PG Business Fundamentals BT V3

PARTICIPANT GUIDE PARTICIPANT GUIDE

Business Theory

Session 1:

Business Fundamentals

Participant Guide

Business Fundamentals Business Theory

1 © ThinkLink Learning 2014

© ThinkLink Learning

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All Trademarks & Trade names acknowledged.

First published by ThinkLink Learning in 2014



Table of Contents

Introduction to the guide .......................................................................................................... 3

Learning Objectives: .................................................................................................................. 4

Introduction to Business ............................................................................................................ 5

Business Classification ............................................................................................................... 8

Characteristics of Services ....................................................................................................... 11

Type of Activities ..................................................................................................................... 13

Sectors of Economy ................................................................................................................. 15

Commerce and Trade .............................................................................................................. 18

Business Objectives ................................................................................................................. 21

Summary .................................................................................................................................. 25

Web Resources: ....................................................................................................................... 25

Classroom Activity ................................................................................................................... 29



Introduction to the guide This Participant Guide (PG) is to be used as a hand-out for material and content referral as well as for assignment and exercise. This document is a part of the complete program that includes classroom sessions, and self-study, hence the program should be run in a particular pattern (to be discussed by the facilitator in the workshop).

Content includes:

• Referral material

• Topic description

• Exercise (depending on the topic)

• Home assignments

• Case study/referral documents

Program curriculum: This module has 17 chapters:

Session 1: Business Fundamentals Session 2: Mission, Goals and Strategies

Session 3: Business Environment and Processes

Session 4: Stakeholders Analysis

Session 5: Communication and Information Flows I

Session 6: Communication and Information Flows II

Session 7: Fundamentals of Marketing

Session 8: Marketing of Logistics Services

Session 9: Financial Accounting

Session 10: Working Capital Management

Session 11: Products and Services Costing

Session 12: Budgeting and Reconciliation

Session 13: Business Plan and Sources of Funds

Session 14: Legal Framework for Logistics

Session 15: International Trade

Session 16: Corporate Social Responsibility

Session 17: Case Study



Learning Objectives: • Describe the purpose and significance of business

• Identify the types of business and activities

• Identify the types of companies and key differences

• Differentiate between industry, commerce and trade

• Describe the key objectives of business



Introduction to Business Business:

“Business is an economic activity, in which goods or services are purchased, produced and sold in exchange of money. It is carried out on a regular basis with the prime objective of making profit”.

Business is as important to the human beings as any other activity. When we look around, we observe examples of various businesses around us such as a doctor treating a patient, a shopkeeper selling products, a manufacturer producing products and a telecom operator providing phone services. The purpose of the business is to satisfy needs of individuals and the society & community for these products & services ranging from basic necessities to convenience & luxury.

Business is also defined as “the activity that provides goods and services to consumers for the purpose of making a profit”. Profit is the difference between the revenue that the company brings in from selling goods / services and the costs of generating this revenue.

Not-for-profit (non-profit) Business: An organization that has a purpose other than returning profits to owners such as social, community or educational services.

Participants in business: There are mainly four direct participants: owners, employees, customers and suppliers.

• Owners invest money into business, create/polish the business idea, and bring together resources (money, people) needed to turn an idea into business, hire employees.

• Employees work for the company and help the company reach their goals.

• Customers buy products and services offered by the businesses to satisfy their needs and wants.

• Suppliers supply goods and services that the company uses to produce goods and services that it sells to its customers.

What is expense?

Investment incurred in running a business (supply, wages, etc.).

What is cost?

The amount of money required for each stage of production (raw material)

What is profit?

Income that is left after all expenses and costs are covered.

Total income – (Expenses + Cost) = PROFIT

Scenario:

A roadside vendor sells Rs 2000 worth of fast food every day. Where the cost of the food is Rs.800, the hawker rents the stand for Rs 200 per day and pays Rs 100 for the permit (per day). He also has a helper with him, whom he pays 100 and keeps 200 as his own wages.

What is the profit of the business (per day)?



Functional Areas in Business Let us take an example of a company manufacturing and selling refrigerators and see what functional areas exist in the business.

