Vision Mission O.C.

M 95+
CONTENTS
1. Form of Business Organisations
2. Business Services
3. Emerging Modes of Business
4. Social Responsibility of Business
5. Consumer Protection
6. Principles of Management
7. Functions of Management
8. Entrepreneurship Management

Chapter 1. Form of Business Organisation

 SOLE TRADING CONCERN
Meaning:
Business which is owned, managed and control by one person is called sole trading concern. It is an
oldest and simplest form of organisations done at local level with minimum capital. It is also known
as one man show type of business.
Definition: ( By James Lundy)
“The sole proprietorship is an informal type of business owned by one person.”

FEATURES:
1.Minimum Government Regulation:
 Registration is not required
 Follow only tax and labour law
2. Unlimited Liability:
 Nodistinction between personal and business property
 Liability can be more than capital
 Personal property can be used to pay debt if business assets are not sufficient.
3.Freedom in Selection of Business:
 Any legal business can be conducted
 No restriction on the type of business
4. Secrecy:
 Books of accounts
 Sole trader ensure maximum business secrecy
 5. Single Ownership & Management:
 Himself the owner and manager
 Owner of all asset

6. Direct contacts with customers and employees:

 Good relationship with customers create goodwill
 Good relationship with employees create belongingness
 Pay personal attention to customer
7. Suitable for some special business:
 Business require individual attention
 Eg : Beauty parlour, cake shop
8. No Sharing of profit and risks:
1. Nobody share his profit or losses
MERITS OF SOLE TRADING CONCERN:
1. Easy formation:
 Very few legal formalities involved
 Any body major at age ,has sound mind can start business
 Direct relationship between efforts and rewards
2. Benefit of Secrecy:
 No need to disclose books of accounts
 Not answerable to third party
3. Direct Motivation:
 Owner and manager he himself
 More aware of the efforts put in so it can grow fast
4. Quick Decision:
 Owner is the decision maker
 Implement his decision directly without consulting others
 Prompt decision
5. Lower Cost:
 All expenses goes out his own pocket
 He ensures less waste and better control
6. Development:
 Risk and Rewards are directly connected with one person
 He is complete responsible and involved in business
 He takes extra efforts to update his skills
 Keep improving his personality, leadership qualities and take better decisions
7. Flexibility in Operation:
 Expansion, diversification, modernization, curtail or close down
 Being only decision maker can make quick changes
8.Limited Government Control:
 Law to minimum extent
 No laws for operation, functioning or dissolution
 Only follow tax and labour law
8. Credit Standing:
 Unlimited liability
 Goodwill and belongingness
 Give personal attention to customers
9. Efficiency:
 Productivity is maximum
 Skill is maximum
 Directly gain profits or losses
 Least wastage of time , efforts and resources

LIMITATIONS OF SOLE TRADING CONCERN:

1 .Limited Managerial Ability:
 Cannot expected to have complete knowledge
 He can not give equal attention to all aspects
 When business enlarged, he is expected to face many difficulties
2. Limited Amount of Capital:
 Owner and provider is one person i.e he himself
 Limitations on capital
 He cannot expand business
 He can borrow money
3. Unlimited liability:
 Greatest disadvantages of sole trader
 Personally suffer if things go wrong
 Growth of business gets affected
4. Not Suitable for large scale operations:
 Cannot fully utilize adequate resources
 Business cannot be extended beyond certain limit
5. Lack of Stability:
 Anything happens unexpectedly, organisations can collapse
 No difference between sole owner and business
 Organisations can be dissolved with death or insolvency
6. Absence of Specializations:
 He himself is the owner, manager, supervisor and controller
 He has small scale business
 Division of labour is not affordable
7. Unprofessional Decisions:
 Quality of decisions may be poor
 Take decision based on limited knowledge
 Not answerable to any person
  JOINT HINDU FAMILY BUSINESS
Meaning:
When business enterprise is run by family members and they run the business as family business is called
joint Hindu family business. It is governed by the Hindu Succession Act 1956. In Maharashtra, female
members of Joint Hindu family, enjoys the co-parcenaryinterest since 1994.
SCHOOL OF THOUGHTS UNDER HINDU LAW:
 Mitakshara:
According to Mitakshara school of thoughts an undivided family is the normal condition. The
moment a son is born he gets all the equal rights, along with his father in the ancestral property. He
has the right to ask for division of the family property.This community is popular in the country
except Assam Bengal and some part of Orissa.
 Dayabhaga:
Dayabhaga ,school of thoughts which is applicable in Bengal, Assam and some part of Orissa,under
this law son does not get any right in the property with his birth. Ancestral property remains with
father throughout his lifetime.only son gets right in property after the death of his father.
Features:
1. Formation:
 Firm is formed as per operation of Hindu law
 Family members becomes co-parcener
 Follow tax and labour law
2. Karta and Co-parceners:
 Senior most members becomes karta
 Karta is the head of the family members
 Other members becomes Co-parceners
3. Joint Ownership:
 Karta is the custodian of the joint property
 Karta's liability is unlimited and co-parcener's liability is limited
 Karta takes any wrong decision ,he has to take responsibility for it and pay off all debts even by
using his own property if need arises.
4. Membership:
 Membership of joint Hindu family firm is unlimited
 Every child born in the joint Hindu family becomes the coparcener (even girls in Maharashtra
state)
 No agreement is required to be get entered
 number of members and membership keeps on changing depending upon the birth and death
in the family.
5. Management:
 Karta is only manager, controller and co-ordinator of the business
  He can enter into contracts with third party, draw bills of exchange ,sellor mortgage the
property of joint Hindu family firm in the interest of the coparceners.
6. Profit sharing:
 The Hindu does not specify the ratio of profit and losses
 profit sharing ratio keeps on changing depending upon the births and deaths in the family.
7. Quick Decisions:
 Karta is the sole decision maker
 Can take quick decisions and act upon them immediately

8. Good Relations:
 Possible to maintain good relation or personal contact with customers
 Maintain good relation with employees

MERITS OF JOINT HINDU FAMILY FIRM:

1. Easy to start:
 Comes into existence as per Hindu law
 No registration is required
 Family members become coparceners by birth itself
2. Prompt Decisions:
 Karta has complete control over hisbusiness
 He takes all the right decisions
3. Good Relations with Employees:
 Joint Hindu family has very few employeeswith whom good and personal relations are maintained
 Employees feel motivated and support business successfully
4. Flexibility:
 Due to quick decisions,Kartacan bring about required changes.
 Expansion or diversification of business can be made as per the changing business trends
5. Secrecy:
 Secrecy of the business remain with the family
6. Co-parcener’s liability:
 Liability of co-parceners is limited to the extent of their share
in the Joint Hindu family business.
 Karta is the custodian of the joint property of the Joint Hindu family firm.
7. Good Credit Standing:
 business is being conducted for a long period of time and passed on from one generation to
another ,it enjoys Goodwill in the market.
 Liability of Karta is unlimited
 Banks and other financial institutions are willing to grant the loans.
8. Continuity and stability:
 Continuity and stability of business is ensured

LIMITATION OF JOINT HINDU FAMILY BUSINESS:

