Business Organization

BBA Semester II
PROF. S.K. DOGRA, HOD-Mgmt

FEATURES & OBJECTIVES OF BUSINESS ORGANISATION

DEMONSTRATE UNDERSTANDING OF THE ECONOMY AND THE BUSINESS CONTEXT THE ECONOMY AS A DYNAMIC FORCE DIFFERENT ECONOMIES THE ECONOMIC SYSTEM OR THE ECONOMY OF A COUNTRY IS A SYSTEM IN WHICH PEOPLE ORGANISE THEIR ACTIVITIES TO UTILISE THE ECONOMIC RESOURCES, TO FULFILL PEOPLES COUNTRIES HAVE DIFFERENT KINDS OF

NEEDS.
COUNTRIES SHOW GREAT DIFFERENCES IN THE LEVEL OF & PATTERN OF ECONOMIC DEVELOPMENT BO- 2

Types of economy will answer questions like

WHAT TO PRODUCE HOW TO PRODUCE

FOR WHOM TO PRODUCE

TYPES OF ECONOMY
CAPITALIST
FREE MARKET ECONOMY, PRIVATE BUSINESSES INSTITUTIONS OWNED WITH BY THE INDIVIDUALS AND

OBJECTIVE TO EARN PROFIT

MINIMAL INTERVENTION BY THE STATE AND MARKET

FORCES OF DEMAND & SUPPLY PLAY IMPORTANT ROLE LOT OF COMPETITION E.G. USA, UK BO- 3

COMMUNIST
COLLECTIVE ECONOMY NO PVT. OWNERSHIP OF MEANS OF PRODUCTION! BUSINESS SOCIAL OWNERSHIP OF BUSINESS RESULTS IN EQUITABLE DISTRIBUTION OF NATIONAL INCOME NO PVT. SECTOR, STATE OWNS THE INDUSTRY CENTRAL PLANNING FOR ENTIRE ECONOMY IN VIEW OF THE RESOURCES PRICES SET BY THE STATE SOCIAL WELFARE IN VIEW OF CONSTRAINED

MAXIMISE

RESOURCES AND EQUITABLE DIST. OF NATIONAL WEALTH (RUSSIA, CHINA) BO- 4

MIXED ECONOMY
CO-EXISTENCE OF PUBLICI PRIVATE SECTOR CENTRAL PROFIT PLANNING MOTIVE WORK, WITH MKT. FORCES OF DEMAND/ SUPPLY. TO FIX THE PRICES CUM SOCIAL WELFARECERTAIN PRACTICES OF PVT. ENTERPRISES CONTROLLED BY STATE-

BLACK MARKETING ETC

PUBLIC SECTOR MAKE PROFITS TO FINANCE SOCIAL WELFARE, EXPENDITURE ECONOMY ACTS AS A DYNAMIC FORCE FOR BUSINESSES E.G. INDIA BO- 5

BUSINESS ORGANIZATIONS
BUSINESS

MEANING
BUSINESS ALL

CONCEPT
AROUND,

CONTENTS
AND FULFILLING

TACKLING

VARIOUS HUMAN NEEDS BUSINESS AN ECONOMIC ACTIVITY CONCERNED WITH EARNING MONEY AND ACQUIRING WEALTH INVOLVES REGULAR PRODUCTION AND/OR EXCHANGE OF

GOODS AND SERVICES, 'WITH THE MAIN PURPOSE OF

EARNING PROFITS THROUGH THE SATISFACTION OF HUMAN NEEDS BO- 6

EARNING OF PROFIT IS NOT THE ONLY OBJECTIVE OF BUSINESS CREATES CUSTOMERS & ENSURE REPEAT SALES PROVIDE CUSTOMER SATISFACTION, AS CUSTOMERS PAY A

PRICE FOR GOODS

BUSINESS AIMS AT PROFIT THROUGH SERVICE F. DRUCKER ALL SAYS "THERE IS ONLY ONE VALID TO

PETER.

DEFINITION OF BUSINESS PURPOSE - TO CREATE A CUSTOMER. INCLUDES ACTIVITIES FROM PRODUCTION DISTRIBUTION OF GOODS AND SERVICES.

INDUSTRY,
BANKING,

TRADE

AND

MANY

OTHER

ACTIVITIES

LIKE
AND

TRANSPORT,

INSURANCE,

WAREHOUSING

ADVERTISING ARE ALL BUSINESS. BO- 7

BUSINESS ORGANIZATION
A BUSINESS ORGANIZATION IS AN OPEN SYSTEM WHICH INFLUENCES THE ENVIRONMENT AND ALSO IS GETTING INFLUENCED BY THE ENVIRONMENT REGULARLY RECEIVES INPUTS FROM THE SOCIETY IN THE FORM OF RAW MATERIALS LABOUR, CAPITAL, INFORMATIONS ETC. RESOURCES COMBINED AND TRANSFORMED BY

MANAGEMENT

OF

THE

BUSINESS

ORGANIZATION

INTO

DESIRABLE GOODS/ SERVICES REQUIRED BY CONSUMERS

BO- 8

DEFINITION OF PROFIT
PROFIT IS THE REWARD OF ENTERPRISE & RISK BEARING
ON THE CAPITAL IN PLANT, MACHINES AND MATERIALS. THE BASIC PARAMETER OF BUSINESS IS THE HOPE OF MAKING MONEY. PROFIT IS ALSO CALLED SURPLUS. PROFITS PROVIDE FUNDS FOR GROWTH/ EXPANSION SURPLUS THAT REMAIN FOR DISTRIBUTION AMONGST PROMOTERS, PARTNERS, SHAREHOLDERS

REWARD
ENTITLED

FOR
TO

CREATION
MAKE/GET

OF

UTILITIES.

