Basic of Enterpreneureship and Management Final

BASICS OF ENTREPRENEURSHIP
AND MANAGEMENT
(BCM5 D01)
Open Course
(Other than B Com Students)
2019 Admission
UNIVERSITY OF CALICUT
School of Distance Education
Calicut University- P.O,
Malappuram - 673635, Kerala.
19618
UNIVERSITY OF CALICUT
SCHOOL OF DISTANCE EDUCATION
Study Material
Open Course
(Other than B Com Students)
2019 Admission
BASICS OF ENTREPRENEURSHIP AND

MANAGEMENT
Prepared by:
Rajan P
Assistant Professor of Commerce
University of Calicut
Scrutinized by:
Dr. Rijila . P.T,
Asst. Professor,
SDE, University of Calicut,
DISCLAIMER
“The author shall be solely responsible for the
content and views expressed in this book”
Basic of entrepreneurship & Management 2

CONTENTS
Modules Page Number
Module 1 05 - 27
Module 2 28 - 38
Module 3 39 - 85


MODULE 1
INTRODUCTION TO COMMERCE
All human beings, wherever they may be, require
different types of goods and services to satisfy their needs. If we
look around, we observe people require different types of
products and services to satisfy their needs. How do they buy
them? They go to the market, either physical or electronic over
internet, where they find variety of shops and sellers offering the
required commodities and choose the best which they require.
Have you ever wondered how do these products and

services are made available in the market. The necessity of
supplying goods and services is done by different set of people
engaged in various economic activities such as production,
manufacturing and distribution and exchange so that the needs
and wants of customers are satisfied. Business is a major
economic activity which is concerned with the production and
sale of goods and services required by people. Business is central
to our lives. Although our lives are also influenced by many
other institutions in modern society, such as schools, colleges,
hospitals, political parties and religious bodies; business has a
major influence on our daily lives. It, therefore, becomes
important that we understand the concept, nature and purpose of
business.
Business starts with production and end with
consumption. Making the finished products reach the consumer
involves a series of steps. The work of production of goods is
covered under Industry and the remaining activities belong to
commerce. In a nutshell we call them ‘Business’ which is a wider

term and includes Industry, trade and commerce.
Concept of Business
The term business is derived from the word ‘busy’. Thus,
business means being busy. However, in a specific sense,
business refers to an occupation in which people regularly
engage in activities related to purchase, production and/or sale
of goods and services with a view to earning profits. If you look
around you will observe that people undertake various activities
to satisfy their needs. These activities may be broadly classified
into two groups — economic and non-economic activities.
Economic activities are those by which we can earn our
livelihood, whereas, non-economic activities are performed out
of love, sympathy, sentiment, patriotism, etc. For example, a
worker working in a factory, a doctor operating in his clinic, a
manager working in an office and a teacher teaching in a school
are doing so to earn their livelihoods and are, therefore, engaged
in an economic activity. On the other hand, a housewife cooking
food for her family, or a boy helping an old man cross the road
are performing non-economic activities since they are doing so
out of love or sympathy. Economic activities may be further
divided into three categories, namely business, profession and
employment. Business may be defined as an economic activity
involving the production and sale of goods and services
undertaken with a motive of earning profit by satisfying human
needs in society.
Characteristics of Business Activities

1. An economic activity: Business is considered to be an
economic activity because it is undertake with the objective

of earning money or livelihood and not out of love, affection,

sympathy or any other emotion.
2. Production or procurement of goods and services: Before
goods are offered to people for consumption, these must be
either produced or procured by business enterprises. Thus,
every business enterprise either manufactures the goods it
deals in or acquires them from producers, to be further sold
to consumers or users.
3. Sale or exchange of goods and services: Directly or

indirectly, business involves transfer or exchange of goods
and services for value. If goods are produced not for the
purpose of sale but for personal consumption, it cannot be
called a business activity. Cooking food at home for the
family is not business, but cooking food and selling it to
others in a restaurant is business. Thus, one essential
characteristic of business is that there should be sale or
exchange of goods or services between the seller and the
buyer.
4. Dealings in goods and services on a regular basis:

Business involves dealings in goods or services on a regular
basis. One single transaction of sale or purchase, therefore,
does not constitute business. Thus, for example, if a person
sells his/ her domestic radio set even at a profit, it will not be
considered a business activity. But if he/she sells radio sets
regularly either through a shop or from his/her residence, it
will be regarded as a business activity.
5. Profit earning: One of the main purposes of business is to
earn income by way of profit. No business can survive for
long without profit. That is why, businessmen make all

possible efforts to maximise profits, by increasing the

volume of sales or reducing costs.
6. Uncertainty of return: Uncertainty of return refers to the
lack of knowledge relating to the amount of money that the
business is going to earn in a given period. Every business
invests money (capital) to run its activities with the objective
of earning profit. But it is not certain as to what amount of
profit will be earned
7. Element of risk: Risk is the uncertainty associated with an

exposure to loss. It is caused by some unfavourable or
undesirable event. Risks are related with factors, like
changes in consumer taste and fashion, changes in method
of production, strike or lockout at workplace, increased
competition in market, fire, theft, accidents, natural
calamities, etc. No business can altogether do away with
risks.
Classification of business activities

Various business activities may be classified into two broad
categories —industry and commerce. Industry is concerned with
the production or processing of goods and materials. Commerce
includes all those activities, which are necessary for facilitating
the exchange of goods and services. On the basis of these two
categories, we may classify business firms into industrial and
commercial enterprises. Let us examine in detail the activities
relating to business.
1. Industry
Industry refers to economic activities, which are connected with
conversion of resources into useful goods. Generally, the term
industry is used for activities in which mechanical appliances
and technical skills are involved. These include activities

relating to producing or processing of goods, as well as, breeding
and raising of animals. The term industry is also used to mean
groups of firms producing similar or related goods. For example,
cotton textile industry refers to all manufacturing units
producing textile goods from cotton. Similarly, electronic
industry would include all firms producing electronic goods, and
so on. Further, in common parlance, certain services, like
banking and insurance, are also referred to as industry, say
banking industry, insurance industry, etc. Industries may be
divided into three broad categories namely primary, secondary
and tertiary.
A. Primary industries:
These include all those activities which are concerned
with the extraction and production of natural resources and
reproduction and development of living organisms, plants, etc.
These are divided as follows.
a. Extractive industries
These industries extract or draw products from natural
sources. Extractive industries supply some basic raw materials
that are mostly products of geographical or natural environment.
Products of these industries are usually transformed into many
other useful goods by manufacturing industries. Important
extractive industries include farming, mining, lumbering,
hunting and fishing operations.
b. Genetic industries:
These industries are engaged in breeding plants and
animals for their use in further reproduction. Seeds and nursery
companies are typical examples of genetic industries. In
additional, activities of cattle breeding farms, poultry farms, and

fish hatchery come under genetic industries.
B. Secondary industries:
These are concerned with using materials, which have
already been extracted at the primary sector. These industries
process such materials to produce goods for final consumption
or for further processing by other industrial units. For example,
mining of iron ore is a primary industry, but manufacturing of
steel by way of further processing of raw irons is a secondary
industry. Secondary industries may be further divided as
follows:
a. Manufacturing industries:
These industries are engaged in producing goods through
processing of raw materials and, thus, creating form utilities.
They bring out diverse finished products, that we consume, or
use through the conversion of raw materials or partly finished
materials in their manufacturing operations. Manufacturing
industries may be further divided into four categories on the
basis of method of operation for production.
• Analytical industry which analyses and separates
different elements from the same materials, as in the case of oil
refinery.
• Synthetical industry which combines various ingredients
into a new product, as in the case of cement.
• Processing industry which involves successive stages
for manufacturing finished products, as in the case of sugar and
paper.

• Assembling industry which assembles different

component parts to make a new product, as in the case of
television, car, computer, etc.
b. Construction industries:
These industries are involved in the construction of buildings,

dams, bridges, roads as well as tunnels and canals. Engineering
and architectural skills are an important part in construction
industries.
C. Tertiary industries:
These are concerned with providing support services to
primary and secondary industries as well as activities relating to
trade. These industries provide service facilities. As business
activities, these may be considered part of commerce because as
auxiliaries to trade these activities assist trade. Included in this
category are transport, banking, insurance, warehousing,
communication, packaging and advertising.
2. Commerce
Commerce includes two types of activities, viz., (i) trade
and (ii) auxiliaries to trade. Buying and selling of goods is
termed as trade. But there are a lot of activities that are required
to facilitate the purchase and sale of goods. These are called
services or auxiliaries to trade and include transport, banking,
insurance, communication, advertisement, packaging and
warehousing. Commerce, therefore, includes both, buying and
selling of goods, i.e., trade, as well as, auxiliaries, such as
transport, banking, etc. Commerce provides the necessary link
between producers and consumers. It embraces all those
activities, which are necessary for maintaining a free flow of

goods and services. Thus, all activities involving the removal of

hindrances in the process of exchange are included in commerce.
Trade and Auxiliaries to Trade

Trade is an essential part of commerce. It refers to sale, transfer
or exchange of goods either physical or virtual. It helps in
making the goods produced available to the consumers or users.
These days’ goods are produced on a large scale and it is difficult
for producers to themselves reach out to individual buyers for
selling their products. Businessmen are engaged in trading
activities to make the goods available to consumers in different
markets. In the absence of trade, it would not be possible to
undertake production activities on a large scale. Activities which
are meant for assisting trade are known as auxiliaries to trade.
These activities are generally referred to as services because
these are in the nature of facilitating the activities relating to
industry and trade. Transport, banking, insurance, warehousing,
and advertising are regarded as auxiliaries to trade, i.e., activities
playing a supportive role. In fact, these activities support not
only trade, but also industry and, hence, the entire business
activity. Auxiliaries are an integral part of commerce in
particular and business activity in general. These activities help
in removing various hindrances which arise in connection with
the production and distribution of goods. Transport facilitates
movement of goods from one place to another. Banking provides
financial assistance to the manufacturer and trader. Insurance
covers various kinds of business risks. Warehousing creates time
utility by way of storage facilities. Advertising provides
information to the consumers. In other words, these activities
facilitate movement, storage, financing, risk coverage and sales

promotion of goods. Auxiliaries to trade are briefly discussed

below:
1. Transport and Communication:

