Question-1 What is the definition and concept of Business?

Explain the nature and scope of business?

Ans : BUSINESS
Business is an economic system in which goods and services are exchanged for
one another or money, on the basis of their perceived worth. Every business
requires some form of investment and a sufficient number of customers to
whom its output can be sold at profit on a consistent basis.
Business can also be defined as the Activities connected with the production or
purchase and sale of goods or services with the object of earning profit are
called business activities. Mining, manufacturing, trade, transportation,
insurance, banking are business activities. Thus business may be defined as an
economic activity involving regular production or purchase and distribution of
goods and services with the objectives of earning profits.
A Business is also known as company, enterprise, or firm. It is a legally
recognized organization designed to provide goods, services, or both to
consumers or tertiary business in exchange for money. [1] Businesses are
predominant in capitalist economies, in which most businesses are privately
owned and typically formed to earn profit that will increase the wealth of its
owners. The owners and operators of private, for-profit businesses have as one
of their main objectives the receipt or generation of a financial return in
exchange for work and acceptance of risk. Businesses can also be formed notfor-profit or be state-owned.
The etymology of "business" relates to the state of being busy either as an
individual or society as a whole, doing commercially viable and profitable work.
The term "business" has at least three usages, depending on the scope the
singular usage (above) to mean a particular company or corporation, the
generalized usage to refer to a particular market sector, such as "the music
business" and compound forms such as agribusiness, or the broadest meaning
to include all activity by the community of suppliers of goods and services.
However, the exact definition of business, like much else in the philosophy of
business, is a matter of debate and complexity of meanings.

Nature and characteristics of Business:

Business is very complex and dynamic in nature as it has very far reaching
impacts on society, nation and rather the whole world as now Business has
become a global activity because of easy communication and wider

connectivity. The nature of business is best understood on the basis of its

characteristics or features which are as follows:
1. Business is an economic activity
2. It includes the activities of production or purchase and distribution.
3. Business deals in goods, ideas and services.
4. It implies regularity of transactions.
5. It aims at earning profits through the satisfaction of human wants.
6. It involves risk; it is not certain that adequate profit will be earned.
7. Business creates utilities and utilize societal resources..
8. Business serves a social purpose by improving peoples standard of living.
9. Business creates employment opportunities for the people in the society.
10. Business keeps a society and a nation economically independent and
strong.

Question-2 Distinguish the Business, Profession and

Employment or sevices as economic activities.
Ans : Business, Profession and Employment or Services are the
significant types of Economic Activities. When a person is regularly engaged in
a particular economic activity, it is known as his or her occupation or vocation.
Occupations may be classified into three categories
(i) Business,
(ii) Profession and
(iii) Employment (Service).

Business:
Activities connected with the production or purchase and sale of goods or
services with the object of earning profit are called business activities. Mining,
manufacturing, trade, transportation, insurance, banking are business activities.
Thus business may be defined as an economic activity involving regular
production or purchase and distribution of goods and services with the
objectives of earning profits.
The main characteristics of Business are as follows ;
1. Business is an economic activity
2. It includes the activities of production or purchase and distribution.
3. Business deals in goods, ideas and services.
4. It implies regularity of transactions.
5. It aims at earning profits through the satisfaction of human wants.
6. It involves risk; it is not certain that adequate profit will be earned.
7. Business creates utilities and utilize societal resources..
8. Business serves a social purpose by improving peoples standard of living.
9. Business creates employment opportunities for the people in the society.
10. Business keeps a society and a nation economically independent and
strong.

Profession:
Any activity which requires special knowledge and skill to be applied by an
individual to earn a living is known as profession. For example doctors,
teachers, lawyers, engineers and accountants are engaged in profession.
Profession involves intellectual activity. It is not a mechanical or routine
operation.
The main characteristics of profession are

(i) Every profession requires special knowledge and training.

(ii) The primary objective is to render service.
(iii) The service cannot be substituted by another individual.
(iv) Every profession is regulated by a professional body. For example the
profession of Chartered Accountants is regulated by the Institute of Chartered
Accountants of India.

Employment
When a person works regularly for others and gets wages/salary in return, he is
said to be in employment. Thus factory workers, office assistants and managers
are said to be in employment. Those in employment are called employees.
Employment may be in government department or in private organisation. It
may be full-time or part-time, permanent or temporary. The main features of
employment are :
(i)

Employees always work for others.

(ii)

There are certain terms and conditions of work.

(iii)

The people involved earn fixed income.

Vocation
Vocation means an occupation which involves the use of some basic skills
which can be developed by practice. Type-writing, tailoring, laundering,
carpentry etc. are some examples of vocation. Those who wish to get
employed after completing secondary education may acquire the basic skills
required for any vocation.

Distinction between Business, Profession and Employment

Basis
Employment
1. Primary
Earning
Objective
wages/salary
2. Reward
Salary/wages
3. Nature of
Job

Business
Earning
profit
Profit

Profession
Rendering
paid service
Professional fee

Production of

Expert

work
performance

purchase and sale

service

Professional

As

4. Qualifications Undefined
per the need

training
of the employer

Question- 3 Define and explain the concept of Business as a

systems. What is the scope of Business in this modern
corporate world?
Or
Question-4 What do you mean by the Concept of Business
as a system? In this highly competitive world how the scope
of business can be explained?
Ans : Business as a System-The concept of Business as a system is a
concept which is very dynamic and comprehensive. If we have to understand
the concept of Business as a system we have to know about both Business
Processes and Business system in detail so that we can understand the concept
of Business as a System.
.
Business Process
A business process is a kind of process in the domain of business
organizational structure and policy for the purpose of achieving business
objectives. Most people intuitively understand a business process to be
a procedure or event with

the

purpose

of

reaching

goal.

When

looking

at

our UML Airport we can find many different business processes and goals:

The goal of our passenger is to go on vacation. To achieve this goal, he

has to book a flight and hotel, pack his bags, drive to the UML Airport, check in
and board his airplane, exit the plane at his destination airport, go to the hotel,
move into his room, and unpack his bags.

The owner of the newsstand at the UML Airport wants to sell her goods.
For this, she buys items inexpensively and sells them to her customers at a
higher price.

In order for passengers to check in at the UML Airport, an employee of

passenger services accepts their tickets and luggage, inquires about their seat
preferences, and uses an IT system. By the end of the procedure, the
passengers receive their boarding passes on which their reserved seats and the
appropriate gates are marked.
As we can see, business processes are often completed in several steps. These
steps are also referred to as activities, and have to be completed in a
predetermined order. The newsstand owner cannot sell any goods unless she
has purchased them before hand.
A passenger packs his or her suitcase before he or she drives to the airport. The
employee of passenger services at the check-in counter can only issue a
boarding pass after check-in is completed :

Figure - Activity of the business process Passenger Services

Activities can run sequentially or in parallel. Thus, a passenger can buy a bottle
of whiskey in the duty-free shop, while his or her luggage is being loaded into
the Airbus 320 to London.
Individual activities can be organizationally distributed. The check-in procedure
takes place at the check-in counter and is performed by an employee of
passenger services, while the subsequent boarding occurs at a different location
and is performed by different employees of passenger services.
Usually, the activities of a business process are interdependent. This
interdependency is created by the interaction of all the activities belonging to a
business process that pursue one common goal.

A process is a coordinated (parallel and/or serial) set of process activity(s) that

are connected in order to achieve a common goal. Such activities may consist
of manual activity(s) and/or workflow activity(s).
According to this definition, a process is a set of activities that occur in a
coordinated manner, either in parallel or one after another, and that pursue one
common goal. These activities can be performed manually or when supported
by an IT system. A business process is a kind of process in the domain of
business organizational structure and policy for the purpose of achieving
business objectives.

Business Systems
So far, we have explained business processes. Business processes are dynamic
in nature and involve activities. However, if we want to look at the entire
business system, we also have to consider the static aspects. This involves, for
instance, the organizational structures within which business processes are
conducted. This also involves various business objects and information objects,
such as tickets or orders. For the static and dynamic aspects as a whole, we use
the term business system.
In business terminology, a business system refers to the value-added chain,
which describes the value-added process, meaning the supply of goods and
services. A business can span one or several business systems.
Each business system, in itself, generates economic benefit. Thus, the business
administrative meaning of business system does not differ very much from our
use of the term business system. We also refer to the results of a business
system as functionality.
For the analysis and modeling of a business system it is important to define
system limits. A business system that is to be modeled can span an entire
organization. In this case, we talk about an organization model. It is also
possible to consider and model only a selected part of an organization. In our
case study, an IT system is to be integrated into the Passenger Services
operation. Therefore, it is sufficient to observe this operation and to narrow the
business system to Passenger Services only.

Passenger Services is a division within the UML Airport, with employees,

organizational structure, an IT system, and defined tasks (Figure). The
surrounding divisions, such as baggage transportation or catering, also belong
to the UML Airport, but not to our business system. So, we will treat them like
other, external, business systems:

Figure - System boundary during analysis of the business system

We are not interested in any of the external business systems as a whole, but
only in the interfaces between them and our business system. For instance, the
staff of passenger services need to know that they have to transfer passengers
luggage to baggage transportation, so that it can be loaded into the airplane. Of
course, for this, passenger services have to know how baggage transportation
accepts luggage, so that it can be made available accordingly. It is possible that
the IT systems of passenger services and baggage transportation will have to
be connected, meaning that interfaces will have to be created. On the other
hand, passenger services are completely unconcerned with how baggage

transportation is organized, and whether each suitcase is individually carried

across the runway or carts are used to transport luggage to the airplane.
Using UML to Model Business Processes and Business Systems
Before we move on to the modeling of business processes and business
systems with UML, we should ask ourselves whether UML is even suitable for
the modeling of business processes and business systems. For this purpose we
will take a look at UMLs definition by OMG (Object Management Group Inc.the
international association that promotes open standards for object-oriented
applications, which publishes each version of UML that is submitted for
standardization at www.omg.org):
This definition indicates that UML is a language for the modeling and
representation of systems in general, and thus, also of business systems.
In any case, UML fulfills at least one of the requirements of business-system
modeling: it reflects various views of a business system, in order to capture its
different aspects. The various standardized diagram types of UMLmeet this
requirement, because every diagram gives a different view of the modeled
business system.

Scope of Business:
The scope of business is very wide. It includes a large number of activities
which may be classified under two broad categories, namely, Industry and
Commerce. A description of the activities which come under these two broad
categories is given below.
1.6.1 Industry : The activities of extraction, production, conversion, processing
or fabrication of products are described as industry. These products of an
industry may fall under any one of the following three categories:
(a) Consumers Goods : Goods used by final consumers are called consumers
goods. Example of consumer goods Edible Oils, Cloth, Jam, Television, Radio,
Scooter, Motor Car, Refrigerator, Cell phone etc. come under this category.
(b) Capital Goods : Goods used in the production of other goods are described
as produces goods. Steel produced by steel plant is used for fabrication into a
variety of products such as motor cars, scooters, rail Locomotive engines, ships,

surgical instruments, blades, etc. Similarly machine tools and machinery used
for manufacturing other products also come under this heading. These are also
called capital goods.
(c) Intermediate Goods : There are certain materials which are the finished
products of one Industry and become the intermediate products of other
industries. A few examples of this kind are the copper industry, the finished
products of which are used in manufacturing Electrical Appliances, Electricity
Wires, Toys, Baskets, Containers, and Buckets.

Question -5 What are the major characteristics of business

and briefly explain the nature of business?
Ans :
Business may be defined as an enterprise engaged in the production and
distribution of goods for sale in the market or rendering service at a price.
Business may be defined as human activities directed towards providing or
acquiring wealth through buying and selling goods". This definition includes
activities relating to the production of goods. A vital omission is 'services'.
Business includes rendering of services also. The main characteristics of
business are;
1. Entrepreneur:- There must be someone to take initiate for establishing a
business. The person who recognises the need for a product or service is known
as entrepreneur. The entrepreneur is a key figure in the process of economic
growth. The quality of entrepreneurship exiting in any region determines to a
large growth. The quality of entrepreneurship existing in any region determines
to a large extent the development of that region. The entrepreneur visualizes a
business, combines various factors of production and puts them into a going
concern.
2. Economic Activities:- A Business includes only economic activities. All
those activities relating to the production and distribution of goods and services
are called economic activities. These activities are under-taken with economic
motive. Business is carried on with a profit motive. Any activity undertaken
without economic consideration will not be a part business. So, business covers
only economic activities.
3. Exchange of Goods and Services: A business must involve exchange of
goods and services. The goods to be exchanged my either be produced or
procured from other sources. The exchange of goods and services is undertaken

with profit motive. Production or purchasing of goods and services for personal
consumption do not constitute business. The purchase of goods by a retailer
constitutes business while the purchase of goods by a consumer is not business.
The purchase of goods should be to sell them again. The same principle is
applicable to services. If a person cooks his food at home it is not business, but
if the same person cook at a restaurant, it is business, because he exchange his
services for money.
4. Profit Motive:- The profit motive is an important element of business. Any
activity undertaken without profit motive is not business. A businessman tries to
earn more and more profits out of his business activities. The incentive for
earning profits keeps a person in business and is also necessary for the
continuity of the business. This does not mean that there will not be losses in
business. The object of starting a business is to earn profit through there may
be losses. The profit motive does not entitle a businessman to start exploiting
the consumers. The responsibility of business towards society restricts a
businessman from earning exorbitant profit. The business activity will flourish
more when the business serves the society.
5. Risk and Uncertainty:- The business involves larger element of risk and
uncertainty. In fact a business tries to foresee any future uncertainties and plan
his business activities accordingly. The factors on which business depends are
never certain, so the business opportunities will also be uncertain. These may
be shift in demand, strike by employees, floods, war, fall in prices, fluctuations
in money market etc. If a businessman is able to foresee uncertainties and is
able to bear them then he will successful, otherwise he may be forced out of
business. The risk element in business keeps a person vigilant and he tries to
ward off his risk by executing his policies properly.
6. Continuity of Transactions:- In business, only those transactions are
included which have regularity and continuity. An isolated transaction will not be
called business, even if the person earns from that deal. A person builds a
house for himself, but later on sells it on profit. We will not sell them, this will be
called business. So the transactions should have continuity and regularity,
otherwise they will not be a part of business.
7. Creation of Utility:- The goods are provided to the consumers as per their
linkings and requirements. Business crates various types of utilities ion goods so
that consumers may use them. The utility may be form utility, place utility, time
utility etc. When raw materials are converted into finished goods, it creates from
utility. The goods are transported from the places of production to the ultimate
consumers; it creates place utility. In the present industrial world, production is
not done only for the present but it is undertaken for the future also. The
process of storing goods when they are not required and supplying them at a

time when they are needed is called creation of time utility. So the business
creates many utilities in goods so that the consumers may use them according
to their preferences and needs.
8. Organisation:- Every enterprise need an organisation for its successful
working. Various business activities are divided into departments, sections, and
jobs. An organisation creates the framework for managerial performance and
helps in coordinating various business activities. A proper oganisation is helpful
in the smooth running of the business and helps to achieve its objectives.
9. Financing:- Business enterprises cannot move a step without finance. The
finances are required for providing fixed and working capital. The availability of
other factors of production also depends upon the availability of finances. After
estimating its financial requirements, the businessman tries to find out the
sources from which these requirements will be met. A proper capital structure is
must for the success of the business.
10. Consumer Satisfaction:- The utilities of business is to supply goods to the
consumers. The foods are produced for the consumers. If the consumer is
satisfied, then he will purchase the same thing again, otherwise he will for in for
an alternative commodity. The business should try to satisfy the consumer so
that the demand for his products is maintained. The existence and expansion of
business depends upon the liking of the consumers for the products of that
business. The businessman should try to produce goods according to the
linkings and tastes of consumers. The commodities should be made available
when they are needed. Business and consumers exist for each other.
11. Satisfying Social Need:- The business should aim at serving the society
at large. The business is a socio-economic institution. It must look to the public
good. A great emphasis is laid, now-a-days, on the social aspect of business and
social obligations of business. It is not only the public which needs business but
business also needs public support. S business must serve public purpose.

Nature of Business
Business by nature is a decision-making organization involved in the process
of using inputs to produce good and/or provide services.. Businesses exist to
satisfy the needs and wants of people, organizations, and governments. The
nature of business is best understood on the basis of its characteristics or
features which are as follows:
1. Business is an economic activity
2. It includes the activities of production or purchase and distribution.

3. It deals in goods and services.

4. It implies regularity of transactions.
5. It aims at earning profits through the satisfaction of human wants.
6. It involves risk; it is not certain that adequate profit will be earned.
7. It creates utilities.
8 . It serves a social purpose by improving peoples standard of living
9. Business denotes creation of utility and service for satisfaction of human
wants. Business helps in the creation, distribution and production of utilities.
10. Business activities are recurring in nature. Recurring purchase and sales are
regarded as identifying marks of the business.
11. Business provides a way of living to the businessman because he intends to
earn profit.
12. Business activities are
benefited.

Question-6
Business?

not sided affairs because both the parties are

What are the various major objectives of

Or
Question-7 What do you understand by economic and social
objectives of business?
Ans :
Objectives of Business - Meaning
An objective is something you want to achieve. You may have many objectives
in mind; one could be to perform well in the examination. Similarly, business
objectives are something which a business organization wants to achieve or
accomplish over a specified period of time. These may be to earn profit for its
growth and development, to provide quality goods to its customers, to protect
the environment etc.

These are the objectives of business. In the following section let us classify the
objectives of
Business
Classification of Objectives of Business
It is generally believed that a business has a single objective, that is, to make
profit. But it cannot be the only objective of business. While pursuing the
objective of earning profit, business units do keep the interest of their owners in
view. However, any business unit cannot ignore the interests of its employees,
customers, the community, as well as the interests of society as a whole.
For instance, no business can prosper in the long run unless fair wages are paid
to the employees and customer satisfaction is given due importance. Again a
business unit can prosper only if it enjoys the support and goodwill of people in
general. Business objectives also need to be aimed at contributing to national
goals and aspirations as well as towards international well-being. Thus, the
objectives of business may be classified as -

a. Economic Objectives
b. Social Objectives
c. Human Objectives
d. National Objectives
e. Global Objectives
Now we shall discuss all these objectives in details.

Economic Objectives
Economic objectives of business refer to the objective of earning profit and also
other objectives that are necessary to be pursued to achieve the profit
objective, which include, creation of customers, regular innovations and best
possible use of available resources. Let us learn about these.
i. Profit earning
Profit is the lifeblood of business, without which no business can survive in a
competitive market. In fact profit making is the primary objective for which a
business unit is brought into existence. Profits must be earned to ensure the
survival of business, its growth and expansion over time. Profits help
businessmen not only to earn their living but also to expand their business
activities by reinvesting a part of the profits.
In order to achieve this primary objective, certain other objectives are also
necessary to be pursued by business, which are as follows:

Creation of customers
A business unit cannot survive unless there are customers to buy the products
and services. Again a businessman can earn profits only when he/she provides
quality goods and services at a reasonable price. For this it needs to attract
more customers for its existing as well as new products. This is achieved with
the help of various marketing activities.
b) Regular innovations
Innovation means changes, which bring about improvement in products,
process of production and distribution of goods. Business units, through
innovation, are able to reduce cost by adopting better methods of production
and also increase their sales by attracting more customers because of improved
products. Reduction in cost and increase in sales gives more profit to the
businessman. Use of power-looms in place of handlooms, use of tractor in place
of hand implements in farms etc. are all the results of innovation.
c) Best possible use of resources
As you know, to run any business you must have sufficient capital or funds. The
amount of capital may be used to buy machinery, raw materials, employ men
and have cash to meet day-to-day expenses. Thus, business activities require
various resources like men, materials, money and machines. The availability of
these resources is usually limited. Thus, every business should try to make the
best possible use of these resources. This objective can be achieved by
employing efficient workers, making full use of machines and minimizing
wastage of raw materials.

Social Objectives
Social objectives are those objectives of business, which are desired to be
achieved for the benefit of the society. Since business operates in a society by
utilizing its scarce resources, the society expects something in return for its
welfare. No activity of the business should be aimed at giving any kind of
trouble to the society. If business activities lead to socially harmful effects, there
is bound to be public reaction against the business sooner or later. Social
objectives of business include production and supply of quality goods and
services, adoption of fair trade practices and contribution to the general welfare
of society and provision of welfare amenities.
i. Production and supply of quality goods and services
Since the business utilizes the various resources of the society, the society
expects to get quality goods and services from the business. The objective of
business should be to produce better quality goods and supply them at the right
time and at a right price. It is not desirable on the part of the businessman to
supply adulterated or inferior goods which cause injuries to the customers. They
should charge the price according to the quality of the goods and services
provided to the society. Again, the customers also expect timely supply of all

their requirements. So it is important for every business to supply those goods

and services on a regular basis.
ii. Adoption of fair trade practices
In every society, activities such as hoarding, black-marketing and over-charging
are considered undesirable. Besides, misleading advertisements often give a
false impression about the quality of products. Such advertisements deceive the
customers and the businessmen use them for the sake of making large profits.
This is an unfair trade practice. The business unit must not create artificial
scarcity of essential goods or raise prices for the sake of earning more profits.
All these activities earn a bad name and sometimes make the businessmen
liable for penalty and even imprisonment under the law. Therefore, the objective
of business should be to adopt fair trade practices for the welfare of the
consumers as well as the society.
iii. Contribution to the general welfare of the society
Business units should work for the general welfare and upliftment of the society.
This is possible through running of schools and colleges for better education,
opening of vocational training centres to train the people to earn their
livelihood, establishing hospitals for medical facilities and providing recreational
facilities for the general public like parks, sports complexes etc.

