities may be communicated by news media, neighbours and other sources. The idea of
public visibility is that it makes business activities subject to public examination, discussion, and
judgement, for unless the activities are known, they cannot be judged.
6. Social Values. Business normally operates in an environment of social values, both of society
and those of the business itself. For business, such values are derived from various sources
such as the mission of the business as a social institution, the country in which the business is
located, the type of industry in which it is active, the nature of its employees, the management
philosophy, the customs and traditions of society and normal practices of other business. In
course of time, these values become institutionalised, i.e., they are accepted by a large number
of people in the organisation and also the society and consequently, they take the shape of an
official policy of the business.
Social values perform certain important functions. One, they become guides for employee
decision in the interests of business and its environment; and, two, they become strong motivators
for people in a business. Thus, they become a key factor in the system relationship of .business
with society.
7. Interface with an External Environment.An individual business cannot work in isolation and
is, therefore, related to other businesses and social groups. This area of contact between one
system and another system has been termed as “interface”. Areas of interface are of vital
significance because they are sources of inputs into the system. These inputs give it additional
resources from which outputs are produced, and the system is provided with information feed-
back which enables it to take corrective action to maintain equilibrium with its environment.
Thus, it should be- noted that business organisations are open systems interconnected with
such external groups as customers, trade unions, government, community agencies, and others.
BUSINESS AND ECONOMIC SYSTEMS
By “economic system is meant the different forms of economic organisations that arise
in the community from the organisation or mode of product”. In other words, it is a set-up, which
comprises various institutions and bodies, with the ultimate purpose of satisfying the wants of the people
living within a particular territory and in the way in which those people want.

17. 19
Basic Features of Economic Systems
The basic features of an economic system are that:
(i) They are not static, they are relative to the needs of the people and, hence, are of a changing
nature.
(ii) They have fundamental uniformity of problems within a mechanism of great diversity.
(iii) They are all evolving patterns of human relations. With the help of institutions (such as property,
money system, labour organisation, government agencies, production unit, etc.), they try to secure
maximum production from scarce human and natural resources.
(iv) Their goal is to satisfy individuals and public by production of goods and services required by
them.
Factors Influencing Economic Systems
Economic systems arise and are modified, from time to time, by various factors, such as:
a. the laws of the land;
b. the decisions of the judicial agencies;
c. the contractual arrangements people set up among themselves in order to carry on
exchange;
d. the customs, habits, set of beliefs that people develop within the social and political set-
up of the country; and
e. the public opinion about the wages and means through which people wish to satisfy their
wants.
Loucks has observed that “The economic system of a country is determined by these forces:
(i) the historic-cultural resources of its people’s ideals, desires and attitudes; (ii) its natural resources,
including climate; (iii) the philosophies which some or many of its people possess and advocate; (iv)
the present and past theorizing of its people about how to achieve chosen ideals and goals; and (v)
the trials and errors of its people in seeking economic ends.”
Basic Economic Systems
A number of major economic systems have developed with the passage of time through
capitalism, fascism, communism, socialism and mixed economy. Each of these systems has devised
different means for making products and services available to the consumer.
Certain questions have to be answered by any economic system:
1. What commodities shall be produced and in what quantities?
That is, how much and which of alternative goods and services shall be produced? The economic
system must provide for the determination of the goods to be used in production.

18. 20
2. How shall goods be produced? That is, by whom and with what resources and in what
technological manner are they to be produced? Technique of production, their choice and use
are extremely important for any economic system.
3. For whom shall goods be produced? That is, who is to enjoy and get the benefit of the goods
and services provided?
Implied in these three is a further job, which may be kept in mind as a separate point:
4. It must decide between the present and the future—how many of the society’s resources should
be devoted to growth and how many to current consumption.
All the systems get the job done somehow as a primitive economy does. So by answering
the above four questions, one can have only a comparative picture. If one wants to evaluate the different
systems, some criteria for judging each need be set up. The tentative four criteria could be:
1. Does the system provide a progressively higher standard of living for all?
2. Does it provide economic freedom and security to the individual?
3. Does it produce the goods and services consumers indicate they want?
4. Does it provide an equitable distribution of income?
An economic activity, i.e., business, takes place under each system, but the forms, methods
and policies differ. We will, therefore, turn to describe these different systems and conditions, which
prevail under each.
Capitalism
Capitalism may be defined as an “economic system in which individuals are relatively free
to determine how goods and services shall be produced and allocated.” In this system, individuals
furnish the money (or capital) necessary to start and run a business. These individual then decide the
means of production and the subsequent distribution of the goods and services. Competition from
other business influences these and other decisions.
The main features of this system are:
1. The individuals have a right to own property, i.e. the right to enjoy its use.
2. Individuals are free to start their own private enterprises.
3. They have comparative freedom to determine what type of business they will start, and what
products they will produce, and to whom they will sell these products.
4. Free competition is the right of every seller to enter the market with his product and to determine
at what price he is willing to sell the product for.

19. 21
5. Individuals have the freedom of choice of occupation.
6. Under capitalism, consumer is the king/queen. It is the impersonal force of consumer’s demand
that helps the producers to take their decisions on the nature and technique of production.
7. In a capitalist economy, goods are produced for the market so that decisions are made on the
basis of market prices.
8. The system revolves around a price mechanism. Allocation of resources and co-ordination
between production and consumption are achieved through price mechanism. There is no
centralised planning for that purpose. Things just happen, as if guided by an “invisible hand”.
9. Profit is the guiding factor in decision-making regarding the use of property.
10. In this system, the society is divided into two broad classes: the capitalists or “Haves” and the
proletariat or “Have-nots”.
Capitalism is still the dominant system in much of Western Europe, North America (Canada
and the USA), West Germany, Japan, etc.
As with the passage of time, the system has become more complex, restraints on the
different freedoms of the system have become necessary. For example, business firms have been
required by law to control the production processes that pollute the environment. Also, large businesses
have been prohibited from certain activities that would prevent concentration of power, and smaller
companies from competing in the market. Such restraints are a must if the whole society is to
prosper.
Fascism
It is a system wherein government philosophy is imposed by the party in power (such as
under the leadership ofAdolf Hitler) as in Germany, and later on in Italy, Japan, andArgentina.
The main features of Fascism are:
1. It involves the take-over both of the government and of the major industries of the country -
without making payment of any compensation of the taken-over enterprise.
2. The government determines what goods shall be produced and in what quantities, how and for
whom.
3. The government assumes that the individuals lack ability in public affairs. Therefore, the dictator
and his group completely dominate the management of the economy and the exchange of goods
and services.
This type of economy has now nearly been extinct.

