Unit1 nature of business

Copyright © 2004 Pearson Education, Inc. Slide 6-1

Business Organization & systems

Supreet Wahee

BBA –1


What is today about ?

Getting around

( Self Introduction Exercise)Name

School

Career Aspirations

An adjective that describes you starting from the first alphabet of your name

Ground rules

Ground Rules

Ground Rules

Enjoy Learnin

g


Unit 1

Nature of Business

Learning Objectives• Introduction• Economic & Non-economic Activities• Concept of Business • Comparison between Business ,Profession ,Employment • Nature & characteristics of Business • Scope of Business• Objectives of a Business System• Structure of Business • Requisites of success in Modern Business • Qualities of successful businessman


Overview

Business

Human Activities and Business

All human activities are broadly divided into two categories:

(i) economic activities (ii) non-economic activities.

The work of a farmer, manufacturer, teacher, doctor, trader etc. are someexamples of economic activities.

They are primarily concerned with the production, distribution and consumption of goods and services

Economic activities are undertaken to earn one’s living and for theproduction of wealth.

Besides economic activities, people also undertake a number of activities formental satisfaction. They engage in charitable work, practice religion, undertakerecreational activities and also do many things out of love for others or outof patriotic feelings. These activities are known as non-economic activities.

these activities are undertaken not for any material reward or gain but forone’s happiness, pleasure or satisfaction which can not be measured in termsof money.

Distinction between economic and non-economic activities

Economic Non-economic

Economic activities are motivated by economic gain

Non-economic activities are motivated by a desire to achieve mental satisfaction or happiness.

Monetary gain is expected from economic activities

There is no such satisfaction from non-economic activities

Economic activities lead to creation of wealth.

Non-economic activities lead to personal satisfaction.

What is Business?

• Wheeler –”An institution organized and operated to provide goods & services to the society under the incentive of private gain”

• L.H Haney “Business may be defined as human activities directed towards providing or acquiring wealth through buying and selling good”

• Economic system in which goods and services are exchanged for one another or money, on the basis of their perceived worth.

• 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.

• A commercial activity engaged in as means of live hood or profit or an entity which engages in such activities

Understanding The Business SystemOld concept of Business:

The exclusive objective of business in those was maximization of profit at any cost

Business begin merely as an as an institution for the purpose of making money

As long as one made money and kept himself out of jail he was considered as

successful

He felt no particular obligation and acknowledged no responsibility to the community

He being the owner of business thought he had perfect right to do what he pleased

New concept of Business:

The modern business enterprise is social & economic institution .It does not exist in a vacuum .

Business by itself is not an end but a means to achieve an end ,a means to achieve public welfare

Profit alone is no longer the main objective of business now .

The objective of business is to create customer .The customer is the master and to serve him well is the only purpose of business

Business cannot survive without customers

Modern business aims at profit through business

Types of Economic Activities

When a person is regularly engaged in a particular economic activity, it is known as his or her occupation or vocation. Occupations may be classified into three categories —

(i) Business,

(ii) Profession and

(iii) Employment (Service).

Concept of Profession & employment

Profession: A profession may be defined as an occupation which involves the rendering of personal services of a specialized nature ,based on professional knowledge ,education and training such as services rendered by physicians ,lawyers ,auditors etc .

Employment Service or employment involve working under a contract of employment for or under someone known as the employer in return for wages or salary .

Comparison Between Business, Profession ,Employment

Nature or characteristics of Business

1. Sale ,Transfer or Exchange for satisfaction of Human Needs

2. Dealings in Goods & services

3. Continuity in Dealings

4. Profit Motive

5. Risk or Uncertainty

6. Creation of Utilities

7. Economic Activity

Nature of BusinessThe nature of business is best understood on the basis of its characteristics

or features which are as follows:

1. Business is an economic activity

2. It includes the activities of production or purchase and distribution.

3. It deals in goods and services.

4. It implies regularity of transactions.

5. It aims at earning profits through the satisfaction of human wants.

6. It involves risk; it is not certain that adequate profit will be earned.

7. It creates utilities.

8. It serves a social purpose by improving people’s standard of living.

Objectives of Business - Meaning

Business objectives are something which a business organization wants to achieve or accomplish over a specified period of time.

These may be to earn profit for its growth and development, to provide quality goods to its customers, to protect the environment etc.

These are the objectives of business.