Human Objectives
Human objectives refer to the objectives aimed at the well-being as well as
fulfillment of expectations of employees as also of people who are disabled,
handicapped and deprived of proper education and training. The human
objectives of business may thus include economic well-being of the employees,
social and psychological satisfaction of employees and development of human
resources.
i. Economic well being of the employees
In business employees must be provided with fair remuneration and incentives
for performance, benefits of provident fund, pension and other amenities like
medical facilities, housing facilities etc. By this they feel more satisfied at work
and contribute more for the business.
ii. Social and psychological satisfaction of employees
It is the duty of business units to provide social and psychological satisfaction to
their employees. This is possible by making the job interesting and challenging,
putting the right person in the right job and reducing the monotony of work.
Opportunities for promotion and advancement in career should also be provided
to the employees. Further, grievances of employees should be given prompt
attention and their suggestions should be considered seriously when decisions
are made. If employees are happy and satisfied they can put their best efforts in
work.

iii. Development of human resources

Employees as human beings always want to grow. Their growth requires proper
training as well as development. Business can prosper if the people employed
can improve their skills and develop their abilities and competencies in course
of time. Thus, it is important that business should arrange training and
development programmes for its employees.
iv. Well being of socially and economically backward people
Business units being inseparable parts of society should help backward classes
and also people those are physically and mentally challenged. This can be done
in many ways. For instance, vocational training programme may be arranged to
improve the earning capacity of backward people in the community. While
recruiting it staff, business should give preference to physically and mentally
challenged persons. Business units can also help and encourage meritorious
students by awarding scholarships for higher studies.

National Objectives
Being an important part of the country, every business must have the objective
of fulfilling national goals and aspirations. The goal of the country may be to
provide employment opportunity to its citizen, earn revenue for its exchequer,
become self-sufficient in production of goods and services, promote social
justice, etc. Business activities should be conducted keeping these goals of the
country in mind, which may be called national objectives of business. The
following are the national objectives of business.
i. Creation of employment
One of the important national objectives of business is to create opportunities
for gainful employment of people. This can be achieved by establishing new
business units, expanding markets, widening distribution channels, etc.
ii. Promotion of social justice
As a responsible citizen, a businessman is expected to provide equal
opportunities to all persons with whom he/she deals. He/She is also expected to
provide equal opportunities to all the employees to work and progress. Towards
this objective special attention must be paid to weaker and backward sections
of the society.
iii. Production according to national priority
Business units should produce and supply goods in accordance with the
priorities laid down in the plans and policies of the Government. One of the
national objectives of business in our country should be to increase the
production and supply of essential goods at reasonable prices.
iv. Contribute to the revenue of the country

The business owners should pay their taxes and dues honestly and regularly.
This will increase the revenue of the government, which can be used for the
development of the nation.
v. Self-sufficiency and Export Promotion
To help the country to become self-reliant, business units have the added
responsibility of restricting import of goods. Besides, every business units
should aim at increasing exports and adding to the foreign exchange reserves of
the country.

Global Objectives
Earlier India had a very restricted business relationship with other nations.
There was a very rigid policy for import and export of goods and services. But,
now-a-days due to liberal economic and exportimport policy, restrictions on
foreign investments have been largely abolished and duties on imported goods
have been substantially reduced. This change has brought about increased
competition in the market. Today because of globalisation the entire world has
become a big market. Goods produced in one country are readily available in
other countries. So, to face the competition in the global market every business
has certain objectives in mind, which may be called the global objectives. Let us
learn about them.
i. Raise general standard of living
Growth of business activities across national borders makes available quality
goods at reasonable prices all over the world. The people of one country get to
use similar types of goods that people in other countries are using. This
improves the standard of living of people.
ii. Reduce disparities among nations
Business should help to reduce disparities among the rich and poor nations of
the world by expanding its operation. By way of capital investment in
developing as well as underdeveloped countries it can foster their industrial and
economic growth.
iii. Make available globally competitive goods and services
Business should produce goods and services which are globally competitive and
have huge demand in foreign markets. This will improve the image of the
exporting country and also earn more foreign exchange for the country.

Question-7 What is the inter-linkage between business and

environment and how it can be established to maintain
global standards?
Or

Question-8 Explain the business and environment interface

and how it is important to be established for global
existance?
Ans : Business Environment
Conditions or situations that affect business activities may be regarded as the
environment of business. In other words, business environment refers to the
surroundings and circumstances, which influence business operations. This
environment consists of forces and factors internal or external to a business
firm. The skill and ability of employees, their attitude to work, relations between
managers and subordinates etc. may be regarded as internal environment of
business. These are important factors, which may affect business operations.
But these are within the control of the businessman. By taking suitable steps
the conditions can be improved. On the other hand, external environment refers
to all those aspect of the surrounding of business, which are not within the
control of the managers and may affect business activities to a great extent.
You may have noticed that sometimes there is less demand of goods produced
by a particular firm. It may be due to better quality substitutes which customers
find more useful. Again, if the government policy changes so as to allow foreign
goods to be imported at lower rates of customs duty, similar good produced in
India may not sell, as the prices of imported goods may be lower. These
conditions are generally not within the control of the businessmen.
Let us discuss about the external factors which influence or affect business
activities and operations and are not controllable by businessmen. We may
classify these factors as economic factors, social factors, political factors and
technological factors.
(i) Economic factors
Economic factors include those factors which affect the business environment
due to changes in income level of the people, rates of interest on borrowing,
availability of capital, tax rates, demand and supply of goods and also changes
in government economic policies, etc. For example, you may have noticed that
if the level of income of people goes up, there is increased demand for goods
and services. Similarly when interest rates on loans are lower people spend
more on buying durable goods like, car, home etc. Growth of business naturally
takes place as a result of increased spending by consumers.
(ii) Social factors
The nature of goods and services in demand depends upon the changes in
habits and customs of people in the society. With rise in population the demand
for household as well as other goods has increased. The nature of food and
clothing has also changed to a great extent. Demand for packaged food and
ready-made garment has increased in recent times. All these force the business

to produce goods accordingly. So the social and cultural factors have also
affected the production pattern of business.
(iii) Political factors
Business environment is adversely affected by the absence of political stability.
The workers union may demand higher wages, may indulge in frequent strike
etc., which affect the normal functioning of business. Problems of law and order
situation in border areas, conflicts between countries, absence of favourable
economic as well as exportimport policy also affect the business activities.
Business activities suffer serious set backs under such circumstances.
(iv) Technological factors
Technological advancement always leads to improvement in the process of
production, transportation and communication. Change in technology is mostly
associated with better service and cost efficiency. In recent years, information
processing and storage with the use of computers and telecommunication
facilities have developed rapidly. People now prefer to use mobile phones in
place of landline phones. Now-a-days electronic appliances have replaced
electrical equipments very widely. Business activities are bound to suffer if
enterprises do not adopt upto-date technology as and when necessary.

BUSINESS AND ENVIRONMENT INTERFACE

Business environment is the overall climate created by internal and external
forces within which an enterprise operate
1) Awareness of the socio-economic situation.
2) To estimate the availability of resources.
3) To estimate present and future production.
4) Changing the methodology of production
5) To analyse the consumer behaviour
6) To understand cultural changes.
7) Impact of economic and social institutions.
8) To understand and appreciate public policy.

9) Tackle problems of taxation.

10) Impact of Liberalization, Globalization and Privatization.
11) Environmental issues.
12) Involvement in social responsibility activities.

Question-9 Write short notes on (i) Business (ii) Commerce &

(iii) Trade
Or
Question-10 How can a Comparative statement of Business,
Commerce and Trade be carried out?
Or
Question-11 How can you make a meaningful distinction
among Business, Commerce and Trade?
Ans : Business
Business may be defined as an enterprise engaged in the production and
distribution of goods for sale in the market or rendering service at a price.
Business may be defined as human activities directed towards providing or
acquiring wealth through buying and selling goods". This definition includes
activities relating to the production of goods. A vital omission is 'services'.
Business
includes
rendering
of
services
also.
A business is
an organization engaged in the trade of goods, services, or both to consumers.
Businesses are predominant in capitalist economies, where most of them
are privately owned and administered to earn profit to increase the wealth of
their owners. Businesses may also be not-for-profit or state-owned. A business
owned by multiple individuals may be referred to as a company, although that
term also has a more precise meaning.
The etymology of "business" relates to the state of being busy either as an
individual or society as a whole, doing commercially viable and profitable work.
The term "business" has at least three usages, depending on the scope the

singular usage to mean a particular organization; the generalized usage to refer

to a particular market sector, "the music business" and compound forms such
as agribusiness; and the broadest meaning, which encompasses all activity by
the community of suppliers of goods and services. However, the exact definition
of business, like much else in the philosophy of business, is a matter of debate
and complexity of meanings.
Although forms of business ownership vary by jurisdiction, there are several
common forms:

Sole proprietorship: A sole proprietorship is a for-profit business owned

by one person. The owner may operate on his or her own or may employ
others. The owner of the business has unlimited liability for the debts
incurred by the business.

Partnership: A partnership is a for-profit business owned by two or more

people. In most forms of partnerships, each partner has unlimited liability for
the debts incurred by the business. The three typical classifications of
partnerships are general partnerships, limited partnerships, and limited
liability partnerships.

Corporation: A corporation is

a limited

liability business

that

has

separate legal personality from its members. Corporations can be

either government-owned or privately-owned, and corporations can organize
either for-profit or not-for-profit. A privately-owned, for-profit corporation is
owned by shareholders who elect a board of directors to direct the
corporation and hire its managerial staff. A privately-owned, for-profit
corporation can be either privately held or publicly held.

Cooperative: Often referred to as a "co-op", a cooperative is a limited

liability business that can organize for-profit or not-for-profit. A cooperative
differs from a for-profit corporation in that it has members, as opposed to
shareholders, who share decision-making authority. Cooperatives are
typically classified as either consumer cooperatives or worker cooperatives.
Cooperatives are fundamental to the ideology of economic democracy.

Commerce
While business refers to the value-creating activities of an organization
for profit, commerce means the whole system of an economy that constitutes
an environment for business. The system includes legal, economic, political,
social, cultural, and technological systems that are in operation in any country.
Thus, commerce is a system or an environment that affects the business
prospects of an economy or a nation-state. We can also define it as a second
component of business which includes all activities, functions and institutions
involved in transferring goods from producers to consumers
Some commentators trace the origins of commerce to the very start
of communication in
prehistoric
times.
Apart
from
traditional selfsufficiency, trading became a principal facility of prehistoric people,
who bartered what they had for goods and services from each other.
Historian Peter
Watson dates
the history
of
long-distance
commerce from circa 150,000 years ago.
In
historic
times,
the
introduction
of currency as
a
standardized money facilitated
a
wider
exchange
of
goods
and
services. Numismatists have collections of these monetary tokens, which
include coins from some Ancient World large-scale societies, although initial
usage involved unmarked lumps of precious metal. The circulation of a
standardized currency provides the major disadvantage to commerce of
overcoming the "double coincidence of wants" necessary for barter trades to
occur. For example, if a man who makes pots for a living needs a new house, he
may wish to hire someone to build it for him. But he cannot make an equivalent
number of pots to equal this service done for him, because even if the builder
could build the house, the builder might not want the pots. Currency solved this
problem by allowing a society as a whole to assign values and thus to collect
goods and services effectively and to store them for later use, or to split them
among several providers.
Today commerce includes a complex system of companies that try to
maximize their profits by offering products and services to the market (which

consists both of individuals and other companies) at the lowest production cost.
A system of international trade has helped to develop the world economy but, in
combination with bilateral or multilateral agreements to lower tariffs or to
achieve free trade, has sometimes harmed third-world markets for local
products

Trade
Trade is the transfer of ownership of goods and services from one person or
entity to another. Trade is sometimes loosely called commerce or financial
transaction or barter. A network that allows trade is called a market. The
original form of trade was barter, the direct exchange of goods and services.
Later one side of the barter were the metals, precious metals (poles, coins), bill,
paper money. Modern traders instead generally negotiate through a medium of
exchange, such as money. As a result, buying can be separated from selling,
or earning. The invention of money (and later credit, paper money and nonphysical money) greatly simplified and promoted trade. Trade between two
traders is called bilateral trade, while trade between more than two traders is
called multilateral trade.
Trade exists for man due to specialization and division of labor, most people
concentrate on a small aspect of production, trading for other products. Trade
exists between regions because different regions have a comparative
advantage in the production of some tradable commodity, or because different
regions' size allows for the benefits of mass production. As such, trade
at market prices between locations benefits both locations.
Retail trade consists of the sale of goods or merchandise from a very fixed
location, such as a department store, boutique or kiosk, or by mail, in small or
individual lots for direct consumption by the purchaser. Wholesale trade is
defined as the sale of goods or merchandise to retailers, to industrial,
commercial, institutional, or other professional business users, or to other
wholesalers and related subordinated services.[2]
Trading can also refer to the action performed by traders and other market
agents in the financial markets.

Trade originated with the start of communication in prehistoric times. Trading

was the main facility of prehistoric people, who bartered goods and services
from each other before the innovation of the modern day currency. Peter
Watson dates the history of long-distance commerce from circa150,000 years
ago.
Trade is believed to have taken place throughout much of recorded human
history. There is evidence of the exchange of obsidian and flint during the stone
age. Materials used for creating jewelry were traded with Egypt since 3000 BC.
Long-range trade routes first appeared in the 3rd millennium BC,
when Sumerians in Mesopotamia traded
with
the Harappan
civilization of
the Indus Valley. The Phoenicians were noted sea traders, traveling across
the Mediterranean Sea, and as far north as Britain for sources of tin to
manufacture bronze. For this purpose they established trade colonies the
Greeks called emporia. From the beginning of Greek civilization until the fall of
the Roman empire in the 5th century, a financially lucrative trade brought
valuable spice to Europe from the far east, including India and China. Roman
commerce allowed its empire to flourish and endure. The Roman empire
produced a stable and secure transportation network that enabled the shipment
of trade goods without fear of significant piracy.
The fall of the Roman empire, and the succeeding Dark Ages brought instability
to Western Europe and a near collapse of the trade network in the western
world. Trade however continued to flourish among the kingdoms of Africa,
Middle East, India, China and Southeast Asia. Some trade did occur in the west.
For instance, Radhanites were a medieval guild or group (the precise meaning
of the word is lost to history) of Jewish merchants who traded between
the Christians in Europe and the Muslims of the Near East.
During the Middle Ages, Central Asia was the economic center of the
world. The Sogdians dominated the East-West trade route known as the Silk
Road after
the
4th
century
AD
up
to
the
8th
century
AD,
with Suyab and Talas ranking among their main centers in the north. They were
the main caravan merchants of Central Asia.

Unit-II

Question- 12 What do you mean by Business Organization

and what are various forms of Business Organizations?
Or
Question-13 Explain briefly Sole Proprietorship, Partnership
Firm and Joint Stock Company as the forms of Business
Organizations.
Ans :
Forms of Business Organisation
While establishing a business the most important task is to select a proper form
of organisation. This is because the conduct of business, its control, acquisition
of capital, extent of risk, distribution of profit, legal formalities, etc. all depend
on the form of organisation. The most important forms of business organisation
are as follows:
Sole Proprietorship
Joint Hindu Family Business
Partnership
Joint Stock Company
Co-operative Society

Sole Proprietor:
A sole proprietorship, also known as the sole trader or simply
a proprietorship, is a type of business entity that is owned and run by one
individual and in which there is no legal distinction between the owner and the
business. The owner receives all profits (subject to taxation specific to the
business) and has unlimited responsibility for all losses and debts. Every asset
of the business is owned by the proprietor and all debts of the business are the
proprietor's. This means that the owner has no less liability than if they were

acting as an individual instead of as a business. It is a "sole" proprietorship in

contrast with partnerships.
A sole proprietor may use a trade name or business name other than his or her
legal name. In many jurisdictions there are rules to enable the true owner of a
business name to be ascertained. In the United States there is generally a
requirement to file a doing business as statement with the local authorities. In
the United Kingdom the proprietor's name must be displayed on business
stationery, in business emails and at business premises, and there are other
requirements.
Advantages of Sole Proprietorship
There are many advantages of corporations that are described in that article;
chiefly they are the ability to raise capital either publicly or privately, to limit
the personal liability of the officers and managers, and to limit risk to investors
Disadvantages of Sole Proprietorship
Raising capital for a proprietorship is more difficult because an unrelated
investor has less peace of mind concerning the use and security of his or her
investment and the investment is more difficult to formalize; other types of
business entities have more documentation.
As a business becomes successful, the risks accompanying the business tend
to grow. One of the main disadvantages of sole proprietors is unlimited
liability where the owner's personal assets can be taken away. This is
particularly true for doing or liabilities created by employees; a corporation only
partially shields an owner or officer for his own actions according to the
principle of piercing the corporate veil. Also, being alone in business, sole
proprietors generally lack money which leads to failure. The small size of the
business limits the breadth of management skills because there are fewer
people working together. As employees generally seek stable employers, small
independent businesses that have a high chance of failing have more difficulty
attracting skilled people.

Lack of continuity. The enterprise may be crippled or terminated if the owner

becomes ill or dies.
Relative difficulty obtaining long-term financing. Because the enterprise rests
exclusively on one person, it often has difficulty raising long-term capital.
At the time of startup the entrepreneur usually has to handle all functional
responsi- bilities of the venture and handles production, marketing, personnel,
finance himself. As a result the vast majority of new businesses start as sole
proprietors. This form has the added merit of being free from formalities
regarding incorporation or maintenance of accounts or auditing etc.
Sole proprietors are unincorporated businesses. They are also called
independent contractors, consultants, or freelancers. There are no forms you
need to fill out to start this type of business. The only thing you need to do is
report your business income and expenses on your Form 1040 Schedule C. This
is the easiest form of business to set up, and the easiest to dissolve.

Joint Hindu Family Business :

The Joint Hindu Fami ly ( JHF) bus iness is a form of bus iness organisat
ion found only in India . In this form of business , all the members of a
Hindu undivided family own the business jointly. The affairs of business are
managed by the head of the family, who is known as the KARTA.
A Joint Hindu Family business comes into existence as per the Hindu Inheritance
Laws of India. In a joint Hindu family business only the male members get a
share in the business by virtue of their being part of the family. The membership
is limited up to three successive generations. Thus, an individual, his sons(s),
and his grandson(s) become the members of a Joint Hindu Family by birth. They
are also called Co-parceners. The term co-parceners implies that such an
individual has got the right to ask for a partition of the Joint Hindu Family
business and to have his separate share. A daughter has no right to ask for a
partition and is, therefore, not a co-parcener.
Characteristics :

1. Legal Status : The Joint Hindu Family business is a jointly owned business just
like a jointly owned property. It is governed by Hindu Law. It can enter into
partnership agreement with others.
2. Membership : There is no membership other than the members of the joint
family. Inside the family also, it is restricted only to male members who are coparceners by birth.
3. Profit Sharing : All co-parceners have equal share in the profits of the
business. In the event of death of any of the co-parcener, his wife can claim
share of profit.
4. Management : The management of a joint Hindu family business is in the
hands of the senior-most family member who is known as the karta. He has the
authority to manage the business and his ways of managing can not be
questioned by the co-parceners.
5. Liability : The liability of each member of the Joint Hindu Family business is
limited to the extent of his share in the business. But the liability of the karta is
unlimited as, it extends to his personal property.
6. Fluctuating Share : The individual share of each co-parcener keeps on
fluctuating. This is because, every birth of a male child in the family adds to the
number of co-parceners and every death of a co-parcener reduces the number.
7. Continuity : A Joint Hindu Family business continues to exist on the death of
any co-parcener. Even on the death of the karta, it continues to exist as the
next seniormost family member becomes karta. However, a Joint Hindu Family
business can be dissolved any time either through mutual agreement between
members or by partition.26 :: Commerce (Business Studies)

Advantages of Joint Hindu Family Business :

1. Assured share in profits : Every co-parcener is assured a share in the profits
irrespective of his contribution to the successful running of the business. This ,
in a way safeguards the interests of some members of the family like minors,
sick, disabled and widows.
2. Freedom in managing : The karta enjoys full freedom in conducting the family
business. It enables him to take quick decisions without much interference.

3. Sharing of knowledge and experience : A Joint Hindu Family business provides

opportunity for the young members of the family to get the benefit of
knowledge and experience of the elder members and also helps in inculcating
virtues like discipline, self-sacrifice, tolerance etc.
4. Unlimited liability of the karta : The liability of the co-parceners is limited,
except for that of the karta. This makes the karta to manage the business in the
most efficient manner.
5. Continued existence : A Joint Hindu Family business is not affected by the
insolvency or death of any member including that of karta. Thus it can continue
for a long period of time.

Disadvantages of Joint Hindu Family Business :

1. Limited resources : Joint Hindu Family business has generally limited financial
and managerial resource. Therefore, it can not undertake big and risky business.
2. Lack of motivation : There is always a lack of motivation among the members
to work hard. It is because the benefit of hard work does not go entirely to any
individual member but shared by all the co-parceners.
3. Scope for misuse of power by the karta : Since the karta has absolute
freedom to manage the business, there is scope for him to misuse it for his
personal gains. An inefficient karta can also do harm to the business.
4. Scope for conflict : In a Joint Hindu Family business the male members of
three successive generations are involved. It always leads to conflict between
generations.
5. Instability : The continuity of business is always under threat. It may be due
to a small rift within the family and if a co-parcener ask for a partition the
business is closed.

Suitability of Joint Hindu Family Business:

The success of Joint Hindu Family business is mostly dependent upon the
efficiency of the karta and the mutual understanding between the co-parceners.
Nevertheless, this type of business is losing its ground with the gradual decline
in the joint Hindu family system.