20. 22
Socialism
Socialism has been defined as “That movement which aims to vest in society as a whole,
rather than in individuals, the ownership and management of nature-made and man-made producers’
goods used in large-scale production, to the end that an increased national income may be more
equitably distributed without materially destroying the individual’s economic motivation or his freedom
of occupational and consumption choices. “
This type of system is found in Great Britain, Sweden, Denmark, India and many other
countries.
The main features of socialism are:
1. Philosophy of socialism is grounded in democratic traditions, i.e., a belief in the worth of each
individual. It provides that all individuals in the nation should get certain goods and services. To
ensure this, the system determines what goods shall be produced and how they shall be
produced.
2. There is no private ownership of means of production. They are owned by the state/society
and the control and use of property rests with the social bodies.
3. There are no two classes, viz., that of the “Haves” and “Have nots”—for the state is the employer
and all the rest are wage-earners.
4. Resources are earned by the society and are utilised for the benefit of the whole society. The
state distributes the resources among such various uses that it thinks will serve the social needs.
The state determines the commodities to be produced and the technique of production.
5. Since government is the employer, there is no exploitation of workers.
6. The production for sale is guided by the decisions made by the state, which also decides the
prices of goods, factor-units and other services. By determining what will be produced, the
state determines what the whole community will consume.
7. When the private sector undertaking is felt not to be working in the interest of the society as a
whole, i.e., when it is considered as “sick”, the government takes over the business/industry,
after paying a reasonable compensation for the same.
8. Individuals in a socialist economy are free to determine their own occupations. The socialist
economy does, however, encourage people to choose certain types of work and discourage
them from pursuing others.
Communism
It has been defined as “A system of economy under which the central authority disposes of
all the means of production (labour, natural resources, capital), autocratically determines the aims of

21. 23
the economy, directs production in a single inclusive plan, and regulates distribution”. This system is
also known as authoritarian” or “totalitarian socialism.”
The main features of communism are:
1. There is no private ownership of the means of production. They are owned by the state or
society, i.e., control of property rests with the social bodies.
2. Class distinctions do not occur but there are simple “strata” or “social layers”, such as “unskilled”,
“skilled” workers, managers, teachers etc.
3. “Social need” and not “private profit” is the guiding motive of production.
4. All are expected to contribute as much as they can to the good of the whole country.
5. Individuals are not given any personal rewards, instead they are given only what they need to
live.
6. Each individual is willing and works for the society as a whole, while a central government
apportions goods and services.
7. The government determines the quantities of goods that will be produced and how much will
be produced. Distribution of goods and services is also supervised by the central government.
8. The state is the only employer, the role of the individual is subordinate to that of the total
population. Individuals work where their services are required. Freedom is restricted.
Mixed Economy or Democratic Socialism
Mixed economy may be defined as “A system in which the public sector and private sector
are allotted their respective roles in promoting the economic welfare of all sections of the community.”
The objective being to bring about economic development without exploitation, the whole emphasis
under this system is on the division of functions between the “public” and “private” sector. India,
Sweden, Denmark, and Norway enjoy mixed economy.
The characteristic features of a mixed economy are:
1. In this system, the spheres of activity for the public and private sectors are well defined. The
duties of the public sector are provision of social overheads, of industrial climate, and of industrial
base.
2. The system is characterised by various categories of industrial undertakings (such as those
productive activities which only the public sector undertakes); (ii) some fields of production
which are exclusively allotted to the private sector; (iii) certain fields are open to both sectors;
and (iv) some items of production are reserved for the “tiny” sector.

22. 24
3. Its aims are fast economic development accompanied by increased opportunities for employment;
reduction of regional imbalances in development; etc.
4. The market mechanism plays an important role, because goods are produced for sale.
5. “Social interest” dominates the “profit interest”. However, it is the profit motive, which, in
combination with the price system, mainly determines the allocation of resources.
6. In this system, the government plays an important role in the economic sphere. It has to ensure
that the gains of economic development are as widely distributed as is fair and possible. It takes
steps to make certain that inequalities between man and man, class and class and region and
region are reduced to the minimum.
Trusteeship Economy System
Gandhiji emphasised the principle ofTrusteeship in social and economic affairs. His conception
of Trusteeship was:
(i) the right of private property be restricted to what was necessary to yield an honourable livelihood;
(ii) if a person had inherited a big fortune or had collected a large amount of money by way of
trade and industry, the entire amount did not belong to him;
(iii) all surplus money/wealth (over and above their necessaries) should be held by the capitalists as
trustees on behalf of the rest of society (i.e., the employees, the poor and the community);
(iv) as trustees, they will be allowed to retain the ownership of their possessions and to use their
talent, to increase the wealth, not for their own sake, but for the sake of the nation and, therefore,
without exploitation;
(v) the poor workers, under trusteeship, should consider the capitalists as their “benefactors”
and should place every faith in their good intentions;
(vi) rich should not be expropriated by the use of force; but by making an appeal to the basic human
principles of reason and love to persuade the capitalists to realise that capital in their hands
represented the fruits of labour of other people and, therefore, they should be persuaded to
work as trustees of the property;
(vii) trusteeship, if established and followed in practice, would increase the welfare of the workers,
and reduce or eliminate the clashes between the workers and employers, and would help
considerably “in realising a state of equality on earth”. He observed: “My theory of Trusteeship
is no make-shift, certainly no camouflage. I am confident that it will survive all theories. It has
the sanction of philosophy and religion behind it and it is compatible with non-violence.”

23. 25
Gandhiji’s “trusteeship” formula may be reproduced below:
Trusteeship Theory of Gandhiji
1. Trusteeship provides a means of transforming the present capitalist order of society into an
egalitarian one. It gives no quarter to capitalism, but gives the present owning class a chance of
reforming itself. It is based on the faith that: “Human nature is never beyond redemption.”
2. It does not recognise any right of private ownership of property except in as much as it may be
permitted by the society for its own welfare.
3. It does not exclude legislative regulation of the ownership and use of wealth.
4. Thus, under state-regulated trusteeship, an individual will not be free to hold or use his wealth
for selfish interests or in disregard of the interest of society.
5. Just as it is proposed to fix a decent minimum living wage, even so a limit should be fixed for
minimum income that could be allowed to any person in society. The difference between such
minimum and maximum income should be reasonable and equitable and variable from time to
time so that the tendency would be towards obliteration of the difference.
6. Under the Gandhian economic order, the character of production will be determined by social
necessity, and not by personal whim or greed.
In the Gandhian type of economic system, three sectors were envisaged to function side by side:
a. Private sector, where production was to be carried on by small and independent
producers with the help of “useful machines”.
b. Trusteeship sector, where production was to be under trust control and was to be carried
out with the help of “useful machines”.
c. Public sector, where production was to be under the state control where production
was to be carried out with the latest and most up-to-date complicated machines.
Gandhiji gave the utmost importance to the trusteeship sector, because in spite of small-
scale, decentralised production and self-sufficient units, it may be possible in some cases for some
people to exploit others. Gandhiji wanted to check exploitation with the least violence and therefore,
would not advocate the bitter pill of nationalisation to meet effectively the cases of exploitation.
SUMMARY
Business plans are decision making tools. There is no fixed content for a business plan.
Rather the content and format of the business plan is determined by the goals and audience.Abusiness
plan should contain whatever information is needed to decide whether or not to pursue a goal. A