1. Limitedresources:
 Funds of joint Hindu family business is limited
 Therefore it cannot established on large scale.
2. Limited Managerial Skills:
 Only the manager skills of Karta are used for running the business
3. Unlimited liability of Karta:
 Karta always faces the risk of his personal property being used to pay debts
 May not be prepared to take any business risk
 Affect the probability of the firm
 4.Disintegration of Joint Family:
 Firm is always exposed to the risk of the breaking of the joint family
 Stability and continuity of the firm is endangered
5. Lack of Motivation:
 Karta is the only manager and puts effort to run the business
 Profit share by all the co-parceners
6. Restricted Expansion:.
 Due to Limited financial and managerial resources of the firm and over cautious nature of
Karta, it is not possible to extend Business beyond certain limit.
7. Unlimited co-parceners:
 There is no upper limit for number of membership.
 Membership the joint family business on the basis of births

 PARTNERSHIP FIRM
Meaning:
Business which is owned and managed by more than one person where all the owners share in the profits
and losses of the business as well as the liability is called a partnership firm. The owners are called
partners and the organisation is called a firm. This form of organisation is governed by Indian Partnership
Act 1932.
Definition: (Indian Partnership Act 1932 (sec 4) ):
“Partnership is the relation between the persons who have agreed to share the profits of a business carried
on by all or any one of them acting for all”
Features of partnership firm:
a. Agreement:
 An agreementamongpartners is called as partnership deed.
 In U.S.A.,U.K , and India Partnership agreement can be oral or written
 France and Italy, a written agreement is a legal requirement.
b. Lawful Business:
 Business cannot be undertaken which is forbidden by law.
 i.e. which is illegal .
 E.g.Smuggling or gambling.
c. Sharing Profits and losses:
 Partners sharing profits and losses in the agreed ratio as mentioned in partnership deed.
 If ratio is not mentioned in agreement then all partners are consider as equal partners.
d. Number of partners:
 Minimum number of partners for forming a partnership firm is 2.
 Maximum number for banking business is 10 and for Non-banking or Ordinary business is
20.
e. Joint ownership:
 All partners are joint owner of the business
 Assets of business Should be utilised only for business not for personal use.
f. Unlimited liabilities:
 All Partners liability of a firm is unlimited, joint and several.
 Property of partners may be attached to fully settled liabilities
  If any one of the partner is declared insolvent, his liability will be borne by solvent
partners
g. Dissolution:
 Death, insolvency or insanity of any partner results into dissolution of partnership
firm.
 Partnership atwill is compulsorily dissolved when any partner serves as 14days
notice to any partner.
8. Joint Management:
 All the partners have equal managerial rights as per the act.
 Responsibility of partners is joint and several.
9. Principal agent Relationship:
 Every partner of the firm act as Principal and as an agent.
 When he is with other partners,he is known as Principal and when he is working with third
parties on behalf of the firm he is known as agent.

REGISTRATION OF PARTNERSHIP:
 According to Indian Partnership Act 1932,registration is not required to form Partnership firm.
 In Maharashtra, registration is compulsory from 1stApril 1985.
Procedure for Registration:
 An officer is appointed to registration of a partnership firm is called Registrar of firms.
 Steps involved are:
 Name of the firm
 Principal place (Head office)
 Branches
 Date when each partner joins the firm
 Name and addresses of each partners
 Duration of the firm
Then the statement fully signed by all Partners and then this form along with fees, has to be
deposited in the office of Registrar.
 Registrar issues a certificate which is called as Certificate of Registration.

EFFECTS OF NON REGISTRATION

 A partner of an unregistered firm cannot file a suit against the firm or any other partner of
the firm.
 An unregistered firm cannot file a suit against a third party to enforce any right arising from
contract but third party can file a suit in the court of law against the partnership firm.
 Firm cannot start legal proceeding against any partner.

BENEFITS OF REGISTRATION
 Registered firms,gets the right of filing a suit against the third party in the court.
 The partners of the firm can also filea suit against the firm or outside parties.
 Registered firm is useful for incoming partner for his rights.
 On the death or retirement of a partner registered firm is benefited.
MERITS OF PARTNERSHIP FIRM:
a. More financial resources:
 More than one person is contributing.
 PARTNERSHIP firm is larger than a sole proprietorship.
 Business can be expanded by admitting new partners who will bring more capital.
b. More Manpower resources:
 Skills and abilities of all the partners are combined to run the business.
 Higher degree or division of labour and specialisation can be done.
c. Easy formation:
 No need to fulfil many legal formalities.
 Only written agreement is necessary to start any lawful business
 Registration of partnership firm is compulsory in Maharashtra from 1st April 1985.
d. Simple Dissolution:
 Partnership at will gets dissolved when a partner serves a 14days notice to other partners.
 A Particular partnership gets dissolved on completion of the specified venture or period
for which it was formed.
e. Rational Decisions:
 Each partner contributes to his fullest.
 They try to minimize the wastage.
 The decisions taken are based in the consultation among all the partners.
f. Secrecy:
 Partnership firms not required to publish their annual accounts like profit and loss and
balance sheet.
 Therefore, third parties cannot take undue advantage of the inner information of the
firm.
g. Personal Contacts:
 Business can maintain personal contacts with customers by supplying goods and services
as per their needs and requirements.
 Helps in creating Goodwill in the market.
 Good relation can be maintained with the employees.
h. Division of Risk:
 Risk is divided among all the partners.
i. Flexible Organisation:
 Business can be expanded, diversified or curtailed as per the changing business
circumstances easily and quickly.
 There is no strict rule on management.

DEMERITS OF PARTNERSHIP
1. Unlimited Liability:
 Liabilities of partners are unlimited, joint and several.
 If Business assets are not sufficient then their personal property will be used to pay off all debts.
2. Limited Resources:
 The upper limit of partner ina firm conducting bankingbusiness is 10 and non banking business is
20.
 Therefore, financial resources remain confined.
  Financial resources prove to be insufficient for expansion of the business.
3. Disputes Among Partners:
 Some partners prefer working for self-interest at the cost of the interest of the firm.
 Partners may blame other partners for wrong decisions.
 Mutual conflicts and lack of team spirit may lead to loss of reputation and finally to Dissolution of
the firm
4. Risk of Implied Authority:
 Each partner works as Principal and as agent.
 Every partner has authority to act on behalf of the firm.
 A wrong decision of a single partner may lead to losses .
 Due to unlimited liability, all partners have to suffer and make those losses good.
5. No Separate Legal Status:
 The Indian Partnership Act 1932 does not give an independent legal status to Partnership firms
distinct from the partners.
6. No Succession:
 Not being legal entity the firm is dependent on mutual undertaking of the partners
 Deaths,insolvency, insanity or retirement of the partners lead to dissolution of the firm.