Partnership Firm:
As the business grows the requirements for funds and management will also
increase which might lead him to enter into partnership with one or more
persons. It is always preferable to have a written agreement in the form of a
partnership deed which clearly indicates the names and addresses of the
partners, their ages, contribution to capital, profit sharing ratio etc. This form
also makes for pooling of skills and responsibilities and spread of risk.
A partnership is an arrangement where parties agree to cooperate to advance
their mutual interests. Since humans are social beings, partnerships between
individuals, businesses, interest-based organizations, schools, governments,
and varied combinations thereof, have always been and remain commonplace.
In the most frequently associated instance of the term, a partnership is formed
between one or more businesses in which partners (owners) co-labor to achieve
and share profits and losses (see business partners). Partnerships are also
common regardless of and among sectors. Non-profit, religious, and political
organizations, may partner together to increase the likelihood of each achieving
their mission and to amplify their reach. In what is usually called an alliance,
governments may partner to achieve their national interests, sometimes
against allied governments who hold contrary interests, such as occurred
during World
War
II and
the Cold
War.
In education,
accrediting
agencies increasingly evaluate schools by the level and quality of their
partnerships with other schools and a variety of other entities across societal
sectors. Partnerships also occur at personal levels, such as when two or more
individuals agree to domicile together, while others are not only personal but
private, known only to the involved parties.
Partnerships present the involved parties with special challenges that must be
navigated unto agreement. Overarching goals, levels of give-and-take, areas of
responsibility, lines of authority and succession, how success is evaluated and
distributed, and often a variety of other factors must all be negotiated. Once
agreement is reached, the partnership is typically enforceable by civil law,
especially if well documented. Partners who wish to make their agreement
affirmatively explicit and enforceable typically draw up Articles of Partnership.

While partnerships stand to amplify mutual interests and success, some are
considered ethically problematic. When a politician, for example, partners with a
corporation to advance the corporation's interest in exchange for some benefit,
a conflict of interest results. Outcomes for the public good may suffer.
Partnerships may enjoy special benefits in tax policies. Among developed
countries,
for
example,
business
partnerships
are
often
favored
over corporations in taxation policy, since dividend taxes only occur on profits
before they are distributed to the partners. However, depending on the
partnership structure and the jurisdiction in which it operates, owners of a
partnership may be exposed to greaterpersonal liability than they would
as shareholders of a corporation. In such countries, partnerships are often
strongly regulated via anti-trust laws, so as to inhibit monopolistic practices and
foster free market competition. Governmentally recognized domestic
partnerships typically enjoy tax benefits, as well.

Characteristics:
1. Number of Partners : A minimum of two persons are required to start a
partnership business. The maximum membership limit is 10 in case of banking
business and 20 in case of all other types of business.
2. Contractual Relationship : The relation between the partners of a partnership
firm is created by contract. The partners enter into partnership through an
agreement which may be verbal, written or implied. If the agreement is in
writing it is known as a Partnership Deed.
3. Competence of Partners : Since individuals have to enter into a contract to
become partners, they must be competent enough to do so. Thus, minors,
lunatics and insolvent persons are not eligible to become partners. However, a
minor can be admitted to the benefits of partnership i.e. he can have a share in
the profits.
4. Sharing of Profit and Loss : The partners can share profit in any ratio as
agreed. In the absence of an agreement, they share it equally.
5. Unlimited Liability : The partners have unlimited liability. They are liable
jointly and severally for the debts and obligations of the firm. Creditors can lay
claim on the personal properties of any individual partner or all the partners

jointly. Even a single partner may be called upon to pay the debts of the firm. Of
course, he can get back the money due from other partners. The liability of a
minor is, however, limited to the extent of his share in the profits, in case of
dissolution of a firm.
6. Principal-Agent Relationship : The business in a partnership firm may be
carried on by all the partners or any one of them acting for all. This means that
every partner is an agent when he is acting on behalf of others and he is a
principal when others act on his behalf. It is, therefore, essential that there
should be mutual trust and faith among the partners in the interest of the firm.
7. Transfer of Interest : No partner can sell or transfer his interest in the firm to
anyone without the consent of other partners.
8. Legal Status : A partnership firm is just a name for the business as a whole.
The firm means partners and the partners mean the firm. Law does not
recognise the firm as a separate entity distinct from the partners.
9. Voluntary Registration : Registration of partnership is not compulsory. But
since registration entitles the firm to several benefits, it is considered desirable.
For example, if it is registered, any partner can file a case against other
partners, or a firm can file a suit against outsiders in case of disputes, claims,
disagreements, etc.
10. Dissolution of Partnership : Dissolution of partnership implies not only a
complete closure or termination of partnership business, but it also includes any
change in the existing agreement among the partners due to a change in the
number of partners.

Company:
A company can be a private limited company, in which case it can have a
minimum of 2 and a maximum of 50 members. It can be a public limited
company, which has to have a minimum of 7 members, and there is no
maximum limit. This form of organisation provides vast amounts of capital as
they, unlike the private limited company, invite the general public to subscribe
to its shares and also provide limited liability. The Companies Act of 1956
governs the companies.

A company is a form of business organization. It is an association or collection

of individual real persons and/or other companies, who each provide some form
of capital. This group has a common purpose or focus and, usually, an aim of
gaining profits. This collection, group or association of persons can be made to
exist in law and then a company is itself considered a "legal person". The name
company arose because, at least originally, it represented or was owned by
more than one real or legal person.
A company is a corporationor, less commonly, an association, partnership,
or unionto carry out an enterprise. Generally, a company may be a
"corporation, partnership, association, joint-stock company, trust, fund, or
organized group of persons, whether incorporated or not, and (in an official
capacity) any receiver, trustee in bankruptcy, or similar official, or
liquidating agent, for any of the foregoing."
In English law and in the Commonwealth realms a company is a body
corporate or corporation company registered under the Companies Acts or
similar legislation. It does not include a partnership or any other unincorporated
group of persons, although such an entity may be loosely described as a
company.
A company can be defined as an "artificial person", invisible, intangible,
created by Law, with a discrete legal entity, perpetual succession and
a common seal. It is not affected by the death, insanity or insolvency of an
individual member.
Types of Companies
1 Private Company
2.Public company
3. Government Company
4.Foriegn company
5.Limited Company
6. Multinational Company
7. Global Company

Co-operative:
A co-operative is an enterprise owned and controlled by people working in it.
Generally they are formed for some specific purpose like a housing cooperative
society.
A cooperative (also co-operative or co-op) is a business organization owned
and operated by a group of individuals for their mutual benefit. A cooperative is
defined by the International Cooperative Alliance'sStatement on the
Cooperative Identity as "an autonomous association of persons united
voluntarily to meet their common economic, social, and cultural needs and
aspirations through jointly owned and democratically controlled enterprise". A
cooperative may also be defined as a business owned and controlled equally by
the people who use its services or by the people who work there. Various
aspects regarding cooperative enterprise are the focus of study in the field
of cooperative economics.
A cooperative is a legal entity owned and democratically controlled by its
members. Members often have a close association with the enterprise as
producers or consumers of its products or services, or as its employees.
In some countries, e.g. Finland and Sweden, there are specific forms of
incorporation for cooperatives. Cooperatives may take the form of companies
limited by shares or by guarantee, partnerships or unincorporated associations.
In the USA, cooperatives are often organized as non-capital stock corporations
under state-specific cooperative laws. However, they may also be
unincorporated associations or business corporations such as limited liability
companies or partnerships; such forms are useful when the members want to
allow:
1. some members to have a greater share of the control, or
2. some investors
fixed interest,

to

have

return

on

their capital that

exceeds

neither of which may be allowed under local laws for cooperatives. Cooperatives
often share their earnings with the membership as dividends, which are divided
among the members according to their participation in the enterprise, such as

patronage, instead of according to the value of their capital shareholdings (as is

done by a joint stock company).

Types of Co-operative Societies

On the basis of objectives, various types of co-operatives are formed :
a. Consumer co-operatives : These are formed to protect the interests of
ordinary consumers of society by making consumer goods available at
reasonable prices. Kendriya Bhandar in Delhi, Alaka in Bhubaneswar and
similar others are all examples of consumer co-operatives
b. Producers co-operatives : These societies are set up to benefit small
producers who face problems in collecting inputs and marketing their
products. The Weavers co-operative society, the Handloom owners
cooperative society are examples of such co-operatives.
c. Marketing co-operatives
: These are formed by producers and
manufactures to eliminate exploitation by the middlemen while marketing
their product. Kashmir Arts Emporium, J&K Handicrafts, Utkalika etc. are
examples of marketing co-operatives.
d. Housing Co-operatives : These are formed to provide housing facilities to
its members. They are called co-operative group housing societies
e. Credit Co-operatives : These societies are formed to provide financial help
to its members. The rural credit societies, the credit and thrift societies,
the urban co-operative banks etc. come under this category.
f. Forming Co-operatives : These are formed by small farmers to carry on
work jointly and thereby share the benefits of large scale farming. Besides
these types, other co-operatives can be formed with the objective of
providing different benefits to its members, like the construction cooperatives, transport co-operatives, co-operatives to provide education
etc.

Characteristics:
1. Voluntary association : Individuals having common interest can come
together to form a co-operative society. Any person can become a
member of such an organisation and leave the same.

2. Membership : The minimum membership required to form a co-operative

society is ten and the maximum number is unlimited. At times the
cooperatives after their formation fix a maximum membership limit
3. Body corporate : Registration of a society under the Co-operative Societies
Act is a must. Once it is registered, it becomes a body corporate and enjoys
certain privileges just like a joint stock company. Some of the privileges are:
(a) The society enjoys perpetual succession.
(b) It has its own common seal.
(c) It can own property in its name.
(d) It can enter into contract with others.
(e) It can sue others in court of law.
4. Service Motive : The primary objective of any co-operative organisation is to
render services to its members in particular and to the society in general.
5. Democratic Set up : Every member has a right to take part in the
management of the society. Each member has one vote. Generally the
members elect a committee known as the Executive Committee to look after
the day to day administration and the said committee is responsible to the
general body of members.
6. Sources of Finances : A co-operative organisation starts with a fund
contribute by its members in the form of units called shares. It can also raise
loans and secure grants from the government easily. One fourth of the profits of
the co-operative are transferred to its fund every year.
7. Return on capital : The return on capital subscribed by the members is in the
form of a fixed rate of dividend after deduction from the profit.

Advantages of Co-operative Society:

1. Easy Formation : Formation of a co-operative society is easy as compared to
a company. Any 10 persons can voluntarily form an association and get
themselves registered with the Registrar of Co-operative societies.
2. Limited Liability : The liability of the members is limited to the extent of
capital contributed by them.
3. Open Membership : There is no restriction on any individual to be a member
of any co-operative.

4. State Assistance : Co-operatives get a lot of patronage in the form of

exemptions and concessions in taxes and financial assistance from the state
governments which no other organisation gets.
5. Middlemans Profit Eliminated : Through the co-operative the consumers
control their own supplies and by this means the middlemans profit is
eliminated.
6. Management : A co-operative functions in a democratic manner. Each
member has only one vote.
7. Winding up : The dissolution of a co-operative firm is quite difficult. It does
not cease to exist in case of death, or insolvency or resignation of a member. It
has thus a fairly stable life.
Disadvantages of Co-operatives :
1. Limited Capital : The amount of capital that a co-operative can generate is
limited because of the membership remaining confined to a locality or region or
a particular section of people.
2. Problems in Management : Generally it is seen that co-operative do not
function efficiently due to lack of managerial talent.
3. Lack of Motivation : Co-operatives are formed to render service to its
members than to earn profit. This does not provide enough motivation to
manage the co-operatives effectively.
4. Lack of Co-operation : Co-operatives are formed with the very idea of cooperation. But, it is often seen that there is lot of friction and bickering among
the members due to personality differences, ego clash etc.
5. Lack of Secrecy : Maintenance of business secrecy is one of the important
factors for the success of enterprise which the co-operatives always lack.
6. Dependence on Government : The inadequacy of capital and various other
limitations make co-operatives dependant on the government for support and
patronage in terms of grants, loans and subject themselves to interference.

Joint-Stock Company (JSC)

A Joint Stock Company form of business organisation is a voluntary association

of persons to carry on business. Normally, it is given a legal status and is
subject to certain legal regulations. It is an association of persons who generally
contribute money for some common purpose. The money so contributed is the
capital of the company. The persons who contribute capital are its members.
The proportion of capital to which each member is entitled is called his share,
therefore members of a joint stock company are known as shareholders and the
capital of the company is known as share capital. The total share capital is
divided into a number of units known as shares. You may have heard of the
names of joint stock companies like Tata Iron & Steel Co. Limited, Hindustan
Lever Limited, Reliance Industries Limited, Steel Authority of India Limited,
Ponds India Limited etc.
The companies are governed by the Indian Companies Act, 1956. The Act
defines a company as an artificial person created by law, having separate
entity, with perpetual succession and a common seal.
Characteristics:
1. Artificial Person : A Joint Stock Company is an artificial person in the sense
that it is created by law and does not possess physical attributes of a natural
person. However, it has a legal status.
2. Separate Legal Entity : Being an artificial person, a company has an existence
independent of its members. It can own property, enter into contract and
conduct any lawful business in its own name. It can sue and can be sued in the
court of law. A shareholder cannot be held responsible for the acts of the
company.
3. Common Seal : Every company has a common seal by which it is represented
while dealing with outsiders. Any document with the common seal and duly
signed by an officer of the company is binding on the company.
4. Perpetual Existence : A company once formed continues to exist as long as it
fulfils the requirements of law. It is not affected by the death, lunacy, insolvency
or retirement of any of its members.32 :: Commerce (Business Studies)
5. Limited Liability : The liability of a member of a Joint Stock Company is
limited by guarantee or the shares he owns. In other words, in case of payment
of debts by the company, a shareholder is held liable only to the extent of his
share.
6. Transferability of Shares : The members of a company are free to transfer the
shares held by them to anyone else.

7. Formation : A company comes into existence only when it has been

registered after completing the formalities prescribed under the Indian
Companies Act 1956. A company is formed by the initiative of a group of
persons known as promoters.
8. Membership : A company having a minimum membership of two persons and
maximum fifty is known as a Private Limited Company. But in case of a Public
Limited Company, the minimum is seven and the maximum membership is
unlimited.
9. Management : Joint Stock Companies have democratic management and
control. Even though the shareholders are the owners of the company, all of the
them cannot participate in the management process. The company is managed
by the elected representatives of shareholders known as Directors.
10. Capital : A Joint Stock Company generally raises a large amount of capital
through issue of shares.
Advantages of Joint Stock Company:
1. Limited Liability : In a Joint Stock Company the liability of its members is
limited to the extent of shares held by them. This attracts a large number of
small investors to invest in the company. It helps the company to raise huge
capital. Because of limited liability, a company is also able to take larger risks.
2. Continuity of existence : A company is an artificial person created by law and
possesses independent legal status. It is not affected by the death, insolvency
etc. of its members. Thus it has a perpetual existence.
3. Benefits of large scale operation : It is only the company form of organisation
which can provide capital for large scale operations. It results in large scale
production consequently leading to increase in efficiency and reduction in the
cost of operation. It further opens the scope for expansion.
4. Professional Management : Companies, because of complex nature of
activities and operations and large volume of business, require professional
managers at every level of organisation. And because of their financial strength
they can afford to appoint such managers. This leads to efficiency.
5. Social Benefit : A joint stock company offers employment to a large number
of people. It facilitates promotion of various ancillary industries, trade and
auxiliaries to trade. Sometimes it also donates money for education, health,
community service and renders help to charitable and social institutions.
6. Research and Development : A company generally invests a lot of money on
research and development for improved processes of production, designing and
innovating new products, improving quality of product, new ways of training its
staff, etc.
Disadvantages of Joint Stock Company:

1. Formation is not easy: The formation of a company involves compliance with

a number of legal formalities under the companies Act and compliance with
several other Laws.
2. Control by a Group: Companies are controlled by a group of persons known as
the Board of Directors. This may be due to lack of interest on the part of the
shareholders who are widely dispersed; ignorance, indifference and lack of
proper and timely information. Thus, the democratic virtues of a company do
not really exist in practice.
3. Speculation and Manipulation : The shares of a company are purchased and
sold in the stock exchanges. The value or price of a share is determined in
terms of the dividend expected and the reputation of the company. These can
be manipulated. Besides there is excessive speculation which is regarded as a
social evil.
4. Excessive government control : A company is expected to comply with the
provisions of several Acts. Non-compliance of these invites heavy penalty. This
affects the smooth functioning of the companies.
5. Delay in Policy Decisions : A company has to fulfill certain procedural
formalities before making a policy decision. These formalities are time
consuming and, therefore, policy decisions may be delayed.
6. Social abuses : A joint stock company is a large scale business organisation
having huge resources. This provides a lot of power to them. Any misuse of such
power creates unhealthy conditions in the society e.g. having monopoly of a
particular business, industry or product; influencing politicians and government
in getting their work done; exploiting workers, consumers and investors.

Question-14
What
is
the
difference
Proprietorship and Partnership?

between

Sole

Ans :
Difference between various forms of Business Organizations
We have learnt about the various forms of business organisation. If we analyse
their characteristics we find that each one is different from the other. Let us try
to distinguish between these different forms of organisation.

Sole Proprietorship and Partnership

Basis
Partnership

Sole Proprietorship

1. Membership
membership is two,

Only one member

Minimum
maxim

um membership is ten in
case of
banking business and
twenty in
other business
2. Functioning
managed by all partners

A sole trader manages

his business at his free

May be
or any one on

behalf of all
will.
3. Formation
is required

others.

Easy and can be formed

An agreement

at any time the owner

between the

partners to start a
decides.
4. Secrecy
secrets are open to

Business secrets are

not open to anyone

business.
Business
every partner.

other than the proprietor

5. Finance
raising

Scope for raising

Scope for

capital is limited

capital is

relatively more.
6. Continuity
a firm does

Comes to an end with

of business the death of the

The business of
not come to an

end if
sole trader.

a partner

leaves the firm.

7. Decision
must agree to
Making
decisions and so

Owner alone takes

decision and so it is

All partners
important

quick.

decision making

may take time.

8. Liability
burdensome

Unlimited and the

Unlimited but less

burden is heavy.

as it is shared by

partners.

Question- 15 What do you understand by a Company and

what are the various types of companies ?
Ans :
Company:
A company can be a private limited company, in which case it can have a
minimum of 2 and a maximum of 50 members. It can be a public limited
company, which has to have a minimum of 7 members, and there is no
maximum limit. This form of organisation provides vast amounts of capital as
they, unlike the private limited company, invite the general public to subscribe
to its shares and also provide limited liability. The Companies Act of 1956
governs the companies.
A company is a form of business organization. It is an association or collection
of individual real persons and/or other companies, who each provide some form
of capital. This group has a common purpose or focus and, usually, an aim of
gaining profits. This collection, group or association of persons can be made to
exist in law and then a company is itself considered a "legal person". The name
company arose because, at least originally, it represented or was owned by
more than one real or legal person.
A company is a corporationor, less commonly, an association, partnership,
or unionto carry out an enterprise. Generally, a company may be a
"corporation, partnership, association, joint-stock company, trust, fund, or
organized group of persons, whether incorporated or not, and (in an official

capacity) any receiver, trustee in bankruptcy,

liquidating agent, for any of the foregoing."

or

similar

official,

or

In English law and in the Commonwealth realms a company is a body

corporate or corporation company registered under the Companies Acts or
similar legislation. It does not include a partnership or any other unincorporated
group of persons, although such an entity may be loosely described as a
company.
A company can be defined as an "artificial person", invisible, intangible,
created by Law, with a discrete legal entity, perpetual succession and
a common seal. It is not affected by the death, insanity or insolvency of an
individual member.
Types of Companies
1 Private Company
2.Public company
3. Government Company
4.Foriegn company
5.Limited Company
6. Multinational Company
7. Global Company
1. "Private company" is defined in section 3(1)(iii) of the Act and it
means a company which has a minimum paid-up capital of one lakh
rupees or such higher paid-up capital as may be prescribed, and by its
articles,
(a) restricts the right to transfer its shares, if any;
(b) limits the number of its members to fifty (50) not including
(i) persons who are in the employment of the company; and
(ii) persons who, having been formerly in the employment of the company, were
members of the company while in that employment and have continued to be
members after the employment ceased; and

(c) prohibits any invitation to the public to subscribe for any shares in, or
debentures of, the company: and
(d) prohibits any invitation or acceptance of deposits from persons other than its
members, directors or their relatives:
Provided that where two or more persons hold one or more shares in a
company jointly, they shall, for the purposes of this definition, be treated as a
single member;
2. "Public company" is defined in section 3(1)(iv) of the Act and it means
a company which
(a) is not a private company;
(b) has a minimum paid-up capital of five lakh rupees or such higher paid-up
capital, as may be prescribed;
(c) is a private company which is a subsidiary of a company which is not a
private company.
3. "Government company" is defined in section 617 of the Act and it
means any company in which not less than fifty-one per cent of the paidup share capital is held by the Central Government, or by any State
Government or Governments, or partly by the Central Government and
partly by one or more State Governments and includes a company which
is a subsidiary of a Government company as thus defined.
As provided by section 620 of the Act, the Central Government may, by
notification in the Official Gazette, exempt Government companies from certain
provisions or certain provisions of the Act shall apply to them with exceptions,
modifications and adaptations.
4. "Foreign company" is defined in section 591 of the Act and it means
a company which
(a) is incorporated outside India and
(b) has established a place of business within India.