24. 26
business plan is a formal statement of a set of business goals, the reasons why they are believed
attainable, and the plan for reaching those goals. It may also contain background information about
the organization or team attempting to reach those goals.
The business goals being attempted may be for-profit or non-profit. For-profit business
plans typically focus on financial goals. Non-profit and government agency business plans tend to
focus on service goals.
Business plans may also target changes in perception and branding by the customer, client,
tax-payer, or larger community. A business plan that has changes in perception and branding as its
primary goals is called a marketing plan.
Business plans may also be internally or externally focused. Externally focused plans target
goals that are important to external stakeholders, particularly financial stakeholders. They typically
have detailed information about the organization or team attempting to reach the goals. In the case of
for-profit entities, external stakeholders would include investors and customers.
External stake-holders of non-profits include donors and the clients of the non-profit’s
services.
In the case of government agencies, external stakeholders would include tax-payers, higher-
level government agencies, and international lending bodies such as the IMF, the world bank, various
economic agencies of the UN, and development banks.
Internally focused business plans target intermediate goals required to reach the external
goals. They may cover the development of a new product, a new service, a new IT system, a
restructuring of finance, the refurbishing of a factory or a restructuring of the organization.
An internal business plan will often be developed in conjunction with a balanced scorecard
or a list of critical success factors. This allows success of the plan to be measured using non-financial
measures. Business plans that identify and target internal goals, but provide only general guidance on
how they will be met are called strategic plans.
Operational plans describe the goals of an internal organization, working group or
department. Project plans, sometimes known as project frameworks, describe the goals of a particular
project. They may also address the project’s place within the organization’s larger strategic goals. A
business plan for a project requiring equity financing will need to explain why current resources,
upcoming growth opportunities, and sustainable competitive advantage will lead to a high exit valuation.

25. 27
Preparing a business plan draws on a wide range of knowledge from many different business
disciplines: finance, human resource management, intellectual property management, supply chain
management, operations management, and marketing, among others.. It can be helpful to view the
business plan as a collection of sub-plans, one for each of the main business disciplines.[
Cost and revenue estimates are central to any business plan for deciding the viability of the
planned venture. But costs are often underestimated and revenues overestimated resulting in later cost
overruns, revenue shortfalls, and possibly non-viability. The main causes of cost overruns and revenue
shortfalls are optimism bias and strategic misrepresentation. The business plan is the subject of many
satires. Satires are used both to express cynicism about business plans and as an educational tool to
improve the quality of business plans.
QUESTIONS:
1. What are the branches of Business? Discuss?
2. Describe the goals of Business?
3. Decision of businessmen are indicative of their goals – justify?
4. Define Mixed Economy? What are its main features?
5. Enumerate Gandhiji’s conception of Trusteeship?

26. 28
CHAPTER - II
OBJECTIVES OF BUSINESS
OBJECTIVE
No business firm is completely static, like a building or a machine with stationary framework
and standard parts that may be replaced from the ready stock or got from outside. Instead, shifts in
demand, in competition, and in other external forces call for continuous adaptation; and, the ambitions
and drives of executives within the company keep it evolving. And, as changes are made in one part
of the company, compensating adjustments are needed in other parts. Consequently, each company
should be thought of as a dynamic, integrated entity.
Each of these business entities develops character and an individual personality of its own.
This personality is shaped, not only by physical resources and technology, or financial inputs, but also
by some basic objectives, which may be set for it by the top management. Objectives are the ends
towards which enterprise activities are aimed—the end points of planning. In fact, management process
begins with setting organisation objectives and ends with determining how well they have been
accomplished. The setting of objectives is an essential part of the initial phase of planning. In the next
phase, the organisation is structured so as to accomplish the work set forth by the firm’s objectives.
The third phase is of direction which is centred on the leadership and motivation of company employees
towards specific objectives. Finally, the control function compares results with objectives in order to
find out whether objectives set have been achieved or fallen short of achievement. In the latter case,
corrective actions may be recommended that conform to organisation objectives.
MISSION, PURPOSE, TARGET, GOAL, OBJECTIVES
In management literature, the terms “mission”, “purpose”, “target”, “goal”, and “objectives”
are often used interchangeably.The term “mission” is often employed by churches; governments, military
operations, philanthropic bodies, etc., to describe a major programme objective, such as: to propagate
the “idea of small family”; “to distribute clothes and medicines to the flood-stricken or destitute people”,
or “to attack the enemy by surprise.”
“Purpose” relates to the reason for an organisation’s very existence, such as providing a
reasonable wage/salary to the worker sufficient for his family and children.
“Target”, “goal” and “objectives” are frequently used synonymously. However, target
and goal relate to the end point in an organisation programme, which is initially stated in quantitative
or qualitative terms.
“Objectives” also indicate the end point of the management programme, whether stated in
general or specific terms.
The reality is that no clear-cut distinction can be made between the last three terms, and
they are, therefore, generally used interchangeably.

27. 29
OBJECTIVES OF BUSINESS
To manage a business is to first determine the objectives, which will focus and guide the
activities of the company. Determining objectives is like identifying the North Star in the sky at night
to locate the direction. These objectives give direction to the activities of the group and serve as media
by which multiple interests are channeled into joint effort. In other words, objectives give purpose
and direction to the work of all employees, and they indicate the broad limits within which
action is to be taken.
Purpose/Objectives
Objectives are needed in every area where performance and results directly and vitally affect
the survival and prosperity of the business. These are the areas which are affected by every management
decision and which, therefore, have to be considered in every management decision. They decide
what it means concretely to manage the business. They spell out what results the business must
aim at and what is needed to work effectively toward these targets.
Objectives contribute to management process and they influence the size and character of
organisation, its policies, personnel interests, type of leadership and managerial control. They are the
very basis of management philosophy; and it is through their adoption that Management by Objectives
(MBO) could be created and practised.
Besides, recognition of objectives is an important first step in planning. Objectives serve as
guides in the determination of policy, in selecting resources, and in setting up programmes
Well-recognised objectives are useful in guiding day-to-day execution because they help to
avoid getting off on a side track taken by different individuals and at different times are more likely to
be consistent rather than working at cross-purposes.
Finally objectives serve as a useful standard when an executive is appraising the
accomplishment of a department or enterprise.
According to Prof. Drucker “the objectives (in the key areas) should enable us to do five
things -
1. to organise and explain the whole range of business Phenomena m a small number of
general statements;
2. to list these statements in actual experience;
3. to predict behaviour;
4. to appraise the soundness of decisions when they are still being made; and
5. to enable practising businessmen to analyze their own experience and, as a result, improve their
performance.

