Business is an economic activity.

It creates time, place and form utility for

satisfaction of wants. It includes the various activities of buying and selling of
goods, manufacturing of goods and providing
services in order to earn money.
De nitions of Business
According to L.H.Haney, "Business is a human activity directed towards providing
or acquiring wealth through buying and selling
activities".
According to Keith Davis, "Business may be de ned as an organized e ort by
individuals to produce goods and services, to sell those goods and services in a
market and to get some reward for this e ort".
According to Wheeler B.O, "Business is an organized e ort by individuals to
produce goods and services, to sell these goods and services in a market place
and to reap some reward for these e orts".
Features of Business:se
1.
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Economic Activity: Business is a form of economic activity. It is an occupation for
number of people like traders, bankers, manufacturers and producers.
2. Basic is buying and selling: The basic activity of any business is buying and
selling. Buying involves purchase of raw materials, plant and machinery, movable
and immovable property and many more items required in business. Selling is of
nished products include goods and services selling to customers, wholesalers
and retailers.
3. Dealing in goods and services: Business deals with production and distribution
of goods and services. Goods include consumer goods and industrial goods.
Services are utilities like supply of electricity, water, gas and transportation,
banking, insurance other nancial services, communication, entertainment etc.

4.
5.
6.
Continuous activity: A single transaction of buying and selling does not constitute
business. It should be a continuous process. The activity undertaken by any
business should be on regular basis.
Pro t motive: Pro t is a driving force behind all business activities. Success of any
business is assessed on the basis of pro t it earns. Pro t is required for survival,
growth and expansion of the business.
Element of risk: The element of risk and uncertainty is very high in business. There
can be insurable risk and uninsurable risk. Insurable risks are those which can be
insured like risk of loss due to re, ood, etc. Non insurable risks are market risk
which cannot be insured. For example change in customer buying behaviour,
increase in competition, change in government policy etc.
7. Creative and dynamic: Business is creative, Customer can be delighted only by
product innovations and by adding new features to the product. Business is also
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dynamic in nature as it has to change according to changes in external
environment 8. Social activity: Business exists in the context of society. The
investors, employees, customers, creditors are part of society. Business cannot
ignore the interest of various social groups. 9. Government control: The
government frames various rules and regulations to control and regulate business
activities. The organization is expected to follow such norms.
Importance of Business
svibojdo svarias of eqlaH
Business plays an important role for consumers, business rms, society and
economy, which is explained as following:
I.
1.
Importance to Consumers:
nd it
Satisfaction of wants: The goods and services are sold by business rms. It
creates desire among the people to buy goods and services which satis es their
wants.

2.
Improves standard of living: Business organization spend huge amount on
research and development in order to improve the quality of the product.
Consumers get bene t by purchasing superior quality products at reasonable
price.
3. Better quality products: Business rms to retain customers, supply superior
quality products at reasonable prices. This leads brs to customer delight.
4.
5.
Better services: Business o ers variety of services to customers so as to deliver
value addition to them. After-sale service becomes more important in case of
consumer durables.
Reasonable prices: There are many companies o ering the same product. Every
company tries to attract customer so o er superior quality product at a reasonable
price.
II. Importance to Business Firm:
1. Increase in pro ts: The objective of business rm is to earn pro ts. Companies
enter into new product lines so as to increase customer base and thereby
increases pro ts.
2. Increase in market share: Business organization strives to increase its market
share. The expansion of market share brings goodwill, more pro ts and increase in
market price of the company's share.
3.
Builds goodwill: Ethical business practices build goodwill of the company. It is
important for the long term growth of the
business.
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 Helps to achieve objectives: Every business organization has various objectives
like earning pro ts, wealth maximization, building goodwill etc. Business helps in
achieving these bi objectives.
5. Improvement in skills: Business requires interaction with customers, suppliers
and employees. It helps in improving skills of the employees.

III. Importance to Society and Economy:

1.
2.
3.
Provides employment: Business provides employment to a large number of
people. The employment opportunities are created in various activities like
production, distribution, marketing, nance etc.
Brings revenue to the Government: Business earns pro ts and pay taxes on such
pro ts which go to public treasury. Such funds are spent by government on
various social and economic infrastructural development works.
Balanced regional development: Government encourage business organizations to
start up business operations in under developed areas by giving tax holidays and
other concessions. 4. Brings Economic growth: Business organizations undertake
expansion of various activities. Industries develop new products, use agriculture
outputs as inputs and also require services like transportation, warehousing,
communication, banking etc. This increase rate of economic growth.
5.
Undertake Social services: Business rms also undertake social services by
operating hospitals, sponsoring various sports and cultural events, creating social
awareness etc. In this way, business rms undertake social services.
Concept
BUSINESS OBJECTIVES
Objectives are the ends that state speci cally how the goals shall be achieved.
They are concrete and speci c in contrast to goals which are generalized.
Objectives make the goals operational. While goals may be qualitative, objectives
tend to be more qualitative in speci cation. In this way they are measurable and
comparable. Objectives should not be static, they should be dynamic. Changes in
the environment and changes in the organizational strengths and weaknesses may
call for modi cations to objectives. A company