Within 30 days of establishment of such place of business within India, the

Foreign Company is required to submit documents/details under section 592.
Alterations and changes in these documents/details are required to be notified
within 30 days.
The provisions of sections 118 (right to obtain copies of trust deed), 124 to 145
(registration of charges), 159 (annual returns to be made by company), 209
(Books of account to be kept by company), 209A (inspection of books of account
of company), 233A (power of Central Government to direct special audits in
certain cases), 233B (audit of cost accounts in certain cases), 234 to 246 (power
of Registrar to call for information etc.) apply to such foreign company.
5. "Company limited by guarantee" is defined in section 12(2)(b) of
the Act and it means a company having the liability of its members limited
by the memorandum to such amount as the members may respectively
undertake by the memorandum to contribute to the assets of the
company in the event of its being wound up. Such company could be
a "company limited by guarantee and not having share capital" or
a "company limited by guarantee and having a share capital".
The Memorandum and Articles of Association of such companies are as per
Tables C and D of Schedule I of the Act, respectively.
6. "Unlimited Company" is defined in section 12(2)(c) of the Act and it
means a company not having any limit on the liability of its members. The
liability of a member extends to the whole amount of companys debts
and liabilities but the member will be entitled to claim contribution from
other members. The Memorandum and Articles of such company is as per
Table E of Schedule I of the Act.
7. "Producer Company" is defined in section 581A of the Act and it
means a body corporate having objects or activities specified in section
581B and registered as Producer Company under this Act.
Section 581B
(1) The objects of the producer company shall relate to all or any of the
following matters, namely

(a) production, harvesting, procurement, grading, pooling, handling, marketing,

selling, export of primary produce of the Members or import of goods or
services for their benefit.
Provided that Producer Company may carry on any of the activities specified
in this clause either by itself or through other institution.
(b) processing including preserving, drying, distilling, brewing, vinting, canning
and packaging of produce of its members.
(c) manufacture, sale or supply of machinery, equipment or consumables
mainly to its members.
(d) providing education on the mutual assistance principles to its members and
others;
(e) rendering technical services, consultancy services, training, research and
development and all other activities for the promotion of the interest of its
members;
(f) generation, transmission and distribution of power, revitalisation of land and
water resources, their use, conservation and communications relatable to
primary produce;
(g) insurance of producers or their primary produce;
(h) promoting techniques of mutuality and mutual assistance;
(i) welfare measures or facilities for the benefit of members as may be decided
by the Board;
(j) any other activity, ancillary or incidental to any of the activities referred to in
clauses (a) to (i) or other activities which may promote the principles of
mutuality and mutual assistance amongst the members in any other manner;
(k) financing of procurement, processing, marketing or other activities specified
in clauses (a) to (j) which include extending of credit facilities or any other
financial services to its members.
(2) Every Producer Company shall deal primarily with the produce of its active
Members for carrying out any of its objects specified in this section.

8. Companies with licence under section 25

(1) Where it is proved to the satisfaction of the Central Government that an
association
(a) is about to be formed as a limited company for promoting commerce, art,
science, religion, charity or any other useful object, and
(b) intends to apply its profits, if any, or other income in promoting its objects,
and to prohibit the payment of any dividend to its members,
the Central Government may, by licence, direct that the association may be
registered as a company with limited liability, without the addition to its name
of the word "Limited" or the word "Private Limited".
(2) The association may thereupon be registered accordingly and on registration
shall enjoy all the privileges and (subject to the provisions of this section) be
subject to all the obligations, of limited companies.
Such companies are generally associations, clubs or chambers of commerce.
The Central Government has conferred powers under section 25(6) to exempt
or modify certain provisions of the Act in relations to such companies.
9. Holding & Subsidiary Company
According to Sec. 2(19) "holding company" means a holding company within
the meaning of section 4 of the Act;
According to Sec. 2(47) "subsidiary company" or "subsidiary" means a
subsidiary company within the meaning of Section 4 of the Act.
Sec. 4. of the Act states,
(1) For the purposes of this Act, a company shall, subject to the provisions of
sub-section (3), be deemed to be a subsidiary of another if, but only if
(a) that other controls the composition of its Board of directors; or
(b) that other

(i) where the first-mentioned company is an existing company in respect of

which the holders of preference shares issued before the commencement of this
Act have the same voting rights in all respects as the holders of equity shares,
exercises or controls more than half of the total voting power of such company;
(ii) where the first-mentioned company is any other company, holds more than
half in nominal value of its equity share capital; or
(c) the first-mentioned company is a subsidiary of any company which is
that others subsidiary.
9. Limited Liability Partnership (LLP)
It may be noted that LLP is not a Company under the Companies Act, 1956 but
it is defined under section 2(1)(n) of the Limited Liability Partnership Act, 2008
as a "partnership formed and registered under the Limited Liability Partnership
Act, 2008".

Question-16
What are
Multinational Companies?

Co-operative

Societies

and

Ans :

Co-operative Society :
A co-operative is an enterprise owned and controlled by people working in it.
Generally they are formed for some specific purpose like a housing cooperative
society.
A cooperative
Society(also co-operative or co-op
Society)
is
a business organization owned and operated by a group of individuals for their
mutual benefit. A cooperative is defined by the International Cooperative
Alliance'sStatement on the Cooperative Identity as "an autonomous association
of persons united voluntarily to meet their common economic, social, and
cultural needs and aspirations through jointly owned and democratically
controlled enterprise". A cooperative may also be defined as a business owned
and controlled equally by the people who use its services or by the people who

work there. Various aspects regarding cooperative enterprise are the focus of
study in the field of cooperative economics.
A cooperative is a legal entity owned and democratically controlled by its
members. Members often have a close association with the enterprise as
producers or consumers of its products or services, or as its employees.
In some countries, e.g. Finland and Sweden, there are specific forms of
incorporation for cooperatives. Cooperatives may take the form of companies
limited by shares or by guarantee, partnerships or unincorporated associations.
In the USA, cooperatives are often organized as non-capital stock corporations
under state-specific cooperative laws. However, they may also be
unincorporated associations or business corporations such as limited liability
companies or partnerships; such forms are useful when the members want to
allow:
1. some members to have a greater share of the control, or
2. some investors
fixed interest,

to

have

return

on

their capital that

exceeds

neither of which may be allowed under local laws for cooperatives. Cooperatives
often share their earnings with the membership as dividends, which are divided
among the members according to their participation in the enterprise, such as
patronage, instead of according to the value of their capital shareholdings (as is
done by a joint stock company).

Types of Co-operative Societies

On the basis of objectives, various types of co-operatives are formed :
a. Consumer co-operatives : These are formed to protect the interests of
ordinary consumers of society by making consumer goods available at
reasonable prices. Kendriya Bhandar in Delhi, Alaka in Bhubaneswar and
similar others are all examples of consumer co-operatives
b. Producers co-operatives : These societies are set up to benefit small
producers who face problems in collecting inputs and marketing their
products. The Weavers co-operative society, the Handloom owners
cooperative society are examples of such co-operatives.

c. Marketing co-operatives
: These are formed by producers and
manufactures to eliminate exploitation by the middlemen while marketing
their product. Kashmir Arts Emporium, J&K Handicrafts, Utkalika etc. are
examples of marketing co-operatives.
d. Housing Co-operatives : These are formed to provide housing facilities to
its members. They are called co-operative group housing societies
e. Credit Co-operatives : These societies are formed to provide financial help
to its members. The rural credit societies, the credit and thrift societies,
the urban co-operative banks etc. come under this category.
f. Forming Co-operatives : These are formed by small farmers to carry on
work jointly and thereby share the benefits of large scale farming. Besides
these types, other co-operatives can be formed with the objective of
providing different benefits to its members, like the construction cooperatives, transport co-operatives, co-operatives to provide education
etc.

Characteristics:
1. Voluntary association : Individuals having common interest can come
together to form a co-operative society. Any person can become a
member of such an organisation and leave the same.
2. Membership : The minimum membership required to form a co-operative
society is ten and the maximum number is unlimited. At times the
cooperatives after their formation fix a maximum membership limit
3. Body corporate : Registration of a society under the Co-operative Societies
Act is a must. Once it is registered, it becomes a body corporate and enjoys
certain privileges just like a joint stock company. Some of the privileges are:
(a) The society enjoys perpetual succession.
(b) It has its own common seal.
(c) It can own property in its name.
(d) It can enter into contract with others.
(e) It can sue others in court of law.
4. Service Motive : The primary objective of any co-operative organisation is to
render services to its members in particular and to the society in general.

5. Democratic Set up : Every member has a right to take part in the

management of the society. Each member has one vote. Generally the
members elect a committee known as the Executive Committee to look after
the day to day administration and the said committee is responsible to the
general body of members.
6. Sources of Finances : A co-operative organisation starts with a fund
contribute by its members in the form of units called shares. It can also raise
loans and secure grants from the government easily. One fourth of the profits of
the co-operative are transferred to its fund every year.
7. Return on capital : The return on capital subscribed by the members is in the
form of a fixed rate of dividend after deduction from the profit.

Advantages of Co-operative Society:

1. Easy Formation : Formation of a co-operative society is easy as compared to
a company. Any 10 persons can voluntarily form an association and get
themselves registered with the Registrar of Co-operative societies.
2. Limited Liability : The liability of the members is limited to the extent of
capital contributed by them.
3. Open Membership : There is no restriction on any individual to be a member
of any co-operative.
4. State Assistance : Co-operatives get a lot of patronage in the form of
exemptions and concessions in taxes and financial assistance from the state
governments which no other organisation gets.
5. Middlemans Profit Eliminated : Through the co-operative the consumers
control their own supplies and by this means the middlemans profit is
eliminated.
6. Management : A co-operative functions in a democratic manner. Each
member has only one vote.
7. Winding up : The dissolution of a co-operative firm is quite difficult. It does
not cease to exist in case of death, or insolvency or resignation of a member. It
has thus a fairly stable life.
Disadvantages of Co-operatives :

1. Limited Capital : The amount of capital that a co-operative can generate is

limited because of the membership remaining confined to a locality or region or
a particular section of people.
2. Problems in Management : Generally it is seen that co-operative do not
function efficiently due to lack of managerial talent.
3. Lack of Motivation : Co-operatives are formed to render service to its
members than to earn profit. This does not provide enough motivation to
manage the co-operatives effectively.
4. Lack of Co-operation : Co-operatives are formed with the very idea of cooperation. But, it is often seen that there is lot of friction and bickering among
the members due to personality differences, ego clash etc.
5. Lack of Secrecy : Maintenance of business secrecy is one of the important
factors for the success of enterprise which the co-operatives always lack.
6. Dependence on Government : The inadequacy of capital and various other
limitations make co-operatives dependant on the government for support and
patronage in terms of grants, loans and subject themselves to interference.

Multi-National Companies
The
A multinational corporation (MNC) or enterprise (MNE), is a corporation or
an enterprise that manages production or delivers services in more than one
country. It can also be referred to as an international corporation.
The International Labour Organization (ILO) has defined an MNC as a
corporation that has its management headquarters in one country, known as
the home country, and operates in several other countries, known as host
countries.
The Dutch East India Company was the second multinational corporation in the
world (the first, the British East India Company, was founded two years earlier)
and the first company to issue stock, and it was the largest of the early
multinational companies. It was also arguably the world's first mega
corporation, possessing quasi-governmental powers, including the ability to
wage war, negotiate treaties, coin money, and establish colonies.

Some multinational corporations are very big, with budgets that exceed some
nations' GDPs. Multinational corporations can have a powerful influence in local
economies, and even the world economy, and play an important role
in international relations and globalization.
A corporation that has its facilities and other assets in at least one country other
than its home country. Such companies have offices and/or factories in different
countries and usually have a centralized head office where they co-ordinate
global management. Very large multinationals have budgets that exceed those
of many small countries.
Nearly all major multinationals are either American, Japanese or Western
European, such as Nike, Coca-Cola, Wal-Mart, AOL, Toshiba, Honda and BMW.
Advocates of multinationals say they create jobs and wealth and improve
technology in countries that are in need of such development. On the other
hand, critics say multinationals can have undue political influence over
governments, can exploit developing nations as well as create job losses in their
own home countries.
Just because a large company is very successful in one country, it doesnt mean
that it will be successful in another country, especially if that country has a
completely different culture. McDonalds is one of the largest companies in the
world. However, it has adapted to the different cultures to make sure it is
successful. In France, McDonald's added tablecloths and candles to improve the
ambience at some eateries and introduced waiter service at certain outlets
because they found that most Europeans prefer leisurely rather than fast food
dining In addition to space, McDonalds has changed its menus from one
country to another, offering food that locals usually eat: in France, a burger has
mustard and ciabatta rolls instead of regular buns. In Japan, fried egg burgers
were offered. In Saudi Arabia, in accordance with the religious beliefs there,
Starbucks has changed its logo and removed the girl from the picture. In
addition, Starbucks branches there usually have two sections, one for the
females and one for the males. This is the case with most stores since men
arent allowed to sit with women.

Question-17 How can you distinguish among Global,

Transnational, International and Multinational Companies?

Ans :
Difference among Global, Transnational, International and
Multinational Companies
We tend to read the following terms and think they refer to any company doing
business in another country.

Multinational

International

Transnational

Global
Andrew Hines over at BNET has brief and clear definitions of each of these
terms, Get your international business terms right.
Each term is distinct and has a specific meaning which define the scope and
degree of interaction with their operations outside of their home country.

International companies are importers and exporters, they have no

investment outside of their home country. International companies are
importers and exporters, they have no investment outside of their home
country
Multinational companies have investment in other countries, but do not have
coordinated product offerings in each country. More focused on adapting their
products and service to each individual local market. Multinational companies
have investment in other countries, but do not have coordinated product
offerings in each country. More focused on adapting their products and service
to each individual local market.
Global companies have invested and are present in many countries. They
market their products through the use of the same coordinated image/brand in
all markets. Generally one corporate office that is responsible for global
strategy. Emphasis on volume, cost management and efficiency. Global
companies have invested and are present in many countries. They market their
products through the use of the same coordinated image/brand in all markets.
Generally one corporate office that is responsible for global strategy. Emphasis
on volume, cost management and efficiency.

Transnational companies are much more complex organizations. They

have invested in foreign operations, have a central corporate facility but give
decision-making, R&D and marketing powers to each individual foreign market.
Transnational companies are much more complex organizations. They have
invested in foreign operations, have a central corporate facility but give
decision-making, R&D and marketing powers to each individual foreign market

Unit - III
Question- 18 What do you mean by Entrepreneurs and
Entrepreneurship and how these can be differentiated?
Ans :
Entrepreneur is an owner or manager of a business enterprise who makes
money
through
risk
and
initiative.
The
term
was
originally
a loanword from French and
was
first
defined
by
the
IrishFrench economist Richard Cantillon. Entrepreneur in English is a term applied to
a person who is willing to help launch a new venture or enterprise and accept
full responsibility for the outcome. Jean-Baptiste Say, a French economist, is
believed to have coined the word "entrepreneur" in the 19th century - he
defined an entrepreneur as "one who undertakes an enterprise, especially a
contractor, acting as intermediatory between capital and labour". A broader
definition by Say: "The entrepreneur shifts economic resources out of lower and
into higher productivity and greater yield
The entrepreneur leads the firm or organization and also demonstrates
leadership qualities by selecting managerial staff. Management skill and strong
team building abilities are essential leadership attributes for successful
entrepreneurs. It is considered that leadership, management ability, and teambuilding as essential qualities of an entrepreneur
Entrepreneurs emerge from the population on demand, and become leaders
because they perceive opportunities available and are well-positioned to take
advantage of them. An entrepreneur may perceive that they are among the few
to recognize or be able to solve a problem. Joseph Schumpeter saw the
entrepreneur as innovators and popularized the uses of the phrase creative
destruction to describe his view of the role of entrepreneurs in changing
business norms. Creative destruction encompasses changes entrepreneurial

activity makes every time a new process, product or company enters the
markets.
The most significant influence on an individual's decision to become an
entrepreneur is workplace peers and the social composition of the workplace.
Entrepreneurs also often possess innate traits such as extroversion and a
propensity for risk-taking.Nanda, R and Sorensen, J (2008) Workplace Peers
and Entrepreneurship . According to Schumpeter, an entrepreneur
characteristically innovates, introduces new technologies, increases efficiency,
productivity, or generates new products or services. An entrepreneur acts as a
catalyst for economic change and research indicates that entrepreneurs are
highly creative individuals who imagine new solutions by generating
opportunities for profit or reward.
There is a complexity and lack of cohesion between research studies that
explore the characteristics and personality traits of, and influences on, the
entrepreneur. Most studies, however, agree that there are certain
entrepreneurial traits and environmental influences that tend to be consistent.
Although certain entrepreneurial traits are required, entrepreneurial behaviours
are dynamic and influenced by environmental factors. The entrepreneur is
solely concerned with opportunity recognition and exploitation; however, the
opportunity that is recognised depends on the type of entrepreneur which
argue there are many different types dependent on their business and personal
circumstances.
studies show that the psychological propensities for male and female
entrepreneurs are more similar than different. Perceived gender differences may
be due more to gender stereotyping. There is a growing body of work that
shows that entrepreneurial behavior is dependent on social and economic
factors. For example, countries which have healthy and diversified labor
markets or stronger safety nets show a more favorable ratio of opportunitydriven rather than necessity-driven women entrepreneurs. Empirical studies
suggest that women entrepreneurs possess strong negotiating skills and
consensus-forming abilities.

Entrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined as
"one who undertakes innovations, finance and business acumen in an effort to
transform innovations into economic goods". This may result in
new organizations or may be part of revitalizing mature organizations in
response to a perceived opportunity. The most obvious form of entrepreneurship
is that of starting new businesses (referred as Start up Company); however, in
recent years, the term has been extended to include social and political forms of
entrepreneurial activity. When entrepreneurship is describing activities within a
firm or large organization it is referred to as intra-preneurship and may include
corporate venturing, when large entities spin-off organizations.
According to Entrepreneurship scholars and creator of the Global
Entrepreneurship Monitors, "by the time they reach their retirement years, half
of all working men in the United States probably have a period of selfemployment of one or more years; one in four may have engaged in selfemployment for six or more years. Participating in a new business creation is a
common activity among U.S. workers over the course of their careers." And in
recent years has been documented by scholars such as to be a major driver of
economic growth in both the United States and Western Europe.
Entrepreneurial activities are substantially different depending on the type of
organization and creativity involved. Entrepreneurship ranges in scale from solo
projects (even involving the entrepreneur only part-time) to major undertakings
creating many job opportunities. Many "high value" entrepreneurial ventures
seek venture capital or angel funding (seed money) in order to raise capital to
build the business. Angel investors generally seek annualized returns of 20-30%
and more, as well as extensive involvement in the business. Many kinds of
organizations now exist to support would-be entrepreneurs including specialized
government agencies, business incubators, science parks, and some NGOs. In
more recent times, the term entrepreneurship has been extended to include
elements not related necessarily to business formation activity such as
conceptualizations
of
entrepreneurship
as
a
specific mindset (see
also entrepreneurial mindset) resulting in entrepreneurial initiatives e.g. in the
form of social entrepreneurship, political entrepreneurship, or knowledge
entrepreneurship have emerged.

The entrepreneur is a factor in micro-economics, and the study of

entrepreneurship reaches back to the work of Richard and Adam Smith in the
late 17th and early 18th centuries, but was largely ignored theoretically until
the late 19th and early 20th centuries and empirically until a profound
resurgence in business and economics in the last 40 years.
In the 20th century, the understanding of entrepreneurship owes much to
the work of economist Joseph Schumpeter in the 1930s and other Austrian
economists such as Carl Menger, Ludwig von Mises and Friedrich von Hayek. In
Schumpeter, an entrepreneur is a person who is willing and able to convert a
new idea or invention into a successful innovation. [4] Entrepreneurship employs
what Schumpeter called "the gale of creative destruction" to replace in whole or
in part inferior innovations across markets and industries, simultaneously
creating new products including new business models. In this way, creative
destruction is largely responsible for the dynamism of industries and longrun economic growth. The supposition that entrepreneurship leads to economic
growth is an interpretation of the residual in endogenous growth theory and as
such is hotly debated in academic economics. An alternate description posited
by Israel Kirzner suggests that the majority of innovations may be much more
incremental improvements such as the replacement of paper with plastic in the
construction of a drinking straw.
Entrepreneurship resulted in new industries but also in new combinations
of currently existing inputs. Schumpeter's initial example of this was the
combination of a steam engine and then current wagon making technologies to
produce the horseless carriage. In this case the innovation, the car, was
transformational but did not require the development of a new technology,
merely the application of existing technologies in a novel manner. It did not
immediately replace the horsedrawn carriage, but in time, incremental
improvements which reduced the cost and improved the technology led to the
complete practical replacement of beast drawn vehicles in modern
transportation. Despite Schumpeter's early 20th-century contributions,
traditional microeconomic theory did not formally consider the entrepreneur in
its theoretical frameworks (instead assuming that resources would find each
other through a price system). In this treatment the entrepreneur was an
implied but unspecified actor, but it is consistent with the concept of the
entrepreneur being the agent of x-efficiency.

