1.1 Concept of Business

Meaning

A business is defined as a corporation or enterprising entity engaged in commercial, industrial, or professional activities. Businesses are often for-profit entities or they can be non-profit organizations that operate to satisfy a charitable mission or further a social cause.

The term "business" also refers to the organized efforts and activities of people to produce and sell goods and services for profit. Businesses home in scale from a sole proprietorship to a global corporation. Several lines of theory are engaged with understanding business administration including organizational behavior, organization theory, and strategic management.

1.2 Nature of Business

The following are the important characteristics of a business:

Economic activity:

 Business is an economic activity of production and distribution of products and services. It provides employment opportunities in several sectors like banking, insurance, transport, industries, trade etc. it is an economic activity corned with creation of utilities for the satisfaction of human wants.

It provides a source of income to the society. Business results into generation of employment opportunities thereby resulting in growth of the economy. It bring about industrial and economic development of the country.

Buying and Selling:

The basic activity of any business is trading. The business involves buying of material, plants and machinery, stationary, property etc. On the other hand, it sells the finished products to the consumers, wholesaler, retailer etc. Business makes available various goods and services to the various sections of the society.

Continuous process:

Business is not one time activity. it is endless process of production and distribution of goods and services. One transaction of trade cannot be termed as a business. A business should be conducted regularly so as to grow and gain regular returns.

Business should continuously involve in research and developmental activities to achieve competitive advantage. a continuous improvement strategy helps to increase profitability of the firm.

Profit Motive:

Profit is an indicator of success and failure of business. it is the difference between income and expenses of the business. the primary goal of a business is typically to get the highest possible level of profit through the production and sale of goods and services. it is a return on investment. Profit acts as a driving force behind all business activities

Profit is required for survival, growth and expansion of the business. it is clear that each business operates to earn profit. Business has many goals but profit making is that the primary goal of every business. it is required to develop economic growth.

Risk and Uncertainties:

Risk is defined as the effect of uncertainty arising on the objectives of the business. Risk is related to every business. Business is exposed to two kinds of risk, Insurable and Non-insurable. Insurable risk is predictable.

Creative and Dynamic:

Modern business is creative and dynamic in nature. firm has to start with creative ideas, approaches and concepts for production and distribution of goods and services. It means to bring things in fresh, new and inventive way.

One has to be innovative because the business operates under constantly changing economic, social and technological environment. Business should also start with new products to satisfy the growing needs of the consumers.

Customer satisfaction:

The phase of business has changed from traditional concept to modern concept. Now a day, business adopts a consumer-oriented approach. Customer satisfaction is the ultimate aim of all economic activities.

Modern business believes in satisfying the customers by providing quality product at an inexpensive price. It emphasizes not only on profit but also on customer satisfaction. Consumers are satisfied only when they get real value for his or her purchase.

The purpose of the business is to make and retain the customers. the power to identify and satisfy the customers is the prime ingredient for the business success.

Social Activity:

Business may be a socio-economic activity. Both business and society are interdependent. Modern business runs within the area of social responsibility.

Business has some responsibility towards the society and successively it needs the support of various social groups like investors, employees, customers, creditors etc. by making goods available to various sections of the society, business performs a crucial social event and meets social needs. Business needs support of various section of the society for its proper functioning.

Government control:

Business organizations are subject to government control. they need to follow certain rules and regulations enacted by the government. Government ensures that the business is conducted for social good by keeping effective supervision and control by enacting and amending laws and rules from time to time.

Some important acts framed by the government include:

-The Competition Act, 2002

-Foreign Exchange Management Act, 1999

-The Environment Act, 1986

-Indian Companies Act, 1956

-Consumer Protection Act

Optimum utilization of resources:

Business facilitates optimum utilization of nation’s material and non-material resources and achieves economic progress. The scarce resources are delivered to its fullest use for concentrating economic wealth and satisfying the requirements and needs of the consumers.

1.3 Functions of Business

For the smooth functioning of business, there is a need to perform the following functions:

Production function:

The Production function undertakes the activities necessary to produce the organization’s products or services. Its main responsibilities are: production planning and scheduling control and supervision of the production workforce managing product quality (including process control and monitoring

Research and Development function:

The Research and Development (R&D) function is concerned with developing new products or processes and improving existing products/processes. R&D activities must be closely coordinated with the organization's marketing activities to make sure that the organization is providing exactly what its customers want within the most efficient, effective and economical way.

Marketing function:

Marketing is concerned with identifying and satisfying customers' needs at the right price. Marketing involves researching what customers want and analyzing how the organization can satisfy these wants. Marketing activities is concerned with the selection of product markets, producing literature like

Product catalogues and brochures, placing advertisements within the appropriate media and so on. A fundamental activity in marketing is managing the Marketing Mix consisting of the ‘4Ps’: Product, Price, Promotion and Place.

Product: Having the right product in terms of advantages that customer’s value.

Price: Setting the right price which is in line with potential customers’ perception of the worth offered by the product.

Promotion: Promoting the product in a way which creates maximum customer awareness and persuades potential customers to form the decision to purchase the product.

Place: Making the product available in the right place at the right time – including choosing appropriate distribution channels.

Human Resources function:

The Human Resources function includes with the following:

-  Recruitment and selection.

-  Training and development.

-  Employee relations.

-  Grievance procedures and disciplinary matters.

-  Health and Safety matters

-  Redundancy procedures

Finance function:

The Accounting and Finance function is concerned with the following:

-  Financial record keeping of transactions involving monetary inflows or outflows.

-  Preparing financial statements (the profit-and-loss statement, balance sheet and cash flow statement) for reporting to external parties like shareholders.

The financial statements are the start line for calculating any tax due on business profits.

-  Payroll administration Paying wages and salaries and maintaining appropriate tax and national insurance records.

-  Preparing management accounting information and analysis to assist managers to plan, control and make decisions.

Sales function:

In large firms the sales activities are performed by the sales division. The sales department works in close coordination with the marketing department. The sales department is concerned with the selling activities of the firm. It receives or book orders from dealers or customers, then distribute the products through the channel. The sales department may need to undertake follow up of sales, special in the case of durables or industrial goods.

Public relations:

There is a need to maintain good relation with the public. Therefore, it makes a good sense to maintain separate department to look after public relations, especially in big organizations. It is the work of the PR department to manage corporate image of the firm and to develop quality relations with the various section of the society.

Inventory management:

Inventory management refers to the management of inventory such as raw materials, semi-finished goods, finished goods and other items of inventory. It involves the following activities:

-  Planning of materials

-  acquiring material and other inputs

-  Store keeping, etc.

1.4 Scope & Significance of Business

The scope of business is extremely broad. It covers a large number of activities which can be looked into from two perspectives, namely: Industry and Commerce.