BUSINESSMEN
PROFITS AS BO- 9

REASONABLE

REMUNERATION.

JUSTIFICATION OF PROFIT
PROFIT NECESSARY TO PAY FAIR RETURN OF INVESTMENT INTEREST ON LOAN CAPITAL & DIVIDEND

ON OWN CAPITAL.
PROFIT NECESSARY SAVINGS TO FOR RETAIN SOME EARNINGS IN

COMPANY

RE-INVESTMENT

THE

BUSINESS TO ENSURE ITS NORMAL RATE OF GROWTH. REWARD FOR RISK TAKING & ENTREPRENEURSHIP. PROFITS HELP MAKING RESERVES TO GAIN STRENGTH TO WITHSTAND COMPETITION.

BO-10

PROFITS PROVIDE MEANS OF SELF - FINANCING FOR GROWTH IN BUSINESS

ALSO HELPS TO ATTRACT NEW CAPITAL FROM OUTSIDE SOURCES. NECESSARY LONG TIME TO ATTRACT INVESTORS. OF PROFITS ARE MEASURES OF EFFICIENCY, SUCCESS. PROFITS OVER A INDICATES EXISTENCE SUCCESSFUL

BUSINESS ENTERPRISES.
SOCIETY APPRECIATES THE SERVICES OF A PROFITABLE BUSINESS, PRODUCED. PROFITABLE ENTERPRISES HAVE GOODWILL AND POSITIVE IMAGE IN SOCIETY. BO-11 AS RIGHT KIND OF GOODS HAVE BEEN

BUSINESS AS A SYSTEM
HUMAN NEEDS EVER GROWING AND CHANGING. BUSINESS SHOULD ACHIEVE MORE EFFICIENT UTILISATION OF HUMAN RESOURCES AND SHOULD HAVE A

SYSTEM OF USING PHYSICAL RESOURCES IN THE MOST

EFFICIENT MANNER. WHAT IS A SYSTEM? ENVIRONMENT

INPUTS

PROCESSES

OUTPUTS

FEEDBACK BO-12

SET OF SUB-SYSTEMS ASSOCIATED IN A WAY THAT FORMS A CO-ORDINATED WHOLE.

REFERS TO A COMBINATION OR ASSEMBLAGE OF CERTAIN COMPONENTS / PARTS FORMING UNITARY WHOLE.

COMPONENTS

OR

PARTS

(MATERIALS,

METHODS,

PROCESSES) ARE THE SUB-SYSTEMS.

THE SYSTEM OPERATES IS A SEQUENCE ACCORDING TO A

PRE-DETERMINED PAN IN ORDER TO ACHIEVE CERTAIN OBJECTIVES

AN ORDERLY ARRANGEMENT OF INTER-RELATED PARTS OR ACTIVITIES DESIGNED TO ACHIEVE SOME GOALS. BO-13

THE MAIN FEATURES OF A SYSTEM ARE: GOALS INPUTS CONVERSION PROCESS OUTPUT

ENVIRONMENT
FEEDBACK CONTROL MECHANISMS

BO-14

A BUSINESS ENTERPRISE IS AN IMPORTANT SYSTEM CREATED TO SATISFY HUMAN NEEDS THROUGH THE PRODUCTION OF GOODS AND SERVICES AND THEIR DISTRIBUTION.

GETS

INPUTS

FROM

ENVIRONMENT

AND

SUPPLIES

OUTPUT TO ENVIRONMENT

INPUTS

INCLUDE

MANPOWER,

MACHINES,

MATERIAL,

MONEY, INFORMATION ETC. HUMAN, FINANCIAL AND PHYSICAL RESOURCES

CONVERTED INTO GOODS AND SERVICES OUTPUTS OF BUSINESS SYSTEMS. BO-15

BUSINESS

SYSTEMS

ALSO

PROVIDE

PROFITS,

EMPLOYMENT, TAX REVENUE, GROWTH. WORK UNDER THE INFLUENCE OF ENVIRONMENT,

CONSISTING OF LEGAL, ECONOMICS, SOCIAL, POLITICAL

FACTORS.
ENVIRONMENT ALSO PROVIDES FEEDBACK WHICH

INFLUENCES FUTURE OPERATIONS.

BO-16

THE

BUSINESS

SYSTEM

IS

COMBINATION

OF

ALL

RESOURCES, ORGANISATIONS INSTRUCTIONS, DIRECTLY OR INDIRECTLY RELATED TO THE PRODUCTION OF GOODS AND SERVICES FOR THE SATISFACTION OF HUMAN NEEDS.

