1.
Foundation Of Business And Economics
Business is an organized and systematized human activity involving production and purchase of
Goods and services with the objectives of selling them at a profit. We can say that Business
Concerns with buying and selling goods, manufacturing goods or providing services in order to
Earn profit. Businesses can be operated by individuals, partnerships, corporations, or other legal
Entities. They may be involved in a variety of industries, such as manufacturing, retail, finance,
Or technology
PEOPLE IN BUSINESS
I Owner/Entrepreneurs:
Owners or entrepreneurs are those people who take the risk of initiating a business. They provide
Capital for starting a business.
II. Managers:
Managers are those people who are responsible for executing the decision of the upper level.
They make the things done through others.
III. Employees:
They are lower middle or operation level workers engaged with the activities as directed by their
Top boss.
IV. Consumers:
The demand of a product is created as the consumers consume it. So consumers are the ultimate
Buyers of an organization’s products.
Traditional View
In the traditional view we see the different entities involved in any business and the
Way their relationship works. Owners sit at the top as they finance the business and hold power.
Next comes the managers who are salaried people hired by the owners for their expertise.
Managers serve the interests for they are less powerful compared to the managers and so ranked
Accordingly. In the traditional view, customers are positioned at the bottom, because all of the
Business efforts made by people from top to bottom are designed and targeted towards the
Customers.
Modern view has an opposite view. It positions customers at the top. Tremendous competition
has compelled businesses to focus on the customers in the first place. Employees are given the
Second priority because it is the employees who drive the engine of a company. When
employees are motivated to work, only then they can ensure customer satisfaction. In the modern
concept, employees are treated as internal customers to the management. A hot saying goes like
– unsatisfied internal customers cannot make satisfied External customers. At last, owners held
the least in terms of power. It is a true democratic situation where customers are empowered
utmost. Modern companies do recognize that and offer a bundle of employee benefits
The objectives of a business can be broadly categorized into survival, growth,
and responsibility.
Survival:
Survival is the fundamental objective of any business. It refers to the ability of a business to
endure and thrive in the market.
Importance: Without survival, other objectives become irrelevant. Businesses need to cover
their costs, generate profits, and adapt to changing market conditions to ensure their continued
existence.
Growth:
Growth involves expanding the size, scope, or influence of a business. This can be achieved
through increasing sales, entering new markets, diversifying products/services, or acquiring other
businesses.
Importance: Growth is essential for long-term sustainability. It allows a business to capitalize
on opportunities, achieve economies of scale, and enhance its competitiveness in the market.
Responsibility:
Responsibility in business refers to ethical and social considerations beyond profit-making. It
includes ethical behavior, environmental sustainability, and social responsibility.
Importance: In the modern business landscape, there is a growing awareness of the impact of
businesses on society and the environment. Meeting social and ethical responsibilities can
enhance a company's reputation, build customer loyalty, and contribute to long-term success.
Profit has two views
Business profit Business profit, also known as accounting profit or net profit, is the amount of
money a company earns after deducting all its explicit costs from its revenue. Explicit costs
include explicit expenses like wages, rent, raw materials, taxes, and other measurable
expenditures.
Economic profit Economic profit goes beyond the explicit costs considered in accounting profit.
It takes into account both explicit (accounting) costs and implicit (opportunity) costs. Implicit
costs include the opportunity cost of using resources in a particular way, such as the potential
earnings that could have been gained in the next best alternative.
Profits reward a business for performing below activities-
Risk Taking:
Profit serves as a reward for successfully navigating uncertainties and taking calculated risks. It
incentivizes businesses to explore new ventures and opportunities, contributing to innovation and
growth.
Evaluation of Demand:
Profitability indicates a successful alignment with market demand. When a company meets
consumer needs and preferences, it generates profits, signaling effective adaptation to market
dynamics.
Efficient Management:
Profit reflects efficient management practices. A well-managed company optimizes resources,
controls costs, and improves operational processes, resulting in increased profitability as a
measure of effective leadership and operational excellence.