TYPES OF PARTNERS
When a person who deals with the firm, must know the partners of the firm and to what extent each
partner is liable.
Following are the types of partners:
1. Active partners /Actual partners :
o Partners who take active participation in the day to daywork are called active partners.
o Contribute money in the firm and have share in profits/losses.
o Act as agent of the firm and have unlimited liabilities.
o They give public notice of their retirement.
o Also known as Ordinary or General Partners.
2. Sleepingor Dormant Partners:
o Do not take active participation.
o Invest money and have share in profit or loss.
o Do not give public notice of their retirement.
o Have unlimited liability
3. Nominal Partners:
o They only lend their names to the firm without having any real interest in the firms.
o They neither contribute to the capital nor share the profits.
o Firm only make them partners to use their personal goodwill for business purpose.
o They have no attachment with the firm and not answerable to any other party.
4. Minor Partner:
o According to the Indian contract Act 1872, a person below 18 years is called minor.
o But according to the provisions in the Indian Partnership Act 1932, a minor can be a partner in the
profit of the firm if all other partners give their consent.
o Minor has Limited liability and not liable for losses.
5. Partners in Profits only:
o He can share the profits of the firm.
o Has unlimited liability.
 o He must give public notice of his retirement.
o Have no right to take part in the daily work.
6. Limited Partners:
o A person whose liability of the firm is limited to the extent of his investment is called limited partner.
o He has no right to take part in day to day work.
o Such partnership must have at least one partner having unlimited liability.
7 .Partners by Holding out:
o A person who is not a partner but represent himself to be a partner by word spoken or written or by
his conduct is called a partner by holding out.
o He is also liable to discharge debts in the same manner as other partners will be .
8. Secret Partner:
o When the relation of the partner with the firm is unknown to the general public is known a secret
partner.
o Have same features like other partners.
o His liability is unlimited and he has to invest in the capital as well as have shares in the profit.

TYPES OF PARTNERSHIP FIRM

1. Partnership at will and Particular Partnership:
 When there is no agreement for the duration of the partnership is called 'Partnership at
will'.
 Some partnership firm formed for some specific object or for a particular period is called
a“particular partnership”.
 A partnership at will may dissolved by any partner by giving notice in writing to all
partners of his intention.
 Particular Partnership comes to an end on the completion of the venture or on the expiry
of the period.
2. General and Limited Partnership:
 When liability of the partners is unlimited is called general partnership.
 Two types of partners are their i.e.general partner and special partner.
 Special Partner's liability is limited and GeneralPartner's Liability is unlimited.
3. Registered and unregistered Partnership:
 Registration of Partnership firm is not necessary all over India.
 In Maharashtra, Registration is compulsory from 1st April 1985.
 Partnership which works according to the Partnership Act is called Registered partnership.
 When partnership is established for general purpose, it may not be registered then it is
called unregistered partnership.

 CO-OPERATIVE SOCIETY
Meaning:
Co-operative organisation is a voluntary organisation of individuals formed in orderto achieve certain
economic objective. The nature of co-operative organisation is service oriented.Each for all and all for
each is the principle of a co-operative society.
Definition: (Indian Co-operative societies Act,1912)
“Co-operative society is a society which has its objectives for the promotion of economic interests of its
member accordance with co-operative principles.”
TYPES OF CO-OPERATIVE SOCIETIES
Co-operative societies are classified into different types according to the nature of the services rendered
by them. Following are the main types of co-operative societies.
1.Consumer’s Co-operative Societies:
 Make their purchase in bulk from wholesaler.
 Supply them in small quantities to members at reasonable price.
 Provides various services to the members.
 Members are given bonus and share in profit in proportion to their investment.
2. Credit Co-operative Societies:
 Formed with objective of granting loans to members at reasonable rate of interest for productive as
well asnon-
Productive Purpose.
 Established in rural areas by agriculturist or artisans called as rural credit societies.
 By Salary earners or industrial workers in urban areas, called as Urban Banks, Salary earners
societies, worker’s societies.
3.Producer's Co-operative Societies:
 Also known as Industrial Co-operative Societies.
 Provide raw material, implement tools, technical guidance to the members on easy terms.
 So they can produce superior quality products.
4.Marketing Co-operative Societies:
 Undertake centralized sale of the products by their members.
 Perform all the marketing functions standardizing ,grading, branding packing,advertising,
transportation etc.
 Selling the product, distribute the proceeds among members depending upon the quantity sold for
each member.
5.Farming Co-operative Societies:
 Formed by farmers who voluntarily come together and pool their land to jointly conduct agricultural
operations using scientific methods of cultivation.
6.Housing Co-operative Societies:
 Housing co-operative societies purchase land and develop it.
 Formed by members for the construction and maintenance of the residential area.

FEATURES OF CO-OPERATIVE SOCIETY

1. Voluntary Association and open membership:
 Co-operative organisation is a voluntary association of individuals.
 Membership is open for all.
 Co-operative society is managed and controlled on democratic principles.
 Common goal is to work for the benefit of all the members.
 Any person of any cast,creed or religion can join the organisation.
 2. Equal Voting rights:
 Equal Voting rights.
 Principlesof votingis , 'one member one vote' or 'one share one vote'.
 All members are treated same.
 Have large capitals.
3. Service Motive:
 Main motto is to provide services and not to maximize profit.
 Provide goods and services to the members by treating member at par with others.
 There is no distinction among members based upon the number of shares held by them.
4. Limited Liability:
 Liability of a member is limited to the extent of the unpaid amount of shares held by
them.
 If Business assets are not sufficient to pay off its debts, the personal property of the
members cannot be utilized for the purpose.
5. Democratic Management:
 Each member has opportunity to express his opinion.
 The principles of voting is ‘One member One vote’.
 Decisions are taken by majority of votes.
 Managing committee is an elected body of representatives of members for day to day
administration.
6. Independent Existence:
 According to the Co-operative Societies’s Act 1912, it has an independent legal status
different from its members .
 It enjoys a stable and continuous life.
7. Registration:
 Compulsory to get the organisation Registered as per the relevant act of the state
according to the Co-operative Societie’s Act,1912 .
 Subjected to state control and supervision.
 Various concessions and facilities are given them by the government.
8. Surplus Profit:
 Dividend and bonus are given to the members.
 A part of the profit is transferred to the statutory reserve and remaining is utilized for the
welfare of the locality.
9. State Control:
 The registration of a co-operative society is compulsory as per the relevant act in the
concerned state.
 A Co-operative organisation in the state of Maharashtra has to be registered under
Maharashtra State Co-operativeSocietie’s Act, 1960.


MERITS OF CO-OPERATIVE SOCIETIES:

1.Easy formation:
 Minimum 10 members are required for the registration of Co-operative Society.
 Any adult member can join hands to start a co-operative societies.
 The procedure for registration is simple and fees are nominal.
2.Democratic Management:
  Co-operative society is democratic in nature.
 Principle of voting is 'One member One vote’.
 Each member is involved in decisions making.
 Managing committee manages day to day administration.
 Works for providing services to members.
3. Limited Liability:
 Liability is limited up to the extent of the unpaid amount of the shares held by them .
 Their personal property will not be used to pay debts.
4. Stability:
 Co-operative society enjoys an independent legal status different from its members.
 It enjoys stable and continuous life.
 Continuity does not get affected by the death, insolvency or insanity of any members.
5 .Open Membership:
 Any person of any cast, cast or religion can join the organisation.
 It is open for all.
 They can join and become members at their free will and also leave the organisation at their own
wish.
6. Tax Concessions:
 Co-operative societies play an important role in the economic and social development of the country.
 Therefore, government gives many concessions to them which include exemption of payment of
income tax upto a certain limit.
7. Less Operating Expenses:
 Expenses are very limited.
 Members offer administrative services without any remuneration.
 No advertisement expenses and no middle man are involved.
 Various concessions are given in registration fees,stamp duty, income tax, etc. by the government.
8 . Supply of goods at cheaper Rate:
 They buy goods in bulk directly from manufacturer or wholesale trader.
 Goods are available at cheaper rate .
 Main aim is to provide services to the members rather than earning profits.
9. Self financing and charity:
 After paying maximum dividend of 15% p.a.( the latest amendment act).
 The surplus Profit us utilized for financing growth and development of the organisation and also for
charitable purpose.