Production of goods generally takes place in particular
locations. For instance, tea is mainly produced in Assam; cotton
in Gujarat and Maharashtra; jute in West Bengal and Odisha;
sugar in U.P., Bihar and Maharashtra and so on. But these goods
are required for consumption in different parts of the country.
The obstacle of place is removed by transport through road, rail
or coastal shipping. Transport facilitates movement of raw
material, to the place of production and the finished products
from factories to the place of consumption. Along with transport
facility, there is also a need for communication facilities so that
producers, traders and consumers may exchange information
with one another. Thus, postal services and telephone facilities
may also be regarded as auxiliaries to business activities.
2. Banking and Finance:

Business activities cannot be undertaken unless funds are
available for acquiring assets, purchasing raw materials and
meeting other expenses. Necessary funds can be obtained by
businessmen from a bank. Thus, banking helps business
activities to overcome the problem of finance. Commercial
banks, generally lend money by providing overdraft and cash
credit facilities, loans and advances. Banks also undertake
collection of cheques, remittance of funds to different places,
and discounting of bills on behalf of traders. In foreign trade,
commercial banks help exporters in collecting money from
importers. Commercial banks also help promoters of companies

to raise capital from the public.
3. Insurance:
Business involves various types of risks. Factory building,
machinery, furniture, etc., must be protected against fire, theft
and other risks. Material and goods help in stock or in transit are
subject to the risk of loss or damage. Employees are also
required to be protected against the risks of accident and
occupational hazards. Insurance provides protection in all such
cases. On payment of a nominal premium, the amount of loss or
damage and compensation for injury, if any, can be recovered
from the insurance company.
4. Warehousing:
Usually, goods are not sold or consumed immediately after
production. They are held in stock to make them available as and
when required. Special arrangement must be made for the
storage of goods to prevent loss or damage. Warehousing helps
business firms to overcome the problem of storage and
facilitates the availability of goods when needed.
5. Advertising and public Relations:

There is an old saying “Advertising is what you pay for and PR
is what you pray for”. Both advertisement and PR activities are
the tools to commerce, influence and promote your product,
services or an idea to you potential customers and motivate you
target customers to recognise your accomplishments.
Objectives of business
1. market standing

2. innovation
3. productivity
4. physical and financial resources
5. earning profit
6. social responsibility
Forms of Business Enterprises
If one is planning to start a business or is interested in
expanding an existing one, an important decision relates to the
choice of the form of organisation. The most appropriate form is
determined by weighing the advantages and disadvantages of
each type of organisation against one’s own requirements.
Various forms of business organisations from which one can
choose the right one include:
Sole Proprietorship
This is a business run by one individual for his or her own
benefit. It is the simplest form of business organization.
Proprietorships have no existence apart from the owners. The
liabilities associated with the business are the personal liabilities
of the owner, and the business terminates upon the proprietor's
death. The proprietor undertakes the risks of the business to the
extent of his/her assets, whether used in the business or
personally owned.
Single proprietors include professional people, service
providers, and retailers who are "in business for themselves."
Although a sole proprietorship is not a separate legal entity from
its owner, it is a separate entity for accounting purposes.
Financial activities of the business (e.g., receipt of fees) are

maintained separately from the person's personal financial

activities (e.g., house payment).
Advantages of Sole Proprietorship

• A proprietor will have complete control of the entire
business. Thus, this will facilitate quick decisions and
freedom to do business
• Law does not require a proprietorship to publish its
financial accounts or any other such documents to any
members of the public. As a result, there is
enough confidentiality which is important in the business
world
• The business owner derives the maximum incentive
from the business. Because he does not have to share any
of his profits. So the work he puts into the business is
completely reciprocated in incentives
• Being your own boss is a great sense of satisfaction and
achievement. Moreover, you are answerable only to
yourself. Hence it is a great boost to your self-worth as
well
Partnership
A partnership is a kind of business where a formal
agreement between two or more people is made who agree to be
the co-owners, distribute responsibilities for running an
organization and share the income or losses that the business
generates.
In India, all the aspects and functions of the partnership
are administered under ‘The Indian Partnership Act 1932’. This

specific law explains that partnership is an association between

two or more individuals or parties who have accepted to share
the profits generated from the business under the supervision of
all the members or behalf of other members.
Features of Partnership:
Following are the few features of a partnership:
1. Agreement between Partners: It is an association of two or
more individuals, and a partnership arises from an agreement
or a contract. The agreement (accord) becomes the basis of
the association between the partners. Such an agreement is
in the written form. In order to avoid controversies, it is
always good, if the partners have a copy of the written
agreement.
2. Two or More Persons: In order to manifest a partnership,
there should be at least two (2) persons possessing a common
goal. To put it in other words, the minimal number of
partners in an enterprise can be two (2). However, there is a
constraint on their maximum number of people.
3. Sharing of Profit: Another significant component of the
partnership is, the accord between partners has to share gains
and losses of a trading concern. However, the definition held
in the Partnership Act elucidates – partnership as an
association between people who have consented to share the
gains of a business, the sharing of loss is implicit. Hence,
sharing of gains and losses is vital.
4. Business Motive: It is important for a firm to carry some

kind of business and should have a profit gaining motive.

5. Mutual Business: The partners are the owners as well as the

agent of their firm. Any act performed by one partner can
affect other partners and the firm. It can be concluded that
this point acts as a test of partnership for all the partners.
6. Unlimited Liability: Every partner in a partnership has
unlimited liability.
Joint Stock Company

The simplest way to describe a joint stock company is
that it is a business organisation that is owned jointly by all its
shareholders. All the shareholders own a certain amount of stock
in the company, which is represented by their shares.
Professor Haney defines it as “a voluntary association of

persons for profit, having the capital divided into some
transferable shares, and the ownership of such shares is the
condition of membership of the company.” Studying the features
of a joint stock company will clarify its structure.
Features of a Joint Stock Company

1. Artificial Legal Person
A company is a legal entity that has been created by the statues
of law. Like a natural person, it can do certain things, like own
property in its name, enter into a contract, borrow and lend
money, sue or be sued, etc. It has also been granted certain rights
by the law which it enjoys through its board of directors.
2. Separate Legal Entity

Unlike a proprietorship or partnership, the legal identity

of a company and its members are separate. As soon as the joint
stock company is incorporated it has its own distinct legal
identity. So a member of the company is not liable for the
company. And similarly, the company will not depend on any of
its members for any business activities.
3. Incorporation
For a company to be recognized as a separate legal entity and for
it to come into existence, it has to be incorporated. Not
registering a joint stock company is not an option. Without
incorporation, a company simply does not exist.
4. Perpetual Succession
The joint stock company is born out of the law, so the only way
for the company to end is by the functioning of law. So the life
of a company is in no way related to the life of its members.
Members or shareholders of a company keep changing, but this
does not affect the company’s life.
5. Limited Liability
This is one of the major points of difference between a company
and a sole proprietorship and partnership. The liability of the
shareholders of a company is limited. The personal assets of a
member cannot be liquidated to repay the debts of a company.
A shareholder’s liability is limited to the amount of
unpaid share capital. If his shares are fully paid then he has no
liability. The amount of debt has no bearing on this. Only the
companies assets can be sold off to repay its own debt. The
members cannot be made to pay up.

6. Common Seal
A company is an artificial person. So, its day-to-day functions
are conducted by the board of directors. So, when a company
enters any contract or signs an agreement, the approval is
indicated via a common seal. A common seal is engraved seal
with the company’s name on it.
So no document is legally binding on the company until and

unless it has a common seal along with the signatures of the
directors.
7. Transferability of Shares
In a joint stock company, the ownership is divided into
transferable units known as shares. In case of a public company
the shares can be transferred freely, there are almost no
restrictions. And in a public company there are some
restrictions, but the transfer cannot be prohibited.
Advantages of a Joint Stock Company

• One of the biggest drawing factors of a joint stock company
is the limited liability of its members. their liability is only
limited up to the unpaid amount on their shares. Since their
personal wealth is safe, they are encouraged to invest in joint
stock companies
• The shares of a company are transferable. Also, in the case
of a listed public company they can also be sold in the market
and be converted to cash. This ease of ownership is an added
benefit.
• Perpetual succession is another advantage of a joint stock
company. The death/retirement/insanity/etc does affect the

life of a company. The only liquidation under the Companies

Act will shut down a company.
• A company hires a board of directors to run all the activities.
Very proficient, talented people are elected to the board and
this results in effective and efficient management. Also, a
company usually has large resources and this allows them to
hire the best talent and professionals.
Co operative organisations
A cooperative (also known as co-operative, co-op, or
coop) is "an autonomous association of persons united
voluntarily to meet their common economic, social, and cultural
needs and aspirations through a jointly-owned enterprise".
Cooperatives are democratically owned by their members, with
each member having one vote in electing the board of directors.
Characteristics of Cooperative Organisation:
 Voluntary Association
A cooperative society is a voluntary association of persons and
not of capital. Any person can join a cooperative society of his
free will and can leave it at any time. When he leaves, he can
withdraw his capital from the society. He cannot transfer his
share to another person.
 Spirit of Cooperation
The spirit of cooperation works under the motto, ‘each for all
and all for each.’ This means that every member of a cooperative
organisation shall work in the general interest of the organisation

as a whole and not for his self-interest. Under cooperation,
service is of supreme importance and self-interest is of second-
ary importance.
 Democratic Management:
An individual member is considered not as a capitalist but as a
human being and under cooperation, economic equality is fully
ensured by a general rule—one man one vote. Whether one
contributes 50 rupees or 100 rupees as share capital, all enjoy
equal rights and equal duties. A person having only one share
can even become the president of cooperative society.
 Capital:
Capital of a cooperative society is raised from members through
share capital. Cooperatives are formed by relatively poorer
sections of society; share capital is usually very limited. Since it
is a part of govt. policy to encourage cooperatives, a cooperative
society can increase its capital by taking loans from the State and
Central Cooperative Banks.
 5. Fixed Return on Capital:

In a cooperative organisation, we do not have the dividend
hunting element. In a consumers’ cooperative store, return on
capital is fixed and it is usually not more than 12 p.c. per annum.
The surplus profits are distributed in the form of bonus but it is
directly connected with the number of purchases by the member
in one year.
 Cash Sale

In a cooperative organisation “cash and carry system” is a

universal feature. In the absence of adequate capital, grant of
credit is not possible. Cash sales also avoided risk of loss due to
bad debts and it could also encourage the habit of thrift among
the members.
 Moral Emphasis:
A cooperative organisation generally originates in the poorer
section of population; hence more emphasis is laid on the de-
velopment of moral character of the individual member. The
absence of capital is compensated by honesty, integrity and
loyalty. Under cooperation, honesty is regarded as the best
security. Thus, cooperation prepares a band of honest and
selfless workers for the good of humanity.
 Corporate Status:
A cooperative association has to be registered under the separate
legislation—Cooperative Societies Act. Every society must
have at least 10 members. Registration is desirable. It gives a
separate legal status to all cooperative organisations—just like a
company. It also gives exemptions and privileges under the Act.
One man company

The Companies Act, 2013 completely revolutionized corporate
laws in India by introducing several new concepts that did not
exist previously. On such game-changer was the introduction of
One Person Company concept. This led to the recognition of a
completely new way of starting businesses that accorded
flexibility which a company form of entity can offer, while also
providing the protection of limited liability that sole
proprietorship or partnerships lacked.

