Chapter 1 Introduction of the business Class 11 (HSEB/NEB)

Chapter 1

Introduction of the business

Business
A business is an economic activity that is concerned with the production and distribution of goods and services to society. It helps to earn profit by serving and satisfying the members of society. In simple words, the term business refers to a business or the state of being busy earning profit or generating wealth

Characteristics of business

a: Creation of utilities: Business creates utilities of goods and services to fulfill the needs and expectations of customers. Business involves many components and each component creates utility such as form, place, time, risk, finance, etc. The manufacturers create form utility, transportation, creates place utility, warehousing creates time utility, insurance fulfills security utility, etc.

b. Production, distribution, and exchange: Production, distribution, and exchange of goods and services are part of business activity. manufacturing organizations involved in the production of goods and services from raw materials. similarly, trading organizations distribute goods and services to final consumers.

c. Continuous activity: Business is a continuous process. it is not one-time financial activity. A business organization should regularly deal with goods and services. for instance, if a person sold his old motorcycle to purchase a raw one should not be considered a business.

d. Risk and uncertainty: It is known that ‘there is no business if there is no risk.’ In business, there is a risk of loss due to an uncertain future. Many factors may affect on business activities of an organization like the introduction of new products of similar nature; change in consumer taste, habit, fashion, and desire; shortage of raw material, natural calamities changes in government policy, etc.

e. Profit: As an economic activity, the primary objective of business is to earn profit and maximize wealth. Profit is essential for the survival and growth of a business. It is the reward to the investors in return for their investment. The ability of a business is measured by its profit-earning capability.

f. Consumer satisfaction: In a competitive market economy, the satisfaction of consumers is taken as one of the important requirements of the business. Business organizations produce and supply goods and services to consumers and obtain returns only by satisfying them. for the satisfaction of the consumers, business organizations need to supply the right quantity and quality of goods

g. Mutual Benefit: Mutual benefit in business means that both the business and its stakeholders, such as customers, employees, and suppliers, gain advantages and value from their interactions and relationships. It's about creating win-win situations where everyone involved benefits.

h.  capital investment: Capital investment means using money to buy assets or invest in projects. Short-term capital refers to funds used for immediate financial needs, like paying bills or buying inventory. For example, a small business taking out a short-term loan to purchase additional inventory for a busy holiday season. Long-term capital, on the other hand, is money invested for a longer period to support growth, such as buying new equipment or expanding facilities. For instance, a construction company securing a long-term loan to build a new office building.

I. Socio-economic activity: Socio-economic activity refers to the actions and behaviors that involve both social and economic aspects. It encompasses how individuals, communities, and societies engage in various economic pursuits while also considering their social and cultural context.

j. Organization: An organization refers to a structured entity or group of people working together towards a common goal. It can be a business, government agency, nonprofit organization, or any other formal group that has a defined structure, roles, and responsibilities

 

Dimensions of business

The dimensions of business refer to its scoop and areas example industry commerce and auxiliary service

Industry

 The industry involves the production of goods and services through the use of raw materials. some industries are involved in the production of industrial products whereas others for the production of consumer goods. based on the nature of the product, 

1. Extractive industry

 These industries are involved to extract mineral resources from land, water, and air. They involve in the collection or extraction of materials required for the production of finished goods. Generally, they supply raw materials for the production of finished goods.

 

2. Manufacturing industry

 Manufacturing industries create form utility of goods and services. These industries produce finished goods from raw materials and semi-finished goods through some specific process. Generally, they collect raw materials from genetic and extraction industries to produce finished products.

 

i.             Analytical industry

The process of converting single raw material into various goods is called the analytical industry.

 

ii.           synthetic industry

the process of manufacturing a single product using various raw materials are called synthetic industry.

 

 

 

iii.         processing industry

 The processing industry involves the transformation of raw materials into finished or semi-finished products through various manufacturing processes.