• First of all, the business needs to identify the customer needs in terms of size of the refrigerator (70 / 165 / 210 / 320 litres); type (frost free / single door / side doors); designs / colours etc. it also needs to decide the price and promote the product to the customers. This part of the business is handled by the Marketing function. The role of marketing is identifying and responding to customer needs, developing benefits and features of products, price and quality evaluation and controls, promotion and delivery of products, keeping and attracting customers and satisfying customer needs.

• Having known the type and features of the product to be developed, the business needs to create drawings and specification of the product as well as the parts and components that go into it e.g. rating and type of compressor. This part of business is handled by the Research and Development function. This function is concerned with new product developments as well as improvements to existing products or product lines.

• Now that the product has been developed, it needs to be manufactured as per the customer demand, quality standards and agreed timelines. It is handled by the Operations function. This function is responsible for designing and overseeing processes that convert resources into goods and services, controlling the quality and ensuring timely operations.

• Supply Chain Management handles sourcing of raw materials and components required for manufacturing goods. Once the finished goods are ready, they are distributed to the customers through a network of warehouses.

• The goods, once produced, need to be sold to the customer through various channels e.g. distributors, wholesalers and retailers. It is the responsibility of the Sales function to make sure that goods are sold to end customers in return for money. A sale is the act of selling a product or service in return for money or other compensation.

• To purchase goods, customers or the channel partners (distributors / retailers) place the orders. The role of the Customer Service function is to ensure that goods are delivered on time and also to respond to the enquiries of the customers on delivery, quality and feedback. Nowadays customer expectations are very high. When people contact a business they expect a prompt, polite and knowledgeable response. Unless they get a high level of service they are likely to take their demand to other businesses in the future.

• In order to run the business i.e. buying materials, paying salaries, meeting expenses etc., funds are needed. The role of the Finance function is to obtain and manage company funds effectively.

• The business owners and their shareholders need to know the financial health (sales revenue, profits, cash flow etc.) of the business. The role of the Accounting function is to monitor, measure and report the financial and managerial information.

• Finally, the businesses need a team of people that set goals, make strategies, organize resources, make important decisions, evaluate performance and take corrective actions. The team that oversees the overall direction of the business and manage these functions is called Management.



Features of Business:

Key features that define a business are:

1. It has the primary objective of earning profit. 2. It provides sale or exchange of goods and services. 3. It drives the entire workforce towards common goal. 4. It involves risk and uncertainty.

Benefits of business:

Business is important for any society or a nation. The businesses provide employment to people so that they can satisfy their wants & improve their living standard as well as creates wealth for the society and the mankind.

The key benefits of the business are:

1. Generates employment. 2. Provides quality goods and services as per consumer

demand. 3. Utilizes the resources and converts them to usable &

productive goods / services. 4. Gives return to the investors on their capital investment. 5. Provide opportunities to grow and expand business. 6. Promotes social interest (sponsoring cultural programs,

trade shows, etc.). 7. Sponsors various Science & Technology research

programs.

Business can be classified based on various factors:

1. Nature of business 2. Size of business 3. Presence 4. Ownership

Non-profit organizations work

Non-profit organizations work around the world to accomplish philanthropic missions and provide services for people in need. Non-profit organizations appear similar to their for-profit counterparts in a number of ways, but there are distinct differences beneath the surface.

Such organizations exist to serve a humanitarian or environmental need, and their complete workforce is geared toward this one goal.

Key Features:

Non-profit organizations usually:

• Get tax exemption under section 501(c) (3) of the IRS tax code.

• Employ a core group of salaried employees and a large pool of volunteers

How do non-profit organizations work?

Non-profit organizations obtain majority of their income from donations & grants. Donations come from individuals / groups / trust fund(s) and other organizations.

These organizations engage in a range



Business Classification

Although business is always classified as an economic activity in which goods or services are purchased, produced and sold in exchange of money; you would find that not every business has similar nature. Hence, to understand the basic nature of any business it is best to classify it as either ‘a For-profit’ or a ‘Non-profit’ business.

