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Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
Topi
cs:
 Meani ngandChar acteristi
csofBusi ness
 Object i
v esofBusi ness
 Requi sitesofasuccessf ulBusiness
 Classificationofbusi nessact i
v i
ty
 Meani nganddef initi
onofbusi nessethics
 Natureandscopeofbusi nesset hi
cs
 Impor tantofbusi nesset hi
cs
 Solet rader
 Co-Oper ati
veSociety
 Partner ship
 Privateandpubl i
cl i
mi tedcompany
 JointSect orandpubl icsect or
 Mul ti
nat ionalandt r
ansact i
onal

MEANI
NGANDCHARACTERI
STI
CSOFBUSI
NESS

I
nLaymant erms,busi nessmeanstogetsomethi
ngatl owcostandselli
tatahighercost,
meanwhil
e,themar ginproducedbet
weenthati
stheprofit
.Busi
ness’
sonlypur
poseisprofi
t,
i
tisdr
ivenbyit.Businessisderi
vedf
rom t
heword‘busyness’meani
ngengagedinanacti
vi
ty.

Abusinessistheorganizedef
for
tofindi
vi
dual
stopr
oduceandsel
l
,forapr
ofi
t,t
hegoods
andservi
cesthatsat
isf
ysociet
y'
sneeds.

Busi
nessi sdefi
nedasanor gani
sedeconomicactivi
ty,wher
eintheexchangeofgoodsand
ser
vicestakesplace,f
oradequat econsider
ati
on.Itisnot hi
ngbutamet hodofmaking
money ,f
rom commerci
altransact
ions.I
tincl
udesallthoseactiv
iti
eswhosesol eai
misto
makeav ai
labl
ethedesi
redgoodsandser v
icestothesociet
y,inaneffect
ivemanner
.

I
tisasystemat
icatt
emptofthebusinessper
sonstoproducegoodsandser
vices,andsel
l
t
hem att
hemarket,
toreapt
hereward,bywayofprof
it
.

Accor
ding to well
-known professors Wil
l
iam Pri
de,RobertHughes,and Jack Kapoor
,
busi
nessis'theorganizedeffortofindi
vi
dualst
opr oduceandsel
l
,foraprofi
t,t
hegoods
andservi
cesthatsati
sfysoci
ety'sneeds.
'

Accordi
ngtoUr wickandHunt,“Busi
nessi
sanyent
erpr
isewhichmakes,dist
ri
but
esor
pr
ov i
desanyser
vicewhichot
hermembersoft
hecommuni
tyneedandar
ewi l
l
ingtopayf
or
i
t”.

Accor
dingtoL.H.Haney,“Busi
nessmaybedef i
nedashumanacti
vi
tydi
rect
edt
owar
ds
pr
oducingoracqui
ri
ngweal
ththr
oughbuy
ingandsel
li
ngofgoods.
”

Accor
dingt
oProf.L.R.Dicksey
,”Busi
nessisafor
m ofact
ivi
typur
suedpr
imar
il
ywit
hthe
obj
ectofearni
ng prof
it
sf orthe beneftoft
i hoseon whosebehal ftheacti
vi
tyis
conduct
ed.
”

Prof
itpl
aysapivot
alrol
e,asal
lthebusinessacti
vi
ti
esar edi
rect
edtowardsi t
,becausei
t
worksanincent
ivetotheentr
epreneur
s,forthei
reffor
ts,andthus,necessaryforever
y
busi
ness.

CHARACTERI
STI
CSOFBUSI
NESS

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
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p&BM CHAPTER:FOUR Page#2
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion

 Economi cAct ivity:Busi nessnecessar i

lyhast obeaneconomi cact ivity.Butwhat
exact lyi saneconomi cact ivity?Anyact ivi
tyt hatgi vesamonet aryr et urni san
economi cact ivity.Forexampl e,i fy ourf riend’sf atherpi cksy ouupanddr opsy ouat
col lege ev ery day ,he i s doi ng t his actoutofki ndness.Buti fhe st ar tsa
transpor tationser v i
ceofpi cki ngupanddr oppi ngbychar gingmoneyt heni t’san
economi cact ivity.
 Pr oduct i
on/ pur chaseofgoodsandser vices: Ifabusi nesspl ansonsel li
ngapr oduct ,
i
thast oei t
hermanuf act ur et hatpr oductorpur chasei tandaddapr of i
tmar gint oi t
andsel litfur ther .Busi nessi si nt erest edi nev er yact ivityt hati sconcer nedwi tht he
product ionorpur chaseofgoodsf orsel l
ing;t hismakesi toneoft hemosti mpor tant
char act eristicsofabusi ness.Ser v i
cesf orsal ei ncl udet ranspor tation, housekeepi ng,
andsecur i
ty.Wher eas, goodsar emost lyconsumabl ei tems.
 Sel lingofgoodsandser vices:Thet hi rdandcr uci aloneoft hechar act eristicsof
busi nessaf terpr oduct ionorpr ocur ementi st osel lthatpr oductf ort hemoney .The
wayt osel lapr oductorser vicei sbyl aunchi ngi ti nt hemar ketort oof f
eri tf orsal e.A
sal eorexchangemustt akepl acebet weent hesel lerandt hebuy er .
 Cont i
nui tyi ndeal i
ngs:Ev er ybusi nessr equi resr egul arityi nt ransact ions,i .e.an
i
sol atedt r
ansact i
onofexchangeofgoodsorser viceswi llnotbeconsi der edas
busi ness.So,t oconst itut ebusi ness,t hedeal ingsmustbecar riedoutonar egul ar
basi s.Forexampl e,i fy ousel ly ourol dbi keandi tgener at esmoney .Al so,i t’san
economi cact ivitybuti sy oudoi ngt hi sonar egul arbasi s?No.Asi thasnor egul ar it
y
i
ni t,i tcannotbeaccept edasabusi nessact ivity .Si mi l
ar ly,ther ei sadeal erwho
deal si nt hepur chaseandsel l
sofsecond- handbi kes.Forhi m, i
t’sabusi nessact i
v it
y
ast her ei sr egul arityinhi sdeal ing.Asi nglet ransact ionofpur chaseorsal ecannot
becl assi fiedasabusi ness.
 Pr of itear ning:Thesol epur poseofbusi nessi st hemaxi mi zat i
onofpr ofit.I tst eps
i
nt ot hemar ketwi tht hemai nobj ectiveofear ni ngapr of it
.Fort hesur vivalof
busi nessi namar ket ,gener at i
ngpr ofitisext remel ynecessar y .Ifabusi nesscan’ t
produce pr of i
t,i ti s expect ed ofi tt o go downhi l
lf inanci ally.Ther ef oret he
busi nessmandoesal lt hepossi bl et r
ickst omaxi mi zei tspr ofitsbyi ncr easi ngt he
vol umeofsal esordecr easi ngt hecost s.
 Elementofr isk:ti swel lknown “ Highert her i
sks,hi ghert her eturn” .Busi ness
attract sr i
sk.Whi lei nit
iat ingbusi nessi tisnotguar ant eed100%t hatt hebusi nesswi ll
besuccessf ul.Ther ei sant icipat iont hatt her emi ghtbedemandf ori tspr oductor
ser v i
cei nt hemar ket.Butt hemar keti sal way sdwi ndl ingt hesubj ectt or isk.The
busi nessmayev enear npr of itbutt heamountofpr of itear nedmayv ary .
 Uncer tainr et urn:Busi nessmeni nv esthugecapi tali nt hei ract iv i
tiest osust ainand
ext ractpr of i
tf rom t hebusi ness.Aswedi scussedt her i
skabov e,i tisv er yuncer tain
ast owhatamountt hepr ofitwi llbeear ned.Of t ent her ear esi tuat i
onswher ei sno
retur nofpr of i
t.Ther ear eal way schancesofl ossesi nt hebusi nessact iv i
ties.
 LegalandLawf ul:Thebusi nesshast obel egalandl awf ul.Busi nessi sanext remel y
i
mpor tantact ivityf oracount r ybuti ti snotabov et hel aw.Ev er yeconomi cact i
v it
y
hast obewi thint hel i
mi tsoft hel aw.Thecount ry ’
sl egisl at i
onput scl ausesont he
funct ioningoft hebusi nesst ocont rol itsact iviti
es.
 Consumersat isf act i
on:Theai m ofbusi nessi st osuppl ygoodsandser v i
cest o
consumer s,so ast o sat isfyt hei rwant s,aswhent heconsumer( fi
naluser )i s
sat isfied,he/ shewi llpur chaset hegoodsorser v ices.But ,ift heyar enot ,t her ear e
chancest hatt heywi l
llookf orsubst i
tut es.

Theconsumeri
sr egardedastheking,andsoalltheact
ivi
ti
esoft
hebusi
nessar
ealigned
towar
dsthesat
isfact
ionofconsumers.Thi
scanbedonebymaki ngav
ail
abl
equal
it
y-r
iched
goodseasi
l
yavail
abletothem,atr
easonablepr
ices.

