UNIT - I

EVOLUTION
AND
FUNDAMENTALS
OF
BUSINESS

BUSINESS STUDIES - XI
 TOPICS COVERED

 Business : An Introduction
 Classification of Business Activities
 History of Commerce in India
 Business Risk : Nature and Causes
BUSINESS : AN INTRODUCTION
 BUSINESS : AN INTRODUCTION

 HUMAN ACTIVITIES
 [A] Economic Activities
It refers to that activity which is undertaken with the objective
of earning money.
(1) Business
-that economic activity which is conducted on regular basis
to earn profit through the production and sales of goods
and services
(2) Profession
-that economic activity which is conducted by a person
having some special knowledge and skill and which is used
impartially to serve the different sections of society
 BUSINESS : AN INTRODUCTION

(3) Employment
- that economic activity under which people work for
others and receive remuneration in lieu thereof
 [B] NON-ECONOMIC ACTIVITIES
It refers to that activity which is undertaken with the objective of
getting psychology satisfaction, such as doing social work.
 BUSINESS : AN INTRODUCTION

 [1] BUSINESS
 Meaning
It refers to that economic activity which is conducted on regular
basis to earn profit through the production and sales of goods
and services.
 Characteristics
1. An Economic Activity
2. Exchange of Goods and Services
3. Regularity in Dealing
4. Profit Motive
5. Element of Risk
6. Creation of Utility
7. Consumer Satisfaction
 BUSINESS : AN INTRODUCTION

 [2] PROFESSION
 Meaning
It refers to that economic activity which is conducted by a person
having some special knowledge and skill which is used impartially
to serve various sections of the society.
 Characteristics
1. Body of specialized knowledge and technique
2. Formalized methods of acquiring Training & Experience
3. Establishment of representative professional association
4. Code of conduct
5. Priority of service over economic consideration
 BUSINESS : AN INTRODUCTION

 [3] EMPLOYMENT
 Meaning
It refers to that economic activity under which people work for
others and receive remuneration in lieu thereof.
 Characteristics
1. Service to others
2. Personal services
3. Agreement
4. Servant
5. No need of capital
6. No risk
7. Nature of employer
 Differentiate B/P/E
Basis Business Profession Employment
1. Mode of Entrepreneur’s Membership & Certificate of Agreement
Establishment Decision & Legal practice
formalities
2. Nature of Work Production & Sales - Expert services Work as per agreement
Purchase
3. Qualification Not necessary As prescribed by the As prescribed by the
professional body employer
4. Reward or Return Profit earned Fee Salary or Wages

5. Capital Investment As per size & nature Limited capital needed No capital needed

6. Risk Present Some risk No or little risk

7. Transfer of Interest Possible Not possible Not possible

8. Code of Conduct No Yes Norms laid down by the

employer
9. Example Shop, Factory, etc. Legal, Medical, Chartered Private & Govt.
accountancy, etc. departments
BUSINESS : AN INTRODUCTION
 BUSINESS : AN INTRODUCTION

 ROLE OF PROFIT IN BUSINESS

 1. For long survival
 2. For rapid growth
 3. For increasing efficiency
 4. For building prestige and recognition
 5. For earning more profit
CLASSIFICATION OF BUSINESS
ACTIVITIES
 CLASSIFICATION OF BUSINESS
ACTIVITIES

 INDUSTRY
It refers to that economic activity which
undertakes the production of goods and services.
 TYPES OF INDUSTRY
 [1] Primary Industry
It refers to that industry which produces unrefined raw
material out of which finished products are made.
• Genetic Industry
• Extractive Industry
 CLASSIFICATION OF BUSINESS
ACTIVITIES
 [2] Secondary Industry
It refers to that industry which uses the raw material produced by
primary industry and changes them into finished items.
• Manufacturing Industry
• Analytical Industry
• Processing Industry
• Synthetic Industry
• Assembling Industry
• Constructive Industry
 [3] Tertiary Industry
It refers to that industry which produces services.
• Transport Industry, Banking Industry, Insurance Industry,
Advertisement Ind., Warehousing Industry, etc.
 CLASSIFICATION OF BUSINESS
ACTIVITIES