28. 30
In fact, managing a business enterprise without objectives is rowing a boat in the open sea
without a rudder. It is the objectives which constantly guide the organisation on the path to the
destination. They have been virtual y regarded as the ends towards which all organisation activities
are aimed at. The objectives decide, to a large extent, “where the firm would like to be, and accordingly
takes action to get there.”
Features or Criteria for Effective Objectives
Before we discuss the characteristics of organisation objectives understanding of the criteria
for effective objectives would be fruitful.
The principal criteria are:
1. Individuals responsible for carrying out the objectives should have a role in setting them, since
they are the closest to the situation and generally have the best information concerning what is
achievable. Moreover, if they help in formulating the objectives, their commitment to achieving
them is much stronger.
2. Top managers, who set overall objectives, have a responsibility for derivative or lower-level
objectives. They should not accept proposals on these objectives with little or no question
3. The objectives should be realistic in the light of internal and external environmental constraints
as well as future trends.
4. The objectives should be reasonable, i.e., within the reach of the organisation, and should
represent a challenge to organisation members.
5. Objectives of company’s functional areas should be examined to see if they are mutually
consistent.
6. Management must update and revise objectives once a year, at the minimum, at least as far as
strategies and supporting programmes are concerned.
7. Key objectives should be stated simply, so that they can be remembered by the personnel
responsible for carrying them out.
8. Some objectives should be innovative. There are occasions when the best course is to continue
in the same pattern, but in today’s rapidly changing environment, objectives, which show no
innovation, can be a danger signal to an organisation.
9. Finally, objectives should be pre-determined and stated, preferably in a written form.
Other characteristics of sound objectives may be suggested thus:
(i) Objectives should make people reach a bit.

29. 31
(ii) They should allow for creative methods and should not predetermine the means for
achieving them.
(iii) They should be known to all employees so that they may understand the targets for their
own work and how they are related to the broader objectives of the organisation.
Characteristics of Objectives
Objectives have certain basic characteristics such as measurability, hierarchy, net-work,
multiplicity, short, medium, and long-range objectives. These are discussed below.
1. Measurability of Objectives
Objectives of an organisation must be measurable. Each management programme should
include enough information to enable specific objectives to be verified against certain criteria. Unless
the management is aware of what is to be accomplished, there can be no measure of effectiveness.
Unmeasurable objectives result in violation of the efficiency and economy of the organisation. Therefore,
the modern manager is anxious to know, for example, that production should be for profit, and also
how much profit should be earned; how much diversification can be achieved; what should be paid
to the employees; how much amount should be spent on research and development; and what should
be the extent of new product development. To find answers to these questions, objectives are so
stated that they are capable of being measured in terms/units of performance.
2. Hierarchy of Objectives
Organisation objectives are structured into a hierarchy, i.e in successive grades. The hierarchy
of objectives corresponds roughly to the structure of the organisation.At the top the entire organisation
aims in a given direction-the objectives set are broad, fundamental and general in the form of purpose,
or mission; such as:
“Our purpose is to furnish low-cost and convenient transport services to the average person;”
and “our mission is to produce and market cars.”
These aims are, in turn, translated into general objectives or strategies, such as designing,
producing and marketing a cheap, fuel efficient and reliable motorcar.
The objectives at the higher level act as ends and those at the next lower level act as means.
Each level of objectives stands as an end relative to the level below it and as a means relative to the
level above it.
At the next lower level, each department in turn directs its efforts toward its own sets or
goals; and each subdivision of each department has its own meaningful aims. Each of these sub-goals
should be consistent with, and contribute toward the goals of the next higher level.

30. 32
This may be explained by a concrete example. It is generally assumed that a corporation
has the broad objective of maximising profit. To aid m achieving the overall goal, it is necessary to
define more meaningful sub-goals for individual departments. The marketing department may have
goals in terms of certain increase in total sales (say, from Rs. 2 lakhs to Rs. 5 lakhs a year) and its
subdivision may be given goals ‘in definite geographic areas/territories or in specific product line (soap
or biscuits). The production department may state its goals in terms of minimising production costs,
and its subdivision may be given sub-goals for particular types of costs. Other departments in turn
have goals redefined for them so that they can visualise exactly their part in striving for the company’s
broad goal of maximising profits.
It should be noted that the hierarchy of objectives is integrated and follows a logical sequence
as reflected by Fig. 1. Each operation has a specific objective, which must add to the final objective.
Hence, no work should be undertaken unless it contributes to the overall objectives.
3. Net-work of Objectives
Objectives and planning programmes form a network of desired results and events. If the
objectives of a management programme are not interconnected and mutually supportive, managers
tend to pursue individual goals that can often be detrimental to the firm. Hence, it is important when
developing specialised programmes to recognise that they interlock and are an integral part of the
total programme. In the final analysis, all programmes contribute to the total management programme.
1. SOCIO ECONOMIC PURPOSE
2. MISSION
3. OVERALL –OBJECTIVES
OF ORGANISATION
4. MORE SPECIFIC OVERALL OBJECTIVES
5. DIVISIONAL OBJECTIVES
6. DEPARTMENT AND UNIT OBJECTIVES
7. INDIVIDUAL OBJECTIVES PERFORMANCE
PERSONAL DEVELOPMENT OBJECTIVES
Fig 1 : Hierarchy of objectives