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
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Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion

CLASSI
FICATI
ONOFBUSI
NESSACTI
VITI
ES
I
ntotwobroadcat
egor
ies,
var
iousbusi
nessact
ivi
ti
escanbecl
assi
fi
ed-
 Indust
ry
 Commer ce

I
ndust
ry:I
ndust
ryi
mpl
iest
heeconomicact
ivi
ti
est
hatar
eassoci
atedwi
tht
heconv
ersi
onof
r
esour
cesint
ogoodst
hatar
ereadyf
oruse.

Thesect orwher er aw materi

algetsconv ert
ed i
nto usefulproductsiscalled i
ndustry
.
Activi
ti
esr elat
ed to pr
oducti
on& pr ocessi
ng aswellasact iv
iti
esrelat
ed toreari
ng &
reproduct
ionofani malsorotherli
vi
ngspeciesarealli
ncludedint hei
ndustry
.Thepur pose
ofindustr
yi stocreatefor
m util
i
tybyconv er
ti
ngrawmat eri
alsintousefulf
ormsoff i
nished
products.

Ani ndustrymaypr oduceconsumergoodsorcapi talgoods.Goodssuchasbr ead,butter,

cloth,radio,et c.ar econsumergoods.Thesegoodsar edirectl
yusedbyt heconsumer .
Goodssuchasmachi nery,cementet c.arecalledcapi talgoodsast hesear eusedf ur
therin
thepr oductionpr ocesst omakeusef ul pr
oducts.
Industrycanbecl assi fi
edintot hr
eebr oadcategor i
es.
 Pr imar yi ndust ry:Thisi salsoknownasex t
ract i
vei ndustri
es.I tincludesact i
vity
connect edwi t
ht hepr oductionofweal t
hdi rect l
yfrom nat uralresour cessuchas
wat er,air,&l andetc.Pr i
mar yindustryincludesact i
vit
ieslikeext r
action&pr ocessing
ofnat uralresour ceset c.
 Secondar yi ndust r
y:Thi sindust ryisconcer nedwi thconv ert
ingr aw mat eri
alinto
fi
nishingpr oduct .Themat eri
al swhichhav eal readybeenext ractedatt hepr imar y
stagei st heconcer noft hesecondar yi ndustry .Suchmat eri
alsar epr ocessedt o
producegoodsf orfinalconsumpt i
onorf orf ur t
herpr ocessingbyot herindustrial
unitsint hesei ndustri
es.
 Ter tiaryi ndust ry:Thesei ndust r
iesar econcer ned wi t
h pr ovi
ding thoseser vices
whichf aci l
i
tat eaf l
owofgoods&ser vices.Thi sindust r
yhelpsi ntheact i
v i
ti
esoft he
primar y&secondar yindustry
.

Commer ce:Wecanr efert

ocommer ceasal lt
hoseactivi
ti
eswhichhel
pdir
ectl
yorindi
rectl
y
i
nt hedistri
buti
onofgoodst otheulti
mat econsumer .Ther
ewi l
lbenouseofpr oducing
goodsunless&unt i
lthesegoodsreachtheulti
mat econsumer.Goodsar
eproducedatone
pl
ace&consumer sarescatt
eredatdif
ferentplaces.Commercecanbeclassi
fiedint
otwo
broadcategori
es:
 Tr ade
 Ai dstotr
ade

Trade
Tradeisani ntegralpar tofcommer ce.Itincludesbuy i
ng&selli
ngofgoods&ser vi
ces.The
tr
adesegmentofcommer cebr ingst ogetherthemanuf act
urer&theconsumer ,
i.
e.i
tisali
nk
betweent hemanuf acturer&t heconsumer .
Tradecanbecl assifi
edi ntotwot ypes:
 I nternalt rade:I tr eferst o buy ing & sel l
i
ng ofgoods orser v
ices wi
thinthe
geogr aphicalboundar i
esofacount r
y.Itisalsoknownashomet radeordomest i
c
trade.Underi nternalt r
ade, goods&ser vicesarebought&soldinthehomecur r
ency
only.Thei nternal t
radecanbet wot ypes:
i
. Whol esal
et r
ade

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
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Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
ii
. Ret ailtrade
 Ext ernaltrade:  When t he buy i
ng & selli
ng ofgoods& ser v
icesi sbey ond the
geographicallimi t
soft hecount r
yitiscall
edexternaltr
ade.I
tisalsoknownast rade
betweent woormor ecount ries.I
next er
naltrade,themarketisverywide.Ext ernal
tr
adei soft hef oll
owingt ypes:
i
. Expor ttrade
ii
. I mpor ttrade
i
ii
. Ent repott rade
AidstoTrade
Theactivi
tieswhi chhel pint hesmoot hf l
ow oftradear eknownasai dst otrade.These
acti
vi
ti
esmakebuy i
ng&sel li
ngofgoodseasi er.Thesehelpinremovingv ar
ioushindrances
oftr
adewhi charisesi npr oduct i
on&di str
ibuti
onofgoods.Thecommonai dstotradeare:
o Tr anspor t&communi cati
on
o Banki ng&f inance
o I nsur ance
o War ehousing
o Adv er t
ising

OBJECTI
VESOFBUSI
NESS
Businessobjecti
vesaresomethi
ngwhichabusinessorgani
sati
onwant stoachieveor
accomplishoveraspeci
fi
edperi
odofti
me.Thesemaybet oearnprof
itforit
sgrowthand
development
,toprovi
dequal
i
tygoodst
oitscust
omers,
toprot
ectt
heenv i
ronment
,etc.

Thebusi
nessobjecti
vei
sagoal,i
.e.wher
ethebusinesswantstor
eachinthef
utur
e.For
exampl
e,abusinesswant
stosetupitsfr
anchi
seinanotherst
atei
nthenext3year
sorit
wantst
oincr
easeitswor
kfor
cei
nthecomingmonths.

Businessneedsobjecti
ves,wit
houtobj
ect
ivesthebusi
nessisli
keacarwi t
houtheadl
ight
s
dri
vi
ngbl ind.Obj
ect
ivesofbusinessar
ethepurposeforwhichthebusinessisestabl
i
shed
andper f
ormed.Wecancal lobj
ecti
vest
hecornerst
oneofev
erybusiness.

Objecti
vesareneededi nev er
yareawhereperf
ormanceandresul
tsdirectl
yaffectt
he
survi
valandpr osperi
tyofabusiness.Ther
ightchoiceofobj
ect
ivesiscr i
ti
calfort
he
successoft hebusi ness.Theobj
ecti
vesofabusinesscanbeclassi
fi
edi nt
ot womain
categori
es,
whi chare
 Economi cobjecti
ves
 Soci alobjecti
ves

Economi
cObj
ect
ivesofBusi
ness
Wel earnedintheprevioustopicthatbusinessisaneconomi cacti
vit
y.Hence,itspurposeis
toshoweconomi cresults.Let
’sunderstandt heeconomicobjecti
vesoft hebusiness.They
areasf ol
lows:
1]ProfitEarni
ng:Businessisasetofact i
vit
iesundert
akenwi t
hthepr ospectofsaleforthe
purposeofear ni
ngapr ofit
.Profi
tistheextraincomeov ert
heexpenses.Themai nobjecti
ve
ofanybusi nessistoear napr of
it.Justasapl antcannotsurvi
vewithoutwat er
,simil
arl
ya
businesscannotsustainwi t
houtprofi
t.

Profi
ti s necessaryforgrowing and expandi
ng business acti
vi
ties.Pr
ofitguarant
ee a
consistentstr
eam ofcapit
alforthemoder ni
zat
ionandaugment at
ionofbusinessacti
vi
ti
es
i
nt hefuture.Profi
tsli
kewi
seshowt hescaleofstabi
li
ty,eff
ici
ency,andadvancementofthe
businessorganizati
on.

Pr
of.Dr
.Shai
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afi
n,skar
afi
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Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion

2]MarketShare/Cr eati
onofCustomers:I
nthewordsofDrucker
,“Ther
ei sonl
yonevali
d
defi
nit
ionofbusi
nesspur pose;t
ocreat
eacustomer
.“Prof
it
sar enotgenerat
edoutoft
hin
ai
r.Theyarether esultofthehardworkofthebusi
nessmant osati
sfytheneedsofthe
cust
omer s.

Inthel ongrun,t
hesurvi
valofthebusinesscompl etel
ydependsupont hemar
ketshare
capturedbyt hebusi
ness.
 Thecr eat
ionofgoodandsat i
sfact
ionoftheneedsoft he
customeri sacruci
alpurposeoft hebusiness.Sot ogenerateprof
itanddemand,the
businessmustsuppl
ypremium qual
i
tyandgivev al
ueformoneyproduct
s.

