INTRODUCTION OF BUSINESS

ORGANIZATION
UNIT 1
 Content

• Business: Concept, nature and scope, Characteristics of Business, business objectives

• Requisites for success in Modern Business
• Industrial Revolution
• Launching a business enterprise: Project report for feasibility report
• Forms of Business organization
 Business

Any profit-seeking
organization that
provides goods and
services designed to
satisfy the
customers’ needs.
 Business: Definition

▪ “Any organization that fulfils itself through making a product or service is

business.”
- P.F. Drucker
▪ “It is an institution organized and operated to provide goods and services to
society under the incentive of private gain”
- B.O. Wheeler
 Recurrence of
transaction
Dealing in
goods and Profit Motive
services

Sale, Transfer
or exchange
Element of
for the Business
risk
satisfaction of
human needs

Characteristics of Business
Interrelationship of Business, Profession and Employment
 Division of Business
Industry: Primary
The term industry refers to that part of
business activity that concerns itself with Secondary
the raising, production, processing or
fabrication of products. Tertiary

Commerce: Banking
It is an organised system for the exchange Transport and Communication
of goods between the numbers of the Warehousing
industrial world. Insurance
Finance
Advertising
 Industry
Primary Industry Secondary Industry
• Those involved in the first stage of • Manufacture raw materials into finished
development of products products
• Harvest natural resources that are later • Gold and silver ores are refined and made
used to manufacture products into jewelry
• Mining, fishing, agriculture, forestry, and • Crude oil is refined into machine oil,
oil and gas extraction are all primary gasoline, and plastics
industries • Wheat is milled into flour and baked into
• Large amounts of money is needed for breads and cookies
research, equipment and machinery • Technology innovations has led to
• Automation reduces the need for labour automation with computer assisted design
• Production is increasing using fewer
Extractive industries and genetic industries workers
 Secondary Industries

Construction Manufacturing
Industries Industries

Steel Cement Lime Assemble Lines,

Mortar And Buildings, Processing, Synthetic,
Dams Bridges Analytical
 Trade
It refers to the sale, transfer or exchange of goods.

Types of
Trade

Internal
International Trade
Trade

Wholesale Retail Import Export Entrepot

 Objectives of Business

Organic
objective

National Economic
Objective Objective
Objectives

Human Social
Objective Objective
 Organic Objective Human Objectives National Objectives

• A business enterprise • Fair deal to employees • Ensuring Social justice

consists of people organised • Development of human • Development of small
to conduct business activity resources entrepreneurs
to meet and satisfy the • Participation • Production according to
needs of society. It is national priorities
• Job Satisfaction.
essentially an organic entity
• National Self- Sufficiency
which has its own infancy,
and Export Development
childhood, adulthood, and
maturity. • Development of skilled
personnel.
• The first concern of a
business enterprise is to
ensure its own survival for
the continuance of business
activity.
 Economic objective Social objective

• Earning of profit • Supply of desired quality of products

• Creation of customers • Avoidance of anti social and unfair
• Innovation trade practices
• Best use of scarce resources • Generation of employment
• Welfare of employees
• Avoidance of slums and pollution.
Requisite [Link] of Objectives
for 2. Planning and setting up of a
proper organization
success 3. Adequate Finance
in 4. Proper Location, Layout and Size
Modern 5. Facilities for research
Business 6. Efficient and dynamic leadership
 Qualities of Good Businessman

Idealism

Personal
Foresight
qualities

Qualities of
Good
Aptitude Businessman
for Initiator
research

Firmness
Business
and
Morality
Courage
 Evolution of business

• DEVELOPMENT OF COMMERCE
• Household economy
• Primitive barter economy
• The rise of trade
• EVOLUTION OF INDUSTRY
• Town economy
• Handicraft system
• International trade
• Guilds
• The domestic system
 Results of Industrial Revolution

• Economic consequences
a) Mass Production
b) Growth of capitalism
c) Specialisation
d) Improvement in Standard of Living
e) Trade cycle
• Social and Political Consequences
 Distinction between Industry, Commerce and Trade
Basis Industry Trade Commerce
It involves manufacturing It involves transfer or
It involves distribution of
activities such as extraction, exchange of products
Meaning products produced by
construction and production of distributed by commerce.
industries.
goods.
Requires less amount of
Requires less capital than
Capital Requires huge amount of capital capital than industry but
industry and commerce.
Requirement to establish industry. larger amount than trade to
operate its activities.
Riskier than commerce and Relatively less riskier than Less riskier than industry but
Level Of Risk
trade. industry and commerce. involves high risk than trade.
Both side (demand and
Side Supply side of the product. Demand side of the product.
supply) of the product.
It creates time utility and
Creation Of Utility It creates form utility. It creates processing utility.
place utility.
It is operated from
It is operated in workshop or
Place Of Operation It is operated in the market. production center to
factory.
distribution center.
Launching a Business Enterprise