BO-17

FEATURES OF A BUSINESS SYSTEM

1. GOAL ORIENTATION:- BUSINESS ACTIVITIES DONE FOR ACHIEVING GOALS SUPPLY OF GOODS TO CONSUMERS,

PROFIT, GROWTH, MEETING SOCIETY EXPECTATIONS ETC.

2. CREATIVITY & INNOVATIVE:CONVERTS VARIOUS

RESOURCES INTO USEFUL PRODUCTS. ADD VALUE TO THE INPUTS AND KEEPS ON MODIFYING, INNOVATING. 3. COMPLEXITY:WITH SO MANY INPUTS, ELEMENTS,

BECOMES A VERY COMPLICATED/SOPHISTCATED ACTIVITY MANAGED EFFICIENTLY TO GET RESULTS.

BO-18

4.

DIVERSITY:- LOT OF VARIETY EXISTS IN THE RANGE OF NPUTS, SIZE, OWNERSHIP, LOCATION, MANAGEMENT ETC.

5.

INTER-DEPENDENCE:- ALL THE VARIOUS COMPONENETS OF A BUSINESS SYSTEMS INTER-RELATED AND INTERDEPENDENT. VARIOUS DEPARTMENT INTERACT & DEPEND ON OTHERS.

6.

DYNAMISM:- OPEN & ADAPTIVE SYSTEM AS IT INFLUENCES AND IS ALSO INFLUENCED BY IT ENVIRONMENT

REGULALRY.
CHANGES.

BUSINESS

HAS

TO

UNDERSTAND

THE

BO-19

7.

CENTRAL MECHANISMS:- CENTRAL MECHANISM NEEDS TO BE VERY STRONG IN A BUSINESS SYSTEM. MANAGEMENT DESIGNS THE CENTRAL SYSTEM. CNTROL MECHANISM INTEGRATES AND CO-ORDINATES ALL ACTIVITIES FOR THE OVERALL SUCCESS OF BUSINESS.

8.

PART OF THE SOCIO-ECONOMIC SYSTEM:- BUSINESS IS A PART AND PARCEL OF THE WIDER SYSTEM THE SOCIETY, THE ECONOMY. ECONOMIC SYSTEM OF A COUNTRY

SERVES AS THE FRAMEWORK IN WHICH BUSINESS ARE

DONE. CONSTANT INTERACTION BETWEEN THE BUSINESS

SYSTEM AND ITS ENVIRONMENT OF LEAGAL, POLITICAL SOCIAL FORCES. BO-20

ELEMENTS (SUS-SYSTEMS) OF BUSINESS SYSTEM

EVERY BUSINESS FIRM IS IN ITSELF A SYSTEM CONSISTING OF SEVERAL SUB-SYSTEMS. A. PRODUCTION SYSTEM B. MARKETING SYSTEM C. FINANCE SYSTEM

D. PERSONNEL SYSTEM
E. RESEARCH & DEVELOPMENT SYSTEM

EACH OF THE ABOVE SUS-SYSTEMS HAS FURTHER PARTS AND DIVISIONS. THE ENTIRE ENVIRONMENT ACTS LIKE A SUPRA SYSTEM BO-21

FUNCTIONAL AREA OF BUSINESS

ENTERPRISE PERFORMS VARIOUS FUNCTIONS TO ACHIVE BUSINESS OBJECTIVES. SALE BIG TRADER BUSINESS /SMALL BUSINESS (ALL THESE FUNCTIONS FUNCTIONS PERFORMED BY ONE/TWO/FEW PERSONS). ORGANISATIONS PROFESSIONALLY MANAGED.

FUNCTION INTER-DEPENDENT & INTER-RELATED

PROPER INTEGRATION PERFORM MUST EXIST E.G. PRODUCTION OF DEPENDS ON MARKETING MANAGERS VARIOUS FUNCTIONS MANAGEMENT AND ENSURE THAT ALL FUNCTIONAL AREAS WORK SMOOTHLY. BO-22

FUNCTIONS OF BUSINESS
1. FINANCE o ARRANGEMENT OF SUFFICIENT CAPITAL. o ENSURES RESOURCES. OPTIMUM UTLISATION OF FINANCIAL

o DECIDES TO RAISE FINANCE FROM VARIOUS SOURCES,

INVESTMENT VENTURES. o FINANCIAL PLANNING/MANAGEMENT/ANALYSIS OF FUNDS IN VARIOUS PRODUCTIVE

BO-23

2. PRODUCTION o CORE FUNCTIONS OF TRANSFORMING INPUTS INTO

OUTPUTS, DESIRED BY SOCIETY. o RESOURCES LIKE RAW MATERIALS, MANPOWER, POWER, TECHNOLOGY, CAPITAL USED FOR PRODUCTION

o INVOLVES PRODUCTION PLANNING & CONTROL, QUALITY

CONTROL, PROCUREMENT AND STORAGE OF RAW

MATERIALS ETC.