(A)  Industry: The activities of extraction, production, conversion, processing or fabrication of products are described as industry. These products of an industry may fall into any one of the types:

Primary Industries: Primary industries include the followings as listed below:

-Extractive Industries

-Genetic Industries

• Extractive Industries: In extractive industries, the industries extract or draw their products from natural sources like earth, sea, air. The products of such industries are generally employed by other industries like manufacturing and construction industries for producing finished goods. Farming, mining, lumbering hunting, fishing, etc., are a number of the examples of extractive industries.

• Genetic Industries: Genetic simply means parentage or heredity. Genetic industries are engaged in breeding plants, and animals for their use in further reproduction.

For breeding plants, the seeds and nursery are typical samples of genetic industries. Additionally, the activities of cattle-breeding farms, poultry farms and the hatchery come under the category of genetic industries.

Secondary Industries: Secondary industries include the followings as listed below:

-Manufacturing Industries

-Construction Industries

• Manufacturing Industries: These are engaged in producing goods through the creation of what is referred to as ‘form utility’ such industries are engaged in the conversion or transformation of raw materials or semi-finished products into finished products. The products of extractive industries generally become the raw-material of producing industries. Factory production is the outcome of producing industry. Manufacturing industries may take any one of the subsequent forms: Analytical, Synthetic, Processing, and production line.

• Construction Industries: These sorts of industries are focused on the making of constructing of buildings, bridges, dams, roads, canals, etc. These industries use the products of producing industries like Iron and Steel, Cement, Lime, Mortar, etc., and also the products of extractive industry like stone, marble, granite, etc. one among the remarkable feature of these industries is that their products are not sold in the sense of being taken to the markets. They are constructed and fabricated at fixed sites.

(B)  Commerce: it is an interchange of products or commodities, especially on a large scale between different countries (foreign commerce) or between different parts of an equivalent country (domestic commerce) trade; business. It can also refer to the method of buying and selling. It covers wholesale, retail, import, export trade and all those activities which facilitate or assist in such buying and selling like storing, grading, packaging, financing, transporting, insuring, communicating, warehousing, etc. the most functions of commerce is to get rid of the hindrance of (i) persons through trade; (ii) place through transportation, insurance and packaging;

(iii) Time through warehousing and storage; and (iv) knowledge through salesmanship, advertising, etc., arising in reference to the distribution of products and services until they reach the ultimate consumers. The concept of commerce usually covers two important areas:

(i)  Trade

(ii)  Service business or Aids to trade

(i)  Trade: The term trade refers the act or process of buying, selling, or exchanging commodities, at either wholesale or retail, within a rustic or between countries. it is also the process of transferring of products and services. it is the central activity around which the ancillary functions like banking, transportation, insurance, packaging, warehousing and advertising are surrounded. Trade are often categorized into two classifications:

(a)  Domestic Trade: this is also refers to as internal trade. it's internal because, it only focuses on buying and selling of goods within the boundaries of a country and the payment for the same is made in national or local currency either directly or through the banking system. Domestic trade is often further sub-divided into:

Wholesale trade - Buying of products in large quantities from producers and selling an equivalent in small quantities to retailer.

Retail trade - activities involved in the selling of commodities directly to consumers, i.e., an industry that sells primarily to individuals, not corporations.

(b)  Foreign Trade: it is also referred to as international trade. It refers to the exchange of products and services between two or more countries. International trade involves the use of foreign currency ensuring the payment of the worth of the exported goods and services to the domestic exporters in domestic currency, and for making payment of the price of the imported goods and services to the foreign exporter therein country’s national currency. International trade allows expansion of markets for both goods and services that otherwise may not are available.

(ii)  Service businesses: These are usually considered Aids to Trade. As already highlighted earlier, there are certain function like banking, transportation, insurance, ware-housing, advertising, communication, etc. which constitute the main auxiliary functions helping trade both internal and international. These auxiliary functions are discussed below.

(a)  Banking: A financial organization licensed as a receiver of deposits. There are two kinds of banks: commercial/retail banks and investment banks. In most countries, banks are regulated by the national government or central bank. Banks provide a device through which payments for goods bought and sold are made thereby facilitating the acquisition and sale of products on credit. Commercial banks are mainly concerned with managing withdrawals and deposits as well as supplying short-term loans to individuals and small businesses.

(b)  Transportation: it is any device used to move business item from one location to another. Common sorts of transportation include planes, trains, automobiles, and other two-wheel devices like bikes or motorcycles. It involved carrying goods from producers to wholesalers, retailers, and final customers. It provides the wheels of business. it has linked all parts of the world together thereby enhancing international trade.

(c)  Warehousing: A warehouse may be a planned space for the storage and handling of goods and material. There is generally a delay between the production and consumption of products. This problem may be solved by storing the products in warehouse. Storage creates time utility and removes the hindrance of your time in trade. It performs the useful function of holding the products for the period they move from one location to another. Thus, warehousing assists in discharging the function of storing the products both for manufacturers and traders for such time till they plan to move the products from one point to another.

(d)  Insurance: In any economy, the insurance industry plays significant roles

functioning of the business environment and shoring investors’ confidence. Insurance industry provides intangible products in the same way as banks, hotels, etc. therefore the firms within the industry are considered service companies.

Insurance provides a canopy against the loss of products within the process of transit and storage. An insurance firm performs a useful service of compensating for the loss arising from the damage caused to goods through fire, pilferage, thief and the hazards of sea, transportation and thus protects the traders form the fear of loss of products. It charges premium for the risk covered.

(e)  Advertising: Advertising is any paid sort of non-personal presentation and promotion of ideas, goods or services by an identified sponsor. When effectively advertising is better placed to satisfy the requirements of its customers, consumers and stakeholders. Advertising performs the function of bridging the knowledge gap about the availability and uses of products between traders and consumers. In the absence of advertising, goods produced by businessmen would not have been sold to a widely scattered market and customers would not be aware of the new products due to the paucity of time, physical-spatial distance, etc.

(f)  Communication: this is another service area that aid business. It helps because up-to- date information is required. This information can be accessed through computers, satellite links and fax machines.

(g)  Salesmanship: It facilitates personal selling. sales department is required to book orders from dealers or customers. Advantage of salesmanship is that, it provides information to the buyers and convinces or persuade them to buy.

Importance of Business organization

1.4.1     Importance to consumers

• Improves standard of living
• Better quality products
• Satisfaction of wants
• Better services
• Reasonable prices

1.4.2     Importance to business firms

• Increase in revenue
• Increase in profits
• Increase in market share
• Build goodwill
• Helps to achieve good will
• Improvement in skills

1.4.3     Importance to society and Economy

• Provides employment
• Brings revenue to the government
• Regional development
• Economic growth
• Undertakes social services

1.5 FORMS OF BUSINESS ORGANIZATIONS

Introduction: Business means production & distribution of goods & services to the society with earning profit. Any firm which engaged in the conduct of business activities is known as a Business organization.