Classification of Objectives of Business

Classification of Objectives of Business

Economic Objectives

Economic objectives of business refer to the objective of earning profit and also

other objectives that are necessary to be pursued to achieve the profit

objective, which include, creation of customers, regular innovations and best

possible use of available resources.

i. Profit earning

Profit is the lifeblood of business, without which no business can survive in a

competitive market .Infact profit making is the primary objective for which a

business unit is brought into existence.

Profits must be earned to ensure the survival of business, its growth and

expansion over time.

Profits help businessmen not only to earn their living but also to expand their

business activities by reinvesting a part of the profits.

In order to achieve this primary objective, certain other objectives are also

necessary to be pursued by business, which are as follows:

a) Creation of customers

A business unit cannot survive unless there are customers to buy the products and services.

Again a businessman can earn profits only when he/she provides quality goods and services at a

reasonable price. For this it needs to attract more customers for its existing as well as new

products. This is achieved with the help of various marketing activities.

b) Regular innovations

Innovation means changes, which bring about improvement in products, process of production and

distribution of goods.

Business units, through innovation, are able to reduce cost by adopting better methods of

production and also increase their sales by attracting more customers because of improved

products. Reduction in cost and increase in sales gives more profit to the businessman. Use of power-looms

in place of handlooms, use of tractors in place of hand implements in farms etc. are all the results of innovation.

c) Best possible use of resources

As you know, to run any business you must have sufficient capital or funds.

The amount of capital may be used to buy machinery, raw materials, employ

men and have cash to meet day-to-day expenses.

Thus, business activities require various resources like men, materials, money

and machines.

The availability of these resources is usually limited. Thus, every business

should try to make the best possible use of these resources.

This objective can be achieved by employing efficient workers, making full use

of machines and minimizing wastage of raw materials.

Quick checkGiven below are some statements relating to the economic objectives of business.

Some statements are true and some are false. Identify the true statements:

i Creation of demand for goods is the primary objective of business.

ii. Profits are expected to be earned by businessmen in proportion to the amount

of capital invested in business.

iii. It is not always necessary for businessmen to make the best possible use of

materials.

iv. Businessmen should use profits earned from the business only for their own

living.

v. Generation of employment is the primary economic objective of business.

Social Objectives

Social objectives are those objectives of business, which are desired to be

achieved for the benefit of the society.

Since business operates in a society by utilizing its scarce resources, the

society expects something in return for its welfare. No activity of the business

should be aimed at giving any kind of trouble to the society. If business

activities lead to socially harmful effects, there is bound to be public reaction

against the business sooner or later.

Social objectives of business include production and supply of quality goods

and services, adoption of fair trade practices and contribution to the general

welfare of society and provision of welfare amenities.

i. Production and supply of quality goods and services

Since the business utilizes the various resources of the society, the society

expects to get quality goods and services from the business.

The objective of business should be to produce better quality goods and

supply them at the right time and at a right price. It is not desirable on the part

of the businessman to supply adulterated or inferior goods which cause

injuries to the customers.

They should charge the price according to the quality of the goods and

services provided to the society.

Again, the customers also expect timely supply of all their requirements. So it

is important for every business to supply those goods and services on a

regular basis.

ii. Adoption of fair trade practices

In every society, activities such as black-marketing and over-charging are considered

undesirable.

Besides, misleading advertisements often give a false impression about the quality of

products. Such advertisements deceive the customers and the businessmen use them for

the sake of making large profits. This is an unfair trade practice.

The business unit must not create artificial scarcity of essential goods or raise prices for

the sake of earning more profits.

All these activities earn a bad name and sometimes make the businessmen liable for

penalty and even imprisonment under the law.

Therefore, the objective of business should be to adopt fair trade practices for the welfare

of the consumers as well as the society.

iii. Contribution to the general welfare of the society

Business units should work for the general welfare and upliftment of the

society. This is possible through running of schools and colleges for better

education, opening of vocational training centers to train the people to earn

their livelihood, establishing hospitals for medical facilities and providing

recreational facilities for the general public like parks, sports complexes etc.

Quick CheckWhich of the following statements relating to social objectives of business are

right and which are wrong?

i) Social objective of business is based on the assumption that what is good for business is also good for society.

ii) Production and supply of quality goods to the consumer is the social objective of business.

iii) Creation of demand for the product is a social objective of business.

iv) Establishment of sports complex for the public is the economic objective of business.

v) Hoarding and black-marketing are considered desirable on the part of business.