BO-24

3. MARKETING o STARTS WITH INDENTIFYING THE NEEDS OF THE

CUSTOMERS. o CONCERNED WITH DISTRIBUTIONS OF GOODS & SERVICES. o THIS FUNCTION PROVIDES USEFUL GUIDANCE TO PRODUCTION DEPARTMENT BY PRODUCT PLANNING AND DEVELOPMENT.

o FIXES PRICES FOR THE PRODUCTS.

o TAKES CARE OF PRODUCT PROMOTION AND DECIDES ABOUT ADVERTISEMENT, PUBLICITY, SALES PROMOTION ETC. o DECIDE PHYSICAL DISTRIBUTIONS TOO BY APPOINTING DEALERS, DISTRIBUTIONS ETC. BO-25

4. PERSONNEL OR HR FUNCTIONS o INVOLVES FINDING, RECRUITING, SELECTING SUITABLE EMPLOEES. o ARRANGING o MAKING THEIR FINAL FOR SELECTION, GROWTH, TRAINING, TRANSFER,

ORIENTATION, REMUNERATIONS AND MOTIVATIONS.

POLICIES THEIR MOTIVATION, INDUSTRIAL RELATIONS. 5. RESEARCH & DEVELOPMENT o THIS FUNCTION TAKES CARE OF INNOVATIONS, CREATIVITY, DEVELOPMENT OF NEW PRODUCTS, VARIANTS.

o HELPS BUSINESS ENTERPRISE TO HANDLE COMPETITION.

o TAKES TIME, EFFORTS AND MONEY.

BO-26

6. PURCHASE FUNCTION

o BIG

ORGANISATIONS

HAVE

THIS

AS

SEPARATE

DEPARTMENT TO UNDERTAKE COMPLICATED ACTIVITIES OF PURCHASING CHOOSING BULK MATERIALS, INVITING TENDERS,

SUPPLIERS,

TRANSPORT

ARRANGEMENT,

IMPORTS OF RAW MATERIALS, MACHINES AND OTHER EQUIPMENTS.

BO-27

7. LEAGAL FUNCTION o ENSURE o GIVES COMPLYING PROFESSIONAL WITH RULES/REGULATIONS TO MANAGEMENT OF TO GOVERNMENT OR ACTs. ADVICE HANDLE DISPUTES WITH SUPPLIERS, GOVERNEMENT AND TAKES CARE OF ALL LEGAL DOCUMENTATION. 8. PUBLIC RELATION o RELATIONS WITH PUBLIC, GOVERNMENT TO IMPROVE AND OTHER INSTITUTIONS. TAKES STEP GOODWILL,

PUBLICITY CAMPAIGNS.

BO-28

BUSINESS & ENVIRONMENT INTERFACE

BUSINESS ENVIRONMENT MACRO FRAMEWORK WITHIN WHICH THE BUSINESS FIRM FUNCTIONS COLLECTION OF ALL FORCES, FACTORS AND INSTITUTIONS WHICH ARE EXTERNAL TO AND BEYOND THE CONTROL OF INDIVIDUAL BUSINESS ORGANISATION AND THEIR

MANAGEMENTS

ECONOMIC ENVIRONMENT

NON-ECONOMIC ENVIRONMENT

ECONOMIC ENVIRONMENT BO-29

 REFERS TO THE NATURE AND THE KIND OF ECONOMY, ORGANISATION INDUSTRIAL ROLE OF POLICIES THE OF THE CAPITAL MARKET, THE OF SETUP OF UNDERTAKING DEVELOPMENT, SECTORS, DEGREE ECONOMIC FISCAL RESOURCES

GOVERNMENT,

MONETORY

AND

EXPLOITATION ETC. GOVERNMENT DOES ECONOMIC PLANNING, MAKING FISCAL

POLICIES & BUDGETS, BUSINESS LAWS, CONTROL ON

WAGES AND PRICES, IMPORT & EXPORT POLICIES. ALL THESE AFFECT THE BUSINESSES. THE INDUSTRIAL

POLICY

RESOLUTIONS

OF

THE

GOVERNMENT

ALSO

INFLUENCES THE ECONOMIC ENVIRONMENT OF BUSINESS. LIKE GROWTH OF SMALL SCALE SECTOR BUSINESSES, DEVELOPMENT OF BACKWARD REGIONS. BO-30

NON-ECONOMIC ENVIRONMENT
COMPRISES COUNTRYS HISTORY, CULTURE, GEOGRAPHY, SOCIAL SETUP ETC., WITHIN WHIH THE NATIONAL

ECONOMY OPERATES. NON ECONOMIC ENVIRONMENT IS A GIVEN PARAMETERS

COMPONENTS:
1. POLITICAL AND LEGAL ENVIRONMENT o IDEOLOGY OF THE GOVERNMENT, PHILOSOPHY OF THE POLITICAL PARTIES, NATURE AND EXTENT OF BUREAUCRACY, REDTAPE ETC. o POLITCAL STABILITY, IMPACT OF CIVIL WAR, ELECTION UPHEAVELS, FOREIGN INFLITRATION ETC. BO-31

