MULTIDISCIPLINARY COURSE (MDC)

BUSINESS
ORGANISATION AND
ENTREPRENEURSHIP
CO1MDC01B24

DEPARTMENT OF COMMERCE (SELFFINANCING)

Module 1: Business
Unit 1.1 – Business: Meaning, Definition,
Characteristics, Functions, Scope, Significance,
Objectives, Forms of Business Organisations &
Stakeholders

1. Introduction to Business
Business is an essential part of human life. From buying vegetables to using mobile apps, we are constantly
engaging with businesses. But what exactly is business?

Meaning of Business

Business refers to any economic activity undertaken with the aim of producing or exchanging goods and
services to earn profit.

Example:

• A person selling handmade soaps on Instagram is doing business.

• Amazon delivering products through its online platform is also business.

Definition of Business

“Business is an activity, in which different persons exchange something of value, whether

goods or services, for mutual gain or profit.”
— Peterson and Plowman
2. Characteristics of Business
Understanding the features of business helps in identifying what makes an activity a business.

2.1 Economic Activity

• Business is done to earn income.

• It is different from social or personal activities.

Example: A doctor working in a hospital earns income – it’s business. But treating a sick friend at home is
not business.

2.2 Production or Procurement of Goods and Services

• Goods may be produced (like a factory making furniture) or procured (like a shop buying furniture
to sell).

2.3 Sale or Exchange

• Goods or services must be exchanged for money or its worth.

Example: A photographer charging for a photo shoot is doing business. But clicking pictures as a hobby is
not.

2.4 Profit Motive

• The main aim of business is to earn profit.

• Profit is necessary for survival and growth.

2.5 Uncertainty of Return

• Business does not guarantee fixed income.

• Returns may vary depending on market conditions.

2.6 Risk Element

• All businesses face some risk – due to changes in taste, competition, economy, etc.

Example: A café may lose customers due to a new competitor nearby.

3. Functions of Business
Businesses perform several important roles that contribute to their operations and society.

3.1 Production and Distribution

• Creating goods or services.

• Supplying them to the market.
Example: Dabur manufactures herbal products and distributes them across India.

3.2 Marketing and Sales

• Promoting goods and services.

• Building brand and customer relationships.

Example: Ads for Maggi noodles focus on emotional connection and taste.

3.3 Financial Management

• Managing funds, investments, and budgets.

Example: A company like BYJU’S raising funds from investors to grow its platform.

3.4 Human Resource Management

• Recruiting, training, and retaining employees.

Example: Infosys hiring engineering graduates and providing onboarding training.

3.5 Innovation and Research

• Creating new products and improving existing ones.

Example: Apple introducing new iPhone features every year.

4. Scope of Business
Business includes a wide range of activities. It can be classified into the following:

4.1 Industry

• Concerned with production of goods and services.

• Divided into:
o Primary: agriculture, fishing
o Secondary: manufacturing (textiles, cement)
o Tertiary: services (education, banking)

4.2 Trade

• Involves buying and selling of goods.

• Can be wholesale or retail.

Example: A shopkeeper selling clothes to consumers.

4.3 Commerce

• Supports trade through banking, transport, warehousing, insurance etc.

Example:
 • HDFC Bank provides financial support.
• Delhivery helps in product delivery.

5. Significance of Business
Business plays a vital role in economic and social development.

5.1 Generates Employment

Example: Startups like Zomato and Swiggy have created jobs across India.

5.2 Improves Living Standards

Example: Access to online shopping platforms like Flipkart makes life easier.

5.3 Encourages Innovation

Example: Startups like Dunzo or Paytm offering digital convenience.

5.4 Contribution to National Income

Example: IT companies exporting services contribute to India’s GDP.

5.5 Social Welfare and CSR

Example: Tata Group building schools and hospitals as part of CSR.

6. Objectives of Business
6.1 Economic Objectives

• Profit Earning – For survival and growth

• Growth – Expand markets or product lines
• Innovation – Bring new ideas, better technology

6.2 Social Objectives

• Provide quality products

• Avoid exploitation
• Environment care

Example: FabIndia uses eco-friendly and traditional materials.

6.3 Human Objectives

• Employee satisfaction
• Good work environment
• Fair wages and opportunities
Example: Google offering flexible work culture and health benefits.

6.4 National Objectives

• Follow laws and regulations

• Promote local employment
• Pay taxes

6.5 Global Objectives

• Export quality goods

• Meet international standards
• Build India’s image globally

Example: Infosys and Wipro serve clients across the world.

7. Forms of Business Organisations

Business can be organized in different forms depending on the scale, ownership, control, and legal
structure. The choice of form depends on factors like size of operations, capital required, liability, and
number of owners involved.