Human Objectives

Human objectives refer to the objectives aimed at the well-being as well as

fulfillment of expectations of employees as also of people who are disabled,

handicapped and deprived of proper education and training.

The human objectives of business may thus include economic well-being of

the employees, social and psychological satisfaction of employees and

development of human resources.

i. Economic well being of the employees

In business employees must be provided with fair remuneration and

incentives for performance, benefits of provident fund, pension and other

amenities like medical facilities, housing facilities etc. By this they feel more

satisfied at work and contribute more for the business.

ii. Social and psychological satisfaction of employees

It is the duty of business units to provide social and psychological

satisfaction to their employees.

This is possible by making the job interesting and challenging, putting the

right person in the right job and reducing the monotony of work.

Opportunities for promotion and advancement in career should also be

provided to the employees.

Further, grievances of employees should be given prompt attention and

their suggestions should be considered seriously when decisions are made.

If employees are happy and satisfied they can put their best efforts in work.

iii. Development of human resources

Employees as human beings always want to grow. Their growth requires

proper training as well as development.

Business can prosper if the people employed can improve their skills and

develop their abilities and competencies in course of time.

Thus, it is important that business should arrange training and development

programmes for its Employees.

iv. Well being of socially and economically backward people

Business units being inseparable parts of society should help backward

classes and also people those are physically and mentally challenged. This

can be done in many ways

. For instance, vocational training programme may be arranged to improve

the earning capacity of backward people in the community.

While recruiting it staff, business should give preference to physically and

mentally challenged persons.

Business units can also help and encourage meritorious students by

awarding scholarships for higher studies

Quick CheckBelow are given some statements regarding human objectives of business. State

which of them are “true” and which are “false”:

i. Businessmen should pay proper remuneration which will motivate the workers for work.

ii. Business units should provide social and psychological satisfaction to the employees.

iii. Businessmen should not help disabled persons unless they are employed in business.

iv. Business units should ignore the suggestions given by the employees while taking important decisions.

v. Helping physically handicapped persons in the society is an economic objective of Business.

National Objectives

Being an important part of the country, every business must have the objective

of fulfilling national goals and aspirations.

The goal of the country may be to provide employment opportunity to its citizen,

earn revenue for its exchange, become self-sufficient in production of goods and

services, promote social justice, etc.

Business activities should be conducted keeping these goals of the country in

mind, which may be called national objectives of business. The following are the

national objectives of business.

i. Creation of employment

One of the important national objectives of business is to create opportunities for

gainful employment of people.

This can be achieved by establishing new business units, expanding markets,

widening distribution channels, etc.

ii. Promotion of social justice

As a responsible citizen, a businessman is expected to provide equal opportunities to all

persons with whom he/she deals.

He/She is also expected to provide equal opportunities to all the employees to work and

progress.

Towards this objective special attention must be paid to weaker and backward sections of

the society.

iii. Production according to national priority

Business units should produce and supply goods in accordance with the priorities laid

down in the plans and policies of the Government.

One of the national objectives of business in our country should be to increase the

production and supply of essential goods at reasonable prices.

iv. Contribute to the revenue of the country

The business owners should pay their taxes and dues honestly and regularly.

This will increase the revenue of the government, which can be used for the

development of the nation.

v. Self-sufficiency and Export Promotion

To help the country to become self-reliant, business units have the added

responsibility of restricting import of goods. Besides, every business units should

aim at increasing exports and adding to the foreign exchange reserves of the

country

Quick CheckFill in the blanks with suitable word(s) from those given in brackets:

(i) To produce and distribute essential goods at a reasonable price is a/an _____________

objective of business. (social, national, human)

(ii) To help the country to become self-reliant business units should aim at increasing

________________. (export import, prices)

(iii) Business units should pay taxes honestly and______________.(occasionally, frequently,

regularly)

(iv) Business should provide equal opportunities to all its ________________.(owners,

employers, suppliers)

Global Objectives

Earlier India had a very restricted business relationship with other nations.

There was a very rigid policy for import and export of goods and services.

But, now-a-days due to liberal economic and export–import policy, restrictions

on foreign investments have been largely abolished and duties on imported

goods have been substantially reduced.This change has brought about

increased competition in the market.