POLITICAL AND LEGAL ENVIRONMENT CONT.. o FOREIGN POLITY OF GOVERNMENT INCLUDING DOOING BUSINESS WITH CERTAIN COUNTRIES, CUSTOMERS ETC. o DEFENCE AND MILITARY POLICY OF THE GOVERNMENT, MORE ALLOCATION ETC. o IMAGE OF THE COUNTRY & ITS LEADERS.

o CONSTITUTIONAL AMENDEMENTS TO MANY ATCS AFFECT

THE BUSINESS. o LEGAL RULES GOVERNING THE BUSINESS. o THEIR FORMATION & IMPLEMENTATION. o BUSINESS LAWS AND JUDICIAL SYSTEMS. BO-32

2. SOCIO-CULTURAL ENVIRONMENT

o BUSINESS

FIRMS

OPERATE

IN

SOCIO-CULTURAL

CONDITION OF A COUNTRY / REGION. o A FIRM AIMING AT CAMTURING MARKETS IS DIVERSIFIED SOCIETIES HAS TO BE CAREFUL ABOUT THE CULTURAL, RELISIONS SENSITIVITIES. o EACH SOCIETY HAS ITS OWN CULTURE CONSISTING OF CUSTOMS, HABITS, BELIEFS, VALUES, LANGUAGES ETC. o SUCH FACTORS CANNOT BE IGNORED.

o MODERN WESTERN SOCIETIES ARE MORE RECEPTIVE TO

NEW PRODUCTS NEW INNOVATIONS BO-33

o BUSINESS FIRMS CANNOT MARKET AND SELL FASHINABLE GARMENTS IN TRADITIONAL SOCIETIES. o INDIAN SOCIETY AND IS ALSO BECOMING NEW LIBERAL PRODUCTS AND AND

MODERNISED

THUS

MANY

SERVICES ARE BEING ACCEPTED.

o NEW PRODUCTS NOT BEING RESISTED.

o LIBERAL OUTLOOK OF THE CHANGING SOCIETY IS

MOTIVATING PEOPLE TO BUY NEW MODERN GOODS AND THE BUSINESS AREFULLY ENCASHING THIS OPPORTUNITY.

BO-34

3. DEMOGRAPHIC ENVIRONMENT
o SIZE AND GROWTH WOMEN RATE WORK OF POPULARITY, LIFE RATE,

EXPECTANCY,

PARTICIPATION

DISTRIBUTION
EDUCATIONAL

OF

POPULARISM,
RELIGION,

RURAL-URBAN
LANGUAGE

DIVIDE
ALL

LEVEL,

ARE

RELEVANT TO BUSINESS. o SIZE OF THE DOMESTIC MARKET FOR VARIOUS GOODS DEPEND UPON THE SIZE OF THE POPULATION OF A CITY/COUNTRY. E.G. PUBLIC SCHOOL IN DELHI 30 YEARS BACK, 20 & 10 YEARS BACK

BO-35

o MANY BUSINESSES IN BIG CITIES PROSPER DUE TO LARGE MIGRATION EACH YEAR. o MNCs WANT TO PENETRATE THOSE COUNTRIES NOW WHERE POPULATIONS ARE LARGE. o AROUND 35% MIDDLE CLASS POPULATION IS ATTRACTING MANY WORLD CLASS COMPANIES TO INDIA TO MARKET THEIR PRODUCTS. o AVAILABILITY OF MORE LABOUR FORCE CATCHUP INTO

DEVELOPING COUNTRIES IN MOTIVATING MANY MNCs TO

SETUP THEIR PRODUCTIONS UNITS THERE. BO-36

4. TECHNOLOGICAL ENVIRONMENT

o IN DEVELOPED COUNTRIES, TECHNOLOGY IN USE CHANGES

WITH LITTLE TIME LAG WHEN EW TECHNOLOGY BECOMES AVAILABLE. o THUS RATE OF OBSOLSCENE HIGH AND CANNOT PERSIST WITH OUTDATED TECHNOLOGY. o FASTER CHANGES IN TECHNOLOGY NEED TO BE ADOPTED BY BUSINESS UNITS TO REMAIN COMPETITIVE AND EASY PROFITS.

o COMPANIES HAVE TO UPDATE THEMSELVES WITH LATEST

TECHNOLOGY CHANGES AND ADOPT THE SAME. BO-37

5. NATURAL & GEOGRAPHICAL ENVIRONMENT o INDUSTRIAL UNITS GET SETUP NEAR THEIR SOURCES OF INPUTS. o MOST OF SUGAR MILLS ARE SETUP WHERE SUGARCANE GROWS MORE. o MOST OF THE IRON & STEEL MILLS GET UP NEAR COAL MINES. o COTTON MILLS IN GUJARAT & MAHARASHTRA AS HUMID CLIMATE REQUIRED. o WHEAT FLOUR MILLS MORE IN UP AS DRY CLIMATE REQUIRED. o BUSINESS HAVE TO CONSIDER THEIR ACTIVITIES WITH

