Business Organisation and System

Sudha Lakshmi Iyer

Human occupations
Human Life is built around work Without showing any preference whether we want or we do not want, whether we like it or not, work is an essential part of life He has to play a long role on his day to day activities.

What is a profession
Professions are those occupations which involve the rendering of personal services of a special and expert nature. Like .. A lawyer An engineer A doctor A manager

What is Employment
In this case, a person has to work under an agreement , or rules of service and perform such work as may be assigned to him by the employer. Remuneration for such work takes the form of wages or salaries or allowances.

What is Business
Business is the state of being busy. As an economic activity business is so familiar to us that it seems almost funny to go back to its literal meaning of being busy. Whether it is . Tatas, Birlas, Ambanis Or A tea stall owner, A shoe repair shop, A pan shop owner

Characteristics of business
Sale, transfer or exchange for the satisfaction of human needs. Dealings in goods and services Recurrence of transactions Profit motive Element of risk

Risk factors of business

Changes in technology Changes in consumer tastes and fashions Wrong management decisions about use of capital and other resources Labour trouble Shortage of raw materials Increase in competition in the market Fire, theft or natural causes

Divisions of Business

Business activities may be classified into two broad catergories A. Industry B. Commerce

Industry

Industry is nothing but which involves the production of goods and materials

Commerce

Commerce is concerned mainly with the distribution of the goods that were manufactured

Types of Industry
The broad sphere of industry may be divided into four distinct types 1. Extractive industries 2. Genetic industries 3. Manufacturing industries 4. Construction industries

Extractive Industries
These industries include activites where by various forms of wealth are drawn out, extracted, or raised from the soil, air or water or obtained from beneath the surface of the earth. The commodities raised by such industries are produced with comparatively little assistane from man.

Extractive Industries
The products of extractive industries are generally meant to be used by the manufacturing and construction industries for producing finished goods though these may be used directly in some cases. They include hunting, fishing, mining, fruit gathering, agriculture, afforestation, etc.

Genetic Industries
These industries engage in reproducing and multiplying certain species of plants and animasl with the object of earning profit from their sale. E. g. - nurseries multiplying and selling plants, Cattle breeding farms, Poultry farms and commercial kennels

Construction Industries
These industries involve construction of buildings, roads, dams, bridges, canals, etc. The distinctive characteristic of these industries is that their products are not marketed in the ordinary sense of being taken to the markets to be sold. They are erected, built, or fabricated at a fixed site. These industries use of the product of manufacturing industries.

Manufacturing Industries
These industries are engaged in the conversion of raw materials or semi finished products into finished products. In this process, they create form utility The products of extractive industries usually become the raw materials. E.g. cotton industry (textile industry)

The categories of manufacturing industries.

Analytical Synthetic Processing Assembly line

Analytical
Many types of products may be manufactured by analysing and separating different elements from the same material. E.g. oil refinery industry Which gives many sub products

Synthetic
Various ingredients are put together and combined in the manufacturing process so as to manufacture a new product. E.g. cement is produced by combing and mixing concrete, gypsum, coal, etc

Processing
In this category , the raw material is processed thru different stages of production resulting in the final product. Paper , sugar are examples of this type

Assembly line
Is nothing but industries where different instruments or component parts already manufactured are assembled to turn out new useful products E.g . Car, scooter, bicycle, television , computer etc.

Classification on the basis of size and investment

Heavy industries

Light industries

Heavy industries
Is generally used to refer to those industries which call for big capital investment and have a longer production cycle. Such investment goes mostly into machinery and equipment of sophisticated and expensive type. Industries like iron, steel, aeronautics, ship building and aluminium are included in this category

Light industries
Are those which involve a comparatively smaller capital investment and have a short duration production cycle. This is because of the less costly machinery required for the manufacturing of certain products. Or because of the use of less sophisticated process of production.

Commerce
While industry is concerned with the production of goods for the satisfaction of human wants, commerce is an activity where by goods are transferred to those who need them. It basically provides the link between the producers and consumers Between the manufactured goods and the services , there are lot of hindrances when it comes to reaching the customer.

Some of the hindrances

i. Hindrances of person Ii. Hindrances of exchange Iii. Hindrances of place Iv. Hindrances of time V. Hindrances of knowledge

Commerce
We can also say that these hindrances can be overcome by removing all these hindrances thru . By trade . Thru banking . Thru transportation,insurance&packing . Thru warehousing . Thru advertising

Trade
Trade refers to the sale, transfer or exchange of goods Trade is classified into two categories 1. Internal Trade 2. Foreign Trade

Internal Trade

Also called as Home Trade , it consists in the sale and exchange of goods within the bounds of a nation. Payments for such sale are made in national currency directly or thru the national banking system and the internal transportation system is used for the movement of goods.

Home Trade
Can be done on either of the following bases Whole sale trade

Retail trade

Foreign Trade
This refers to the supply of goods to buyers who are situated in foreign countries. When goods are moved from one country to another, accordingly the currency should be changed.

Foreign Trade
Can be divided into Import trade Export trade Entrepot trade which is nothing but exchange of goods between foreign producers and foreign consumers.

Plant
Means an establishment for the production of goods or provision of services. It includes the equipments, personnel also.

Firm
Is used to mean the concern which owns and manages the plant, and also arranges for marketing of the products. It is not only concerned with the technical unit (i.e plant) , but also the unit of finance, management and enterprises too. For e.g , Sundaram group owns two automobile units, one assembly line and two maintainance units. The collection of all these plants under one organisation makes a firm.

Industry

The term Industry means the collection of the firms which either use the same raw material or manufacture the same product, even if they use different raw materials .

Classification of Business
Activities which relate to the production of goods Activities that render services Activities related to the distribution of various goods Activities which provide financial assistance.

Classification of business
Activity one - relates to all types of industries which are into manufacturing. Activity two relates to services like transportation, communication and insurance sector etc Activity three channel of distribution like whole saler or retailer Activity four includes industrial finance corp. , state finance corp, commercial banks , stock exchange etc.

Features of business

1. 2. 3. 4. 5. 6.

production of wealth distribution continuity earning of profit combination uncertainity of return a. risk of rising costs,risk of loss of assets, risk of competition, risk of fall in demand, risk of fluctuation in exchange rates.

Divisions of Business
On the basis of ownership On the basis of the scale of operations According to nature Basis of objectives

On the basis of ownership

A. sole trader or proprietorship B. partnership C. joint stock company D. co-operative society E. public enterprise

On the basis of size

Small size Medium size Large scale

On the basis of nature

Manufacturing Distributive

On the basis of objectives

It is generally believed that business activity is carried on only for profit

As Urwick puts it Earning of profits cannot be the objective of a business any more than eating is the objective of living As Henry Ford also points out that mere money chasing is not business

Objectives of Business
May be broadly categorised under the following heads 1. organic objectives 2. economic objectives 3. social objectives 4. human objectives 5. national objectives