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Introduction to Business

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Introduction to Business ­MGT 211
VU
LESSON 03
BUSINESS ORGANIZATION
Business organization is an act of grouping activities into effective cooperation to obtain the
objective of the business.
In the words of L. H. Haney
"It is more or less independent complex of land, labour and capital, organized and directed for
productive purposes but entrepreneurial ability.
SCOPE OF BUSINESS ORGANIZATION
The scope of business organization can be defined as under:
Scope of
Business
Organization
Partnership
Combination
Sole
Joint Stock
Cooperative
Proprietorship
Company
Societies
1. Sole Proprietorship
According to D.W.T. Stafford
"It is the simplest form of business organization, which is owned and controlled by one man."
Sole proprietorship is the oldest form of business organization which is owned and controlled
by one person. In this business, one man invests his capital himself. He is all in all in doing
his business. He enjoys the whole of the profit. The features of sole proprietorship are:
Easy Formation
Unlimited Liability
Ownership
Profit
Management
Easy Dissolution
2. Partnership
According to Partnership Act 1932:
"Partnership is the relation between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all."
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Introduction to Business ­MGT 211
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Partnership means a lawful business owned by two or more persons.  The profit of the
business shared by the partners in agreed ratio. The liability of each partner is unlimited.
Small and medium size business activities are performed under this organization. It has the
following features:
Legal Entity
Profit and Loss Distribution
Unlimited Liability
Transfer of Rights
Management
Number of Partners
3. Joint Stock Company
According to S. E. Thomas:
"A company is an incorporated association of persons formed usually for the pursuit of some
commercial purposes"
A joint stock company is a voluntary association of persons created by law. It has a separate
legal entity apart from its members. It can sue and be sued in its name. In the joint stock
company, the work of organization begins before its incorporation by promoters and it
continues after incorporation. The joint stock company has the following feature:
Creation of Law
Separate Legal Entity
Limited Liability
Transferability of shares
Number of Members
Common Seal
4. Cooperative Societies
According to Herrik:
"Cooperation is an action of persons voluntarily united for utilizing reciprocally their own forces,
resources or both under mutual management for their common profit or loss."
Cooperative Societies are formed for the help of poor people. It is formed by economically
weak persons of the society. In this form of organization, all members enjoy equal rights of
ownership. The features of cooperative society are as under:-
Easy Formation
Protection of Mutual Interest
Limited Liability
Equal Distribution of Wealth
Equal Rights
5. Combination
According to J. L. Hanson
"Combination is the association, temporary or permanent, of two or more firms."
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Introduction to Business ­MGT 211
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Business combinations are formed when several business concern undertaking units are
combined to carry on business together for achieving the economic benefits. The combination
among the firms may be temporary or permanent.  The salient features of business
combination are:
Economy in Production
Effective Management
Division of Labour
Destructive Competition
IMPORTANCE OF BUSINESS ORGANIZATION
The following points elaborate the role of business organizations:
1. Distribution
Another benefit of business organization is that it solves the problems of marketing and
distribution like buying, selling, transporting, storage and grading, etc.
2. Feedback
An organization makes possible to take decisions about production after getting the feedback
from markets.
3. Finance Management
It also guides the businessman that how he should meet his financial needs which is very
beneficial for making progress in business.
4. Fixing of Responsibilities
It also fixes the responsibilities of each individual. It introduces the scheme of internal check.
In this way chances of errors and frauds are reduced.
5. Minimum Cost
It helps in attaining the goals and objectives of minimum cost in the business.
6. Minimum Wastage
It reduces the wastage of raw material and other expenditures. In this way the rate of profit is
increased.
7. Product Growth
Business organization is very useful for the product growth. It increases the efficiency of
labour.
8. Quick Decision
Business organization makes it easy to take quick decisions.
9. Recognition Problems
Business organization makes it easy to recognize the problems in business and their
solutions.
10. Reduces the Cost
Business organization is useful in reducing the cost of production as it helps in the efficient use
of factors of production.
11. Secretariat Functions
It also guides the businessman about the best way of performing the secretarial functions.
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Introduction to Business ­MGT 211
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12. Skilled Salesmen
It is also a benefit of the business organization that it provides the skilled salesmen for
satisfying various needs of the customers.
13. Transportation
It is another benefit is that it guides the businessman that what type of transport he should
utilize to increase the sales volume of the product.
What are the factors of consideration before starting a business?