RELATION TO NOT CAUSING WATER/AIR/NOISE POLLUTION

ETC. AS TO THE GREATER ROLE PLAYED BY GOVERNMENT & ENVVIRONMENTALISTS. BO-38

BUSINESS & ENVIRONMENT INTERFACE

NTERACTION IN FOLLOWING WAYS:
1. EXCHANGE OF INFORMATION o BUSINESS HAS TO FORECARS THE EXTENSION

ENVIRONMENT.
o HAS TO COLLECT, TO ANALYSIS AND USE INFORMATION

RELATING

MARKET

CONDITIONS OF

TECHNOLOGICAL COMPETITION,

DEVELOPMENTS,

ACTIVITY

GOVERNMENT POLICIES. o BUSINESS TOO SUPPLIES INFORMATIONS TO GOVERNMENT AGENCIES, SHAREHOLDERS, PUBLIC AND OTHER BO-39

INSTITUTIONS.

2. EXCHANGE OF RESOURCES

o BUSINESS

OBTAINS

FINANCE,

MATERIALS,

MANPOWER

TECHNOLOGY FROM ENVIRONMENT COLLABORATORS. o BUSINESS DEPENDS UPON EXT. ENVIRONMENTS TO

DISPOSE OFF ITS OUTPUTS, FULFILLS EXPACTATIONS OF CUSTOMERS SHAREHOLDERS, SUPPLIERS. 3. EXCHANGE OF INFLUENCE & POWER o EXT. ENVIRONMENT HOLDS INFLUENCE AND POWER OVER BUSINESS, GOVERNMENT, TRADE UNION, REGULATIONS.

o BUSINESS ALSO INFLUENCES AS ADVERTISEMENTS OF

PRODUCTS SHAPE, THE LIFE OF PEOPLE ETC. BO-40

PROFIT MAXIMISATION V/S SOCIAL RESPONSIBILITY OF BUSINESS

o PROFIT REWARD FOR TIME, EFFORT, INVESTMENT. o PROFIT ESSENTIAL FOR GROWTH & SURVIVAL.

o MEASURE OF EFFICIENCY AND PRESTIGE.

o NOT THE ROLE OBJECTIVE OF BUSINESS. SOCIAL RESPONSIBILITY: A BUSINESS FIRM MORE THAN AN

ECONOMIC
ACTIVITIES WELFARE.

INSTITUTION
EXERCISE

AN

ORGAN

OF

SOCIETY
ON

&

DECISIVE

INFLUENCE

SOCIAL

o MUST WORK IN OVERALL SOCIAL INTEREST.

o MUST CONSIDER PUBLIC INTEREST WHILE TAKING BUSINESS DECISION AND ACTIONS. BO-41

o OBJECTIVE OF PROFIT MAXIMISATION RELATED TO SOCIAL RESPONSIBILITY. o IN SHORT RUN, SOCIALLY RESPONSIBLE ACTION MAY

REDUCE IMMEDIATE PROFIT. COST OF POLLUTION CONTROL

EQUIPMENTS CANNOT BE PASSED ON TO THE CONSUMERS, LONG RUN, IMAGE OF COMPANY IMPROVES AND ALSO PROFITABILITY. o CREATERS FAVOURABLE SOCIAL ENVIRONMENT. o MAXIMISING PROFITS WITHOUT BEING SOCIALLY RESPONDENTS WILL BE RISKY FOR THE BUSINESS.

o REGULATORS

PLAY

AN

IMPORTANT

ROLE

IN

MAKING

BUSINESS SOCIALLY RESPOSIBLE.

BO-42

BUSINESS ETHICS AND VALUES

o ETHICS

THE

DISCIPLINE

AND

SCIENCE

OF

HUMAN

CONDUCT A STUDY OF RIGHT OR WRONG IN HUMAN RELATIONSHIPS. BUSINESS ETHICS MORAL PRINCIPLES OR RULES OF BEHAVIOUR WHICH SHOULD GO VERN THE CONDUCT OF BUSINESS ENTERPRISES. o CODE OF CONDUCT WHICH CAN GUIDE BUSINESSMEN IN

PERFORMING THEIR JOBS.

o MORAL PRINCIPLES AND SOCIAL RULES. BO-43

AREA OF BUSINESS PRODUCTION PLANT LOCATION ADVERTISING

ETHICAL PRACTICE CONTROL OF POLLUTION NO ADVERSE IMPACT ON LOCAL COMMUNITY OR ENVIRONMENT TRUTHFUL AND REALISTIC CLAIMS

NEED & IMPORTANCE:

A. MORAL CONSCIOUSNESS BUSINESSMEN BELIEVE THAT ETHICAL BUSINESS BEHAVIOUR IS GOOD BUSINESS.

BO-44

MANAGING SALES & MARKETING

o SALES REFERS THE EXCHANGE OF GOODS & SERVICES FOR
AN AMOUNT OF MONEY. o SELLING IS MOST DIFFICULT & IMPORTANT FUNCTIONS. o MANAGING SALES CRITICAL ACTIVITY BRINGS REWARDS. o SALES HELP ACHIEVING ORGANSATION GOALS. NATURE & ROLE OF SELLING o SELLING HELPS ACHIEVING ORGANISATION GOALS. o DEVELOPING A POSITIVE RELATIONSHIP WITH CUSTOMERS,