31. 33
A net-work of programmes that is guided by specific goals requires the utmost cooperation
and coordination among managers so that the components can mesh together properly. What is needed
is a net-work of mutually supportive objectives.
4. Multiplicity of Objectives
Every business organisation, by its very nature, has more than one objectives. Multiple
objectives include one or more for each of the firms’functional areas. Similarly, at each functional
level, goals are likely to be multiple. For example, “A business might include among its overall objectives
a certain rate of profit and return on investment (ROI) (say 10% by Dec. 1984); emphasis on research
to develop a continuing flow of proprietary products; developing publicly-held stock ownership;
financing primarily by ploughing back earnings in business and borrowing from banks; distributing
products in local and foreign markets; undertaking vigorous advertising campaigns; assuring competitive
prices for quality goods; achieving a dominant share in the industry and adhering in all respects to the
value of the society.”
5. Short, Medium, and Long-Range Objectives
If planning is to be effective, the short, medium and long-range objectives must have an
integral relationship with one another.
Short-range objectives are very specific and are generally realized within one year. They
proceed from an evaluation of priorities relating to long-tern objectives. Certain things need to be
done first, either because they are prerequisite to doing other things or because of lead time
considerations. For example: “When a new firm is established, raising capital for fixed and operating
expenses is likely to be a prime objective and may be the sole short-run objective.” To achieve this
objective, managers hire engineers, production personnel, and sales personnel etc.
Medium-range objectives generally extend over a two-to-four year period. Long-range
objectives extend over five or more years; they are more speculative for distant years. In order that
longer-term objectives can be achieved, they must relate to shorter-term objectives. A master plan,
then, is needed to bring various time level objectives together for consistency and practicability.

32. 34
PRINCIPLES OF OBJECTIVES
The underlying principles of objectives provide a logical framework for the management
functions (of planning, organising, directing and controlling) and are applicable to objectives, whether
qualitative or quantitative and they apply from the highest level down to the lowest level.
The basic principles of objectives are:
1. Principle of the Primacy of Service Object
Management’s primary aim is to create customer-value satisfaction. This objective is dictated
by the markets, which it serves; because it is the set of saleable values that justifies the economic
existence of the firm.
2. Principle of (Collateral Secondary) Service Objectives
These objectives are values that individuals and groups within the firm, those associated
with the firm, and the firm itself seek to acquire. For example, employees want reasonable and
competitive wages, firms desire reasonable profits and the trade unions want amicable relations
and good working conditions for labour.
3. Principle of Setting Objectives by Top Management
The objectives must be set by the top management so that they could be carried out/
accomplished smoothly. Objectives may also be set by lower and middle management, but this should
be done in consultation with the top management so that they are easily approved and implemented
willingly by the personnel and the lower level.
4. Other Principles
The other principles are: principle of the measurability of objectives; principle of the hierarchy
of objectives; principle of multiplicity of objectives; and principle of short-to-long-range objectives.
All of these have been discussed in the previous section.
MANAGEMENT PHILOSOPHY
The interest in management philosophy and practice has steadily increased during the present
century, especially since World War II. This management philosophy has been stated by Prof. R. C.
Davis, thus: “The problem of greatest importance in the field of management is and probably will be
the further development of the philosophy of management. A philosophy is a system of thought. It is
based on some orderly, logical statements of objectives, principles, policies, and general methods of
approach to the solution of some set of problems.....

33. 35
Top
Management
1.
Represent
stockholder’s
interest
-
net
profit
of
10%
or
more.
2.
Provide
service
to
consumers
-
provide
reliable
products.
3.
Maintain
growth
of
assets
and
sales
-
double
each
decade.
4.
Provide
continuity
of
employment
for
company
personnel
-
no
involuntary
lay-offs.
5.
Develop
favourable
image
with
public.
Production
Department
1.
Keep
cost
of
goods
not
more
than
5%
of
sales.
2.
Increase
productivity
of
labour
by
3%
per
year.
3.
Maintain
rejects
of
less
than
2%.
4.
Maintain
inventory
at
6
months
of
sales.
5.
Keep
production
rate
stable
with
not
more
than
20%
variability
from
yearly
average.
Sales
Department
1.
Introduce
new
products
so
that
over
a
10
year
period,
75%
will
be
new.
2.
Maintain
a
market
share
of
15%.
3.
Seek
new
market
areas
so
that
sales
may
grow
at
a
15%
annual
rate.
4.
Maintain
advertising
costs
at
4%
of
sales.
Finance
&
Accounting
Department
1.
Borrowing
should
not
exceed
50%
of
assets.
2.
Maximise
tax
write-off.
3.
Provide
monthly
statements
to
operating
Deptts.
by
the
15th
of
the
following
month.
4.
Pay
dividends
at
the
rate
of
50%
of
net
earnings.

34. Fig.
2
:
Sample
of
a
Hierarchy
of
Objectives
in
a
middle-sized
company
36
Foremen
1.
Handle
employee
grievance
within
24
hrs.
2.
Maintain
production
to
standard
or
above.
3.
Keep
scrappage
to
2%
of
materials’
usage.
District
Sales
Manager
1.
Meet
weekly
sales
quotas.
2.
Visit
each
large
customer
once
each
month.
3.
Provide
salesmen
with
immediate
follow-up
support
Office
Managers
1.
Maintain
cycle
billing
within
3
days
of
target
date.
2.
Prepare
special
within
a
week
of
request.

35. Fig.
3:
Net-work
of
Programmes
37
PRODUCT
DEVELOPMENT
IDEA
PRODUCT
RESEARCH
PROGRAMME
PRODUCTION
ENGINEERING
PROGRAMME
MANUFACTURING
PROGRAMME
DISTRIBUTION
&
WAREHOUSING
PROGRAMME
PACKAGE
DESIGN
PROGRAMME
SALES
PROGRAMMES
ADVERTISING
&
PROMOTION
PROGRAMME
IMPLEMENT-
ATION
OF
ADVERTISING
PROGRAMME
PRODUCT
COMMER-
CIALISATION
MARKET
RESEARCH
PROGRAMME
RECRUITMENT
OF
SALES
SALES
TRAINING
PROGRAMME
LAUNCH
OF
SALES
PROGRAMMES

36. 38
“Business objectives involve the public interest as well as the interests of customers, dealers,
bankers, owners, and employees. They affect everyone in an industrial company. A managerial
philosophy that is commonly accepted is a requisite for a common scale of values in an economy.
Therefore, it is necessary for unity of thought and action in the accomplishment of economic objectives.
We cannot have effective industrial economy without effective industrial leadership. We cannot have
an effective leadership without a sound managerial philosophy.....
“Industrial leaders without such a philosophy are business mechanics rather than professional
executives... “
The main reasons for the continued interest in management philosophy among educators,
public administrators, and progressive businessmen are:
1. The increasing trend toward decentralisation of operating responsibilities and decision-
making in business and governmental organisations.
2. The increasing numbers of professional executives required in business and government
for growth and decentralisation of operations.
3. The necessity for a logical framework of managerial management philosophy and practice
as a basis for framing in executive-development programmes, and professional curricula.
OBJECTIVES OF BUSINESS
In modern times, the starting point for either a philosophy or the practice of management
seems to centre around pre-determined objectives. The entire management process concerns itself
with ways and means to realise predetermined results with the intelligent use of people.
These objects may be general or specific, they may concern the organisation as a whole or
a part of it within the unit.
The objectives of management would be clear from the extracts given below as culled from
the writings of experts on the subject:
“The goal of the business must be this—to make a better product to be sold at a lower and
lower price—profit cannot be the goal. Profit must be a by-product. This is a state of mind and a
philosophy. Actually, an organisation doing its job as it can be done will make large profits which
must be properly divided between user, worker, and stockholder. This takes ability and character.”
“It has been our (Texaco’s) settled policy of thinking, first of quality of product and service
to the customer, and only second to the size of its profits. To some of you, this may sound somewhat
trite. But it is the starkest kind of business realism. In a highly competitive industry, the highest
rewards are reserved for those who render the greatest service. “