 

iv.         assembling industry

The assembling industry is responsible for putting together individual components or parts to create a final product.

 

3. construction industry

These industries involve the construction of infrastructure development work such as the construction of roads, bridges, buildings, dams, canals, etc. Each construction industry is specialized in certain development work. They use products of manufacturing industries in construction work like cement, rod, bricks, stones, etc.

 

4. genetic industry

The word genetic means heredity. Genetic industries involve the production of goods from plants and animals. They collect various types of plants from the forest or nurseries, which are required for the production of medicines, scents, perfumes, etc.

 

 Commerce

Commerce is one of the important components of business. It is concerned with the buying, selling, and distribution of goods and services to the market. The concept of business is not completed only with the production of commodities in a particular region. It is essential to distribute those products to consumers in different places. To distribute products from the manufacturers to the consumers for the purpose of exchange, commerce plays a crucial role.

i. Trade: Trade is concerned with the buying and selling of goods and services. It is an important branch of commerce engaged in the exchange of commodities between producers and consumers. Trade may be divided into the following two types:

a. Home trade: It is known as domestic trade or internal trade. Under this trade, buying and selling activities are done within the boundaries of the nation. Both the buyer and seller are from the same country. Generally, trading activities are done in different regions of a nation.

i.  Wholesale trade: Trading activities performed by wholesale enterprises are wholesale trade. Wholesalers buy watches in large quantities directly from manufacturers and sell them to retailers in small units. In some cases, goods are sold to industrial users and industrial buyers.

ii.  Retail trade: In retail trade, small traders play an important role. Retail traders provide door-to-door services to consumers at different places. Generally, they purchase goods from the wholesaler in small quantities and sell them to the ultimate consumers.

B. foreign trade: foreign trade is also known as international trade. Under this trade, buying and selling activities are done with trading enterprises for customers in foreign countries. Both the buyers and sellers are from two different countries.

i. Export trade: It is concerned with selling goods to foreign countries. A seller is known as an exporter. Export trade plays an important role in the distribution of surplus products to friendly nations and in earning foreign currency.

ii. Import trade: It is concerned with purchasing goods from foreign countries. The purchaser is known as the "importer. Imports play an important role in fulfilling the basic and other needs of the people.

iii. Entrepôt trade: it is also one of the parts of international trade. It refers to the import of goods from the suppliers of one country to export them directly to the consumers of other countries.

C. Service Enterprises: Besides auxiliaries of trade, many business organizations are directly involved in service sector businesses. The development of science and technology initiatives to develop service businesses The emergence of globalization in business contributes to the huge development of service businesses. Service sector businesses cover many areas such as education, hospitals, hotels, travel agencies, trekking agencies, computer software companies, TV and film entertainment, cable networks, etc.

 

Auxiliary to industry and trade

The activities are fascinating to industry and trade for their smooth operation are known as auxiliary to industry and trade.

 

Transportation: The function of transportation involves the movement of people, goods, or materials from one location to another, enabling the efficient exchange of goods, facilitating trade, and connecting people and businesses.

 

Warehousing: The function of warehousing involves the storage, management, and handling of goods or materials in a designated facility, providing a central location for inventory control, order fulfillment, and distribution to support efficient supply chain operations.

 

Insurance: The function of insurance is to provide financial protection and coverage against potential risks or losses by transferring the risk to an insurance company in exchange for premiums.

 

Banking: The function of banking involves the facilitation of financial transactions, such as accepting deposits, providing loans, and offering various financial services, to individuals, businesses, and governments, promoting economic growth and financial stability.

 

Communication: The function of communication is the transmission and exchange of information, ideas, or messages between individuals or groups, facilitating effective understanding, collaboration, and the sharing of knowledge.

 

Promotion: The function of promotion involves activities aimed at increasing awareness, generating interest, and persuading target audiences to engage with a product, service, or brand through various marketing and advertising strategies.