PRE-REQUISITES OF BUSINESS
Following are the main pre-requisites of a successful business:
1. Selection
The first and most important decision before starting a new business is its selection. If once a
business is established, it becomes difficult to change it.  One should make a detailed
investigation in the selection of business.
2. Feasibility Report
A person should prepare the feasibility report about the business to be started. This report will
provide the facts and figures whether business is profitable or not.
3. Nature of Business
There are various types of business like manufacturing, trading and services. The
businessman should decide that what type of business he would like to start.
4. Demand of Product
The businessman also keeps in view the demand of the product which he wants to sell. If the
demand is inelastic, the chances of success are bright. If the demand of a product is irregular,
seasonal and uncertain, such business should not be started.
5. Size of Business
The Size of business means the scale of business. The size of business depends upon the
demand of commodity in the market and organizational ability of entrepreneur. The
determination of size of business is an important decision of a person.
6. Availability of Capital
Availability of capital is an important factor in the business. Capital is required for the purchase
of land, machines, wages and raw materials. A businessman must decide that how much
capital he can arrange.
7. Business Location
A businessman has to select the place where he wants to start his business. He should select
that place where raw material, cheap labour and transportation facilities are available. He
should also check the location of business competitors.
8. Government Policy
The businessman should also carefully consider the policies of government before starting a
new business.  Some areas are declared as `tax free zones' and for some particular
businesses the loan is provided without any interest.
9. Availability of Raw Material
Availability of Raw material is essential to produce the goods at low cost. Sometimes the raw
material is to be imported which may create problem for him. So a businessman must keep
this factor in mind.
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Introduction to Business ­MGT 211
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10. Availability of Machines
Availability of new machines is also an important factor for a business. A businessman must
see whether these machines are easily available inside the country or not. If these are to be
imported then it may create the problems for him.
11. Availability of Labour
Skilled and efficient labour is essential to run the business in profit. But if efficient and skilled
labour is not available where business is going to be started then it will not be profitable.
12. Means of Transportation
Quick and cheap means of transportation are essential for low cost of production and high
profit rate. A businessman must keep in view this factor.
13. Power Resources
There must be availability of power resources like water, oil, coal and electricity.
So
businessman must keep in view this factor.
14. Hiring Employees
A businessman must hire the efficient and competent employees in the business. The proper
training must be given to employees.
15. Product Pricing
A businessman must decide the price of his product. In the beginning the price must be low.
He must keep in view that whether he will cover cost of his product and other expenses with
such price.
FUNCTIONS OF BUSINESS
Following are the main functions of a business:
1. Production
Production of goods and services is the first main function of the business. The production
must be regular. The goods and services must be produced in such a way which can satisfy
human needs.
2. Sales
The sale is another important function of the business. Sales are of two types:
Cash sales
Credit sales
The sale must be regular and at reasonable price. It is very difficult job because there is hard
competition in each market.
3. Finance
It is also an important function of the business to secure finance. Finance is required for
establishment and expansion of business. There are two sources of raising funds:
(a)
Owner's Capital
(b)
Borrowed Funds
4. Management Function
"To do things efficiently and effectively" is known as management.
The functions of
management are:
Planning
Organizing
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Introduction to Business ­MGT 211
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Leading
Controlling
Staffing
The management also provides direction for all subordinates.
5. Innovation
In this era of competition, for the survival of business, innovation is essential.  The
businessman must try to find new techniques of production because the business may not sell
present output in future.
6. Accounting
Another function of the business is to maintain its records properly. To record the business
activities is called accounting.  With proper accounts, the owner can know the actual
performance of business and chances of fraud are reduced.
7. Marketing - According to Harry Henser
"Marketing involves the design of the products acceptable by the consumers and the conduct
of those activities which facilitate the transfer of ownership between seller and buyer."
Through marketing, goods are moved from producers to consumers.  It is an important
function of the business.  This function includes buying, selling, transportation, product
designing and storage, etc. The concept of marketing mix is very important in marketing. It
includes four Ps:
Product
Price
Place
Promotion
8. Quality Improvement
Quality of product must be improved to increase the sale. If quality of product is poor then
business may suffer a loss.
9. Motivation
Motivation is very essential for increasing the efficiency of employees. Motivation encourages
the employees to give their best performance.
10. Research
Research is also an important function of any business.  Research is a search for new
knowledge. By research, business becomes able to produce improved and new goods. The
research is of two types:
Basic Research
Applied Research
11. Public Relations
It is very important function to make friendly relations with public, In this way sales volume is
increased.