 Business organization may be defined as, “An organization formed with Activity of Production and Distribution and the object of earning profit and providing services to the members of the society.”

• Sole Trading Concern   *Departmental undertaking

• Partnership Firm    *Public corporation

• Joint Hindu Family Firm              *Government Company

• Joint Stock Company

    • Co-operative Society

A] SOLE TRADING CONCERN

INTRODUCTION: Sole Trading Concern is the oldest type of business organization.

A business organization which is owned and controlled by one person, with or without the help of his family members or a few employees, is called Sole trading concern. It also called as one-man show business and the owner is called Sole Proprietor or Sole Trader.

Sole trader is a person who invests capital and acts as owner, organizer, manager and supervisor of his business and who shares entire profits or losses of the business.

Sole proprietorship is a form of business organization in which an individual introduces his own capital, uses his own skill and intelligence and is solely responsible for results of its operations.

FEATURES OF SOLE TRADING CONCERN:

1)     Minimum Government Regulations: This is the only form of business which is not governed by any specific Act. The sole trader has to observe the general law of the country. There are no legal formalities required at the time of formation. They only follow the local govt. rules. E.g. Gumasta license, Labour laws.

2)     Unlimited Liability: The Liability of the trader is unlimited, which means, there is no distinction between Private and business property. For payment of business liabilities even private property is taken away in case the business property is not sufficient to pay off business liabilities.

3)     Freedom in Selection of Business: A Sole Trader can select any business as per his desire. There is no restriction on the type of business, which may be conducted by a proprietary concern. Any legal business can be conducted by the concern. Any method of keeping of books of accounts may be followed by him.

4)     Secrecy: Secrecy plays the most important role in the sole trading concern. The information about all the important matters concerning the business rests only the owner and no outside party can take any undue advantage out of it. The proprietor can ensure maximum business secrecy.

5)     Single Ownership: The business is owned by a single person. All the property and assets of the business is owned by him. There is no another owner or partner in his business.

6)     Direct contacts with customers and Employees: Since a proprietor usually deals directly with his customers and employees, he can maintain good relations with his employees and provide personal attention to his customers.

7)     Suitable for some special Business: There are some special business concerns and trades which require individual attention and service and can only be started as a sole trade for example, Beauty Parlour, Cake shop and Agricultural Product.

8)     No sharing of profits and risks: A sole trader enjoys entire profit of the business. He also bears the full responsibility in the business. Therefore, he alone has to bear all the risks and losses of the business. The risk of the sole trading is entirely bear by the sole trader. If there is any loss that will bear by sole trader only.

9)     Local Business: A sole trading concern operates in a local market. Sole trader normally runs the business in residential location.

10) Complete Control: In sole trading concern, the owner, manager and controller is the same. The sole trader has to control and supervise the working of his own organization. He is the sole planner and executor.

 B] JOINT HINDU FAMILY BUSINESS

INTRODUCTION: Joint Hindu Family Business as a type of commercial organization particularly in India. It is a form of commercial organization where a business is owned by the members of a Hindu family living jointly and the ownership is spread over the members of a Hindu family belonging to a number of generations.

Joint Hindu Family Business is a business which is inherited on account of birth in the Hindu family. When business continues from one generation to another in a Hindu family, it becomes a Joint Hindu family business. According to Hindu law, the business of a Hindu is inherited by his heir, in the same manner as his property inherits. The inheritors of a joint Hindu family business are called Coparceners.

According to Hindu Succession Act, of 1956, a female member born in a Joint Hindu family doing business also becomes member of the firm. In Maharashtra, the female members of a Joint Hindu family enjoy the co-parcenary interest since 1994. The management of such a family business rests with Karta or Manager who is usually the head of the family. The liability of the Karta is unlimited and the liability of the coparceners is limited.

FORMS OF JOINT HINDU FAMILY BUSINESS: There are two forms of such family firms –

1) Mitakshara School: According to Mitakshara School of thoughts an undivided family is the normal condition. The moment a son is born he gets all the equal rights, along with his father in the ancestral property. He has a right to ask for a division of the family property. This community is popular in the country except Assam, Bengal and some parts of Orissa.

2) Dayabhaga School:  Dayabhaga, school of thoughts which applicable in Bengal, Assam and some part of Orissa, under this law a son does not get any right in the property with his birth. Ancestral property remains with father throughout his life time. Only son gets rights in property after the death of his father.

FEATURES OF JOINT HINDU FAMILY BUSINESS:

1)     Conduct of Business: It is managed and conducted by the senior member of the family or Head called the Karta who inherits full rights to conduct the business.

2)     Liability: The liability of the coparceners is limited to the extent of their shares in the business and Joint family property but the liability of Karta is unlimited.

3)     Continuity: This form of business organization enjoys continuity and stability. It is not affected the death, insolvency or insanity of coparceners or Karta. Thus, it is a stable form of business organization.

4)     Right of Karta: The Karta is the head and custodian of family property. He enjoys wide powers. He possesses all rights to deal with family property in the interests of the family business.

5)     Rights of Coparceners: Legally, coparceners do not enjoy any rights. They have to obey the Karta. Unsatisfied coparceners can demand their share and cause a split in the business.

6)     Formation: Joint Hindu family firm is formed as per the operation of Hindu Law. Each member of the family becomes the co-parcener in the family business by birth and not by the virtue of an agreement with other co-parceners.

7)     Registration: Registration of Joint Hindu family business is not compulsory. The business is governed by the Hindu Succession Act.

8)     Sharing of Profit or loss: The profit and loss sharing ratio is not mentioned in the Hindu Succession Act. It varies as per the birth and death of male members in the family who are coparceners.

9)     Partition: If the coparceners find Karta’s policies disagreeable, they can demand partition and separate themselves from the family and the business.

10) Domination by male members: Generally, female members do not take part in the business. So this type of business is dominated by male members.

11) Quick decision making: Karta, being the sole decision maker, can take quick decisions and act upon them immediately. It is assumed that Karta’s decisions are always correct.

12) No maximum membership: In a Joint Hindu family business, there is a maximum limit to membership. The membership depends upon the birth and death in the family.

13) Business Secrecy: Business Secrecy can be kept as it is not obligatory to publish accounts. The competitors cannot easily obtain the secrets of the Joint Hindu family business.

C] PARTNERSHIP FIRM

Meaning: - A partnership firm as a form of business organization has developed due to limitation of sole trading concern. Limited capital, limited managerial ability.

Definition: -

According to section 4 of the Indian partnership Act, 1932, “Partnership is the relation between persons who have agreed to share the profits of a Business, carried on by all or any of them acting for all.”