Packaging: The function of packaging is to enclose and protect products, facilitate storage and transportation, provide information, and enhance the visual appeal of the product to attract customers and promote its value.

 

 

Objective of Business

 

A. Economic Objective:  Economic objectives focus on satisfying and fulfilling the demands of customers by supplying goods and services with the purpose to earn profit. The fulfillment of economic objectives is essential for the survival and growth of business. The economic objectives of the business are as follows:

I. Profit:  Every business organization wants to earn profit by satisfying the needs of consumers. It is the reward to the investors. A business must earn profit to meet its factors of production and service. It is essential for the survival of business in the market.

ii. Creation Of customer:  Market standing is concerned with the long-term activities of a business organization in the market. For this purpose, the satisfaction of current customers and searching for new customers in new territory is necessary. For long-term economic growth and return, a business organization needs to perform many activities like improving the quality and quantity of products, minimizing cost, developing a new marketing strategy

iii. Innovation: In competitive business environment innovation is taken as one of the objectives of business. It is concerned with the development of new concept ideas, model designs, structures, knowledge, and technology. It is supportive of advancement in the production and distribution of goods and services.

iv. Productivity: Productivity is concerned with the best utilization of organizational resources through an efficient management system. Resources involve manpower, money, material, and machines. The proper use of resources helps to minimize wastage and maximize the quantity of products.

v. market share:  One of the objectives of a business is to increase market share. It is essential to consider the changing needs and expectations of consumers. For this purpose, it is necessary to take necessary measures for continuous improvement of the quality of products and services,

 

B. Social Objectives
A business organization is established with the basic objectives of providing to society. It performs business in society and also grows in society. Therefore, it needs to fulfill social obligations. It needs to consider social traditions, rules, regulations, morals, and ethics while doing business.

i. Supply of goods in times: The main objective of business is to supply
goods at the proper time to fulfill the needs of customers. It is the responsibility of businesses to supply goods in the market on a uniform basis by developing a network of distribution.

ii. Supply of quality goods: It is the responsibility of the business quality goods to the customers. It has to maintain the minimum standard prescribed by the concerned department of the Government. Adulteration, supply of low-quality goods, and other unfair business practices must be avoided.

iii. Supply of goods at a proper price: Price is the method of measurement of the value of products. It is one of the important components, which is considered by customers while making purchase decisions. Businesses should supply goods and services at the proper price. Necessary actions should be taken for minimizing the cost of products.

Iv Creating employment: Business is one of the important sources of employment. It creates employment opportunities both in management and technical works. The scope of business is vast and covers various areas like trade, auxiliaries of trade, and service sectors. Every activity of business requires various types of skilled, semi-skilled, and unskilled employees.

V. Fair dealing with suppliers and competitors: The function of fair dealing involves conducting business with suppliers and competitors ethically and equitably, promoting transparency, honesty, and integrity in negotiations, transactions, and competition to foster healthy business relationships and a competitive market environment.

vi. Supply of desired goods and services: The function of supply is to provide the desired goods and services to meet the demands and needs of consumers, ensuring availability, accessibility, and timely delivery of products or services that satisfy customer preferences and contribute to their well-being.

V. Maintaining social environment: Another objective of business is to maintain a social environment. It needs to take necessary precautions for the safety and protection of the social environment. It has to control pollution, noise, and other factors, which can affect public health.

 

 

C. Human Objectives

The prominent objective of a business organization is to fulfill the interest and expectations of the people directly involved in the business activities of the organization. Along with investors, various stakeholders have an interest in business such as consumers, suppliers, creditors, and the community. Some major human Objectives of business are as follows:

i. Cordial Relation with employees: Employees are directly involved in the production and distribution activities of the business. They have a direct interest in the welfare and development of the business. They spend their time and effort during regular working hours. It is the objective of businesses to provide financial as well as welfare facilities.

