BUSINESS ORGANISATION

UNIT 1
ENTERPRENEURSHIP DEVELOPMENT

 Problems:
1. Cash flow management
The challenge: Cash flow is essential to small business survival, yet many
entrepreneurs struggle to pay the bills (let alone themselves) while they’re
waiting for checks to arrive. Part of the problem stems from delayed
invoicing, which is common in the entrepreneurial world. You perform a
job, send an invoice, then get paid (hopefully) 30 days later. In the
meantime, you have to pay everything from your employees or contractors
to your mortgage to your grocery bill. Waiting to get paid can make it
difficult to get by — and when a customer doesn’t pay, you can risk
everything.

The solution: Proper budgeting and planning are critical to maintaining

cash flow, but even these won’t always save you from stressing over bills.
One way to improve cash flow is to require a down payment for your
products and services. Your down payment should cover all expenses
associated with a given project or sale as well as some profit for you. By
requiring a down payment, you can at least rest assured you won’t be left
paying others’ bills; by padding the down payment with some profit, you
can pay your own.

Another strategy for improving cash flow is to require faster invoice

payments. Invoice clients within 15 days, which is half the typical invoice
period. This means if a customer is late with a payment, you have two
weeks to address it and get paid before the next month’s bills are due. In
addition, more and more companies are requiring immediate payment
upon project completion — and in our digital age when customers can pay
invoices right from their mobile phones, it’s not a stretch to request
immediate payment.

You can also address cash flow management from the other side of the
equation by asking your own vendors to invoice you at 45, 60 or even 90
days to allow ample time for your payments to arrive and checks to clear. If
you can establish a good relationship with vendors and are a good
customer, they’ll be willing to work with you once you explain your
strategy.

And if you’re looking for an easier way to pay bills and save
money, consider sending checks via email.

2. Hiring employees

The challenge: Do you know who dreads job interviews the most? It’s not
prospective candidates — it’s entrepreneurs. The hiring process can take
several days of your time: reviewing resumes, sitting through interviews,
sifting through so many unqualified candidates to find the diamonds in the
rough. Then, you only hope you can offer an attractive package to get the
best people on board and retain them.

The solution: Be exclusive. Far too many help wanted ads are incredibly
vague in terms of what qualifications candidates must have, what the job
duties are, what days and hours will be worked, and what wages and
benefits will be paid. You can save yourself a ton of time by pre-qualifying
candidates through exclusive help wanted ads that are ultra-specific in what
it takes to be hired at your firm, as well as what the day-to-day work entails.
Approach your employee hunt the same way you would approach a
customer-centric marketing campaign: through excellent targeting.

Once you have a pool of prospects, arrange for a “walking interview” in

which you take candidates on a tour of their working environments. Ask
questions relevant to the job and to candidates’ experiences, expectations,
dedication, and long-term goals. Don’t act like an overlord determining
which minion gets to live another day; rather, behave as though you’re
seeking a partner to help you operate and grow your business.

Take the time to seek real references: not the neighbor lady your
candidates grew up with, but people who can honestly attest to their work
ethic and potential. Once you’ve picked a candidate and before you’ve
made a job offer, ask them specifically what it will take to keep them
employed with you for the long haul. Tell them to be honest with their
expectations. Provided they do a good job for you, you’ll know what kind of
rewards they’re seeking, and you can make adjustments accordingly: Do
they want more vacation? The opportunity for advancement? More pay?
Freedom from micromanagement?

This isn’t to say you have to bend backwards for your employees; however,
it stands to reason that if you make expectations clear for both parties you
can lay the foundation for a long-term, mutually-rewarding client-boss
relationship.

3. Time management

The challenge: Time management might be the biggest problem faced by

entrepreneurs, who wear many (and all) hats. If you only had more time,
you could accomplish so much more!

The solution: Make time. Like money, it doesn’t grow on trees, of course,
so you have to be smart about how you’re spending it. Here’s how:

 Create goal lists: You should have a list of lifetime goals, broken down
into annual goals, broken down into monthly goals, then broken
down into weekly goals. Your weekly goals, then will be broken down
into specific tasks by day. In this manner, what is on your task list in
any given day is all you need to do to stay on track with your lifetime
goals
 If any tasks do not mesh with your goals, eliminate them
  If any tasks do not absolutely have to be completed by you, delegate
them
 Consistently ask yourself: “Is what I’m doing right now the absolute
best use of my time?”

4. Delegating tasks

The challenge: You know you need to delegate or outsource tasks, but it
seems every time you do something gets messed up and you have to redo
it anyway.

The solution: Find good employees (see above) and good outsourced
contract help, for starters. You might have to pay a little more for it, but the
savings in time (and the resulting earning potential) more than make up for
it.

Next, be ultra-specific as to what you want done. It will take a little more
time at first, but write down detailed steps listing exactly what you want
your help to do. Don’t make assumptions, and don’t assume your help will
be able to think for themselves (they can, but they will complete the job
verbatim because that’s what they’re trained to do). So, don’t say “list stats
in a spreadsheet” when you can say “alphabetically list XYZ in the right
spreadsheet column, then list statistic A in the next column.” It might seem
like overkill, but take the time to be specific once, and your help will get it
right every time thereafter.

5. Choosing what to sell

The challenge: You know you could make a mint if you just knew what
products and services to sell. You’re just unsure how to pick a niche.

The solution: Admit that you’re weak in identifying prosperous niches, and
delegate the task to someone who is strong in this area. You don’t have to
hire a huge, expensive marketing firm; rather, recruit a freelance researcher
who has experience in whatever type of field you’re considering entering
(retail e-commerce, service industry, publishing, etc.). Have them conduct
market research and create a report with suggested niches, backed by
potential profit margins and a complete SWOT analysis: Strengths,
Weaknesses, Opportunities and Threats.

This isn’t to say you should have someone else decide for you; however, if
you’re not good at identifying niches it’s a good idea to have someone who
is make suggestions. You can then analyze the suggestions for yourself to
determine if you agree. Taking this step now can save you a lot of time,
money and hassles later — and it can save your entire business and
livelihood.

6. Marketing strategy

The challenge: You don’t know the best way to market your products and
services: print, online, mobile, advertising, etc. You want to maximize your
return on investment with efficient, targeted marketing that gets results.

The solution: Again, if you’re not adept at creating marketing plans and
placing ads, it’s a good idea to outsource your marketing strategy to
someone who is. At this point, all you need is a core marketing plan: what
marketing activities will you undertake to motivate purchases? Give your
planner a budget and tell them to craft a plan that efficiently uses that
budget to produce profits.

This is not the time for experimentation. You can do that later, on your own
or with the advice of your marketing strategist, after you’ve established a
baseline that works.

7. Capital

The challenge: You want to start or grow your business, but you have little
capital to do it with.

The solution: There are many ways to earn funding, from traditional bank
loans to family and friends to Kickstarter campaigns. You can choose these
routes, certainly, but I prefer the self-fueled growth model in which you
fund your own business endeavors.