Question- 19 What are the significant traits of successful

Entrepreneurs?
Ans :
Entrepreneurs are very unique in nature as they have some special Traits.
What are the traits of successful entrepreneurs? That's quite a challenge. What,
besides the obvious, do successful entrepreneurs have in common? We can get
the idea started. As an entrepreneur, one have a lot of freedom and choosing
this path was one of the best decisions One has ever made. Everything is done
on your own time, where you want it and how you want it. It feels good to be
able to simply turn your day into night and your night into day. The joy of being
an entrepreneur is endless. Even though the entrepreneurial lifestyle is great,
there are some key traits and characteristics all successful entrepreneurs must
hold.
1. Get Things Done Quickly
One of the most important characteristics of an entrepreneur is to not waste
time never put off what you can accomplish today for tomorrow. Successful
entrepreneurs dont procrastinate because they know it is always great to get
things done faster. The best feeling is when you complete something off of your
to-do list. The most productive people are the ones who make the most with
the allotted time. Be sure that you plan ahead and focus on what matters.
2. Self- Confident
Since every business success revolves around taking risks, successful
entrepreneurs are always ready to take risks when it comes to their business.
When trying to succeed and attain greater heights as an entrepreneur it is
always advisable to take risks. The best and most profitable investments
require the most risk.
3. Ability to Effectively Manage Money
Many entrepreneurs today dont even think twice before doing anything, and
often lose sight of how to invest their money properly.
As an entrepreneur it is very important to effectively manage your money and
plan for the future. You dont want to be too cheap with your money and not
look to expand, but you also need to remember to keep a percentage. Spending

money frequently requires a risk, but dont spend the money if the risks
exceeds the possible return.
4. Network
Another great characteristic of successful entrepreneurs is that they always
network with each other. Successful entrepreneurs have realized the power of
working together and they always team up with each other to get great results
for their business. The best advice anyone can give you is to look for advice
from others. Dont be afraid to initiate a conversation with someone that has
more experience than you.
When trying to succeed as an entrepreneur, never do it alone and try to find
other people in your field. Brainstorm ideas together, support each other and
learn from each other.
5. Adaption to Changes
Many of the top entrepreneurs of our time are always adapting to changes,
specifically in regards to new technologies. Everything is improving day by day
and it is very important not to just expect things to be as they used to be.
Adapting to changes is very important and it can lead to a major breakthrough
of your business. Are you an entrepreneur who does not have your business
online? Why not take advantage of the vast audience of the internet and
expand your business.
Becoming a successful entrepreneur is no easy task. If you consistently get
things done early, remain confident even when times are tough, manage your
money wisely, network with others and adapt properly to new changes you will
find that things will come easier.

6.Curiosity

Its such a wonderful trait in business. To want, no, need to know whats next,
how something works, why people arent buying, or how to do something just a
little faster is a trait I look for in any potential employee and one that successful
entrepreneurs are almost plagued with. (Insatiable curiosity is often
encumbered with boredom of the routine.)

7.Risk Averse

This one throws people, but successful entrepreneurs are not any more wired to
take risks than most, but they are wired to spot opportunities and possess the
confidence that something, perhaps not what was originally envisioned, can be
made of the opportunity. They are often better at letting something thats
clearly a bad idea go, limiting the ultimate risk.

8. Planners

This goes hand in hand with risk. Successful entrepreneurs enjoy the planning
process, not necessarily completing a plan, but this is what makes them averse
to taking foolish risks. They often so value the plan for their life that they always
hold a glimmer of the vision of the business that can serve that plan.

8.Trusting

Successful entrepreneurs are trustworthy. They keep their promises, but more
than that, they are trusting. In other words, they extend trust to others and
focus on results instead of blame when something goes wrong.

9. Judgment Power

Its tough to succeed long-term as an entrepreneur when you judge one or

most of your actions as failed. Successful entrepreneurs have an uncanny ability
to look at every misstep (and there will be plenty) as a learning opportunity. The
key question is what did we learn from this as opposed to why did this fail.

10.Spatial

We might get some challenges on this one as my research is a bit shaky here,
but most of the successful entrepreneurs Ive worked with view things from a
different point of view than the general population. They can do puzzles. This
includes seeing how seemingly random sets of ideas fit together in simple and
elegant ways. If they excel at math, its probably geometry over calculus.

11.Pragmatic

Heres another one that I think is misunderstood. Successful entrepreneurs Ive

met are very realistic about whats possible and are very practical in terms of
getting there. That doesnt mean that they choke off growth by being overly
cash sensitive, but it does usually mean that they have a great sense of how
many units they can really move next quarter and what action steps are needed
to do it.

Question- 20 Explain various types of Entrepreneurs and

what are their important characteristics?
Ans : The Various Types of Entrepreneurs are as follows

Social entrepreneur
A social entrepreneur is motivated by a desire to help, improve and
transform social, environmental, educational and economic conditions.
Key traits and
characteristics of highly effective social entrepreneurs
include ambition and a lack of acceptance of the status quo or accepting the
world "as it is". The social entrepreneur is driven by an emotional desire to

address some of the big social and economic conditions in the world, for
example, poverty and educational deprivation, rather than by the desire
for profit. Social entrepreneurs seek to develop innovative solutions to global
problems that can be copied by others to enact change.
Social entrepreneurs act within a market aiming to create social value through
the improvement of goods and services offered to the community. Their main
aim is to help offer a better service improving the community as a whole and
are predominately run as non profit schemes. Zahra et al. (2009: 519) said that
social entrepreneurs make significant and diverse contributions to their
communities and societies, adopting business models to offer creative solutions
to complex and persistent social problems.

Serial entrepreneur
A serial entrepreneur is one who continuously comes up with new ideas and
starts new businesses. In the media, the serial entrepreneur is represented as
possessing a higher propensity for risk, innovation and achievement. Serial
entrepreneurs are more likely to experience repeated entrepreneurial success.
They are more likely to take risks and recover from business failure.
Lifestyle entrepreneur
A lifestyle entrepreneur places passion before profit when launching a business
in order to combine personal interests and talent with the ability to earn a
living. Many entrepreneurs may be primarily motivated by the intention to make
their business profitable in order to sell to shareholders. In contrast, a lifestyle
entrepreneur intentionally chooses a business model intended to develop and
grow their business in order to make a long-term, sustainable and viable living
working in a field where they have a particular interest, passion, talent,
knowledge or high degree of expertise. [6] A lifestyle entrepreneur may decide to
become self-employed in order to achieve greater personal freedom, more
family time and more time working on projects or business goals that inspire
them. A lifestyle entrepreneur may combine a hobby with a profession or they
may specifically decide not to expand their business in order to remain in
control of their venture. Common goals held by the lifestyle entrepreneur

include earning a living doing something that they love, earning a living in a
way that facilitates self-employment, achieving a good work/life balance and
owning a business without shareholders. Many lifestyle entrepreneurs are very
dedicated
to
their
business
and
may
work
within
the creative
[7]
industries or tourism industry, where a passion before profit approach
to entrepreneurship often prevails. While many entrepreneurs may launch their
business with a clear exit strategy, a lifestyle entrepreneur may deliberately
and consciously choose to keep their venture fully within their own control.
Lifestyle entrepreneurship is becoming increasing popular as technology
provides small business owners with the digital platforms needed to reach a
large global market.[8] Younger lifestyle entrepreneurs, typically those between
25 and 40 years old, are sometimes referred to as Treps.
Fabian Entrepreneurs
A Fabian Entrepreneur is one who is very cautious in taking the decisions, very
skeptical, and takes calculative steps.

Drone Entrepreneur
Drone Entrepreneurs suffer losses, as they refuse to make any modifications in
the existing production methods. These entrepreneurs are conservative or
orthodox in outlook. They never like to get noticed.

Question-21
What
Entrepreneurship?

is

the

Concept

and

nature

of

Ans Concept of Entrepreneurs

It has assumed super importance for accelerating economic growth both in
developed and developing countries. It promotes capital formation and creates
wealth in country. It is hope and dreams of millions of individuals around the
world. It reduces unemployment and poverty and it is a pathway to prosper.
Entrepreneurship is the process of exploring the opportunities in the market
place and arranging resources required to exploit these opportunities for long
term gain. It is the process of planning, organising, opportunities and assuming.
Thus it is a risk of business enterprise. It may be distinguished as an ability to
take risk independently to make utmost earnings in the market. It is a creative
and innovative skill and adapting response to environment of what is real.

Nature of Entrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined
as "one who undertakes innovations, finance and business acumen in an effort
to transform innovations into economic goods". This may result in
new organizations or may be part of revitalizing mature organizations in
response to a perceived opportunity.
The most obvious speciality of entrepreneurship is that of starting new
businesses (referred as Start up Company); however, in recent years, the term
has been extended to include social and political forms of entrepreneurial
activity.
When entrepreneurship is describing activities within a firm or large
organization it is referred to as intra-preneurship and may include corporate
venturing, when large entities spin-off organizations.
Entrepreneurial activities are substantially different depending on the type of
organization and creativity involved.
Entrepreneurship ranges in scale from solo projects (even involving the
entrepreneur only part-time) to major undertakings creating many job
opportunities.
Many "high value" entrepreneurial ventures seek venture capital or angel
funding (seed money) in order to raise capital to build the business. Angel
investors generally seek annualized returns of 20-30% and more, as well as
extensive involvement in the business.
Many kinds of organizations now exist to support would-be entrepreneurs
including specialized government agencies, business incubators, science parks,
and some NGOs. In more recent times, the term entrepreneurship has been
extended to include elements not related necessarily to business formation
activity
such
as
conceptualizations
of
entrepreneurship
as
a
specific mindset (see also entrepreneurial mindset) resulting in entrepreneurial
initiatives e.g. in the form of social entrepreneurship, political entrepreneurship,
or knowledge entrepreneurship have emerged.

The entrepreneurship is a factor in microeconomics, and the study of

entrepreneurship reaches back to the profound resurgence in business and
economics in the last 40 years.
Entrepreneurship employs what Schumpeter called "the gale of creative
destruction" to replace in whole or in part inferior innovations across markets
and industries, simultaneously creating new products including new business
models. In this way, creative destruction is largely responsible for the dynamism
of industries and long-run economic growth.
The supposition that entrepreneurship leads to economic growth is an
interpretation of the residual in endogenous growth theory and as such is hotly
debated in academic economics. An alternate description suggests that the
majority of innovations may be much more incremental improvements such as
the replacement of paper with plastic in the construction of a drinking straw.
Entrepreneurship resulted in new industries but also in new combinations of
currently existing inputs. Schumpeter's initial example of this was the
combination of a steam engine and then current wagon making technologies to
produce the horseless carriage. In this case the innovation, the car, was
transformational but did not require the development of a new technology,
merely the application of existing technologies in a novel manner. It did not
immediately replace the horse drawn carriage, but in time, incremental
improvements which reduced the cost and improved the technology led to the
complete practical replacement of beast drawn vehicles in modern
transportation.
Traditional microeconomic theory did not formally consider the entrepreneur in
its theoretical frameworks (instead assuming that resources would find each
other through a price system). In this treatment the entrepreneur was an
implied but unspecified actor, but it is consistent with the concept of the
entrepreneur being the agent of x-efficiency.

Promotion of Entrepreneurs

Given entrepreneurship's potential to support economic growth, it is the policy

goal of many governments to develop a culture of entrepreneurial thinking. This
can be done in a number of ways: by integrating entrepreneurship into
education systems, legislating to encourage risk-taking, and national
campaigns. An example of the latter is the United Kingdom's Enterprise Week,
which launched in 2004.
Outside of the political world, research has been conducted on the presence of
entrepreneurial theories in doctoral economics programs. Dan Johansson, fellow
at the Ratio Institute in Sweden, finds such content to be sparse. He fears this
will dilute doctoral programs and fail to train young economists to analyze
problems in a relevant way.[9]
Many of these initiatives have been brought together under the umbrella
of Global Entrepreneurship Week, a worldwide celebration and promotion of
youth entrepreneurship, which started in 2008.

Question-22 What do you understand by contemporary

business environment and what are the entrepreneurial
opportunities in contemporary business environment?
Ans :
Business Environment
The business environment is the aggregate of all conditions, events, and
influences that surround and affect a business firm. Business environment
generally refers to the external factors affecting, either positively or negatively,
the operation of a firm. The most important external factors include economic,
legal, political, social and technological factors.

Contemporary Business Environment

The term Contemporary Business Environment is composed of three words
Contemporary, Business and Environment. In simple terms, Contemporary
means the present time the state in which a person remains busy is known as

Business. The word Business in its economic sense means human activities like
production, extraction or purchase or sales of goods that are performed for
earning profits.
On the other hand, the word Contemporary Environment refers to the aspects
of surroundings. Therefore, Business Environment may be defined as a set of
conditions

are uncontrollable

Social,
in

Legal,

Economical, Political or

Institutional that

nature

and

functioning

affects

the

of

organization. Business Environment has two components:

1. Internal Environment
2. External Environment

Internal Environment: It includes 5 Ms i.e. man, material, money, machinery

and management, usually within the control of business. Business can make
changes in these factors according to the change in the functioning of
enterprise.
External

Environment: Those

factors

which

are beyond

the control of

business enterprise are included in external environment. These factors are:

Government and Legal factors, Geo-Physical Factors, Political Factors, SocioCultural Factors, Demo-Graphical factors etc. It is of two Types:
1. Micro/Operating Environment
2. Macro/General Environment
Micro/Operating Environment: The environment which is close to business
and affects its capacity to work is known as Micro or Operating Environment. It

consists of Suppliers, Customers, Market Intermediaries, Competitors and

Public.
(1) Suppliers: They are the persons who supply raw material and required
components to the company. They must be reliable and business must have
multiple suppliers i.e. they should not depend upon only one supplier.
(2) Customers: - Customers are regarded as the king of the market. Success
of every business depends upon the level of their customers satisfaction. Types
of

Customers:

(i) Wholesalers
(ii) Retailers
(iii) Industries
(iv) Government and Other Institutions
(v) Foreigners
(3) Market Intermediaries: - They work as a link between business and final
consumers.

Types:-

(i) Middleman
(ii) Marketing Agencies
(iii) Financial Intermediaries
(iv) Physical Intermediaries
(4) Competitors: - Every move of the competitors affects the business.
Business has to adjust itself according to the strategies of the Competitors.

(5) Public: - Any group who has actual interest in business enterprise is termed
as public e.g. media and local public. They may be the users or non-users of the
product.
Macro/General Environment: It includes factors that create opportunities
and threats to business units. Following are the elements of Macro Environment:
(1) Economic Environment: - It is very complex and dynamic in nature that
keeps on changing with the change in policies or political situations. It has three
elements:
(i) Economic Conditions of Public
(ii) Economic Policies of the country
(iii)Economic System
(iv) Other Economic Factors: Infrastructural Facilities, Banking, Insurance
companies, money markets, capital markets etc.
(2) Non-Economic Environment: - Following are included in non-economic
environment:(i) Political Environment: - It affects different business units extensively.
Components:
(a) Political Belief of Government
(b) Political Strength of the Country
(c) Relation with other countries
(d) Defense and Military Policies
(e) Centre State Relationship in the Country
(f) Thinking Opposition Parties towards Business Unit

(ii) Socio-Cultural Environment: - Influence exercised by social and cultural

factors, not within the control of business, is known as Socio-Cultural
Environment. These factors include: attitude of people to work, family system,
caste system, religion, education, marriage etc.
(iii) Technological Environment: - A systematic application of scientific
knowledge to practical task is known as technology. Everyday there has been
vast changes in products, services, lifestyles and living conditions, these
changes must be analysed by every business unit and should adapt these
changes.
(iv) Natural Environment: - It includes natural resources, weather, climatic
conditions, port facilities, topographical factors such as soil, sea, rivers, rainfall
etc. Every business unit must look for these factors before choosing the location
for their business.
(v) Demographic Environment :- It is a study of perspective of population i.e.
its size, standard of living, growth rate, age-sex composition, family size,
income level (upper level, middle level and lower level), education level etc.
Every business unit must see these features of population and recongnise their
various need and produce accordingly.
(vi) International Environment: - It is particularly important for industries
directly depending on import or exports. The factors that affect the business
are: Globalisation, Liberalisation, foreign business policies, cultural exchange.
Characteristics:1. Business environment is compound in nature.
2. Business environment is constantly changing process.
3. Business environment is different for different business units.

4. It has both long term and short term impact.

5. Unlimited influence of external environment factors.
6. It is very uncertain.
7. Inter-related components.
8. It includes both internal and external environment.
The entrepreneurial process begins with identifying an opportunity and
evaluating it through an initial screening process. If it appears reasonable a
detailed business plan can be made. If not it can be discarded.
SEARCH FOR BUSINESS IDEA
Clearly, except in very rare cases, opportunities just do not occur to the
individual. These have to be actively searched/ scouted for. Hence, the start up
process for a new venture creation begins with scouting for opportunities. The
process may start from an arms length, that is, one may just look around ones
immediate context- family, community, and job and build up a case for business
from the bottom-up. Else, one may take a top-down approach, Clearly, except in
very rare cases, opportunities just do not occur to the individual. These have
to be actively searched/ scouted for. Hence, the start up process for a new
venture creation begins with scouting for opportunities. The process may start
from an arms length, that is, one may just look around ones immediate
context- family, community, and job and build up a case for business from the
bottom-up. Else, one may take a top-down approach, starting from the scanning
of the international and macro economic environment and conducting/using
industrial/consumer surveys and identifying appropriate business ideas. An
entrepreneur can sense and intelligently seize opportunities, which exist in the
environment. Often it is said that necessity is the mother of all inventions.
However, in the context of entrepreneurship, opportunities besides existing in
the environment in the form of needs and problems of people around might
have to be created. Thus, the entrepreneurs meet not only the existing needs;
they create the new needs as well!

It is also possible to create opportunities. Maggi noodles, Credit cards, FM radio

are all examples of needs which were created either out of demographic
changes e.g. with more women opting for employment the need for a quick
snack was created resulting in the phenomenal success of the two minute
noodles and packaged food. Hectic work schedules, frequent corporate traveling
created the need for fast banking services and hence the ATM, credit card, debit
card and telephone banking came in vogue.

Entrepreneurial Opportunity Scanning

Once the entrepreneur perceives opportunities, it becomes important for him to
scan the environment. It is quite possible that many of the
promising
opportunities might not make commercial sense. Scanning involves close
examination of the environmental conditions and their impact upon the
business idea. It is not a cursory exercise but rather an attempt to look
beyond the immediate opportunities to the emerging trends. An attempt can be
made to modify, adapt, rearrange, substitute, combine, reverse etc.
Entrepreneurship does not exist in a vacuum. It is affected by and affects the
environment.
Entrepreneurship
is directly linked to
Contemporary Business
Environment
Relationship Between Entrepreneurship And Environment
As the economies are getting internationally integrated, for an analysis of the
environment of
entrepreneurship you would be required to develop an understanding of
international, domestic macro-economic, and industry/sector specific factors.

Question-23 What is a Business Enterprise? Explain briefly

the process of setting up a Business Enterprise.

Ans :
Business Enterprise
A Business Enterprise is a Commercial organization engaged in the trade
of goods, services, or both to consumers. Business Enterprises are predominant
in capitalist economies, where most of them are privately owned and
administered to earn profit to increase the wealth of their owners. Business
Enterprise may also be not-for-profit or state-owned. A Business Enterprise
owned by multiple individuals may be referred to as a company, although that
term also has a more precise meaning.
The etymology of Business Enterprise" relates to the state of being busy either
as an individual or society as a whole, doing commercially viable and profitable
work. The term " Business Enterprise" has at least three usages, depending on
the scope the singular usage to mean a particular organization; the
generalized usage to refer to a particular market sector, "the music business"
and compound forms such as agribusiness; and the broadest meaning, which
encompasses all activity by the community of suppliers of goods and services.
However, the exact definition of business, like much else in the philosophy of
Business Enterprise, is a matter of debate and complexity of meanings.

Small and Medium-sized Business Enterprises

Small
and
medium
enterprises or small
and
medium-sized
enterprises (also: Small and Medium-sized Enterprises; acronym in the
plural: SMEs; small and medium businesses or small and medium-sized
businesses, acronym: SMBs; and variations thereof) are companies whose
headcount or turnover falls below certain limits.
The abbreviation "SME" occurs commonly in the European Union and in
international organizations, such as the World Bank, the United Nations, and
the WTO. The term "small and medium businesses" or "SMBs" is predominantly
used in the USA.
In most economies, smaller enterprises are much greater in number than large
companies. SMEs are often said to be responsible for driving innovation and
competition in many economic sectors.

How to Set Up an Business Enterprise

Setting up a Business Enterprise requires time, money and energy. Your
enterprise doesn't necessarily have to make money, though. Non-profit
organizations or social enterprises -- such as Red Cross and YMCA -- play a role
in society that is no lesser than that of for-profit businesses. Whatever the
enterprise you want to set up, approach it professionally

Steps of the Process of Setting up a Business Enterprise

o

Come up with an idea of what your enterprise will be about. Think about who
will be the customers of your business. If you plan your enterprise to be a nonprofit organization, define the beneficiaries of its work. Also, consider how to
finance your organization and where it will get money to grow.
o

2
Write a business plan. This formal document describes the structure of the
organization, its financial aspects, the products it will produce or services it will
provide and many other details relating to how the organization will work. Social
enterprises also need a business plan as it will make the enterprise more
professional. Instead of profits, they can measure their success in terms of
people fed, children saved from HIV/AIDs or other measurements of their social
impact.

3
Raise capital to start your enterprise. If you want to start a business enterprise,
contact local banks and venture capital funds. If your enterprise is of social
nature, ask for funding from charity organizations, the government or
philanthropic foundations.

4
Register the enterprise's name at the local authority, typically the office of the
Secretary of State. As name registration differs from state to state, consult
business.gov for how to do it in your state.

5
Obtain an Employer Identification Number, or EIN, from the U.S. Revenue and
Internal Revenue Service. You can apply for this number online at irs.gov. The

site includes information on tax state registration you may need to go through,
depending on the state in which you registered the enterprise.
The major factors affecting how a Business Enterprise is organized are
usually:

The size and scope of the Business Enterprise and its structure,
management, and ownership, broadly analyzed in the theory of the firm.
Generally a smaller business is more flexible, while larger businesses, or
those with wider ownership or more formal structures, will usually tend to be
organized as corporations or (less often) partnerships. In addition, a Business
Enterprise that wishes to raise money on a stock market or to be owned by a
wide range of people will often be required to adopt a specific legal form to
do so.

The sector and country. Private profit-making businesses are different

from government-owned bodies. In some countries, certain
Enterprises are legally obliged to be organized in certain ways.

Business

Limited Liability Companies (LLC), limited liability partnerships, and other

specific types of business organization protect their owners or shareholders
from business failure by doing business under a separate legal entity with
certain legal protections. In contrast, unincorporated Business Enterprise or
persons working on their own are usually not so protected.