Problems for establishment of new

business

1. Problems relating to the planning and

organization of the new enterprise
2. Problems arising out of the procedure
lay down by the government
 Steps for launching of a new enterprise
Building the Launching the
Product Analysis
organization enterprise
and Market survey
structure

Determining the Financial Tax planning

size of the firm and Planning
plant

Selection &
Location organization of
Physical facilities
 Project Report or Feasibility Report

-A Project Report or Feasibility Report is a written account of various activities

to be undertaken by a firm and their technical, commercial and social
viabilities.
- It states as to what business is intended to be undertaken by the entrepreneur
and whether it would be physically possible, financially viable, commercially
profitable and socially desirable to do such a business.
 Information Included in Project Report
1. Examination of Government Policy
2. Broad specification of output and Input
3. Listing and description of alternative locations
4. Preliminary estimation
5. Preliminary Estimation of Profitability
6. Marketing analysis
7. Specification of product pattern and product price
8. Specification on Raw Material
9. Estimation of material
10. Listing of major equipment
11. Listing of auxiliary equipment
[Link] on source of supply of equipment
13. Place of factory
14. Listing of building, structure and yard
15. Specification of supply source and cost
16. Preparation of layout and design
17. Specification on labour requirement
18. Estimation of working capital
19. Phasing of activities
20. Analysis of profitability
21. Determination of environmental issues
22. Analysis of past performance
23. State of preparedness to implement the project
 Forms of Business Organization
Individual Sole
Ownership Proprietorship
General
Private Partnership
Collective Limited
Business

Ownership
Joint Company Private
Company
Public
Co-operative
Co-operative society

Public
Public corporation, Departmental
Organization, Government company
 Sole proprietorship

Sole proprietorship is a form of business organisation in which an individual

introduces his own capital, uses his own skill and intelligence in the
management of its affairs and is solely responsible for the results of its
operations.
 Features of sole proprietorship

Single ownership

One-man control

Unlimited liability

Undivided risk

No government regulation

No separate entity of the firm

 Merits of sole proprietorship

[Link] of
[Link] [Link] of co- [Link] in
formation and
motivation ordination Decision making
dissolution

[Link] from
[Link] in
[Link] [Link] standing Government
management
regulations
Limitation of sole proprietorship

2. Limited Managerial
1. Limited finance
skills

4. Uncertainty of
3. Unlimited liability
duration
 Joint Hindu Family Firm

The Joint Hindu Family (JHF) business is

a form of business organization run by
Hindu Undivided Family (HUF), where in
the family members of three successive
generations own the business jointly. The
head of the family known as Karta
manages the business.
 Joint Hindu Family Firm

Formation

There should be at least two male members in the family to form a HUF.

Ancestral property should have been inherited by members of HUF.

All the members enjoy this property and have an equal share in that property. Thus, any
child taking birth in that family becomes a member of the HUF.

There is no requirement for an agreement to become a member.

 Merits of Joint Hindu Family Firm

1. Effective Control 2. Continued Business Existence

3. Limited Liability of Members 4. Expanded Loyalty and Cooperation

 Limitations of Joint Hindu Family Firm

1. Limited Resources

2. Unlimited Liability of Karta

3. Dominance of Karta

4. Limited Managerial Skills

 Partnership Organization

A partnership is a kind of business where a formal agreement between two or more

people is made and agreed to be the co-owners, distribute responsibilities for running
an organization and share the income or losses that the business generates.

In India, all the aspects and functions of the partnership are administered under ‘the
indian partnership act 1932’.

This specific law explains that partnership is an association between two or more
individuals or parties who have accepted to share the profits generated from the
business under the supervision of all the members or behalf of other members.
 Features of Partnership

Existence of Plurality of Contractual

Profit motive
business persons relationship

Utmost good
Principal agent Unlimited
faith and implied
relationship liability
agency
 MERITS of PARTNERSHIP

Facility of Promptness in
Larger resources Balance judgment
formation decisions

Personal Protection of Influence of

Flexibility
Supervision minority interest unlimited liability
 Lack of harmony

Limited resources

Limited risk taking

Instability
Limitation of Partnership

Risk of implied authority

Lack of public confidence

 Types of Partner
Sleeping Partner

Nominal Partner

Partners by Estoppel

Partner by holding out

Minor partners
 Joint Stock company

According to Marshall, C.J, “ A corporation is an artificial being , invisible, and

existing only in contemplation of the law. Being a mere creation of law, it possess
only the properties which the charter of its creation confers upon it, either
expressly or as to its very existence.”
 Characteristics From Definition Of Joint Stock Company

• Separate legal entity

• Limited liability of members
• Perpetual Existence
• Common seal as a substitute for signature
 Features of Joint Stock Company

Formation Financing Control

Management Duration Taxation

THANK YOU!