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Table of Contents:
  1. INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE
  2. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:THE ECONOMIC ENVIRONMENT
  3. BUSINESS ORGANIZATION:Sole Proprietorship, Joint Stock Company, Combination
  4. SOLE PROPRIETORSHIP AND ITS CHARACTERISTICS:ADVANTAGES OF SOLE PROPRIETORSHIP
  5. PARTNERSHIP AND ITS CHARACTERISTICS:ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP
  6. PARTNERSHIP (Continued):KINDS OF PARTNERS, PARTNERSHIP AT WILL
  7. PARTNERSHIP (Continued):PARTNESHIP AGREEMENT, CONCLUSION, DUTIES OF PARTNERS
  8. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:ETHICS IN THE WORKPLACE, SOCIAL RESPONSIBILITY
  9. JOINT STOCK COMPANY:PRIVATE COMPANY, PROMOTION STAGE, INCORPORATION STAGE
  10. LEGAL DOCUMENTS ISSUED BY A COMPANY:MEMORANDUM OF ASSOCIATION, CONTENTS OF ARTICLES
  11. WINDING UP OF COMPANY:VOLUNTARY WIDNIGN UP, KINDS OF SHARE CAPITAL
  12. COOPERATIVE SOCIETY:ADVANTAGES OF COOPERATIVE SOCIETY
  13. WHO ARE MANAGERS?:THE MANAGEMENT PROCESS, BASIC MANAGEMENT SKILLS
  14. HUMAN RESOURCE MANAGEMENT:Human Resource Planning
  15. STAFFING:STAFFING THE ORGANIZATION
  16. STAFF TRAINING & DEVELOPMENT:Typical Topics of Employee Training, Training Methods
  17. BUSINESS MANAGERíS RESPONSIBILITY PROFILE:Accountability, Specific responsibilities
  18. COMPENSATION AND BENEFITS:THE LEGAL CONTEXT OF HR MANAGEMENT, DEALING WITH ORGANIZED LABOR
  19. COMPENSATION AND BENEFITS (Continued):MOTIVATION IN THE WORKPLACE
  20. STRATEGIES FOR ENHANCING JOB SATISFACTION AND MORALE
  21. MANAGERIAL STYLES AND LEADERSHIP:Changing Patterns of Leadership
  22. MARKETING:What Is Marketing?, Marketing: Providing Value and Satisfaction
  23. THE MARKETING ENVIRONMENT:THE MARKETING MIX, Product differentiation
  24. MARKET RESEARCH:Market information, Market Segmentation, Market Trends
  25. MARKET RESEARCH PROCESS:Select the research design, Collecting and analyzing data
  26. MARKETING RESEARCH:Data Warehousing and Data Mining
  27. LEARNING EXPERIENCES OF STUDENTS EARNING LOWER LEVEL CREDIT:Discussion Topics, Market Segmentation
  28. UNDERSTANDING CONSUMER BEHAVIOR:The Consumer Buying Process
  29. THE DISTRIBUTION MIX:Intermediaries and Distribution Channels, Distribution of Business Products
  30. PHYSICAL DISTRIBUTION:Transportation Operations, Distribution as a Marketing Strategy
  31. PROMOTION:Information and Exchange Values, Promotional Strategies
  32. ADVERTISING PROMOTION:Advertising Strategies, Advertising Media
  33. PERSONAL SELLING:Personal Selling Situations, The Personal Selling Process
  34. SALES PROMOTIONS:Publicity and Public Relations, Promotional Practices in Small Business
  35. THE PRODUCTIVITY:Responding to the Productivity Challenge, Domestic Productivity
  36. THE PLANNING PROCESS:Strengths, Weaknesses, Threats
  37. TOTAL QUALITY MANAGEMENT:Planning for Quality, Controlling for Quality
  38. TOTAL QUALITY MANAGEMENT (continued):Tools for Total Quality Management
  39. TOTAL QUALITY MANAGEMENT (continued):Process Re-engineering, Emphasizing Quality of Work Life
  40. BUSINESS IN DIGITAL AGE:Types of Information Systems, Telecommunications and Networks
  41. NON-VERBAL COMMUNICATION MODES:Body Movement, Facial Expressions
  42. BUSINESS ORGANIZATIONS:Organization as a System
  43. ACCOUNTING:Accounting Information System, Financial versus Managerial Accounting
  44. TOOLS OF THE ACCOUNTING TRADE:Double-Entry Accounting, Assets
  45. FINANCIAL MANAGEMENT:The Role of the Financial Manager, Short-Term (Operating) Expenditures