Sunday, August 4, 2019

Class xi Business studies note Introduction to Business


Unit 1 Introduction to Business
Concept of Business
Human beings are continuously engaged in some activity or other in order to satisfy their unlimited wants. Every day we come across the word ‘business’ or ‘businessman’ directly or indirectly. Business has become essential part of modern world. However, Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human wants.
All of us need food, clothing and shelter. These needs are the basic human needs. We also have many other household needs that are to be satisfied in our daily lives. We meet these requirements from the shopkeeper. The shopkeeper gets from wholesaler. The wholesaler gets from manufacturers. The shopkeeper, the wholesaler, the manufacturer are doing business and therefore they are called as Businessman.
Lewis Henry defines business as, “Human activity directed towards producing or acquiring wealth through buying and selling of goods.”
In short, all those economic activities which are concerned with earning profit and creating wealth through the production and exchange of goods and services is called business.

Characteristics of Business

1. Human activities:
Business cannot be performed without human efforts. The main aim of business is to produce goods and services to fulfill the requirement of human being internally associated in the production or the consumers.
2. Economic activities:
It is concerned with earning profits and generating wealth, which are measured in terms of money. Economic activities include production of goods and services, distribution of goods and services and the benefits generated from them.
3. Production of goods and services:
The main feature of business is to produce goods and services. Business is concerned with the production of goods and services to the society. In this process we get goods from shopkeeper, shopkeeper gets from wholesaler. The wholesaler gets from manufacturers. The shopkeeper, the wholesaler, the manufacturer are doing business to earn profit.
4. Risk and uncertainty:
There is no business if there is no risk but accidents never knock the door. In future anything may happen. So risk is a possibility that losses may occur. Introduction of new product, change in government policies, change in customer taste and preference etc are the risks
5. Profit motive:
Business has the main aim to earn profit. To get maximum profit revenue of business should be maximized.  Profit generation is vital for business survival and expansion. However, profit should be earned through legal and fair means and in ethical manner. Profit is the reward for the investors.
6. Continuous process:
Continuous process means to provide goods and services by the business to the customers continuously and regularly.  In business, the exchange of goods and services is a regular feature. A businessman regularly deals in a number of transactions and not just one or two transactions.
7. Satisfaction of customers:
The aim of business is to satisfy human demands by producing quality of goods and also to supply right product in right time at right place to meet the right needs. Quality goods should be provided at reasonable price.
8. Finance:
Finance is known as “life blood” of business. Business needs investment of capital and to run smoothly. For regular and continuous business finance is needed, finance includes purchase of raw materials, payment of wages, assets of business and so in.
9. Organizing:
It means integration of all activities. Co-ordination is very important for organizing. Allocation of limited resource, assigning job, authority and responsibility also comes under organizing.

Component of Business

Scope of business

Business covers wide area and all economic activities. It also includes all types of industry and commerce. Industries are related to the activities of production of goods and services and commerce is related to distribution of goods and services from producers (industries) and customers.
Types of industries
1. Genetic industries:
Genetic industries are also called heredity industries that involve in production of goods from plants and animals to earn profit. Those industries which produce medicines from herbs, perfume from flowers, milk and meat form animals are called genetic industries
2. Extraction industries:
Industries that are involved in extracting the resources from the sources of nature are called extraction industries. It supplies the raw material to other industries. These types of industries are generally based in mining, fishing etc.
3. Construction industries:
Those types of industries which are related to construction of different infrastructures are called construction industries. They basically construct road, bridges, houses and so on . It helps in development of country
4. Manufacturing industry:
It is related to produce finished goods. It processes raw materials into finished goods. There are mainly 4 types of manufacturing industry they are :
A. Analytical industry:
It is a industry which produces goods by analyzing raw materials in scientific way. In this industry various goods ate purchased by single materisl. For example dairy product (milk, ghee, butter, ice cream from milk)
B. Processing industry:
The industry which is involved for production of goods and services by using different steps or stage is called processing industry. For example for processing cotton into thread the processes of spinning, weaving, dying, bleaching is used.
C. Synthetic industry:
The industry which is involved for using various raw materials to produce a single good is called synthetic industry. For example to produce cement limestone, red soil, chemicals etc are used.
D. Assembling industry:
The industry which is involved for production of goods by combining different parts which are already manufactures by different industries is called assembling industry. For example TV, computer, mobile, watch manufacturing industries.