1. For-profit business

2. Non-profit business

1. For profit business: For-profit business is when goods or services are

purchased, produced and sold to meet and satisfy the customer / consumer’s demand for the purpose of making profit (money).All the manufacturing and service industry falls into this category.

2. Non-profit business: Non-profit businesses do not necessarily have profit as the primary

motive; however it works toward certain social goals. For example, raising money for social and human welfare would fall under this category.

Classification based on business or organization size: 1. Small scale enterprises or industries

2. Large scale enterprises or industries

Small scale enterprises

• Business that employees less than 500 employees. • Business with an investment less than 1 Crore. • Business that produce/manufacture goods at small/medium qts • Business owned by single or few partners. • Example: Departmental store, small eateries, Poultry farms etc

Small Scale Industry

Small scale industries receive many concessions and benefits from the government such as loan on easy terms, sales and marketing support.

Large Scale Industry

Iron and steel industry Petro-chemicals Energy & power Pharmaceuticals Textile industry Automobile manufacturing IT industry Telecom industry.

The Indian economy heavily depends on these large industries for:

a. Country’s economic growth b. Foreign currency c. Employable opportunities

Classification in terms of presence within or across nations:

1. National

2. Multinational

National organizations are the one that have their presence in one nation/country only. Multinational organizations are the one that have their business spread across more than one country.



Large scale enterprises

• Business employing large number of people (more than 500). • Business that requires high capital investment. • Business that produces/manufactures goods at large scale • Examples: Reliance industries, Tata Motors, Aditya Birla Group etc.

Classification based on business output:

Goods In economics, goods are tangible materials that satisfy human wants and provides utility, for example, a consumer making a purchase. Commodities may be used as a synonym for economic goods but often refer to marketable raw materials and primary products.

There are many different kinds of goods. Consumer goods are those such as food and clothing that satisfy human wants or needs. Producer goods are those such as raw materials and tools, used to make consumer goods. Capital goods are that machinery, used in the production of commodities or producer goods.

Business

Goods Services

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The term “service” refers to an intangible activity which full fills a certain need or a want, and just as in case of a physical product a customer needs to have a want and the monetary ability to acquire a service. Any organization which fulfils its customers’ needs by providing a certain service rather than a physical product is known as a service organization. Some of the examples of services organizations are given below:

Service According to Lovelock (2004), “service is any act, performance or experience that one party can offer another; one that is essentially intangible, and does not result in the ownership of anything. Its production may or may not be tied to a physical product.” The service can be understood in various concepts. Some of the common service concepts are:

• Service industries and companies: Classified within the service sector whose core product is service (eg; Bank)

• Service as products: Represent the wide range of intangible product offerings that customers value and pay • for. Sold by service and non-service companies. (eg; Savings Account in a bank) • Customer Service: Service provided in support of company’s core products (typically not charged for) • (eg; Supporting opening an bank account, activating accounts offline & online) • Hidden services: Another way of thinking about products and services (eg; Paying for utility bills & other

services through the bank account without physical presence) The broad definition of services implies that intangibility is a key determinant of whether an offering is a service. The following figure shows the tangible versus intangible elements in



4BUCharacteristics of Services There are five main characteristics which are associated with services. The following figure shows these characteristics:

1. VARIABILITY When you go to a bank, do you get same level of service every time? Or, does every customer of the bank get the same level of service? Does every branch of the bank provide same level of service? Compare it with a product, such as noodle of a particular brand and flavour. Wherever and whenever you buy it, you can expect to get same taste every time. In the production and marketing of physical products, companies have increasingly paid special attention to ensuring consistency in quality, feature, packaging, and so on. More often than not all customers can be sure that every bottle of Coke he/she buys, even in a life-time of purchases, will not vary. The provision of services, however, invariably includes a large measure of the human element. Indeed, with many services, we are purchasing nothing else but the skills of the suppliers. Because of this, it is often very difficult for both supplier and consumer to ensure a consistent “product” or quality of service. Services are highly variable because they are not only dependent on the customers and the service providers but also on the place and time at which they are provided. Since service depends upon individual customers, it can be said that no two services are exactly same and that services are always unique. For this reason service providers face a lot of problems trying to deliver standardized services. Even the customers are Aware of this problem and hence, look at previously provided services and their results. Therefore it is very important to have a consistency in every service provided. Proper training and constant monitoring of customer feedback is important in achieving high standards of services.