Today because of globalization the entire world has become a big market.

Goods produced in one country are readily available in other countries. So, to

face the competition in the global market every business has certain objectives

in mind, which may be called the global objectives.

Let us learn about them.

i. Raise general standard of living

Growth of business activities across national borders makes available quality

goods at reasonable prices all over the world.

The people of one country get to use similar types ofgoods that people in other

countries are using.

This improves the standard of living of people.

ii. Reduce disparities among nations

Business should help to reduce disparities among the rich and poor nations of

the world by expanding its operation.

By way of capital investment in developing as well as underdeveloped countries

it can foster their industrial and economic growth.

iii. Make available globally competitive goods and services

Business should produce goods and services which are globally competitive

and have huge demand in foreign markets.

This will improve the image of the exporting country and also earn more

foreign exchange for the country.

Quick checkMatch the following.

(A) (B)

i. Lower Interest rate a. Political factor

ii. Demand for Packaged Food b. Technological factor

iii. Strike in the factory c. Social factor

iv. New Methods of Production d. Economic factor


Requisites of Success in Modern Business

& Qualities of a Successful

Businessman

Ingredients of Good Business Scan Pg 1.16 in modern business org and

mngments.a sherlekar

Requisites of Success in Modern Business

Clear –cut Objectives Efficient Business planning Proper Size Location ,and Layout Sound Organization ‘Financial Planning Marketing network Executive Development Dynamic Management Human Relations Research & Development

Qualities of a Successful Businessman Wide Knowledge Initiative Physical energy Foresight Business Morality Dependability & consistency Ability to cooperate Self-Confidence Aptitude for research & Analysis Winning Personality

Besides the above traits, the most important qualities of a businessman are as follows:Initiative and capacity to take prompt decision: Now-a-days, things move very fast and as such the businessman should have the capacity to take initiative and prompt decision.Determination, courage and perseverance: He must have strong will power and determination. He must have courage and perseverance to face the initial and future problems of the business.Intelligence and alertness: The businessman should be alert to his surroundings and he must be aware of the possible changes otherwise he will fail in business. He should be intelligent enough to utilize business opportunities.Quality of leadership: He should have the quality of leadership because today's business require loyalty and co-operation of all employees.Morality and integrity: The businessman should be honest, straight-forward, fair in dealings, dependability, and moral character. If a businessman intends to make money in a dishonest manner, he cannot establish in business for a long period.Training and Education: The businessman should learn the intricacies of modern business through training and education. These are thus essential for a successful businessman.Besides the above qualities, the businessman should posses the qualities of tact, patience, foresight, frankness, common sense and charming.

Qualities Of a successful business Independent Risk bearing Locus of Control , Preservance Positive self concept Analytical ability of mind Sense of Afficacy Openness to feedback & learning from Experience Confronting Uncertainty Interpersonal skills Need to influence others Stress takers Time Orientation Innovators Business communications skills Telescopic Faculty Leadership Business Planning

Significance of Business in Modern SocietyBusiness is an integral part of modern society. It is an organized and systematized activity for

profit.

It is concerned with activities of people working towards a common goal.

The modern society can not exist without business.

The need and importance of business in society can be described as follows:

1. Improvement in standard of living:

Business helps people in general to improve their standard of living.

2. Proper utilization of resources:

It leads to effective utilization of the scarce resources of society.

It provides facility of mass production.

3. Better quality and large variety of goods and services:

It involves production, purchase and sale of goods and services for price. Customer’ satisfaction

is the backbone of modern business.

Services such as supply of water, electricity etc. may be considered highly significant for the

community.

4. Creates utilities:

Business makes goods more useful to satisfy human wants. It adds to products the utilities of

person, time, place, form, knowledge etc. Thus, people are able to satisfy their wants

effectively and economically.

5. Employment opportunities:

It provides employment opportunities to large number of people in society.

6. Workers' welfare

Business organisations these days take care of various welfare activities for workers. They

provide safer and healthier work environment for employees.


Structure of Business

Business Departments

Accounting

Accounting departments examine and analyze money within the company.

● Management Accounting – Provides accounts for management

● Financial Accounting – Provides accounts for external reports

Human Resources (Personnel)

Human resources hires, fires, administrates, motivates and provides services for employees

● Payroll – Provides salaries for staff

● Recruitment – Recruits new staff

● Training – Trains staff

● Talent Management – In some companies there will be a special department to manage the needs of specialist personnel. e.g. Actors, singers or engineers with specialist skills.