Section 2(62) of Companies Act defines a one-person

company as a company that has only one person as to its
member. Furthermore, members of a company are nothing but
subscribers to its memorandum of association, or its
shareholders. So, an OPC is effectively a company that has only
one shareholder as its member.
Features of a One Person Company

Here are some general features of a one-person company:
1. Private company: Section 3(1)(c) of the Companies Act
says that a single person can form a company for any
lawful purpose. It further describes OPCs as private
companies.
2. Single-member: OPCs can have only one member or
shareholder, unlike other private companies.
3. Nominee: A unique feature of OPCs that separates it

from other kinds of companies is that the sole member of
the company has to mention a nominee while registering
the company.
4. No perpetual succession: Since there is
only one member in an OPC, his death will result in the
nominee choosing or rejecting to become its sole
member. This does not happen in other companies as
they follow the concept of perpetual succession.
5. Minimum one director: OPCs need to have minimum
one person (the member) as director. They can have a
maximum of 15 directors.

6. No minimum paid-up share capital: Companies Act,

2013 has not prescribed any amount as minimum paid-
up capital for OPCs.
7. Special privileges: OPCs enjoy several privileges and
exemptions under the Companies Act those other kinds
of companies do not possess.
Factors to be considered while setting up of a business

Following factors are considered while starting a new
business:
1. Selecting the line of business: The first thing to be
decided by the entrepreneur is the line and type of business
to be undertaken.
2. Scale or size of business: After deciding the line of

business the businessman must decide whether he/she
wants to set up large scale or small scale business.
3. Choice of form of business organization: The next
decision must be taken is to finalise the form of business
i.e., to set up sale, proprietorship, partnership or joint stock
company.
4. Location of business enterprise: The entrepreneur has to
decide the place where the business will be located. Before
taking this decision he/she must find out availability of raw
materials, power, labour, banking, transportation etc.
5. Financial requirement: The businessman must analyse
the amount of capital he/ she might require to buy for fixed
assets and for working assets). Proper financial planning
must be done to determine the amount of funds needed.

6. Physical facilities: It includes machinery, equipment

building etc. This decision depends upon the size, scale
and type of business activities he/she wants to carry on.
7. Plant layout: Showing the physical arrangement of
machines and equipment needed to manufacture a product.
8. Competent and committed workforce: The entrepreneur
must find out the requirement of skilled and unskilled
workers and managerial staff to perform various activities.
9. Tax planning: The entrepreneur must try to analyse the
types of taxes, because there are a number of tax laws in
the country which affect the functioning of business.
10. Setting up the enterprise: After analysing the above-
mentioned points carefully the entrepreneur can start the
business which would mean mobilising various resources
and completing legal formalities.
Social Responsibility of business

Social responsibility of business implies the obligations of the
management of a business enterprise to protect the interests of
the society.
According to the concept of social responsibility the objective
of managers for taking business decisions is not merely to
maximize profits or shareholders’ value but also to serve and
protect the interests of other members of a society such as
workers, consumers and the community as a whole.
1. Responsibility to Shareholders:
In the context of good corporate governance, a corporate
enterprise must recognise the rights of shareholders and protect
their interests. It should respect shareholders’ right to

information and respect their right to submit proposals to vote
and to ask questions at the annual general body meeting.
The corporate enterprise should observe the best code of
conduct in its dealings with the shareholders. However, the
corporate Board and management try to increase profits or
shareholders’ value but in pursuing this objective, they should
protect the interests of employees, consumers and other
stakeholders. Its special responsibility is that in its efforts to
increase profits or shareholders’ value it should not pollute the
environment.
2. Responsibility to Employees:
The success of a business enterprise depends to a large
extent on the morale of its employees. Employees make valuable
contribution to the activities of a business organisation. The
corporate enterprise should have good and fair employment
practices and industrial relations to enhance its productivity. It
must recognise the rights of workers or employees to freedom of
association and free collective bargaining. Besides, it should not
discriminate between various employees.
The most important responsibility of a corporate
enterprise towards employees is the payment of fair wages to
them and provide healthy and good working conditions. The
business enterprises should recognise the need for providing
essential labour welfare activities to their employees, especially
they should take care of women workers. Besides, the
enterprises should make arrangements for proper training and
education of the workers to enhance their skills.

3. Responsibility to Consumers:
Some economists think that consumer is a king who
directs the business enterprises to produce goods and services to
satisfy his wants. However, in the modern times this may not be
strictly true but the companies must acknowledge their
responsibilities to protect their interests in undertaking their
productive activities.
MODULE – 2
ENTREPRENEURSHIP
Entrepreneurship is the ability and readiness to develop,
organize and run a business enterprise, along with any of its
uncertainties in order to make a profit. The most prominent
example of entrepreneurship is the starting of new businesses.
In economics, entrepreneurship connected with land,
labour, natural resources and capital can generate a profit. The
entrepreneurial vision is defined by discovery and risk-taking
and is an indispensable part of a nation’s capacity to succeed in
an ever-changing and more competitive global marketplace.
Meaning of Entrepreneur
The entrepreneur is defined as someone who has the ability and
desire to establish, administer and succeed in a start-up venture
along with risk entitled to it, to make profits. The best example
of entrepreneurship is the starting of a new business venture. The
entrepreneurs are often known as a source of new ideas or

innovators, and bring new ideas in the market by replacing old
with a new invention.
Characteristics of Entrepreneurship:
Not all entrepreneurs are successful; there are definite
characteristics that make entrepreneurship successful. A few of
them are mentioned below:
• Ability to take a risk- Starting any new venture involves
a considerable amount of failure risk. Therefore, an
entrepreneur needs to be courageous and able to evaluate
and take risks, which is an essential part of being an
entrepreneur.
• Innovation- It should be highly innovative to generate
new ideas, start a company and earn profits out of it.
Change can be the launching of a new product that is new
to the market or a process that does the same thing but in
a more efficient and economical way.
• Visionary and Leadership quality- To be successful,
the entrepreneur should have a clear vision of his new
venture. However, to turn the idea into reality, a lot of
resources and employees are required. Here, leadership
quality is paramount because leaders impart and guide
their employees towards the right path of success.
• Open-Minded- In a business, every circumstance can be

an opportunity and used for the benefit of a company. For
example, Paytm recognised the gravity of
demonetization and acknowledged the need for online
transactions would be more, so it utilised the situation
and expanded massively during this time.
• Flexible- An entrepreneur should be flexible and open to

change according to the situation. To be on the top, a
businessperson should be equipped to embrace change in
a product and service, as and when needed.
• Know your Product-A company owner should know the
product offerings and also be aware of the latest trend in
the market. It is essential to know if the available product
or service meets the demands of the current market, or
whether it is time to tweak it a little. Being able to be
accountable and then alter as needed is a vital part of
entrepreneurship.
Importance of Entrepreneurship:
• Creation of Employment- Entrepreneurship generates
employment. It provides an entry-level job, required for
gaining experience and training for unskilled workers.
• Innovation- It is the hub of innovation that provides new
product ventures, market, technology and quality of
goods, etc., and increase the standard of living of people.
• Impact on Society and Community Development- A
society becomes greater if the employment base is large
and diversified. It brings about changes in society and
promotes facilities like higher expenditure on education,
better sanitation, fewer slums, a higher level of
homeownership. Therefore, entrepreneurship assists the
organisation towards a more stable and high quality of
community life.
• Increase Standard of Living- Entrepreneurship helps to
improve the standard of living of a person by increasing
the income. The standard of living means, increase in the
consumption of various goods and services by a

household for a particular period.
• Supports research and development- New products
and services need to be researched and tested before
launching in the market. Therefore, an entrepreneur also
dispenses finance for research and development with
research institutions and universities. This promotes
research, general construction, and development in the
economy.
Functions of an Entrepreneur
1. Decision Making:
The primary task of an entrepreneur is to decide the policy of
production. An entrepreneur is to determine what to produce,
how much to produce, how to produce, where to produce, how
to sell and’ so forth. Moreover, he is to decide the scale of
production and the proportion in which he combines the
different factors he employs. In brief, he is to make vital business
decisions relating to the purchase of productive factors and to
the sale of the finished goods or services.
2. Management Control:
Earlier writers used to consider the management control one of
the chief functions of the entrepreneur. Management and control
of the business are conducted by the entrepreneur himself. So,
the latter must possess a high degree of management ability to
select the right type of persons to work with him. But, the
importance of this function has declined, as business nowadays
is managed more and more by paid managers.

3. Division of Income
The next major function of the entrepreneur is to make necessary
arrangement for the division of total income among the different
factors of production employed by him. Even if there is a loss in
the business, he is to pay rent, interest, wages and other
contractual incomes out of the realised sale proceeds.
4. Risk-Taking and Uncertainty-Bearing:

Risk-taking is perhaps the most important function of an
entrepreneur. Modern production is very risky as an
entrepreneur is required to produce goods or services in antici-
pation of their future demand.
5. Innovation:
Another distinguishing function of the entrepreneur, as
emphasised by Schumpeter, is to make frequent inventions —
invention of new products, new techniques and discovering new
markets — to improve his competitive position, and to increase
earnings.
Difference between Entrepreneur and Manager

• The key difference between an entrepreneur and a
manager is their standing in the company. An entrepreneur
is a visionary that converts an idea into a business. He is the
owner of the business, so he bears all the financial and other
risks. A manager, on the other hand, is an employee, he
works for a salary. So he does not have to bear any risks.
• The focus of an entrepreneur lies in starting the business
and later expanding the business. A manager will focus on
the daily smooth functioning of the business.