Tax advantages. Different structures are treated differently in tax law,

and may have advantages for this reason.

Disclosure

and

compliance

requirements.

Different

Business

Enterprises structures may be required to make less or more information

public (or report it to relevant authorities), and may be bound to comply with
different rules and regulations.
Many Business Enterprises are operated through a separate entity such as a
corporation or a partnership (either formed with or without limited liability).
Most legal jurisdictions allow people to organize such an entity by filing certain

charter documents with the relevant Secretary of State or equivalent and

complying with certain other ongoing obligations. The relationships and legal
rights of shareholders, limited partners, or members are governed partly by the
charter documents and partly by the law of the jurisdiction where the entity is
organized. Generally speaking, shareholders in a corporation, limited partners in
a limited partnership, and members in a limited liability company are shielded
from personal liability for the debts and obligations of the entity, which is legally
treated as a separate "person". This means that unless there is misconduct, the
owner's own possessions are strongly protected in law if the business does not
succeed.
Where two or more individuals own a Business Enterprise together but have
failed to organize a more specialized form of vehicle, they will be treated as a
general partnership. The terms of a partnership are partly governed by a
partnership agreement if one is created, and partly by the law of the jurisdiction
where the partnership is located. No paperwork or filing is necessary to create a
partnership, and without an agreement, the relationships and legal rights of the
partners will be entirely governed by the law of the jurisdiction where the
partnership is located.
A single person who owns and runs a Business Enterprise is commonly known
as a sole proprietor, whether that person owns it directly or through a formally
organized entity.
A few relevant factors to consider in deciding how to operate a
Business Enterprise include:
1. General partners in a partnership (other than a limited liability
partnership), plus anyone who personally owns and operates a Business
Enterprise without creating a separate legal entity, are personally liable
for the debts and obligations of the business.
2. Generally, corporations are required to pay tax just like "real" people. In
some tax systems, this can give rise to so-called double taxation,
because first the corporation pays tax on the profit, and then when the
corporation distributes its profits to its owners, individuals have to include

dividends in their income when they complete their personal tax returns,
at which point a second layer of income tax is imposed.
3. In most countries, there are laws which treat small corporations differently
than large ones. They may be exempt from certain legal filing
requirements or labor laws, have simplified procedures in specialized
areas, and have simplified, advantageous, or slightly different tax
treatment.
4. To "go public" (sometimes called IPO) -- which basically means to allow a
part of the business to be owned by a wider range of investors or the
public in generalyou must organize a separate entity, which is usually
required to comply with a tighter set of laws and procedures. Most public
entities are corporations that have sold shares, but increasingly there are
also public LLCs that sell units (sometimes also called shares), and other
more exotic entities as well. However, you cannot take a general
partnership "public."

Question-24 What are the various factors affecting the

appropriate choice of a suitable form of Business
Organization?
Or
Question-25 What do you understand by a Suitable form of
Business Organization and how the choice can be made for
this?
Ans :
Choosing a Form of Business Organisation
A business enterprise can be owned and organized in several forms. Each form
of organization has its own merits and demerits. The ultimate choice of the form
of business depends upon the balancing of the advantages and disadvantages
of the various forms of business. The right choice of the form of the business is
very crucial because it determines the power, control, risk and responsibility of

the entrepreneur as well as the division of profits and losses. Being a long term
commitment, the choice of the form of business should be made after
considerable thought and deliberation.
The choice of the form of business is governed by several interrelated
and interdependent factors :

The nature of business is the most important factor. Businesses providing

direct services like tailors, restaurants and professional services like
doctors, lawyers are generally organised as proprietary concerns. While,
businesses requiring pooling of skills and funds like accounting firms are
better organised as partnerships. Manufacturing organisations of large
size are more commonly set up as private and public companies.

Scale of operations i.e. volume of business ( large, medium, small) and

size of the market area (local, national, international) served are the key
factors. Large scale enterprises catering to national and international
markets can be organised more successfully as private or public
companies. Small and medium scale firms are generally set up as
partnerships and proprietorship. Similarly, where the area of operations is
wide spread (national or international), company ownership is
appropriate. But if the area of operations is confined to a particular
locality, partnership or proprietorship will be a more suitable choice.

The degree of control desired by the owner(s). A person who desires

direct control of business, prefers proprietorship, because a company
involves separation of ownership and management.

Amount of capital required for the establishment and operation of a

business. A partnership may be converted into a company when it grows
beyond the capacity and resources of a few persons.

The volume of risks and liabilities as well as the willingness of the owners
to bear it, is also an important consideration.

Comparative tax liability.

Entrepreneurs should seriously weigh the pros and cons of various forms of
business organizations. Your small business can be set up as a sole proprietor,
corporation, S-corporation, partnership, non-profit organization, Limited Liability
Company, Limited Liability Partnership, and in some states a Professional

Limited Liability Company/Partnership. Such a dizzying array of choices! Which

form of organization is best for your business depends on several factors, some
of which are tax-related, some of which are business-related, and some of which
are influenced by legal concerns. Moreover, you may need a different form of
organization at different times in the life of your business. So don't be afraid to
change your form of business if your needs change.

Question-26 Define and explain a Business Plan? What is the

process of preparation of a proper Business Plan?
Ans : Business Plan
A business plan is a comprehensive, written description of the business of an
enterprise. It is a detailed report on a company's products or services,
production techniques, markets and clients, marketing strategy, human
resources, organization, requirements in respect of infrastructure and supplies,
financing requirements, and sources and uses of funds. The business plan
describes the past and present status of a business, but its main purpose is to
present the future of an enterprise. It is normally updated annually and looks
ahead for a period of usually three to five years, depending on the type of
business and the kind of entity.
A business plan is a formal statement of a set of business goals, the reasons
why they are believed attainable, and the plan for reaching those goals. It may
also contain background information about the organization or team attempting
to reach those goals. Business plans may also target changes in perception and
branding by the customer, client, tax-payer, or larger community. When the
existing business is to assume a major change or when planning a new venture
- a 3 to 5 year business plan is required since investors will look for their annual
return in the 3 to 5 year time.
Business plans may be internally or externally focused. Externally focused
plans target goals that are important to external stakeholders, particularly
financial stakeholders. They typically have detailed information about the
organization or team attempting to reach the goals. With for-profit entities,

external stakeholders include investors and customers. External stake-holders

of non-profits include donors and the clients of the non-profit's services. For
government agencies, external stakeholders include tax-payers, higher-level
government agencies, and international lending bodies such as the International
Monetary Fund, the World Bank, various economic agencies of the United
Nations, and development banks.
Internally focused business plans target intermediate goals required to
reach the external goals. They may cover the development of a new product, a
new service, a new IT system, a restructuring of finance, the refurbishing of a
factory or a restructuring of the organization. An internal business plan is often
developed in conjunction with a balanced scorecard or a list of critical success
factors. This allows success of the plan to be measured using non-financial
measures. Business plans that identify and target internal goals, but provide
only general guidance on how they will be met are called strategic plans.

Operational plans describe the goals of an internal organization, working group

or department. Project plans, sometimes known as project frameworks, describe
the goals of a particular project. They may also address the project's place
within the organization's larger strategic goals
Business plans are decision-making tools. There is no fixed content for a
business plan. Rather the content and format of the business plan is determined
by the goals and audience. A business plan represents all aspects of business
planning process declaring vision and strategy alongside sub-plans to cover
marketing, finance, operations, human resources as well as a legal plan, when
required. A business plan is a summary of those disciplinary plans.

The Need of a Business Plan

The depth and detail of the business plan depends upon the size of the market,
nature of business [manufacturing/trading/service] and degree of competition.
For, e.g., an entrepreneur planning to market a new washing machine will need
a comprehensive business plan. On the other hand, an entrepreneur who plans
to open a general provisions corner store will not need such a comprehensive
business plan. Business plan is important due to the following reasons:

(i) It helps the entrepreneur to decide where he wants to go.

(ii) It helps him to determine the viability of the venture.
(iii) It provides guidance to the entrepreneur in planning realistic goals and
targets, in organizing and even in identifying possible roadblocks.
(iv) It is a pre-requisite to obtain finance.

The Out line Sketch of a Business Plan

1 Introductory Page
(a) Name and address of business
(b) Name(s) and address (es) of principals
(c) Nature of business
(d) Statement of financing needed
(e) Statement of confidentiality of report
2 Executive Summary
Three to four pages summarizing the complete business plan.
3 Industry Analysis
(a) Future outlook and trends
(b) Analysis of competitors
(c) Market segmentation
(d) Industry forecasts
4 Description of Venture
(a) Product (s)
(b) Services (s)
(c) Size of business
(d) Office equipment and personnel
(e) Background of entrepreneurs
5 Production Plan
(a) Manufacturing process (amount subcontracted)
(b) Physical plant
(c) Machinery and equipment
(d) Names of suppliers of raw materials

6 Marketing Plan
(a) Pricing
(b) Distribution
(c) Production
(d) Product forecasts
(e) Controls
Organisational Plan
(a) Form of ownership
(b) Identification of partners or principal shareholders
(c) Authority of principals
(d) Management-team background
(e) Roles and responsibilities of members of organization
8 Assessment of Risk
(a) Evaluate weakness of business
(b) New technologies
(c) Contingency plans
9 Financial Plan
(a) Pro forma income statement
(b) Cash flow projection
(c) Pro forma balance sheet
(d) Break-even analysis
(e) Sources and application of funds
10 Appendix (contains backup material)
(a) Letters
(b) Market research data
(c) Leases or contracts
(d) Price lists from suppliers

How to Prepare Your Business Plan

Preparing a business plan draws on a wide range of knowledge from many

different
business
disciplines: finance, human
resource
management, intellectual
property
management, supply
chain
management, operations management, and marketing, among others. It can be
helpful to view the business plan as a collection of sub-plans, one for each of
the main business disciplines.

A business plan should not be something you prepare once, then put on a shelf
and forget. Dynamic planning should be an integral part of managing your
business. Most successful ventures prepare a three-to-five year business plan
every year. This involves updating last years business plan by comparing the
planned figures and goals with results achieved and taking into account
changes, new information, experiences and new ideas. The steps involved in
the business planning process are the following:

1. Assessing the situation

2. Developing a mission
3. Getting ready
4. Setting goals
5. Working out the business plan
6. Setting employee objectives
7. Monitoring the process

1. Assessing the situation

This should be an assessment of how your customers, partners, competitors
and suppliers view your business. It should answer the question where are we
now? It should also be a honest and self-critical exercise trying to answer the
important questions any businesspersons should be asking themselves

regularly: What are our important strengths and main weaknesses? What
can we do well and what should we not be doing at all? What are the major
mistakes we have made in the past and what can we learn from them? Do we
make a reasonable number of mistakes?

2. Developing a mission
Before proceeding further you should formulate a clear mission statement for
your enterprise. Developing your mission is often the most valuable part of the
dynamic planning process since it can change or reconfirm the direction of your
business. Missions are intended to provide a sense of purpose and act as a tool
for communicating where the business is heading. Shareholders, employees and
business partners can be better motivated and support the mission if they
know what it is.
Your vision says how you see yourself in the far future. It expresses what you
want your company to become. A vision shared by all the people concerned
with the business is an important factor for its successful development.
Your mission defines what you want to achieve. It states the benefits your
business will bring to clients, employees, shareholders and the community as a
whole.
Your
culture.

philosophy expresses the values and beliefs of your organization's

Your strategy indicates how to get there.

A business is often founded on the vision of an individual. As the entity grows,
the organization may lose its original raison dtre and its mission may change.
The mission should be reviewed regularly and if necessary adapted. This should
be providing an updated picture of what you are trying to achieve and
answering questions such as: UNCTAD, How to Prepare Your Business Plan

What business are you in?

What do you do best?
Whose needs do you meet?
What needs do you meet?
What benefits do you generate?
Philosophies or values should be included in the written business plan. They are
an important foundation that should be communicated to all levels within your
organization and to your outside business partners. A consistent corporate

culture and a good understanding of the entity's direction and values can
improve decision- making and staff productivity. Staff may feel better about
what they do.
People are motivated by more than just getting a salary. The vision, mission,
philosophy and strategy of a firm are usually developed by the top
management, sometimes at an off-site location has many benefits (getting
away from the day-to-day distractions for the purpose of this process).

3. Getting ready
After the mission and the philosophical basis have been defined, you need to
start the actual work of preparing the business plan. Some important matters
you need to address when getting ready are:

Appointing a coordinator.
Appoint the staff member who will be
responsible for coordinating the business planning process and for delivering
the final document (business planning project manager) in time.
Hiring a facilitator. Consider the value of an experienced facilitator. Hire
one if you do not have a staff member who is available and has the relevant
experience and talent in guiding complex business planning processes. Very
often an external person - neutral and independent - can be of value in
moderating complex consensus-seeking sessions. This person should be
knowledgeable about the requirements of the readers of the business plan.
Defining tasks. Define the different tasks and steps involved in the
process, the timing of these and the overall schedule for the work.
Identifying team members. Identify the people who will be involved in the
process and define their roles, competencies, responsibilities and expected
contributions/deliverables.
Gathering information. Gather and organize all the basic information that
will be required from internal and external sources (market surveys, reports on
competition, new technological developments, etc.). In addition to information
available in-house, there are valuable sources and tools such as industry
associations, databases and specialized consultants to be considered.

4. Setting goals.
Setting goals for the future development of the business is a prerequisite for the
preparation of the business plan. Although these goals will have to be adjusted
in the iterative planning process, they can still be of great value in setting the
tune and spirit for further work. The goals should be time-bound, realistic
and measurable. Examples of such goals can be:
Over the next three years increase sales volume by an average of 20 per cent
per year by intensifying marketing and sales effort in the neighbouring
countries (export);

 In the coming year reduce production costs by 10 per cent through greater
automation of production lines;
By the end of the second planning year launch three new products on the
local market.

5. Working out the business plan

Working out the business plan basically involves synthesizing and harmonizing
your marketing, sales, development, manufacturing, operations and financing
targets in such a way as to enable the enterprise to meet its overall objectives.
This matching work is usually conducted in an iterative process until full
consistency of all elements of the business is achieved.

6. Setting employee objectives.

One of the most important actions after your business plan has been completed
is to use it as a basis for setting the objectives of units and individuals in your
firm. The objective of your sales manager is to achieve the sales volumes set in
the plan. The production manager has to meet the quality standards and
production rates anticipated. The development staff have, among other things,
to meet the schedules planned for bringing into production the new product.
These individual objectives should be fixed in writing and the results of the
work should be monitored and assessed periodically. These should form the
basis for the financial compensation of the employee.

7. Monitoring the process.

Systematic monitoring of the implementation of your plan is a very important
factor for the success of your business. Action plans, monitoring systems and
constant feedback should be integrated to ensure successful implementation of
the plan and achievement of its objectives. Participation in this process can
have a profound effect on the way your team members view their role in the
enterprise, and can have an immediate impact on their performance. If the
business plan is completed and then locked up in a cupboard and forgotten for a
year, your employees will never take business planning seriously again.
If key assumptions change, the plan must be adjusted. Accordingly, mid-term
corrections are recommended. The key to maximizing the benefits of dynamic
planning lies in implementation, action and keeping the plan up to date.

Question-27 What is a Feasibility Report? How Feasibility

Report is prepared for a Business Plan?
Ans :

Feasibility Report
Feasibility literally means whether some idea will work or not. It knows before
hand whether there exists a sizeable market for the proposed product/service,
what would be the investment requirements and where to get the funding from,
whether and wherefrom the necessary technical know-how to convert the idea
into a tangible product may be available, and so on. In other words, feasibility
study involves an examination of the operations, financial, HR and marketing
aspects of a business before the venture comes into existence.
Feasibility is a multivariate concept; that is, a project has to be viable not
only in technical terms but also in economic and commercial terms too.
Moreover, there always is a possibility that a project that is technically possible
may not be economically viable. For instance, you can construct a dust free
factory in Rajasthan, but it is more economically sensible to do so in
Chandigarh/ Bangalore. So even as we take up the various aspects of feasibility
oneby-one, it must not mislead into believing that there is a sequence and that
there are no interdependencies.
Examination of the feasibility requires skills that you may fall short of. You may
take the help of the Technical Consultancy Organisations (TCOs) such as
HARDICON (Haryana-Delhi Industrial Consultancy Organisation) towards this
purpose. There are district-wise industrial potential surveys available with the
SISIs and DICs that may serve as a good starting point. You may also make use
of the Project Reports published by the directorate of industries and private
consulting firms. Obviously, as you use these off-the- shelf project reports, you
need to re-validate their assumptions and findings and resist the temptation of
jump-starting. Whether you use the already published project reports or wish to
start afresh, you need to examine all the facets of the feasibility of the proposed
project idea, viz., marketing, technical, financial, economic and legal.
Marketing Analysis
A market, whether a place or not, is the arena for interaction among buyers and
sellers. From sellers point of view, market analysis is primarily concerned with
the aggregate demand of the proposed product/service in future and the market
share expected to be captured. Success of the proposed project clearly hinges
on the continuing support of the customers. However, it is very difficult to
identify the market for ones product/service. After all, the whole universe
cannot be your market. You have to carefully segment the market according to
some criteria such as geographic scope, demographic and psychological profile
of the potential customers etc. It is a study of knowing who all comprise your
customers, for this you require information on:
- Consumption trends.
- Past and present supply position
- Production possibilities and constraints

- Imports and Exports

-Competition
- Cost structure
- Elasticity of demand
- Consumer behaviour, intentions, motivations, attitudes, preferences and
requirements
-

Distribution channels and marketing policies in use

- Administrative, technical and legal constraints impinging on the marketing of

the product
FINANCIAL ANALYSIS
The objective of financial analysis is to ascertain whether the proposed project
will be financially viable in the sense of being able to meet the burden of
servicing debt and whether the proposed project will satisfy the return
expectations of those who provide the capital. While conducting a financial
appraisal certain aspects has to be looked into like:
- Investment outlay and cost of project
- Means of financing
- Projected profitability
- Break- even point
- Cash flows of the project
- Investment worthiness judged in terms of various criteria of merit
- Projected financial positions
TECHNICAL ANALYSIS
The issues involved in the assessment of technical analysis of the proposed
project may be classified into those pertaining to inputs, throughputs and
outputs.
Input Analysis: Input analysis is mainly concerned with the identification,
quantification and evaluation of project inputs, that is, machinery and 67
materials. You have to ensure that the right kind and quality of inputs
would be available at the right time and cost throughout the life of the
project. You have to enter into long-term contracts with the potential
suppliers; in many cases you have to cultivate your supply sources. When
Macdonald entered India, they developed sustainable sources of supply of

potatoes, lettuce and other ingredients for their burgers. The activities
involved in developing and retaining supply sources are referred to as
supply chain management.

Throughput Analysis: It refers to the production/operations that you would

perform on the inputs to add value. Usually, the inputs received would undergo
a process of transformation in several stages of manufacture. Where to locate
the facility, what would be the sequence, what would be the layout, what would
be the quality control measures, etc. are the issues that you would learn in
greater details in subsequent lessons.
Output Analysis: this involves product specification in terms of physical
features- colour, weight, length, breadth, height; functional features;
chemicalmaterial properties; as well as standards to be complied with such as
BIS, ISI, and ISO etc.

ECONOMIC ANALYSIS
Economics is the study of costs- and- benefits. In regard to the feasibility of the
study the entrepreneur is concerned whether the capital cost as well as the cost
of the product is justifiable vis--vis the price at which it will sell at the market
place. For example, technically, silver can be extracted from silver bromide, (a
chemical used for processing the X-ray and photo films); but, the cost of
extraction is so high that it would not be economically feasible to do so.
Likewise, until recently cost of harnessing solar power was prohibitively high.
This cost-benefit analysis goes into financial calculations for profitability
analysis that we discussed under financial analysis. At this stage it is also useful
to distinguish between the economic and commercial feasibility; whereas
economic feasibility leads one to the unit cost of the product, commercial
feasibility informs whether enough units would sell.
Apart from the cost-benefit analysis as above, which we also refer to as private
costbenefit analysis, it is also useful to do what is known as social- cost-benefitanalysis (SCBA). For example, the entrepreneur may be getting subsidized
electricity in which case private cost would be less than social cost. Likewise,
exporting units earn precious foreign exchange resulting into social benefits
being more than private earnings. Many a time, a project that is worthy on SCBA
may find greater favour with the support agencies.

ECOLOGICAL ANALYSIS
In recent years, environmental concerns have assumed a great deal of
significance especially for projects, which have significant ecological
implications like power plants and irrigation schemes, and for environment
polluting industries (like bulk drugs, chemicals and leather processing). The
concerns that are usually addressed include the following:
- What is the likely damage caused by the project to the environment?

- What is the cost of restoration measures required to ensure that the damage
to the environment is contained within acceptable limits?

UNIT-IV
Question- 28 What are Business Policies of Government and
what are the impacts of Government and Government
policies on Business?
Or
Question-29 Explain the Government and Business interface.
Ans : Policy
A policy is typically described as a principle or rule to guide decisions and
achieve rational outcome. The term is not normally used to denote what is
actually done, this is normally referred to as either procedure or protocol.
Policies are generally adopted by the Board of or senior governance body within
an organization where as procedures or protocols would be developed and
adopted
by
senior
executive
officers.
Policies
can
assist
in
both subjective and objective decision making. Policies to assist in subjective
decision making would usually assist senior management with decisions that
must consider the relative merits of a number of factors before making
decisions and as a result are often hard to objectively test e.g. work-life balance
policy. In contrast policies to assist in objective decision making are usually
operational in nature and can be objectively tested e.g. password policy.
A Policy can be considered as a "Statement of Intent" or a "Commitment". For
that reason at least, the decision-makers can be held accountable for their
"Policy".