37. 39
“The mission of business organisation is to acquire, produce and distribute certain values.
The business objective, therefore, is the starting point for business thinking. The primary objectives
of a business organisation are always those economic values with which we serve the customer. The
principal objective of a businessman, naturally, is profit. And profit is merely an academic
consideration, nevertheless, until we get the customer’s dollar. “
The fundamental objective of the Tata Iron & Steel Co. Ltd., is to: strengthen India’s base
through increased productivity, effective utilization of material and manpower resources, and applied
and continued application of modern scientific and managerial methods as well as through systematic
growth in keeping with material aspirations......
“The Company recognises that while honesty and integrity are the essential ingredients of a
strong and stable enterprise, profitability provides the main spark for economic activity. It affirms its
faith in democratic values and in the importance of the success of the individual, collective and corporate
enterprise for the economic emancipation and prosperity of the country......
“The objectives of the Company are directed towards making the TISCO:
The best company to buy from;
A sound company to invest in;
A good company to work for;
A reliable company to sell; and
Aleading company in the life of the country and the community.”
Numerous further examples of the objectives of modem business could be presented.
However, all of them could be summarised with the conclusion that: (i) Profit is the motivating force
for business; (ii) Service to customers by the provision of desired economic values (goods and services)
justifies the existence of the business. Profit and service objectives are linked together; (iii) Social
responsibilities do exist for business in accordance with the ethical and moral codes established by
the society in which the industry resides and functions.
Establishing Objectives
The task of establishing or setting objectives involves individuals and groups within and outside
the organisation. There are two schools of thought on the issue of setting objectives. The traditional
school of management feels that the organisation’s overall objectives must be determined by the
Board of Directors and the top management, so that a close co-ordination and co-operation may be
established whereby the company’s objectives can be accomplished effectively. But it should be noted
that though these objectives are posted for all members for their information, often the stated goals
are not the real goals. Real objectives are the result of pressure from specific groups - shareholders,
creditors, labour unions, and minority groups.

38. 40
The behavioural school of Management is of the view that power plays a dominant role
in determining the firm’s real goal. Who yields power in the organisational level and how much often
influences the mode of thinking of others and consequently objectives are framed accordingly.
The best way is to set the objectives in consultation with the different levels of management
by the top executive so that conflicts, if any, could be reduced to the bare minimum.
When a subordinate and superior are involved in the process of searching for sound
objectives, they have the opportunity to select the specific objectives from a number of sources. First,
the objectives may be built upon past experience, for example, cost will be reduced by 10% or sales
will be increased by 5%. Second, the objective can be based upon some outside authority; for
example, as a result of research, it may be discovered that a fair day’s work for a reasonable standard
would be 10 units of work (say, 5 metres of cloth), or Rs. 20/- in the form of profit, or Rs. 15/- as a
cost or a given percentage of a total. Third, the objective may also be based upon an average of
similar operations by other organisations. Finally, the objective may be based upon response from
the customer or user of the output: for example, the number of complaints must be kept below 5 out
of 100 sales transactions.
CLASSIFICATION OF ORGANISATION OBJECTIVES
Organisation objectives may be classified on at least three bases:
1. On the basis of nature of objectives;
(a) General objectives, and (b) Specific objectives.
2. On the basis of multiplicity of objectives:
(a) Economic service objectives; (b) Broadly-stated company objectives; (c) Survival and
Growth Objectives; (d) Personal Group Objectives; and (e) Governmental and Societal
Objectives.
3. On the basis of measurable goals:
(a) Productivity objectives; (b) Budgetary objectives; (c) Quantitative objectives; and
(d) Qualitative objectives.
1. On the Basis of Nature of Objectives
Such objectives may be general or specific.
a. General Objectives. These objectives are statements, which include many goals and take
many directions. They should be positive, clear and self-explanatory. But often, the words used are
very vague, such as “generating optimum profit; to develop a sound financial position, good, vigorous;

39. 41
growing; diversified;” because their meaning is not clear in the statement of objectives. Therefore, if
they are to be effective and meaningful, they need be stated as specific measurable objectives.
Below are given two examples of a good general objective:
(i) “The company seeks to earn a rate of interest on invested capital each year that is at
least equal to the average rate of return for its five competitors having annual sales closest
to that of the company.”
Or Simply:
“To obtain 15 per cent return on investment (ROI) by the end of the calendar year 1984.”
(ii) “The company’s objective is to increase the number of units of products—”Usha Fan”—
by 10 per cent without an increase in cost or reduction of current quality level by
December, 1984.”
b. Specific Objectives give a clear-cut picture about the goals/target which a company expects
to accomplish within a specified, time period. Such objectives add to the management effectiveness
by making the objectives attainable. Actual performance can be reported in relation to the measures
and target values that have been set in the objectives. The planning and control functions can be served
with greater utility because the “objectives” and the “results” are expressed in the same terms.
2. On the Basis of Multiplicity of Objectives
To manage a business is to balance a variety of needs and goals and this requires multiple
objectives as are needed in all areas in which the survival of the business depends. The specific targets,
the goals in any objective area depend on the strategy of the individual business. But the areas in
which objectives are needed are the same for all businesses, for all businesses depend on the same
factors for their survival.
A business’s function is to create functions. There is, therefore, need for a marketing
objective. Businesses must be able to innovate or else their competitors will outstrip them by their
superior techniques. There is also need for innovation objective. All businesses depend upon three
factors of production, i.e., on the human resource, the capital resource, and the physical resource.
There must be objectives for their supply, their employment and their development. The resources
must be employed productively and their productivity has to grow if the business is to survive. There
is need, therefore, for productivity objectives. Business exists in society and community and, therefore,
has to discharge social responsibility, at least to the point where it takes responsibility for its impact
upon the environment. Therefore, objectives in respect of the social dimensions of business are
needed. Finally, there is need for profit; otherwise none of the objectives can be attained. Therefore,
profitability objective has also to be established.

