Business

An organization that provides goods and

services to earn profit.
Profit
Difference between the revenues and
expenses of a business.

A business (also called a firm or an

enterprise) is a legally recognized
organization designed to provide goods
and/or services to consumers.
Every business requires some form of
investment and a sufficient number of
customers to whom its output can be sold
at profit on a consistent basis.

Business is an Economic activity which involves

regular production and or exchange of goods and
services with the main purpose of earning profits
through the satisfaction of human wants.

These activities are organised and performed under

the framework of an institution known as business
organisation /firm/enterprise

According to B.O Wheeler, Business is an institution

organised and operated to provide goods and services
to society under the incentive of private gain.

ECONOMIC ACTIVITIES

BUSINESS

TRADE
INDUSTRY
BANKING
TRANSPORTATION
INSURANCE
WAREHOUSING
ADVERTISING ETC.

PROFESSION

MEDICAL
LEGAL
CHARTERED ACCOUNTANT.

EMPLOYMENT

MANAGER
FOREMAN
CLERK
SALESPERSON
WORKER,ETC...

Economic Activity
Production or procurement (acquisition of goods for the
purpose of sale)
Dealing in goods and services;( goods are consumer
goods and capital goods)
Satisfaction of consumer wants
Regular dealings (continuous supply of goods and
services)
Profit motive
Uncertainty.
Risk element
Creation of utility

Business activities broadly divided in to

three;
They are,
a) Economic objectives,
b) social objectives
c)Human objectives

TYPES OF BUSINESS ACTIVITY

ECONOMIC
OBJECTIVES

OF PROFIT
1)EARNING
ERS
OF CUSTOM
2)CREATION
N
3)INNOVATIO
N
E UTILISATIO
4)EFFECTIV
CE
OF RESOUR

SOCIAL
OBJECTIVES

1)BETTER QUALITY PRODUCTS

2)FAIR TRADE PRACTICES
3)GENERATION OF EMPLOYMENT
EMPLOYEES WELFARE
4)COMMUNITY SERVICE
5)PROTECTION OF EMPLOYMENT

HUMAN
OBJECTIVES

1)GOOD SERVICE AND

FAIR DEALINGS
2)TREATING EMPLOYEES
AS PARTNERS
3) DEVELOPMENT OF EMPLOYEES
SKILLS
4) JOB SATISFACTION OF
EMPLOYEES

Resources used by businesses to produce

goods & services.

Labor
Capital
Physical resources

Human resources
People who work for businesses
Includes both physical & mental
contributions.

Funds needed to operate a business.

To start a business & to keep it growing &
operating.
Major source for small business is
personal investment.
Profit/Revenue from an ongoing business
is another source.

Tangible things used to conduct business

Natural resources
Raw materials
Office supplies
Land
Building

Private
Joint Sector
Public Sector

Sole Proprietorship
Partnership (general & limited)
Joint Stock Company

A sole proprietorship is a business owned and

operated by one individual.

The shops or stores which you see in your locality the

grocery store, the vegetable store, the sweets shop, the
chemist shop, the paanwala, the stationery store, the
STD/ISD telephone booths etc. come under sole
proprietorship.

Easy to start
No registration
No profit sharing
Easy decision-making
Easy to windup
Secrets (information about business
techniques)
No corporate taxes

Unlimited liability
Employee benefits i-e Medical
insurance premiums not
deductible(taxes)
Raising funds
Limited Life
Loss in absence

For business where capital required is

small and risk involvement is not heavy,
this type of firm is suitable.

It is also considered suitable for the

production of goods which involve
manual skill e.g. handicrafts, filigree
works, jewellery, tailoring, haircutting,etc

A Partnership is a legal relationship formed

by the agreement between two or more
individuals to carry on a business as coowners.
Each member of such a group is individually
known as partner and collectively the
members are known as a partnership firm.
These firms are governed by the Indian
Partnership Act, 1932.

1. Number of Partners: Maximum limit is

10 in case of banking business and 20 in
case of all other types of business.

2. Contractual Relationship: The

agreement in writing is known as a
Partnership Deed.