Instead of trying to launch a multi-million dollar corporation overnight,

focus on your initial core customers. Continually work to find new
customers, of course, but consistently strive to be remarkable to those
customers you already serve. Word-of-mouth will spread, and more
customers will come looking for you. As they do, develop systems and
business processes that allow you to delegate tasks without sacrificing
quality. Your business will grow slow and steady, and you’ll be able to solve
problems while they’re small.

Think about where you want to be five years from now. Can you get there
without help, even if you have to delay growth a bit while you’re doing it?
This is the best strategy to adopt for small business entrepreneurs. If you
do feel you need funding, however, be sure to consult an attorney to make
sure you’re not giving up too much of your business to get it.

8. Strapped budget

The challenge: Even though cash flow is fine, it seems you never have
enough in your budget to market your company to its full potential.

The solution: Unless you’re one of the Fortune 500 (and even if you are),
every entrepreneur struggles with their budget. The key is to prioritize your
marketing efforts with efficiency in mind — spend your money where it
works — and reserve the rest for operating expenses and experimenting
with other marketing methods.

Keep a close eye on your money, too: chances are, there are areas you can
skim to free up more funds. Unless an expense is absolutely critical to your
business and/or represents an investment with an expected return, cut it. In
fact, do this exercise: See how lean you can run your business. You don’t
have to actually do it, but cut everything you can and see if you still feel
you can run your business (save for what you have to delegate and market
with). Somewhere in between your leanest figure and your current budget
is a sweet spot that will allow you to be just as effective and leave funds
leftover to fuel growth.

9. Business growth

The challenge: We’re assuming you are growing, not that you can’t grow,
and you’ve come to the point at which you can’t take on any more work in
your current structure.

The solution: Create new processes that focus on task delegation. Many
entrepreneurs, used to wearing all the hats, find themselves in this position
once they’ve achieved a modicum of success. Because you’re doing
everything, your growth halts to a stop when it hits a self-imposed ceiling.
The only way to break through is to delegate tasks to others to take
yourself out of the production end, and segue into management and,
finally, pure ownership.

10. Self-doubt

The challenge: An entrepreneur’s life is not enviable, at least in the

beginning. It’s extremely easy to get discouraged when something goes
wrong or when you’re not growing as fast as you’d like. Self-doubt creeps
in, and you feel like giving up.

The solution: Being able to overcome self-doubt is a necessary trait for

entrepreneurs. Having a good support system will help: family and friends
who know your goals and support your plight, as well as an advisory board
of other entrepreneurs who can objectively opine as to the direction of your
business.

One of the best ways to deal with self-doubt is to work on your goals and
tasks lists. When you’re down and lack motivation, look at your lists and
know that the tasks you do today are contributing to your lifetime goals. By
doing them, you’re one step closer, and you can rest assured that you are,
indeed, on the path to business success.
Entrepreneurs face many challenges, and volumes have been written about
how to overcome them. Perseverance and intelligence are your allies; use
them to your advantage to keep working toward your goals. Understand
that you’re not the first to struggle. Because of that, there are many
resources available to help you get through your darkest days as an
entrepreneur, so you can reap the immeasurable rewards that come with
building your own successful business.

 Suggestions:
 1. Emphasis on stimulating, supporting and sustaining activities:
The success of EDPs depends upon the stimulating, supporting and
sustaining activities. Stimulating activities includes entrepreneurial
education, publicity of entrepreneurial facilities, motivational training and
assistance in the identification of viable projects, creating a common
platform for entrepreneurs, where they can share their problems,
experiences and success.Supporting activities involves the various forms of
support provided to the potential entrepreneurs for setting up and running
of their units such as registration, funds mobilization, license, tax relief and
incentives and management consultancy services. Sustaining activities refer
to expansion, diversification, Modernization and quality control.

 2. Focus on achievement motivation:

 It is important to develop achievement motivation amongst
prospective entrepreneur through proper training and conducive
environment to create right type of impact of training. Entrepreneurs
should be helped ideas into reality.

 3. Designing of viable projects:

 ADVERTISEMENTS:

 A viable project is feasible to implement in terms of availability of

resources and market potentials. The EDP organizers should prepare
 the projects keeping in mind local resources, funding, training
requirements.

 The entrepreneurial development agencies should select right people,

impart right training and entrust viable projects to make EDPs
successful.

 4. Selection of trainees:
 Trainees should be selected after proper examinations and tests.
Educated unemployed youth should be selected on priority. Persons
having traditional background in the chosen economic activity should
be preferred.

 5. Training of trainers:
 Success of EDPs depends on abilities skills and experience of trainers.
They must be committed, competent and qualified.

MORE POINTS

1. Industry Oriented Planning

Although efforts are being made throughout the country for planned
economic development, planning needs to be made industry oriented so
that Rapid industrialization may be encouraged and national goals may
also be achieved.

Entrepreneurship development will become easy, by adopting the policy of

industries dominated planning.

More: 18 Factors Affecting Entrepreneurship Growth in India.

2. Formation of Favourable Environment

Infrastructural facilities should be developed for entrepreneurship

development.

Land, electricity, water, and raw material should be made available to the
entrepreneurs, at cheaper rates and by constructing the industrial estates.
Favorable entrepreneurship environment should be also created by making
improvements in the social environment.

3. Facilities and Incentives

Adequate and proper facilities and incentives should be provided to the

new entrepreneurs for establishing industries and implementing the
innovations.

Special concessions should be provided to the entrepreneurs occupied in

research, inventions and investigation activities and executors of
innovations.

Preference should be given for new entrepreneurs, in granting licenses,

providing finances, and in Import of machinery and implements, etc.

Besides, the government should also assist entrepreneurs with respect to

the marketing of their products. 19 Factors Influencing Entrepreneurship
Development.

4. Extension of Entrepreneurial Training Program

Following suggestions should be accepted for extension of entrepreneurial

training programs:

 The entrepreneurial training programmes executed by Central

Government, State governments, various Government and non-
government organizations should be adequately improved and
extended, so that they may prepare entrepreneurs to successfully
operate their Enterprises and expand their entrepreneurial activities.
 Educated unemployed persons and the technically qualified person
should be attracted towards such programmes, by providing them with
suitable incentives.
 Short term refresher courses should also be organized, from time to
time for earlier trained entrepreneurs to solve their specific problems
experienced by them after starting the industry.
5. Encouragement to Research and Investigation

Research and investigation facilities should be encouraged in the country.

For this purpose, the service conditions of the scientist and specialists
should be made more attractive, so that the Indian scientist working abroad
may get inspired for performing research and investigation activities, by
returning to their own country and benefit the nation by their valuable
works. 8 Meaning of Entrepreneurship by Different Scholars.

6. Development of Public Enterprises and Managerial Efficiency

The government itself should come forward and establish industries in the
public sector, In those fields areas, in which private industrialists are not
taking the interest.

In addition, the government should also make the role of the public sector
more active Cooperative and constructive, so that on one side, managerial
efficiency may be enhanced, and other environments of competition may
also be developed.

7. Improvements of Managerial Education and Training Arrangements

Managerial education and training should be restructured, in accordance

with the requirements of the present-day business, so that efficient and
adequate technostructure may be billed, for proper management and
operation of industries in the country.