3]Innovat
ion&Ut i
li
zati
onofResour ces:Innov at
ionnormall
ymeanstochangepr ocessesor
creati
ng more eff
ecti
v e pr
ocesses,pr oduct s and i
deas.Nowadays,business is ever
-
changinganddy namic.Tokeepupwi tht hegr owingcompeti
ti
onabusi nessmanhast o
i
ntroduceeff
ici
entdesign,l
atestt
rends,upgr adedmachinery
,newtechni
ques,etc.

Largecorporati
onsinvestahumongousamountofcapi tali
ntheirResear
ch&Dev el
opment
departmenttoboosti nnovati
on.Wher eas,onthepar
allelli
nes,uti
l
izat
ionofresourcesisa
properuseofwor kforce,raw material
,capit
alandt echnologyusedi nt hebusiness.A
businesshaslimit
edresourcesandt hat’
swhyitsmainobj ecti
veistoputtheseresourcest
o
correctdi
vi
sions.

4]Increasi
ngPr oducti
vi
ty:Product
ivi
tyisascal etomeasur etheef f
ici
encyofthebusiness
acti
vity
.I tis usual
lythe lastobjecti
ve butj ustas i mpor
tantbecause producti
vi
t yis
measur edbytheout putgiv
enbyt heact i
vit
ies.Itistheendresultofanybusinessactivi
ty.
Eachbusi nessmustgof ormor epr ominentpr oducti
vi
ty– toguar anteei
tssurvi
valand
development.Thisgoalcanbeaccompl ishedbydecr easingwastagesandmakingprofi
cient
uti
l
izationofmachinesandsuppl i
es,HR,cashandsof orth.

Soci
alObj
ect
ivesofBusi
ness
AccordingtoDaytonHudson“ Thebusinessofbusinessisservi
ngsociety,notjustmaking
money .
”Businessisoneoft hepil
lar
sonwhi chthesoci et
ystands. 
Therefore,i
tisapartof
thesociety.Inf
act,itcannotthri
vewithouttheresourcesfr
om t hesociet
y. Thebusiness
earnsitsincomefrom thesaleofpr oductsandservicestothesociet
y.Itismandatoryon
thepartofthebusinesstotakecareofthesocial
factors.

Thenecessar
ysoci
alobj
ect
ivesofabusi
nessar
easf
oll
ows:

1]Provi
dingGoods&Ser v
icesatReasonablePri
ces:Businessexist
si nthef
ir
stplaceto
sati
sfytheneedsoft hesociet
y.I
t’
sthef i
rstandmajorsocialobjecti
veofthebusiness.
Product
sandser v
icesoughttobeofbet terqual
it
yandt heseoughtt obeprovi
dedat
sensi
blecosts.Itisaddi
ti
onall
ythesocialcommitmentofbusi nesst okeepawayf rom
misbehavi
orsli
keboardi
ng,Bl
ackpromoti
ngandmani pul
ati
veadverti
sing.

2]Empl oymentGenerati
on:One oft he majorprobl
em t oday’
s generati
on faci
ng i
s
unemployment.Busi
nessgenerat
esempl oyment.Ther
efor
e,itisthesocialobjecti
veofa
busi
nesstogivechancestobenefi
cialempl
oymenttoindiv
idualsofthesociet
y.Inanati
on
l
ikeI
ndia,unemploy
menthasturnedintoacri
ti
cali
ssue.

3]FairRemunerati
ont oEmpl oy
ees:Thebusi nessdoesnotrunoni tsownbutt hepeople
areresponsi
blef
orthesuccessandf ai
lureoft hebusi
ness.Thepeopleont hei
nsideofthe
businessaremorev al
uablei.
e.employ
ees.Theyar eanassetoft hebusinessandmakea
ground-br
eaki
ngcont r
ibut
iontothebusiness.Theymustbegi venreasonablepayforthei
r

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
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eneur
shi
p&BM CHAPTER:FOUR Page#6
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
work.
Notwi
thstandingwagesandsalary,asignif
icantpi
eceofprofi
tsoughttobedist
ri
b¬uted
amongthem inacknowledgmentofthei
rcommi tment
s.Suchshari
ngofbenef
it
swil
lexpand
thei
nspir
ationandprof
ici
encyofemployees.

4]Communi t
yServi
ce:Businessmustgi vebacksomet hi
ngtothesoci et
y.Asar esul
t,the
Library,di
spensar
y,educat
ionalfoundat
ionsandsoonwhi chabusi nesscanmakeandhel p
i
nt headv ancementofsocietyar
ecr eat
ed.Businessenterpri
sescanbuildschools,
coll
eges,
l
ibraries,hospi
tal
s,spor
tsbodiesandr esear
chi nst
itut
ions.Theycanhel pnon-gover
nment
organi zat
ions(NGOs)likeCRY,Hel pAge,andot her
swhi chr enderservi
cest o weaker
sectionsofsociet
y.

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:FOUR Page#7
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
REQUI
SITESOFASUCCESSFULBUSI
NESS
Abusinesshast
oco- or
dinatev ar
iousf
act
orsofproductionforachiev
ingagi
venobject
ive.
Allf
actor
sareequall
yimpor tantformaki
ngthebusinessasuccess.Var i
ousdepar
tment s
shoul
dwor kinco-ordi
nationwi t
heachot herandor ganisat
ionalandfi
nanci
alpl
anning
shoul
dbyproper
lydeter
mi ned.

Modernbusinesshasbecomecompl exandcompl icat

ed.Thei mpr
ovement
sintechnol
ogy
andchangingconsumerprefer
encesar ecr
eati
ngmor echall
engesfort
hebusi
nessman.Al
l
aspect
sofanent erpr
ise,i
.e.
,producti
on,f
inanci
ng,or gani
sati
onandmarketi
ngshouldbe
proper
lyar
rangedandco-or
dinatedtomakeabusi nesssuccessful
.
Somepr e-
requi
sit
esofthesuccessofbusinessar easunder :

1.Set t
ingObjecti
ves:Thesetti
ngupofbusi nessobjecti
vesi
st hefir
stthingtobedoneby
themanagement .Onemustknowast owhati stobedone.Onlyaf t
erdecidingtheobjecti
ve,
theway sandthemeanswi l
lbedeterminedt oachievetheobject
ives.Ifitisaproducing
business,thenatureofproducttobepr oduced,whethertoproducet hewhol eproductor
partofitshouldbedecided.I
ncaseofser vi
cebusinessthenatureandt y
peofser vi
cet obe
providedshouldbedecided.I
tisnotonlythemanagementwhi chshoul dbeconv er
santwi t
h
thebusi nessobj
ecti
vesbuteveryper
soni ntheconcernshouldknowt heai msandgoal sof
the
business.

2.Pr operPl anning:Afterdetermining,t

heobj ecti
ves,thewor kshoul dbepl annedinal lits
perspect i
ves.Planninginvol
vesf orecast
ingandl ayingdownt hecour seofact i
on.I
tinvolv es
planningf orbothpr esentandf ut
ure.Whatist obeachi evedandhowi tistobeachi evedi s
ofpr imarysi gni
ficanceforthepr esent.Futurei salwaysuncer t
ainandt heest i
mat i
onof
futur
ehappeni ngsi sverydif
ficul
t.Inplanni
ngf ort hefutur
e,anef fortismadet oest i
mat e
thefut ureuncertainti
esanddet erminethepossi blecourseofactionf orthecomi ngper iod.
Thus,pl anningal sohelpsthemanagementt opr epareit
selfforfacingtheuncer t
ainti
esof
tomor row.

3.SoundOr ganisat
ion:Organisat
ioni sanar rangementbywhi chtasksar eassi
gnedto
employeessot hatthei
rindiv
idualeffor
tscontr
ibuteeffect
ivel
ytotheachiev
ementofclear
ly
defi
nedpurposes.Thedut iesandr esponsi
bil
i
tiesofallpersonsar
cdefinedandtheyshoul
d
knowwhatt heyar ctodo.

Anef fect
iveorgani
sati
onsystem i sessenti
alfort hesuccessofabusi ness.First
ly,a
decisi
onshouldbet akenaboutt heform ofowner shi
p,i.
e.,sol
et rade,par t
nershi
p,Joi nt
StockCompany .Thenasuit
ableinter
nalorgani
sationshouldbedev eloped.Nowor kshoul d
be leftunassi
gned.The superv
isors and subordinat
es should know t heirroles inthe
business.

4.ProperFinancialPlanni
ng:Ther equi
rement soff i
nanceandi t
spossi blesourcesshould
bedecidedatt hetimeofst art
ingt heent erpri
se.Thepur poseoff i
nancialplanni
ngist o
makesur et hatadequatefundsar eraisedatt heminimum ofcost .Ther equiredcapit
al
shoul
dbemadeav ail
abl
eatal ltimes,ot herwise,i
twillhampert hewor k.Thescarcit
yof
capi
talandtoomuchofi tbothwi l
lbebadf ortheconcern.
Theav ai
labil
it
yofexcesscapi t
almayt emptt hemanagementt ospendmor emoneyon
i
nventoryandonf ixedassets.Apr operpl ani snecessar
yf orprov
idingfundsforthepresent
needsandf utur
edev el
opment alplans.