Partnership is form of business which is carried on by two or more persons. The persons enter into an agreement to conduct a lawful business of common interest in order to make a profit persons who have entered into a partnership are individually known as partners’ and collectively as a ‘partnership firm’

FEATURES OF PARTNERSHIP FIRM:

1) Agreement: A partnership is the outcome of an agreement, which is the base of a partnership business. Agreement is known as a partnership Deed, which includes the terms & conditions, rights and duties of each partner.

2) Plural Membership: An agreement can be made by more than one person. A partnership firm can be formed with minimum two members and maximum 10 for banking and 20 for non-banking or general business.

 3) Sharing of Profit: The object of partnership is to earn the profit and share it. The sharing ratio is agreed by the partners. If there is no agreement, the sharing ratio equal. Even though the definition says about the profit- sharing, it is implied that one who is sharing profit must also share the losses too. However, if a partner is admitted into the business only for profits, then he has no obligation to share the losses.

4) Lawful Business: The main purpose of a partnership is to do some business which must be lawful. Any association formed without the motive of profit-making is not a partnership. Hence, the existence of lawful business is must.

5) Joint Ownership and Management: As per the provisions of the partnership Act, every partner has a right to take part in the management of the business. For convenience, however, the right of management may assign (give) to a particular partner.

6) Agency Principal Relationship: The partners enjoy double relationship in the firm. Every partner acts as an owner (principal) as well as an agent of the other partner while dealing with third parties.

7) Unlimited Liability: The partners are all jointly as well as severally liable for the debts of the firm. The liability of every partner is unlimited. If the assets of business are found insufficient to pay off the debts and liabilities the personal property of the partner is taken to discharge (paid) the business liability.

8) Absence of Legal Status: Partners and firm are one and same. The firm does not have a separate legal existence, because registration of partnership firm is optional.

9) Dissolution: The death, insolvency or insanity of any partner results into dissolution of partnership unless specified. Otherwise the remaining partners may continue to conduct business on the basis of a fresh agreement among them. The partnership at will compulsorily dissolved when any partner serves at 14 days’ notice to other partners regarding his unwillingness to continue the business.

10) Mutual Trust and Confidence: Partnership is based on mutual trust and confidence. Every partner must work in the interests of the entire firm. He should not make any secret profits and must disclose all material facts to the other partners.

 D] CO-OPERATIVE SOCIETY

MEANING: - Co-operative society is a different type of commercial organization. It is distinct from Sole Trading, Partnership, Joint Stock Company and even public enterprises. All these forms of commercial organizations aim at profit- making, whereas, co-operative form of organization aims at “self-help through mutual help”. The main motto of this form of Organization is Service.

Co-operative Society or Co-operative Organization is a voluntary association, of persons, coming together on the basis of their common economic interests through self-help and service. Each for all and all for each is the principle of a co-operative society. Co-operative Organization is one which is voluntarily formed by a group of people who come together on the basis of unity and equa1ity to protect and promote their economic interest.

Co-operative society is an association of persons. It is formed voluntarily by its members. Minimum 10 persons are required to form a co-operative society. Any person can become a member of co-operative society irrespective of religion, language, caste and creed. In-short, the membership of co-operative society is open to all.

Definition: -

According to Indian Co-operative societies Act, 1912, “Co-operative society is a society which has its objectives for the promotion of economic interests of its members in accordance with co-operative principles.”

FEATURES OF CO-OPERATIVE SOCIETY:

(1) Voluntary Association: It is a voluntary association of likeminded people having common problems, no one is forced to join or continue in the society. Any person is free to join or leave the society as per his will and wish.

(2) Equal Voting Rights: ‘One man one vote” is the basic principle of a co-operative society. Every member enjoys only one vote irrespective of number of shares held by him. All members are treated equal; their position in the society (Organization) does not depend on their social, financial and political status.

(3) Democratic Management: A co-operative society functions on the principle of democracy. The members elect their representatives amongst them to look after day to day affairs of the society. This body is known as Managing Committee. Each member has a right to take part in the management of the society irrespective of their shareholdings.

(4) Registration: Registration of a society is compulsory as per the relevant act in the concerned state. Co-operative societies must be registered under the State Co-operative Societies Act.

(5) Independent Existence: According to the co-operative societies’ Act 1912, a co-operative society has an independent legal status different from its members. Therefore, it enjoys a stable and continuous life.

(6) Service Motive: The aim of the society is to provide service to the members rather than reaping (earning) profits. Even if any small profit is earned by the society, it will be distributed among the members or may be used for social & charitable purposes.

(7) Surplus Profit: After payment of dividend and bonus, a part of the profit is transferred to the statutory reserve and remaining is utilized for the welfare of the locality where the co-operative society is situated.

(8) State Control: As the registration of a society is compulsory and also their progress and activities depend on the Government support. Therefore, societies are subject to the Government supervision and control. The account, minute’s books and other necessary documents are inspected periodically by the concerned authorities’ appointed by the Government to look after the co-operative societies.

(9) Limited Liability: The liability of the members of the co-operative society is limited to the face value of the share held.

TYPES OF CO-OPERATIVES SOCITIES: Co- operatives societies are classified into different types according the nature if the services rendered by them. Following are the main types of co-operatives societies.

1)     Consumer’s Co-operatives Societies: Consumers co-operatives societies make their purchases in bulk from wholesalers and supply them in small qualities to members at very members at very reasonable prices and also provide various services to them. Members are given bonus and share in profit in proportion to their investment.

2) Credit Co-operatives Societies: It is formed with the objective of granting loans to members at a reasonable rate of interest for productive as well as non- productive purpose. They may be established in rural areas by agriculturist or artisans called by rural societies or by salary earners or industrial workers in urban areas, called as Urban Banks, Salary Earns Societies worker’s societies.

3) Producer’s co-operative Societies: Producer’s c-operative societies are also called industrial co-operative which provide raw materials, implement tool, technical guidance, to the members on easy terms so that they can produce superior quality products.

4) Marketing co-operative Societies: Marketing co-operatives societies undertake centralized sale of the produced by their members. The perform all the marketing functions standardizing, grading, branding, packing, advertising, transportation etc. and after selling the products, distribute the proceeds among members depending upon the quantity sold for each members.

5) Framing Co-operatives Societies: These societies are formed by farmers who voluntarily come together and pool their land to jointly conduct agricultural operation using scientific methods of cultivation.

6) Housing Co-operatives Societies: Housing co-operatives societies purchase land and develop it. Co-operatives housing societies are formed by members for the constructions and maintenance of building for residential purpose on ownership basis.            

E] JOINT STOCK COMPANY

A Joint Stock Company is a voluntary association of members formed for the purpose of undertaking a business. It is called a Joint Stock Company, because the shares or stock of the company are jointly owned by its members.