Suggestions for Entrepreneurship Development in India is very quiet.

8. Law and Provisions

The legal provision prescribed for establishment and control on business

and industries in the country are quite complicated and rigid and they are
not conducive for entrepreneurship development and as a result, many
persons are not able to expose themselves, entrepreneurs.

Hence, it is essentially required that the law and legal provisions should be
simple, so as they attract and encourage the entrepreneurs.
9. Publicity and Dissemination of Entrepreneurship Literature

Entrepreneurship literature should be prepared, published, and adequately

properly disseminated.

This literature should also incorporate the success stories of successful

entrepreneurs, narrating their experiences, functional activities and also the
incentives, concessions and other facilities provided by various
governments.

10. Regularly Publicized

Programmes, thoughts, and ideas relating to entrepreneurship

development should be regularly published through radio, television, and
other mediums of publicity. 20 Types of Entrepreneurs (Informative
Explained).

 Role of RIICO:
 The Rajasthan State Industrial Development &. Investment
Corporation (RIICO) since its inception in 1969, has emerged as a
multifaceted and dynamic institution. It has kept pace with the
industrialisation process in providing complete and innovative
means of financial and investment support services.
 The corporation was incorporated on 28 March 1969 as RIMDC
and got its present name on 1 January 1980. It has 26 offices in
Rajasthan and one in Delhi and has staff strength of 1054. RIICO
has so far developed 321 industrial areas by acquiring about
59,084 acres (239.10 km2) of land . More than 26633 industries
are in production within the industrial areas developed by RIICO in
Rajasthan

RIICO is also the sole government agency in the state involved in

development of land for industrial enterprises. Large, medium and
 small scale projects get an easy access to a ready-to-use base with
supportive infrastructure facilities in the industrial areas,
developed and managed by RIICO. The financial and vital
infrastructural facilities provided by RIICO have contributed to
promoting accelerated growth of industrial sector in the state.
Role RIICO has played a catalytic role in the industrial
development of Rajasthan. Services provided by RIICO to investors
and entrepreneurs include:
Allotment of land and site selection
Financial assistance to medium and large scale projects
Direct equity participation in large projects
Technical consultancy for project identification and technical tie
up
Escort services, facilitation of government clearances
Merchant banking and financial tie-ups
Extending incentives and concessions according to the policy of
State Government
More than 14,500 industries are in production within the industrial
areas developed by RIICO in Rajasthan.
These include industry majors like Ericsson, Samcor Glass, Indian
Shaving Products, Bausch & Lomb, Climate Systems, Modi Alkalies
and Chemicals, Dabur (India), Haryana Sheet Glass among others.
RIICO also provides a unique financial package to investors for
large and medium industrial projects, all under a single roof.

OBJECTIVES OF RIICO
RIICO was formed to meet the following objectives:
a) To encourage, assist and ensure the promotion of industries with the highest
value addition in the State in consonance with the state governments social and
economic objectives and industrial policy.
b) To provide and ensure the provision of all necessary infrastructure (including
energy and water, residential, social and commercial facilities infrastructure) to
achieve the above objectives.
c) To provide appropriate financial assistance and guidance to entrepreneurs to
establish industries in the State.
d) To identify and promote the entrepreneurial talent for widening
entrepreneurial
base in the state.
e) To provide project ideas, concepts and concrete plans for the implementation
of
industrial projects in the State.
f) To earn a reasonable rate of return on the funds placed at disposal of the
corporation so as to ensure corporate viability and to enrich its resource base.
g) To act as a merchant banker to facilitate availability of all related services at the
State level.
h) RIICO accords priority to development of social and industrial infrastructure in
and around industrial areas.
i) Social infrastructure includes educational institutes, parks, post office, banks,
shopping complexes, housing, etc.

FUNCTIONS OF RIICO

a) Identification of projects, obtaining letters of intent or industrial licenses and

implementations thereof jointly with private sector entrepreneurs or on its
own.
b) Preparation and operation of schemes of industrial development in Rajasthan.
c) Preparation of project profiles, project blueprints, project reports and provide
consultancy.
d) Acquisition of land, development of industrial areas and allotment of
industrial plots and sheds for the establishment of industries.
e) To provide assistance to industries in the form of underwriting of public
issues, grant of term-loans, seed capital, interest free loans in lieu of sales tax
etc.

 Role of district industrial center:

Entrepreneurship development (ED) refers to the process of improving
entrepreneurial skills and knowledge through structured training and
institution-building programmes. Entrepreneurship development focuses
on the individual who wishes to start or expand a business. This accelerates
employment generation and economic development. District Industries
Centers (DICs) provide full assistance to the entrepreneurs who are going to
start the business on their own and in their regional places. These centers
provide service and support to small entrepreneurs under a single roof at
both pre and post investments. The DICs program was started on May 1st
in the year of 1978 with a view to providing integrated administrative
framework at the district level for promotion of small scale industries in
rural areas. Providing complete assistance and support to entrepreneurs in
multi-regions are the ultimate aims of DICs. These DIC programs can take
over the responsibilities in order to promote cottage and small scale
industries at district level effectively. DIC’s are the implementing arm of the
central and state governments of the various schemes and programmes.
Registration of small industries is done at the district industries centre and
PMRY (Pradhan Mantri Rojgar Yojana) is also implemented by DIC.
Management of DIC is done by the state government.

 OBJECTIVES OF DISTRICT INDUSTRIES CENTERS

(DICS)
1. To identify the new entrepreneurs and providing assistance to them
regarding their own startup’s.
2. To provide financial and other facilities to smaller blocks.
3. To rise the complete efforts for industrialization at district level.
4. To enhance the rural industrialization and also the development of
handicrafts. 
5. To reach economic equality in multiple areas of the district.
6. To allow various government schemes to the new entrepreneurs.
7. To desize the regional imbalance of development.
8. To make all the necessary facilities to come under one roof.