DEMERITS OF CO-OPERATIVE SOCIETY

1. Lack of capital:
 Members of co-operative society belong to lower and middle income group.
 So they can invest only limited capital.
 There is no capital appreciation.
 A maximum dividend of 15% p.a. is paid on the shares.
2. Rigid Government Rules and Regulations:
 There is strict control and supervision by the state government.
 Registration is compulsory as per the act of the concerned state.
  Various statements are required to be sent to the government from time to time.
 Due to excess interference of the government, the spirit of the co-operation is lost.
3. Incompetent Management:
 Members may not possess the required skills, abilities, time and experience for managing
the affairs efficiently.
 Members, works on an honorary capacity.
 They lack motivation.
 Due to limited funds, expert services cannot be engaged for efficient management.
4. Lack of Public Confidence:
 Some particular members becomes , members of the managing committee and they are
politically motivated.
 Co-operative societies do not enjoy public confidence.
 Because of unnecessary interference by politician, corrupt government officials in the
working of the Co-operatives.
5. Lack of Motivation:
 Members work at honorary basis.
 There is no incentive for them to work hard.
 These results in lack of interest by the management in affairs of the co-operative society.
6. Disputes:
 Constant conflicts among members.
 They lack maturity and experience in handling the affairs of the co-operative society.
 Disputes also result in the winding up of the co-operative society.
7. Limited Scope for Expansion:
 Due to limited financial and managerial resources, a co-operative society cannot expand
the business beyond certain limit.

 JOINT STOCK COMPANY

Meaning:
A Joint stock company is an incorporated association which is an artificial person, created by law,
having a common seal, ensuring perpetual succession. It has a large number of shareholders with
limited liability, who elect their representatives known as board of directorsto run the business on
their behalf.
Definition: (Prof.Haney)
“A joint stock company is a voluntary association of individuals for profits having capital dividend
into transferable shares, the ownership of which is the condition on membership”.

 COMPANY LIMITED BY SHARES CAN BE OF TWO TYPES

 Private limited company and Public limited company.
 “A private company is a company which by its articles, restricts the right to transfer its
shares, if any limits the number of its members to 50.
 A public company means a company which is not a private company.
 Minimum number of 2 directors is essential in private company where as minimum 3 number
of directors is essential.
 Shares are not transferable in private company .
 But in public company they invite public for issuing shares and debentures.
 Minimum number of members are 2 and maximum 50 in private company where 7is the
minimum number of members in public and there is no maximum limit of members.
 It is compulsory for private company to add “Private limited' after the name of the company.
  For public company is compulsory to add word “limited” after the name of the company.
 Private company does not have to issue the prospectus and statement of lieu of prospectus.
 Public company have to issue prospectus and in the absence of prospectus to sent statement
of lieu to the Registrar.
 Minimum paid up capital is 1 lakh rupees for private and 5 lakh rupees for public company.

Features of Joint Stock Company

1. Artificial Legal Person:
 Artificial person created by law.
 Has separate name and uses a common seal as a substitute for its signature.
 Does not have a physical existence because it is not a natural person.
 It can enter into contracts with third parties i.e. can buy and sell property, etc.
2. Separate Legal Entity:
 A Company is created by law , therefore it enjoys an independent legal status different
from its members.
 Company’s liabilities are its own.
 Share holders are not liable for the debts of the company.
 Share holders cannot act on behalf of the company or bind person/persons.
3. Limited Liabilities:
 Most important advantages of a joint stock company is limited liability to the extent of
unpaid amount on shares held by them.
 Their personal property cannot be used for satisfying the claims of the creditors of the
company.
4. Common Seal:
 Company is an artificial person which cannot sign as a human being. Therefore a common
seal is used as a substitute for the signature of the company.
 Common seal such as stamps are the symbol of the company incorporate existence.
 Common Seal shows the name of the company, engraved in a particular manner.
5. Registration:
 Every Joint Stock Company have to get registered with the Registrar of companies under
Indian Companies Act,1956.
6. Transferability of Shares:
 Ownership of the company is divided into shares.
 The share are freely transferable in a public limited company i.e.members can buy or sell
these shares without seeking permission from the company.
 High degree or liquidity is involved in buying shares of the company.
 Shares of private company are not transferable.
7. Separation between ownership and Management:
 Shareholders, in the company is large and are spreads all over the country.
 They cannot take part in day to day routine of the company, therefore they elect
representative called as “border of directors” to run business on their behalf.
 Ownership of the joint stock company is separated from its management.
8. Membership:
 In case of public company, minimum number of members is 7and maximum is unlimited.
 Such large membership helps in raising large capital.
 In private company minimum number of members is 2 and maximum 50.
 9. Registered Office:
 The address of the registered office of the company he must be mentioned in the domicile
claws of Memorandum of association.
 Registered office of the company is very important since it is such a place, where all the
important documents like Register of Members, Annual returns, Minute books etc. are
kept.
10. Voluntary Association:
 Joint stock company is a voluntary association of persons.
 Any person of any cast, creed or religion can join the company and become its members
by buying shares.
 Share may be sold by any members at his free will
(excepts in a private company).
 Company business is managed on democratic principles.
11. Perpetual Succession:
 Ensures perpetual Succession.
 It enjoys continuous and stable life.
 Also enjoys an independent legal status different from its members.
 Death, insolvency, insanity or retirement of any member does not affect the company.

MERITS OF JOINT STOCK COMPANY:

1. Large Capital:
 Possible to raise huge financial resources.
 Because there is no maximum limit on membership in a public limited company.
 Loans can be taken from banks and other financial institutions by the company.
2. Democratic Management:
 Share holders elect the Board of Directors, who manages the Business efficiently.
 Director activities are supervised and controlled by share holders indirectly.
 Directors can be removed, if they do not perform well.
3. Transferability of shares:
 Ownership of the company is divided into shares.
 The share are freely transferable in a public limited company i.e. members can buy or sell
these shares without seeking permission from the company.
 Private companies, however does not permit free transferability of shares.
4. Limited Liability:
 Liability of a member in a public limited company is limited to the extent of the unpaid
amount of the shares held by him.
 Advantage of limited liability attracts a large number of investors.
 Share holders are not liable for debts of the company.
5. Expert Services:
 Due to large financial resources, joint stock company can appoint experts services for
managing each area or function of the company.
 They pay high salaries to them,these brings in a great degree or professionalism and
efficiency in management of the business.

6. Relief in Taxation:
 Companies are required to pay taxes at flat rate.
7. Public Confidence:
 It enjoys public confidence.
  Joint stock company in India is governed by the provisions of Indian Companies Act,1956.
 As per the act Company has to get its account audited by a practicing Chartered
Accountant.
8. Scope for Growth and Expansion:
 There is possibility for growth and expansion of the company.
 Company can raise huge capital.
 Expert Services can be appointed by paying high salaries to professionals for managing
business.
 A part of profit kept asides in the firm if reserve which is ploughed back in the business
expansion.
 Loans can be raised from banks and other financial institutions by hypothecating some
assets of the company.

