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Nature and purpose of business

The document is from Trivandrum International School and provides an introduction to business studies for 11th commerce class students. It defines business, industry, trade and commerce. Business involves the production and exchange of goods/services with the aim of earning profit. It distinguishes between types of economic activity like business, professions, employment, and categorizes industries as primary, secondary, manufacturing and construction. It also defines trade as the exchange of goods for money between traders, distinguishing between internal/home trade like wholesale and retail, and external/foreign trade like imports and exports. Commerce is defined more broadly as activities that facilitate trade.

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TRIVANDRUMTRIVANDRUM INTERNATIONAL SCHOOLINTERNATIONAL SCHOOL Welcomes you to XIWelcomes you to XI commerce classcommerce class TRIVANDRUM INTERNATIONAL SCHOOL
Chapter – 1
What is business ? How we identify it is a business? Do we need a permanent place to start the business ? What is the ultimate aim behind business? Find some business organization around your Locality? TRIVANDRUM INTERNATIONAL SCHOOL
Business? • Business is an Economic activity which involves regular production and or exchange of goods and services with the main purpose of earning profits through the satisfaction of human wants. TRIVANDRUM INTERNATIONAL SCHOOL
Familiar the meaning OF Business? 1.business involves production and exchange of goods. 2.It’s main aim is to earn profit. 3.It must satisfy human wants. “ These activities are organised and performed under the framework of an institution known as business organisation /firm/enterprise.” TRIVANDRUM INTERNATIONAL SCHOOL
“According to B.O Wheeler, Business is an institution organised and operated to provide goods and services to society under the incentive of private gain.” TRIVANDRUM INTERNATIONAL SCHOOL
Business ? • Business pervades all human activities directed towards earning profits or economic gains. Industry,trade,Banking,Transport ,Insurance,warehousing,advertisin g etc are integral part of modern business. TRIVANDRUM INTERNATIONAL SCHOOL
TYPES OF ECONOMIC ACTIVITY ECONOMIC ACTIVITIES BUSINESS PROFESSION EMPLOYMENT TRADE INDUSTRY BANKING TRANSPORTATION INSURANCE WAREHOUSING ADVERTISING ETC. MEDICAL LEGAL CHARTERED ACCOUNTANT. MANAGER FOREMAN CLERK SALESPERSON WORKER,ETC... TRIVANDRUM INTERNATIONAL SCHOOL
Definition of Business • Business refers to all those activities which are concerned with the production and /or purchase and sale of goods or services with the purpose of selling them at a profit. TRIVANDRUM INTERNATIONAL SCHOOL
Characteristics of business • Economic Activity • Production or procurement (acquisition of goods for the purpose of sale) • Dealing in goods and services;( goods are consumer goods and capital goods) • Satisfaction of consumer wants • Regular dealings (continuous supply of goods and services) • Profit motive • Uncertainty. • Risk element • Creation of utility TRIVANDRUM INTERNATIONAL SCHOOL
Objectives Of Business • Business objectives as the purpose or the reason for the existence of the business in the society. TRIVANDRUM INTERNATIONAL SCHOOL
Business activities Business activities broadly divided in to three; They are, a) Economic objectives, b) social objectives c)Human objectives TRIVANDRUM INTERNATIONAL SCHOOL
TYPES OF BUSINESS ACTIVITY ECONOMIC OBJECTIVES HUMAN OBJECTIVES SOCIAL OBJECTIVES 1)EARNING OF PROFIT )CREATION OF CUSTOMERS 3)INNOVATION )EFFECTIVE UTILISATION OF RESOURCE 1)GOOD SERVICE AND FAIR DEALINGS 2)TREATING EMPLOYEES AS PARTNERS 3) DEVELOPMENT OF EMPLOYEES SKILLS 4) JOB SATISFACTION OF EMPLOYEES 1)BETTER QUALITY PRODUCTS 2)FAIR TRADE PRACTICES 3)GENERATION OF EMPLOYMENT EMPLOYEES WELFARE 4)COMMUNITY SERVICE 5)PROTECTION OF EMPLOYMENT TRIVANDRUM INTERNATIONAL SCHOOL
NECESSITY OF PROFITABILITY OBJECTIVE • ACCORDING TO PETER. F. DRUCKER “A BUSINESS MUST ACHIEVE SUFFICIENT PROFITS TO COVER THE RISKS OF ECONOMIC ACTIVITY AND THUS TO AVOID LOSS” TRIVANDRUM INTERNATIONAL SCHOOL
A BUSINESS MUST EARN ADEQUATE PROFITS BECAUSE OF THE FOLLOWING REASONS; • MEANS OF LIVELY HOOD • RETURN TO INVESTORS • REWARD FOR RISKS • SOURCE OF FINANCE FOR GROWTH AND EXPANSION • INDICATOR OF EFFICIENT WORKING • GOODWILL OR REPUTATION TRIVANDRUM INTERNATIONAL SCHOOL
Can profit be the sole objective of a Business • A lay man may say that business is carried on for profit only. But a good business man cannot afford to keep profits as his sole objective. • “earning of profits cannot be the objective of a business any more than eating is the objective of living”
The argument against the profit maximisation are; • Profit maximization ignores the interests of labour,customers,and the society. • Unfair means such as hoarding, black marketing or adulteration may be followed to maximize profits. • Long term interest of the business may be ignored to maximize profits in the short run. • In the present day environment, a business can't be effective with the sole objective of profit maximisation.It must also set objectives in areas like customer satisfaction, employee welfare, community development, environment protection etc..