Afi
nanci
alpl
anwilldeter
mine:
(
a)Theneedsofcapit
al,

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
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eneur
shi
p&BM CHAPTER:FOUR Page#8
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
(h)Sour
cesforcol
lect
ingfunds,and
(
c)Administ
rat
ionofcapit
alstr
uctur
e.

5.Locat ion and layoutofPl ant:One oft he importantdecisionst o be made byt he

managementatt hetimeofst art
ingaconcer ni sregardi
ngt helocati
onoft hepl
ant.The
plantshouldbel ocatedatapl acewhereal lfactorsofpr oducti
onar cav ai
labl
eatlowest
costs.Theai m ofreachinganopt i
mum pointwi llbeachievedonlyiftheplaceoflocati
onof
thebusi nessesissui t
able.Raw mat er
ial
s,l abour,powerand mar ketsf orthefini
shed
productsshouldbeav ai
lablenearthepl
aceofl ocati
on.

Afterdeci
dingaboutlocat i
on,adecisi
onismadeaboutl ay
outoftheplant.Thesetti
ngupof
themachineryandequi pmentshoul dbesy st
ematicsothatthef
lowofpr oducti
onshoul dbe
smoot handuninter
rupt ed.Theof f
icebuil
dingandwar ehouseetc.
,shouldbel ocatednear
thefactor
y.Properl
ay outwi l
lenabl
et heeconomicaluseofavai
lablespace.Properlocati
on
andlayoutofthebusinessar enecessaryforthesuccessofabusiness.

6.Mar keti
ngSy stem:Themar keti
ngaspectsofabusinessaremor eimpor t
antthaneven
producti
on.Therei snouseofproducingathi
ngifi
tcannotbesold.Marketi
ngmanagement
i
s essent i
alforear ni
ng prof
its.Managementshould decide aboutt he channels of
di
stri
bution.Whethert osel
ldir
ectl
ytoconsumersortosellt
hroughwhol esal
ers?Itshould
bedecidedaftertakingint
oconsider
ationv
ari
ousaspect
sofgoods.

7.Research:Inthechangi ngtechnol
ogicalworld,iti
sessenti
altousel at
estdevicesf or
producti
onandmar ketingofgoods.Changei st heessenceofbusiness.Ever
yday ,new
producti
onmet hodsaref ound.Consumer s’needsandpr efer
encesshouldbet akeni nto
consider
ati
onindev i
singpr oducti
onandmar ketingpol
ici
es.Resear
chanddev elopment
shouldbegivendueplaceinthebusiness.

Onecancompet ewi t
hchangingbusi
nessworldonlythroughresear
chpr ogrammes.I
f
at
tent
ionisnotgi
ventoresear
chworktheni
twil
lbecomedi f
fi
cul
ttostayinbusinessf
ora
l
argeperi
od.So,
resear
chacti
vi
ti
esar
enecessar
yforthesuccessofanenter
prise.

8.Dy nami cleadership:Thesuccessofanent erpr

isewilldependupont heef fi
ciencyofits
management .Thet askofmanagementi stoplan,organise,co-ordi
nateanddi r
ectv ar
ious
acti
viti
esf orachievingbusinessobject
ives.Thi
swi l
lbepossi bleonlyifthel eadershi
pi s
dynami c.Theoper ati
onmanagi ngtheconcernshouldhav eforesight,
ini
tiat
ive,courageand
apti
tudef orachange.Thesequal it
iesar
enecessaryinthel eadershiptotaket heconcernon
theroadofpr ogr
ess.

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
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eneur
shi
p&BM CHAPTER:FOUR Page#9
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
MEANI
NGANDDEFI
NITI
ONOFBUSI
NESSETHI
CS

Et
hicsmeansthesetofrulesorpri
nci
plest hattheorgani
zat
ionshoul
dfoll
ow.Whil
einbusiness
et
hicsr
efer
stoacodeofconductt
hatbusinessesareexpect
edtofol
l
owwhiledoi
ngbusi
ness.

Thr
oughethi
cs,astandar
dissetfort
heorgani
zati
ontoregulat
et hei
rbehav
ior
.Thi
shel
pst
hem i
n
di
sti
ngui
shi
ngbetweenthewrongandt
heri
ghtpartoft
hebusinesses.

Theethi
csarebasedont
hecr eat
ionofahumanmi
nd.Thati
swhyet
hicsdependont
hei
nfl
uenceof
thepl
ace,t
ime,andt
hesi
tuat
ion.

Codeofconductisanot
herter
mthati
susedextensi
vel
yinbusinessesnowaday
s.I
tisasetofr
ules
thatar
econsi
deredasbi
ndingbyt
hepeopl
eworkingi
ntheorganizat
ion.

Busi
nessethi
cscompr omi
sesofalltheseval
uesandprinci
plesandhelpsi
ngui
dingthebehav
iorin
theor
gani
zati
ons.Busi
nessesshoul
dhav eabalancebet
weent heneedsoft
hest
akehol
der
sandt hei
r
desi
retomakeprofi
ts.

Whilemaintai
ningthesebalances,manyt
imesbusinessesrequi
ret
odot
radeof
fs.Tocombatsuch
scenar
ios,r
ulesandprinci
plesarefor
medi
ntheorganizati
on.

Thi
sensuresthatbusi
nessesgainmoneywithoutaffect
ingthei
ndi
vi
dualsorsoci
etyasawhol
e.The
et
hicsi
nvolv
edinthebusinessesref
lectt
hephi
losophyofthator
gani
zat
ion.

Oneofthesepol
iciesdeterminest
hef undamental
soft hatorganizat
ion.Asaresul
t,busi
nessesof
ten
hav
eethical
pri
nciples.Thereisal
istofethi
calpri
nci
plesinvolvedinthebusi
nesses.

Thedefi
nit
ionofbusi
nesset
hicsi
sthesetofmor
alr
ulest
hatgov
ernhowbusi
nessesoper
ate,how
busi
nessdecisi
onsar
emadeandhowpeoplear
etr
eat
ed.

Accordingt
oAndr ewCr ane,
"Busi
nessethicsisthest udyofbusi
nesssi
tuat
ions,act
ivi
ti
es,anddeci
sionswher
eissuesofr
ight
andwr ongareaddressed."

AccordingtoRaymondC.Baumhart,
"Theethicsofbusi
nessi
stheet
hicsofr
esponsi
bil
i
ty.Thebusi
nessmanmustpr
omi
set
hathewi
l
lnot
harm knowingl
y."

“
Busi
nessEthi
csisgeneral
lycomingt
oknowwhatisr i
ghtorwr
ongintheworkpl
aceanddoingwhat
i
sri
ght.Thi
sisinregar
dt oeffect
sofpr
oduct
s/ser
vicesandinrel
ati
onshi
pwit
hthestakeholder
s.”
—Cat
erMcnamara

“Businesset
hicsinshortcanbedef i
nedast hesy st
emat
icst
udyofethicalmat
ter
spert
aini
ngtothe
business,i
ndustr
yorr elat
edactiv
iti
es,insti
tut
ionsandbeli
efs.Busi
nessethi
csisthesystemati
c
handlingofval
uesinbusinessandindust
ry.”—JohnDonal
dson

Accordingt
oAndr ewCr ane,
“Busi
nessethicsisthest udyofbusi
nesssi
tuat
ions,act
ivi
ti
es,anddeci
sionswher
eissuesofr
ight
andwr ongareaddressed.”

AccordingtoRaymondC.Baumhart,
“Theethicsofbusi
nessi
stheet
hicsofr
esponsi
bil
i
ty.Thebusi
nessmanmustpr
omi
set
hathewi
l
lnot
harm knowinf
ly.
”

Et
hicsisabr anchofsocialsci
ence.Itdealswithmoralpri
nci
plesandsocialval
ues.I
thel
psust o
cl
assify
,whatisgoodandwhati sbad?I ttel
lsust odogoodthingsandavoiddoi
ngbadthings.So,
et
hicsseparate,goodandbad,rightandwr ong,fai
randunfai
r,moralandimmoralandproperand
i
mpr operhumanact i
on.I
nshort
,ethi
csmeansacodeofconduct .