should, therefore, appraise how well its objectives tap the rm

opportunities and resources.
De nitions of Business Objectives
According to George Terry, "A managerial objective is the intended goal which
prescribes de nite scope and suggests direction to e orts of a manager".
According to Koontz and O'Donell, "Objectives are the end towards which
activities of any enterprise or department or project within it are aimed".
Features of Business Objectives
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 1. Understandable: Objectives should be understandable by those who have to
achieve them. Objectives play an important role in management and are put to use
in variety of ways.
2.
3.
4.
Concrete and speci c: Concrete and speci c objectives lead and motivate
managers. For example, company plan to achieve 10% increase in sales is
certainly better than stating company seeks to increase its sales.
Related to a time frame: Objectives should be related to a time frame. It enhances
the speci city of the objectives. If objectives are related to time frame then
manager knows the duration within which they have to be achieved.
Measurable and Controllable: Objectives should be quanti ed and possible to
measure at the end. The objectives should be comparable to companies in a
particular industry and in general.
5. Challenging: Both too high and too low objectives are To demotivating.
Therefore objectives should be set at challenging but not unrealistic levels.
Objectives should motivate managers. Correlated: Organization set objectives in
di erent areas. If objectives are set in one area disregarding the other areas such
an action is likely to lead to problems. For example con ict in
6.

7.
setting sales and production objectives. Di erent objectives should be correlated
with each other.
Set within constraints: There are many internal as well as external constraints
which have to be considered in objective setting. For example resource availability
is an internal constraint which a ects objective setting. Di erent objectives
compete for scarce resources and trade-o s are necessary for optimum utilization.
Importance of Business Objectives
The following points explain the importance of business objectives: 1. Justify the
organization existence: The objectives indicate the purpose and aim and thereby
justify the existence of an organization.
2. Provide direction: Objectives provide direction for the functioning of an
organization. Clearly formulated objectives match individual and organizational
objectives.
3. Help strategic management: Strategic management is indeed povit means to
achieve the objectives. Objectives help in e ective functioning of the organization
in a given environment.
4. Basis for decision making: Objectives provide basis for decision making related
to allocation of resources and setting performance targets for various departments.
5.
Provide standards for performance appraisal: Objectives make clear what the
results should be. Objectives provide standards for performance appraisal. It is
di cult to evaluate organizational performance without setting objectives.
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 6. Help in Coordination: As Glueck pointed out, "objectives help coordinate
decisions and decision makers by directing the attention of employees to desirable
standards of behavior. It may reduce con icts in decision-making if all employees
know what the objectives are."
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Factors A ecting Setting up Objectives

Objectives are not formulated in isolation. Glueck identi es four
factors that should be considered for objectives setting:
1.
2.
The Forces in the environment: These take into account con icting interest of
di erent stakeholders in an organization. Each group of stakeholders has claims or
expectations which have to be considered while setting objectives.
Realities of enterprise resources and internal power relationships: Objectives are
dependent on the resources capability of a company as well as the relative
decisional power that di erent groups wield with respect to each other in sharing
those resources.
3. The value system of the top executives: Values as an enduring set of beliefs
shape perception about what is good or bad, desirable or undesirable. The value
system has an impact on as the corporate philosophy that organization adopts
with regard to objectives.psd ferbiss Bosfoubi
4.
Awareness by the management: Awareness of the past objectives may lead the
organization to a choice of objectives that has been emphasized in the past due to
di erent resources.
Classi cation of Objectives
Broadly objectives can be classi ed into ve major categories:
I. Organic/ Three fold objectives:
1. Survival: The basic objective of every business is to stay in the business,
constant monitoring of the business environment and strategic planning are
needed for survival in a competitive
2.
environment.
Growth: Growth over a period is the second organic objective of most of the
business enterprises. A business can grow either vertically, horizontally or by
diversi cation into unrelated areas.

