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BusinessAn organization that provides goods and services to earn profit.

ProfitDifference 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 ACTIVITIESBUSINESSPROFESSIONEMPLOYMENTTRADEINDUSTRYBANKINGTRANSPORTATIONINSURANCEWAREHOUSINGADVERTISING ETC.MEDICALLEGALCHARTERED ACCOUNTANT.MANAGERFOREMANCLERKSALESPERSONWORKER,ETC...

Economic ActivityProduction 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 wantsRegular dealings (continuous supply of goods and services) Profit motiveUncertainty.Risk elementCreation of utility

Business activities broadly divided in to three;They are, a) Economic objectives, b) social objectives c)Human objectives

TYPES OF BUSINESS ACTIVITYECONOMICOBJECTIVESHUMAN OBJECTIVESSOCIALOBJECTIVES1)EARNING OF PROFIT2)CREATION OF CUSTOMERS3)INNOVATION4)EFFECTIVE UTILISATION OF RESOURCE1)GOOD SERVICE AND FAIR DEALINGS2)TREATING EMPLOYEES AS PARTNERS3) DEVELOPMENT OF EMPLOYEES SKILLS4) JOB SATISFACTION OF EMPLOYEES1)BETTER QUALITY PRODUCTS2)FAIR TRADE PRACTICES3)GENERATION OF EMPLOYMENTEMPLOYEES WELFARE4)COMMUNITY SERVICE5)PROTECTION OF EMPLOYMENT

Resources used by businesses to produce goods & services.

LaborCapitalPhysical resources

Human resourcesPeople who work for businessesIncludes 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 businessNatural resourcesRaw materialsOffice suppliesLandBuilding

PrivateJoint SectorPublic Sector

Sole ProprietorshipPartnership (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 startNo registrationNo profit sharingEasy decision-makingEasy to windupSecrets (information about business techniques)No corporate taxes

Unlimited liabilityEmployee benefits i-e Medical insurance premiums not deductible(taxes)Raising fundsLimited LifeLoss 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 co-owners.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 startThe ability to raise fundsMore skilled personsLoss sharingNo Loss in absence

Unlimited liabilityProfit sharingConflictsLimited lifeTransferability 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. Limited Liability.2. Continuity of existence.3. Benefits of large scale operation.4. Professional Management.5. Social Benefit.

1. Formation is not easy.2. Control by a Group.3. Excessive government control.4. 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 like-banking 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:ComplexDynamicMulti-facetedFar- 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 EnvironmentMicro environmentMacro environmentEconomic 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 ResourcesCompany ImageOther 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.

SuppliersCustomersMarketing IntermediariesCompetitors Financial Community

PotentialSupplier PotentialCustomersCustomersPressureGroupsForSuppliesForCustomersPotentialDealersGovernmentLocalCommunities

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 policiesEconomic 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 ProblemsFunctioning 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 USHow perceived in JapanCompanyTeam in sportFamily in villageBusiness goalTo winTo surviveEmployeesPlayers in a teamChildren in FamilyHuman relationsFunctionalEmotionalCompetitionCut-throatCooperationSense of identificationJob prideGroup prestigePromotionAccording to abilitiesLength of serviceWork motivationIndividual incomeGroup 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 to pricing and foreign investment

Policies related to the public sector, SSIs, development of backward areas and control of environmental pollution

Important factors that operate at global level which have an impact on organization are: Growth of world economy

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 discriminationGrowing market accessPromotion of fair competition

The response of Indian government to WTO constitutes the following actionsReduction of tariffsOpening Indian markets for Global PlayersRationalizing 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 competitionConsolidation of activities in core competence areasImprovements in infrastructure to negate structural disadvantages.Shake out of minor players and M&As to gain global scale.

Non - Economic Environment

MACRO ENVIRONMENT

ECONOMIC Environment

MICRO ENVIRONMENT

BUSINESS

Internal Environment

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

TECHNOLOGICAL FACTORS

MARKETING INTERMEDIARIES

DEMOGRAPHIC FACTORS

SOCIAL CULTURAL FACTORS

Environmental ScanningThe process by which organizations monitor their opportunities and threats affecting their business is known as environmental scanning

SWOT Analysis

PEST AnalysisPESTLE STEEPLE S - SocialT - TechnologicalE - EconomicE - EnvironmentalP - PoliticalL - LegalE - 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 performanceA 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 competitorsExistence of Barriers to EntryEconomies of scale Product differentiationBrand EquityCapital requirements Access to distribution channelsAbsolute 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 supplierssupplier 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, camerasWhy 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)

1. Factor Endowments A nations position in factors of production such as skilled labor, capital, infrastructure necessary to compete in a given industry2. Demand Conditions 3. Related and Supporting Industries4. Firm Strategy, Structure, Rivalry the conditions in the nation that govern how companies are created, organized and managed and the nature of domestic rivalry

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