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:FOUR Page#10
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
So,thebusinessmenmustgi vear egularsupplyofgoodqual itygoodsandser vi
cesatr easonabl e
pri
cest otheirconsumer s.Theymustav oi
di ndul
ginginunf airt
radepr acti
cesl ikeadult
er ati
on,
promotingmisleadingadverti
sement s,cheati
ngi nweight
sandmeasur es,blackmar keti
ng,etc.They
mustgi vef
airwagesandpr ov idegoodwor ki
ngcondit
ionstotheirworkers.Theymustnotexpl oitt
he
workers.Theymustencour agecompet it
ionint hemarket.Theymustpr ot
ectt heinter
estofsmal l
busi
nessmen.Theymustav oidunf ai
rcompet i
ti
on.Theymustav oi
dmonopol i
es.Theymustpayal l
thei
rtaxesregular
lytothegov ernment.

I
nshort
,businesset
hicsmeanst
oconductbusi
nesswi
thahumant
ouchi
nor
dert
ogi
vewel
far
eto
t
hesoci
ety.

ETHI
CALPRI
NCI
PLESI
NBUSI
NESSES
Int
egri
ty
Whenevertherei
sgreatpr
essuret
odorighti
nst
eadofmaximizi
ngprofi
ts,
thi
spri
nci
pleistested.The
execut
ivesneedtodemonstr
atecour
ageandpersonal
int
egr
it
y,bydoingwhat
-whatt
hinkisright.

Thesearethepri
ncipl
es,whi
chareupr
ight
,honorabl
e.Theyneedt ofi
ghtf
ort
hei
rbel
i
efs.Fort
hese
pri
nci
ples,
theywi
llnotbackdownandbehypocr
it
icalorexper
ience.

Loyalt
y
Noet hi
calbehav
iorcanbepromotedwithouttrust.Andf
ort rust
,loyalt
yneedst obedemonstrated.
Theexecuti
vesneedt obewor
thyofthi
strustwhileremai
ningloyaltotheinsti
tut
ionsandtheperson.
Thereshouldbefr
iendshi
pint
heti
meofadv er
sit
yandsuppor tanddev oti
onfortheduty.

Theyshouldnotuseordiscl
osepersonalinf
ormati
on.Thi
sleadstoconfidenceintheor
ganizat
ion.
Theyshoul
dsafeguardtheabi
li
tyofaprofessi
onalt
omakeani ndependentdecisi
onbyavoi
dingany
ki
ndofinfl
uenceortheconf
li
ctsofi
nter
est.

So,theyshoul dremainloyaltotheircompanyandt hei

rcol
leagues.Whent heyacceptt heother
employees,theyneedtoprovi
dear easonabl
eti
met ot
hefir
m andrespectt
hepr opri
etar
yinf
ormation
att
achtot hepr ev
iousfi
rm.Thus,theyshouldref
usetotakepartinanyacti
vi
tyt hatmighttakethe
undueadv antageofthef
ir
m.

Honesty
Theethi
calexecuti
vesarehonestwhil
edealingwi t
ht hei
rregul
arwork.Theyalsoneedt
obet r
uthf
ul
anddonotdeliber
atel
ydeceiveormisl
eadtheinformat i
ontoother
s.Thereshouldbeanavoi
danceof
thepart
ialtr
uths,overst
atements,misr
epresentati
ons,etc.Thus,theyshouldnothaveselecti
ve
omissi
onbyanymeanspossi ble.

RespectandConcern
Thesearetwonecessar
il
ydi
ff
erentf
ormsofbehav
iori
ntheorgani
zat
ion.Buttheygoi
ntandem t
hat
i
swhyt heyhavebeenputunderonepri
nci
ple.Whentheexecut
ivei
set hi
calheiscompassi
onate,
ki
nd,andcari
ng.

Therei s one golden rul

e which states t
hathelpt hose who arein need.Further
,seek thei
r
accompl i
shmentsinsuchamannert hatthebusi
nessobject
ivesofthef
ir
m areachieved.
Theexecut i
vesalsoneedt oshow respecttowardstheempl oy
ee’sdi
gnit
y,pri
vacy,autonomy
,and
ri
ghts.Heneedst omai ntai
ntheint
er estsofal
lthosewhosedecisi
onsareatstake.Theyneedtobe
courteousandtreatthepersonequall
yandr i
ghtl
y.

Fai
rness
Theexecuti
vesneednotbej ustfai
rinal
lthedeal
ings,butt
heyal soshoul
dnotexer
ciset hewr
ong
useofthei
rpower.Theyshouldnottr
ytouseovereachorotherindecentmanner
stogainanysortof
advant
age.Also,
theyshoul
dnottakeundueadvant
ageofany t
hingorotherpeopl
e’
smistakes.

Fai
rpeopl
eareincl
inedmoretowardsjust
iceandensuret
hatthepeopl
eareequallytr
eated.They
shoul
dbetol
erant
,open-
minded,wi
l
lingtoadmitt
heirownmist
akes.Theexecut
ivesshoul
dalsobe

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:FOUR Page#11
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
abl
etochanget
hei
rbel
i
efsandposi
ti
onsbasedont
hesi
tuat
ion.

Leadershi
p
Any executi
v e,ifethi
cal
,should be a l
eadert
o other
s.They shoul
d be abl
et o handl
et he
responsi
bil
it
ies.Theyshouldbeawareoft
heoppor
tuni
ti
esduetot
heirposi
ti
on.Theexecut
ivesneed
tobeapr operrolemodelforot
her
s.

NATURE/
CHARACTERI
STI
CSOFBUSI
NESSETHI
CS
Thechar
act
eri
sti
csorf
eat
uresofbusi
nesset
hicsar
e:-

 Codeofconduct :Busi nesset hi csisacodeofconduct .Itt ellswhatt odoandwhatnott odo

forthewel fareoft hesoci et y.Al lbusi nessmenmustf ollowt hiscodeofconduct .
 Basedonmor alandsoci alv alues:Busi nesset hicsi sbasedonmor alandsoci alv alues.I t
contai nsmor alandsoci alpr inciples( r ules)f ordoi ngbusi ness.Thi sincl udessel f -cont rol
,
consumerpr ot ect i
onandwel fare,ser vicet osoci ety,fai rtreat mentt osoci algr oups,nott o
exploi tothers, et c.
 Givespr otect iont osoci algr oups:Busi nesset hicsgi vepr otectiont odi fferentsoci algr oups
suchasconsumer s,empl oy ees, smal lbusi nessmen, gov ernment ,shar eholders, creditor s,etc.
 Prov idesbasi cf ramewor k:Busi nesset hicspr ovideabasi cf ramewor kfordoi ngbusi ness.I t
givest hesoci alcul tur al
,economi c,l egalandot herl i
mi tsofbusi ness.Busi nessmustbe
conduct edwi thi nt hesel i
mi ts.
 Volunt ary
:Busi nesset hicsmustbev olunt ar y.Thebusi nessmenmustacceptbusi nesset hics
ont hei rown.Busi nesset hicsmustbel ikesel f-di
scipline.I tmustnotbeenf orcedbyl aw.
 Requi res educat i
on and gui dance:Busi nessmen mustbe gi ven pr opereducat ion and
guidancebef or ei ntroduci ngbusi nesset hi cs.Thebusi nessmenmustbemot i
vatedt ouse
businesset hics.Theymustbei nf ormedaboutt headv antagesofusi ngbusi nesset hics.
TradeAssoci at ionsandChamber sofCommer cemustal sopl ayanact iver ol
eint hismat ter.
 Relat i
v eTer m:Busi nesset hicsi sar elativ et erm.Thati s,itchangesf r
om onebusi nesst o
anot her .Italsochangesf rom onecount ryt oanot her.Whati sconsi deredasgoodi none
count rymaybet abooi nanot hercount ry .
 New concept :Busi nesset hicsi sanewerconcept .Itisst rictl
yf ollowedonl yi ndev eloped
count ries.Itisnotf ollowedpr oper l
yi npooranddev elopi ngcount ries.

SCOPEOFBUSI
NESSETHI
CS
Ethicalprobl
emsandphenomenaar i
seacr ossallt
hef unct
ionalar easofcompani esandatalll
evels
withinthecompany .
1.Et hi
csinCompl iance
Compl ianceisaboutobey i
ngandadheringt orul
esandaut hority.Themot i
vat
ionf orbei
ngcompliant
couldbet odot her i
ghtthingoutofthef earofbeingcaughtr atherthanadesi retobeabi di
ngbyt he
l
aw.Anet hi
calcl
imat einanor gani
zati
onensur esthatcompl iancewi t
hl awisf uell
edbyadesiret o
abidebyt helaws.Or ganizati
onsthatvaluehighethicscompl ywi t
ht helawsnotonl yi
nlett
erbutgo
beyondwhati sst
ipulatedorexpectedoft hem.