 Functions of DICs
The DIC’s art funded by the State government concerned and the
Centre
jointly. The Government has provided substantial assistance to the
DIC’s
which can be spent by DICs on construction of an office building,
expenditure
on furniture, fixtures, equipment, vehicles and other recurring
expenses. With this basis facility, DIC’s in the district level undertakes
various promotional measures with a view to bringing out all
development of SME in the district. In starts from exploration of
potential entrepreneurs to marketing the products
produced by the SMEs. The DICs provide and arrange a package of
assistance
and facilities for credit guidance, raw materials, training, marketing etc.
including the necessary help to unemployed educated young
entrepreneurs in
general. Thus it may be said that DIC extends promotional, technical,
physical,
financial, marketing and all other type of services, required for growth
and
development of SSI. The important functions of DICS are discussed as
follow:
1. Identification of Entrepreneurs: DIC’s develop new entrepreneurs by
conducting entrepreneurial motivation programmes throughout the
district
particularly under SEEUY scheme. DICs also take association of SIS’s and
TCOs for conducting EDPs.
2. Provisional Registration: Entrepreneurs can get provisional
registration
with DICs which enable them to take all necessary steps to bring the
unit into
existence. The entrepreneur can get assistance from term lending
institutions
only after getting provisional registration. The provisional registration is
awarded for two years initially and can be renewed every year but only
for two
times.
3. Permanent Registration: When the entrepreneur completes all
formalities
required to commence the production like selection of site, power
connection,
installing machinery etc they can apply to DIC for permanent
registration. It is
only after getting the permanent registration that the entrepreneur can
apply for
supply of raw materials on concessional rates. Permanent registration is
essential to avail all types of benefits extended by the government from
time to
time.
4. Purchases of Fixed Assets: The DIC’s recommend loan applications of
the
prospective entrepreneur to various concerned financial and
developmentalinstitutions e.g. NSIC, SISI etc. for the purchase of fixed
assets. It also recommend to the commercial banks for meeting the
working capital
requirement of SSI to run day -to -day operations.
5. Clearances from Various Departments: DIC takes the initiative to get
clearances from various departments which is essential to start a unit.
It even
takes follow up measures to get speedy power connection.
6. Assistance to Village Artisans and Handicrafts: In spite of inherent
talent
and ability, village artisans are not better off because they lack financial
strength to strive in the competitive market. DIC in support with
different lead
banks and nationalized banks extends financial support to those
artisans.
7. Incentives and Subsidies: DIC helps SMEs and rural artisans to
subsidies
granted by government under various schemes. This boost up the
moral as well
as the financial capacity of the units to take further developmental
activities.
The different types of subsidies are power subsidy, interest subsidy for
engineers and subsidy under IRDP etc. from various institutions.
8. Interest Free Sales Tax Loan: SIDCO provides interest free sales tax
loan
up to a maximum limit of 8per cent of the total fixed assets for SSI units
set up
in rural areas. But the sanction order for the same is to be issued by
DIC. The
DIC recommends the case of SME to National Small Industries
Corporation
Limited for registration for Government purchase programme.
9. Assistance of Import and Export: Government is providing various
types
of incentives for import and export of specific goods and services.
These
benefits can be availed by any importer or exporter provided the same
is routed
through the concerned DIC. Export and import license is also issued to
the
importer or exporter only on the basis of recommendation of DIC.
10. Fairs and Exhibitions: The DIC inspires and facilitates the SSI units to
participate in various fairs and exhibitions which are organized by the
154
Government of India and other organizations to give publicity to
industrial
products. DICs provide free space to SMEs for the display of their
products and
provide financial assistance for the purpose.
11. Training Programmes: DIC organizes training programs to rural
entrepreneurs and also assists other institutions or organization
imparting
training to train the small entrepreneurs.
12. Self-employment for Unemployed Educated Youth: The DICs have
launched a scheme to assist the educated unemployed youth by
providing them
facilities for self-employment. The youth should be in the age group of
18 to 35
years with minimum qualification of Metric or Middle with I.T.I. in
engineering or Technical Trade. Technocrats and women are given
preference.

BUSINESS ORGANISATION

 Steps of Establishment :
1] Identification and Division of work
The organisational work commences with an identification of the extent and
the amount of work that needs to be done and dividing this into manageable
activities. The idea behind this is to eliminate duplication and share the burden
of work.

2] Departmentalisation
Now as the work has been redefined as a number of manageable activities, the
next step is to group activities according to a predefined basis. This basis
decided what activities are similar to each other. All the similar activities are
assigned to a particular department. All in all, a number of departments are
defined that are concerned with their own set of activities.

3] Assignment of Duties
The next step involves the distribution of work among the employees. The
responsibility of looking after the functioning of each department is given to
an individual. Further, jobs are allocated to the employees.

It is important to realize that this assignment of jobs should be done in such a

manner that the employees most suited for a particular type of job ultimately
 perform it. This ensures, a proper match between the ability and the type of
job of the employee and subsequently effective overall performance.

4] Establishing Reporting Relationships

The final step is concerned with erecting a hierarchical structure and effecting
communication among the diverse departments. This is done by establishing
relationships. Effectively this means that every employee should be made
aware of whom he has to take orders from and prove his accountability.

 The Importance/Significance of an
Organisation:

1. Benefits in specialisation:
In organising every individual is assigned a part of total work and not
the whole task.Due to this division of work into smaller units and
assignment of units according to the qualification leads to
specialisation. The specialisation automatically comes when an
individual is performing one job repeatedly.

2. Role Clarity:
In the organising function the employees are assigned different jobs
and the managers clearly define the jobs. The jobs are defined on the
written document called job description which clearly spells out what
exactly has to be done in every job.

This description of job brings clarity in the minds of employees.

3. Clarity in working relationship:

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In the organising function it is clearly defined that what all and how
much power and authority is enjoyed by different individuals or
managers. Each manager knows very clearly to whom he can give
order and from whom he has to receive the order. The superior-
subordinate relation is clearly defined in organising.

4. Optimum utilization of resources:

In the organising function there are very few chances of duplication of
work or over-lapping of work because the jobs are assigned to different
individuals by clearly defining the job in job description document. So,
there are no chances that the same work is performed by two or more
individuals.

5. Co-ordination and effective administration:

In the organising function, the similar and related jobs are grouped
under one department which leads to unification of efforts and
harmony in work. The organising function establishes relation
between different departments keeping in mind the co-ordination
among different departments. By bringing clarity in working
relationship administrative efficiency improver.

6. Adoption to change:
Whenever the changes take place in the business environment then
with the help of organising function these changes can be adopted
systematically because organising function creates different
departments and group related activities under each department.
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With this, changes can be adopted only in that area which may be
affected by these changes and changes can be easily communicated to
whole organisation through departments. Organisational structures
can be suitably modified according to changes.

7. Expansion and Growth:

With optimum utilization of resources and proper division of work
and departmentation, companies can easily meet the challenges and
can expand their activities in a planned manner.

8. Development of personnel:
Delegation of authority is an important part of organising. By
delegating the routine the managers can concentrate to develop new
methods and ways of performing job. It gives them time to innovate
new technologies and areas for growth of the companies. Delegation
not only reduces the work load of managers but it also helps them to
use and realise their full potential for more creative work.

BUSUNESS ENVIORMENT
 Types of business environment
Internal Environment: Internal Environment refers to the factors existing
within a business firm. These internal factors are considered to be
controllable because the enterprise has control over these factors. The
main internal factors which influences Business Decisions are as
follows:
 A. Culture: The values, beliefs and attitudes of the founder and top
management of the company exercises a strong influence on what
the company stands for, how it does things and what it considers
important. When the value system is shared by all the members, the
organization is likely to be more successful.
B. Mission And Objectives: The Objectives of all the firms is assumed to
be Profit Maximization in the long run. But Mission is different from this
narrow objective of profit maximization. Mission is defined as the
overall purpose or reason for existence which guides and influences a
firm decisions and economic activities.
C. Top Management Structure: The structure of the organization also
influences the business decisions. The composition of the board of
directors, the degree of professionalization of management and the
organizational structure of a company have a important bearing on its
business decisions.
D. Power Structure: The internal power relationship between the board
of directors and the Chief Executive Officer is an important factor. The
extent to which the top management enjoys the support of
shareholders and employees at different levels, also has an important
bearing on decision making.