• For an entrepreneur the key motivation is achievements.

But for the managers, the motivation comes from the power
that comes with their position.
• The reward for all the efforts of an entrepreneur is the profit
he earns from the enterprise. The manager is an employee,
so his remuneration is the salary he draws from the
company.
• The entrepreneur can be informal and casual in his role.
However, a manager’s approach to every problem is very
formal.
• The entrepreneur by nature is a risk taker. His has to take
calculated risks to drive the company further. A manager,
on the other hand, is risk-averse. His job is to maintain the
status quo of the company. So he cannot afford risks.
Micro small and medium enterprises (MSME)

The Government of India has introduced MSME or
Micro, Small, and Medium Enterprises in agreement with
Micro, Small and Medium Enterprises Development (MSMED)
Act of 2006. These enterprises primarily engaged in the
production, manufacturing, processing, or preservation of goods
and commodities.
MSMEs are an important sector for the Indian economy

and have contributed immensely to the country’s socio-
economic development. It not only generates employment
opportunities but also works hand-in-hand towards the
development of the nation’s backward and rural areas.
According to the annual report by the Government (2018-19),
there are around 6,08,41,245 MSMEs in India.

Features of MSMEs
Following are some of the essential elements of MSMEs –
1. MSMEs work for the welfare of the workers and artisans.

They help them by giving employment and by providing
loans and other services.
2. MSMEs provide credit limit or funding support to banks.
3. They promote the development of entrepreneurship as
well as up-gradation of skills by launching specialized
training centres for the same.
4. They support the up-grading of developmental
technology, infrastructure development, and the
modernization of the sector as a whole
5. MSMEs are known to provide reasonable assistance for
improved access to the domestic as well as export
markets.
6. They also offer modern testing facilities and quality
certification services.
7. Following the recent trends, MSMEs now support
product development, design innovation, intervention,
and packaging.
Role of MSMEs in Indian Economy

Since its formation, the MSME segment has proven to be
a highly dynamic Indian economy sector. MSMEs produce and
manufacture a variety of products for both domestic as well as
international markets. They have helped promote the growth and
development of khadi, village, and coir industries. They have
collaborated and worked with the concerned ministries, state

governments, and stakeholders towards the upbringing of rural
areas.
MSMEs have played an essential role in providing
employment opportunities in rural areas. They have helped in
the industrialization of these areas with a low capital cost
compared to the large industries. Acting as a complementary
unit to large sectors, the MSME sector has enormously
contributed to its socio-economic development.
MSMEs also contribute and play an essential role in the
country’s development in different areas like the requirement of
low investment, flexibility in operations, mobility through the
locations, low rate of imports, and a high contribution to
domestic production.
With the capability and capacity to develop appropriate
local technology, provide fierce competition in domestic and
international markets, technology-savvy industries, a
contribution towards creating defence materials, and generating
new entrepreneurs by providing knowledge, training, and skill
up-gradation through specialized training centres.
Registration of Sole Proprietorship

The procedure for incorporating a sole proprietorship firm is-
1. Applying for PAN card.
2. After obtaining a PAN card, or if the proprietor already has
a PAN card, the next step is to keep a name for the sole
proprietorship business.

3. The next step is to open a bank account in the name of the

business. All the transactions of the business will be
through this bank account.
4. Though no specific registration is required for starting a
sole proprietorship firm, certain basic registrations are
required to be obtained by a sole proprietorship firm for
doing business. The basic registrations required by a sole
proprietorship are-
• The proprietor needs to obtain the Registration Certificate

under the Shops and Establishment Act of the state in which
the business is located.
• The sole proprietorship should also register for GST if the
business turnover exceeds Rs.20 lakh.
• The sole proprietorship can also register as a Small and
Medium Enterprise (SME) under MSME Act, though it is not
mandatory, it is beneficial to be registered under the same.
Documents Required for Sole Proprietorship

The documents required for registration of Sole Proprietorship
are-
1. Aadhaar Card.
2. PAN Card.
3. Registered Office proof.

4. Bank Account.
Checklist required for Sole Proprietorship

1. PAN Card of the proprietor.
2. Name and address of the business.

3. Bank Account in the name of the business.
4. Registration under the Shop and Establishment Act of the

respective state.
5. Registration under GST, if the business turnover exceeds
Rs.20 lakhs.
Procedure for Registering a Partnership Firm

Step 1: Application for Registration
An application form has to be filed to the Registrar of Firms of
the State in which the firm is situated along with prescribed fees.
The registration application has to be signed and verified by all
the partners or their agents.
The application can be sent to the Registrar of Firms through
post or by physical delivery, which contains the following
details:
• The name of the firm.
• The principal place of business of the firm.
• The location of any other places where the firm carries
on business.
• The date of joining of each partner.
• The names and permanent addresses of all the partners.
• The duration of the firm.

Step 2: Selection of Name of the Partnership Firm

Any name can be given to a partnership firm. But certain
conditions need to be followed while selecting the name:
• The name should not be too similar or identical to an
existing firm doing the same business.
• The name should not contain words like emperor, crown,
empress, empire or any other words which show sanction
or approval of the government.
Step 3: Certificate of Registration

If the Registrar is satisfied with the registration application and
the documents, he will register the firm in the Register of Firms
and issue the Registration Certificate. The Register of Firms
contains up-to-date information on all firms, and anybody can
view it upon payment of certain fees.
An application form along with fees is to be submitted to the
Registrar of Firms of the State in which the firm is situated. The
application has to be signed by all partners or their agents.
Documents for Registration of Partnership

The documents required to be submitted to Registrar for
registration of a Partnership Firm are:
• Application for registration of partnership (Form 1)
• Certified original copy of Partnership Deed.
• Specimen of an affidavit certifying all the details
mentioned in the partnership deed and documents are
correct.

• PAN Card and address proof of the partners.

• Proof of principal place of business of the firm
(ownership documents or rental/lease agreement).
MODULE – 3
MANAGEMENT
Concept And Definition of Management
Managing is essential in all organized co-operation, as
well as at all levels of organization in an enterprise. It is the
function performed not only by corporation President and the
army general but also of the shop supervisors and the company
commander. Managing is equally important in business as well
as non-business organizations. During the last few decades,
Management as a discipline has attracted the attention of
academicians and practitioners to a very great extent. The basic
reason behind this phenomenon is the growing importance of
management in day-to-day life of the people.
Because of the divergent views, it is very difficult to give
a precise definition to the term “Management”. It has drawn
concepts and Principles from economics, sociology, psychology,
anthropology, history, and statistics and so on. The result is that
each group of contributors has treated Management differently.

Management is invariably defined as the process of “getting
things done through the effort of others”, getting from where we
are to where we want to be with the least expenditure of time,
money and efforts, or co-ordinating individual and group efforts,
or co-ordinating individual and group efforts towards super-
ordinate goals.
Harold Koontz defines management in a very simple
form where he states that “Management is the art of getting
things done through and with the people in formally organized
groups”.
Dalton E. McFarland defines Management as
“Management is defined for conceptual, theoretical and
analytical purposes as that process by which Managers create
direct, maintain and operate purposive organization through
systematic co-ordinated co-operative human effort.”
To sum up, we can say that management is the process of
designing and maintaining an environment in which individuals,
working together in groups, efficiently accomplish selected
aims.
NATURE AND SCOPE OF MANAGEMENT
The study and application of Management techniques in

managing the affairs of the organization have changed it’s nature
over the period of time. The nature of Management can be
described as
1. Multi-disciplinary
Management integrates the ideas and concepts taken from
disciplines such as psychology, sociology, anthropology,
economics, ecology, statistics, operation research, history etc.
and presents newer concepts which can be put in practice for

managing the organizations. Contributions to the field of
management can be expected from any discipline which deals
with some aspects of human beings.
2. Dynamic Nature of Principle

Principles are a fundamental truth which establish cause and
effect relationship of a function. Based on practical evidences,
management has framed certain principles, but these principles
are flexible in nature and change with the changes in the
environment in which an organization exists. In the field of
Management, organization researches are being carried on to
establish principles in changing society and no principles can be
regarded as a final truth.
3. Relative, Not Absolute Principles

Management Principles are relative, not absolute and they
should be applied according to the need of the organization.
Each organization may be different from others. The difference
may exist because of time, place, socio-cultural factors etc. A
particular management Principles has different strength in
different conditions and therefore Principles of Management
should be applied in the light of the prevailing conditions.
4. Management, Science or Art

Science is based on logical consistency, systematic explanation,
critical evaluation and experimental analysis. It is a systematized
body of knowledge. Management, being a social science may be
called as an inexact or pseudo-science. The meaning of art is
related with the bringing of desired result through the
application of skills. It has to do with applying of knowledge or
science or of expertness in performance. Management can be
considered as an art and a better manager is one who knows how

to apply the knowledge in solving a particular problem.
5. Management as a Profession
The word profession may perhaps be defined as an occupation
based upon specialized intellectual study and training, the
purpose of which is to supply skilled service or advice to others
for a definite fee or salary. Profession is an occupation for which
specialized knowledge, skills and training are required and the
use of these skills is not meant for self-satisfaction, but these are
used for the larger interests of the society and the success of
these skills is measured not in terms of money alone.
Management possesses certain characteristics of profession,
while others are missing. Therefore, it cannot be said to be a
profession, though it is emerging as a profession and the move
is towards management as a profession.
6. Universality of Management
There are arguments in favour and against the concept of
universality. The
arguments in favour of universality are: -
• management as a process and the various process of
management are universal for all organizations
• distinction between management fundamentals and

techniques
• distinction between management fundamentals and
practices.
The arguments against universality are: -
• management is culture bound
• management depends upon the objectives of an

enterprise
• management depends upon the differences in
philosophies of organization
MANAGEMENT AS A SCIENCE AND AN ART

