Business Organization and

Management
 Introduction
Business is all round us and it is the
mainspring of modern life.
The study of business is essential for training
oneself for a career.
Study of the principles and practices of
business organization helps in understanding
events in their right perspective and in
tackling the problems of satisfying human
wants through the use of available resources.
 Every human beings is busy in one activity or the other to
satisfy his unlimited wants and desires.
The human activities may broadly be divided into two
categories
Economic Activities
Non-economic Activities
1.Economic Activities
Economic activities are designed to attain and use the
material resources of life.
They are concerned with the production, distribution and
consumption of goods and services.
Human beings undertake economic activities in order to earn
their livelihood.
For Example- A worker works in the factory, a
doctor operates his clinic, a manager works in
his office and a lecturer teaches in a college to
earn money for himself/herself and for his /her
family.
2.Non-Economic Activities
Non-economic activities are carried out not for
earning money but on account of the human
sentiments of charity, love, sympathy,
patriotism, religion etc.
For Example- A housewife cooks food for
her family , a person goes to the temple for daily
prayers and a boy helps an old man in crossing
the road.
Types of Economic Activities
Economic activities or human occupations may
be further classified into three categories,
namely 1.Business
2.Profession
3.Employment
1.Business
Business is an economic activity as it is concerned with
earning money and acquiring wealth.
It is the human activity directed towards the acquisition
of wealth through the production and exchange of
goods and services.
A business enterprise is an economic institution as it is
engaged in the production and /or distribution of
goods and services in order to earn profits and acquire
wealth.
Thus business encompasses all activities involved in the
production and sale of goods and services for profit.
2.Profession
Profession is an occupation involving the provision of personal
services of a specialized and expert nature.
For Example- A doctor helps his patients through his expert
knowledge of the science of medicine.
Minimum educational qualifications are prescribed for entry into a
profession and
Every professional requires a high degree of formal education and
specialized training in a particular field.
For Example- A person must have the L.L.B degree in order to
become a lawyer. A professional maintains close personal contact
with his clients and he charges fee for the services rendered to them.
The professional is expected to follow the professional code of
conduct.
3.Employment or Service
Service or employment involves working under a
contract of employment for or under someone known as
the employer in return for wages or salary.
A person who is in the employment of a person or an
organization renders personal services and performs the
duties assigned by the employer from time to time.
There is an employer-employee relationship.
Professionally qualified people also serve as employees
in various organizations.
For Example A person who has passed the chartered
accountancy examination may serve as an accountant in
a private firm or in a public sector undertaking.
Nature or Characteristics of Business
1.Sale,Transfer or Exchange
The foremost characteristic of business is the
exchange or transfer of goods and services for price
or value.
For Example- A farmer who keeps cows to obtain
milk for his family is not running a business .
But if he keeps a number of cows to sell the milk
obtained from them it becomes business provided the
other conditions are also satisfied.
2.Dealings in Goods and Services
Dealing in goods and services is another distinguishing feature
of business. Every business enterprise comes into existence to
provide goods or services to society.
The goods may be consumer goods such as bread, rice, cloth ,
shoes etc. or producers goods like tools, components
,machinery, raw materials etc.
The consumers goods are meant for direct consumption in
the original or processed form.
Producers goods or capital goods are used for producing
other goods.
Services are intangible and invisible goods.
Example-Electricit,Gas,Insurance,Transportation,Banking
etc.
3.Continuity in Dealings
Dealings in goods and services constitute business
only when they are carried on regularly.
A single transaction like sale of old newspapers by a
housewife or the sale of ones old scooter is not
business through the seller gets money in exchange.
But the Hindustan Times Ltd and Bajaj Auto Ltd.
are business concerns because they are regularly
dealing in the same article. Recurring sale rather
than an isolated deal is the hallmark of business.
4.Profit Motive
Every business is carried on with the purpose of earning
money and acquiring wealth. It is the hope of making
money that induces people to go into business.
No business can survive without earning profits.
Even government enterprises are expected to earn profit
or surplus.
However, profits must be earned through honest and
fair means or by serving the society and not by
exploiting it.
It is because of this reason that making of money
through gambling , cheating , smuggling and black
marketing cannot be called Business.
5.Risk or Uncertainty
Risk implies the uncertainty of reward of the
possibility of loss.
The element of risk is present in almost all economic
activities but it is more significant in business.
Though the business runs at profits, losses are quite
possible and common.
Risk or uncertainty arises because the future is
unknown and businessmen have practically no
control over several factors affecting profits.
These factors include
Changes in consumers tastes , fashions and demand.
Changes in technology resulting into obsolescence of
plant , machinery and techniques of production.
Increase in the degree of competition in the market.
Shortage of raw materials , power , fuel etc.
Labour trouble in the form of strikes ,lockouts ,
gheraoes etc.
Faculty managerial decisions concerning the use o f
capital and other resources and
Fire , theft and other natural calamities which can be
insured against.
6.Creation of Utilities
A business makes goods more useful for satisfying human
wants.
Every business activity involves the creation of utilities
through the production of goods and services.
Utilities may be created in Three ways
1.Utility of Form
2.Utility of Place
3.Utility of Time.
1.Utility of Form- Existing things may be changed or
rearranged so as to make them more useful for the
satisfaction of human wants and this is called Utility of
Form
For Example- A flour mill converting wheat into flour,
a cloth mill converting cotton into cloth, a
contractor converting cement, bricks ,iron etc into a
house are examples of utility of form.
2.Utility of Place- Goods may be transported from one
place to another in order to make them available in a
place where the demand for them is greater. This is
utility of place.
3.Utility of Time Commodities may be stored in
times of plenty, to make them available during the
times of scarcity . This is called Utility of time.
 Business is concerned with the production of various
types of goods and services for the satisfaction of human
wants.
A business enterprise makes efficient use of scarce
resources like men ,money, materials and machinery for
this purpose. Thus business involves creation of utilities.
7.Economic Activity- Business is an economic activity
because it involves sale of goods or service for profit.
Business also makes use of scarce economic resources.
In view of the above mentioned characteristics ,business
may be called as an economic activity concerned with the
regular production or purchase of goods and services
with the objective of selling them at uncertain profit
through the satisfaction of human wants.