3. Competence of Partners: Minors and

insolvent persons are not eligible.

4. Sharing of Profit and Loss: In absence of

an agreement, they share it equally.

5. Transfer of Interest: No partner can sell or

transfer his interest in the firm to anyone
without the consent of other partners.

6. Voluntary Registration: Registration of

partnership is not compulsory. But since
registration entitles the firm to several
benefits, it is considered desirable.

Relatively easy to start

The ability to raise funds
More skilled persons
Loss sharing
No Loss in absence

Unlimited liability
Profit sharing
Conflicts
Limited life
Transferability is difficult

Such firms are most suitable for

comparatively small business such as

retail and wholesale trade,

professional services,
medium sized mercantile houses and
small manufacturing units.

a voluntary association of persons to

carry on business.
Members of a joint stock company are
known as shareholders and the capital of
the company is known as share capital.
The companies are governed by the Indian
Companies Act, 1956.
Tata Iron & Steel Co. Limited, Hindustan Lever
Limited, Reliance Industries Limited, Steel
Authority of India Limited, Ponds India Limited etc.

1. Artificial Person.
2. Separate Legal Entity.
3. Common Seal.
4. Perpetual Existence.
5. Limited Liability.
6. Transferability of Shares.
8. Membership: Minimum membership of two
persons and maximum fifty is known as a
Private Limited Company. But in case of a
Public Limited Company, the minimum is seven
and the maximum membership is unlimited.

1.
2.
3.
4.
5.

Limited Liability.
Continuity of existence.
Benefits of large scale operation.
Professional Management.
Social Benefit.

1.
2.
3.
4.

Formation is not easy.

Control by a Group.
Excessive government control.
Delay in Policy Decisions.

A joint stock company is suitable where

the volume of business is quite large, the
area of operation is widespread;
certain businesses likebanking and insurance.

Meeting stakeholders expectations

Developing and retaining top talent

Creating a customer responsive organisation

Pricing and quality

The environment of any organization is the

aggregate of all conditions, events and
influences that surround and affect it.
Characteristics of Business Environment:

Complex

Dynamic

Multi-faceted

Far- reaching impact

Development of broad strategies

To foresee the impact of socio-economic

changes at the national and international
levels on firms ability

Analysis of competitors strategies and

formulation of effective counter measures

To keep oneself dynamic

Internal Environment

External Environment
Micro

environment
Macro environment
Economic
Non Economic

Refers to all the factors that are within an organization which

impart strengths or cause weaknesses of strategic nature.

Controllable factors

These include:
Value system

Mission and Objectives

Management Structure and Nature

Human Resources
Company Image
Other Factors

Physical Assets and Facilities

R & D and Technological Capabilities

Marketing Resources

Financial Resources

Includes
all
factors
outside
the
organization which provide opportunities
or pose threats to the organization

Uncontrollable factors

Consists of Micro and Macro environment

It consists of the factors in the

companys immediate environment

that affect the performance of the
company.

Suppliers
Customers
Marketing Intermediaries
Competitors
Financial Community

Potential
Supplier
Components
Supplier
Local
Communities

Potential
Customers
Stakeholders

Pressure
Groups

Government

Customers
Car
Manufacturer

Competitors

Car Dealers
Potential
Dealers

For
Customers

For
Supplies

It comprises general trends and

forces that may not immediately
affect the organization but sooner or
later will alter the way organization
operates.
Macro Environment : Economic
Non Economic

Economic stages that exists at a given time in a

country
Economic planning, such as five year plans, budgets,
etc.
Economic policies for example, monetary, industrial
and fiscal policies
Economic Indices such as National Income, Per
Capital Income, Disposable Income, Rate of growth
of GNP, Distribution of Income, Rate of savings,
Balance of Payments etc.
Economic Problems
Functioning of economy