SUPPLIERS

& DISTRIBUTORS AND NEGOTIATING

WITH

CUSTOMERS TO SELL COMPANYS PRODUCTS PROFITABLY. BO-45

o SALES

TEAM

NEEDS LIKE,

SUPPORT

FROM

OTHERS

DEPARTMENTS

PRODUCTION,

ACCOUNTS,

CUSTOMERS SERVICES. o SALES TEAMS REGULARLY MONITOR THE CHANGE IN

EXTERNAL

ENVIRONMENT
GOVERNMENT

REGARDING
AND

COMPETITITION,
REGULATORY

CUSTOMERS,

OTHER

AGENCIES, INCLUDING TRENDS. o SALES TEAMS SHOULD IDENTIFY POTENTIAL PROSPECTS, QUALIFY THEM AND DEVELOP A LONG TERM RELATIONSHIP WITH SUCH CUSTOMERS. o LOCATING NEW CUSTOMERS WHILE RETAINING EXISTING

ONES IS MOST IMPORTANT FUNCTIONS OF SALE.

o DEVELOPING & MAINTAINING GOOD RELATIONS WITH CUSTOMERS ARE THE FUNCTIONS OF SALES TEAMS. BO-46

B. ENLIGHTENED SELF-INTERESTS o LONG RUN ETHICAL BEHAVIOUR IS IN BUSINESSMENS SELF INTEREST.

o GOODWILL, SALES, PROFITS WILL INCREASE CUSTOMER

SATISFACTION AND HEALTHY COMPETITION. C. SOCIAL PRESSURE: ENVIRONMENTAL PRESSURE FROM CONSUMER FORUMS, TRADE UNIONS, SHAREHOLDERS HAS MADE THEM REALISE ARE USING RESOURCES OF THE SOCIETY SO THEY MUST HAVE ETHICAL PRACTICES. D. LEGAL IMPERATIVE : MUST FOLLOW LAWS OF THE LAND. IF

DONT

FOLLOW

ETHICAL

BEHAVIOUR,

THE

LAWS,

REGULATIONS WILL HAVE TO BE FOLLOWED.

BO-47

BUSINESS VALUES
o VALUES ARE BELIEFS THAT GUIDE ACTIONS AND JUDGEMENT.

o BASIC CONVICTION ABOUT THE RIGHT BEHAVIOUR E.G.

HONESTY AND TRUTH BASIC VALUES OF SOCIETY. BUSINESS VALUS CONTRIBUTE WHAT IS GOOD BUSINESS? WHAT OBJECTIVES BUSINESS SHOULD PURSUE? WHOSE INTERESTS TO SERVE? o TO A GREAT EXTENT, BUSINESS VALUES REFLECT THE VALUES OF THE SOCIETY IN WHICH BUSINESS OPERATE.

BO-48

THE BUSINESS SHOULD AVOID:

ADULTERATION AND HOARDING

FALSE WEIGHTS BLACK MARKETING FALSE & MISLEADING ADVERTISEMENTS IMPORTANCE OF VALUES IN BUSINESS: GUIDES TO ACTION BUSINESS VALUES INDICATE RIGHT ACTION, BEHAVIOUR TO BUSINESSMEN.

CORPORATE

CULTURE

CREATES

STRONG

CORPORATE

CULTURE, LEADING TO GOOD BUSINESS VALUES(CUSTOMER IS KING). SOCIAL RESPONSIBILITY BUSINESS WILL FEEL RESPONSIBLE TO DIFFERENT SECTIONS OF THE SOCIETY. OBJECTIVE STANDARDS SERVE AS OBJECTIVE STANDARDS OR NORMS AGAINST WHICH BUSINESSMEN & PERFORMANCE CAN BE JUDGED. BO-49

CODE OF CONDUCT & CORPORATE GOVERNANCE

o CODE OF CONDUCT IS A GUIDE TO THE ETHICALLY DESIRABLE BEHAVIOUR. o PREPARED IN THE LIGHT OF THE CUSTOMS, BELIEFS, VALUES AND LAWS PREVAILING IN A SOCIETY. THERE ARE THREE TYPES OF CODES IN BUSINESS: o COMPANY PHILOSOPHY (CODE) GUIDELINES MADE BY A COMPANY TO GUIDE THE BEHAVIOUR OF ITS STAFF. THE COMPANY PHILOSOPHY RELECTS THE MORAL VALUES OF THE TOP MANAGEMENT. o POLICY GUIDELINES EVERY INDUSTRY DEVELOPS CERTAIN ETHICAL GUIDELINES FOR MANAGEMENT DECISIONS AND ACTIONS BY THE MEMBER FIRM. o PROFESSIONAL CODE OF CONDUCT PROFESSIONAL BODIES MAKE CODE OF CONDUCT, WHICH IS BINDING ON ALL THE MEMBERS. INSTITUTE OF CHARTERED ACCOUNTS OF INDIA, COMPANIES SECRETARY OF INDIA, AIMA ETC. BO- 50