DEMERITS OF JOINT STOCK COMPANY

1. Difficulty in Formation:
 Formation of the company is too difficult and involved too many formalities.
 Public limited company cannot commence business without obtaining a certificate of
commencement of business.
 Registration of Joint Stock companies is compulsory as Indian Companies Act,1956.
2. Delay in Decisions:
 There is no direct motivation for directors to give their best to the company.
 For taking various decisions and getting them approved from share holders,they have to
hold board meeting and share holders meeting, for which a proper procedure has to be
followed.
 These results into delay in decisions making, good business opportunities may be lost.
3. Excessive Government Control:
 Lot of government interference is there in working of the company.
 Various rules and regulations of companies Act have to be strictly followed.
4. High cost of management:
 The formation involves availing of the expert services of many professional like
underwriters, financial and technical experts, share brokers, solicitors, bankers etc.
 Even the process of dissolutionof Company is lengthy and costly.
5. Undue Speculation:
 The confidential information are used for speculation and for personal gains.
 This results in fluctuations in price of shares in stock exchange, adversely affecting the
public confidence.
6. No Personal contact:
 Due to large in size, employees feel that their efforts are not recognized and appreciated.
 They feel demoralized and their productivity declines.
7. Lack of secrecy:
 Every company must publish it’s annual accounts and certain other important documents
under Indian Companies Act,1956.
 Due to this competitors may take undue advantage of the inner information for their
benefit.
8. No Direct Efforts Reward Relationship:
 Since ownership and management are separate, there is no direct relationship between
efforts and rewards.
Chapter2. Business Services
 BUSINESS SERVICES
Meaning:
Business services are those services which help in successful running of a business.
E.g.Banking, Insurance, Transport, WarehousingandCommunications.
 NATURE OF BUSINESS SERVICES
1) Intangible:
 Services cannot be seen, touched and smelled as they are intangible.
 They can only be felt.
 E.g. Building of the bank is visible but the banking services can’t be seen, yet people take
benefits of the bank.
2) Heterogeneous:
 Services lack in homogeneity.
 Like the behaviour of a bank employee it can be good towards one consumer and harsh
towards the other.
 It is not essential that the services provided by a person or an organization are
homogeneous.
3) Non- Stocking:
 Services cannot be stored.
 Demand and supply of services go hand in hand.
 It is not possible to supply more services than its demand.
 Services are perishable.
 E.g. A bank employeegoes on strike on 10thJanuary, now it is not possible to stock the
services which he can give on that day and get double work done on 11th January.
4) Non-Transferable:
 Business services are non- transferable in nature.
 There is no exchange of ownership in services.
5) Participations of Consumers:
 To avail the benefit of services, the participation of a consumer is indispensable.
 E.g. A transportcompany, is ready to take you on tour, a bus is ready and waiting for the
passengers. Now, passenger wishes to avail this service, he has to travel in the bus.

 TYPES OF BUSINESS SERVICES

1) Banking Services:
 Banking services are those services which facility to provide finance to the business.
 Bank provide facility of loan to the business, business needs finance to purchase
properties and for its daily expenses.
 Also bank provide facilities like drafting facility, locker, debitcard and credit card etc.
2) Insurance Services:
 Insurance company, after charging a definite fee, transfers the risk of the businessman to
itself.
 According to the agreement, insurance company promises to pay a fixed amount to the
insured either on the expiry of a period or in case of a mishap.
 Insurance are of many types, like Life insurance, fire insurance,marine insurance etc.
 3) Transport Services:
 Transportation means to transfer goods people etc. from one place to another.
 Transportation is mainly used to take raw materials, finished goods,human resources etc.
from one place to another.
 Transportation plays a significant role in the development of business as it is the only
medium of transportation of products and services.
 Labour can also travel from one place to another through transportation.
4) Warehousing:
 Warehousing means to store the material in a regular manner.
 The time of production and utilisation of the product can vary which causes problems of
preserving the product until its use arises.
 This problem can be solved by the way of warehousing.
5) Communication:
 Communication means the process of exchanging messages between or among people to
create common understanding.
 Communication is the main aid to trade.
 With this medium enquiry of the products and services is made, ordered are placed,
complaints and suggestions are registered and transactions are finalized.

 BANKING:
Meaning:
Banking is an institution which deals in money and credit. Bank accepts moneyin the form of deposits
e.g. FD,RD,SD.
Bankalso provides credit in the form of loan and advances.
E.g. cash credit, BOD,BOE. A banker is one who under takes banking activities.
Definition:(Oxford Dictionary)
“ Bank is an establishment for Custody of money, which it pays out on customer’s order.”

 TYPES OF BANKS :
a. Central Bank:
 Central bank is the apex Bank in the banking structure of a country.
 It plays an important role in a country’s monetary and banking system.
 The main function is to maintain economic stability of the country and in reference to
underdeveloped countries,its main function is to bring economic development.
 Central bank issues currency, control other banks and work as a bank of the government.
 It provides guidance to other banks.
 Therefore it is also known as banker’s bank.
 In India, the Reserve Bank of India, in England, The Bank of England and in America, The
Federal Reserve Bank are the central Banks.
b. Commercial Banks:
 These banks accept the deposits from the general public and provide short term loans to
traders, manufacturers and businessman by way of cash credit and overdraft etc.
 Bank also provides various services like collecting cheques, Bills of Exchange, remitting
money from one place to another.
 Commercial Banks are of three types i.e. Public sector banks, Private sector banks and
Foreign Banks.
a) Public Sector Banks:
  These banks where majority of the stake is held by the Government of India or
Reserve Bank of India.
 E.g. State Bank of India, Corporation Bank, Bank of Baroda, Dena Bank etc.
b) Private Sector Banks:
 Private sector banks majority of share capital is held by private individuals.
 These banks are registered as companies with limited liability.
 E.g. The Jammu& Kashmir Bank ltd. , Bank of Rajasthan ltd., Global Trust
Bank,etc.
c) Foreign Banks:
 These banks are registered and have their headquarters in a foreign country
but operate their branches in our country.
 Foreign banks operating in our country have increased since financial reforms
of 1991.
 E.g. Hong Kong and Shanghai BankingCorporation (HSBC), Citibank, American
Express Standard,StandardChartered Banketc..
c. Development Banks:
 Business often requires medium and long term capital for purchases of assets and for
expansion and modernization of the business.
 Such financial assistance is provided by Development Banks.
 They undertake other development measures like subscribing to the shares and
debentures issued by Companies, in under subscriptions of the issue by the public.
 Examples of Development Banks are Industrial finance Corporation of India, State financial
Corporation and Industrial Development Bank of India.
d. Co-operative Banks:
 Co-operative Banks are financial institutions registered under the co-operative societies
act.
 Main objective is to give credit to economically backward people.
 In India co-operative banks are the main source of rural credits.
 Encourage saving habit among the villagers and give loans at low rate of interest.
 Co-operative Banks are of three types at different levels.
i. Primary Credit Societies:
 Formed at the village or town level with borrower and non borrower members
residing in one locality.
 Operations of each area is restricted to small area so the members know each
other and keep watch over the activities and prevent frauds.
ii. District Central Co-operative Banks:
 These banks are operated at District level having primary credit societies belonging
to the same district .
 Members and functions are the link between the primary credit societies and state
co-operative banks.
iii. State Co-operative Banks:
 These are the apex co-operative banks in all the states of the country.
 Mobilize funds and helps in its properchannelization among various sectors.
 The money reaches the individual borrowers from the state co-operative banks
through the central co-operative banks and primary credit societies.
e. Specialized Banks:
 Provide overall support for setting up business in specific areas.
 Exim Banks, SIDBI and NABARD are example of such banks.
 a. Export Import Bank of India (Exim Bank):
 For exporting and importing products to foreign country for sale purpose, Exim Bank can
provide required support and assistance.
 Banks grants loan to exporters and importers also provide information about the
international market.
b. Small Industries Development Bank of India ( SIDBI):
 To establish small scale business unit or industry, loan on easy terms can be availed
through SIDBI
 Provides finance to modernize small scale industrial units and bring use of new
technology.
 Main aim is to promote , finance and develop small scale industries.
c. National Bank for Agricultural and Rural Development (NABARD):
 Apex institution for financing agriculture and rural sector.
 Provide credit for short term and long term through regional rural banks.
 E.g. people who engaged in agricultural activities like handloom weaving, fishing,etc.