Public Policy or Government Policy

Public policy as government action is generally the principled guide to action
taken by the administrative or executive branches of the state with regard to a
class of issues in a manner consistent with law and institutional customs. In

general,
the
foundation
is
the
pertinent
national
and
subnationalconstitutional law and implementing legislation such as the US
Federal
code.
Further
substrates
include
both judicial interpretations
and regulations which are generally authorized by legislation. Other scholars
define it as a system of "courses of action, regulatory measures, laws,
and funding priorities concerning a given topic promulgated by a governmental
entity or its representatives." Public policy is commonly embodied "in
constitutions, legislative acts, and judicial decisions."
Shaping public policy is a complex and multifaceted process that involves
the interplay of numerous individuals and interest groups competing and
collaborating to influence policymakers to act in a particular way. These
individuals and groups use a variety of tactics and tools to advance their aims,
including advocating their positions publicly, attempting to educate supporters
and opponents, and mobilizing allies on a particular issue. In this context,
advocacy can be defined as attempting to influence public policy through
education, lobbying, or political pressure. Advocacy groups "often attempt to
educate the general public as well as public policy makers about the nature of
problems, what legislation is needed to address problems, and the funding
required to provide services or conduct research. Although advocacy is viewed
as unseemly by some in the professional and research community, it is clear
that public policy priorities are influenced by advocacy. Sound research data can
be used to educate the public as well as policy makers, thereby improving the
public policy process."
Government Policy or Public policy-making in India has frequently been
characterized by a failure to anticipate needs, impacts, or reactions which
could have reasonably been foreseen, thus impeding economic development.
Policies have been reversed or changed more frequently than warranted by
exogenous changes or new information. This paper is concerned with why
India's policymaking structures have so much difficulty in formulating the "right"
policy and then sticking to it. It goes on to ask, and make a modest beginning in
answering, the question of what can be done to improve the structures and
systems involved in the making of Public Policy or Government Policy in India

Types of Government or public Policies

Policies may be classified in many different ways. The following is a sample of

several different types of policies broken down by their effect on members of
the organization.
Distributive policies
Distributive policies extend goods and services to members of an organization,
as well as distributing the costs of the goods/services amongst the members of
the organization. Examples include government policies that impact spending
for welfare, public education, highways, and public safety, or a professional
organization's benefits plan.
Regulatory policies
Regulatory policies, or mandates, limit the discretion of individuals and
agencies, or otherwise compel certain types of behavior. These policies are
generally thought to be best applied when good behavior can be easily defined
and bad behavior can be easily regulated and punished through fines or
sanctions. An example of a fairly successful public regulatory policy is that of a
speed limit.
Constituent policies
Constituent policies create executive power entities, or deal with laws.
Constituent policies also deal with Fiscal Policy in some circumstances.
Miscellaneous policies
Policies are dynamic; they are not just static lists of goals or laws. Policy
blueprints have to be implemented, often with unexpected results. Social
policies are what happens 'on the ground' when they are implemented, as well
as what happens at the decision making or legislative stage.
When the term policy is used, it may also refer to:

Official government policy (legislation or guidelines that govern how laws

should be put into operation)

Broad ideas and goals in political manifestos and pamphlets

A company or organization's policy on a particular topic. For example, the

equal opportunity policy of a company shows that the company aims to treat
all its staff equally.

The actions the organization actually takes may often vary significantly from
stated policy. This difference is sometimes caused by political compromise over
policy, while in other situations it is caused by lack of policy implementation and
enforcement. Implementing policy may have unexpected results, stemming
from a policy whose reach extends further than the problem it was originally
crafted to address. Additionally, unpredictable results may arise from selective
or idiosyncratic enforcement of policy.

Impact of Government Policies on Business

ONCE upon a time economists thought government policies has no impact on
business. But after the Great Depression of the 1930s, Keynes, the great
economist, showed government policies could effect business. For example, if a
government imposes more taxes and duties on a particular sector than is
justified by its profit margin, it would go down or the businessmen in it can lose
their interest in the sector and can give up their business. Similarly, tax and
duty exemption for a particular sector would encourage businessmen to invest
in it. As a result the sector will grow. If a country's monetary policy ensures
availability of loans at reasonable rates, investment will go up.
The prevailing global order has a tremendous impact on a country's business. It
may be legal or illegal. For example, the USA manipulate the UN to impose
sanctions on Iraq in the 1990s. The sanctions destroyed Iraqi business for which
it lost business worth billions of dollars as well as its money in the banks of the
USA and its allies. Iran is another example. The impact of government policy on
business can be explained from the political and technical perspective.
From the political pint of view, political parties, their ideologies as well as world
politics
are
relevant.
From the technical perspective, the following policies of a government can
impact business directly or indirectly:
(a) Taxation
(b) Subsidies
(c) Interest Rates
(d) Exchange Rates

(e) Public-Private Partnerships.

The government policy of a country depends upon its political culture. It can
also vary depending on the form of government. Policy in a communist country
will be different from that in a democracy or monarchy. The government policy
in a politically stable country will also be different from an unstable country. In a
stable political system, a government can take sustained business-friendly
decisions to strengthen local business. The government, in this situation, gets
the help of the opposition. But in an unstable political system in which the
opposition boycotts parliament and takes to street agitations businesses and
investment would suffer.
In such a negative political culture, a country cannot have a sustained
business-friendly environment or policy. In an unstable system, a government
finds it difficult to maintain law and order which affects the business
environment. It hampers business. Foreign investors do not invest in such an
environment.
Taxation policy can affect businesses. High tax rate on imported products
would encourage local entrepreneurs to produce goods at home. But high tax
rate on raw materials will discourage domestic production and encourage
imports.
Lending rates of the banks and the financial policy of a government can
affect the economy. If interest rate rises, investment falls because businessmen
would not borrow at unviable rates.

Question-30 What do you mean by Stock Exchange? Explain

briefly about the Stock Exchange in India.
Ans : Stock Exchange - A stock exchange is an entity that provides
services
for stock
brokers and traders to
trade stocks, bonds,
and
other securities. Stock exchanges also provide facilities for issue and
redemption of securities and other financial instruments, and capital events
including the payment of income and dividends. Securities traded on a stock
exchange include shares issued by companies, unit trusts, derivatives, pooled
investment products and bonds.
To be able to trade a security on a certain stock exchange, it must be listed
there. Usually, there is a central location at least for record keeping, but trade is
increasingly less linked to such a physical place, as modern markets
are electronic networks, which gives them advantages of increased speed and
reduced cost of transactions. Trade on an exchange is by members only.

The initial offering of stocks and bonds to investors is by definition done in

the primary market and subsequent trading is done in the secondary market. A
stock exchange is often the most important component of a stock market.
Supply and demand in stock markets is driven by various factors that, as in
all free markets, affect the price of stocks (see stock valuation).
There is usually no compulsion to issue stock via the stock exchange itself, nor
must stock be subsequently traded on the exchange. Such trading is said to
be off
exchange or over-the-counter.
This
is
the
usual
way
that derivatives and bonds are traded. Increasingly, stock exchanges are part of
a global market for securities.

The Role of Stock exchange

Stock exchanges have multiple roles in the economy. This may include the
following
Raising capital for businesses
The Stock Exchange provide companies with the facility to raise capital for
expansion through selling shares to the investing public.
Mobilizing savings for investment
When people draw their savings and invest in shares (through a IPO or
the issuance of new company shares of an already listed company), it usually
leads to rational allocation of resources because funds, which could have been
consumed, or kept in idle deposits with banks, are mobilized and redirected to
help companies' management boards finance their organizations. This may
promote business activity with benefits for several economic sectors such
as agriculture, commerce and industry,
resulting
in
stronger economic
growth and higher productivity levels of firms. Sometimes it is very difficult for
the stock investor to determine whether or not the allocation of those funds is in
good faith and will be able to generate long-term company growth, without
examination of a company's internal auditing.

Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines,
increase distribution channels, hedge against volatility, increase its market
share, or acquire other necessary business assets. A takeover bid or
a merger agreement through the stock market is one of the simplest and most
common ways for a company to grow by acquisition or fusion.
Profit sharing
Both casual and professional stock investors, as large as institutional
investors or
as
small
as
an
ordinary middle
class family,
through dividends and stock price increases that may result in capital gains,
share in the wealth of profitable businesses. Unprofitable and troubled
businesses may result in capital losses for shareholders.
Corporate governance
By having a wide and varied scope of owners, companies generally tend to
improve management standards and efficiency to satisfy the demands of these
shareholders, and the more stringent rules for public corporations imposed by
public stock exchanges and the government. Consequently, it is alleged
that public companies (companies that are owned by shareholders who are
members of the general public and trade shares on public exchanges) tend to
have better management records than privately held companies (those
companies where shares are not publicly traded, often owned by the company
founders and/or their families and heirs, or otherwise by a small group of
investors).
Creating investment opportunities for small investors
As opposed to other businesses that require huge capital outlay, investing in
shares is open to both the large and small stock investors because a person
buys the number of shares they can afford. Therefore the Stock Exchange
provides the opportunity for small investors to own shares of the same
companies as large investors.

Government capital-raising for development projects

Governments at various levels may decide to borrow money to finance
infrastructure projects such as sewage and water treatment works or housing
estates by selling another category of securities known as bonds. These bonds
can be raised through the Stock Exchange whereby members of the public buy
them, thus loaning money to the government. The issuance of such bonds can
obviate the need, in the short term, to directly tax citizens to finance
developmentthough by securing such bonds with the full faith and credit of
the government instead of with collateral, the government must eventually tax
citizens or otherwise raise additional funds to make any regular coupon
payments and refund the principal when the bonds mature.
Barometer of the economy
At the stock exchange, share prices rise and fall depending, largely,
on market forces. Share prices tend to rise or remain stable when companies
and the economy in general show signs of stability and growth. An economic
recession, depression, or financial crisis could eventually lead to a stock market
crash. Therefore the movement of share prices and in general of the stock
indexes can be an indicator of the general trend in the economy.

Stock Exchanges of India

There are three major stock exchanges in India as mentioned below

Bombay Stock Exchange (BSE)

The Bombay Stock Exchange (BSE) ( Bombay hare Bzar) (formerly, The
Stock
Exchange,
Bombay)
is
a stock
exchange
located
on Dalal
Street, Mumbai and is the oldest stock exchange in Asia. The equity market
capitalization of the companies listed on the BSE wasUS$1.63 trillion as of
December 2010, making it the 4th largest stock exchange in Asia and the 8th
largest in the world. The BSE has the largest number of listed companies in the
world.
As of June 2011, there are over 5,085 listed Indian companies and over
8,196 scrips on the stock exchange,[3] the Bombay Stock Exchange has a

significant trading volume. The BSE SENSEX, also called "BSE 30", is a widely
used market index in India and Asia. Though many other exchanges exist, BSE
and the National Stock Exchange of India account for the majority of the equity
trading in India. While both have similar total market capitalization (about USD
1.6 trillion), share volume in NSE is typically two times that of BSE.
The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history
to the 1850s, when four Gujarati and one Parsi stockbroker would gather under
banyan trees in front of Mumbai's Town Hall. The location of these meetings
changed many times, as the number of brokers constantly increased. The group
eventually moved to Dalal Street in 1874 and in 1875 became an official
organization known as 'The Native Share & Stock Brokers Association'. In 1956,
the BSE became the first stock exchange to be recognized by the Indian
Government under the Securities Contracts Regulation Act. The Bombay Stock
Exchange developed the BSE SENSEX in 1986, giving the BSE a means to
measure overall performance of the exchange. In 2000 the BSE used this index
to open its derivatives market, trading SENSEX futures contracts. The
development of SENSEX options along with equity derivatives followed in 2001
and 2002, expanding the BSE's trading platform. Historically an open outcry
floor trading exchange, the Bombay Stock Exchange switched to an electronic
trading system in 1995. It took the exchange only fifty days to make this
transition. This automated, screen-based trading platform called BSE On-line
trading (BOLT) currently has a capacity of 8 million orders per day. The BSE has
also introduced the world's first centralized exchange-based internet trading
system, BSEWEBx.co.in to enable investors anywhere in the world to trade on
the BSE platform.[5] The BSE is currently housed in Phiroze Jeejeebhoy
Towers at Dalal Street, Fort area.

National Stock Exchange (NSE)

The National Stock Exchange (NSE) ( Rashtriya hare Bzar) is a stock
exchange located at Mumbai, Maharashtra, India. It is the 9th largest stock
exchange in the world by market capitalization and largest in India by daily
turnover and number of trades, for both equities and derivative trading. NSE
has a market capitalization of around US$1.59 trillion and over 1,552 listings as
of December 2010. Though a number of other exchanges exist, NSE and

the Bombay Stock Exchange are the two most significant stock exchanges in
India, and between them are responsible for the vast majority of share
transactions. The NSE's key index is the S&P CNX Nifty, known as the
NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks
weighted by market capitalisation.
NSE is mutually-owned by a set of leading financial institutions, banks,
insurance companies and other financial intermediaries in India but its
ownership and management operate as separate entities. There are at least 2
foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in
the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than
1500 cities across India. NSE is the third largest Stock Exchange in the world in
terms of the number of trades in equities. It is the second fastest growing stock
exchange in the world with a recorded growth of 16.6%.
The National Stock Exchange of India was promoted by leading Financial
institutions at the behest of the Government of India, and was incorporated in
November 1992 as a tax-paying company. In April 1993, it was recognized as
a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE
commenced operations in the Wholesale Debt Market (WDM) segment in June
1994. The Capital market (Equities) segment of the NSE commenced operations
in November 1994, while operations in the Derivatives segment commenced in
June 2000.

Over The Counter Exchange of India (OTCEI)

OTC Exchange Of India (OTCEI) also known as Over-the-Counter Exchange of India based
in Mumbai, Maharashtra.It is the first exchange for small companies. It is the first screen based nationwide
stock exchange in India. It was set up to access high-technology enterprising promoters in raising finance for
new product development in a cost effective manner and to provide transparent and efficient trading system to
the investors.
OTCEI is promoted by the Unit Trust of India, the Industrial Credit and Investment Corporation of India,
the Industrial Development Bank of India, theIndustrial Finance Corporation of India and others and is a
recognised stock exchange under the SCR Act. OTC Exchange Of India was founded in 1990 under
the Companies Act 1956 and got recognized by the Securities Contracts Regulation Act, 1956 as a stock
exchange.

An electronic stock exchange based in India that is comprised of small- and

medium-sized firms looking to gain access to the capital markets. Like
electronic exchanges in the U.S. such as the Nasdaq, there is no central place of
exchange and all trading is done through electronic networks. The first
electronic OTC stock exchange in India was established in 1990 to provide
investors and companies with an additional way to trade and issue securities.
This was the first exchange in India to introduce market makers, which are firms
that hold shares in companies and facilitate the trading of securities by buying
and selling from other participants.

Question-31 Which
India? Explain.

are various Stock Exchanges in

Ans : The three major stock Exchanges in India are

1. Bombay Stock Exchange BSE
2. National Stock Exchange NSE
3. Over The Counter Exchange of India OTCEI

1. Bombay Stock Exchange BSE

BSE is the leading and the oldest stock exchange in India as well as in Asia. It
was established in 1887 with the formation of "The Native Share and Stock
Brokers' Association". BSE is a very active stock exchange with highest number
of listed securities in India. Nearly 70% to 80% of all transactions in the India
are done alone in BSE. Companies traded on BSE were 3,049 by March, 2006.
BSE is now a national stock exchange as the BSE has started allowing its
members to set-up computer terminals outside the city of Mumbai (former
Bombay). It is the only stock exchange in India which is given permanent
recognition by the government. At present, (Since 1980) BSE is located in the
"Phiroze Jeejeebhoy Towers" (28 storey building) located at Dalal Street,
Fort, Mumbai. Pin code - 400021.
In 2005, BSE was given the status of a full fledged public limited company along
with a new name as "Bombay Stock Exchange Limited". The BSE has
computerized its trading system by introducing BOLT (Bombay On Line Trading)

since March 1995. BSE is operating BOLT at 275 cities with 5 lakh (0.5 million)
traders a day. Average daily turnover of BSE is near Rs. 200 crores.

2. National Stock Exchange NSE

Formation of National Stock Exchange of India Limited (NSE) in 1992 is one

important development in the Indian capital market. The need was felt by the
industry and investing community since 1991. The NSE is slowly becoming the
leading stock exchange in terms of technology, systems and practices in due
course of time. NSE is the largest and most modern stock exchange in India. In
addition, it is the third largest exchange in the world next to two exchanges
operating in the USA.
The NSE boasts of screen based trading system. In the NSE, the available
system provides complete market transparency of trading operations to both
trading members and the participates and finds a suitable match. The NSE does
not have trading floors as in conventional stock exchanges. The trading is
entirely screen based with automated order machine. The screen provides
entire market information at the press of a button. At the same time, the system
provides for concealment of the identify of market operations. The screen gives
all information which is dynamically updated. As the market participants sit in
their own offices, they have all the advantages of back office support, and
facility to get in touch with their constituents.
1.
2.
3.

Wholesale debt market segment,

Capital market segment, and
Futures & options trading.

3. Over The Counter Exchange of India OTCEI

The OTCEI was incorporated in October, 1990 as a Company under the

Companies Act 1956. It became fully operational in 1992 with opening of a

counter at Mumbai. It is recognised by the Government of India as a recognised

stock exchange under the Securities Control and Regulation Act 1956. It was
promoted jointly by the financial institutions like UTI, ICICI, IDBI, LIC, GIC, SBI,
IFCI, etc.

Features of OTCEI are :1.

2.
3.

4.
5.
6.
i.
ii.
iii.
iv.
v.
vi.

OTCEI is a floorless exchange where all the activities are fully

computerised.
Its promoters have been designated as sponsor members and they alone
are entitled to sponsor a company for listing there.
Trading on the OTCEI takes place through a network of computers or OTC
dealers located at different places within the same city and even across the
cities. These computers allow dealers to quote, query & transact through a
central OTC computer using the telecommunication links.
A Company which is listed on any other recognised stock exchange in
India is not permitted simultaneously for listing on OTCEI.
OTCEI deals in equity shares, preference shares, bonds, debentures and
warrants.
The Participants of OTCEI are :Members and dealers appointed by OTCEI,
Companies whose securities are listed,
Investors who trade in the OTCEI,
Registrar who keeps custody of scrip certificates,
Settlement Bank which clears the payment between counters, and
SEBI and Government who supervise and regulate the working.
This was the brief outline of various stock exchanges in India .

Question-32 Define and explain the concept of a Business

Combination. What are the significant causes of Business
Combination?
Or

Question-33 What is the concept and causes of a Business

Combination?
Ans : Business Combination
A Business combination is the merger of separate entities or operations of
entities into one reporting entity. A business combination is the acquisition of
one business by another, and is part of what is commonly referred to as M&A
(mergers and acquisitions) activity. Business combinations are an important
feature of the capital markets.
A business combination involves the bringing together of two or more
entities or businesses into one reporting entity. A business combination cannot
occur if no business is acquired, or if control already exists. All business
combinations must be accounted for using the purchase method, which
requires the identification of an acquirer which may not be the same as the
acquirer from a legal perspective.
The total cost of the combination is allocated to the acquirees assets, liabilities
and contingent liabilities on the basis of their fair values. Prescriptive guidance
is provided on the determination of the fair values of various items. Identifiable
intangible assets acquired in a business combination must be recognised
separately from goodwill when accounting for the business combination unless
strict criteria are met. Restructuring provisions cannot be recognised unless
they are a pre-existing liability of the acquiree. The excess of the cost of a
business combination over the aggregate of the fair values of the acquired
assets, liabilities and contingent liabilities of the acquiree must be recognised as
goodwill.
If the aggregate fair values are higher than the cost of the
combination, income is recognised for the excess, after the reassessment of the
fair values of the acquired assets, liabilities and contingent liabilities

Forms of Business Combinations

1. Simple Combinations: They arise out of association of natural persons
such as partnership firms and companies.
2. Compound Combinations: Compound combinations may take the
following forms
(i) Association : Trade Associations, Chambers of Commerce and Industry and
informal agreements.
(ii) Federation : Pools and cartels.
(iii) Consolidation : Consolidation may take two forms:
(a) Partial consolidation : trust, holding company and community of

interest.
(b) Complete Consolidation: Merger and amalgamation.
FORMS OF COMBINATIONS

Association
--Trade association
Complete
--Chambers of
Consolidation
Commerce &
Industry
I--nformal
Amalgamation
agreement
--

Federation
--Pools

Consolidation

Partial

--Cartels

Consolidation

--Trust
--Holding

Merger

company
--Community
of Trust

Causes of Business Combinations

There are so many causes of Business combinations discussed as follows:
1. Destructive Competition: destructive competition may result into the
stoppage of many firms. In order to remove the fear created by strong
competition, the competing firms arrive at some sort of understanding to
regulate prices and eliminate overproduction. In other words, combination may
be created as a means of furthering self interest by common action.
2. Economies of Large Scale: A large number of economies are achieved if a
business is carried on a large scale. These economies relate to production,
management, financing and marketing. Small business units may combine
together to reap the benefits of large scale operations and organisation. This
will reduce the cost of production and increase the profits of the business.
3. Joint Stock Enterprise: The evolution of company form of organisation has
also facilitated the combination of various units by acquiring shares of various
companies to control their affairs. The companies under the common control
through the system of inter-locking directorship can be easily combined to get

many

benefits

of

combination.