CORPORATE GOVERNANCE
o CAN BE DEFINED AS A SET OF SYSTEMS AND PROCESSES
WHICH ENSURE THAT A COMPANY IS MANAGED TO THE BEST INTERESTS OF ALL THE STAKEHOLDERS, SHAREHOLDERS/ OWNERS/CREDITORS/EMPLOYEES, CUSTOMERS,SUPPLIERS. o INCLUDES FAIR, EFFICIENT, TRANSPARENT ADMINISTRATION TO MEET CERTAIN WELL-DEFINED OBJECTIVES, BY COMPLYING WITH THE LEGAL, REGULATORY REQUIREMENTS APART FROM

MEETING ENVIRONMENTAL AND LOCAL COMMUNITY NEEDS.

o PROCESS OF DIRECTION, SUPERVISION AND ACCOUNTABILITY OF CORPORATION. o CONCERNS THE THEORIES AND PRACTICES OF THE BOARD OF DIRECTORS & ITS RELATIONSHIPS WITH THE SHAREHOLDERS OF THE COMPANY, CUSTOMERS. o GOOD CORPORATE GOVERNANCE EXPECTED. BO- 51

PRINCIPLES OF CORPORATE GOVERNANCE

o BASIC OBJECTIVE OF CORPORATE GOVERNANCE TO MAXIMISE LONG TERM SHAREHOLDERS VALUE. o GOOD GOVERNANCE SERVE THE INTERESTS OF ALL THE STAKEHOLDERS. THE MAIN ISSUES/PRINCIPLES OF CORPORATE GOVERNANCE ARE:

1.TRANSPARENCY
o ACCURATE, ADEQUATE AND TIMELY DISCLOSURE OF RELEVANT INFORMATION TO ALL STAKEHOLDERS. o SHAREHOLDERS CONFIDENCE ALSO GAINED. o PUBLIC COMPANY TO BE COMMITTED TO FINANCIAL TRANSPARENCY. BO- 52

2.ACCOUNTABILITY HAS TO BE A TOP DOWN APPROACH. CHAIRMAN, MANAGING DIRECTOR, DIRECTORS MUST FULFILL ALL THEIR RESPONSIBILITIES.
NORMALLY JUNIORS ARE HELD ACCOUNTABLE.

3.MERIT BASED MANAGEMENT

o A STRONG BOARD OF DIRECTORS, TOP MANAGEMENT,

OWNERS NECESSARY TO LEAD AND SUPPORT MERIT BASED MANAGEMENT. o BOARD TO BE STRONG, INDEPENDENT AND NON-PARTISAN BODY TO TAKE DECISION WITH BUSINESS PRUDENCE.

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BUSINESS OBJECTIVES
o BUSINESS MULTIPLE OBJECTIVES. o PRIMARY PROFIT MOTIVE. EVERY BUSINESS HAS TO ACHIEVE MULTIPLE OBJECTIVES FOR ITS EXISTENCE: A. ORGANIC OBJECTIVES i. AFTER STARTING A BUSINESS, MAIN CONCERN IS SURVIVAL, GROWTH AND EXPANSION. ii. BEATS COMPETITION, DIVERSIFICATION AND MUST EARN

PRESTIGE & RECOGNITION.

B. ECONOMIC OBJECTIVES i. PROFIT MAKING MAJOR OBJECTIVES. ii. CREATION OF CUSTOMERS & THEIR SATISFACTION. iii. INNOVATION ADAPTING TO CHANGES IN ENVIRONMENT. BO- 54

C. SOCIAL OBJECTIVES i. QUALITY GOODS AT FAIR PRICES - REGULARLY. ii. PROVIDING EMPLOYMENT.

iii. AVOIDING PROTITEERING & ANTI-SOCIAL PRACTICES LIKE

HOARDING, ADULTERATION ETC. D. HUMAN OBJECTIVES i. FAIR DEAL TO EMPLOYEES LIKE WAGES, WORKING HOURS. ii. JOB SATISFACTION RIGHT JOB GIVEN iii. PARTICIPATION IN DECISION MAKING WHICH AFFECT THE

EMPLYEES IN THEIR WORK.

iv. DEVELOPMENT OF HUMAN RESOURCES.

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E. NATIONAL OBJECTIVES i. ENSURING SOCIAL JUSTICE PROVIDE A FAIR OPPORTUNITY TO ALL TO WORK. ii. DEVELOPMENT OF SMALL ENTERPRISES, BY LARGE BUSINESS HOUSES. iii. PRODUCTION ACCORDING TO NATIONAL PRIORITIES ALL

TYPE OF GOODS FOR WEAKER SECTION ALSO.

iv. DEVELOPMENT OF SKILLED PERSONNEL. v. NATIONAL SELF-SUFFICIENCY & EXPORT PROMOTION PRODUCE GOODS TO REDUCE IMPORTS AND EXPORT BEST GOODS TO EARN FOREIGN EXCHANGE.

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