2. INTANGIBILITY Physical products in the store are widely displayed for customers to see, feel, touch, weigh or sniff at before deciding whether or not to buy. Compare this with the choice of the service of say, an insurance policy. You cannot touch, see or smell the products before choosing, although clearly you can make some assessment based on past experience, word of mouth, or even the location and decor of the insurance office. Services are intangible and do not appeal to the senses like look or smell. This causes problems for customers and providers both in evaluating the value and quality of the service. Thus, customers tend to look at other attributes like the surroundings or the decorum of the place where service is provided.

3. INSEPARABILITY A key distinguishing feature of service marketing is that the service provision and provider are inseparable from

the service consumption and consumer. For example, we cannot take a hotel room home for consumption; we must “consume” this service at the point of provision. Similarly, the hairdresser needs to be physically present for this service to be consumed. In other words, service provider and the actual service cannot be separated from each other. For example when a doctor performs an operation he has to be physically present to perform the service, and the same way the customer also has to be present to obtain a service unlike in case of a physical product where he need not be present physically. Services are produced and consumed simultaneously. This has implications

both for channels of distribution and scale of operations. Inseparability of production and consumption increases the importance of the quality in services. Therefore, service marketers not only need to develop task-related, technical competence of service personnel , but also , require a great input of skilled personnel to improve their marketing and inter personal skills. For example, the role of a surgeon is not only to have an expertise in performing a surgery but also to gauge patient’s state of mind and make him or her feel relaxed before the surgery.

4. PERISHABILITY Services are highly perishable compared to physical products. Services cannot be stored. Their consumption takes place simultaneously as when they are produced. In other words, services have zero inventory. Once sold, they stand sold and cannot be returned. Service providers cannot improve their supply chain to improve the service frequency. A vacant seat on a plane is lost forever; similarly a partly-used operation theatre will take longer to recover the cost of building it. Unlike services, goods once produced can be stored and sold later. Companies produce and store goods for the peak seasons such as festivals, which is not possible in case of services.



5. NON-OWNERSHIP The final distinguishing feature of a service is that, unlike a physical product, the consumer does not secure ownership of the service. Rather the customer pays only to secure access to or use of the service. Again the hotel room is a good example. Similarly, with banking services, although the customer may be given a cheque book or a credit card, they serve only to allow the customer to make use of what he or she is actually buying, namely, bank services.

Type of Activities Activities which human beings undertake are known as human activities. These may be cultivating land, growing plants, rearing animals, teaching in a school or college, working in a factory or office, watching television, listening to radio, reading newspaper, worshipping in a temple, playing football, etc. Business is a complex process that includes multiple activities, and each of these activities may be divided into two broad categories as-

a. Economic activities; and

b. Non-Economic activities

a. Economic Activities

Activities, which are performed with an objective to earn money, are known as economic activities. For example, a farmer grows crops to sell them, a factory or an office employee works and gets wage or salary, a businessman earns profit through buying and selling goods.

For example,

• Maruti Udyog manufacturing cars. • Dominos selling Pizza. • Farmer producing crops to sell them for a profit.

b. Non-economic Activities Activities, which are not performed to earn money but to get some satisfaction, are called non-economic activities. These activities are performed to discharge social obligation or for physical fitness or for recreation. People visiting places of worship, providing relief to the victims of flood and earthquake, engaging in sports activities, gardening, listening to radio or watching television are all examples of non-economic activities.

For example,

• Organization helping flood victims • Charity soccer / events • Official gathering / carnivals, etc.

“Economics-the study of how scarce resources are used to produce outputs-goods and services- that are distributed among people. Resources-inputs used to produce outputs- land and other natural resources, labour (physical/mental), capital (buildings, equipment, and money), entrepreneurship.



Business Activities: Business Activities refer to all the activities in a company that enable the business to achieve its economic and non-economic objectives.

