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Business Organisation Business Organisation and Systemand System

Sudha Lakshmi IyerSudha Lakshmi Iyer

Human occupationsHuman occupations

Human Life is built around workHuman Life is built around workWithout showing any preference Without showing any preference

whether we want or we do not want, whether we want or we do not want, whether we like it or not, work is an whether we like it or not, work is an essential part of lifeessential part of life

He has to play a long role on his day He has to play a long role on his day to day activities.to day activities.

What is a professionWhat is a profession

Professions are those occupations Professions are those occupations which involve the rendering of personal which involve the rendering of personal services of a special and expert nature.services of a special and expert nature.

Like ……..Like ……..A lawyerA lawyerAn engineerAn engineerA doctorA doctorA managerA manager

What is EmploymentWhat is Employment

In this case, a person has to work In this case, a person has to work under an agreement , or rules of under an agreement , or rules of service and perform such work as service and perform such work as may be assigned to him by the may be assigned to him by the employer.employer.

Remuneration for such work takes Remuneration for such work takes the form of wages or salaries or the form of wages or salaries or allowances.allowances.

What is BusinessWhat is Business

Business is the state of being busy.Business is the state of being busy.As an economic activity business is so As an economic activity business is so

familiar to us that it seems almost familiar to us that it seems almost funny to go back to its literal meaning funny to go back to its literal meaning of ‘ being busy’.of ‘ being busy’.

Whether it is ……. Tatas, Birlas, Whether it is ……. Tatas, Birlas, Ambanis Ambanis

OrOrA tea stall owner, A shoe repair shop, A tea stall owner, A shoe repair shop,

A pan shop ownerA pan shop owner

Characteristics of businessCharacteristics of business

Sale, transfer or exchange for the Sale, transfer or exchange for the satisfaction of human needs.satisfaction of human needs.

Dealings in goods and servicesDealings in goods and servicesRecurrence of transactionsRecurrence of transactionsProfit motiveProfit motiveElement of riskElement of risk

Risk factors of businessRisk factors of business

Changes in technologyChanges in technologyChanges in consumer tastes and Changes in consumer tastes and

fashionsfashionsWrong management decisions about Wrong management decisions about

use of capital and other resourcesuse of capital and other resourcesLabour trouble Labour trouble Shortage of raw materialsShortage of raw materials Increase in competition in the marketIncrease in competition in the marketFire, theft or natural causes Fire, theft or natural causes

Divisions of BusinessDivisions of Business

Business activities may be classified Business activities may be classified into two broad catergories into two broad catergories

A. IndustryA. Industry

B. CommerceB. Commerce

IndustryIndustry

Industry is nothing but which Industry is nothing but which involves the production of goods and involves the production of goods and materialsmaterials

CommerceCommerce

Commerce is concerned mainly with Commerce is concerned mainly with the distribution of the goods that the distribution of the goods that were manufacturedwere manufactured

Types of IndustryTypes of Industry

The broad sphere of industry may be The broad sphere of industry may be divided into four distinct typesdivided into four distinct types

1. Extractive industries1. Extractive industries2. Genetic industries2. Genetic industries3. Manufacturing industries3. Manufacturing industries4. Construction industries4. Construction industries

Extractive IndustriesExtractive Industries

These industries include activites These industries include activites where by various forms of wealth are where by various forms of wealth are drawn out, extracted, or raised from drawn out, extracted, or raised from the soil, air or water or obtained from the soil, air or water or obtained from beneath the surface of the earth. beneath the surface of the earth.

The commodities raised by such The commodities raised by such industries are produced with industries are produced with comparatively little assistane from comparatively little assistane from man.man.

Extractive IndustriesExtractive Industries

The products of extractive industries The products of extractive industries are generally meant to be used by are generally meant to be used by the manufacturing and construction the manufacturing and construction industries for producing finished industries for producing finished goods though these may be used goods though these may be used directly in some cases.directly in some cases.

They include hunting, fishing, mining, They include hunting, fishing, mining, fruit gathering, agriculture, fruit gathering, agriculture, afforestation, etc.afforestation, etc.

Genetic IndustriesGenetic Industries

These industries engage in These industries engage in reproducing and multiplying certain reproducing and multiplying certain species of plants and animasl with the species of plants and animasl with the object of earning profit from their object of earning profit from their sale. sale.

E. g. - nurseries – multiplying and E. g. - nurseries – multiplying and selling plants, selling plants,

Cattle breeding farms,Cattle breeding farms,Poultry farms and commercial kennelsPoultry farms and commercial kennels

Construction IndustriesConstruction Industries

These industries involve construction of These industries involve construction of buildings, roads, dams, bridges, canals, etc.buildings, roads, dams, bridges, canals, etc.