External Environment: External Environment refers to the factors existing outside

a business firm. These External factors are considered to be uncontrollable
because the enterprise has No or Partial control over these factors. Further,
External Environment can be divided into two types Namely:

1. Micro Environment: Micro Environment consists of the factors in the

company's immediate environment. These factors affects the performance of the
company and its ability to serve the customers. Micro Environment consists of
the following:
1. Customers: Customers constitutes an important segment of the micro
environment. Customer is the king of the market and every business exists to
serve its customers. A business has no meaning until and unless there are
customers to serve.
 2. Suppliers: Suppliers are the person who supply various inputs such as
money, raw material, fuel, power etc. and help in the smooth conduct of
business. Further, firms should have more than one supplier so that changes in
the policies of one supplier does not effect their production schedules.
3. Competitors: Competitors form an important part of the Micro
Environment. Business Firms compete to capture a larger share in the market.
They constantly watch the competitors policies and adjust their policies to gain
customer confidence.
4. Company Image And Brand Equity: The image and Brand Equity of the
company plays a very important and significant role in raising finance, forming
alliances, choosing dealers and suppliers etc.

2. Macro Environment: The Macro Environment consists of the Economic and

Non-Economic variables that provide opportunities and threats to firms. This is
largely uncontrollable and therefore, firms must adjust their operations to these
environmental factors. Macro Environment consists of the following:
0.Political Environment: Political Environment consists of the elements relating to
government affairs. The political environment provides the framework within
which business has to function. The main components of Political Environment
are:
 The Constitution of the Country.
 Political Organization: includes Philosophy of political parties,
ideology of the government, nature and extent of bureaucracy,
influence of primary groups etc.
 Political Stability: includes structure of Military and police
force, election system, Law and order situation etc.
 Image of the country and its leaders.
 Foreign policy alignment or non-alignment.
 Law Governing Business
1.Economic Environment: The Economic Environment consists of the economic
forces that affects the business activities. These forces influences the buying
behavior and spending patterns of consumers and institutions. The main
components of Economic Environment are:
 Economic System: includes Capitalist, socialist and Mixed
Economic System.
 Economic Policies: includes Monetary Policy, Fiscal Policy,
Supply side Policy etc.
 Economic Indices: includes Gross Domestic Product, Consumer
Price index, Per Capita Income etc.
 Financial Market: includes Share Market, Money Market,
Derivative Market, Capital Market.
 Industrial Infrastructure etc.
2.Social And Cultural Environment: Social Environment refers to the characteristics
of the society in which a business firm exists and operates. The main components
of social and cultural environment are:
 Demographic Forces: includes Size, Composition and Mobility
of Population.
 Social Institutions and Groups.
 Caste Structure and Family Organisation.
 Educational System and Literacy Rate.
 Customs, beliefs, values and life styles.
 Tastes and Preferences of People.
 Entrepreneurial Spirit.
3.Technological Environment: Technology is changing at a fast pace and
technological environment is dramatically affecting the business environment
either due to easy import policies or because of technology up-gradation. The
main components of Technological Environment are:
  Rate of Technological change and Diffusion.
 New approaches to the production of goods and services.
 Use of New processes and equipment.
 Transfer of Foreign Technology.
 Impact of Technology on cost, quality and value chain.
4.Legal Environment: The Legal Environment consists of the regulatory forces that
will affect the business activities and operations. The main components of Legal
Environment are:
 Current Legislation.
 International Legislation.
 Regulatory bodies and processes.
 Tax Regulations.
 Competitive Regulations.
 Industry Specific Regulations.
 Government Regulations.
5.Natural Environment: The main components under Natural Environment are:
 Climatic Conditions.
 Agriculture, Commercial, and other Natural Resources.
 Ecological System.
 Levels of Pollution.