40. 42
Objectives, therefore, have to be set, according to Prof. Drucker, in the eight key areas :
(1) market standing; (2) innovation; (3) human organisation (manager performance and development);
(4) worker performance and attitude; (5) physical and financial resources; (6) productivity; (7) social
or public responsibility; and (8) profit requirements.
Objectives in the key areas, 1, 2, 5, 6 and 8 can be subject to quantitative measurement.
These objectives have received universal recognition. These are the traditional methods of growth
and well-being of an organisation. However, unless these five objectives are properly supported by
the other three objectives, they become meaningless. If the three objectives (manager performance
and development; worker performance and public responsibility) soon result in a loss of market
standing, loss of technical leadership, productivity and profit, the entire edifice of business objectives
will ultimately collapse.
It must be remembered that a business enterprise is a community of human beings. Its
performance is the performance of human beings. And a human community must be founded on
common beliefs, must symbolise its cohesion in common principles. Otherwise, it becomes paralysed,
unable to act, unable to demand and to obtain effort and performance from its members.
To be effective in accomplishing its tasks, management should recognise that the firm has
multiple objectives. Such objectives can be conveniently categorised into two groups, viz. (i) those
overall organisation objectives which are concerned with the firm’s broad goals and which focus
on operating profitably in the long run for the benefit of the share/stock-holders; and (ii) specific
organisation objectives, which look at the whole system of managing and appraising management
results through measurable goals.
Overall Organisation Objectives
These comprise (a) economic service objectives, (b) broadly-stated company objectives;
(c) survival and growth objectives; (d) personal group objectives; and (e) government and societal
objectives.
a. Economic Service Objectives
These objectives recognise that economic service objective is primary and making a profit
is secondary. Satisfaction of a customer need is the primary objective. But profits are also necessary
to attract capital for investment opportunities, which create further expansion in business, which, in
turn, provides more employment. Large investments in plants and machinery reduce the cost of
manufacture, thereby making the goods more competitive; and higher profits mean more tax revenues
for government programmes needing finance. Finally, profits are essential in meeting the real purpose
of business, which is that of satisfying customer needs.

41. 43
Profit is the ultimate test of business performance. It is a true criterion for efficiency. The
more efficient a business is, the greater are the profits it earns. It is the “risk premium” that covers the
costs of staying in businesses—replacement, obsolescence, market risk and uncertainty. Profits are
“costs of being in business” and “costs of staying in business.” Under this objective, the creation and
distribution of economic values—whether they be goods or services—come first and profits second
and are the result of fulfilling the economic service objective in an efficient and economical manner.
Therefore, the service objective must be well defined and integrated for effective cooperation
and coordination.
b. Broadly-stated Company Objectives
To meet the demands of the different market segments, the products and services to be
sold must be specified in very broad terms so as not to make these obsolete in the long run.
c. Survival and Growth Objectives
The importance of staying in business and growing is an- objective, which every business
firm cherishes. Business enterprise is productive when it has a stable and growing earning power.
Peter Drucker observes, “It is the purpose, nature and necessity of this institute to take risks, to create
risks. Unless we provide for risk, we are going to destroy capacity to produce. And, therefore, a
minimum profitability, adequate to the risks which we, by necessity, assume and create, is an absolute
condition for survival not only of enterprise but for society too.”
So a firm wants not only just to stay in business but also to grow and prosper. Growth
objectives include acquiring the economic advantages that come from being of a certain size and
becoming a recognised leader in the industry. Such an environment stimulates organisation members
to greater heights and ensures against going out of business. Desirable growth goals often lead to
producing better products and services, which are recognised by the customer. This, in turn, leads to
higher sales and more profits, which allows the firm to pay higher salaries and offer opportunity to
advancement. A successive pattern of this type leads to a desired growth rate.
According to Peter Drucker, there are five survival functions of business:
(i) It is a human organisation designed, for joint performance and capable of perpetuating
itself.
(ii) It exists in society and economy. Anticipation of social climate and economic policy
is a business need and business is a creature of the economy—population, income, wages
of spending, expectations and values.
(iii) The specific purpose of business is to supply economic goods and services. This is the
only reason why business exists.

42. 44
(iv) The business enterprise is an institution that is designed to create change. In a changing
economy and a changing technology, every business strives to innovate.
(v) There is an absolute requirement of survival, i.e., of profitability.
d. Personal Group Objectives
Personal objectives refer to the aspirations and goals of individual members of the enterprise,
and include financial and non-financial incentives (like salaries, wages, bonus), status in society and
organisation, the opportunity to advance, desire for association with other people, the need for security
of employment and drive for achievement. Each individual strives for the accomplishment of these
objectives. These objectives must be met by the firm to gain the cooperation of its members. Thus,
goals of individuals become organisation goals, which can work for the betterment or detriment of
the firm. If there are conflicts between personal and objective goats, people will leave the firm and
seek employment elsewhere.
It would, therefore, be in the fitness of things that the objectives of the organisation and the
personal groups should be balanced. The primary responsibility of a business manager is to “reduce
the areas of such conflict and to bring about harmony of interest among diverse groups.” Peter
Drucker’s remarks, “There are few things that distinguish competent from incompetent managers
quite as sharply as the performance of balancing objectives. It is the job of an enlightened manager
to continuously balance his objectives without allowing any conflict to arise between two or more
objectives.”
e. Governmental and Societal Objectives
These objectives create other economic values desired by society through government
legislation and regulation. For example, the Companies Act, 1956, provides for checking concentration
of economic power and promoting the spread of professional management; regulation and regularisation
of company management by infusing new discipline and introducing new spirit in the company
promotion, management and administration.
3. On the Basis of Measurable Goals
These are the objectives, which provide a measuring yard to evaluate the objectives set.
For this purpose, attention is focused on these:
a. Productivity objectives;
b. Budgetary objectives;
c. Quantitative objectives; and
d. Qualitative objectives.