The controversy with regard to management, as to
whether it is a science or art is very old. Specification of exact
nature of management as science or art or both is necessary to
specify the process of learning of management. Management is
not easy. It is not an exact science. In fact, it is seen as an art that
people master with experience. When viewed as an art,
management is remarkable, but natural expression of human
behaviour. It is intuitive, creative and flexible. Managers are
leaders and artists who are able to develop unique alternatives
and novel ideas about their organization’s needs. They are
attuned to people and events around them and learn to anticipate
the turbulent twists and turns around them.
However, artistry in management is neither exact nor
precise. Artists interpret experience and express it in forms that
can be felt, understood and appreciated by others. Art allows for
emotion, subtlety and ambiguity. An artist frames the world so
that others can see new possibilities.
Science is extraordinary. It is a method of doing things.
It is the organized systematic expertise that gathers knowledge
about the world and condenses the knowledge into testable laws
and principles. When science is done correctly, it can advise us
in all of our day-to-day decisions and actions. The Process of
scientific theory construction and confirmation can be viewed as
involving the following steps: -

 The formulation of a problem or complex of problems

based on observation.
 The construction of theory to provide answers to the
problem or problems based on inductions from
observations
 The deduction of specific hypothesis from the theory.
 The recasting of the hypothesis in terms of specific
measures and the operations required to test the
hypothesis.
 The devising of the actual situation to test the theorem;
and
 The actual testing in which confirmation does or does not
occur.
Management as an art
The artistic talents of the manager can be enriched by the
usage of scientific tools. The artist in any manager definitely has
an edge. His creativity and productivity can be magnified by
using the correct scientific methods. The art of management
existed long before automation. Without doubt, the science has
made the management easier. But focusing only on the science
may lead to shift of focus of the entire team and create
overheads. Success of managers depends on how effectively
they can use the scientific aid to enhance their artistic skills.
Medicine engineering, accountancy and the like require skills on
the part of the practitioners and can only be acquired through
practice. Management is no exception

Art is concerned with particle knowledge and personal

skill for doing out the desired results. In management, a manager
should have practical knowledge & skill. Otherwise, his
performance will be adversely affected.
Management is a way of doing a specific action while
doing the function of an art is to achieve the success in a given
action.
According to George R. Terry, "Art is bringing about of
a desired result through application of skill." Thus, art has 5
essential features.
 Practical Knowledge
 Personal Skill
 Concrete Result
 Constructive Skill
 Improvement through practice
These 5 functions of art also belong to the management. When a
manager uses his management skill then he must have practical
knowledge for solving managerial problem. A manager also has
power to face the problem to find out the result, which is only
possible when he/she has constructive skills. To improve the
managerial skill, managerial work should be done on regular
basis because regularity and practice make the work effective.
So, we can say that manager is an artist since he/she possess the
skill of getting the work done through and with the people.
Therefore, it can be concluded that manager is an artist and
management is bound to be an art.
Management as a Science
Science refers to an organized and systematic body of
knowledge acquired by mankind though observation,
experimentation and also based on some universal principles,
concepts, and theories. Principles of science are developed
through testing & observation. With the help of concept of
science, it can safely be concluded that management is also a
science because it is based upon certain principle and concerned
as a systematized body of knowledge, observation, test and
experiment is a science, however it is not exact as physics,
chemistry, biology, etc.
Before ·trying to examine whether the management. is a
science or not we have to understand the nature of science.
Science may be a described as a systematized body of
knowledge pertaining to an act of study and contains some
general truths explaining past events or phenomena. It is
Systematized in the sense that relationships between variables
and limit have been ascertained and underlying principal
discovered. Three important characteristics of science are.
 It is a systematized body of knowledge and uses

scientific methods for Observation;
 Its principles are evolved on the basis of continued
observation and experiment; and
 Its principles are exact and have universal applicability
without any limitations
Judging from these criteria, it may be observed that

management too is a systematized body of knowledge and its
principles have evolved on the basis of observation not
necessarily through the use of scientific methods. However, if
we consider science a discipline in the sense of our natural

science one is able to experiment by keeping all factors and
varying one at a time. In the natural science it is not only possible
to repeat the same conditions over and over again, which enables
the scientist to experiment and to obtain a proof. This kind of
experimentation-cannot be accompanied in the art of
management since we are dealing with the human element. This
puts a limitation on management as a science. It may be
designated as 'inexact' or 'soft science’
LEVELS OF MANAGEMENT
The term “Levels of Management’ refers to a line of
demarcation between various managerial positions in an
organization. The number of levels in management increases
when the size of the business and work force increases and vice
versa. The level of management determines a chain of command,
the amount of authority & status enjoyed by any managerial
position. The levels of management can be classified in three
broad categories:
1. Top level / Administrative level
2. Middle level / Executory

3. Low level / Supervisory / Operative / First-line managers
Managers at all these levels perform different functions. The role
of managers at all the three levels is discussed below:
Top Level of Management

It consists of board of directors, chief executive or

managing director. The top management is the ultimate source
of authority and it manages goals and policies for an enterprise.
It devotes more time on planning and coordinating functions.
The role of the top management can be summarized as follows -
Top management lays down the objectives and broad policies of
the enterprise.
• It issues necessary instructions for preparation of
department budgets, procedures, schedules etc.
• It prepares strategic plans & policies for the enterprise.
• It appoints the executive for middle level i.e.,
departmental managers.
• It controls & coordinates the activities of all the

departments.
• It is also responsible for maintaining a contact with the
outside world.
• It provides guidance and direction.
• The top management is also responsible towards the
shareholders for the performance of the enterprise.
Middle Level of Management

The branch managers and departmental managers
constitute middle level. They are responsible to the top
management for the functioning of their department. They
devote more time to organizational and directional functions. In
small organization, there is only one layer of middle level of
management but in big enterprises, there may be senior and
junior middle level management. Their role can be emphasized

as
 They execute the plans of the organization in accordance
with the policies and directives of the top management.
 They make plans for the sub-units of the organization.

 They participate in employment & training of lower-
level management.
 They interpret and explain policies from top level
management to lower level.
 They are responsible for coordinating the activities
within the division or department.
 It also sends important reports and other important data
to top level management.
 They evaluate performance of junior managers.
 They are also responsible for inspiring lower-level

managers towards better performance
Lower Level of Management

Lower level is also known as supervisory / operative
level of management. It consists of supervisors, foreman, section
officers, superintendent etc. According to R.C. Davis,
“Supervisory management refers to those executives whose
work has to be largely with personal oversight and direction of
operative employees”. In other words, they are concerned with
direction and controlling function of management. Their
activities include -

• Assigning of jobs and tasks to various workers.

• They guide and instruct workers for day-to-day
activities.
• They are responsible for the quality as well as quantity
of production.
• They are also entrusted with the responsibility of
maintaining good relation in the organization.
• They communicate workers problems, suggestions, and
recommendatory appeals etc to the higher level and
higher-level goals and objectives to the workers.
• They help to solve the grievances of the workers.

• They supervise & guide the sub-ordinates.
• They are responsible for providing training to the
workers.
• They arrange necessary materials, machines, tools etc for

getting the things done.
• They prepare periodical reports about the performance of
the workers.
• They ensure discipline in the enterprise.
• They motivate workers
• They are the image builders of the enterprise because
they are in direct contact with the workers.

Henri Fayol 14 Principles of Management

Henry Fayol, also known as the ‘father of modern
management theory’ gave a new perception of the concept of
management. He introduced a general theory that can be applied
to all levels of management and every department. The Fayol
theory is practised by the managers to organize and regulate the
internal activities of an organization. He concentrated on
accomplishing managerial efficiency. The fourteen principles of
management created by Henri Fayol are explained below.
1. Division of Work-
Henri believed that segregating work in the workforce amongst
the worker will enhance the quality of the product. Similarly, he
also concluded that the division of work improves the
productivity, efficiency, accuracy and speed of the workers. This
principle is appropriate for both the managerial as well as a
technical work level.
2. Authority and Responsibility-

These are the two key aspects of management. Authority
facilitates the management to work efficiently, and
responsibility makes them responsible for the work done under
their guidance or leadership.
3. Discipline-
Without discipline, nothing can be accomplished. It is the core
value for any project or any management. Good performance
and sensible interrelation make the management job easy and
comprehensive. Employees good behaviour also helps them
smoothly build and progress in their professional careers.

4. Unity of Command-
This means an employee should have only one boss and follow
his command. If an employee has to follow more than one boss,
there begins a conflict of interest and can create confusion.
5. Unity of Direction-
Whoever is engaged in the same activity should have a unified
goal. This means all the person working in a company should
have one goal and motive which will make the work easier and
achieve the set goal easily.
6. Subordination of Individual Interest-

This indicates a company should work unitedly towards the
interest of a company rather than personal interest. Be
subordinate to the purposes of an organization. This refers to the
whole chain of command in a company.
7. Remuneration-
This plays an important role in motivating the workers of a
company. Remuneration can be monetary or non-monetary.
However, it should be according to an individual’s efforts they
have made.
8. Centralization-
In any company, the management or any authority responsible
for the decision-making process should be neutral. However, this
depends on the size of an organization. Henri Fayol stressed on
the point that there should be a balance between the hierarchy
and division of power.
9. Scalar Chain-
Fayol on this principle highlights that the hierarchy steps should

be from the top to the lowest. This is necessary so that every
employee knows their immediate senior also they should be able
to contact any, if needed.
10. Order-
A company should maintain a well-defined work order to have
a favourable work culture. The positive atmosphere in the
workplace will boost more positive productivity.
11. Equity-
All employees should be treated equally and respectfully. It’s the
responsibility of a manager that no employees face
discrimination.
12. Stability-
An employee delivers the best if they feel secure in their job. It
is the duty of the management to offer job security to their
employees.
13. Initiative-
The management should support and encourage the employees
to take initiatives in an organization. It will help them to increase
their interest and make then worth.
14. Esprit de Corps-

It is the responsibility of the management to motivate their
employees and be supportive of each other regularly.
Developing trust and mutual understanding will lead to a
positive outcome and work environment.

Functions of Management
Management has been described as a social process
involving responsibility for economical and effective planning
& regulation of operation of an enterprise in the fulfilment of
given purposes. It is a dynamic process consisting of various
elements and activities. These activities are different from
operative functions like marketing, finance, purchase etc. Rather
these activities are common to each and every manger
irrespective of his level or status.
Different experts have classified functions of
management. According to George & Jerry, “There are four
fundamental functions of management i.e. planning, organizing,
actuating and controlling”.
According to Henry Fayol, “To manage is to forecast and
plan, to organize, to command, & to control”. Whereas Luther
Gullick has given a keyword ’POSDCORB’ where P stands for
Planning, O for Organizing, S for Staffing, D for Directing, Co
for Co-ordination, R for reporting & B for Budgeting. But the
most widely accepted are functions of management given by
KOONTZ and O’DONNEL i.e. Planning, Organizing, Staffing,
Directing and Controlling.
For theoretical purposes, it may be convenient to separate the
function of management but practically these functions are
overlapping in nature i.e. they are highly inseparable. Each
function blends into the other & each affects the performance of
others.