Business activities are broadly classified into two main categories:

a. Industrial activities, and b. Commercial activities

a. Industrial activities: These activities are related to production or extraction of goods through utilization of various resources. Growing crops and plants, extracting oil, natural gas and minerals from the surface of the earth, processing raw materials into finished and semi-finished goods, construction of buildings, dams and bridges are examples of industrial activities.

Example: • Growing crops

• Extracting natural resources (oil, natural gas, etc.).

• Manufacturing of automobiles, consumer goods, industrial products etc.

b. Commercial activities: Commercial activities include all those business activities, which are undertaken for selling or exchanging goods & services, and for facilitating their availability for consumption and use. Thus, it includes trading activities and other service activities like transport, banking, insurance, warehousing etc.. These service activities are known as auxiliaries to trade or aids to trade. They facilitate the business by carrying goods from the place of production to the place of consumption, providing finance, undertaking risk, systematic storing of goods etc.

Example: • Buying and selling of goods by wholesalers, dealers, retailers, also called as Trading.

• Activities and other service activities like transport, banking, insurance, warehousing etc. that support

the trading activities.

• Advertising and promoting.

Exercise 1

1. What is the purpose of economic activities?

______________________________________________________________________________________

_____________________________________________________________________

What is the outcome of such activities?

______________________________________________________________________________________

______________________________________________________________________



Sectors of Economy Based on the dependence of a sector on the natural resources directly or indirectly they are classified as:

1. Primary sector 2. Secondary sector 3. Tertiary sector

1. Primary Sector Industries engaged in extracting, producing and processing natural resources such as minerals, plants, agriculture or animals are called primary industry. These industries use natural resources as raw materials and produce finished goods.

Examples: Mining Oil Extraction Dairy Farming Poultry Farming Horticulture Fisheries etc.

2. Secondary Sector

Industries that use the products produced by primary industry as the raw materials and produce variety of goods are called secondary industry.

Examples: Iron (primary source - iron ore). Wood Furniture (primary source – wood/trunk). Breakfast Cereals (primary source – cereals/grains).

3. Tertiary Sector

Sectors providing services to the consumers are called tertiary industries.

Examples: Healthcare Banking Insurance IT services Transport, etc.



Link between Primary, Secondary and Tertiary Industries:

•

Primary indstry: Cotton crop production

Secondary industry: Textile Mill

• Image 3

Tertiary industry: Apparel Store



Exercise 3

1. Business benefits only the shareholders and doesn’t contribute to the development of a nation. a) True b) False.

2. The activities that include production and extraction of goods are called _____________ activities.

3. A business group contributing money to the Prime Minister’s relief fund is _______________.

4. Social responsibility is one of the important features of the business.

a) True b) False

Exercise 2

Identify the primary and secondary industries for the following tertiary industries:

Primary Sector Secondary Sector Tertiary Sector

1) ________________________ _________________________ Transport Industry

2) ________________________ _________________________ Healthcare Industry

3) ________________________ _________________________ Retail Industry

4) ________________________ _________________________ Insurance Industry



Commerce and Trade Commerce:

1) You may get up in the morning and have your favourite cup of Brazilian coffee, sitting in front of a TV that has been manufactured in China. Have you ever wondered how goods from various parts of the Globe reach your home? Why would Brazil sell coffee and China sell computers to India? A simple explanation is that each side expects to derive profit. For example, those goods that are cheaper to produce (and thus, are in abundance) in a particular country are exported (sold), and those that are more expensive to produce (or are not available at all) are imported (bought). This is called international trade and all the activities that support and regulate the exchange of goods are called Commerce.

2) Commerce is a branch of business. It is concerned with the exchange of goods and services. It includes all those activities, which directly or indirectly facilitate that exchange. Commerce looks after the distribution aspect of the business. Whatever is produced must be consumed and to facilitate this consumption there must be a proper distribution channel. Here comes the need for commerce, which is concerned with the smooth buying and selling of goods and services.

3) Goods produced in a factory change number of hands before they reach the end consumer. (see example below)

Trade :

Buying and selling of goods & services either for cash or on credit. The person who buys goods for the purpose of selling is a trader. For example, a shopkeeper who buys goods from a distributor or a wholesaler in bulk and sells it to the individual consumers is a trader. There are also two types of trade, i.e. Domestic Trade (done within a country) and International Trade (done with other countries).