43. 45
a. Productivity Objectives
These objectives aim at developing productivity factors for manufacturing and non-
manufacturing operations that can be utilised as a measure of operating efficiency and economy.
“Productivity is the measure not of how hard we work, but of how well we use our
intelligence, our imagination, and our capital.”. In other words, it is “to produce more with the same
amount of... effort.”
Increased productivity results from: (i) better planning and improved technology; (ii)
employment of better techniques; (iii) greater efficiency of equipment; (iv) more inventiveness and
more ingenuity, that is, through the better exercise of the management functions; (v) improved working
conditions; (vi) removal of boredom from routine task; and (vii) attitude of workers towards their
work, etc.
An enlightened manager, aware of these factors and the relationship between the worker
and productivity, uses such techniques as job enrichment, group incentives, promotion opportunities,
adopts technology and improved materials and standardised equipments so that the cost is reduced
and productivity increases. He also uses joint labour management productivity teams.
b. Budgetary Objectives
These objectives develop reliable financial data on a flexible or variable budget basis that
can be used to establish expected performance at all levels. Budgets are translated into financial
statements (Balance Sheet, Income Statement, Cash Budget, Source and Application of Funds, etc).
This budgeted information becomes the specific goal towards which actions are directed. They form
the basis for expected performance.
c. Quantitative Objectives
These objectives state “how much” the objectives can be measured in quantitative terms,
for example, the objectives set may be: average five calls a day on new customers, and 10 calls a
day for old and regular customers; 10 units of work per day at a fixed money cost; or set limits for
labour turnover, scrappage and absenteeism during the month.
Other examples are:
Marketing objectives can be the rate of return of sale, number of new customers, number
of service calls, number of different products sold, types of customers served.
In manufacturing, the objectives can be so many rupees of wages per hour, so much amount
for fringe benefits, number of work stop pages, hours/days lost because of strikes and grievances,
ratio of productive hours earned to productive time available.

44. 46
In the field of finance, the objectives may be:
Cash to accounts payable, ratio of current assets to current liabilities, rupee cost of assets
for employee, number of stockholders, the ratio of cost of money to average capital employed.
These objectives are variable in quantitative terms.
d. Qualitative Objectives
These are the objectives which can be gauged by “how well” they accomplish their tasks.
Such tasks are generally stated in qualitative terms. Such objectives include setting long-range market
objectives and specifying research and development activities. A typical example is the R & D
department’s objective of finishing a new product design by a certain fixed date, or the marketing
department may have the objective of improving product quality as well as service to customers within
a specified time.
One author has developed objectives, based on research and its evaluation. According to
him, the first of these objectives (which he refers to as “Bed-rock objectives”) is to promote
reasonable and improving corporate earnings through productive effort applied primarily.This objective
places emphasis on “profit motive”. The second is to conduct the business as a constructive and
honourable corporate citizen in its relations designed to be mutually profitable—with shareholders,
customers, employees, suppliers, government and the community. Both these objectives are
fundamental to the long-term success of any business.
The bed-rock objectives are the first step. To make them effective, some more basic
objectives are needed for each company and also the means of accomplishing them. These basic
objectives are termed as Administrative Organisation Objectives and Operating Organisation
Objectives.
Administrative Organisation Objectives
These aim at establishing and periodically re-evaluating four objectives for corporate
guidance:
a. To plan, direct, and co-ordinate the various company organisations, programmes and activities
for comprehensive, balanced accomplishment.
b. To secure a reasonable return on company investments in markets, plant facilities, products
and manpower.
c. To build good, mutually profitable relations with all those who help to make the company a
constructive and successful enterprise.
d. To develop and maintain a sound, clearly understood organisation structure and personnel
classified to meet the needs of the business.

45. 47
Operating Organisation Objectives
These objectives aim at improving the business. For this, detailed standards and controls
are developed to improve the quality of products, reduce costs of their manufacture and provide added
insurance for on time deliveries to customers. The purpose is:
a. to strive for both major and minor economies in operations and procedures, for increased
savings and improved earnings;
b. to undertake developments that promise new improved products;
c. to develop and apply human resources to stimulate recognition of employee as individua
- involving his dignity, his status and service in the organisation and his contribution to the
success of the enterprise.
BASIC OBJECTIVES OF BUSINESS
A business is an organisation of human, material and other intangible resources. It is a socio-
economic unit and, therefore, a modern business must undertake some basic functions to fulfil human
objectives such as recognition of human values in organisation, treating employees as responsible human
beings. It must ensure job satisfaction and higher employee morale through financial as well as non-
financial motivation. It must recognise public and social responsibilities and promote public welfare
and satisfaction. It must offer maximum consumer service and satisfaction. To achieve these basic
objectives, the business enterprise is treated as a whole dynamic unit.
Newman and Logan classifies basic objectives of a company under four heads, viz.
1. The place company seeks in its industry;
2. Emphasis on stability vs. dynamism;
3. Social philosophy of the company; and
4. Management philosophy of the company.
1. To decide the place of the Company in the Industry
The first objective is to decide in which industry it will operate. This decision will take into
consideration questions such as:
(i) What major functions are to be performed—the production and distribution of goods and
services, or serving a particular class of customers or general customers and in what particular
product;
(ii) Whether to concentrate in one line/type of product or to go into diversification of its activities;

46. 48
(iii) What range or quality of product is to be produced—that which is in demand by sophisticated
class or middle-class society; and
(iv) What should be the size of operation, because it is the size which profoundly affects the sales
promotional activities, its financial structure, organisational set-up and executive personnel,
investment facilities, operating procedures, and many other phases of management. Careful
thought on all the four issues/objectives will give the company a better character and a place in
the industry.
2. Emphasis on Stability vs. Dynamism
(i) The company has also to decide whether it seeks stability or it wants to be dynamic, because
this issue influences the character and type of administration of the company. For this, the
objectives have to be set whether it wants to be progressive, i.e., to use the modern techniques
of doing business with the adoption of most modern facilities, policies and techniques; new
personnel practices in regard to selection, training, salary and wage administration, employee
services; adoption of materials handling equipment and continuous methods of manufacture;
computerised accounting system; latest techniques of market research and analysis. “Some
practical managers place greater emphasis on stability of operations. New policies and techniques
naturally require changes, and there is considerable human energy and financial cost involved in
introducing changes into a going enterprise. If these changes are introduced frequently, a feeling
of insecurity and instability develops among the executives and employees. Moreover, the
development of new methods is always accompanied by unanticipated difficulties and mistakes.
Hence, progressive objectives are held in abeyance till tangible results are available from
demonstrations and trial use.
(ii) The other objective may be aggressiveness which refers to the energy, the self-assertiveness,
and attack on the other company which is its competitor by adopting aggressive sales promotional
measures, undercutting of prices or by giving a handsome discount.
(iii) Willingness to take risks may be another objective. Every business involves risk, especially
when changes in its objectives/policies are made.
(iv) Along with the bearing of risk, business expansion needs considerable capital resources from
within or outside the company, which have to be arranged.
3. Social Philosophy of the Company
Social objectives do shape the character of a company in the minds of the people and the
community. The purpose is to find out what kind of business the citizens want the company to be in;