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UNIT- II- BOB.pptx

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UNIT- II- BOB.pptx

  1. 1. BASICS OF BUSINESS AND BUSINESS ENVIRONMENT UNIT- 2 Mrs. ANANTHAVALLI S P Assistant Professor, BBA School of Management KPRCAS 1
  2. 2. Contents: Business and Economic System Capitalism, Socialism, Communalism and Mixed economy Different sectors of the economy and role of businesses in it. Different stakeholders of business firms Factors of production Business model –Meaning &example Business risks & their causes Steps in starting business Qualities of Entrepreneur 2 Unit-2
  3. 3. Business and Economic System Economic System is a particular set of institutional arrangements and a coordinating mechanism-to respond to the economizing problem. It is a society decides what goods to produce, how to produce them, and for whom goods will be produced. It provides the economic structure of a given economy. An Economic system of a nation or a country may be defined as a framework of rules, goals and incentives that controls economic relations among people in a society 3
  4. 4. Capitalism An Economic system in which the means of production of goods or services are privately owned and operated for a profit. An Enterprise that is privately owned, privately controlled Individual right to property, not community/society rights prevail in capitalist system The Goal is to provide a product or service that people want to purchase, make money(the profit motive) 4
  5. 5. Socialism It is defined as an economic system in which the means of production are owned not by private individuals but by the community in order that all may share more fairly in the wealth produced. Government ownership and administration of the means of production and distribution of goods. A system of society or group living in which there is not private property. A system or condition of society in which the means of production are owned and controlled by the state. 5
  6. 6. Difference between Capitalism and Socialism Capitalism Socialism Ownership Assets owned by private firms Assets owned by government/Co- operatives Equality Income determined by market forces Redistribution of income Prices Prices determined by supply and demand Price controls Efficiency Market Incentives encourage firms to cut costs Government owned firms have fewer incentives to be efficient Taxes Limited taxes/limited government spending High progressive taxes/Higher Spending on Public services Healthcare Health care left to free-market Healthcare provided by government free at point of use Problems Inequality, market failure, monopoly Inefficiency of state industry, less incentives, Advantages Dynamic economy, incentives for innovation and economic growth Promotion of equality. Attempt to overcome market failure 6
  7. 7. Communalism • The word communalism is derived from the word community. It implies extreme sense of pride into identification with one’s own community. • Effects of Communalism Material and human loss due to conflicts Weakens democracy Communalism Hiders social and economic progress Communalism gives rise to regionalism. 7
  8. 8. Mixed Economy Mixed Economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight. Mixed economy implies demarcation and harmonization of the public and private sectors. 8
  9. 9. Cont.. Mixed Economy.. Market mechanism is not permitted and the government intervenes or regulates the private sector in such a way that the two sectors become mutually re-inforcing. A mixed economy represents an achievable balance between individual initiative and social goals. There is a commitment on the part of both the sectors to national objectives and priorities. 9
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  11. 11. Primary Sector The primary sector of the economy is the sector of an economy making direct use of natural resources Eg: Agriculture, Mining, Fishing, Forestry, Dairy etc., People engaged in primary activities are called red-collar workers due to the outdoor nature of their work. It seen in less developed countries, and typically less important industrial countries. 11
  12. 12. Secondary Sector Where finished products are made from natural materials produced in the primary sector. Industrial production, cotton fabric, sugar cane production etc. activities comes under this sector. Its the part of a country's economy that manufactures goods, rather than producing raw materials This sector is associated with different kinds of industries, it is also called industrial sector. People engaged in secondary activities are called blue collar workers. Examples:Mills producing textiles, Factories producing steel, chemicals, plastic, car. 12
  13. 13. Tertiary Sector/Service Sector In tertiary sector do not produce a goods but they are an aid or a support for the production. Goods transported by trucks or trains, banking, insurance, finance etc. come under the sector. It provides the value addition to a product same as secondary sector. This sector jobs are called white collar jobs. 13
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  15. 15. Classification on the basis of ownership Private Sector-Owned by individuals or firms Public Sector-Industries owned by the state and its agencies. Joint Sector-Industries owned by private firms and the state or its agencies. C-Operative sector-Industries owned and run co-operatively by a group of people who generally are the producers of raw materials. 15
  16. 16. Different stakeholders of business firms 16 Internal Stakeholders Shareholders Owners Employees External Stakeholders Customers Suppliers Investors Creditors Media Communities Trade Unions Government Agencies
  17. 17. Factors of production • Land: All natural resources that are used to produce goods and services. • Labor: Any effort a person devotes to a task for which that person is paid. • Capital: Any human-made resource that is used to create other goods and services. 17
  18. 18. Business model –Meaning &example A set of planned activities designed to result in a profit in a market place. A business model is the method of doing business by which a company can sustain itself that is, generate revenue. The business model spells out how a company makes money by specifying its position in the value chain. A business model is a reflection of the firm realised strategy. A business model describes the rationale of how an organisation creates, delivers and captures value. 18
  19. 19. Business Model Example 19
  20. 20. Types of Risk 20 Systematic Risk Unsystematic Risk Market Risk Interest Risk Purchasing Power Risk Business Risk-Internal Risk, External Risk Financial Risk-Credit Risk, Currency Risk, Country Risk, Liquidity Risk
  21. 21. Business Risk Business risk is an uncertain or unexpected events that hampers a company from achieving its objectives. The term risk refers to the responsibility of inadequate profits or even losses due to uncertainties or unexpected events. •Characteristics: •i)Business risks arise due to uncertainties •ii)Risk is an essential part of every of business. •iii)Degree of risk depends upon the nature & size of business. •iv)Business risks depends on terms of sale. •V)Business risks arise due uncertainties. •Vi)Profit is reward for risk taking. 21
  22. 22. Causes of Business Risks i) Natural Causes ii) Human Causes iii) Economic Causes iv) Political Causes V) Managerial Causes 22
  23. 23. Steps to Start a Business •1.Discover a Business Opportunity •2.Decide the size of Business •3.Decide form of Business Ownership •4.Select Location of Business •5.Fix Capital Needs of Business •6.Organise physical facilities •7.Plan a Good Layout •8.Proper Organisational Structure •9.Manpower Requirements •10.Registration of Business •11.Strating the Business •12.Tax Planning 23
  24. 24. Qualities of Entrepreneur  Moderate risk taking  Hard work  Accountability  Educated in real sense  Analytical mind  Dynamic leadership  Presence of mind  Accommodative  Courageous and tactful  Maker of right decision  Foresighted  Right Perception of things 24
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