ii. Satisfaction to investors: Investors invest capital and take risks. They invest fixed capital for the establishment of business and working capital for day-to-day business activities. They expect a proper rate of return on investment and appreciation in the value of the wealth of business.

iii. Job satisfaction: The level of happiness and fulfillment an individual derives from their work, influenced by factors such as job conditions, recognition, and growth opportunities.

iv. Human resource development: The process of enhancing and developing the knowledge, skills, abilities, and potential of individuals within an organization through training, education, mentoring, and other developmental activities to support their professional growth and contribute to organizational success.

v. Participation: The act of actively engaging, contributing, and involving oneself in a group, organization, or community, often through collaboration, decision-making, and taking part in activities or initiatives.

D. National objective

Business organizations are an indispensable part of the nation. They do business by considering national rules, regulations, norms, and values. They contribute to the development of the socio-economic activities of the country. The main objective of business is to promote the economic development of the country through the proper use of resources. The following are the national objectives of the business

i. Utilization of resources: Business organizations need to utilize national resources consisting of human, mineral, water, agriculture, forest, and other natural resources. The proper utilization of resources is necessary for the economic development of the country.

ii. Payment of tax: One of the objectives of business organizations is to pay tax to the government based on their business turnover and profitability position. Such tax involves value-added tax, income tax, custom duty, clearing charge, etc. It helps to maximize government revenue.

iii. Creation of employment: Generating employment opportunities is one of the objectives of the business. Business is taken as an important source of employment. Business organizations need skilled, semi-skilled, and unskilled employees both in management and technical jobs. The development of industry, commerce, and service sector enterprises generate employment opportunities for the people.

iv. Balance development: The objective of business is to focus on the balanced development of all the regions and communities of the country. It is essential to establish production plants and other business units in different regions of the country. It is supportive of the proper utilization of resources available in different regions. The proper use of resources helps to promote economic activities in all the regions of the country

 

Organic Objective

Survival: The ability to endure and persist in the face of challenges, competition, and changing circumstances, ensuring the continued existence and viability of an individual, organization, or species.

Growth: The process of increasing in size, quantity, or quality, often associated with progress, expansion, and development in various aspects, such as business, personal development, or population.

 

Goodwill and Image: The intangible asset of a positive reputation and the perception others have, contributes to trust, credibility, and overall success.

 

 

The function of Business:

A business organization is established with a definite objective. For the achievement of pre-determined objectives, it performs various functions which are interrelated and interdependent to each other. The major functions of business are as follows:

1)  Production: Manufacturing organizations are involved in the production of goods and services Generally, they purchase raw materials from suppliers, process manufacturing plants, and produce finished goods. The production functions involve various activities like product planning, procurement of raw materials, storage of raw materials, and proper layout of plant and machinery.

2) Distribution: The distribution of goods and services is an important function of the business. It fulfills place utility. Trading organizations are involved in the distribution of goods and services from manufacturers to final consumers. This function is necessary to fulfill the demands of the customers living in different places. Distribution functions involve various activities like buying, selling, advertising, etc.

3) Investment: Investment of capital is an important element of business function. It is also known as the lifeblood of business. It is required for the proper use of human and other physical resources of the business organization. It is the function of a business to manage sufficient capital in terms of equity capital or loan and utilize it systematically.

4) Organizing: Organizing functions is necessary for performing business activities systematically and effectively. In every business, organization there should be a system of the proper division of work, rules, regulations, and working procedures.

5) Creating employment: Organizing function is necessary for performing and the creation of employment opportunities is the main function of a business organization. A business organization needs various types of employees skilled, semi-skilled, and unskilled. They need employees both in managerial and technical jobs. Some business organizations are involved in production and distribution whereas some are in customers’ service functions.

6) Research and development: Research and development is essential for every business organization to make itself up to date with the changing environment of the market and society. It helps with the innovation of new concepts, models, sizes, designs, structures, knowledge, and technology. It contributes to the generation of new products and services.