A Joint stock company undertakes different business activities like manufacturing, marketing and servicing. The funds required by the company are contributed by its members called shareholders. The company also borrows funds from banks and financial institutions. The shareholders are the Co-owners and they share in the profits of the company in the form of dividend.

The company is managed by Board of Directors. The Board is a group of elected representatives of the shareholders. The Board frames a plans and policies of the company. The Board in turn appoints several other managers and subordinate staff to look after day-to-day aspects of the Organization.

Definition: -

According to section 566 Indian Company Act, 1956, Company may be defining as “An incorporated voluntary association which act as an artificial person, created by Law, having common seal & perpetual succession.”

Section 566 of the Indian Companies Act, 1956 has defined Joint stock company as, “A company which is having a permanent paid-up or nominal share capital of fixed amount divided into shares, also of fixed amount or held and transferable as stock, or divided and held partly in one way and partly in the other and formed on the principle of having for its members, only the holders of those shares or that stock and no other persons”.

TYPES OF COMPANIES:-

COMPANY LIMITED BY SHARES CAN BE OF TWO TYPES:

1] Private limited Company: According to Sec 3(I)(iii) of the Companies Act, 1956.

“A private company is a company which by its articles, restricts the right to transfer its shares, if any limits the number of its members to 50 and prohibits any invitation to the public to subscribe for any shares or debentures of the company”.

• Restrict the number of its members up to 2 to 50.
• Restrict the right of members to transfer its shares if any.
• Put a ban on inviting to the public to subscribe for any shares in or debentures of the company.
• Prohibits any invitation or acceptance of deposits from persons other that its members, directors or their relatives.
• Must have a minimum paid up share capital of one lakh rupees.

It is important that all the above said condition should be in order to remain a private company. If any one of the condition is not fulfilled by the company, shall be considered as public company. In the case of private company is a limited company, and then it must add the words ‘Private Limited’ at the end of its name. A private company may be a company limited by shares or a company limited by guarantee or an unlimited company.

2] Public Company: According to Sec 3(I)(iv) public company means a company which is not a private company. A public company may be said an association which –

• Has no restriction on the transfer of its shares.
• There should be a minimum number of members are seven.
• Has a minimum paid up shares capital of Rs. 5, 00,000/- or such higher paid up capital as may be prescribed.
• Does not prohibit any invitation or acceptance of deposits.

There are minimum 7 members required for establishment of public company but there is no restriction of the maximum number of members. In the case of a public company is limited company, and then it must be ‘Limited’ word at the name of company. The public company must have at list 3 directors.

FEATURES OF A JOINT STOCK COMPANY

(1) An incorporated association: A Joint stock company is an incorporated association. It is a registered organization. Such registration is compulsory for all types of companies, according to Indian Companies Act 1956.

(2) An artificial person: A company is the creation of law. It is like an artificial person created by law and it has a separate name uses a common seal as a substitute for its signature. It doesn’t have a physical existence because it is not a natural person. However, it can enter into contract with third parties.

 (3) Common seal: A company has its own seal. A seal acts as its representative. It is affixed on all important documents of the company. It indicates approval by the company which is an artificial person. A seal acts as the substitute for the signature of the company.

(4) Separate Legal Entity: A joint stock company is created by law and enjoys and independent legal status different from its members. Therefore the company’s liabilities are its own i.e. shareholders are not liable for the debts of the company. Similarly shareholders cannot act on behalf of the company or bind person or persons.

(5) Limited liability: One special feature of the company form of organization is that the liability of its members is limited to the book value of the shares purchased by them. Members or shareholders are not liable for the debts or losses made by their company.

(6) Separation of ownership from management: In a company organization, ownership and management are separate. The ownership is with the shareholders while the management is with the Board of Directors and other company executives.

(7) Easy transfer of shares: In company organization, a shareholder can transfer the ownership of his shares to any other person by following the necessary procedure. The shares are freely transferable in public limited company, i.e. members can buy or sell these shares without seeking permission from the company or other members of the company. The shares of private limited company however cannot be transferred freely.

(8) Effective Government control: The Government keeps effective control on the working of joint stock companies. A registered company has to submit annual accounts and other documents to the Government. Such control supervision is necessary for the protection of small investors.

(9) Large membership: A company has huge membership. For a private company, the maximum membership is 50 while there is no limit to the number of members in a public limited company. Huge capital collection and large scale business operations are possible due to large membership.

10) Perpetual Succession: A joint stock company ensures perpetual succession, i.e. it enjoys continuous and stable life. Joint Stock Company is an artificial person created by law, having a common seal which acts as a substitute for its signature. It enjoys an independent legal status different from its members. The death, retirement, insolvency or insanity of any of its members does not result into dissolution of company.

STATUTORY CORPORATION

A Statutory Corporation is an autonomous corporate body created by the Special Act of the parliament or state legislature with defined powers, functions and duties. State helps statutory corporation by subscribing to its capital. For example, Reserve Bank of India.

FEATURES OF STATUTORY CORPORATION:

1. Corporate Body:

Statutory corporation is an artificial person created by law and its an independent legal entity. It is managed by the board of directors constituted by the government. A corporation has a right to enter into contracts and can undertake any kind of business under its own name.

2.             Answerable to the Legislature:

A statutory corporation is answerable to parliament or state assembly whosoever creates it. Parliament has no right to interfere in the working of statutory corporations. It can only discuss policy matters and overall performance of the corporations.

3.             Own Staffing System:

Employees are not government servants, even though the government owns and manages a corporation. Employees of various corporations receive balanced or uniform pay and benefits by the government. They are recruited, remunerated and governed as per the rules laid down by the corporation.

4.             Financial Autonomy:

A statutory corporation enjoys financial autonomy or independence. It is not subject to the budget, accounting and audit controls. After getting the prior permission from the government, it can even borrow money within and outside the country.

5.             No Political Interference:

A Statutory Corporation comes into existence by following particular act or statute therefore there is no political interference in formation, working and administration of a statutory corporation.

All statutory corporations are free from political interference.

GOVERNMENT COMPANY

The company which is registered under Companies Act,2013 having minimum 51% of paid-up share capital held by the central government or any state government or partly by central government and partly by one or more

The shares of Government Company are purchased in the name of The President of India or in the name of Governor of a State.

           Important Concepts

1. Annual Reports:

In Government Company, annual reports and audit reports are laid or presented before the Parliament and in case of state company. Such reports are presented before state legislature.

2.             Appointment of Auditors:

Government on the advice of Comptroller and Auditor General of India appoints auditor of a government company.

3.             Shareholding:

A Government company may either wholly or partially owned by Government. In wholly owned company, 100% capital is provided by the government. In partially owned companies minimum 51% capital is held by the government or combination of governments. Private concerns can hold maximum 49% share capital

4.             Management:

The management of Government Company is in the hands of Board of Directors who are nominated by the government and private investors together. Government companies have professional management and skillful employees which results into higher productivity and performance.