Commerce:
It is related with buying, selling and exchanging of goods and services. It is related to economic activities to earn profit. The role of bridge between manufacturer and customer is played by commerce
Types of commerce:
Trade:
Trade is related to buying and selling goods and services for earning profit. It supplies quality goods with reasonable price. Those activities which are related to buying, selling and distributing goods in market is known as trade
Types of trade
1. Home trade:
Home trade means national, domestic or internal trade i.e. Buying and selling within a nation. In home trade both buyer and seller are from the same nation. In home trade task is simple than foreign trade. It is classified into two types they are.
A. Wholesale trade:
When trader buy goods in bulk amount and resell to retail in small volume is called whole sale trade. In this trade goods are bought from manufacturer and are sold to retail. It acts as a middleman between manufacturer and retailer. It deals with special product
B. Retail trade:
When trader buy goods in bulk amount and resell to customer in small volume is called retail trade. In this trade goods are bought from wholesaler and are sold to customer. It acts as a middleman between wholesaler and customer. It deals with various types of product.
2. Foreign trade:
Foreign trade means international, global, external trade i.e. Buying and selling is between two or more nation. In foreign trade buyer and seller are from different nation. In foreign trade task is difficult than home trade. It is classified into three types they are.
A. Import:
A good or service brought into one country from another is called import. Along with exports, imports form the backbone of international trade. The higher the value of imports entering a country, compared to the value of exports, the more negative that country’s balance of trade becomes. Buying goods from India, china is called import.
B. Export:
A good or service sold to another country from one is called export. Along with imports, exports form the backbone of international trade. The higher the value of exports exiting a country, compared to the value of imports, the more positive that country’s balance of trade becomes. Exporting herbs, garments to Germany, India is the example of export
C. Entry port:
The trade in which a country purchases the goods from one country and sells it to another country is called entry port trade. The goods bought from a country is not used for self benefit but is rather exported to another country. For example India buys herbs from Nepal and sells it to china.

Auxiliaries of trade:
It supports or assists the trade activities. It helps to run business smoothly. It helps for transfer goods from production area to consumption area. It creates time and place utility.
1. Transportation:
It transfers goods from one place to another. There are many means of transportation that can assist business and trade activities. They are air travel. Bus route, sea route, rope route etc. It delivers right product and right time in right place. It creates time utility
2. Warehouse:
It is one of the auxiliary of trade. It helps to protect and store goods until customers uses them. It provides the goods hen demand is created. It also helps to provide unseasonal goods.
3. Insurance:
It acts as nutrition to trading activities. It helps to reduce risk and uncertainties. It is a contract between organization and their future. The system that takes the responsibility of compensation of certain risk is called insurance system.
4. Banking:
Banks are the financial institution that supports for traders. It provides loan, investment, credits facilities to the trading companies. It helps for expansion and flexibility of trade.
5. Advertising:
It is a supporter to trade. It provides information to customer about goods and services. Its aim is for creation of demand. It also acts as a promotional tool.

Functions of business


1.         Organizing function:
It helps to organize all the activities. It organizes men, Machine, materials, money and methods. It performs different activities and all activities are organized properly
2.     Financing function:
It is related to money. It helps in maximum utilization of resources. Bank is a financial company. All the activities related to money are defined in this function.
3.     Production function:
The main function of business is to produce goods and commodities and transfer them to right place at right time. It helps to complete needs of human beings.
4.     Distributing function:
It helps in the transfer of goods/services from producers to customers. It transfers right product at right time in right place.
5.     Personnel function:
It deals with human activities. It is related o the utilization of people to perform different activities. It is also called staffing function. It helps in management of resources.
6.     Managing function:
It helps in management of business. It includes planning, organizing, controlling, coordinating, decision making and so on. It helps making activities of people effective.
7.     Research and development function:
It helps in improvement of product. It works under the taste, desire and preference of the customers. In it various marketing, strategies, skills, knowledge and experts are used. Research and development is the main way to achieve profit with customer satisfaction

Objectives of business

1.         Economic objectives
The economic objectives are related to earning profit through customer satisfaction. It is to provide quality goods with reasonable price. Economic objectives can be defined in terms of money too. Some of the major economic objectives are:
1.         Earning profit:
The main economic function of business is earning profit. It includes supply of quality goods and services to gain profit. T is done for the survival of business and it is also reward for the investors. It is required for expansion if business
2.     Production of commodities:
Production of goods and services are to be done according to the customer demand and desired. Supply of commodities is also to be done according to needs of customer.
3.     Creation of market:
Business can provide service only if demand of customers are fulfilled. When production is made according to the requirements of the customers then there is creation of new customer which creates new market. Creation of market helps in enlargement of production and promotes business expansion too
4.     Technical improvement:
Use of modern technology is the base for successful operation o business. When modern tools, techniques and technologies are used then there is production of quality goods. Changes are the basic factor for flexibility and changes in terms of working methods is the main objective of business
5.     Innovation:
New ideas, methods, men, tactics and technology create the ways of better production and services. It helps in survival of business too.