Regulatory Environment

Socio- Cultural Environment

Demographic Environment

Technological Environment

Political Environment

Cultural Environment

Social Customs & Rituals and practices

Lifestyle patterns

Family structure

Role & position of men, women, children and

aged in family & society

Management
Concepts

How perceived in
US

How perceived in
Japan

Company

Team in sport

Family in village

Business goal

To win

To survive

Employees

Players in a team

Children in Family

Human relations

Functional

Emotional

Competition

Cut-throat

Cooperation

Sense of identification Job pride

Group prestige

Promotion

According to abilities

Length of service

Work motivation

Individual income

Group atmosphere

Demographic Environment

Growth of population

Age Composition

Life Expectancy

Sex Ratio

Fertility and Mortality rates

Inter-state migration

Technological Environment

Sources of technology

Technological development

Impact of technology
Political Environment

Political parties in power

Political Philosophy

Regulatory Environment

Constitutional framework

Policies relating
investment

Policies related to the public sector, SSIs,

development of backward areas and control of
environmental pollution

to

pricing

and

foreign

Important factors that operate

organization are:
Growth of world economy

at

global level which

have an impact on

Distribution of world GDP

International institutions IMF,WTO ILO

Economic relations between nations

Global human resource-nature and quality of skills, mobility of labor

Global technology and quality standards

Global demographic patterns

The main guidelines of WTO are:

Trade without discrimination

Growing market access

Promotion of fair competition

The response of Indian government
to WTO
constitutes the following actions

Reduction of tariffs

Opening Indian markets for Global Players

Rationalizing industrial licensing and removal of

controls on the size of operations

The impact of WTO on Indian companies is likely

to include the following :

Increasing competition

Consolidation of activities in core competence

areas

Improvements in infrastructure to negate

structural disadvantages.

Shake out of minor players and M&As to gain

global scale.

MACRO ENVIRONMENT

ECONOMIC
Environment
MICRO ENVIRONMENT
BUSINESS

Internal Environment

TECHNOLOGICAL
FACTORS

Values,
Mission & Objectives.
Human Resources,
Co. Image & Brand Equity

DEMOGRAPHIC
FACTORS
MARKETING
INTERMEDIARIES

SOCIAL
CULTURAL
FACTORS

Non - Economic Environment

Environmental Scanning
The process by which organizations monitor
their opportunities and threats affecting
their business is known as environmental
scanning
SWOT Analysis

PEST Analysis
PESTLE
STEEPLE
S - Social
T - Technological
E - Economic
E - Environmental
P - Political
L - Legal
E - Ethical

CSFs are those areas in which good

results will help ensure an organizations
success against competition and where
poor results usually lead to declining
performance
A strategy is defined as a unified,
comprehensive and integrated plan
relating the strategic advantages of the
firm to the challenge of the environment.

Threat of the entry of new competitors

Existence of Barriers to Entry

Economies of scale
Product differentiation
Brand Equity
Capital requirements
Access to distribution channels
Absolute cost advantages
Government policies

The intensity of competitive rivalry

Number of Firms and their Relative Market Share,
Strengths
Rate of industry growth Demand conditions
High Fixed cost
Exit barriers
Product Standardization
Informational complexity and asymmetry

Threat of Substitutes

Bargaining power of customers:

buyer concentration to firm concentration

ratio
buyer volume
buyer switching cost relative to firm
switching costs
buyer information availability
ability to integrate backward
availability of existing substitute products
buyer price sensitivity
price of total purchase

Bargaining power of suppliers

supplier switching costs relative to firm

switching costs
degree of differentiation of inputs
presence of substitute inputs
supplier concentration to firm concentration
ratio
threat of forward integration by suppliers
relative to the threat of backward integration
by firms
cost of inputs relative to selling price of the
product

According to Andrew Grove- former CEO

of Intel sixth force are complementary
goods

Why a nation achieves success in a

particular industry?

Why Japan -- automobile, cameras

Why Germany -- engineering

Four broad attributes of a

nation shape the environment
in which local firms compete,
and these attributes promote
or impede the creation of
competitive advantage
(Diamond of four mutually
reinforcing factors)

Factor Endowments A nations position

in factors of production such as skilled
labor, capital, infrastructure necessary
to compete in a given industry
2. Demand Conditions
3. Related and Supporting Industries
4. Firm Strategy, Structure, Rivalry the
conditions in the nation that govern how
companies are created, organized and
managed and the nature of domestic
rivalry
1.

Thank You