Multiplicity objectives of a Business • According to peter f Drucker remarked “To manage a business is to balance a variety of needs and goals. And this requires multiple objectives” • He suggests 8 areas where objectives must be set.
Multiplicity objectives of a Business • 1 market standing (eg; Bata) • 2 Innovation (eg; Hero Honda) • 3 productivity( It is the ratio b/w output and inputs in production process. it is considered as the efficiency of the enterprises.) • 4 Human organization-workers attitude and performance • 5 Physical and financial resources • 6 managarial performance • 7 social rresponsibility • 8 profitability-reasonable rate.
Classification of business activities • Business activities are classified on the basis of 3 criteria,ie, • 1 size • 2 ownership • 3 functions
Classification of business activities • On the basis of size business activities are classified as • 1 small scale • 2 large scale • Small scale the investment does not exceed Rs 100 lakhs. • Large scale means the investment exceed 1 Crore
Classification of business activities • On the basis of OWNERSHIP business activities are classified as • Public sector –under the govt. control • pvt sector-under private control • Joint sector –both govt. and private
Classification of business activities Public enterprises may be organized as • Departmental undertaking • Government company • Statutory corporation etc… But pvt.enterprises are like; Sole trader, Joint Hindu family Partnership Joint stock company And co-operative society.
Classification of business activities • On the basis of functions business activities are classified in to two; • Industry • and commerce • Commercial activities are again classified as ; • trade and aids to trade
BUSINESS ACTIVITIES INDUSTRY COMMERCE Trade 1 EXTRACTIVE 2 GENETIC 3 MANUFACTURING 4 CONSTRUCTION Aids to Trade Home trade; 1)Retail trade 2) wholesale trade Foreign trade 1 import 2 export 3 Entrepot Transport Warehousing Insurance Banking advertising
A brief review of the various types of Business activities • 1 Industrial activities or Enterprise; It includes mining ,breeding,costruction of roads building,etc.... (manufacturing,mining,constructions ) . 2 Commercial activities; commercial activities involve exchange of goods and services like...transport, ware housing,banking,insurance and advertisement. .3 Trading activities or firms; it refers to purchase and sale of goods to earn profits by the business men known as traders. They engaged in a) Home trade - includes wholesale and retail b) foreign trade- import-export and entreport
A brief review of the various types of Business activities • Service activities or enterprises; These include those services which facilitate smooth trade and also serve as the back born of modern industry. banking,insurance,transportation,warehousing, insurance, packaging.
Types of industries • Primary industry; it includes extraction ,producing and processing of natural resource (extractive+ Genetic) • Secondary industry are concerned with processing materials which have already been produced at the primary stage. • Manufacturing and construction industry is under secondary industry.
Manufacturing industry may assume the following forms • Analytical industry;petrolium refining is an example of analytical industry. • Synthetic industry; two or more materials are mixed together in the manufacturing operations to obtain some new products.like soap,cement etc
Manufacturing industry may assume the following forms • Processing industry; raw materials are processed through a series of manufacturing operations making use of analytical and synthetic method)- textile sugar and steel. Assembly line industry; in assembly industry, the finished products can be produced only after various components have been made and then brought together for final assembly. automobile watches,telivision are examples
Construction industry may assume the following forms • They are concerned with making of roads,bridges,dams and canals.
Definition of trade • Trade is that branch of commerce which deals with exchange of goods and services in terms of money between different persons known as ‘traders’
Types of trade • Trade may be classified on the basis of 1) Geographical area covered 2) volume of trade transaction • On geographical basis trade may be classified in to two like internal trade and external trade. • On volume of trade basis trade is divided in to two • Wholesale & retail trade
Internal or home trade • It refers to purchase and sale of goods within the boundaries of a country. • Wholesale trade; purchase and sale of goods in bulk quantity and sell to retailers at small quantity. • Retail trade; selling of goods by the retailer to the customer
External or foreign trade • Import trade • Export trade • & Entrepot trade
AUXILIARIES TO TRADE • Transportation and communication • Banking • Insurance • ware housing • Advertising • And packaging
Differentiate between industry, trade and commerce industry commerce Trade
Nature and purpose of business