2.    Social objectives

Business is operated in society and use resource available in society. This is known social objectives. It fulfills social expectation. All business operations are established in society, grow in society and fulfill all its expectation in society. Some of the major social objectives of business are:
1.             Supply quality food:
It provides better quality of goods and services by charging reasonable price. It provides right product at right time in right place. It involve in fulfillment of social objective.
2.     Utilizing resources:
A business house can’t continue its operation without utilizing the resources available in the society. But there must be proper utilization of resources and no any destruction in name of utilization. Maintenance of environment is must.
3.     Providing employment:
There are many people in the society. Human needs are the basic need for operation of business. Many personnel are require dot fulfill the job of a business. Therefore a business house without nepotism and favoritism must employ the human from the society and provide employment opportunities to the optimum level.
4.     Avoiding social stigma:
Big industries are the cause of environmental pollution. Constant noise, smoke from the industries produces noise and air pollution. This is the social objective of the business to control pollution and wastages. There must be establishment of industries far from residential areas.



3.     Human objectives

Human objectives are performed by different human activities. It is related with satisfaction of employees, investors and other personnel. Some of the major human objectives are
1.             Satisfaction of employees:
The success of business depends on employees’ performance. It provides better working environment to satisfy the employees. It provides salary, bonus, provident funds and job security. It also provides financial and non financial supports.
2.     Payment to creditors:
Creditors means supplier who supply goods and services. It is the objective to make duly payment. Satisfaction of creditors helps in further expansion of business.
3.     Satisfaction of customers:
Production of goods and services are to be done according to the customer demand and desired. Supply of commodities is also to be done according to needs of customer. It provides better quality of goods and services by charging reasonable price
4.     Satisfaction of shareholder:
It returns to investors the amount they have invested in business in the name of profit earn. They should be given reasonable returns of their investments. The objectives are to provide reasonable rate of return to shareholder. It also provides the information about plan of business.

Importance of business:


1. Economic development:
Business is important for economic development. Concept of true business is used in industries and commerce. Industries use men, money, materials, methods and machines and help to create employment. Commerce is the concept of exchange goods/services at national and international levels. It helps to earn foreign currency by export business too. Therefore, business helps in economic development

2. Utilizing natural resources
Every country has diverse natural resources. Business must be directed towards proper and efficient utilization of resources. Business utilizes the resources like water, minerals,   ores and so to achieve its own goals. But resources must be utilized without exploitation.

3. Creation of utility:
Business creates place and time utility. It helps to satisfy the needs of human beings. Financial utility is to be maximized.

4. Employment:
Business helps to provide job to people. It provides various types of managerial or technical job. Many types of business houses like hotels, industries, and transport companies are established for business which helps to solve the unemployment problem.

5. Revenue generation:
Business is the source of revenue generation. It pays taxes, royalties, fees, custom duties, and other things which help to generate government revenue.

6. Earning foreign currency:
It is the source of earning foreign currency. Business can earn foreign currency through exporting the goods and services.

7. Development of country:
Development of industries helps to utilize natural resources, create time and place utility, provide employment opportunities, help in revenue generation and earning foreign currency. All these things help in the development of the economy of the country and the economic development is the major factor that can develop the nation to a wider sense.

8. Provide investment opportunities:
Establishment of new industries and commercial fields are the major source of investment. Further the profit owned by the investors after the successful operation of business helps to ensure larger amount of saving which can be invested in the newer future for pension of current business or establishment of newer business. Thus business helps in providing investment opportunities.

9. International relations:
Business is the medium for development of national and international relationship. It helps to maintain harmonious relation among the various countries. There can be mutual understanding and better diplomatic relationship among the countries. Import and export is the major base for international relationship.

10. Self sufficiency:
It helps in achieving countries and individuals self sufficiency. It also helps in improving the living standard of people by reducing the dependency.
Social responsibility of business

The major responsibilities of business are:
A. Employees
I. Provides better working environment to satisfy the employees
Ii. . It provides salary, bonus, provident funds and job security.
Iii. It also provides financial and non financial supports.
Iv. Enriches employees’ performance.
V. Provide training to develop their skills.
Vi listen and handle their complaints and issues

B. Creditors:
I. Make duly payment
Ii .satisfaction of creditors with proper relationship
Iii. Helping them to create their own market.
Iv. Entrusting the right of proper selling of goods and services of their goods
V. Copyright and other legal rights.

C. Customers/consumers:
I. Better quality of goods and services by charging reasonable price
Ii. Supply of commodities is also to be done according to needs of customer
Iii. Helps to achieve needs and wants
Iv. Provide right goods at right place in right time.
V. Provide proper pre-sale and post sale information
Vi. Provide proper information about new products

D. Investors:
I. True information about earning power of business
Ii. The objectives are to provide reasonable rate of return to shareholder.
ii. Provide the information about plan of business.
Iv. Ensure safe investment
V. Promote utilization of resources without leakage
Vi. Ensure transparency of business activities

E. Government
IIncrease in tax i.e. Increase in government revenue
Ii. Fulfill demand of government
Iii. Non violation of rules and regulation of government.
Iv. Avoid unfair trade
V. Provide essential information to the government.
Vi. Solve national problems like natural calamities.
Vii. Avoid malpractice like black marketing, adulteration, smuggling

F. Society
I. Good environment
Ii. Employment opportunities generation.
Iii. Socio cultural understanding
Iv. Apply anti pollution measures.

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