Manufacture

Custom

Seller Distributor

Retailer

Consumer

Trade

Domestic Trdae

Wholesale Retail

International Tradel

Import Export Entrepot



Domestic Trade:

Refers to buying and selling goods or services within the boundaries of a country. The payment is done in the currency of the country, Indian Rupees for Indian domestic trade e.g.. Domestic trade is again divided into wholesale and retail.

Wholesale:

A trader that buys goods from a company in a bulk quantity and sells it to the smaller traders, is called a wholesale trader. They do not sell directly to the end consumers. There are wholesale markets in every city where such trade happens. One of such wholesale market for electronic goods in Delhi is Lajpat Rai market. Can you find out wholesale markets for various categories of products in your city?

Retail:

A trader who buys in bulk from a company or a wholesaler and sells it to the end consumer, is called a retail trader. All the shopkeepers, departmental stores or company outlets are examples of retail. All the big outlets for the consumers such as Big Bazar, Reliance, Spencer and Croma, which do retailing on a large scale & have a proper infrastructure of storing, moving and displaying goods are called Modern Retail.

Difference between Wholesale Trade and Retail Trade

Wholesale Trade Retail Trade

Wholesale traders buy goods from a company in a bulk quantity and sell it to the smaller traders.

Retail Traders buy bulk from a company or a wholesaler and sell it to the end consumer.

Wholesale traders do not sell directly to the end consumers.

Retailers sell directly to the end consumers.

Example: Metro Cash and Carry outlets in Bangalore and Mumbai sell only to the small retailers in those cities. Similarly there are multiple small and big wholesalers for every product in a city or a town.

Example: All the shopkeepers, departmental stores or company outlets are the example of retail.

International Trade: If the buying & selling of goods happens across the boundary of the country, it is called international or foreign trade. The payment is done in international currencies such as US Dollar, Euro, Pounds etc. The international trade is further classified as:

Import: Goods or services purchased from foreign country for selling in own country.

Export: Goods or services sold to another country.

Entrepot: Goods imported from one country for the purpose of exporting to other country with or without making any change. For example, some companies import parts and components from other countries, assemble them into finished product and then export to other countries.



Electronic Commerce: What is common between the companies whose logo are shown below? You must have used their sites to buy products or service.

If the buying and selling of goods and services happens over the internet or other computer networks, it is called electronic or e Commerce. Even the payments are electronically transferred from the buyer’s to seller’s account. There are number of websites available that provides this facility including listing features & details of the products, price of the products, availability and delivery time, payment options etc.

Advantages of e Commerce:

a. Low cost of business: e Commerce can connect a business with a large number of customers across the globe, at a fraction of a cost that is required to reach so many customers in a traditional way of setting up physical outlets at every place and stocking goods in each outlet.

b. Wider Choice of Goods: The customers have a wider choice of goods & services to select from. c. Convenience: The customers can purchase goods right from home or office using internet and do not

physically need to go to any outlet. d. Quick Response to Customers: The goods to end customers can be reached directly without routing

through the distributor or wholesalers. The customers get better service, faster transaction, fewer shortages of the products etc.

Exercise 4

Fill in the blanks

1. Trade matches the gap between producer and _________________. 2. Commerce consists of activities that include trade and __________________________. 3. A trader imports washing machine in India for exporting to neighbouring countries. This trade is

called ____________________. 4. A trader in Chawri bazar buys goods in bulk to sell to the smaller retailers. The trader is a

____________________. 5. Ramesh buys household grocery from a _______________. 6. Easy Trade.com allows traders to buy and sell goods on internet, also known as

_______________.



Business Objectives A business has four main objectives:

1. Economic objective 2. Social objective 3. People objective 4. National objective

1. Economic objective Economic objective is the primary objective of any business that leads to the growth of business, earning profit and providing value to shareholders.

Economic objectives are:

a. Profits:

- Required for business growth. - Provide return to the investors. - Act as cushion against any future risks.

b. Growth: - To increase sales revenue. - To be competitive in the market. - To expand customer base.