The distinctive characteristic of these The distinctive characteristic of these industries is that their products are not industries is that their products are not marketed in the ordinary sense of being marketed in the ordinary sense of being taken to the markets to be sold.taken to the markets to be sold.

They are erected, built, or fabricated at a They are erected, built, or fabricated at a fixed site.fixed site.

These industries use of the product of These industries use of the product of manufacturing industries.manufacturing industries.

Manufacturing IndustriesManufacturing Industries

These industries are engaged in the These industries are engaged in the conversion of raw materials or semi conversion of raw materials or semi finished products into finished finished products into finished products. products.

In this process, they create ‘form In this process, they create ‘form utility’utility’

The products of extractive industries The products of extractive industries usually become the raw materials.usually become the raw materials.

E.g. cotton industry (textile industry)E.g. cotton industry (textile industry)

The categories of The categories of manufacturing industries.manufacturing industries.

Analytical Analytical SyntheticSyntheticProcessingProcessingAssembly lineAssembly line

Analytical Analytical

Many types of products may be Many types of products may be manufactured by analysing and manufactured by analysing and separating different elements from separating different elements from the same material.the same material.

E.g. oil refinery industryE.g. oil refinery industryWhich gives many sub productsWhich gives many sub products

SyntheticSynthetic

Various ingredients are put together Various ingredients are put together and combined in the manufacturing and combined in the manufacturing process so as to manufacture a new process so as to manufacture a new product.product.

E.g. cement is produced by combing E.g. cement is produced by combing and mixing concrete, gypsum, coal, and mixing concrete, gypsum, coal, etcetc

ProcessingProcessing

In this category , the raw material is In this category , the raw material is processed thru different stages of processed thru different stages of production resulting in the final production resulting in the final product.product.

Paper , sugar are examples of this Paper , sugar are examples of this typetype

Assembly lineAssembly line

Is nothing but industries where Is nothing but industries where different instruments or component different instruments or component parts already manufactured are parts already manufactured are assembled to turn out new useful assembled to turn out new useful productsproducts

E.g . Car, scooter, bicycle, television , E.g . Car, scooter, bicycle, television , computer etc.computer etc.

Classification on the basis of Classification on the basis of size and investmentsize and investment

Heavy industriesHeavy industries

Light industriesLight industries

Heavy industriesHeavy industries

Is generally used to refer to those Is generally used to refer to those industries which call for big capital industries which call for big capital investment and have a longer investment and have a longer production cycle. Such investment goes production cycle. Such investment goes mostly into machinery and equipment mostly into machinery and equipment of sophisticated and expensive type. of sophisticated and expensive type.

Industries like iron, steel, aeronautics, Industries like iron, steel, aeronautics, ship building and aluminium are ship building and aluminium are included in this categoryincluded in this category

Light industriesLight industries

Are those which involve a Are those which involve a comparatively smaller capital comparatively smaller capital investment and have a short investment and have a short duration production cycle. duration production cycle.

This is because of the less costly This is because of the less costly machinery required for the machinery required for the manufacturing of certain products.manufacturing of certain products.

Or because of the use of less Or because of the use of less sophisticated process of production.sophisticated process of production.

CommerceCommerce

While industry is concerned with the While industry is concerned with the production of goods for the satisfaction of production of goods for the satisfaction of human wants, commerce is an activity human wants, commerce is an activity where by goods are transferred to those where by goods are transferred to those who need them.who need them.

It basically provides the link between the It basically provides the link between the producers and consumersproducers and consumers

Between the manufactured goods and the Between the manufactured goods and the services , there are lot of hindrances when services , there are lot of hindrances when it comes to reaching the customer.it comes to reaching the customer.

Some of the hindrancesSome of the hindrances

i. Hindrances of personi. Hindrances of person Ii. Hindrances of exchangeIi. Hindrances of exchange Iii. Hindrances of placeIii. Hindrances of place Iv. Hindrances of timeIv. Hindrances of timeV. Hindrances of knowledgeV. Hindrances of knowledge

CommerceCommerce

We can also say that these hindrances We can also say that these hindrances can be overcome by removing all these can be overcome by removing all these hindrances thru hindrances thru

. By trade. By trade. Thru banking. Thru banking. Thru transportation,insurance&packing. Thru transportation,insurance&packing. Thru warehousing. Thru warehousing. Thru advertising. Thru advertising

TradeTrade

Trade refers to the sale, transfer or Trade refers to the sale, transfer or exchange of goodsexchange of goods

Trade is classified into two categoriesTrade is classified into two categories1. Internal Trade1. Internal Trade2. Foreign Trade2. Foreign Trade

Internal TradeInternal Trade

Also called as Home Trade , it Also called as Home Trade , it consists in the sale and exchange of consists in the sale and exchange of goods within the bounds of a nation. goods within the bounds of a nation. Payments for such sale are made in Payments for such sale are made in national currency directly or thru the national currency directly or thru the national banking system and the national banking system and the internal transportation system is internal transportation system is used for the movement of goods. used for the movement of goods.