Marketing and Sales

Marketing and sales deal with customers and sell the company's products.

● Sales – Sell the company's products

● New Business – Gets in new customers

● Account Management – Manages existing customers

● Telesales – Sells via the telephone

● Customer service – Provides service after the customer has bought a product

● Strategic Marketing – Plans future marketing

Market Research – Analyses customers wants and needs

● Advertising – Manages advertising and promotions

● Corporate Communications – Provides information to shareholders, customers, employees and other stakeholders

● Public Relations – Deals with the press

Operations

Operations will depend on the type of company. It could be: Production, manufacturing, assembly, design or retail.

Procurement

● Strategic Sourcing – Plans materials and suppliers requirements

● Purchasing – Purchases supplies on a day to day basis

Research and Development

Develop new products

Information Technology

● IT Support – Looks after computers and solves employees' IT problems

● Strategic Information Systems – Plans new technology

● Data Entry – Enters in information

Administration

Deals with paperwork within a company.

Logistics

Deal with transporting resources. Can be supplies, products and internal transfers.

Which Department?Which department would deal with the following:

1. There is something wrong with the accounts computer

2. Management need the latest sales figures

3. There is lead in the toys we manufacture and a reporter is asking questions

4. We need a better phone to compete with Apple's iPhone

5. We need to improve the quality of our Radio adverts

6. We need to ensure that our key design team do not find jobs with our competitors

7. We need to hire more people

8. We need to do the annual accounts

9. We need to find a way to increase sales by 20% over the next three years.

10. We need to find out why customers are not buying our orange paint.

Forms of business organization

Although forms of business ownership vary by jurisdiction, there are several common

forms:

Sole proprietorship: A sole proprietorship is a business owned by one person. The

owner may operate on his or her own or may employ others. The owner of the business

has personal liability of the debts incurred by the business.

Partnership: is a form of business in which two or more people operate for the

common goal which is often making profit. In most forms of partnerships, each partner

has personal liability of the debts incurred by the business. There are three typical

classifications of partnerships: general partnerships, limited partnerships, and limited

liability partnerships.

Corporation: is either a [limited liability ] or unlimited liability entity that has a separate

[legal personality] from its members. A corporation can be organized for-profit or not-

for-profit. A corporation is owned by multiple shareholders and is overseen by a board

of directors, which hires the business's managerial staff. In addition to privately

owned corporate models, there are state-owned corporate models.

Cooperative: Often referred to as a "co-op", a cooperative is a limited liability entity that

can organize for-profit or not-for-profit. A cooperative differs from a corporation in that

it has members, as opposed to shareholders, who share decision-making authority.

Cooperatives are typically classified as either consumer cooperatives or worker

cooperatives. Cooperatives are fundamental to the ideology of economic democracy.

For a country-by-country listing of legally recognized business forms, see Types of

business entity.


Scope of Business Organization / Classification of Business Activities

Scope Of Business

Classification of Business Activities Industry :is that branch which is concerned with the

production of good & services . the term industry is used to refer to useful things are

extracted from environment and transformed ,processed ,fabricated and multiplied into other products

Commerce :is concerned with the exchange of goods & services with all that is involved buying & selling of goods at any stage in their progress from raw materials to finished good on consumer hands

Primary Industries :Primary businesses and industries are those which extract (i.e. mine, farm, fish or drill) things normally provided by nature, e.g.~ fish from the sea;~ metal from the earth;~ food from the land.They produce raw materials in the form of oil, iron, coal or limestone, which are used to make other products. Also, they may also produce final products such as fish or fruit.

• Extractive Industry :These industries extract or draw out products from natural sources such as earth ,soil ,water ,air etc

• Examples: Farming ,mining ,Hunting ,fishing etc • Genetic Industry :means parentage or hereditary .Genetic Industries are

engaged in multiplying or reproduction of certain species of plants & animals • Example: Cattle breeding farms, poultry farms ,fish farms ,hatcheries &

commercial kernels

• Secondary Industries :Secondary businesses and industries are those involved in manufacturing products. That is, they turn the raw materials produced by the primary industries into things that can be sold and used. e.g.~ metal into cars~ wood into furniture~ wheat into bread

• Manufacturing Industries :these industries are concerned with conversion of raw material & semi finished products into finished products .They create form Utility

• Analytical :The Basic material is analyzed & separated into a number of products .Oil refinery-crude oil is extracted from beneath the earth and is processed into petrol ,diesel ,kerosene ,gasoline ,lubricating oil etc .