f. Regional Rural Banks:

 Established in 1975 to enhance banking facilities in rural areas.
 Features of commercial and co-operative banks are found.
 Banks are sponsored by some commercial banks.
 50% of their capital is provided by the central government. 35% by the Commercial bank
and 15% by the state government.
 Main function is to provide loans to small traders, small farmers and for development of
agricultural activities.
g. Exchange Banks:
 Mainly concerned with financing foreign trade.
 Main functions of Exchange bank are remitting money from one country to another
country, discounting of foreign bills, helping import and export trade, etc.
 Bank of Tokyo, Bank of America, are examples of exchange banks working in India.
h. Indigenous Bankers:
 Mainly deals in”hundis” and promissory notes
 Charge very high rate of interest on loans.
 Hundis are regarded as native Bills of Exchange.
i. Savings Bank:
 Accepts small savings from public who have fixed income.
 Creates savings habit among people.
 In India, post office saving bank is one of the saving banks.
 Commercial and Co-operative b9anks also play a role of saving bank.

 FUNCTIONS OF COMMERCIAL BANKS

Commercials bank performs diverse types of functions. It satisfies the financial needs of the sectors
such as agriculture, industry, trade, etc.
Functions of Commercial bank are divided into two categories:
1. Primary functions ( banking)
2. Secondary functions ( non-banking).
1.Primary Functions
A) Accepting Deposits:
The most important activity of commercial bank is mobilise deposits from the public. People who have
surplusincome and savings ,find it convenient to deposit the amounts with banks in different types of
deposits which are as follows:
 Types of Deposits:
1. Fixed Deposits:
 A Fixed amount is deposited for a fixed period and it is called fixed deposit
account.
 Also known as term deposit.
 Fixed period of time may be from 30 days to 5 years.
 Rate of interest in this account is highest because the amount accepted is
invested elsewhere for long term by the bank .
 Depositor is given a fixed deposit receipt
 If he needs to money before maturity date then he can get loan against the
deposits.
2. Savings Account:
 Meant for promotion of savings.
 People who have fixed and regular income can deposit their savings in this
account.
 Not permitted to have frequent withdrawals, as it is meant for savings.
 Interest on this account credited ,once in every six months.
3. Current Account:
 Depositor can deposit money any number of times and can withdraw it as per
his needs.
 Generally, business class deposits the money in this account.
 Bank does not pay interest on this deposit.
 If amount deposited in the bank is not sufficient then the bank can charge
some service charges .
 Money is withdrawn through cheques .
 A current account holder enjoys overdraft facility.
4. Recurring Deposit Account:
 A depositor deposits a fixed amount of money every month for a fixed period.
 Money is deposited on monthly basis.
 Money cannot be withdrawn before the expiry date .
 Amount of interest on the money is re-deposited in this account along with
principal.
 Have higher interest in comparison to other account except Fixed Deposit
Account.
5. Multiple Option Deposit Account:
 It is a type of saving bank account in which deposit in access of a particular limit
gets automatically transferred into FixedDeposit.
 In case adequate fund is not available in our saving bank account so as to
honour a cheque that we have issued, the required amounts get automatically
transferred from Fixed Deposit to the saving account.
 Balance amount is continues as fixed deposit and gets interest as per the
existing rate of interest.
 Higher rate of interest is earn in this account as compared to saving account.
B) Granting Loans and Advances:
A Banker receives money its deposits at lower rates. Out of this, Bank grants loans and advances to the
public and business community at higher rate of interest.
i.Loans:
 A Loan is granted for a specific time period.
 The loans are particularly granted to businessman and public against personal security gold and silver
and other movable and immovable assets.
 Commercial bank grant short term loans. But term loans i.e. loans for more than a year may also be
granted.
 Interest is charged on the entire amount.
ii. Advances:
 An advance credit facility provided by the bank to its customers
 It differs from loan as loan is granted for longer period, but advances are normally for a short period
of time.
 Interest is charged only in the amount withdrawn and not on the sanctioned amount.
Types of advances:
A).Cash Credit:
 Under this system, bank allows the borrower to draw amount upto a specific limit .
 A limit of certain amount is sanctioned to the customer.
 Interest is charged on the amount actually withdrawn.
B). Overdraft:
 Overdraft facility is granted to the current account holder.
 Holder can withdraw more than the credit balance of his account.
 Overdraft facility with a specific limit may be allowed either on the security of assets or on his
personal security .
 Bank charges interest on this facility .
 A current account shows debit balance where there is an overdraft.
C). Discounting of Bills:
 A Bill of Exchange is an negotiable instrument.
 Bank provide shirt term finance by discounting bills. i.e. making payment before the due date after
deducting certain amount of discount.
 A .party gets the funds without waiting for the due date.
 In case if dishonoured on the due date , the bank recover the amount from the customer.

2.Secondary Functions
Bank performs a number of other functions which are called as secondary functions.
A.Agency Functions:
I. Collection of cheques, Dividends and Interest:
 On behalf of its customers banks act as a agent and collect cheques, drafts, promissory notes,
interest, dividend etc. And credit the amount to their accounts.
 II. Payment of rent, insurance premiums, etc.:
 The bank makes the payment such as rent, insurance premiums, subscriptions, etc. In standing
instruction until further notice.
 Electronic clearing system (ECS) under which one time instruction is given to the bank for
debiting/crediting the account.
III. Dealing in foreign exchange:
 As an agent the commercial bank purchases and sells foreign exchange for customers as per RBI
Exchange Control Regulations.
IV. Purchase and Sale of Securities:
 Commercial bank undertake the purchase and sale of different securities such as shares,
debentures, bonds, etc. on behalf of their customer.
 They run separate 'Portfolio Management Scheme' for their big customers.
V. Act as trustee, executor of will, attorney, etc.:
 The bank acts as executives of will, trustees and attorneys.
 It is safe to appoint a bank as a trustee than to appoint an individual
 Acting as attorneys of their customers, they receive payments and sign transfer deed .
VI. Act as Correspondent:
 Commercial Banks act as a correspondent of their customers.
 Small bank even get travel tickets, book vehicles, receive letters,etc.
VII. Preparation of Income Tax Returns:
 They prepare income tax returns and provide advice on tax matters for their customers.
 They employ tax experts and make their services available to their customers.

VIII. Bank Drafts:

 A Bank Draft is a financial instrument with the help of which money can be remitted from one
place to another.
 Anyone can obtain a bank draft after depositing the amount on the bank.
 The bank charges commission for issuing a bank draft.
 For bank draft, funds are withdrawn directly from a bank’s fund and not from an individual
account.
IX. Underwriting of Shares:
 These include guarantee by the bank to the company.
 In case the company shares are not sold, the bank will take the responsibility of the unsold
shares .
 Bank charges commission for this service.
X. Demat Account:
 This account is introduced by commercial banks to facilitate the customers who are
shareholders.
 To keep a record of their shareholders in electronic form.
 To facilitate buying and selling of shares in the share market.
 A statement of holding is issued to the account holder periodically for his information and
records.