2.Et
hicsinFinance
Theethi
cal i
ssuesi nfinancet hatcompaniesandempl oyeesar econfr
ontedwithi
ncl
ude:
 I naccount i
ng–wi ndowdr essi
ng,misl
eadingfinancial
analysi
s.
 Rel atedpar tytransactionsnotatarm’slengt
h
 I nsidertrading,securiti
esfraudl
eadingtomani pulat
ionofthefinanci
almar
kets.
 Execut i
vecompensat i
on.
 Br ibery,kickbacks, ov
erbill
ingofexpenses,f
acili
tati
onpay ments.
 Faker ei
mbur sement s

3.Ethi
csinHumanResources
Humanr esour
cemanagement( HRM)playsadeci si
verol
einint
roducingandi mplementi
ngethi
cs.
Ethi
csshouldbeapiv
otali
ssueforHRspecial
i
sts.Theethi
csofhumanr esourcemanagement(HRM)
coverst
hoseethi
cali
ssuesari
si
ngaroundtheemployer-
employ
eerelat
ionship,suchastheri
ght
sand

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:FOUR Page#12
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
dut
iesowedbet
weenempl
oyerandempl
oyee.

Thei
ssuesofet hi csfacedbyHRM i nclude:
 Di scrimi nat i
oni ssuesi.e.discri
mi nati
ononthebasesofage, gender,race,
reli
gion,
disabi
li
ti
es,
weightet c.
 Sexual har assment .
 Af firmat iveAct ion.
 I ssues sur r
oundi ng the r epresentati
on ofempl oyees and t he democrati
zati
on oft he
wor kplace, t
radei zat
ion.
 I ssuesaf fectingt hepri
v acyoft heempl oy
ee:workpl
acesur veil
lance,drugtest
ing.
 I ssuesaf fectingt hepri
v acyoft heempl oy
er:whi
stl
e-blowing.
 I ssuesr elati
ngt ot hefairnessoft heempl oy
mentcont ractandt hebalanceofpowerbet ween
empl oy erandempl oyee.
 Occupat ional safetyandheal th.

Companiestend to shi
fteconomicr
isksontotheshoul
dersofthei
rempl
oyees.Theboom of
per
for
mance-relat
edpaysy st
emsandf l
exi
bleempl
oymentcont
ract
sarei
ndi
cat
orsofthesenewl
y
est
abl
ishedf
or msofshif
tingr
isk.

4.Ethi
csinMar keting
Marketi
nget hicsi st hear eaofappl i
edethicswhi chdealswi t
hthemor alpri
ncipl
esbehindthe
oper
ationandr egul at
ionofmar keti
ng.Theethi
calissuesconf
rontedinthi
sar
eaincl
ude:
 Pr icing:pricefixing, pricediscri
minat
ion,pri
ceskimming.
 Ant i
-compet i
ti
vepr acticesl i
kemanipulat
ionofsupply,excl
usiv
edeali
ngarrangement
s,ty
ing
ar
rangement set c.
 Mi sl
eadi ngadv ertisement s
 Cont entofadv ertisement s.
 Chi l
drenandmar ket ing.
 Bl ackmar kets, greymar ket
s.

5.Ethi
csofPr oduct i
on
Thisar eaofbusi nesset hicsdeal swi ththedut iesofacompanyt oensur ethatproduct
sand
productionpr ocessesdonotcausehar m.Someoft hemor eacutedilemmasi nthisareaari
seoutof
thefactt hatther eisusuallyadegr eeofdangeri nanypr oductorproduct ionpr
ocessanditisdif
fi
cult
todefineadegr eeofper missi bi
li
ty,orthedegreeofper mi ssi
bil
i
tymaydependont hechangingstat
e
ofprevent at
ivet echnologiesorchangi ngsocialpercept i
onsofaccept abler i
sk.
 Def ective,addicti
veandi nherentl
ydanger ouspr oductsand
 Et hi
calr elati
onsbet weent hecompanyandt heenv ir
onmenti ncludepoll
uti
on,envi
ronmental
ethi
cs, andcar bonemi ssionstradi
ng.
 Et hi
cal problemsar isingoutofnewt echnologi esforeg.Genet ical
lymodifi
edfood
 Pr oductt esti
nget hics.

Themostsy st
emati
cappr
oachtofoster
inget
hicalbehav
iouri
stobui
l
dcor
por
atecul
tur
est
hatl
i
nk
et
hical
standar
dsandbusi
nesspr
acti
ces.

I
MPORTANCEOFBUSI
NESSETHI
CS
 Long-t
erm growt h:sustainabil
it
ycomesf rom anet hi
callong-ter
mv isionwhi chtakes
i
ntoaccountal lstakehol der
s.Smal lerbutsust ai
nablepr of
itslong-term mustbe
bett
erthanhigherbutr i
skiershort
-l
ivedprofit
s.
 Costandr i
skr educt i
on:compani eswhi chr ecognizethei mportanceofbusi ness
ethi
cswi l
lneedt ospendl esspr otect
ingt hemselv esfrom internalandext er
nal
behavi
oralrisks,especi allywhen suppor t
ed bysound gov er
nance sy stemsand
i
ndependentr esearch
 Anti
-capit
ali
stsent iment :thefi
nancialcrisi
smar kedanotherblowf orthecr edi
bil
i
t y
ofcapital
ism,wi thr esentmentt owar dsbankbai l
outsatt hecostoff undament al

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
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l.
com
Ent
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eneur
shi
p&BM CHAPTER:FOUR Page#13
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
ri
ghtssuchaseducat i
onandheal t
hcare.
 Limit
edr esour
ces:theplanethasfini
teresourcesbutagrowi
ngpopul
ati
on;wi
thout
ethi
cs,thoseresourcesarer epl
eteforpurelyindi
vi
dualgai
nathugecostbotht o
curr
entandf ut
uregenerati
ons.

SOLETRADER
A sol
et raderist he si
mplestf
orm ofbusi ness st
ructure and i
sr el
ati
velyeasyand
i
nexpensi
vet osetup.Asasol et
raderyouwi l
lbel
egall
yr esponsi
bleforal
laspectsofthe
busi
ness.You’l
lgeneral
lymakeallthedeci
sionsaboutstarti
ngandr unni
ngy ourbusi
ness
andyoucanempl oypeople.

Adv
ant
ages
 Simplet osetupandoper ate.
 Your etai ncompl etecontrol ofyourasset sandbusi nessdecisi
ons.
 Fewerr eportingrequirement s.
 Anyl ossesi ncurr
edbyy ourbusi nessact ivi
ti
esmaybeof f
setagainstotherincome,
suchasy ourinvestmenti ncomeorwages( subj
ecttocertaincondi
tions).
 All
owsy outousey ourindividualtaxf i
lenumber( TFN)tolodgetaxr et
urns.
 Youar enotconsi deredanempl oy eeofy ourownbusi nessandt hereforedon’tpay
payrollt ax,superannuationorwor kers’compensationoni ncomey oudr awfrom the
business.
 Relati
v elyeasyt ochangebusi nessst ruct
ureifyourbusinessgrowsori fyouwi shto
windt hingsup.

Di
sadv
antages
 Unl i
mi t
edli
abil
i
tywhi
chmeansallyourper
sonalassetsare atr
iski
fthingsgowr ong.
 Li t
tl
eoppor t
unit
yfort
axpl
anning–y oucan’
tsplitbusinessprof
itsorl osseswith
familymembersandyouarepersonall
yli
abl
etopayt axonalltheincomef r
om the
business.

CO-
OPERATI
VESOCI
ETY
ACo- oper at
iveSocietyisav oluntar yassoci ationofpeopl ewhocomet ogetherandi nvest
thei
rsmal lsavingstof ormt heor ganization.TheCo- operati
veSoci et
yi sf or medf ort he
mut ualbenefitofallt
hemember s.Themember soft heco-operati
v esoci etyar epeoplewho
comet ogetherandi nvesttheirsmal lsav ingst of or mt heor ganizationwhi chwi llwor k
towardst hei
rcommoncause.TheCo- operativeSoci etyisformedwi thani deaofsuppor ting
eachot hertoachi eveacommoneconomi cobj ect i
ve.Forexampl e,thef armer smaycome
togetherandf orm aco-operativ
esoci etytowor kj ointlyandtakeadv antageofeconomi esof
scale.Whent heywor ktogethert heywi l
lhav eabet terbargainingpowerf orbuyingr aw
mat eri
als.Theywi l
lalsoenj oyabet terbar gai ningpowerwhi lesel li
ngt heiragri
cul t
ur al
output.Mi ni
mum noofmember sr equir
edt ost artacooper at
ivesoci etyi s10.Howev er,
thereisnoupperl i
mittothenumberofmember st hatacooper ativ
esoci et ycanhav e.

Feat
uresofaCooper
ati
veSoci
ety
 Asitisavolunt
aryassoci ation,themember shipisalsovol
untar
y.Apersonisfreeto
j
oinacooper at
ivesoci ety
,andcanal soleaveany t
imeasperhisdesir
e.Ir
respecti
ve
ofthei
rrel
igi
on,gender&cast e,
member shipisopent oal
l.
 Itiscompulsoryf ort heco- operati
vesocietytogetr egi
str
ati
on.Theco-operati
ve
societ
yisaseparat elegali
dent i
tytothesociety.
 Itdoesnotgetaffectedbyt heent ryorexi
tofitsmember s.

