MARIEL BESTUDIO BTLED HE 2-A

Learning Task

Answer the questions below.

1. What is Business? Discuss its essential characteristics.

A business is an organization where people work together. In a business, people work to make and
sell products or services. Other people buy the products and services. The business owner is the
person who hires people for work. A business can earn a profit for the products and services it offers.

 Deals in Goods and Services:

People in business are engaged in production and distribution of goods and
services. The goods may be consumer goods like bread, butter, milk, tea, etc. or
capital goods like plant, machinery, equipment, etc. The services may be in the
form of transportation, banking, insurance, warehousing, advertising and so on.

 If a person produces or buys a product for self consumption or for gifting it to

another, he is not engaged in business. But when he produces or buys goods to sell
it to somebody, he is engaged in business.

 Thus, in business the goods and services produced or purchased must be

exchanged for money or for goods (under barter system) between the buyers and
sellers. Without sale or exchange of goods the activities cannot be treated as
business.

 Regular Exchange of Goods and Services:

The production or buying and selling activities must be carried out on a regular
basis. Normally, an isolated transaction is not treated as business. For example, it
Raja sold his old Maruti car to Harish it is not considered as business, unless he
continues to carry on buying and selling of cars on a regular basis.

 Requires Investment:
Every business activity requires some amount of investment in terms of land,
labour or capital. These resources are utilised to produce a variety of goods and
services for distribution and consumption.
 Business activities are performed with the primary objective of earning income by
the way of profit. Without profit it is not possible to survive for a long period.
Earning of profit is also required to grow and expand the business.

 Involves Risk and Uncertainty of Income:

The business normally aims at earning profit. The businessman who invests in
various resources expects a fair amount of return. But, in spite of his/her best
effort, the reward he/she gets is always uncertain.

 Sometimes he/she enjoys profits and also times may come when he suffers heavy
losses. This happens because the future is unpredictable and businessman has
practically no control over certain factors that affect his earnings.

2. What are different types of business environment?

 Internal Environment
 External Environment
 Micro Environment
 Macro Environment

3. Distinguish between:

a. Internal and External Business Environment

 The internal environment is composed of all those factors, events,

conditions, etc. which exist inside the company and has the capability to
influence the company’s strategic decisions and functions, as well as they
can be influenced by company’s decisions. On the contrary, the external
environment is that part of the business environment consisting of all
those factors which do not exist within the company but can affect the
company’s operations, decisions, survival, growth and profitability.
 Internal environmental factors are controllable in nature, in the sense that
the company has supremacy over these factors. Conversely, external
environmental factors are largely uncontrollable in nature.
 Internal environmental factors, either impart strength or cause weakness
to the firm. As against, external environmental factors either give
opportunities or poses threats.
 Changes in internal environmental factors affect the company only, as the
factors belong specifically to the company. In contrast, changes in external
environmental factors have an impact on the industry as a whole and so all
the companies operating in the industry gets affected by it.
 The internal environment consists of those factors which have the
potential to influence the company’s decisions, working and strategies. On
 the flip side, the external environment comprises of those factors which
can affect the survival, growth, reputation and expansion of the company
positively or negatively.

b. Micro and Macro Business Environment

 The microenvironment is the environment which is in immediate contact

with the firm. The environment which is not specific to a particular firm
but can influence the working of all the business groups is known as Macro
Environment.
 The factors of the microenvironment affect the particular business only,
but the macro-environmental factors affect all the business entities.
 The micro environmental factors are controllable by the business but to
some extent only. However, the macroeconomic variables are
uncontrollable.
 The elements of the microenvironment affect directly and regularly to the
firm which is just opposite in the case of the macro environment.
 The study of the microenvironment is described as COSMIC analysis.
Conversely, PESTLE Analysis is a study of the macro environment.

4. What are varied scales of business? List them.

 Small scale enterprises are generally more labour intensive than larger organizations.
As a matter of fact, small scale sector has now emerged as a dynamic and vibrant sector
for the Indian economy in recent years. It has attracted so much attention not only
from industrial planners and economists but also from sociologists, administrators
and politicians.
Basically, the industries which are organized on a small scale and produce goods with
the help of small machines, hired labour and power are called as small scale industries
The definition for small-scale industrial undertakings has changed over time. Initially,
they were classified into two categories- those using power with less than 50
employees and those not using power with the employee strength being more than 50
but less than 100. However, the capital resources invested on plant and machinery
buildings have been the primary criteria to differentiate the small-scale industries
from the large and medium scale industries.

 Large scale industries refers to those industries which require huge infrastructure,
man power and a have influx of capital assets. The term ‘large scale industries’ is a
generic one including various types of industries in its purview. All the heavy
 industries of India like the Iron and steel industry, textile industry, automobile
manufacturing industry fall under the large scale industrial arena. However in recent
years due to the IT boom and the huge amount of revenue generated by it the IT
industry can also be included within the jurisdiction of the large scale industrial
sector.

5. Define Small business and discuss its characteristics.

Small scale enterprises are generally more labour intensive than larger organisations. As a matter of
fact, small scale sector has now emerged as a dynamic and vibrant sector for the Indian economy in
recent years. It has attracted so much attention not only from industrial planners and economists but
also from sociologists, administrators and politicians.

 Ownership: They have a single owner. So it is also known as a sole proprietorship.

 Management: All the management works are controlled by the owner.
 Limited Reach: They have restricted area of operation. So they may be a local shop or
an industry located in one area.
 Labor Intensive: Their dependency on technology is very little because they are
dependent on labour and manpower.
 Flexibility: Because they are small, they are open and flexible to sudden changes,
unlike large industries.
 Resources: They utilize local and immediately available resources. They do better
utilization of natural resources and limited wastage.

6. Distinguish between:

a. Small Business and Large Business

 Small businesses are those businesses that operate at a low scale of production
making its owner the price taker. On the other hand, large businesses are those
businesses that operate at a large scale of production making its owner price
maker.

 Small business has lack funds and employ low-skilled employees. On the other
hand, large-scale businesses attract educated and skilled employees.

 Small business has no brand value, whereas the large businesses have a brand
value.
  Small business faces a higher risk of failure, whereas the large business has a low
risk of failure.

 Small businesses are managed by owners themselves, whereas large businesses

are managed by employees.

Fill in the Blanks:

1. A partnership firm requires at least two persons.

2. The partners are liable jointly and severally for all the debts and obligations of the firm.
3. There exists a close relationship between partners.
4. The persons who own the partnership business are individually called directors and collectively
known as board directors UESTIONS
5. A company has independent and separate existence.
6. A company is managed by employees
7. A co-operative society is a persons association.
8. Membership of a co-operative is no minimum limit
9. A co-operative’s primary motive is for mutual benefit
10. The minimum membership to get a co-operative registered Voluntary registration