OR OTHER EXPLANATION
Type 1# External Micro Environment:
Micro external forces have an important effect on business operations of a
firm.
However, all micro forces may not have the same effect on all firms in the
industry. For example, suppliers, an important element of micro level
environment, are often willing to provide the materials at relatively lower
prices to big business firms.
ADVERTISEMENTS:
They do not have the same attitude towards relatively small business firms.
Similarly, a competitive firm will start a price war if its rival firm in the industry
is relatively small. If the rival firm is a big one which is a capable of retaliating
any adverse action from its rival, a competitive firm will hesitate to start a
price war. We explain below important factors or forces of micro-level external
environment.
Suppliers of Inputs:
An important factor in the external environment of a firm is the suppliers of its
inputs such as raw materials and components. A smooth and efficient working
of a business firm requires that it should have ensured supply of inputs such as
raw materials. If supply of raw materials is uncertain, then a firm will have to
keep a large stock of raw materials to continue its transformation process
uninterrupted. This will unnecessarily raise its cost of production and reduce
its profit margin.
To ensure regular supply of inputs such as raw materials some firms adopt a
strategy of backward integration and set up captive production plants for
producing raw materials themselves.
Further, energy input is an important input in the manufacturing business.
Many large firms such as Reliance industries have their own power generating
plants so as to ensure regular supply of electricity for their manufacturing
business. However, small firms cannot adopt this strategy of vertical
integration and have to depend on outside sources for supply of needed
inputs.
Further, it is not a good strategy to depend on a single supplier of inputs. If
there is disruption in production of the supplier firm due to labour strike or
lock-out, it will adversely affect the production work of a firm. Therefore, to
reduce risk and uncertainty business firms prefer to keep multiple suppliers of
inputs.
Customers:
The people who buy and use a firm’s product and services are an important
part of external micro-environment. Since sales of a product or service is
critical for a firm’s survival and growth, it is necessary to keep the customers
satisfied. To take care of customer’s sensitivity is essential for the success of a
business firm.
A firm has different categories of customers. For example, a car manufacturing
firm such as Maruti Udyog has individuals, companies, institutions,
government as its customers. Maruti Udyog, therefore, has catered to the
needs of all these types of customers by producing different varieties and
models of cars.
Besides, a business firm has to compete with rival firms to attract customers
and thereby increase the demand and market for its product. In the present
day of intense competition a firm has to spend a lot on advertisements to
promote the sales of its product by creating new customers and retaining the
old ones. For this purpose, a business firm has also to launch new products or
models.
With increasing globalisation and liberalization the customers’ satisfaction is of
paramount importance because the consumers have the option of buying
imported products. Therefore, to survive and succeed a firm has to make
continuous efforts to improve the quality of its products.
Marketing Intermediaries:
In a firm’s external environment marketing intermediaries play an essential
role of selling and distributing its products to the final buyers. Marketing
intermediaries include agents and merchants such as distribution firms,
wholesalers, retailers.
Marketing intermediaries are responsible for stocking and transporting goods
from their production site to their destination, that is, ultimate buyers. There
are marketing service agencies such as marketing research firms, consulting
firms, advertising agencies which assist a business firms in targeting,
promoting and selling its products to the right markets.
Thus, marketing is an important link between a business firm and its ultimate
buyers. A dislocation of this link will adversely affect the fortune of a company.
A few years ago chemists and druggists in India declared a collective boycott of
a leading pharma company because it was providing a low retail margin. They
succeeded in raising this margin. This shows that a business firm must take
care of its intermediaries if it has to succeed in this age of intense competition.
Competitors:
Business firms compete with each other not only for sale of their products but
also in other areas. Absolute monopolies in case of which competition is totally
absent are found only in the sphere of what are called public utilities such as
power distribution, telephone service, gas distribution in a city etc. More
generally, market forms of monopolistic competition and differentiated
oligopolies exist in the real world.
In these market forms different firms in an industry compete with each other
for sale of their products. This competition may be on the basis of pricing of
their products. But more frequently there is non-price competition under
which firms engage in competition through competitive advertising, sponsor-
ing some events such as cricket matches for sale of different varieties and
models of their products, each claiming the superior nature of its products.
The readers will be witnessing how intense is the competition between Coca
Cola and Pepsi Cola. Sometimes there has been price war between them to
capture new markets or enlarge their market share. Likewise, there is severe
competition between the manufacturers of Aerial and Surf washing powders,
between manufacturers of various brands of colour TV. This type of
competition is generally referred to as brand competition as it relates to
producing and selling different brands of a product.
But not only is there a competition among the producers producing different
varieties or brands of a product but also among firms producing quite diverse
products as all products ultimately compete for attracting spending by the
consumers of their disposable incomes.
For example, competition for a firm producing TVs does not come only from
other brands of TV manufacturers but also from manufacturers of air
conditioners, refrigerators, cars, washing machines etc. All these goods
compete for attracting disposable incomes of the final consumers.
Competition among these diverse products is generally referred to as desire
competition as all these goods fulfill the various desires of the consumers who
have limited disposable incomes.
As a consequence of liberalisation and globalisation of the Indian economy
since the adoption of economic reforms there has been a significant increase
in competitive environment of business firms. Now, Indian firms have to
compete not only with each other but also with the foreign firms whose
products can be imported.
For example, in the USA American firms faced a lot of competition from the
Japanese firms producing electronic goods and automobiles. Similarly, the
Indian firms are facing a lot of competition from Chinese products. It is
important to note that for successful competition the Indian firms have to
improve not only the quality of the products but also to enhance their
productivity so that cost per, unit can be reduced.
Publics:
Finally, publics are an important force in external micro environment. Public,
according to Philip Kotler “is any group that has an actual or potential interest
in or impact on a company’s ability to achieve its objective”.
Environmentalists, media groups, women associations, consumer protection
groups, local groups, citizens associations are some important examples of
publics which have an important bearing on environment of the firms.
For example, a consumer protection firm in Delhi headed by Sunita Narain
came out with an amazing fact that cold drinks such as Coca Cola, Pepsi Cola,
Limca, Fanta had a higher contents of pesticides which posed threat to human
health and life. This produced a good deal of adverse effect on the sale of
these products in 2003-04. The Indian laws are being amended to ensure that
these drinks must not contain pesticides beyond European safety standards.
Similarly, environmentalists like Arundhi Roy have been campaigning against
industries which pollute the environment and cause health hazards. Women in
some villages of Haryana protested against liquor shops being situated in their
localities.
Many citizen groups are actively campaigning against cigarette manufactures
for their advertising campaigns luring the people to indulge in smoking. Thus,
the existence of various types of publics influences the working of business
firms and compels them to be socially responsible.
Type 2# External Macro Environment:
Apart from micro-environment, business firms face large external
environmental forces. The external macro environment determines the
opportunities for a firm to exploit for promoting its business and also presents
threats to it in the sense that it can put restrictions on the expansion of
business activities. The macro-environment has thus both positive and
negative aspects.
An important fact about external macro-environmental forces is that they are
uncontrollable by the management of a firm. Because of the uncontrollable
nature of macro forces a firm has to adjust or adapt itself to these external
forces.
External macro-environmental factors are classified into:
(1) Economic,
(2) Social,
(3) Technological,
(4) Political and legal, and
(5) Demographic.
We explain below all these factors determining external macro-environment:
1. Economic Environment:
Economic environment includes the type of economic system that exists in the
economy, the nature and structure of the economy, the phase of the business
cycle (for example, the conditions of boom or recession), the fiscal, monetary
and financial policies of the Government, foreign trade and foreign investment
policies of the government. These economic policies of the government
present both the opportunities as well as the threats (i.e. restrictions) for the
business firms.
The type of the economic system, that is, socialist, capitalist or mixed provides
institutional framework within which business firm have to work. For example,
before 1991, the Indian economic system was of the type of a mixed economy
with pronounced orientation towards the public sector. Prior to 1991 private
sector’s role in India’s mixed economy was greatly restricted. Many industries
were reserved exclusively for investment and production by the public sector.
Private sector operations were limited mainly to the consumer goods
industries. Even in these goods the private sector production and operation
was controlled by industrial licensing system, Monopolistic and Restrictive
Trade Practices (MRTP) Commission. The private sector was also subjected to
various export and import-restrictions. High tariffs were imposed to protect
domestic industries and to pursue import substitution strategy of industrial
growth.
Now, there have been significant changes in the economic policies since 1991
which have changed the macroeconomic environment for private sector firms.
Far-reaching structural economic reforms were carried out by Dr. Manmohan
singh during the period 1991-96 when he was the Finance Minister. Industrial
licensing has been abolished and private sector can now invest and produce
many industrial products without getting license from the government.
Many industries, except only a few industries of strategic importance, which
were earlier reserved for the public sector have been thrown open for the
private sector. Import duties have been greatly reduced due to which domestic
industries face competition from the imported products. Incentives have been
given to boost exports. Rupee has been made convertible into foreign
currencies on current account. It is thus evident that new economic reforms
carried out since 1991 has significantly changed the business environment.
2. Social and Cultural Environment:
Members of a society wield important influence over business firms. People
these days do not accept the activities of business firms without question.
Activities of business firms may harm the physical environment and impose
heavy social costs. Besides, business practices may violate cultural ethos of a
society. For example, advertisement by business firms may be nasty and hurt
the ethical sentiments of the people.
Businesses should consider the social implications of their decisions. This
means that companies must seriously consider the impact of its actions on the
society. When a business firm in their decision making take care of social