Growth vs. Market Share

If the business grows at the same rate as its sector, they retain their market share. If the business grows more than its sector, this leads to an increase in market share and vice versa.

Growth vs. Profit

Growth requires part of profit to be invested in the business as higher growth leads to higher profits.

To sustain continuous growth of business, lot of investment is required. These investments may seem to be reducing profits; however they yield higher profits in future.

Some common examples of such

investment are:

Marketing / advertisement

Infrastructure

Information technology, etc.

Higher growth

leads to more profit

Growth requires part of profits to be invested in the business



2. Social objective

Business should contribute to the improvement of wellbeing of the society and should not engage in any activity that harms the society or its environment in any manner.

Social objectives are:

a. Value for Money

- Improve quality and features. - Provide customized product/services. - Make product/services consumer friendly.

b. Corporate Social Responsibility:

Corporate Social Responsibility (CSR) ensures that a company's business model should be socially responsible and environmentally sustainable. Examples of activities undertaken under CSR are:

- Sponsor research programs.

- Participate in charity events for social welfare.

- Invest on education, healthcare, safe drinking water, etc.

c. Business Ethics: All the business need to adhere to laws of the country and follow ethical ways of doing business. They should adapt fair trade practice, should not discriminate against any gender, caste or a race. They should not make false claims or mislead public for their personal gain.

Organizational approach towards ‘Corporate social responsibility’ (CSR):

Philanthropic approach

- Few of the socially active organizations have taken the philanthropy approach. This includes monetary donations and aid given to local organizations and impoverished communities in developing countries.

- E.g. Bill and Melinda Gates Foundation.

Community based development:

- This approach involves corporations to work with local NGO’s or communities for social welfare.

- E.g. Marks & Spencer.

CSR into Corporate Strategy

- On the other hand, other organizations who do not support a philanthropic approach, introduce the CSR values into their corporate strategy.

Bill & Melinda Gates foundation with an annual endowment of $37.1bn focuses on Education, Healthcare & Poverty via various US

as well as Global Health & Development Programs.



3. UPeople objective Every business employs people to run and manage its operations. The human objective of the business therefore includes well-being of their employees, providing opportunities for their development & growth, making the work environment conducive & safe, and providing social security benefits such as insurance, medical cover, pension etc.

People objectives are:

a. Employee well-being:

- Fair compensation for the services. - Reward commendable performance. - Provide benefits such as PF (Provident Fund), pension, health & life

coverage, etc.

b. Employee development: - Invest on skill building trainings and workshops. - Provide opportunities to take higher responsibility and challenges. - Arrange counselling or coaching sessions if needed. - Equip employees with the required infrastructure. - Motivate to learn and grow.

4. UNational Objective Business is the backbone of a country’s economy. National objectives are:

a. Provide employment: By providing employment to people, it not only help them to survive but also help them to improve their standard of living. As people earn more, their purchasing power increases and they demand more products or services. This helps the business to grow further and employ more people.

b. Grow nation’s wealth: The Gross Domestic Product (GDP) that is used as a measure of wealth of a nation, is directly impacted by the goods and services produced by various business operating in country. The higher the GDP per capita (Total GDP divided by population of a country) the more prosperous is the nation. The business that focus on exports of goods and services help country to earn foreign exchange and achieve balance of trade with other countries.



Exercise 5

Please select the appropriate business objective (people, economic, social, and national) against each of the following statements:

Business activity Business Objective

1 A business must ensure that the product or service sold to the customers is worth its cost.

2 A business should ensure that it pays all the due taxes to the government on time.

3 A company has provided schooling facility for the children of its employees.

4 A company organized a meeting of its shareholders to discuss its performance.

GDP Comparison for major economies (figs. for the year 2010):

United States : USD 14.5 Trillion

China : USD 5.8 Trillion

India : USD 1.6 Trillion



Summary • Business is an economic activity in which goods or services are purchased, produced and sold in exchange of

money.