• Syntactical: Two or more products mixed together in the manufacturing operations to obtain some new products :example Soap ,cement ,paints ,fertilizers ,cosmetics etc

• Processing: Raw ,materials are processed through a series of manufacturing operations .examples-textile sugar ,steel

• Assembling :various components or parts are brought together to produce finished products

• Manufacture of Radio ,bicycle TV . Watches automobiles etc

• Construction Industries :They are concerned with making of

Buildings ,bridges ,dams ,roads ,canal etc

National & International Business

International business National Business

International business carries out its business activities across the boundaries of the nation

National Business carried out within the boundaries of the nation

International Business faces more problems and complexities in terms polices ,legal and Financial Systems

National Business faces comparatively less problems in these aspects .

Other Challenges in this are the cross cultural & different Market Structures It is not in this case

it is carried out in an unusual conditions like political differences of the countries ,legal aspects that impose certain conditions ,rules and regulations on the conducting of international business

the domestic business activities are free from these restrictions, as they are carried out in the same infrastructure environment and within the same rules & regulations

Formulation of strategies by the organizations performing international business is not an easy task

Formulation of strategies by the organizations performing domestic business is not as difficult .

IB is prone to various risks like -Political ,Exchange rate risk this is free from all these risks

Due too various reasons & decisions IB is very complex This is not as complex

What is a Business SystemA system is an organized or complex whole ,a combination of things or parts forming a complex or unitary whole .

A system is an established arrangement of components which lead to the attainment of particular objectives according to the plan.

A business enterprise is a system consisting of various sub-systems which operate in a balanced ,coordinated and integrated manner to make the whole as a business system

The business system is a subsystem of the national economic system. Its is a combination of all resources ,institutions and organizations ,engaged ,directly or indirectly in production & distribution of goods & services desired by consumers The system includes all sectors viz private ,public ,joint ,cooperative sectors .Thus the business system has two parts :operating Structure & Environmental factors in which the structure operates .The operating structure is the entire group of business organization & enterprisesEnvironmental Factors are economic ,human ,social, political ,technological factors

A business system is an organized or complex or whole, combination of things or parts forming a complex or unitary whole. A business system is an established arrangement of components which leads to the attainment of particular objective according to plan.

On this basis of a business system may be presented as follows: Inputs: consists of human and non-human resources like money,

material, equipment and information. Processing: Consists of production, finance, personnel, marketing,

processing of information and Output: Consists of goods and services, compensation to owners

and employees, meeting societies expenditure Feed back: Consists of (i) If result not acceptable adjust resources -

like better machinery and better management. Above all parts or components must be closely coordinated and

properly integrated, so that the entire system is a unified whole and it can accomplish common objectives as per plan.

Characteristics Of business system

Goal Orientation-directed towards achievement of specific objectives

Creativity-converts resources into useful products

Complexity-consists of innumerable elements and entities

Interdependence-various components are highly interacting and interdependent

Diversity-there is diversity in the range of output ,size ,ownership, location ,organization,

management

Dynamism-the structure & operations of business system are continuously changing due to

changes in its environment

Part of Socio-economic system-Business environment consist of all those economic ,social,

political, legal ,technological and other forces which influence the functioning of business.

Control Mechanism-Control mechanism helps to coordinate the organizational activities and

to respond to environmental opportunities and constraints

THE END

Business as a System If we look at a business as a system ,it may be regarded

as entity functioning in the social ,Economic ,political & cultural environment of a country or even world

The structure of business system consists of subsystems of industry & commerce .These sub systems are made up of various forms of enterprise which are engaged in the production and supply of goods and services to the community.

Each firm or enterprise is itself a system compromising sub-systems like production ,marketing ,financing ,personnel etc .