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3. Prestige/Recognition: Every organization strives hard to build positive image in
the society. To get acceptance from the society many companies undertake social
welfare activities.
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 II. Economic Objectives:
1.
2.
Return on investment: Adequate return on investment is an important economic
objective not only for private enterprises but also for public sector enterprises.
Private business is often pro t motivated. However, the level of pro t private
enterprise aim at is in uenced by its social outlook and a number of environmental
factors like government policy, attitude of society competitive and other conditions
of the industry etc.
Innovation: The purpose of business is to create a customer and therefore the
business enterprise has two and only two basic functions marketing and
innovation. Innovation is the key to customer satisfaction.
3. Expansion of market share: An increase in its market share is an important
objective of many companies. It is important for any business to create, retain and
satisfy customers. Several companies also strive for market leadership.
4.
Reduction in cost: To compete and to be e cient it is important for the business to
reduce cost by controlling unproductive expenses and wastages. A part of this
bene t of reduced cost can be transferred to customers by way of reducing prices.
III. Social Objectives:
1. Provide satisfaction to consumers: One of the business objectives is to satisfy
consumers by providing goods as per their needs. Satis ed consumer is the most
important asset of a
2.
business unit.
To pay reasonable return on investment: The social objective of the business is to
pay reasonable return to investors. The investors must be paid suitable return in
the form of interest, dividend and bonus shares.

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3.
4.
To utilize natural resources for social welfare: Business unit is expected to use the
natural resources like water, gas, electricity and raw materials with proper care.
The wastage of natural
resources is a social loss.
To avoid pro teering and unfair trade practices: Business unit must not get into
pro teering through unfair trade practices like arti cial scarcity, adulteration etc.
Business unit should not
indulge in unfair trade practices.
5. To control pollution and to maintain ecological balance: The problem of pollution
is closely related to industrial development. It is the outcome of rapid
industrialization. Business unit should take suitable measures for pollution control.
IV. Human Objectives:
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 1. To provide fair wages: Employees should be paid fair wages. They should be
given monetary and non-monetary bene ts.
2. Good working conditions: Due attention should be given to provide employees
hygienic and safe working conditions. There should be canteen facility, adequate
drinking water facility, toilet facility, medical facility etc. available for the
employees. 3. Motivation: Employees should be treated with courtesy and
empathy to motivate them to give their best. Employees can be motivated by
giving monetary and non-monetary bene ts. Monetary bene ts are in the terms of
wages and salaries and other allowances, the value of such bene ts can be
quanti ed; whereas non-monetary bene ts are like job appreciation,
acknowledgement, job recognition etc.
4. Promotion: It is important that employees should grow and get more bene ts
with the growth and expansion of the business. Only then they can connect
themselves with the organizational goals. The deserving employees should be
promoted to satisfy and retain them.
5. Employees Welfare and Social Security Measures: The organization should
provide to its employees various welfare facilities like canteen, transport, recreation
facilities etc. Social

security measures like provident fund scheme, pension scheme; payment of

gratuity gives employees job security.
V. National Objectives:
1.
2.
Social Justice: Business should provide equal opportunities to all without any kind
of discrimination. It should protect the interest of the weaker section of the society.
Creation of employment opportunities: Business should create directly or indirectly
employment opportunities. Creation of employment in the economy gives impetus
to economic growth. 3. Encourage Small and Medium Enterprises: Organization
can facilitate growth of Small and Medium Enterprises (SMEs) by ef procuring raw
materials and other inputs from such units.
Development of Backward areas: By setting up industries in backward areas,
organization can contribute towards development of backward areas. Government
gives various assistance and incentives to attract industries in backward areas.
Reconciliation between Economic and Social Objectives
Business exists in the context of society. So it should meet social obligations along
with economic objectives. There is need to balance economic and social
objectives to satisfy various groups. These are customers, employees, investors,
government and society at large. The economic and social objectives can be
reconciled as following:
1.
2.
3.
Pro t and consumer price: Business rm should not only aim at earning pro ts. To
increase pro ts it should not charge higher price to customers. The rm should
provide quality products to consumers at reasonable price.
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 Pro t and after sale services: Firm should focus on after sale services. Business
rm should always provide better and fast 30 after sale services.
Pro t and employees welfare: To earn more pro ts business rm should not exploit
employees by making them work for

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long hours and pay less. Rather it should spend a part of pro ts for employees'
welfare. Company should provide better working conditions, increased salaries
and incentives to its employees.
Pro t and shareholder's interest: Corporate should provide fair return to
shareholders in the form of dividends and by issue of bonus shares. It should
disclose true and fair information to shareholders. them ruigms to notre Pro t and
taxes: Company should disclose true pro ts. It should pay taxes and duties to
taxation authorities. Company should not manipulate pro ts to evade taxes.
Pro t and social welfare: A part of pro ts must be utilized for social welfare
activities like contribution to government funds, donations to schools, trusts etc.
Companies also tie up with Non- Government Organizations and run social
awareness campaigns.
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7. Business expansion and business practices: A rm must expand its activities
but should not opt for unethical practices like bribing government o cials,
unethical advertising, criticizing competitors etc. Business rm should adopt
healthy business practices.
8. Cordial relations with suppliers: Company needs support of Barsuppliers for
business expansion and for smooth functioning of the business. It should not
exploit suppliers. It should make timely payment to suppliers and follow the terms
and conditions agreed with suppliers.
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