• Businesses can be for Profit and not for Profit

• Businesses can be for selling Goods, Services or both

• Characteristics of Services businesses that makes it more challenging are: Variability, Intangibility, Inseparability, Perishability, Non-ownership

• Business not only help the owners earn profits but also serves the National, Economic and Social cause

• GDP is the measure of the health of economy

• Sectors of economy are: Primary, Secondary and Tertiary

• All the three sectors are linked to each other and play an important role in the economy of a country

• Trade is buying and selling of goods and services

• Commerce is the branch of business that support and regulate the trade

• E Commerce is f the fastest growing channel of trade that has many advantages over the traditional channels of trade

Web Resources:

• Evolution of e Commerce (Video) : http://www.youtube.com/watch?v=LW4X3b_j0eE

• Business Objectives: http://www.informationbible.com/article-objectives-of-business-23.html

• International Trade Bodies http://commerce.nic.in/resourcecenter/internationaltradebodies.asp?id=12

• Public Sector Undertakings http://commerce.nic.in/aboutus/aboutus_autonomousbodies.asp#b13

http://www.youtube.com/watch?v=LW4X3b_j0eE

http://www.informationbible.com/article-objectives-of-business-23.html

http://commerce.nic.in/resourcecenter/internationaltradebodies.asp?id=12

http://commerce.nic.in/aboutus/aboutus_autonomousbodies.asp#b13



Students Activities Quick Games

Identify the brand by the logo:

Brand Logo

Brand Name

Brand Logo

Brand Name

01

11

02

12

03

13

04

14

05

15

06

16

07

17

08

18

09

19

10

20

http://www.toxel.com/wp-content/uploads/2008/08/creativelogos14.jpg

http://www.google.co.in/imgres?imgurl=http://mattcastille.com/me/wp-content/uploads/2007/05/photos-uncategorized-apple-logo-red-wo-background.jpg&imgrefurl=http://mattcastille.com/me/2007/05/mac2sell-offers-online-estimates-for-used-apple-macs/&usg=__BfRfMv64Aq0i7EjaeDza9VmJk7k=&h=720&w=720&sz=139&hl=en&start=12&zoom=1&tbnid=GzVd4vgzFJCrdM:&tbnh=140&tbnw=140&ei=Zw2rTrvCNMjQrQfD9PC5DA&prev=/search?q=apple+logo&um=1&hl=en&sa=N&tbm=isch&um=1&itbs=1

http://www.google.co.in/imgres?imgurl=http://www.tutorials.connahey.com/pepsi/images/pep.jpg&imgrefurl=http://www.tutorials.connahey.com/pepsi/pepsi.html&usg=__dAn2PF0KFJHdwicjdyoPMSYGPc4=&h=474&w=425&sz=36&hl=en&start=8&zoom=1&tbnid=ZXAXilg7zfzmPM:&tbnh=129&tbnw=116&ei=9A2rTr6REYH4rQe8idHHDA&prev=/search?q=pepsi+logo&um=1&hl=en&sa=N&tbm=isch&um=1&itbs=1



Can you identify the brand name by its tagline/slogan?

Brand Tagline/Slogan

Brand Name

01 There are some things that money can’t buy, for everything else there’s...

02 The Best a Man Can Get

03 Experience Life, Beautifully Arranged

04 Where do you want to go today?

05 Between Love and Madness lies Obsession

06 The Ultimate Driving Machine

07 High Performance. Delivered

08 Forever New Frontiers

09 Think Outside the Bun

10 A Passion to Perform

11 When it Rains, it pours

12 ON DEMAND



13 A Positive A++itude

14 We are Building a New Technology Company

15 Born in Japan Entertaining the World

16 Welcome to Cashless World

17 Das Auto

18 Journalism of Courage

19 Like. No. Other.

20 “At the edge of the world, his journey begins”



Classroom Activity

Pick any industry e.g. food, automobile, furniture and discuss the following with your group:

• Plot all the business activities right from obtaining the materials to reaching to end consumer or user.

• Classify each of these activities as:

– Primary, Secondary, Tertiary Industries

– Industrial or Commercial Activities

– Agencies engaged in Trading and Commerce



Notes:

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Documents

PG Business Fundamentals BT V3