1. Planning
It is the basic function of management. It deals with

chalking out a future course of action & deciding in advance the
most appropriate course of actions for achievement of pre-
determined goals. According to KOONTZ, “Planning is
deciding in advance - what to do, when to do & how to do. It
bridges the gap from where we are & where we want to be”. A
plan is a future course of actions. It is an exercise in problem
solving & decision making. Planning is determination of courses
of action to achieve desired goals. Thus, planning is a systematic
thinking about ways & means for accomplishment of pre-
determined goals. Planning is necessary to ensure proper
utilization of human & non-human resources. It is all pervasive,

it is an intellectual activity and it also helps in avoiding

confusion, uncertainties, risks, wastages etc.
2. Organising
It is the process of bringing together physical, financial and
human resources and developing productive relationship
amongst them for achievement of organizational goals.
According to Henry Fayol, “To organize a business is to provide
it with everything useful or its functioning i.e. raw material,
tools, capital and personnel’s”. To organize a business involves
determining & providing human and non-human resources to the
organizational structure. Organizing as a process involves:
Identification of activities.
Classification of grouping of activities.
Assignment of duties.
Delegation of authority and creation of
responsibility.
Coordinating authority and responsibility
relationships.
2. Staffing
It is the function of manning the organization structure and
keeping it manned. Staffing has assumed greater importance in
the recent years due to advancement of technology, increase in
size of business, complexity of human behaviour etc. The main
purpose o staffing is to put right man on right job i.e. square pegs
in square holes and round pegs in round holes. According to
Kootz & O’Donell, “Managerial function of staffing involves
manning the organization structure through proper and effective
selection, appraisal & development of personnel to fill the roles

designed un the structure”. Staffing involves:
Manpower Planning (estimating man power in
terms of searching, choose the person and giving
the right place).
Recruitment, Selection & Placement.
Training & Development.
Remuneration.
Performance Appraisal.
Promotions & Transfer.
3. Directing
It is that part of managerial function which actuates the
organizational methods to work efficiently for achievement of
organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because
planning, organizing and staffing are the mere preparations for
doing the work. Direction is that inert-personnel aspect of
management which deals directly with influencing, guiding,
supervising, motivating sub-ordinate for the achievement of
organizational goals. Direction has following elements:
Supervision
Motivation
Leadership
Communication

Supervision- implies overseeing the work of subordinates by

their superiors. It is the act of watching & directing work &
workers.
Motivation- means inspiring, stimulating or encouraging the
sub-ordinates with zeal to work. Positive, negative, monetary,
non-monetary incentives may be used for this purpose.
Leadership- may be defined as a process by which manager

guides and influences the work of subordinates in desired
direction.
Communications- is the process of passing information,
experience, opinion etc from one person to another. It is a bridge
of understanding.
4. Controlling
It implies measurement of accomplishment against the standards
and correction of deviation if any to ensure achievement of
organizational goals. The purpose of controlling is to ensure that
everything occurs in conformities with the standards. An
efficient system of control helps to predict deviations before they
actually occur. According to Theo Haimann, “Controlling is the
process of checking whether or not proper progress is being
made towards the objectives and goals and acting if necessary,
to correct any deviation”. According to Koontz & O’Donell
“Controlling is the measurement & correction of performance
activities of subordinates in order to make sure that the
enterprise objectives and plans desired to obtain them as being
accomplished”. Therefore controlling has following steps:
Establishment of standard performance.
Measurement of actual performance.
Comparison of actual performance with the

standards and finding out deviation if any.
Corrective action.
PLANNING
Meaning
Planning is the most crucial and foremost function of
management. It is defined as the process of setting goals and
choosing the means to achieve those goals. A sound planning is
imperative for the successful achievement of the goals in the
desired direction. It is rightly said “well plan is half done”. It
involves setting of objectives and goals, designing appropriate
strategy and cource of action, and framing plans and procedure
etc for execution of the proposed activities under the project.
Definitions
According to George R Terry, “Planning is the selecting
and relating of facts and making and using of assumptions
regarding the future in the visualization and formulation of
proposed activities believed necessary to achieve desired
results.”
According to Henry Fayol, “Planning is deciding the best
alternatives among others to perform different managerial
operations in order to achieve the predetermined goals.”
Generally speaking, planning is deciding in advance
what is to be done, that is, a plan is a projected course of action.
Features of Planning
1. Planning is looking in to the future
2. It involves predetermined lines of action

3. Planning is a continuous process
4. Planning integrates various activities of an organization

5. Planning is done for a specific period
6. It discovers the best alternatives out of available
alternatives
7. Planning is a mental activity

8. Planning is required at all levels of Management
9. It is the primary functions of Management
10. Growth and prosperity of any organization is depends
upon planning
Objectives of Planning
Planning in organization serve to realize the following
objectives:
• To reduces uncertainty
• To bring co-operation and co-ordination in the
organisation
• To bring economy in operations
• Helps to anticipate unpredictable contingencies
• To achieve the pre-determined goals

• To reduce competition.

Advantages of Planning
Planning helps the organization to achieve its objectives easily.
Some of the advantages of planning are given below:
1. It helps the better utilization of resources
2. It helps in achieving the objectives
3. It helps in achieving economy in operations
4. It minimizes future uncertainties

5. It improves competitive strength
6. It helps effective control
7. It helps to give motivation to the employees
8. It develop rationality among management executives
9. It reduces redtapism
10. It encourages innovative thought

11. It improves the ability to cope with changes.
12. It creates forward looking attitude in Management
13. It helps in delegation of authority
14. It provide basis for control
Planning Process (Steps)

It is not necessary that a particular planning process is
applicable for all organization and for all types of plans because
the various factors that go into planning process may differ from
plan to plan or from one organization to another. Perception of

Opportunities:-It is the beginning of planning process. This
Provides an opportunity to set the objectives in real sense. It
helps to take the advantage of opportunities and avoid threats.
Once the opportunities are perceived, the other steps of planning
are undertaken.
1. Establishing the objectives:-This stage deals with the
setting of major organisational and unit objectives. The
organizational objectives should be specified in all key
areas. Once organizational objectives are identified,
objectives of lower units can be identified in that context.
2. Establishing planning premises: -It means deciding the
condition under which planning activities will be
undertaken. Planning premises may be external or
internal. The nature of planning premises differs at
different levels of planning.
3. Identification of alternatives:-This point says that a
particular objectives can be achieved through various
actions. Since all alternatives cannot be considered for
further analysis, it is necessary for the planner to reduce
the number of alternatives.
4. Evaluation of alternatives: -Various alternatives which
are considered feasible may be taken for detailed
evaluation. It is evaluated on the basis of contribution of
each alternative towards the organizational objectives in
the light of its resources and constraints.
5. Selection of alternatives: -After the evaluation, the
most fit one is selected. At the same time a planner must
be ready with alternatives, normally known as

contingency plans, which can be implemented in

changed situation.
6. Developing supporting plans: -After formulating the
basic plan, various plans are devised to support the main
plan. These plans are known as derivative plans.
7. Establishing sequence of activities: -After formulating
basic and derivative plans, the sequence of activities is
determined, so that plans are put in to action.
8. Devising a mechanism of Project monitoring and
Evaluation
ORGANISING
Meaning and Definition
The process of organizing involves establishing an
intentional structure of roles for the staff at all levels of hierarchy
in the organization. It is the function of identifying the required
activities, grouping them into jobs, assigning jobs to various
position holders, and creating a network of relationship, so that
the required functions are performed in a co-ordinated manner,
leading to the accomplishment of desired goals.
According to Koont’s O Donnel. “Organizing involves the
grouping of activities necessary to accomplish goals and plans,
the assignment of these activities to appropriate departments,
and the provision of authority delegation and Co-ordination.”
According to GR Terry, “Organizing is the establishing of
effective behavioural relationship among persons so that they
may work together effectively and gain personal satisfaction in

doing selected tasks under given environmental conditions for

the purpose of achieving some goal or objectives.”
Steps in Organizing
The logical sequence of steps in organizing is mentioned below:
-
1. Establishing objectives
2. Designing Plans and Policies
3. Identifying specific activities
4. Grouping activities according to available resources
5. Delegating the authority necessary to perform the
activities.
6. Tying the groups together through authority relationship
and communication.
Functions of Organisation
The following are the important functions of organization
1. Determination of activities:-It includes the deciding
and division of various activities required to achieve the
objectives of the organization. The entire work is divided
into various parts and sub parts.
2. Grouping of activities:-Here, identical activities are

grouped under one department.
3. Allotment of duties to specified persons:-For the
effective performance, the grouped activities are allotted
to specified persons.
4. Delegation of authority:-Assignment of duties should

be followed by delegation of authority. It is difficult to
perform the duties effectively, if there is no authority to
do it.
5. Defining relationship:-When a group of person is
working together for a common goal, it is necessary to
define the relationship among them in clear terms.
6. Co-ordination of various activities:-The delegated
authority and responsibility should be co-ordinated by a
responsible person.
Classification of Organization
1. Formal Organisation: It is an organizational structure
which clearly defines the duties, responsibilities,
authority and relationship as prescribed by the top
management. It represents the classification of activities
within the enterprise, indicate who reports to whom and
explains the vertical flow of communications which
connects the chief executive to the ordinary workers.
2. Informal Organisation: It is an organizational structure
which establishes the relationship on the basis of the
likes and dislikes of officers without considering the
rules, regulations and procedures. The friendship, mutual
understanding and confidence are some of the reasons
for existing informal organization.
Organisation Structure
Organisation is designed on the basis of principles of
division of labour and span of management. The success of the
organization depends upon the competence and efficiency of the

officers. It is necessary to chalk out line of authority among the

people working in an organization.
Types of Organizational Structure

A brief explanation of the important types of
organizations is given below: -
Line Organisation
Under Line organization, each department is generally a
complete self-contained unit. In this type of organization, the
line authority flows from top to bottom vertically. It clearly
identifies authority, responsibility and accountability at each
level, departmental heads are given full freedom to control their
department. This type of organization is followed in the army on
the same pattern. So, it is also called military organization.
Features of Line organization

1. It consists of vertical direct relationship
2. Authority flows from top to bottom
3. Operations of this system is very easy.