 FEATURES:

1. Registration Under the Companies Act:

A Government company is formed through registration under the Companies Act, 2013 and is subject to the provisions of this Act, like any other company. However, the Central Government may direct that any of the provisions of the Companies Act shall not apply to a Government company or shall apply with certain modifications.

2.             Separate Legal Entity:

A Government company is a legal entity separate from the Government. It can acquire property� can make contracts and can file suits in its own name.

3.             Majority of Government Directors:

In Government company major capital is held by Government.  So in Board of Directors maximum directors are appointed by respective Government.

4.             Own Staff:

A Government company has its own state except Government officials who are sent on deputation. Its employees are not governed by civil service rules.

5.             Free from Procedural Controls:

A Government company is free from budgetary, accounting and audit controls which are applicable to Government undertakings.

PART B

1.6 Concept and Importance of Business Environment

Business environment consists of all the internal and external forces or factors that influence the working of a business firm.

The internal factors consist of firm’s strategy and policies, management-labour relations, resources like manpower, capital, machines, etc.

The internal forces consist of the micro factors like, economic, political, social, technical and other factors.

Features of Business Environment: 

The main features of the Business Environment are as follows:

1. Dynamic in Nature: Changes takes place in the external environment. For Instance, - Customers taste and preference may change any time.

-  Competitors might introduce new product designs, may change pricing, etc.

-  Government may introduce policy changes in respect to taxation, foreign trade, foreign investment, etc.

2.     Direct & Indirect Impact: Business Environment may have direct and indirect impact in the cycle of business. For example,

-  Micro external factors like competition, government policies, customer preference, etc., can have a direct and immediate effect on the working of a business firm.

-  The macro external factors like social, economic and political factors may have indirect effect on the working of the business firm.

3.     Internal and External Factors: Activities of business firms an influenced by internal and external factors. The internal factors are controllable in nature. It includes machinery, manpower, management-labor relations, etc. For instance, a company can replace old machinery with new, if so required. The external factors are beyond the control of a business firm. External factors include Government policies competitor’s strategies, customer preferences, etc. A business firm needs to adjust its strategies depending upon the changes in external factors.

4.     Inseparable Part of Business: Environment is an integral part of business. Business firms cannot operate without environment. For instance, business firms cannot operate without customers, suppliers and dealers. Also business firms depend upon natural environment for is resources such as raw materials. The technological and other factors also influence the working of the business.

5.     Complex in Nature: Environment of modern business is more complex and unpredictable. In olden days, business environment was stable - customers' preferences were few, competition was limited, government policies were stable, and so on. Nowadays, the business environment is more complex due to heavy competition, growing customers' expectations, drastic changes in government policies, and so on.

6.     Creates Opportunities and Obstacles: Environment provide opportunities and creates obstacles in the working of an Opportunities may be turned as favorable situations which facilitates higher profits and growth of the business. Obstacles are the unfavorable situations, which may adversely affect the organization’s profitability and organization growth.

7.     Regulates Scope of Business: Environment regulates the scope of business activities. For instance, Government regulations such as restrictions on advertising of liquor and cigarettes, restricts advertising of socially undesirable products.

8.     Reactive and Proactive Decisions: Due to environment, business firms take proactive and reactive decisions. Majority of the firms take reactive decisions, i.e., in reaction to decisions taken by others or competitors.

Few firms take proactive decisions to launch new models/ schemes, to introduce price changes, to restructure business, etc., before others do it. Such firms gain competitive advantage in the market. Examples: Hero Motorcycles, TCS (software), Ultra Tech Cements, etc.

9.     Environment is Multi-dimensional: Changes in environment may have positive and negative impact on the working of business firms. Environmental changes may be favorable to some firms, and unfavorable to others.

For instance, Government of India has liberalized the entry of foreign companies into India. A majority of Indian domestic firms consider the Govt.'s move as a threat because they have to face competition from the foreign firms. However, few of the Indian firms consider it as an opportunity as they can have a tie-up with the foreign firms, and also they can learn techniques from the foreign firms.

10. Environment Analysis and Planning: The relationship between planning and environment analysis is inseparable. The main purpose is to set the goals or objectives. Environmental analysis indicates strengths, weaknesses, opportunities and threats (SWOT. Depending on the SWOT analysis, a firm sets its objectives.

For instance, if the SWOT analysis indicates opportunities, the firm can set higher targets. However, if the threats are identified, the firm may lower down its targets.

1.7 ENVIRONMENTAL ANALYSIS

Environmental analysis is a strategic tool. It’s a process to find all the external and internal elements, which affect the organization’s performance. The analysis entails assessing the extent of threat or opportunity the factors might present. These evaluations are later translated into the decision-making process. The analysis helps align strategies with the firm’s environment.

Our market is facing changes on a daily basis. Many new things develop over time and therefore the whole scenario can alter in just some seconds. There are some factors that are beyond your control. But, you'll control plenty of these things.

Businesses are greatly influenced by their environment. All the situational factors which determine day to day circumstances impact firms. So, businesses must constantly analyze the trade environment and therefore the market.

There are many strategic analysis tools that a firm can use, but some are more common. The foremost used detailed analysis of the environment is that the PESTLE analysis. This is a bird’s eye view of the business conduct. Managers and strategy builders use this analysis to seek out where their market currently. It also helps foresee where the organizations are going to be in the future.

1.8 SWOT ANALYSES

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, then a SWOT Analysis is a technique for assessing these four aspects of your business.

You can use SWOT Analysis to form the most of what you've , to your organization's best advantage. And you'll reduce the probabilities of failure, by understanding what you're lacking, and eliminating hazards that might otherwise catch you unawares.

Better still, you'll start to craft a technique that distinguishes you from your competitors, and then compete successfully in your market.

1.9 How to Do a SWOT Analysis

First, draw up a SWOT Analysis matrix, or use our free downloadable template. this is often a 2x2 grid, with one square for every of the four aspects of SWOT. Figure 1 shows what it should appear as if (click on the image to ascertain a larger version).

Figure 1 A SWOT Analysis Matrix

You can approach a SWOT Analysis in two ways: to urge people together to "kick off" strategy formulation informally, or as a more sophisticated and formal tool.

In either case, gather a team from a variety of functions and levels in your organization. Use Brainstorming techniques to create a list of ideas about where your organization currently stands. Whenever you identify a Strength, Weakness, Opportunity, or Threat, write it down in the relevant a part of the grid.

To clarify which section an idea belongs to, it's going to be useful to consider Strengths and Weaknesses as internal factors – that’s, to try to to with the organization, its assets, processes, and people. Think about Opportunities and Threats as external factors, arising from your market, your competition, and therefore the wider economy.