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
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eneur
shi
p&BM CHAPTER:FOUR Page#14
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
 Ther eisli
mi t
edl i
abil
i
tyofthemember sofco-operati
vesociety.Li
abil
it
yi sl
imit
edto
theext entoftheamountcont r
ibut
edbymember sascapital.
 Anel ectedmanagi ngcommi t
teehast hepower st otakedecisions.Member shave
ther i
ghttov ote,bywhichtheyelectthemember swhowi l
lconsti
tutethemanaging
commi tt
ee.
 Thecooper at
ivesocietyworksont heprinci
pleofmut ualhelp&wel fare.Hence,t
he
principalofser vice dominat
es it’
s wor ki
ng.Ifany sur plus is generat
ed,itis
distri
butedamongstt hemember sasadi vi
dendi nconformitywiththeby e-
lawsof
thesoci et
y.

PARTNERSHI
P
A businesspar t
nershi
pisaspeci f
icki
ndofl egalrel
ationshipfor
medbyt heagreement
betweent woormor eindiv
idual
stocarryonabusi nessasco- owners.
 Thepart
nersina
businesspartnershi
pinvestinthebusi
ness,andeachi nvestor
/par
tnerhasasharei nthe
profi
tsandlosses.

Thepartner
shipasabusi nessmustregi
sterwithal
lstat
eswher
eitdoesbusiness.Each
stat
ehisseveraldif
ferentki
ndsofpart
ner
shipsthatyoucanf
orm,
soit
'simpor
tanttoknow
thepossi
bil
i
ties(explai
nedbelow)bef
oreyouregi
ster
.

Somepartnershi
psincl
udeindi
vidual
swhowor ki nt
hebusi
ness,whi
l
eot her
 par
tner
ships
mayincl
udepar t
ner
swhohav eli
mitedpar
ti
cipat
ionandal
soli
mitedl
iabi
l
ityforthedebts
andl
awsuitsagai
nstthebusi
ness. 
 

Apar t
nershi
p,asdiffer
ent
 f
rom acorpor
ati
on,isnotasepar at
eent i
tyfr
om thei ndi
vi
dual
owners.Apar t
nershi
pi ssi
milartoasolepropri
etororindependentcontr
actorbusiness
becauseinbothofthesebusi
nessest
hebusinessi
sn'tsepar
atefrom t
heowners,forli
abil
i
ty
purposes.

Thepar
tner
shi
pincometaxispai
dbythepartner
shi
p,butt
heprof
it
sandl
ossesar
edi
vi
ded
amongthepar
tner
s,andpai
dbythepar
tner
s,basedonthei
ragr
eement
.

Ty
pesofPar
tner
shi
ps
 
Befor
eyoustar
tapar
tner
shi
p,y
ouwi
l
lneedt
odeci
dewhatt
ypeofpar
tner
shi
pyouwant
.
Youmayhav
eheardt
heter
ms:

 A gener alpar tnershipi scomposedofpar t

nerswhopar ti
cipatei ntheday -
to-day
operationsoft hepar t
nershipar ewhohav eliabi
l
ityasowner sf ordebtsandl awsui t
s.
Theremayal sobel imitedpartner s
 Alimitedpar tnershi phasonegener alpartnerwhomanagest hebusi nessandoneor
mor elimitedpar tnerswhodon' tparti
cipateintheoper ati
onsoft hepartnershi
pand
whodon' thavel i
abili
ty.
 Al i
mi t
edl iabil
itypar tnershi
p( LLP) i
ssimi l
artot heli
mi t
edpar tner
ship,butitmay
havesev eralgener alpar t
ners.
 AnLLPi sf ormedbypar tnersinthesamepr ofessional
category( account ants,archit
ect s,etc.)andt hepartnershippr otect
spar t
nersf rom
l
iabil
ityfrom t heact i
onsofot herpar tners.Eachst at
ehasdi ff
erentcategoriesof
professionalsthati tall
owst of orm anLLP.

Pr
osofPar
tner
shi
p
Ther
ear
esev
eraladv
ant
agesofchoosi
ngt
ost
ruct
ureabusi
nessasapar
tner
shi
p,whi
ch

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:FOUR Page#15
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
i
ncl
ude:
 Fair l
yeasytosetupandmai ntainovertime
 Par tnerscanpoolthei
rresourcestof undt hecompany’
sstart-
up
 Par tnerscansharethewor kl
oadandt herewardsofthebusiness’
ssuccess
 Bei ngabletoofferkeyempl oy eesthepot enti
alt
oonedaybecomeapar tneri
nthe
businesscanbeabi gcarrotthatencour agesthem t
ostaylong-t
erm

ConsofPar
tner
shi
p
Ofcourse,wher et her e are adv antages,t here are also disadvant ages tof orming a
par
tner
ship:
 Wher emor ethanoneownerexi sts, t
hereareboundt obedi fferencesofopi ni
onthat
couldthreatenthebusi ness
 Althoughpar t
ner ssplitanypr ofi
tst hebusinessgener ates,i
fthepay outisnotinsync
witheachpar tner’scont ri
buti
ont ot hecompany ,di
sagreement scaner upt
 Unlikecorporations,whi chhelptoshi eldowner sf r
om li
abili
ty,par t
nershipshaveboth
joi
ntandi ndividualliabili
ty.Thati s,allpartnersar eli
ablefort hei
rownact i
onson
behalfofthecompanyaswel l astheact ionsoftheot herpartner s.

PRI
VATEANDPUBLI
CLI
MITEDCOMPANY
A priv
ateli
mitedcompany 
i
sacompanywhi chispri
vat
elyheldforsmal
lbusi
nesses.The
l
iabili
tyofthemembersofaPr i
vat
eLi
mi t
edCompanyi slimi
tedtotheamountofshar es
respecti
vel
yheldbythem.Shar
esofPri
vateLi
mitedCompanycannotbepubli
cal
lytraded.
Alltheaspect
sofPri
vateLi
mit
edCompanyisdi
scussedi
nt heart
icl
e.

Adv
ant
agesofaPr ivateLimi tedCompany
 Member s:You can st ar
tapr i
v atel i
mi ted companywi th ami nimum ofonl y2
member s(andmaxi mum of50) ,aspert hepr ovi
sionsoft heCompani esAct1994.
 Limitedliabil
ity:Thel iabil
ityofeachshar eholderormemberi sli
mi t
ed.Thismeans
thatifthecompanyr unsi ntoal oss, thecompanyshar eholdersarel i
abletoselltheir
companyshar est ocl eart hedebtorl i
abi l
ity.Thei ndivi
dualorper sonalassetsof
shareholdersormember sar enotatr i
sk.
 Perpetualsuccessi on:Aspercompanyl aw,per petualsuccessi onmeanst hatt he
companycont i
nuesi t
sexi stenceev enanyownerormemberdi es,goesbankr uptcy,
exit
sf r
om t hebusi nessandt ransf ershisshar estoanot herperson.
 Prospect us:Pr ospectusi sadet ailedstat ementt hatmustbei ssuedbyacompany
thatgoes publ i
c.Howev er,privatel imited compani es do notneed t oissue a
prospectusbecauset hepubl i
ci snoti nv it
edt osubscr ibef ortheshar esoft he
company .
 Numberofdi rect ors:Apr i
v ateli
mi tedcompanyneedsami ni
mum ofonl y2directors.
Atleastonedi rectoront heboar dofdi rector smusthav est ayedi nIndiaforat otal
peri
odofnotl esst han182day si nt hepr eviouscal endary ear.Thedi r
ectorsandt he
shareholderscanbet hesamepeopl e.

Di
sadv
antagesofaPr i
vateLimitedCompany
 Theshar esinapr i
vatelimi
tedcompanycannotbesol dortr
ansf
err
edt oany
one
unl
essothersharehol
dersagreeonthesame.
 Thereisnoopt i
ont oinv
itepubl
ict
osubscri
betotheshares.
 ItismandatorythatyoushouldmentionPv
t.Lt
d.attheendofacompanyname.

Whati
saPubl
icCompany
?
Apubl
i
ccompanyi
sacompanyt
hathasper
missi
ont
oissuer
egi
ster
edsecur
it
iest
othe

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:FOUR Page#16
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
generalpubli
cthr
oughaninit
ialpubl
icof
feri
ng( I
PO)andi ti
str
adedonatl eastonestock
exchangemar ket
.Apubli
ccompanyi snotauthori
sedtobegini
tsbusinessoperat
ionsj
ust
upont hegrantofthecer
ti
fi
cateofincor
porati
on.Inordertobeeligi
bletor
unasapubl i
c
company ,i
tshoul
dobtai
nanotherdocumentcall
edatradi
ngcert
if
icate.