interests, it is said to be socially responsible.
Social responsibility is the felt obligation or self-enforced duty of business
firms to serve or protect social interests. By doing so they promote social well-
being. Good corporate governance should be judged not only by the
productivity and profits earned by a business firm but also by its social-welfare
promoting activities.
It is worth noting that in modern management science a new concept of social
responsiveness has been developed. By social responsiveness we mean “the
ability of a corporate firm to relate its operations and policies to social
environment in way that are mutually beneficial to the company and society at
large”.
It may be noted that social responsibility or social responsiveness is related to
ethics. The discipline of ethics deals with what is good and bad, or right and
wrong or with moral duty and obligation. Further, even if managers enjoy full
freedom to adopt actions and policies in accordance with the conceived notion
of social responsibility, they may not do so if standards applied to evaluate
their performance are quite different.
Every manager would like its performance to be positively appraised.
Therefore, if the performance of managers of business firms are judged by the
amount of profits .they make for the owners of the firms, it is then not proper
to expect socially responsible actions from them.
3. Political and Legal Environment:
Businesses are closely related to the government. The political philosophy of
the government wields a great influence over business policies. For example,
after independence under the leadership of Jawahar Lal Nehru India adopted
‘democratic socialism as its goal.
In the economic sphere it implied that public sector was to play a vital role in
India’s economic development. Besides, it required that working of the private
sector were to be controlled by a suitable industrial policy of the government.
In this political framework provide business firms worked under various types
of regulatory policies which sought to influence the directions in which private
business enterprises had to function.
Thus, Industrial Regulation Act 1951, Industrial Policy Resolution 1956, Foreign
Exchange Regulation Act (FERA), Monopolistic and Restrictive Practices (MRTP)
Act were passed to control the business activities of the private sector.
Besides, role of foreign direct investment was restricted to only few spheres.
However, since 1991 several structural economic reforms have been
undertaken following a change in political philosophy in favour of a free
market economy. The collapse of socialism in Soviet Russia, China and East
European Countries has brought about a change in political thinking about the
roles of public and private sectors in India’s industrial development.
To encourage the growth of the private sector in India, licensing has now been
abolished, role of public sector greatly reduced and foreign capital, both direct
and portfolio, is being encouraged to raise the rate of capital formation in the
Indian economy. FERA has been replaced by FEM A (Foreign Exchange
Management Act) It is evident from above that with the change in the nature
of political philosophy business environment for private firms has greatly
changed.
4. Technological Environment:
The nature of technology used for production of goods and services is an
important factor responsible for the success of a business firm. Technology
consists of the type of machines and processes available for use by a firm and
the way of doing things. The improvement in technology raises total factor
productivity of a firm and reduces unit cost of output.
The use of a superior technology by a firm gives it a competitive advantage
over its rival firms. The use of a particular technology by a firm for its
transformation process determines its competitive strength. In this age of
globalisation the firms have to compete in the international markets for sales
of their products. The firms which use outdated technologies cannot compete
globally. Therefore, technological development plays a vital role in enhancing
the competitive strength of business firms.
It has been generally observed that the competition between firms in the
domestic economy and in international markets ensures that the firms will try
to improve the technology they use because failure to do so would pose a
threat to their survival. In the protected markets, technological improvements
are slow and firms are able to survive for a long period without making
technological changes.
This is quite evident from the experience of automobile industry in India.
Manufacturers of Ambassadors and Fiat Cars not only made no significant
changes in their models, but also did not make any improvement in technology
for decades because of absence of competition. The users had no choice and
Ambassador and Fiat cars survived for decades in the protected environment.
It is when Maruti Udyog Ltd. was started in India using superior technology
and introducing more attractive models that there has been a significant
improvement in car manufacturing. With liberalisation of the Indian economy
new car manufacturing firms have entered the industry and are producing
different verities and models of cars with improved technology.
Besides, the cotton textile industry is another important example of an
industry which due to protection provided to it by imposing high tariffs on
imports of cotton textiles became sick. Following trade liberalisation many
cotton textile firms have closed down because they could not withstand
competition. Technological environment affects the success of firms and the
need for technological advancement cannot be ignored.
5. Demographic Environment:
Demographic environment includes the size and growth of population, life
expectancy of the people, rural-urban distribution of population, the
technological skills and educational levels of labour force. All these
demographic features have an important bearing on the functioning of
business firms. Since new workers are recruited from outside the firm,
demographic factors are considered as parts of external environment.
The skills and ability of a firm’s workers determine to a large extent how well
the organisation can achieve its mission. The labour force in a country is
always changing. This will cause changes in the work force of a firm. The
business firms have to adjust to the requirements of their employees. They
have also to adapt themselves to their child care services, labour welfare
programmes etc.
The demographic environment affects both the supply and demand sides of
business organisations. Firms obtain their working force from the outside
labour force. The technical and education skills of the workers of a firm are
determined mostly by human resources available in the economy which are a
part of demographic environment.
On the other hand, the size of population and its rural-urban distribution
determine the demand for the products of industrial firms. For example, when
there is good monsoon in India causing increase in incomes of rural population
dependent on agriculture, demand for industrial products greatly increases.
In the wake of economic reforms initiated in the early nineties when foreign
investors were allowed to make investment in India, they were prompted to
invest in India by pointing out that the size of Indian market was quite large.
They were told that 200 million Indian people could afford to buy the
industrial products and this constituted quite a large market which could be
profitably exploited.
Besides, the growth rate of population and age composition of population
determine the demand pattern of goods. When the population of a country is
growing at a high rate, its child population will be relatively large. This means
demand for products such as baby food which cater to the needs of children
will be relatively high.
On the other hand, if population of a country is stable and life expectancy of
the people is high, this will cause greater proportion of elderly aged people in
the population of a country. This means different demand pattern of goods.
Thus business firms have to consider all these demographic factors in their
planning for production of goods and services and formulation of marketing
strategies for sale of their products.
Demographic environment is also important for business firms as it determines
the choice of technology by them. Other things being equal, if labour is
abundant and relatively cheaper than capital, business firms will prefer
relatively labour-intensive techniques for production of goods.
However, for various reasons such as rigid labour laws and low productivity of
labour, various tax concessions on investment in capital equipment and
machinery, business firms in India are generally seem to be using capital-
intensive technologies imported from abroad. This has resulted in the increase
in unemployment of labour, especially among the young workers.
Therefore, social and government pressure is increasing on the business firms
to create more employment opportunities for labour so as to render help in
solving the problem of unemployment. It is quite interesting to note here that
to take advantages of relatively cheap labour in India and China that foreign
MNCs are setting up manufacturing plants in these countries. It is evident from
above that demographic factors play a crucial role in determining the produc-
tive activity of business firms.
Natural Environment:
Natural environment is the ultimate source of many inputs such as raw
materials, energy which business firms use in their productive activity. In fact,
availability of natural resources in a region or country is a basic factor in
determining business activity in it. Natural environment which includes
geographical and ecological factors such as minerals and oil reserves, water
and forest resources, weather and climatic conditions, port facilities are all
highly significant for various business activities.
For example, the availability of minerals such as iron, coal etc. in a region
influence the location of certain industries in that region. Thus, the industries
with high material contents tend to be located near the raw material sources.
For example, steel producing industrial units are set up near coal mines to save
cost of transporting coal to distant locations.
Besides, certain weather and climatic conditions also affect the location of
certain business units. For example, in India the firms producing cotton textiles
are mostly located in Bombay, Madras, and West Bengal where weather and
climatic conditions are conducive to the production of cotton textiles.
Natural environment also affects the demand for goods. For example, in
regions where there is high temperature in summer there is a good deal of
demand for dessert coolers, air conditioners, business firms set up industrial
units producing these products. Similarly, weather and climatic conditions
influence the demand pattern for clothing, building materials for housing etc.
Furthermore, weather and climatic conditions require changes in design of
products, the type of packaging and storage facilities.
It may however be noted that resource availability is not a sufficient condition
for the growth of production and business activities. For instance, India
through rich in natural resources remained poor and underdeveloped because
available resources had not been put to use due to lack of adequate
capabilities of Indian business class. Thus, it is not the availability of natural
resources alone but also the technology and ability to being them into use that
determines the growth of business and the economy.
Ecological Effects of Business:
Until recently businesses had generally overlooked the serious ecological
effects of its activities. Driven purely by the motive of maximizing profits, they
cause irreparable damage to the exhaustible natural resources, especially
minerals and forests. By their careless attitude they caused pollution of
environment, especially air and water which posed health hazards for the
people.
 By creating external detrimental diseconomies they imposed heavy costs on
the society. Thanks to the efforts by environmentalists and international
organisations such as World Bank, the people and the governments have now
became conscious of the adverse effects of depletion of exhaustible natural
resources and pollution of environment by business activity.
Accordingly, laws have been passed for conservation of natural resources and
prevention of environment pollution. These laws have imposed additional
responsibilities and costs for business firms. But it is socially desirable that
these costs are borne by business firms if we want sustainable economic
growth and also healthy environment for human beings.