4. It facilitates to know from whom one should get orders
and to who one should give orders
5. Existence of direct relationship between superior and
subordinates
6. The superior will take decisions within the scope of his
authority.
Line and Staff Organisation

In this type of organization Line officers have authority

to take decisions and implement them, but the staff officers will
assist them while taking decisions. The function of staff officers
is only an advising one. They should advise and help line
managers to take proper decisions. In the fast-developing
industrial world, the line officers are not in a position to acquire
all the technical knowledge, which are necessary for taking right
decisions. That gap may be bridged with the help of staff
officers. The staff officers may be experts in a particular field.
Features of Line and Staff Organisation

1. Authority flows from top to bottom
2. Line Officers will take decisions on the basis of
suggestions given by staff officers
3. Staff officers have no power to take decisions and no
control over subordinates.
4. The workers get the instructions only from the line
officers
Advantages of Line and Staff Organisation

1. A line officer can take sound decisions on the basis of
proper advice from the staff officer.
2. The work load of line officers would be reduced to some
extent,
3. It promotes the efficient functioning of the line officers
4. The principles of unity of command are followed in the
line and staff organization.

5. A very good opportunity is made available to the young

person to get training.
6. It facilitates the workers to work faster and better.
7. It enables the organization to effectively utilize the staff
officer’s experience and advice.
Disadvantages of Line and Staff Organisation

1. If the powers of authority is not clearly defined, it will
lead to confusion though out the organization.
2. The line officers may reject the advice from staff officers
without assigning any reason.
3. The staff officers may under estimate the powers of line
officers.
4. The staff officers are not involved in the actual
implementation of the programme.
5. The staff officers are not responsible if favourable results

are not obtained.
6. The difference of opinion between line officers and staff
officers will defeat the very purpose of specialization.
7. The line officers may misunderstand the advice given by
staff officers
Functional Organisation
In this type of organizations, specialists are appointed in
top position throughout the organization. Various activities of
the enterprise are classified according to functions and
functional heads will give directions related to his functions.
Workers, under functional organization, receive instructions

from various specialists.
Characteristics of Functional Organisation

1. The work is divided according to specified functions.
2. Authority is given to specialists to give orders and
instructions in relation to specific functions.
3. The decision is taken only after making consultations
with the functional authority relating to his specialized
area.
4. The executives and supervisors discharge the
responsibilities of functional authority.
Advantages of Functional Organisation

The following points will explain the benefits of
functional organization.
1. Benefit of specialization: -In this type of organization,

each work is performed by a specialist. It helps to
enhance the efficiency of the organization.
2. Reducing work load: Each person is expected to look
after only one type of work. It reduces the unnecessary
work allotted to them.
3. Relief to line executives: Under functional organization,
the instructions are given by the specialists directly to the
actual workers. Hence, the line executives do not have
any problem regarding the routine work.

4. Mass production: Large scale production can be

achieved with the help of specialization and
standardization.
5. Flexibility: Any change in the organization can be
introduced without any difficulty
DELEGATION OF AUTHORITY
Authority
It is the power to make decisions which guide the actions
of others. In other words, it is the power to give orders and make
sure that these orders are obeyed. In order to finish the work in
time, there is a need to delegate authority and follow the
principles of division of labour.
According to Koontz and O’Donnell, “ Authority is the

power ot command others to act or not to act in a manner deemed
by the possessor of the authority to further enterprise or
departmental purposes.”
According to Luis Allen, “It is the sum of powers and
rights entered to make possible the performance of the work
delegated.”
Responsibility
It is the obligation to do something. In other words, it is
the obligation to perform the tasks, functions, or assignments of
the organization. The essence of responsibility is obligation. If a
person is entrusted with any work, he should be held responsible
for the work that he completes
According to Davis, ”Responsibility is the obligation of

individual to perform the assigned duties to the best of his ability
under the direction of his executive leader. “In the words of Theo
Haimann,” Responsibility is the obligation of subordinates to
perform the duty as required by his superior.”
Delegation of Authority
Delegation is a process which enables a person to assign
a work to others with adequate authority to do it. The authority
can be delegated but not the responsibility. Delegation of
authority is considered to be one of the most important methods
of training subordinates and building morals. It is acknowledged
that delegation of authority is one of the surest and best methods
of getting better results.
Principles of Delegation
The following are the important principles of delegation.
1. Delegation to go by results: The superiors should
clearly know what he expects from the subordinates
before delegation of authority. It should be noted that the
objective of the organization are to be accomplished in
time.
2. Non-delegation of responsibility: Assigning duties
does not mean delegation of responsibilities. A superior
can delegate authority but not responsibility.
3. Parity of authority and responsibility: Responsibility
without authority will make a person an inefficient one.
So there should be a proper balance between authority
and responsibility.

4. Unity of command: A subordinate should be assigned

duties and responsibilities only by one superior and he is
accountable only to the concerned superior.
5. Definition of limitation of authority: There should be
a written manual which help a person to understand the
authority in right direction.
CENTRALISATION AND DECENTRALISATION

Centralization: It means concentration of decision-
making authority at the top level management. All the decision
are taken by the top management without delegating to the
subordinate. As far as a big organization is concerned, it is not
possible to run the organization for long period without
delegating the authority
Decentralization: In decentralization, each section has
its own workers to perform activities within the department.
According to Allen,” Decentralisation refers to the systematic
efforts to delegate to the lowest levels all authority except that
which can only be exercised at central point.”
Advantages of Decentralization
1. It saves the time of top executive and give relief to the
top executive
2. Decentralisation gives the subordinates the freedom to
act and make some decisions. It gives him a feeling of
status and recognition.
3. It helps to coordinate the activities of the organization in
a better way.
4. It helps to take prompt and quick action at the earliest.
5. It is a best devise to develop future business executives
Span of Control
Span of management or Span of control means the
number of people managed efficiently by a single officer in an
organization. It is an accepted truth that large number of
subordinates cannot be supervised and their efforts coordinated
effectively by a single executive. Only limited numbers of
persons are allocated to the executive for dividing the work. The
limit of number of members for span of control may be increased
or decreased according to the levels of management. According
to Urwick, the ideal number of subordinates is four in case of
higher level management and eight to twelve in case of lower
level management.
Factors affecting the span of Control

The following are some of the factors which influence
the span of control.
1. Nature of work: If the works are repetitive in nature, the

supervisor can control a large number of subordinates
and vice versa.
2. Leadership qualities of the supervisor: If the

supervisor has more skill and capacity to control the
subordinates, the span of management may be increase
and vice-versa.
3. Capacity of the subordinates: If the subordinates have
enough talent to perform the work assigned to them, the
manager or the supervisor can control more number of
subordinates.

4. Delegation of authority: If the authority delegates the

powers of decision making, planning and execution to
the subordinates, the span of control may be increased.
5. Level of supervision: Depending up on the requirement
of supervision needed, the span of control may vary. In
other words degree of span of control can be increased at
bottom level and decreased at top level.
6. Fixation of responsibility: In case the responsibility of
subordinate is clearly defined, then the superior can
supervise large number of subordinates.
7. Communication methods: The methods used for
communication is very important. If new and modern
techniques are used, then lesser time is required to
control and vice-versa.
8. Using of standards: If standards are used to detect the
errors, then the executives can control more number of
subordinates.
Difference between authority and Responsibility

1. The power or right, inherent to a particular job or
position, to give orders, enforce rules, make decisions
and obtain conformity, is called authority. Duty or
obligation to undertake and complete a task
satisfactorily, assigned by the senior or established by
one’s own commitment or circumstances is called
responsibility.
2. Authority refers to the legal right of the manager to give
orders and expect obedience from subordinates. On the

other hand, responsibility is the corollary, i.e. result of

the authority.
3. The position of an individual in an
organisation determines his/her authority, i.e. the higher
the position of a person in the corporate ladder, the more
is the authority and vice versa. As against this, the
superior-subordinate relationship forms the basis for
responsibility.
4. While authority is delegated, by the superior to

subordinates, responsibility is assumed, i.e. it is inherent
in the task assigned.
5. Authority needs the ability to give orders and
instructions, whereas responsibility demands the ability
of compliance or obedience, to follow orders.
6. Authority flows downward, i.e. the extent of authority is
greatest at the top level and lowest at the low level. On
the contrary, the responsibility exacts upward, i.e. from
bottom to top, the subordinate will be responsible to
superior.
7. The purpose of the authority is to take decisions and
execute them. Conversely, responsibility aims at
executing duties assigned by the superior.
8. Authority is inherent with the position, and so it
continues for a long period. Unlike responsibility, which
is attached to the task assigned and hence it is short-lived,
it ends as soon as the task accomplishes successfully.
STAFFING

Staffing may be defined as a process of recruiting and

equipping the people to handle various positions and perform
assigned tasks in line with the structure and the overall goals of
the organisation. It is the managerial function which involves
managing the organisation structure through proper and
effective selection, appraisal and development of the personnel
to fill the roles assigned to the employers/workforce.
According to Theo Haimann “ Staffing pertains to
recruitment, selection, development and compensation of
subordinates .”
In the words of Benjamin, “It is the process involved in

identifying, assessing, placing, evaluating, and directing
individuals at work place.”
Staffing Process
The following specific activities are included in the
staffing process.
1. Identification of areas of specialization to match the

nature and mandate of the organisation.
2. Estimation of the future manpower requirements
3. Recruitment
4. Selection and Placement
5. Performance Appraisal
6. Placing and Training
Staffing Function

Staffing function involves Man power planning,

Recruitment, Selection, Training and Development and
Performance Appraisal.
Man Power Planning

Planning of man power resources is a major managerial
Responsibility to ensure adequate supply of personnel at the
right time both in terms of their quality, quantity and aptitude
Man power planning, which is also called HR Planning consists
of putting right number of people at the right place, right time
doing the right things for which they are suited for the
achievement of goals of the Organisation.
According to Geisler,” Man power planning is the
process including forecasting, developing, implementing and
controlling –by which a firm ensures that it has the right number
of people and right king of people, at the right place, at the right
time, doing things for which they are economically most
suitable.”
Features of Man power Planning

1. It involves determination of future needs of man power.
2. It deals with effective utilization of manpower.

3. It is a process for ensuring the availability of right people
in the organisation.
4. It relates to establishing job specifications.
5. It gives emphasis on better working conditions.
RECRUITMENT AND SELECTION

Recruitment is the process of finding the apt candidate

and inducing them to apply for the job in an organisation. The
success of any recruitment depends upon the procedure followed
by the company while recruiting the members
According to McFarland, “The term recruitment applies
to the process of attracting potential employees of the company.”
In the words of Edwin B Filippo, ”It is the process of

searching for prospective employees and stimulating them to
apply for the job in the organisation.”
Sources of Recruitment
Sources of recruitment may be external or internal.
External sources
• Advertisement
• Employment agencies
• Public Employment Exchanges

• Private Employment agencies
• Campus recruitment
• Deputation
• Employee recommendations
• Labour unions
• Gate Hiring
• Un solicited applications

• Jobbers and Contractors

• Walk in interviews
Internal sources
1. Transfer
2. Promotion and demotion
Selection
It is the process adopted by an organisation to select adequate
number of persons who are fit for the job. Selection procedure
starts with the end of recruitment. Since it is a process of
rejecting the application of a candidate who is not suitable for
the job, selection is described as negative process.
Steps/Stages of Selection Process

Generally, the selection procedure has the following
stages:
1. Receiving and screening of Applications: Prospective
employees have to fill up Some sort of application form.
After getting the filled application form, the personnel
department will screen the application. Based on the
screening of application, only those candidates are called for
further process of selection who are found to be meeting the
job standards of the organization
2. Preliminary interview: -The object of conducting this
interview is to know whether the applicant is physically and
mentally fit for the job.