B) Utility Functions:
1.Safe Deposit vault/ lockers:
 Safety of valuables like jewels, documents, etc. Is provided by commercial bank by way of safe
deposit vaults or lockers.
  'Lockers' are small receptacles ( cabinets) which are fitted in real ssteel racks and kept inside ' strong
rooms' known as vaults.
 Vaults are available on half yearly or annual rental basis.
2.Travellee's Cheque:
 Traveller's cheques are used by domestic travellers as well as by international travellers.
 Bank issues cheques to help carry money safely while travelling within India or abroad.
 Therefore, customers can travel without fear ,theft or loss of money.
 Commonly used by international travellers.

3.Letter of Credit (L/C):

 Letter of document is a payment document provided by the buyer’s Banker in favour of the seller .
 Guarantees payment to the seller upon presentation of documents mentioned in the Letter of Credit
evidencing dispatch of goods to the buyer.
 The buyer or the importer also known as Applicant.
 The bank which is issues the letter of credit known as opening bank.
 The seller in whose favour the letter of credit is issued also known as Beneficiary.
 The credit receiving bank.
4.Provides Trade Information:
 Commercial banks collect information on business and financial condition etc. for their customer.
 Trade information services is very useful for those customers who do trade at international level.
 It will help traders to know the exact business conditions, payment rules and buyer’s financial status
in other countries.
5.Gift Cheques:
 Commercial Banks offers Gift cheque facility to the general public.
 These cheques receive a wider acceptance in India.

 E-BANKING
Meaning:
E-banking refers to electronic banking. E-banking is also called as Virtual Bankingor “Online
banking”. E-banking is a result of the growing expectations of bank’s customers.
E-banking system makes the transaction of banking system much faster.
1) Automated Teller Machine (ATM):
o ATM are electronic machines which are used by the customer himself to deposit or
withdraw cash.
o ATM card have obtain through bank for use .
o ATM card is magnetically coded.
o It can be easily read by the machine.
o For withdrawing or depositing, customers have to enter a password or authentication i.e.
number.
o ATM provides 24 hrs service and convenience.
o Beneficial for travellers as they can withdraw money from anywhere.
 o ATM provides privacy in the banking transactions, so it is safe.
2) Credit Cards:
o Credit Cards ( VISA or MASTER CARD) are issued by the bank to the person who may or
may not have an account in the bank.
o Credit Cards are use to make payments for the purchase without carrying cash along with
themselves.
o Bank provide certain period to the card holder to make payments of the credit amount or
else they may charge a high rate of interest if it is not pay before due.
3) Debit Card:
o Debit card are provided to the person who have savings account or current account in the
banks.
o Payments can be made for goods through debit card instead of cash.
o Amount paid through debit card are automatically debited from the customer’s account.
4) Electronic Funds Transfer (EFT):
o Money can be transferred from one account to another account.
o There can be direct credits, which includes dividend on shares, interest on debentures,
commission, salary, pension, etc. And direct debits which are telephone and electricity
bills, loan instalments, credit card dues etc.
5) Core Banking:
o 'Core Banking Solution'or ' Centralised Banking Solution' is popularly known as CBS.
o CBS makes banking convenient by changing the status of a customer from 'Customer of a
Branch' to 'Customer of the Bank'.
o Facilitating speedy and effective banking anywhere and all the times.
o By opening a Bank account in one branch (which has CBS facility) can operate the same
account in all CBS branches of the same bank throughout the country.
6) Internet Banking:
o Bank have started transactions over internet.
o Customer having an account in the bank can log on to the bank’s website and access his
bank account.
o He can pay bills, give instructions for money transfer, fixed deposits, etc.

7) Phone Banking:
o Phone banking is possible through mobile phones.
o A customer can receive and send messages from and to the bank in addition to all the
functions possible through phone banking.
o By using phone, customers can make banking transactions like fixed deposits, money
transfer, demand drafts, collection and payment of bills etc.
8) National Electronic Funds Transfer (NEFT):
o NEFT refers to a nation-wide system that facilitates individuals, firms and companies to
electronically transfer funds from any bank branch to any individual, firms or company
having an account.
o NEFT settle transactions in batches.
o The settlement take place at a particular point of time.
o All transactions are held till that time. e.g. NEFT settlement take place 6 times a day during
the week days.( 9:30 am , 10:30 am, 12 noon, 1 pm, 3 pm, 4 pm) and 3 times during
Saturdays ( 9.30 am , 10.30 am, 12.00 noon ).
9) Real Time Gross Settlement ( RTGS):
o RTGS refers to transfer system where transfer of funds takes places from one bank to
another on a ' RealTime' and on ‘Gross' basis.
 o Settlement in ‘Real Time' means payment transaction is not subjected to any waiting
period and they processed to settle soon.
o 'Gross' settlement means the transaction is settled on one to one basis without netting
with any other transactions.
o It is a fastest possible money transfer system.
o RTGS service for customers is available from 9.00 am to 3.00 pm on week days and from
9.00 am to 12.00 noon on Saturdays.

 INSURANCE
Meaning:
Insurance is a contract entered between two parties that is the company assuring in the contract of
insurance to compensate is known as insurer / assurer. While the person to whom such assurance is
given is known as insured / assured. In this contract the insurer bound to compensate for the specific
loss to the insured who in consideration of which pays insurance premium.

Definition:
“According to Insurance Act of 1938, Insurance is defined as “ A provision which a prudent man
makes against inevitable contingencies”.
BASIC TERMS
 Insured: The person to whom a compensation is to be paid, in case of loss is called the insured.
 Insurer: The company that agrees to pay compensation on the happening of a specific event
against the payment of regular premium is called the insurer.
 Premium: Fixed amount to be paid to the insurer by insured.
 Policy: The statement of contract between the insured and the insurer. It contains the terms
and condition of the insurance contract.
 Subject matter of Insurance: It refers to the subject against which the policy is taken.
A.In life insurance, the life of the assured is a subject of matter.
B. In fire Insurance, the goods and assets or property of the insured is the subject matter.
C. In Marine Insurance, the cargo or ship is the subject matter.

 Claim: It is the demand made by the insured on the insurer to compensate for loss on the
happening of the event.
 Propsal: It is a written request by the proposal (insured) to the insurance company issue in
insurance policy.