7) Human resource management: Human Resource Management involves all the activities necessary for manpower management. It refers to the philosophy, policies, procedures, and practices concerned with the management of employees of the organization. It is the process of acquisition, development, motivation, and maintenance of human resources.

8) Financial function of business: The management and allocation of financial resources, including financial planning, budgeting, accounting, and decision-making, to ensure the efficient use of funds and achieve financial objectives.

9) Service function: The provision of intangible and value-added services to customers, such as customer support, after-sales service, technical assistance, and consultation, to enhance customer satisfaction and build long-term relationships.

 

 

Components Of Business Environment

The interaction between the internal and external environments shapes the opportunities and challenges faced by a business and influences its decision-making, strategies, and overall performance.

 

Internal environment: The internal environment of a business includes factors within the organization's control, such as its culture, structure, and resources.

Owners: The owners of a business refer to the individuals or entities that have legal ownership or equity in the organization, which may include shareholders, partners, or sole proprietors. They have the ultimate authority over the business and make key strategic decisions.

 

Boards of Directors: The board of directors is a group of individuals elected or appointed to represent the interests of shareholders and oversee the management of the organization. They provide guidance, set policies, make important decisions, and monitor the performance of the executive management team.

 

Organization Resources: Organization resources refer to the assets, both tangible and intangible, that are available to the business to support its operations. This includes financial resources, physical assets, intellectual property, technological infrastructure, human capital, and other resources necessary for the functioning of the organization.

 

Organization Culture: Organization culture refers to the shared values, beliefs, norms, and behaviors that shape the working environment and define the collective identity of the organization. It influences how employees interact, make decisions, and operate within the organization, and plays a significant role in shaping the overall work atmosphere and employee behavior.

 

Organization Structure: Organization structure refers to the formal arrangement of roles, responsibilities, authority, and relationships within the organization. It determines how tasks are divided, coordinated, and controlled among different departments, teams, and individuals, providing a framework for efficient communication, decision-making, and workflow within the organization.

 

 

External environment: The external environment of a business encompasses factors outside the organization's control, including economic conditions, competition, and legal and social factors.

 

General Environment

 The general environment refers to the broader external factors and conditions that impact businesses, including social, technological, economic, political, and legal factors.

 

Political-Legal Environment: The political-legal environment includes government policies, laws, regulations, and political factors that affect businesses' operations, strategies, and decision-making.

 

Economic Environment: The economic environment comprises factors such as economic conditions, trends, inflation rates, employment levels, and overall market conditions that influence the financial performance and opportunities available to businesses.

 

Social-Cultural Environment: The social-cultural environment encompasses social attitudes, values, beliefs, demographics, cultural norms, and lifestyle patterns that shape consumer behavior, market demands, and business practices.

 

Technological Environment: The technological environment refers to advancements, innovations, and developments in technology that impact businesses' operations, processes, products, and services, as well as their competitive landscape and opportunities for growth.

 

 

Task Environment:

 

Customers: Customers are individuals or entities who purchase or use the products or services offered by a business.

 

Suppliers: Suppliers are individuals or companies that provide the necessary inputs, materials, or resources to support the operations and production of a business.

 

Competitors: Competitors are other businesses or organizations that offer similar products or services in the same market and compete for customers and market share.

 

Government: The government refers to the governing body or regulatory authorities that create and enforce laws, regulations, and policies that impact businesses' operations and conduct.

 

Pressure Group: Pressure groups are organizations or associations formed to influence or advocate for specific social, environmental, or political causes and can exert pressure on businesses through activism, lobbying, or public campaigns.

 

Financial Institution: Financial institutions are organizations such as banks, credit unions, and investment firms that provide various financial services, including loans, credit, investment opportunities, and financial advice.

 

Strategic Alliance: A strategic alliance is a cooperative agreement between two or more organizations to pursue shared goals, collaborate on specific projects, or gain competitive advantages through combined resources, expertise, or market access.