Home TradeHome Trade

Can be done on either of the Can be done on either of the following basesfollowing bases

Whole sale tradeWhole sale trade

Retail tradeRetail trade

Foreign Trade Foreign Trade

This refers to the supply of goods to This refers to the supply of goods to buyers who are situated in foreign buyers who are situated in foreign countries.countries.

When goods are moved from one When goods are moved from one country to another, accordingly the country to another, accordingly the currency should be changed.currency should be changed.

Foreign TradeForeign Trade

Can be divided intoCan be divided into Import tradeImport tradeExport tradeExport tradeEntrepot tradeEntrepot trade

which is nothing but exchange of which is nothing but exchange of goods between foreign producers goods between foreign producers and foreign consumers.and foreign consumers.

Plant Plant

Means an establishment for the Means an establishment for the production of goods or provision of production of goods or provision of services.services.

It includes the equipments, personnel It includes the equipments, personnel also.also.

Firm Firm

Is used to mean the concern which owns Is used to mean the concern which owns and manages the plant, and also arranges and manages the plant, and also arranges for marketing of the products.for marketing of the products.

It is not only concerned with the technical It is not only concerned with the technical unit (i.e plant) , but also the unit of unit (i.e plant) , but also the unit of finance, management and enterprises too. finance, management and enterprises too.

For e.g , Sundaram group owns twoFor e.g , Sundaram group owns two automobile units, one assembly line and automobile units, one assembly line and

two maintainance units.two maintainance units.The collection of all these plants under one The collection of all these plants under one

organisation makes a firm.organisation makes a firm.

IndustryIndustry

The term Industry means the The term Industry means the collection of the firms which either collection of the firms which either use the same raw material or use the same raw material or manufacture the same product, even manufacture the same product, even if they use different raw materials .if they use different raw materials .

Classification of BusinessClassification of Business

Activities which relate to the Activities which relate to the production of goods production of goods

Activities that render services Activities that render services Activities related to the distribution Activities related to the distribution

of various goodsof various goodsActivities which provide financial Activities which provide financial

assistance.assistance.

Classification of businessClassification of business

Activity one - relates to all types of Activity one - relates to all types of industries which are into manufacturing.industries which are into manufacturing.

Activity two – relates to services like Activity two – relates to services like transportation, communication and transportation, communication and insurance sector etcinsurance sector etc

Activity three – channel of distribution like Activity three – channel of distribution like whole saler or retailerwhole saler or retailer

Activity four – includes industrial finance Activity four – includes industrial finance corp. , state finance corp, commercial corp. , state finance corp, commercial banks , stock exchange etc.banks , stock exchange etc.

Features of businessFeatures of business

1. production of wealth1. production of wealth 2. distribution2. distribution 3. continuity3. continuity 4. earning of profit4. earning of profit 5. combination5. combination 6. uncertainity of return6. uncertainity of return a. risk of rising costs,risk of loss of assets, a. risk of rising costs,risk of loss of assets,

risk of competition, risk of fall in demand, risk of competition, risk of fall in demand, risk of fluctuation in exchange rates.risk of fluctuation in exchange rates.

Divisions of BusinessDivisions of Business

On the basis of ownershipOn the basis of ownershipOn the basis of the scale of On the basis of the scale of

operationsoperationsAccording to natureAccording to natureBasis of objectivesBasis of objectives

On the basis of ownershipOn the basis of ownership

A. sole trader or proprietorshipA. sole trader or proprietorshipB. partnershipB. partnershipC. joint stock companyC. joint stock companyD. co-operative societyD. co-operative societyE. public enterpriseE. public enterprise

On the basis of size On the basis of size

Small sizeSmall size

Medium sizeMedium size

Large scale Large scale

On the basis of natureOn the basis of nature

Manufacturing Manufacturing

DistributiveDistributive

On the basis of objectivesOn the basis of objectives

It is generally believed that business It is generally believed that business activity is carried on only for profitactivity is carried on only for profit

As Urwick puts it As Urwick puts it Earning of profits cannot be the Earning of profits cannot be the

objective of a business any more than objective of a business any more than eating is the objective of livingeating is the objective of living

As Henry Ford also points out that As Henry Ford also points out that “mere money chasing is not business”“mere money chasing is not business”

Objectives of BusinessObjectives of Business

May be broadly categorised under May be broadly categorised under the following headsthe following heads

1. organic objectives1. organic objectives2. economic objectives2. economic objectives3. social objectives3. social objectives4. human objectives4. human objectives5. national objectives5. national objectives