Adv
ant
agesofaPubl icLimi t
edCompany
 Member s:I nor derf oracompanyt obepubl i
c,i tshoul dhav eami ni mum of7
member s( maxi mum   unlimited).
 Limi ted l iabili
ty:Thel i
abil
ityofapubl iccompanyi sl i
mi ted.No shar ehol deri s
indiv i
dual lyl i
ablef ort hepay ment .Thepubl iclimi t
edcompanyi sasepar atel egal
ent i
ty, andeachshar ehol derisapar tofi t.
 Boar dofDi rectors:Apubl i
ccompanyi sheadedbyaboar dofdi rectors.I tshoul d
hav eami ni mum of7ofdi rect ors.Theyar eelectedf r
om amongt heshar ehol der sby
theshar ehol dersoft hecompanyi nannualgener almeet ings.Theel ect eddi r ect ors
actasr epr esentativ
esoft heshar ehol dersi nmanagi ngt hecompanyandt aki ng
deci sions.Hav i
ngabi ggerboar dofdi rect or
st hereforebenef it
sal lshar ehol der si n
termsoft ransparencyaswel lasf osteringademocr ati
cmanagementpr ocess.
 Tr anspar ency :Privatel imit
edcompani esar est ri
ctl
yr egulatedandar er equi r edby
law t o publ i
sh theircompl et ef i
nanci alst atement sannual lyt o ensur et he t rue
financi alposi t
ionoft hecompanyi smadecl eart otheirowner s( sharehol ders)and
pot ential investors.Thi salsohel pst odet erminethemar ketv alueofi t
sshar es.
 Capi tal:Apubl i
ccompanycanr aisecapi talfr
om t hepubl i
cbyi ssuingshar est hr ough
stock mar kets.Publ ic compani es can al so raise capitalbyi ssuing bonds and
debent urest hatar eunsecur eddebt si ssuedt oacompanyont hebasi soff i
nanci al
per formanceandi ntegr i
tyoft hecompany .
 Tr ansf erabl eshar es:Apubl icl i
mi t
edcompany ’
sshar esar epur chasedandsol don
themar ket .Theyar ef reel
yt ransf erredamongt hemember sandt hepeopl et radi ng
onst ockmar kets.

Di
sadv
ant agesofgoi ngpubl i
c:
 Pr ospect us:Forapubl iccompany ,issui ngpr ospect usi smandat orybecauset he
publ icisinv i
tedtosubscr i
bef ortheshar esoft hecompany .
 Expensi ve:Goi ngpubl i
ci sanexpensi veandt i
meconsumi ngpr ocess.A publ i
c
companymustputi tsaf f
airsinor derandpr epar erepor tsanddi sclosur est hatmat ch
withSEBIr egulationsconcer ningi nitialpubl i
cof ferings( I
PO) .Theownerhast ohire
speci ali
stsl ikeaccount antsand under wri
terst ot aket hecompanyt hr ough the
process.
 Equi tyDi l
ution:Anycompanygoi ng publ i
ci s sel li
ng a par toft he company ’
s
owner shipt ostranger s.Eachbi tofowner shipthatt heownersel lscomesoutoft hei
r
currentequi typosi tion.Itisnotal way spossi blet or aiset heamountofmoneyt hat
youmayneedt ooper ateapubl iccor porati
onf rom shar es,socompanyowner s
shoul dhol datl east51per centoft heowner shipi ntheircont r
ol.
 LossofManagementCont rol:Onceapr i
vatecompanygoespubl ic,managi ngt he
busi nessbecomesmor ecompl icated.Theowneroft hecompanycannol onger
makedeci sionsi ndependent l
y .Ev enasamaj orityshar ehol der,theyar eaccount able
tomi nori
t ysharehol der sabouthowt hecompanyi smanaged.Al so, companyowner s
willnol ongerhav et otalcontrolov ert hecomposi tionoft heboar dofdi r
ect orssince
SEBIr egulationspl acer estri
ctionsonboar dcomposi t
iontoensur ethei ndependence
oft heboar df r
om i nsiderimpact .
 I ncreasedRegul at oryOv ersi
ght :Goi ngpubl icbr ingsapr ivatecompanyundert he
super v i
sion oft he SEBIand ot herr egulatory aut horities t hatr egul at e publi
c
compani es,aswel last hest ockexchanget hathasagr eedt ol i
stt hecompany ’
s
stock.Thi sincreasei nr egulatoryov er si
ghtsi gnifi
cant lyi
nf l
uencesmanagementof

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:FOUR Page#17
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
thebusi ness.
 Enhanced Repor ti
ng Requi rements:A pr i
vate company can keep i tsi nternal
busi nessi nformati
onpr i
vate.A publ iccompany ,howev er,mustmakeext ensive
quar ter
ly and annual r epor t
s about busi ness oper ati
ons,f i
nancial posi t
ion,
compensat ionofdi r
ectorsandof f
icersandot heri nternalmat ters.Itlosesmost
privacyrightsasaconsequenceofal lowingt hepubl ictoi nvestinitsstock.
 IncreasedLi abi
li
ty:Takingapr i
vatecompanypubl i
ci ncreasest hepot entialli
abili
ty
oft hecompanyandi tsoffi
cersanddi r
ectorsf ormi smanagement .Byl aw,apubl ic
companyhasar esponsibil
it
yt oit
sshar eholderst omaxi mizeshar eholderpr of
itsand
disclosei nformati
onaboutbusi nessoper ations.Thecompanyandi t
smanagement
canbesuedf orself-
deali
ng,maki ngmat erialmi srepresent at
ionst oshar eholdersor
hidinginformat i
ont hatfederalsecuri
tieslawsr equiret obedi sclosed.

JOI
NTSECTOR:
Jointsect orenter
pri
sesconsi
stofthoseunder
taki
ngswherei
ntheGover
nment,Pri
vat
e
entrepreneursandPubli
csharethemanagement
,owner
shi
p,andpower
softheenter
pri
se,
j
ointly.

MULTI
NATI
ONALANDTRANSACTI
ONAL
Whati
sMul
ti
nat
ional
?
Thi
sisacorporat
iont
hathasassetsandfacil
i
tiesi
noneormorecountr
ies,ot
hert
hanthe
homecountry
,and hasacent r
aliz
ed off
icewhereglobalmanagementiscoordi
nat
ed.
Deci
si
onmakinghenceaff
ect
sallthesubsi
diar
iesgl
obal
l
y.
 
WhatisTr
ansnati
onal
?
Thesear ecor porat
ionswhichoper at
ei nothercountri
es,othert
hant hehomecount ry
,and
donothav eacent r
ali
zedmanagementsy stem.Decisionsarehencemadet osuitt he
operati
ng zone.Si mil
arfirms operating i
n ot hercountri
es cannotbe r efer
red t
o as
subsidi
aries,sincethemanagementsy stem i
snotcentrali
zed.Tr
ansnationalcompani
esar e
also notl oyalt othe operat
ing country’
sv alue sy
stem,butar ef ocused on business
expansion.

Si
mil
ari
ti
esbet
weenMul
ti
nat
ional
andTr
ansnat
ional
 Bot
hhaveforei
gnaffi
li
atesandoper
ateglobal
ly
 Bot
hhavelocalserv
icesaswellasproducti
onhenceaf
fectempl
oyment
,st
andar
ds
ofl
i
vingandhouseholdi
ncomes

Di
ff
erencesbet
weenMul
ti
nat
ional
andTr
ansnat
ional
 Definit
ion:Mul t
inationalr eferst oacor porat i
ont hathasasset sandf acil
iti
esinone
ormor ecount ri
es,ot hert hanthehomecount r
y,andhasacent r
alizedof fi
cewher e
globalmanagementi scoor dinated.Ont heot herhand,t ransnationalr efer
st oa
corporati
onwhi choper atesinot hercount ries,otherthant hehomecount ry,anddo
nothav eacent rali
zedmanagementsy stem.
 Oper at
ions:Whi lemul t
inationalshavesubsi diari
esinot hercountri
es, atransnati
onal
doesnothav esubsi diariesinot hercount r
ies. 
 Decisionmaki ng:Deci sionmaki nginamul ti
nationalismadei nt hemot hercount r
y
andshoul dbeef fectedi nallthesubsi diariesgl obal
ly.Ont heot herhand,deci sion
maki nginat r
ansnat ional ismadebyi ndiv i
dual tr
ansnationalcorporations.
 Localmar kets:Mul tinationalsfacer estri
ctionswheni tcomest ol ocalmar ketssince
they hav e central
ized managementsy stems.On t he ot herhand,t ransnati
onal

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:FOUR Page#18
Busi
nessandTy
pesofBusi
nessOr
gani
zat
aion
compani
esar
efr
eet
omakedeci
sionsi
ndependent
lybasedonl
ocal
mar
ket
s.

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com