Let's check out each area in more detail and consider what questions you'll ask as a part of your analysis.

Strengths

Strengths are things that your organization does particularly well, or in a way that distinguishes you from your competitors. Think about the benefits your organization has over other organizations. These could be the motivation of your staff, access to certain materials, or a strong set of producing processes.

Your strengths are an integral a part of your organization, so think about what makes it "tick."

What does one do better than anyone else?

What values drive your business?

What unique or lowest-cost resources can you draw upon that others can't?

Identify and analyses your organization's Unique Selling Proposition (USP), and add this to the Strengths section.

Then turn your perspective around and ask yourself what your competitors might see as your strengths. What factors mean that you get the sale before them?

Remember, any aspect of your organization is merely strength if it brings you a clear advantage. For instance, if all of your competitors provide high-quality products, then a high-quality production process isn't a strength in your market: it is a necessity.

Weaknesses

Now it is time to consider your organization's weaknesses. Be honest! A SWOT Analysis will only be valuable if you gather all the knowledge you need. So, it is best to be realistic now, and face any unpleasant truths as soon as possible.

Weaknesses, like strengths, are inherent features of your organization, so specialize in your people, resources, systems, and procedures. Think about what you'll improve, and the kinds of practices you should avoid.

Once again, imagine (or find out) how other people in your market see you. Do they notice weaknesses that you simply tend to be blind to? Take time to look at how and why your competitors do better than you. What are you lacking?

Opportunities

Opportunities are openings or chances for something positive to happen, but you will need to claim them for yourself

They usually arise from situations outside your organization, and require a watch to what might happen in the future. They could arise as developments in the market you serve, or in the technology you employ. Being able to identify and exploit opportunities can make an enormous difference to your organization's ability to compete and take the lead in your market.

Think about good opportunities you'll spot immediately. These don't got to be game-changers: even small advantages can increase your organization's competitiveness. What interesting market trends are you conscious of , large or small, which could have an impact?

You should also be careful for changes in government policy associated with your field. And changes in social patterns, population profiles, and lifestyles can all present interesting opportunities.

Threats

Threats include anything which will negatively affect your business from the outside, like supply chain problems, shifts in market requirements, or a shortage of recruits. it is vital to anticipate threats and to take action against them before you become a victim of them and your growth stalls.

Think about the obstacles you face in getting your product to market and selling. you'll notice that quality standards or specifications for your products are changing, and that you will need to alter those products if you're to remain in the lead. Evolving technology is an ever-present threat, also as an opportunity

Always consider what your competitors do, and whether you ought to be changing your organization's emphasis to satisfy the challenge. But remember that what they're doing might not be the right thing for you to do, and avoid copying them without knowing how it'll improve your position.

1.10 Constituents of Business Environment: Internal & External

1. Internal Environment

The following are the factors on internal environment:

Value System:

The value system of an organization means the ethical beliefs that guide the organization in achieving its mission and objective. The value system of a business organization also determines its behavior towards its employees, customers and society at large. The value system of the promoters of a business firm has an important bearing on the choice of business and the adop­tion of business policies and practices. Due to its value system a business firm may refuse to produce or distribute liquor for it may think morally wrong 8to promote the consumption of liquor.

Mission and Objectives:

The objective of all firms is assumed to be maximization of long-run profits. But mission is different from this narrow objective of profit maximization. Mission is defined as the overall purpose or reason for its existence which guides and influences its business decision and economic activities. The-choice of a business domain, direction of its development, choice of a business strategy and policies are all guided by the overall mission of the company. For example, “to become a world-class company and to achieve global dominance has been the mission of ‘Reliance Industries of India’. Similarly, “to become a research based international pharma company” has been stated as mission of Ranbaxy Laboratories of India.

Organization Structure:

Organization structure means such things as composition of board of directors, the number of independent directors, the extent of professional management and share -holding pattern. The nature of organizational structure has a significant influence over decision making process in an organization. An efficient working of a business organization requires that its organization structure should be conducive to quick decision making. Delays in decision making can cost a good deal to a business firm.

The board of directors is the highest decision making body in a business organization. It takes general policy decisions regarding direction of growth of business of the firm and supervises its overall functioning. Therefore, the managerial capability of the board of directors is of crucial importance for the functioning of a business firm and for achievement of its overall mission and objectives.

Corporate Culture and Style of Functioning of Top Management:

Corporate culture and style of functioning of top managers is important factor for determining the internal environment of a company. Corporate culture is generally considered as either closed and threatening or open and participatory.

In a closed and threatening type of corporate culture the business decisions are taken by top-level managers, while middle level and work-level managers have no say in business decision making. There is lack of trust and confidence in subordinate officials of the company and secrecy pervades throughout in the organization. As a result, among lower level managers and workers there is no sense of belongingness to the company.

On the contrary, in an open and participatory culture, business decisions are taken at lower levels of management, and top management has a high degree of trust and confidence in the subordinates. Free communication between the top level management and lower-level managers is the rule in this open and participatory type of corporate culture. In this open and participatory system the participa­tion of workers in managerial tasks is encouraged.

Human Resources:

Human Resources of a firm is an important factor of internal environment of a firm. The success of a business organization depends to a great extent on the skills, capabilities, attitudes and commitment of its employees. Employees differ with regard to these characteristics.

It is difficult for the top management to deal directly with all the employees of the business firm. Therefore, for efficient management of human resources, employees are divided into different groups. The manager may pay little attention to the technical details of the job done by a group and encourage group cooperation in the interests of a company. Due to the importance of human resources for the success of a company these days there is a special course for managers how to select and manage efficiently human resources of a company.

Labor Unions:

Labor unions are other factor determining internal environment of a firm. Unions collectively bargain with top managers regarding wages, working conditions of different categories of employees. Smooth working of a business organization requires that there should be good relations between management and labor union.

Each side must implement the terms of agree­ment reached. Sometimes, a business organization requires restructuring and modernization. In this regard, the terms and conditions reached with the labor union must be implemented in both letter and spirit of cooperation of workers is to be ensured for the reconstruction and modernization of business.

Physical Resources and Technological Capabilities:

Physical resources such as plant and equipment, and technological capabilities of a firm determine its competitive strength which is an important factor determining its efficiency and unit cost of production. R and D capabilities of a company determine its ability to introduce innovations which enhance productivity of workers. The firm may take appropriate measures to correct weakness. For instance, the obsolete machines may be replaced.

Corporate Image:

 A firm should develop and maintain good corporate image in the minds of the employees, investors, customers, and others. A firm should undertake analysis of its corporate image. If a firm finds problem in corporate image, then adequate measures need to be taken.

Brand Equity:

It is a value of the brand. More consumer awareness about the brand and loyalty towards brand increases brand value that’s why every organization does advertising and takes up promotional activities.