Each of these functions or systems has its own sub systems .The behavior of the business system as a whole depends on the functioning of and interrelationship among these sub systems .However these sub systems are the direct parts of the business system and these constitute the structure of business .The structure of business being a sub-system of the society is tied up with the environment in which it has to function

Objectives Of business system To convert inputs to outputs through coordinated efforts of all subsystems within the

business system

To formulate the aims and objectives of the business

To ensure the integrated development of business plans and programmes in all the areas

of business

To provide a good basis for the logical and orderly analysis of business activities

To stress on both internal & external linkages of business activities

To ensure good framework for managerial control

To use right information for decision making

To adapt to ever changing environment

To create opportunities for innovation

To provide for effective measurement and control

Organizing a business The major factors affecting how a business Is organized are usually

The size & scope of the business , and its anticipated management &

ownership. Generally a smaller business is more flexible ,while larger business ,or

those with wider ownership or more functional structures, will usually tend to be

organized as partnership or( more commonly) corporations .In addition ,a business

which wishes to raise money on a stock market or to be owned by a wide range of

people will often be required to adopt a specific legal form to do so

The sector and country. Private profit making businesses are different from government owned bodies. In some countries, certain businesses are legally obliged to be organized in certain ways.

Limited liability. Corporations, limited liability partnerships, and other specific types

of business organizations protect their owners or shareholders from business

failure by doing business under a separate legal entity with certain legal protections.

In contrast, unincorporated businesses or persons working on their own are usually

not so protected.

Tax advantages. Different structures are treated differently in tax law, and may

have advantages for this reason.

Disclosure and compliance requirements. Different business structures may be

required to make more or less information public (or reported to relevant

authorities), and may be bound to comply with different rules and regulations.

What is a Business System

A system is a set of parts ,elements or components which are interrelated and which interact with one another and make up the whole. these elements work together on the inputs as to accomplish common objectives ,that is the objective of the entire systemIn simplest form ,

*An environment *An Input *A processing Unit *Feedback *An output

A business organization can be regarded as an open adhesive system with its environment acting as a supra –system.


A Quick Check

Qualities Of a successful business

Business Ability For the success of any business it is essential that a businessman must possess

the sounds knowledge of market, product, technological development, scientific .inventions, innovation, organization and business laws. It requires an ability to initiate, direct and control, and even more important, the capacity to win and hold the respect and loyalty of fellow workers. It permits the businessman to work efficiently for the prosperity of his business. This type of quality depends first on temperament and second on training.

Financial AbilityFinance is an important factor for successful operation of the business. Without

adequate finance no business can smoothly run. So a businessman must possess good financial position. The larger the amount of capital, the larger is the size of business and larger the volume

Qualities Of a successful businessman

. Good Appearance This is a prominent quality required in a businessman. It help him much to win the

opinion of the public. Good appearance is a rare quality and depends on a combination of many other qualities of head and heart. It is the capacity of attracting and influencing other people without conscious effort. A businessman with sound personality can easily win the confidence of his prospect and convince him about his point of view.

of profit.

Spirit to Co-OperateThis businessman shall be a good Co-operator, and so a good businessman. He must be able

to compromise adjust, adapt, and be willing to admit that his judgment may on occasions be wrong. Besides he must be temperamentally fitted to exercise a divided authority.

Well BalancedA businessman must be a well balanced man of talent. He must have a consistent mind for

clearness, steadiness and firmness in his dealings with others. He must never be prey to moods, by being of complacent temper today.

Sincerity and HonestyA businessman should be sincere and honest in his business activities. His own and the form's

reputation depends on honesty. This honesty and sincerity which goes with it are attributes of the businessman at his best. Honesty with him is not only the best policy but also the best practice.

Enthusiasms The next quality without which no one should consider a profession as a I businessman, is

enthusiasm for his activities, for an unsettled life, and for long hours and for the people who is going to meet. Then the knowledge of product, knowledge of the marketing conditions and knowledge of the prospect to enthusiasm and you have unbeatable combination.

DependabilityThe successful businessman should have the capacity of dependability. He should use every

effort to hold it constant and dependable, so that those who work under it know what to expect as it remains unfluctuating from day today. It keep him much to win the heart of both customers and workers.

Courtesy Courtesy is to business what oil is to machinery. It costs nothing but wins a reputation. So

businessman has to win the heart of everyone with his polite manners. Every one cannot know how may down is head before the polite and courteous businessman.

AlertnessA businessman must be alert to the opportunities surrounding his business. He must keep in

touch with the world, and not keep himself to himself. He should move about and see what is going on for he has to estimate new wants and new inventions for creating fresh demands.