 COMMERCE
It refers to the sum total of all those activities which are engaged
in the removal of hindrances of PERSON, PLACE, TIME, RISK, FINANCE
and INFORMATION in the exchange of commodities.
 CLASSIFICATION OF BUSINESS
ACTIVITIES

 COMPONENTS OF COMMERCE
 [A] Trade
 It refers to purchase and sale of goods or services with profit
motive.
 [B] Auxiliaries to Trade
 It refers to those activities which are undertaken to overcome
the hurdles appearing in the way of trade. It includes :
 Transport & Communication
 Banking & Finance
 Insurance
 Warehousing
 Advertising
 HISTORY OF COMMERCE

 HISTORY OF COMMERCE
Commerce has had to cover a long journey before
reaching on its climax.
 DEVELOPMENT OF COMMERCE IN INDIA
 1. Barter System Stage
 2. Village Economy Stage
 3. Money Invention Stage
 4. Town Economy Stage
 5. Industrial Revolution Stage
 6. Communication & Transport Development Stage
 HISTORY OF COMMERCE

 INDIGENEOUS BANKING SYSTEM

 HISTORY OF COMMERCE

 TYPES OF HUNDIES
 HISTORY OF COMMERCE

 METHODS OF BUSINESS OF INDIGENEOUS BANKERS

 Methods of Advancing Loans by Indigenous Bankers
 1. Loans against the receipts
 2. Bahi loans
 3. Mortgage
 4. Discounting of hundies
 Importance of Indigenous Bankers
 1. Credit to small traders
 2. Credit to agriculture
 3. Long term credit
 HISTORY OF COMMERCE

 TRADING COMMUNITY
 1. Merchants
 Main group of performing trading activities
 It includes Vaisyas, Baniyas, Chetti, ect.
 2. Sarrafs and Moneylenders
 They play double role :
 Trading &
 Money Lending
 3. Brokers
 There job was to make the sellers & buyers of different
goods together.
 HISTORY OF COMMERCE

 MAJOR TRADE CENTRES

 HISTORY OF COMMERCE

 MAJOR IMPORTS & EXPORTS OF INDIA

• IMPORTS : Pearls, Wool, Dates, Dried Fruits, Coffee,
Honey, Paper, Tea, Silk, Metals, etc.
• EXPORTS : Raw Silk, Cotton, Leather, Indigo, Rice,
Wheat, Opium, Pepper, Spices, Precious
Stones, etc.
 MODES OF TRANSPORT
• In Local Trade : Camel, Bullock/Ox, Donkeys
• In Foreign Trade : Mainly Ships
 HISTORY OF COMMERCE

 POSITION OF INDIAN SUB-CONTINENT IN THE

WORLD ECONOMY
 BUSINESS RISK

 MEANING
It refers to the possibility of inadequate profits or even
losses in the business because of uncertainties.
 NATURE
 1. Risk is the result of uncertainties
 2. Risk is an essential part of every business
 3. Degree of risk varies with the size of business
 4. Profit is the consideration of risk taking
 5. Risk depends on the nature of business
 BUSINESS RISK

 CAUSES OF BUSINESS RISK

 1. Natural Causes
 Seasonal changes
 Geological changes
 Other natural calamities

 2. Human Causes
 Dishonesty by employees
 Dishonesty by customers
 Strike and lock-out
 Working carelessly
 BUSINESS RISK

 CAUSES OF BUSINESS RISK

 3. Economic Causes
 Change in fashion
 Change in prices
 Effect of competition
 Providing facilities to the consumers
 4. Other Causes
 Natural causes
 Technical causes
 Mechanical causes
 Managerial causes
 UNIT-1

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