7.1 Sole Proprietorship

• A single individual owns and manages the business.

• Easiest and cheapest form to start.
• Owner gets full control and keeps all profits, but bears all risks and losses.

Example: A tailor running his own shop; a home bakery business on Instagram.

Advantages: Limitations:

• Easy to start and close • Limited capital

• Complete control by the owner • Unlimited liability (owner is personally
• Quick decisions responsible for all debts)
• Limited life span (ends on death or
decision of the owner)

7.2 Partnership

• A business owned by two or more people who share profit and loss.
• Governed by the Partnership Act, 1932.
• A partnership deed specifies duties, capital, and sharing ratio.

Example: A firm of lawyers or architects; medical clinics with multiple doctors.

Advantages: Limitations:

• More capital and skills • Risk of conflict

• Shared responsibilities • Unlimited liability (except in LLPs)
• Easy formation • Decisions require mutual consent
7.3 Joint Stock Company

• A legal entity separate from its owners (shareholders).

• Capital is raised by issuing shares.
• Managed by Board of Directors.

Example: Infosys Ltd., Tata Steel, Reliance Industries.

Advantages: Limitations:

• Large capital • Complex legal formalities

• Limited liability of shareholders • Delay in decisions
• Perpetual existence • High cost of formation

7.4 Cooperative Society

• Formed by a group of people for mutual benefit, not profit.

• One person = one vote, regardless of shareholding.

Example: AMUL (milk producers’ cooperative), housing cooperatives.

Advantages: Limitations:

• Democratic control • Limited capital

• Limited liability • Inefficient management (volunteers)
• Government support • Conflict among members

7.5 One Person Company (OPC)

• Introduced in Companies Act, 2013.

• A single individual can enjoy benefits of a company (like limited liability).

Example: A freelance graphic designer registering as OPC.

Advantages: Limitations:

• Full control • Can’t have more than one shareholder

• Limited liability • Limited capital
• Separate legal identity • Conversion to private limited company
after threshold

7.6 Limited Liability Partnership (LLP)

• Combines benefits of partnership and company.

• Partners have limited liability.
Example: Consulting firms, startup legal firms.

Advantages: Limitations:

• Less legal formalities • Not suitable for large businesses

• Limited liability • Lesser public trust than companies
• Separate legal entity

7.7 Multinational Corporations (MNCs)

• Businesses that operate in multiple countries.

• Use local resources and labour in many countries.

Example: Coca-Cola, Nestlé, Samsung, Apple.

Advantages: Limitations:

• Global reach • Threat to local companies

• Technological advancement • May exploit host country’s resources
• Huge capital base • Cultural and ethical concerns

8. Stakeholders of Business
Stakeholders are individuals or groups who have a direct or indirect interest in a business and are affected
by its activities.
8.1 Types of Stakeholders

Type Who They Are How They Are Affected

Owners / People who invest capital and expect
Gain profits or suffer losses.
Shareholders profits.
Employees People who work in the business. Depend on salary, job security, growth.
Customers Buyers of goods or services. Want quality, affordability, and service.
Want timely payments and long-term
Suppliers Provide raw materials or inputs.
contracts.
Expect timely repayment and financial
Creditors Lenders of money (banks, etc.)
health.
Ensures legal compliance and gets tax
Government Regulates and taxes business.
revenue.
Affected by pollution, employment, CSR,
Society / Community General public, environment.
etc.

8.2 Role of Stakeholders in Business Success

• Owners provide capital and take strategic decisions.
• Employees help in daily operations and achieving business goals.
• Customers drive revenue; businesses must keep them satisfied.
• Suppliers ensure availability of inputs; reliable supply chain is critical.
• Government ensures fair competition and responsible behavior.
• Community supports or opposes based on the company’s local impact.

Example 1: If TATA Steel pollutes a river, the local community becomes a stakeholder.
Example 2: If a Flipkart delivery agent is unhappy, it affects customer experience.

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Business plays a vital role in the economic and social development of any nation. It is more than just the
pursuit of profit—it is a dynamic activity that brings together people, resources, ideas, and technologies to
create value for society. Through various forms of organization, from small proprietorships to large
multinational corporations, businesses contribute to employment, innovation, and improved living standards.
Understanding the meaning, characteristics, scope, objectives, and stakeholders of business helps students
appreciate its relevance in everyday life, regardless of their academic background. In today’s world,
successful businesses are those that not only focus on economic gain but also act responsibly towards their
employees, customers, society, and the environment. This holistic approach ensures long-term sustainability
and trust, making business a true driver of progress.