4. Control of Market: Combinations are created to secure steady market.

Sometimes, combinations are created to control the entire market and create a
monopoly which is detrimental to the interest of the consumers. By controlling
the market, they can sell their products at higher prices and earn huge profits.
5. Individual Ability: According to Shield, Great organising ability, strategic
genius, or personal ambition on the part of one or a number of men may
account in part for the rise of certain business combinations. The scarcity of
business talent became one of the causes of centralisation of power in a few
hands, endowed with business insight, business talent and business courage.' '
Many a time, business combination a are created due to the initiative and
organising ability of an individual or a number of individual
6. Lust for power: Some businessmen have a lust for economic power which
can be satisfied by creating industrial empires. Desires to bring up industrial
regime lies at the back of many combinations. Individual ambition of becoming
the pioneer member or coordinator of a huge combine is also on of the factors
favoring combination
7. Business Cycles: In uncontrolled economies, there are trade cycles. During
books, firms expand to take advantage of rising demand, and during
depressions, inefficient and weak firms find it difficult to survive because of
lower demand. Business ups and downs generally lead to business
combinations. Particularly in industries, where huge capital is employed and
where demand is subject to cyclical changes, combinations occur as a revulsion
against risk of burdensome overhead cost, glut, low turnover and lower process
during
depression.
8. Protective tariffs: Protective tariffs are used to encourage home industries.
When the Government imposes import duty on certain items, the home
manufacturers of such items are encouraged to form combination to develop
their business and exploit the domestic market fully. Sometimes, national level
combinations are formed to provide a united front to perpetuate protection.
9. Government Pressure: The Government policy may compel the weaker
units to amalgamate with the stronger units so as to improve the overall
efficiency of the industry. Even the Government may take over the sick units
and combine them to form a viable unit and introduce rationalization in it.
10.Miscellaneous Factors:
(a) Dearth of managerial talents may lead to managerial integration of business
units. Many companies have common directors which in fact means their

common

control.

(b) If an enterprise wants to be self sufficient, it may combine with other units.
Vertical integration is the result of desire for self-sufficiency. Under this, various
units producing the related raw materials and semi-finished products are
combined together so that they produce the finished products at economical
prices.
(c) Growth of transport an communication has increased the intensity of
completion not only in the national market but also in the international market.
This has resulted in the formation of multinational enterprises having
subsidiaries in different countries.
(d) Sometimes, firms in an industry join to avail of the benefits of patent rights
of
one
firm.
Haney has divided the above factors or forces into three categories which are as
follows:
(i) Driving or impelling forces consisting of cut-throat competition and decrease
in the opportunity for speculative gains
(ii) Beckoning forces which include opportunity for profits, protective tariffs and
gains
of
over
capitalization
(iii) Facilitating forces comprising of joint stock enterprises and other forces.

Question-34 What do you understand by Chambers of

Commerce and Industries in India?
Ans :
The Indian Chamber of Commerce and Industry is the premier body of business
and industry in Eastern and North-Eastern India. The membership of the
Chamber comprises several of the largest corporate groups in the country, with
business operations all over the country and abroad. Set up by a group of
pioneering industrialists led by Mr G D Birla, the Indian Chamber was closely
associated with the Indian Freedom Movement, as the first organised voice
of indigenous Indian Industry. Several of the distinguished industry leaders in
India, such as Mr B M Birla, Sir Ardeshir Dalal, Sir Badridas Goenka, Mr S
P Jain, Lala Karamchand Thapar, Mr Russi Mody, Mr Ashok Jain, have led
the ICC as its President.

One of the most pro-active Chambers in India, the ICC has been privileged to
interact and host several of the esteemed Indian Presidents and Prime Ministers
in the past. With over eighty years of service to the nation, the ICC retains the
character of being the premier Chamber with senior Indian industry leaders
forming the core of its Executive Committee or the Governing Board of the
Chamber. Its enlightened leadership and membership has enabled the ICC to
move ahead and respond pro-actively to the dynamic changes that have taken
place in the world order and with a vision for the future.
The ICC constituents are mainly large manufacturing units with operations all
over the country and abroad. A large number of corporate bodies of India form
the backbone of the organization. Leading industrial promotion organizations,
banks & financial institutions, as well as governmental organizations, are
members of the ICC and lend a diversified membership base for the Chamber.
This apart, the ICC Secretariat runs a number of important national level
industry associations, as members, around the country. Some of the important
Industry Associations are the Indian Foundry Association, the Foundry Cluster
Development Association, the Indian Sugar Mills Association, the West Bengal
Cold Chain & Cold Storage Owners Welfare Association, the Indian Chemical
Merchants and Manufacturers Association, and the Gunny Trades Association.
The ICC also derives its strength and sustenance from the representative
national character of its constituents. Another distinguishing feature of the ICC
is that industrialists & owners of leading corporate entities in India are
themselves members and are responsible for charting out the policies of the
organization. Indeed, the ICCs forte has always been its ability to move with the
times, anticipate the needs of the future and suggest pro-active measures for
furthering Indian business and industry. It has always been alive to the pulse of
the environment in which it operates. Through the Chambers enlightened
leadership, its powerful and progressive membership of important companies
and its professional secretariat, the ICC has adapted to the changes in the
global order and is moving ahead with confidence to meet the challenges of the
21st century.
Focus Areas of Operation
Policy Advocacy
Policy advocacy is the first and foremost function of the Indian Chamber of
Commerce. Recognized as a proactive body of business, the ICC has contributed
to economic policy making throughout the seven and a half decades of its
existence. ICC anticipates future needs, responds to these challenges and
prepares the stakeholders of the economy to benefit from these changes and
opportunities. Through its linkages with partner chambers, it helps in making
the voice of the Indian business community heard across continents.
Services

In order to strengthen the business community with the essential tools of doing
business better in a fast paced changing global business environment, the ICC
offers a plethora of services, replete with a state of the art infrastructure such
as video-conferencing and information networks that provide the cutting edge
and managed by professional secretariat.
Business Information Services at ICC
Recognizing that information is the key to business success, the ICC Business
Information Services offer a wide array of information through an extensive
computerized network. These include:
Economic Policy Analysis Reports, Macro-Economic Review Reports, Government
Notifications, Guidelines, Data on tax rates, duties, Information on Indian states,
Trade Enquiries, Country Profiles & Business Directories, Facts and Figures on
Industry Sectors, Financial data of select companies and Online links to
database worldwide.
ICC EXIM Initiative
In the backdrop of ever-increasing globalised business and cross-border trade,
the ICC Foreign Investment & Trade Promotion Cell assists business and industry
in the following manner:

Hosting foreign business delegation and individual representatives of

foreign business circles, business meetings and negotiations
Sponsoring participation in international trade fairs and exhibitions
Facilitating export process by issuing non-preferential Certificate of Origin
Visa Recommendation
Organising and conducting educative programmes relating to exim policy
and procedures
Maintaining a database providing useful information on exports and
imports, identification of new resources, products and services, feedbacks to
trade enquiries
Making business connections with counterpart chambers all over the
world for furtherance of investment and trade.
Cooperation arrangements with leading chambers in the US, Europe,
Japan, Singapore, Israel, Australia, among others.
ICC Agri Business Initiative
The Indian Chamber of Commerce and Industry the leading organization of
business and industry in Eastern and North-eastern India has been focusing on
improving and increasing business opportunities for food industries in West
Bengal. Given the growing importance of the Agro and Food Processing Sector
in the Eastern region, ICC has formed the largest forum involving all
stakeholders in the agro sector for facilitating growth and development. ICC has

launched a unique Forum for Food Industry in West Bengal named ICC Agri
Business Initiative by opening its doors to all potential leaders from this sector.
This Forum will be uniquely positioned as an all-industry trade association,
representing the interests of every segment of the Foods industry from Eastern
region, including, Growers, Cold storage / Cold Chain, Processors, Equipment
provider, Retailers, Foodservice Operators, logistics Providers, Distributors and
Suppliers. In view of the strategic and economic importance of food sector in
the Indian economy the forum will identify major bottlenecks that hinder the
growth of food sector, identify its competitiveness in the global market and
suggest a policy framework that would rejuvenate it, address the conflicting
domestic policies relating to production, procurement, pricing and distribution,
ineffective subsidy system, regulated domestic markets, lack of infrastructure
facilities, low productivity, low value addition, ad hoc export policies and
sensitize all the stakeholders including the Central and the State Governments
to catalyse the necessary policy changes that are needed to make this sector
more vibrant and competitive.
ICC Environment Management Centre
The ICC-EMC specializes in promoting environment management amongst
business and industry. Powered by a fully computerized network of information
databases and a specialized intranet, the EMCs basic objective is to promote
environment management as a tool for enhancing competitiveness and
efficiency. It provides ISO 14000 consultancy and facilitation, has empanelled
experts and interacts extensively with the Government and Pollution Control
Boards as well as experts in NGOs, academic institutions, industry and other
institutions. It has produced a unique CD based database on environment
legislations in India, and brings out an information-packed monthly
newsletter Environment Watch. Under its aegis, the EMC also conducts an
Energy Efficiency Initiative which works for sensitization and awareness on
energy efficiency in industries.
ICC Council of Arbitration
This is a specialized body, providing institutional service for the settlement of
Commercial disputes. The ICCA also administers and conducts the proceedings
of cases referred under the rules of Arbitration of the International Chamber Of
Commerce, Paris and the Indian Council of Arbitration, New Delhi. It also
provides advice on drafting of contracts and organizes conferences, seminars,
workshops etc. for training of arbitrators and awareness programmes in
association with the leading arbitral organizations like the Indian Council of
Arbitration, New Delhi, International Chamber of Commerce, Paris and CPR
Institute of Dispute Resolution, New York
ICC Young Leaders Forum

The ICC-YLF was set up to fulfill a long standing desire to involve the younger
generation, the dynamic force of the nation today more actively in mainstream
activities, be it social, political or economic spheres. The Young Leaders Forum
hopes to channelize the strengths of the younger generation, the future leaders
of the nation in different spheres, to shape a new framework for economic
progress and development in the new millennium. The objective of the YLF is
also to build confidence and leadership through greater networking with policy
makers. It is the YLFs mission to bring hope to the next generation and enable
them to meet the challenges of the New Age era.
The ICC North East Initiative
North- Eastern India, comprising 8 sister States, is today poised for a major
economic leap forward. A virtual tax-free package designed especially for the
region, adequate availability of critical natural and energy resources provide
significant business opportunities that are practically untapped at this juncture.
In a serious effort to showcase the business strengths of the north eastern
states of India, the ICC has launched a new and major initiative of generating
business and entrepreneurial interest in the region, being the premier chamber
of commerce in the eastern and north-eastern region. As part of playing the
catalyst in promoting business and attracting investments into the region, the
ICC in collaboration with the Department of Development of North Eastern
Region, Government of India, organizes an annual business summit in important
metros of India to promote and generate investor interest in this resource-rich
region.
ICC Convention Facilities
The ICC Convention Facilities include a well-equipped 500-seater auditorium and
3 conference rooms; State-of-the-art facilities such as video conferencing and
computer projection equipment are available for business meetings. The ICC as
the meeting place for business and industry is the most appropriate address for
holding high profile business conferences.
ICC Voice IT Initiative
The Indian Chamber of Commerce (ICC) has embarked on a major initiative to
create a platform for the IT and ITES industry in the Eastern segment of the
country. The forum named as VOICE IT Vitalizing IT & Communications in the
East, was formally launched on April 30, 2005 by the then Principal Secretary,
Department of Information Technology, Government of West Bengal. VOICE ITs
mission is to facilitate the creation of a performance-powered environment for
the players and propel the development of the region and the country. The aims
of VOICE IT are to create an interface between industry and government for
better
policy
advocacy; exchange
and
share
best
practices; propagate information and research; compile a database of all the IT
and ITES firms in the region and the country, and other related bodies;

create convergence - meetings, conferences, workshops; build brand for Kolkata

and Eastern region as a vibrant IT destination, in India and abroad.
ICC Calcutta Foundation
The ICC Calcutta Foundation is a charitable trust set up by the Indian Chamber
of Commerce and Industry, Calcutta with the objective of promoting the wellbeing of Calcutta. The Foundation funds various projects to bring about a
change in the quality of urban life and is geared to reach out to almost every
sphere of urban life where deprivation and denials warrant redressal. Prevention
of substance abuse, environment-friendly income generation projects, awards
for excellence, the Better Calcutta Contest are just some of the ICC Calcutta
Foundations long term projects.

ICC Informatics
ICC Informatics is a specialized division of the Indian Chamber of Commerce
that looks into design, development and implementation of software application
projects. It implements the latest software development tools and
methodologies with special emphasis to services in the field of:

Geographical Information Systems (GIS);

Digitization and Image Processing;

Client/server applications;

Specialized thin-client solutions (e-commerce

applications);

and

distributed

Over the last few years the unit has acquired expertise in development of
customized software solutions related to Industrial Risk Management,
Environmental Management Information Systems etc. The ICC Informatics has
been instrumental in development and implementation of the major European
Commission funded project named Environmental Risk Reporting and
Information System (ERRIS), which looks into the issue of industrial risk
management for chemical and petrochemical downstream industries. The
project has been successfully implemented in the industrial clusters of Haldia
and Durgapur in West Bengal.
AS India continues to act more and more integrated with the world economy
riding the waves of globalisation, ICCs strategies and programmes are focused
towards enhancing Indias competitiveness and through effectively utilizing
opportunities that emerge from internationalization and liberalisation. We lay
special emphasis on growth with equity, to bring about greater social
development and employment as well as the faster growth of eastern and
north- eastern region.

In the recent years, the Chamber came up with major Economic Surveys &
Reports like West Bengal Investment Climate Survey 2007, and Survey on IT &
ITeS Sector in West Bengal, both of which were very well received by Govt.,
Industry, Media and other relevant stakeholders. In the current year, the
Chamber plans to release a number of Reports / Surveys of strategic importance
including a Report on Special Economic Zones with special focus on
Rehabilitation & Resettlement (R & R); Report on Status of State
Finances, Report on Regional Stock Exchanges & their Turnaround Strategies
among others.

Question-35 Write notes on

(i)
(ii)
Ans :

FICCI
CII Association

FICCI

FICCI stands for Federation of Indian Chambers of Commerce and Industry, a

powerful association of all the moneybags in Indian Industry & Trade.
The Federation of Indian Chambers of Commerce and Industry (FICCI) is
an association of business organizations in India, headquartered in the national
capital New Delhi. FICCI is one of the main organizations to fund and support
many governmental and non-governmental educational institutes. It was
founded by GD Birla and Purushottam Takkur in 1927, on the advice of Mahatma
Gandhi.
Established in 1927, FICCI is the largest and oldest apex business organisation
in India. Its history is closely interwoven with India's struggle for independence
and its subsequent emergence as one of the most rapidly growing economies
globally. FICCI plays a leading role in policy debates that are at the forefront of
social, economic and political change.
A non-government, not-for-profit organisation, FICCI is the voice of India's
business and industry. FICCI has direct membership from the private as well as
public sectors, including SMEs and MNCs, and an indirect membership of over
83,000 companies from regional chambers of commerce.
It works closely with the government on policy issues, enhancing efficiency,
competitiveness and expanding business opportunities for industry through a

range of specialised services and global linkages. It also provides a platform for
sector specific consensus building and networking.
FICCI Partnerships with 77 countries across the world carry forward our
initiatives in inclusive development, which encompass health, education,
livelihood, governance, skill development, etc. FICCI serves as the first port of
call for Indian industry and the international business community.
FICCI is also the permanent Indian host of the Global India Business Meeting, an
annual meeting organised by Horasis. Now it is headed by Rajan Bharti Mittal. It
has a nationwide membership of over 1500 corporate and over 500 chambers
of commerce and business associations.
Federation of Indian Chambers of Commerce & Industry FICCI is the rallying
point for free enterprises in India. It has empowered Indian businesses, in the
changing times, to shore up their competitiveness and enhance their global
reach.
With a nationwide membership of over 1500 corporate and over 500
chambers of commerce and business associations, FICCI espouses the shared
vision of Indian businesses and speaks directly and indirectly for over 2,50,000
business units. It has an expanding direct membership of enterprises drawn
from large, medium, small and tiny segments of manufacturing, distributive
trade and services. FICCI maintains the lead as the proactive business solution
provider through research, interactions at the highest political level and global
networking.
Set up in 1927, on the advice of Mahatma Gandhi, FICCI is the largest and
oldest apex business organization of Indian business. Its history is very closely
interwoven with the freedom movement. FICCI inspired economic nationalism as
a political tool to fight against discriminatory economic policies. That
commitment, drive and mission continue in the ever-changing economic
landscape of India, chasing always newer agenda.
In the knowledge-driven globalized economy, FICCI stands for quality,
competitiveness, transparency, accountability and business-government-civil

society partnership to spread ethics-based business practices and to enhance

the quality of life of the common people.

(ii) CII ASSOCIATION

The Confederation of Indian Industry (CII) works to create and sustain an
environment conducive to the growth of industry in India, partnering industry
and government alike through advisory and consultative processes.
CII is a non-government, not-for-profit, industry led and industry managed
organisation, playing a proactive role in India's development process. Founded
over 116 years ago, it is India's premier business association, with a direct
membership of over 8100 organisations from the private as well as public
sectors, including SMEs and MNCs, and an indirect membership of over 90,000
companies from around 400 national and regional sectoral associations.
CII catalyses change by working closely with government on policy issues,
enhancing efficiency, competitiveness and expanding business opportunities for
industry through a range of specialised services and global linkages. It also
provides a platform for sectoral consensus building and networking. Major
emphasis is laid on projecting a positive image of business, assisting industry to
identify and execute corporate citizenship programmes. Partnerships with over
120 NGOs across the country carry forward our initiatives in integrated and
inclusive development, which include health, education, livelihood, diversity
management, skill development and water, to name a few.
CII has taken up the agenda of Business for Livelihood for the year 2011-12.
This converges the fundamental themes of spreading growth to disadvantaged
sections of society, building skills for meeting emerging economic compulsions,
and fostering a climate of good governance. In line with this, CII is placing
increased focus on Affirmative Action, Skills Development and Governance
during the year.
With 63 offices including 10 Centres of Excellence in India, and 7 overseas
offices in Australia, China, France, Singapore, South Africa, UK, and USA, as well
as institutional partnerships with 224 counterpart organisations in 90 countries,
CII serves as a reference point for Indian industry and the international business
community.

Perspective of CII
CII strongly believes that partnership and cooperation between industry,
government and civil society is the key to economic and social development of

India. Tenets of life, business paradigms are changing at an astonishing pace. At

CII, all our efforts are directed towards harnessing and leveraging the power of
technology to change communication, business and business procedures,
connect knowledge to procedures and hence, impact profits and the lives of
common citizens for the better. Essential prerequisites for this to happen are
wider, more holistic perspectives and greater participation in policy formulation
by all concerned groups. Our policy advisory and consultative services cover
intra and inter-industry discussions, industry-community parleys and industrygovernment meetings, all aimed at giving the whole policy making process a
better business focus and more representative hue. We have over the years
created several credible, generic and focused fora for meaningful dialogue
covering various aspects such as finance and taxation, foreign direct
investment, banking, insurance, WTO and international trade, disinvestment,
small and medium enterprises, defence, elections and industrial relations.
CII's Annual National Conference has established itself as the major interface
between all sections of government, academia, society and industry. It is here
that policy and opinion makers come together on a common platform to discuss
and brainstorm on issues relevant to sustained development and its equitable
distribution. The event provides a unique opportunity to take stock of initiatives
taken over the past year, unveil new plans and set the charter for the year
ahead.
India Economic Summit organised annually since 1984, in partnership with
World Economic Forum is South Asia's most prominent annual gathering of
decision makers, industry and thought leaders, senior representatives of leading
global corporations and international investors. Deliberations at the Summit
centre around India's ongoing reforms process, the opportunities and concerns.
Informal discussions and opinions shared here serve as a global barometer for
the same.
Infrastructure is the yarn that weaves the fabric of an economy. Investments in
telecommunications, surface transport, roads, highways, ports and airports
have emerged as key imperatives in India's efforts to derive maximum benefits
from economic reforms. CII's Infrastructure Council seeks to establish publicprivate partnerships for sound strategising and faster operationalisation of
plans, the idea being to dovetail corporate managerial skills and expertise with
government financial resources and reach. Investor friendly legal and regulatory
policy frameworks, risk mitigation, resource mobilisation and centre-state
harmonisation are critical issues that CII continuously addresses during its
interactions with governments and institutions.
CII Council for MNCs has been set up in recognition of the crucial role being
played by multinational corporations in global integration and overall
development of the Indian economy. The council looks after the interests of over
498 organisations and holds regular discussions with key government officials. It

has made a strong case for a single window clearance system for all investment
projects as a step towards making India a more attractive destination for foreign
direct investment.
Small and medium enterprises are key drivers of the Indian economy. They
generate substantial employment and have earned global recognition for cost
effectiveness and technology adaptation. CII works towards keeping small
industry at the forefront of change with updates on latest technologies, market
opportunities and finance. Our MoU with the Small Industries Development Bank
of India (SIDBI) helps promote ancillary linkages. CII has also evolved a unique,
tailor-made cluster approach to help SMEs implement ISO 9000 quality systems.

Roles of CII
The Primary goal of CII is to develop Indian industry and to ensure that
government and society as a whole, understand both the needs of industry and
its contribution to the nation's well being. For this, we work

To identify and strengthen industry's role in the economic development of

the country

To act as a catalyst in bringing about the growth and development of

Indian Industry

To reinforce industry's commitment to society

To provide up-to-date information and data to industry and government

To create awareness and support industry's efforts on

environment, energy management, and consumer protection

To identify and address the special needs of the small sector to make it
more competitive

To promote cooperation with counterpart organisations

To work towards the globalisation of Indian industry and integration into

the world economy

quality,

This is done by adopting a proactive and partnership approach with the

government on various national and international issues concerning the Indian
economy. It closely interacts on policy issues at both the central and state
levels. Extensive dialogue and interaction with members and all sections of the
community to build consensus are held.

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