Sociability Another notable quality of the businessman is ability to mix with anyone within a minute or two.

He must get himself introduced to an unknown persons within a short time. Thus a businessman of sociable nature can easily win the confidence of many persons and much popularity among them.

Classifications

Agriculture and mining businesses are concerned with the production of raw

material, such as plants or minerals.

Financial businesses include banks and other companies that generate profit

through investment and management of capital.

Information businesses generate profits primarily from the resale of

intellectual property and include movie studios, publishers and packaged

software companies.

Manufacturers produce products, from raw materials or component parts,

which they then sell at a profit. Companies that make physical goods, such

as cars or pipes, are considered manufacturers.

Real estate businesses generate profit from the selling, renting, and

development of properties, homes, and buildings.

Retailers and Distributors act as middle-men in getting goods produced by

manufacturers to the intended consumer, generating a profit as a result of

providing sales or distribution services. Most consumer-oriented stores and

catalogue companies are distributors or retailers. See also: Franchising

Service businesses offer intangible goods or services and typically generate a

profit by charging for labor or other services provided to government, other

businesses, or consumers. Organizations ranging from house decorators to

consulting firms, restaurants, and even entertainers are types of service

businesses.

Transportation businesses deliver goods and individuals from location to

location, generating a profit on the transportation costs

Utilities produce public services, such as heat, electricity, or sewage treatment,

and are usually government chartered.

Meaning of Business OrganizationBusiness organization is composed of two words, business and organization. In order to understand the nature of business organization, it is necessary that the meaning of these two words is made clear to the readers.

(1) Business

Business is a human economic activity. It involves continuous and regular production and distribution of goods and services with a view to earn profit. Money flowing in and earning of profit through the satisfaction of the customers are the two measuring rods of the success of a business.

(2) Organization

The meaning of the word organization is generally divided into two parts (i) material organization and (ii) human organization.

(i) Material Organization

The material organization is the determining and providing of necessary raw materials, tools, capital, personnel etc in an enterprise fonts smooth functioning.

(ii) Human Organization

It is the appointment of qualified staff, dividing the duties and responsibilities of the personnel employed. Then grouping these duties in the form of posts and delegating authority to each post so that work is carried out as planned.

Business Organization

Thus is a process or an art of establishing effective cooperation between the factors of production (land, material, capital equipment. personnel) for producing or acquiring wealth with a view to earn profit in an enterprise. Scope of business organization. Business organization thus is a process or an art of establishing effective cooperation between the factors of production (land, material, capital equipment. personnel) for producing or acquiring wealth with a view to earn profit in an enterprise.

sole proprietorship is one person ownership without incorporation, e.g., corner grocery store, a housekeeper, a plumber or dog groomer, Freelance writers, copy editors, photographers and craftspeople,

partnership involves two persons or more in a business venture, e.g., lawyer partnership, common forms of partnerships are law firms, doctors sharing a small clinic or office, accountants and real estate partnerships. The partners share proportionally the profits or losses.

A corporation is owned by many people, usually thousands of people through "shares" which is basically a document saying you own a certain percent of a company. The share holders hire "officers" to operate the business, and these officers are people like managers and stuff like that. So in a corporation, the people who own the business do not run it, instead hired officers run it. corporation is a company with limited liability and shareholders, e.g., IBM or MacDonald Restaurants.

. A cooperative (also referred to as a co-op)is a form of business ownership that

consists of a group of people who have joined together to perform a business function more efficiently than each individual could do alone. The purpose of a cooperative is not to make a profit for itself, but to improve each member's situation. However, members of certain types of cooperatives do make a profit by selling their product and/or service to customers who are not co-op members. Cooperative Business is an association of people who are united voluntarily to meet common social, cultural and economic needs. This is done by a jointly owned enterprise.

Management

The efficient and effective operation of a business, and study of this subject, is called

management. The main branches of management are financial management, marketing

management, human resource management, strategic management, production management,

operation management, service management and information technology management

Organizing a business The major factors affecting how a business Is organized are usually

The size & scope of the business , and its anticipated management & ownership. Generally a

smaller business is more flexible ,while larger business ,or those with wider ownership or more functional

structures, will usually tend to be organized as partnership or( more commonly) corporations .In addition ,a

business which wishes to raise money on a stock market or to be owned by a wide range of people will

often be required to adopt a specific legal form to do so