BUSINESS ETHICS
Business ethics is the study of appropriate business policies and
practices regarding potentially controversial subjects including corporate
governance, insider trading, bribery, discrimination, corporate social
responsibility, and fiduciary responsibilities. The law often guides
business ethics, but at other times business ethics provide a basic
guideline that businesses can choose to follow to gain public approval.

Ethics means the set of rules or principles that the organization should
follow. While in business ethics refers to a code of conduct that
businesses are expected to follow while doing business.
Through ethics, a standard is set for the organization to regulate their
behavior. This helps them in distinguishing between the wrong and the
right part of the businesses.
The ethics that are formed in the organization are not rocket science.
They are based on the creation of a human mind. That is why ethics
depend on the influence of the place, time, and the situation.
Code of conduct is another term that is used extensively in businesses
nowadays. It is a set of rules that are considered as binding by the people
working in the organization.
Business ethics compromises of all these values and principles and helps
in guiding the behavior in the organizations. Businesses should have a
balance between the needs of the stakeholders and their desire to make
profits.
While maintaining these balances, many times businesses require to do
tradeoffs. To combat such scenarios, rules and principles are formed in
the organization.
This ensures that businesses gain money without affecting the
individuals or society as a whole. The ethics involved in the businesses
reflect the philosophy of that organization.
One of these policies determines the fundamentals of that organization.
As a result, businesses often have ethical principles. There is a list of
ethical principles involved in the businesses.

 Importance of Business Ethics:

1. Corresponds to Basic Human Needs:

The basic need of every human being is that they want to be a part
of the organisation which they can respect and be proud of,
because they perceive it to be ethical. Everybody likes to be
associated with an organisation which the society respects as a
honest and socially responsible organisation. The HR managers
have to fulfill this basic need of the employees as well as their own
basic need that they want to direct an ethical organisation. The
basic needs of the employees as well as the managers compel the
organizations to be ethically oriented.

2. Credibility in the Public:Ethical values of an organisation

create credibility in the public eye. People will like to buy the
product of a company if they believe that the company is honest
and is offering value for money. The public issues of such
companies are bound to be a success. Because of this reason only
the cola companies are spending huge sums of money on the
advertisements now-a-days to convince the public that their
products are safe and free from pesticides of any kind.
3. Credibility with the Employees:
When employees are convinced of the ethical values of the
organisation they are working for, they hold the organisation in
high esteem. It creates common goals, values and language. The
HR manager will have credibility with the employees just because
the organisation has creditability in the eyes of the public.
Perceived social uprightness and moral values can win the
employees more than any other incentive plans.

4. Better Decision Making:

Respect for ethics will force a management to take various
economic, social and ethical aspects into consideration while
taking the decisions. Decision making will be better if the
decisions are in the interest of the public, employees and
company’s own long term good.

5. Profitability:
Being ethical does not mean not making any profits. Every
organisation has a responsibility towards itself also i.e., to earn
profits. Ethical companies are bound to be successful and more
profitable in the long run though in the short run they can lose
money.

6. Protection of Society:
Ethics can protect the society in a better way than even the legal
system of the country. Where law fails, ethics always succeed. The
government cannot regulate all the activities that are harmful to
the society. A HR manager, who is ethically sound, can reach out
to agitated employees, more effectively than the police.

 Ethical Principles in Businesses from an Indian

Perspective
Essentially, any businesses that run in India comprises of these ethical
principles.

Integrity

Whenever there is great pressure to do right instead of maximizing

profits, sthis principle is tested. The executives need to demonstrate
courage and personal integrity, by doing what-what think is right.

These are the principles, which are upright, honorable. They need to fight
for their beliefs. For these principles, they will not back down and be
hypocritical or experience.

Loyalty

No ethical behavior can be promoted without trust. And for trust, loyalty
needs to be demonstrated. The executives need to be worthy of this trust
while remaining loyal to the institutions and the person. There should be
friendship in the time of adversity and support and devotion for the duty.

They should not use or disclose personal information. This leads to

confidence in the organization. They should safeguard the ability of a
professional to make an independent decision by avoiding any kind of
influence or the conflicts of interest.

So, they should remain loyal to their company and their colleagues. When
they accept the other employees, they need to provide a reasonable time
to the firm and respect the proprietary information attach to the previous
firm. Thus, they should refuse to take part in any activity that might take
the undue advantage of the firm.

Honesty

The ethical executives are honest while dealing with their regular work.
They also need to be truthful and do not deliberately deceive or mislead
the information to others. There should be an avoidance of the partial
truths, overstatements, misrepresentations, etc. Thus, they should not
have selective omission by any means possible.

Respect and Concern

These are two necessarily different forms of behavior in the organization.

But they go in tandem that is why they have been put under one principle.
When the executive is ethical he is compassionate, kind, and caring.

There is one golden rule which states that help those who are in need.
Further, seek their accomplishments in such a manner that the business
objectives of the firm are achieved.

The executives also need to show respect towards the employee’s dignity,
privacy, autonomy, and rights. He needs to maintain the interests of all
those whose decisions are at stake. They need to be courteous and treat
the person equally and rightly.
Fairness

The executives need not be just fair in all the dealings, but they also
should not exercise the wrong use of their power. They should not try to
use over each or other indecent manners to gain any sort of advantage.
Also, they should not take undue advantage of anything or other people’s
mistakes.

Fair people are inclined more towards justice and ensure that the people
are equally treated. They should be tolerant, open-minded, willing to
admit their own mistakes. The executives should also be able to change
their beliefs and positions based on the situation.

Leadership

Any executive, if ethical, should be a leader to others. They should be

able to handle the responsibilities. They should be aware of the
opportunities due to their position. The executives need to be a proper
role model for others.