B.    External Environment

The external environment consists of all the factors which provide opportunities or pose threats to an organization. In a wider sense, the external environment encompasses a variety of factors like international, national and local economy. Social changes, demographic variables, political system, technology, attitude towards business, energy sources, raw materials and other resources and many other macro level factors make up the external environment.

We could designate such wide perception of the environment as a general environment. All organizations, in some way or the other, are concerned about the general environment but the immediate concerns of any organization are confined just to a part of the general environment which could be termed as a highly relevant environment and enables the organization to focus its attention on those factors which are intimately related to its mission, purpose, objects and strategies.

Depending on its perception of the relevant environment, an organization takes into account those influences in its surroundings which have an immediate impact on its strategic management process.

i. Micro Environment:

Micro external factors have an important effect on business operations of a firm. However, all micro factors may not have the same effect on all firms in the industry. For example, suppliers, an important element of micro level environment, are often willing to provide the materials at relatively lower prices to big business firms. They do not have the same attitude towards relatively small business firms.

Some important micro elements of the business environment are described here:

a) Customer:

The prime task for any business is to attract and retain customers. This is to ensure its own long-term profitability and existence in the market. It therefore follows that the need and the desire of the customer should be monitored minutely to ensure customer delight, which will lead to the firm having an increasing number of loyal customers.

Changing tastes and preferences of the customer should not only be observed as they happen, but forecasted before, and necessary corrections should be made in the product/service profile by the company. Customers are the backbone of a company and the very reason for the company’s existence.

b) Products:

Product factors such as the demand, image, features, utility, function, design, life cycle, price, promotion, distribution, differentiation and availability of substitutes of products or services also form an intimate part of the business environment. The product/service features are the key to attract/retain customers.

c) Marketing Intermediary:

This includes all those who facilitate distribution of goods from the centers of production to the various centers of consumption. These are the middlemen who form part of the distribution channel and those who help reach the product/service to the ultimate consumer. They can be few or many in number, depending on the length of the distribution chain and type of distribution system that the company adopts. If this chain is hassle free and functions without many hurdles, it eventually helps the organization.

d) Competitors:

The world has become a global market. There exists tremendous competition in each and every area. There are other business entities that manufacture similar products and compete with a company for market share and turnover. These have to be managed well and market intelligence is required to find out about their future plans. These can play a major role in making or marring the fortunes of any company.

e) Suppliers:

An important factor in the micro environment is the supplier, i.e., those who supply raw materials and components and machines to the company. The suppliers should be reliable and act as business partners, working in coordination to fulfil the ultimate consumer expectations. If the suppliers are reliable, there is no need to keep heavy inventory stocks that increases the risk of obsolescence and damage and also blocks to working capital of the company.

ii. Macro Environment:

The macro environment is the larger, uncontrollable environment consisting of societal forces that affect all other environments. They offer tremendous opportunities for any business and also present threats that can harm a business in a major way. This environment becomes crucially important to understand and study for the purpose of strategic planning and decision-making.

It has broader dimensions than the micro environment. It consists of individuals, groups, agencies, events, conditions and forces with which the organization comes into frequent contact in the course of its functioning. The macro environment is actually the real environmental factor that influences the growth and structure of any business to the greatest degree.

It is made up of following components:

A) Socio-Cultural Environment:

This consists of the society and culture of a place where the organization is doing its business. It is a general entity and influences almost all firms in a similar manner. Some of the important factors and influences operating in the social environment are the buying and consumption habits of people, their languages, beliefs and values, customs and tradition, tastes and preferences, education and ail factors that affect the business.

b) Political Environment:

The political environment consists of factors related to the management of public affairs and their impact on the business of an organization. Political environment has a close relationship with the economic system and economic policies. For Example, communist countries have a centrally planned economic system. In most countries apart from those laws that control investment and related matters, there are a number of laws that regulate the conduct of the business. These laws cover such matters as standard of product, packaging, promotion, etc.

India is a democratic country having a stable political system where the Government plays an active role as a planner, promoter and regulator of economic activities. Businessmen therefore are conscious of the political environment that their organization faces. Most governmental decisions related to business are based on political considerations in line with the political philosophy followed by the ruling party at the center and the state level.

c) Economic Environment:

The economic environment consists of macro level patterns related to the areas of production and distribution of wealth that have an impact on the business of an organization.

Some of the important factors and influences operating in economic environment are:

1. Economic stages existing at a given time in a country.
2. The economic structure adopted such as capitalistic, socialistic or mixed economy.
3. Economic planning, such as 5 — year plans, annual budgets, etc.
4. Economic policies, such as industrial, monetary and fiscal policies.

d) Technological Environment:

The technological environment consists of those factors related to knowledge applied and the materials and machines used in the production of goods and services that have an impact on the business of an organization. For many enterprises, technology is the most dynamic of all environmental factors. An individual firm is concerned with its product and process technology. This environment consists of those factors that involve any type of technological advancement or lack of the same.

e) Demographic Environment:

This environment deals with the composition and characteristics of the population of a place. All the relevant descriptions of the population of a place with respect to its demographic profile will affect business decisions drastically. It would be in the interest of any firm to consider these aspects in detail before planning the strategy.

It includes factors such as:

I. Average family size

II. Size of population

III. Educational levels

IV. Economic stratification of the population, etc.

f) Legal Environment

This environment includes laws that define and protect the fundamental rights of Individuals and Organizations.

Business in a country can be started, regulated, controlled and expanded only within the legal framework of a country. In this connection all countries of the world have a separate set of laws for the control and direction of business. All business managers should have the knowledge of law for taking decision.

Some important laws influencing the business are:

•  Indian Contract Act, 1872 (2017)
• Workmen’s Compensation Act, 1923 (2010)
• Industrial Dispute Act, 1947 (2016)
• Standards of Weight and Measures Act, 1969 (2016)
• Consumer Protection Act, 1986 (2018 proposed)
• Competition Act, 2002

g) International Environment

The international environment of business comprises of a country's foreign policy, bilateral relations, international agreements (like WTO), the policies of trading blocs (like European Union, NAFTA ASEAN, etc.), the import export policy, monetary policies etc., other factors like war, civil disturbances, political instability etc. have also an effect on international environment.

Business units engaged in import or export trade or domestic units using imported raw materials, technology or machinery are affected more by a minor change in international environment. Further, business units engaged in export marketing are influenced by depression or boom in international market.

In recent years, the international environment has changed significantly. The developments in transport and communication systems have brought countries closer to each other. Today, global market is emerging out together single market. Under such situations, companies like multinational corporations are likely to dominate the world market.

References

1. Business Environment by Veena Keshav Pailwar
2. Business Environment by Dr. V.C. Sinha
3. Business Analytics by S.Christian Albright