business meaning and nature of business and business as a system..

1. BUSINESS

2.  What is Business?
 What are the three elements of Business?
 Questions to be answered in Business….
◦ What business we do?
◦ What do we produce?
◦ To whom to produce?
◦ How to produce?
◦ Where to produce?
◦ What is our Vision?
◦ What is our Mission?

3.  Lewis H. Haney “Business may be defined as
human activity directed towards producing or
acquiring wealth through buying and selling
of goods”.
 Arthur “Business is that complex field of
commerce and industry in which goods and
services are created and distributed in the
hope of profit within a framework of laws and
regulations”.

4.  Business may be understood as the organized
efforts of enterprises to supply consumers
with goods and services for a profit.
 Business also defined as any activity carried
out with the intention of making financial
benefit has the following characteristics.
◦ Exchange of goods or services for Income
◦ Recurring Activities
◦ Profit Motive
◦ Risks

5.  Buying
 Assembling
 Risk bearing
 Transportation
 Storage and Warehousing
 Financing
 Promotion
 Selling
 Banking
 Insurance
 Market Information
 Standardisation and Grading
 Pricing
 Package
 Labelling
 Brand

6.  Thus the term business is all about
organizing all the above activities and being
carried out with a purpose.
 The purpose to earn profit by supplying
goods and services to consumers to satisfy
their needs.
 Thus people occupy a central place around
whom, by whom and for whom business is
run.

7.  A system presupposes the existence of four sequential stages:
◦ Inputs
◦ Conversion Process
◦ Outputs
◦ Feedback
 Each stage in the system is interdependent and significant.
 Inputs represent material, capital, technology and human
resources.
 Output represented by goods, services, profit and consumer
satisfaction.
 Outputs are the end products of inputs being fed into the
conversion process.
 Feedback about the output is fed to inputs, thus completing the
system.

8. Conversion
ProcessINPUTS
OUTPUT
S
Materials
Capital
HR
Technolog
y
Products
Services
Customer
-
Satisfactio
n
Profit

9.  The systems view point of management
represent:
◦ An approach to solving problems
◦ By diagnosing them within the framework
◦ The framework of inputs, conversion, output and
feedback.
 There are two types of systems
◦ Closed Systems – Which limits its interaction with
environment.
◦ Open Systems – Interacts with the external
environment

10.  Transition
 Pressure of competition
 Immense Opportunities(India has perceived a car club,
India second largest manufacturing base after china,
Toyota Kirloskar’s Bidadi’s plant highest yield in steel
plates in Asian operation, Ford in sriperambadur in
Chennai top in production efficiency)
 Globalization
 Technology
 Information

11.  Profit.
 Growth.
 Employee Satisfaction and Development.
 Quality Products and Services.
 Market Leadership.
 Challenging.
 Service to Society.
 Joy of Creation.

12.  Business Environment consists of all those
factors that have a bearing on the business.
 The survival ad success of the firm depend
on two sets of factors:
◦ Internal factors – internal environment and
◦ External factors – the external environment.
 However the term business environment
often refers to the external factors.
 Thus business dynamics is a dependent
factor on the environment dynamics.

13. Business Decisions
Internal
Environment
External
Environmen
t

14.  The internal factors are generally regarded as
controllable factors because the company has
control over these factors.
 These internal factors have a bearing on the
strategy and other business decisions.

15.  The external factors on the other hand are by and
large, beyond the control of a company.
 The external environment factors such as:
Economic factors
Socio-cultural factors
Government and legal factors
Demographic factors
Technological factors
Natural / Ecological factors

16.  Internal Environment.
 Micro Environment/ Task Environment/
Operating Environment.
 Macro Environment/ General Environment/
Remote Environment.

17. Business
Decisions
Macro Environment
Micro Environment
Internal Environment
Political/Government Legal
Social/Cultural Technological/Natural
GlobalDemographic
Marketing Intermediaries
Suppliers
Customers
Competitors
Promoters/Shareholders Values,
Management Structure, Mission/Objectives,
Human Resources, Brand Equity, Internal
Power Relationship, Financial Capabilities,
Marketing Capabilities, Technological
Capabilities, Marketing Capabilities.

18.  Value System
 Vision, Mission and Objectives
 Management Structure and Nature
 Internal Power Relationship
 Human Resources
 Company Images and Brand Equity
 Miscellaneous Factors

19.  As stated earlier, the external environment consists
of a micro environment and a macro environment.
EXTERNAL
ENVIRONMENT
MICRO
ENVIRONMENT
MACRO
ENVIRONMENT

20.  Micro environment is also known as the task
environment and operating environment.
 Micro environment forces have a direct bearing on
the operations of the firm.
 Micro environmental factors are most intimately
linked with the company than the macro factors.
 When competing firms in an industry have the
same micro elements, the relative success of the
firm depends on their relative effectiveness in
dealing with these elements.