3. Blank application: The applicants who were selected at

preliminary interview are required to fill up a blank
application form. It is basically a printed form used to collect
the individual bio data of the candidate.
4. Tests: The test is conducted by the organization for the
purpose of knowing more about the applicants to be selected
or rejected. There are mainly two tests. Proficiency test and
aptitude test. Proficiency test refers to the testing of skills
and abilities possessed by the candidate. Aptitude test refers
to measuring the skills and abilities which may be developed
by the applicant to perform the job in future.
5. Interviews: It is considered as a method of personal
appraisal through a face-to-face conversation and
observation. Interview helps the employer to evaluate the
candidate regarding the personality, smartness, intelligence,
attitude etc. There are different types of interviews are used
by different organizations, like Direct interview, Indirect
interview, Patterned interview, Stress interview, Systematic
in depth interview, group interview etc.
6. Checking references: Sometimes, the applicants are

requested to furnish references. The applicants may include
the name and address of present educational institutions or
respected or reputed persons in his locality. The information
furnished in the application is checked from these persons.
7. Medical Examinations: This is carried out for the purpose
of assessing physical fitness of the prospective employees.
8. Final Selection: A suitable applicant is selected on the basis
of performance in the above mentioned tests and interviews.
Only the required number of applicants is selected by the
management.
9. Placement: Here a position is assigned to an individual

where he can use all his efforts consistent with the
requirement of his total working group and then he will get
job satisfaction
Training
It refers to a Programme that facilitates an employee to
perform the job effectively through acquiring increased
knowledge and skills.
According to Edwin B Flippo,” Training is the act of
increasing the knowledge and skills of an employee for doing a
particular job.”
Types of Training
The training may be of
I. On the Job Training
II. Off the Job Training
On the Job Training: It refers to the learning while actually
performing a particular work or job. This type of training is more
suitable to every type of employees. It includes:
• On specific job training
• Rotation of position job rotation
• Special projects
• Apprenticeship training

Off the Job Training: Under this method, a trainee is removed

from his normal working place and spends his full time for
training purpose in any other place. It includes:
• Special course and lectures
• Conference
• Case study.
• Role playing
• Management games etc
Direction
Directing is the process of integrating the people within
the organisation so as to obtain their willing co-operation
towards meeting the pre-determined goals.
According to Theo Haimann,” Directing consists of the
process and techniques utilized in issuing instructions and
making certain that operations are carried on as originally
planned.”
Principles of Direction
The following are the basic principles of directing
1. Integration of individual and organizational goals:

This implies that the individuals contribute to the
organizational goals to their maximum capabilities and
at the same time satisfy their personal needs.
2. Participative decision making: Effective direction can

be achieved by involving individuals and groups in
decision making process.
3. Delegation of Authority: The subordinates should be
delegated with adequate authority in order to facilitate
decision making.
4. Effective communication: The managers should ensure

free flow of communication at all levels of
organizational hierarchy.
5. Right type of leadership: The management should
develop leadership quality among the employees.
6. Unity of Command: This principle states that the
subordinates should get directives from one superior
only and should be accountable to one superior only.
7. Appropriateness of direction techniques: The

direction techniques selected should be according to the
situation.
8. Follow up: The management should see that whether the
direction issued by them is carried out or not
Co-ordination
It is a process of integrating the interdepartmental activities as
unified action towards the fulfilment of the predetermined
common goals of the organization.
According to Henry Fayol, “To co-ordinate is to
harmonize all the activities of a concern so as to facilitate its
working and its success. In a well-co-ordinated enterprise, each
department or division, works in harmony with other and is fully
informed of its role in the organization. The working schedule

of various departments is constantly turned to circumstances.”
Features
1. It is not a separate function of management.
2. It is necessary to all levels of management.
3. It is a continuous and dynamic process.
4. Group efforts are more relevant than individual efforts.
5. Unity of action is the heart of co-ordination.
6. It is a system concept.
Controlling
The Control function is closely related with all other
functions of management. The management control is the
process of ensuring that the actual plan implementation matches
with the original plan. It is an ongoing and dynamic function and
linked with other function of the management in a circular
relationship.
According to Koonts O’Donnel, “Controlling is the
measurement of accomplishment against the standards and the
correction of deviation to assure attainment of objectives
according to plan.”
Steps in Control Process

The control process involves four basic steps as mentioned
below:-
1. Establishing standards: -Standard represents criteria of
performance. This implies the statement of goals and
objective envisaged under the planning process are
stated in clear and measurable terms along with specific

milestones. The standard should have some
characteristics to produce effective performance
2. Measurement of performance against standards: The
measurement of performance is an ongoing process.
Several techniques are used by the management to
measure the performance.
3. Comparing the actual performances with standards:

The measured results are compared with the project and
standards. In case the performance meets the standards,
then it would mean that the performance or activity is
progressing in the desired direction.
4. Taking corrective action: In the situations when
performance does not confirm to the specified criteria of
the standards, then it is necessary to take corrective
measures to deal with the observed deviations in the
performance.

BCM5D02 -BASICS OF ENTREPRENEURSHIP AND

MANAGEMENT
Lecture Hours per week: 3, Credits: 3
Internal: 15, External: 60,

Examination 2 Hours
Objective:
To enable the students to have an understanding of the basics of

business, entrepreneurship and organizationalmanagement.
Module I Foundation of Business : Concept of business – Industry,

Trade and Commerce –Classification of Industry, Types of trade and
Aids to trade – Forms of Business enterprises-Sole trader – Partnership
- Joint-stock Companies – Cooperative organisations – One
mancompany. Factors to be considered while setting up of a business
- Social Responsibility ofbusiness. (18Hours, 15marks)
Module IIEntrepreneurship: Concept of entrepreneur -

Characteristics of entrepreneur - Functions of anentrepreneur -
Difference between entrepreneur and manager – Micro, Small and
MediumEnterprises, Definition, Registration procedure of Sole
proprietorship and partnership units. (10 Hours, 10 marks)

Module III Management Concepts: Meaning - Nature and

characteristics of management - Managementas science, art and
profession - Levels of management –Henry Fayol‘s Principles
ofmanagement. Functions of Management : Planning - Steps in
planning – Organising - Typesoforganisation–
Line,StaffandFunctional-CentralisationVsdecentralisation-
AuthorityVs responsibility - Staffing – Elements of Staffing -
Directing - Leadership - Leadershipstyles - Controlling - Steps in
controlling. (20 Hours, 15marks)

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BASICS OF ENTREPRENEURSHIP

BASICS OF ENTREPRENEURSHIP AND

Basic of entrepreneurship & Management 2

Modules Page Number

Basic of entrepreneurship & Management 3

Basic of entrepreneurship & Management 4

Have you ever wondered how do these products and

commerce. In a nutshell we call them ‘Business’ which is a wider

Characteristics of Business Activities

Basic of entrepreneurship & Management 6

of earning money or livelihood and not out of love, affection,

3. Sale or exchange of goods and services: Directly or

4. Dealings in goods and services on a regular basis:

Basic of entrepreneurship & Management 7

possible efforts to maximise profits, by increasing the

7. Element of risk: Risk is the uncertainty associated with an

Classification of business activities

and technical skills are involved. These include activities

additional, activities of cattle breeding farms, poultry farms, and

Basic of entrepreneurship & Management 10

• Assembling industry which assembles different

These industries are involved in the construction of buildings,

Basic of entrepreneurship & Management 11

goods and services. Thus, all activities involving the removal of

Trade and Auxiliaries to Trade

Basic of entrepreneurship & Management 12

promotion of goods. Auxiliaries to trade are briefly discussed

1. Transport and Communication:

2. Banking and Finance:

importers. Commercial banks also help promoters of companies

5. Advertising and public Relations:

Basic of entrepreneurship & Management 14

Basic of entrepreneurship & Management 15

maintained separately from the person's personal financial

Advantages of Sole Proprietorship

Basic of entrepreneurship & Management 16

specific law explains that partnership is an association between

4. Business Motive: It is important for a firm to carry some

Basic of entrepreneurship & Management 17

5. Mutual Business: The partners are the owners as well as the

Joint Stock Company

Professor Haney defines it as “a voluntary association of

Features of a Joint Stock Company

2. Separate Legal Entity

Basic of entrepreneurship & Management 18

Unlike a proprietorship or partnership, the legal identity

Basic of entrepreneurship & Management 19

So no document is legally binding on the company until and

Advantages of a Joint Stock Company

Basic of entrepreneurship & Management 20

life of a company. The only liquidation under the Companies

Characteristics of Cooperative Organisation:

organisation shall work in the general interest of the organisation

 5. Fixed Return on Capital:

Basic of entrepreneurship & Management 22

In a cooperative organisation “cash and carry system” is a

One man company

Basic of entrepreneurship & Management 23

Section 2(62) of Companies Act defines a one-person

Features of a One Person Company

3. Nominee: A unique feature of OPCs that separates it

Basic of entrepreneurship & Management 24