21.  Suppliers
 Customers
 Competitors
 Marketing Intermediaries
 Financiers
 Public

22.  Macro environment is also known as General
Environment and Remote Environment.
 The macro forces are generally more
uncontrollable than micro forces.
 When the macro environment is
uncontrollable, the success of a company
depends on its adaptability to the
environment.

23.  Economic Environment
 Political and Regulatory Environment
 Social/Cultural Environment
 Demographic Environment
 Technological Environment
 Natural Environment
 Global Environment

24. Macro
Environment
Economic
Environment
Political/
Government
Environment
Natural/
Technological
Environment
Demographic
Environment
Social/
Cultural
Environment
Global
Environment

25. A typical business unit may be owned by
Government, private business people or jointly by
both. Where government is the owner/manager, the
business unit is said to come under Public sector or
private sector.
In our Country, a public sector enterprise may be
owned by central government, state government,
local body or a combination of all.
If a business enterprise is owned and managed by
private business people , the unit comes under
Private sector.
If a business unit is owned/managed jointly by
Government and private individuals it is known as
Joint-Sector.

26. BUSINES
S
Public
Sector
Private
Sector
Ministry
Statutory
Corps
Departmental
Undertaking
Company
Central
Board
Proprietory
Partnership
Co-Operative
Private
Co;
Ltd
Company

27.  Ministry: In this, an undertaking is managed by a
whole ministry of the government as in the case of
Indian Railways. Railways are run by the ministry
which is accountable to Parliament. The ministry
has its own budget which is debated and approved
by parliament.
 Departmental Undertakings: These undertakings
are directly subordinate to a ministry. Yet these
units are self-contained, and each has a
management responsible for its activities.EX: Post
& Telegraph,Defence production Units run as
Departmental Undertakings.

28.  Statutory Corporations: A company which is
created by a special act of legislature is called a
statutory company, and it is governed by the
provisions of such an act.(EX:LIC, RBI, IFC,
ESIC,ONGC and National Textile Corporation Etc;)
 Central Boards: These are common in river valley
projects which involve huge capital investments.
Set-up jointly by central and concerned state
governments, the central boards are charged
with the responsibility of executing big
projects.(EX; Bhakra nangal,Hirakud and
Nagarjuna sagar )

29.  Companies: Sec 3(1) of Indian Companies Act 1956
defines Company as “a company means a company formed
and registered under this act or an existing company”.
An enterprise becomes a government company when
it has following features :
 It is created under the provisions of Companies act 1956.
 Whole of the capital or 51% or over is owned by the
government.
 All the directors or majority of them are appointed by the
government.
 If funds are obtained from the Govt. and in some cases,
from private shareholders and through revenues derivd
from the sale of its goods and services.
If a part of the share capital is held by private
investors, the enterprise come under Joint-Sector.

30.  Ethics refers to a system of moral principles-
a sense of right or wrong and goodness and
badness of actions and their motives and
consequences.

31.  Business Ethics refers to application of ethics
in business. To be more specific, business
ethics is the study of good and evil, right and
wrong and just and unjust actions of
businessmen.

32.  Ethics corresponds to basic human needs.
 Values create credibility with the public.
 Values give management credibility with
employees.
 Values help better decision making.
 Ethics and profit go together.
 Law cannot protect society, ethics can.

33.  Codes of conduct specify actions in the workplace and
codes of ethics are general guides to decisions about
actions.
 For example: The codes of conduct that are detailed in the
following are sources of ethics.
 Company Codes: Each company draws its own ethical
codes.
 Company operating methods: How company operates their
codes or rule book has important contribution
 Industry principles: Each industry has its own written or
unwritten ethical practices.

34.  Corporate Governance is the overall control
of activities in a company. It is concerned
with the formulation of long-term objectives
and plans and proper management
structure(organisation ,system and people)to
achieve them.

35.  Cadbury Committee (UK) “Dedined Corporate
Governance as the system by which
companies are directed and controlled”.
 Corporate governance is a term that refers
broadly to the rules, processes, or laws by
which businesses are operated, regulated and
controlled.

36.  Discipline.
 Transparency.
 Accountability.
 Fairness.
 Social Responsibility.