 PRINCIPLES OF INSURANCE
Insurance in the contract between two parties. Hence, all the elements of a valid contract should be
present in every insurance contract.
1.Principle of Utmost Good Faith (Uberrimae fidei):
 All type of insurance contracts require utmost good faith towards each other.
 The insurer and the insured must also disclose all material facts , clearly, correctly and
completely.
 If the insurer finds that certain material facts relating to the contract was not disclosed the
insurer may avoid the contract, the principal is more important for life insurance as the
information disclosed will affect the decision of the insurance companyto decide whether to
accept or reject the proposal.
2.Principle of Insurable Interest:
 The insured must have insurable interest financially in the subject matter of insurance.
 In life insurance it refers to the life insured.
 In fire and General Insurance, it must be present at the time of occurrence of loss and in Marine
Insurance, the insurable interest exists only at the time of the occurrence of the loss.
 Owner is said to have insurable interest as long as he is the owner.
 The subject matter of insurance must be a physical object and must be subject to risk.
 Absence of insurable interest will make the contract of insurance invalid.
 It should be present at the time of taking policy and at the time of claim.
3.Princple of Indemnity:
 Indemnity means a guarantee or assurance to out the insured in the same position in which he
was immediately prior to the happening of the uncertain event.
 The insurer undertakes to make payment of actual loss incurred by the insured.
 Insurance contract is signed only for getting protection against unpredicted financial losses
arising due to future uncertainties.
 Insurance is not made for profit.
 The amount of compensation is limited to the amount assured or the actual loss, whichever is
less.
 It is applicable to fire, marine and general insurance.
4.Principle of Contribution:
 This principle is corollary to the principle of indemnity.
 Insured person can take any number of policies.
 The insured can claim the compensation only to the extent of actual loss either from any one
insurer it all the insurers.
 If one insurer pays full compensation then the insurer can claim proportionate claim from the
other insurers.
5.Principle of Subrogation:
 According to principal of Subrogation, after the insured is compensated for the loss due to
damage to property insured then the right of ownership of such property passes on to the
insurer.
 This principle is applicable onlywhen the damaged property has an value after the event
causing the damage.
 The insurer can benefit out of Subrogation rights only to the extent of the amount he has paid
to the insured as compensation.
6.Principle of Mitigation of Loss:
 Insured must always try his level best to minimise the loss of his insured property, in case of
uncertain events like fire outbreak, blast etc.
 Insured must take all possible measures and necessary steps to control and reduce the losses.
 It is the responsibility of insured to protect his own property an not to neglect if loss has taken
place .
7.Principle of Causa-Proxima (Nearest Cause):
 Principle of Causa-Proxima means when a loss is caused by more than one causes, the
proximate (nearest) Cause should be taken into consideration to decide the liability of the
insurer.
  The property may be insured against some causes and not all causes, therefore proximate cause
of loss is to be found in such case.
 If proximate cause is the one which is insured against, the insurance company is bound to pay
the compensation and vice versa.

 TYPES OF INSURANCE
 Life insurance
 Fire insurance
 Marine insurance

A. LIFE INSURANCE
Meaning:
Life Insurance is not for the person who passes away, but it is for those who survive it is the
responsibility of every earning member toguard against the events that could affect the family in the
unfortunate circumstances of his demise. Thus, having a LifeInsurancePolicy is very vital.

Definition:
“ A contract where an insurance company undertakes in consideration of regular payment of
premium to pay a certain sum of money to the assured on maturity of policy or death, whichever is
earlier.”

 TYPES OF LIFE INSURANCE POLICY

1.Whole Life Policy:

 The whole life of a person is insured under this policy.
 Insured cannot receive the money from the Insurance Company till he is alive.
 The money becomes payable on the death of the insured person to the nominee or the
legal heir.
 This policy is mere beneficial for the family of the deceased, as it provides finance to the
family.
2.Endowment Insurance Policy:
 Insurance is taken for a specific period.
 The sum assured along with bonus is given on his death to the dependents of family or on
expiry date of the policy.
 It is a popular plan as it protects the family of the deceased or provides old age pension to
the insured.
3.Term Insurance Policy:
 Term Insurance policies taken for a specific period.
 It has lowest premium among a place Insurance plans.
 Premium is fixed and does not change during the term of policy.
 In case of untimely death, the dependents receive the benefit amount specified in the
term insurance agreement.
4.Money-Back Policy:
 This policy provide a regular percentage of the sum assured during the life time of the
policy.
 Also guarantee the benefit of full sum assured in the event of the death of the insured.
  This policy is suitable for those people who like to have savings and Insurance cover.
5.Joint Life Policy:
 Two or more persons are jointly assured.
 Must have insurable interest in each other.
 It is useful for individuals having common interests, requiring joint safety and security to
their lives.
 Sum assured is payable at the end of the policy or first death of any partner , whichever is
earlier.
6.Annuity Policy:
 Insured has to pay the premium in lump sum or instalments over a certain period of time.
 Insured will receive back a specific sum periodically from a specified date onwards.
 This policy is for whole life or for a fixed number of years.
 This policy is opted by a person who have surplus wealth.

7.Pension Policy:
 Pension Policy is different from all other form of insurance.
 It does not provide any life insurance cover but merely offers a guaranteed income either for
a life or for a certain period.
 This policy is taken after retirement to get an income.
8.ULIP ( Unit Linked Insurance Plans):
 ULIP is introduced by the private companies.
 It is popular as they combine the benefits of life insurance policies with mutual funds.
B.FIRE INSURANCE
Meaning:
The fire insurance protects the insured against the risks of fire. Any property which is subject to damage by
fire can be insured against fire. Fire insurance is for protection and not for profit.
Definition:
According to Indian Fire Insurance Act,1938: “ In addition to other insurance, fire insurance is that
Insurance contract which takes place against fire and such other risks which are mentioned in the fire
insurance contract.”
 TYPES OF FIRE INSURANCE
1.Valued Policy:
 Value of subject matter of Insurance is agreed upon at the time of making the contract.
 Insurer has to pay a specified amount or value irrespective of the amount of loss caused due to fire.
 This policy is taken for those goods whose value becomes difficult to calculate in case of loss of fire.
 This policy is taken for art work , paintings, etc.
2.Average Policy:
 It is a policy which contains an average clause.
 If subject matter is not insured as per the market value or undervalued, then the insurer is liable to
pay that Percentage of loss for which it is insured .
3.Specific Policy:.
 The property is insured for a definite sum irrespective of the market value.
  If there is loss, the stated amount will have to be paid to the policy holder.
 But actual value of the subject matter will not be considered.
4.Floating Policy:
 This policy is taken for those goods which are lying in different localities or godowns or warehouse.
 Since the quantity of goods lying at different places fluctuate from time to time, it becomes difficult
for owners to take specific policy.
 Such policy is taken for One sum and one premium for goods lying at different places .
5.Comprehnsive Policy:
 This policy covers all types of risks like fire, burglary, riots, explosion, strikes etc.
 This policy is called as all in one policy.
 This is not so popular in India but in other countries like UK, USA, etc. it is popular.

6.Excess Policy:
 Excess Policy is taken when the value of the stock in the market constantly fluctuates.
 It is not advisable to take one policy of certain sum, but instead of two policies can be taken.
 One policy is for minimum amount below which value of the stock never falls.
 Another policy for a difference/excess amount ( for a maximum amount of stock) by which price
fluctuates.
7.Reinstatement Policy:
 The insurer undertakes to replace the property or good lost by fire.
 Instead of paying compensation for the property lost by fire, the property is replaced.
 Depreciation amount is not taken into consideration. While paying compensation.
 Rate of premium is higher
8.Blanket Policy:
 Blanket policy covers all fixed assets and current assets of the assured in one policy.
 All assets lying at different places are covered under one premium and one policy.

C.MARINE INSURANCE
Meaning:
Marine insurance gives protection against losses caused due to the dangers of the sea.Marine Insurance
isvery useful for foreign trades i.e. for exporters and importer. Marine insurance covers the dangers of the
sea such as sinking of the ship, storm, fire, explosion in the ship, pirates etc.
Definition:
According to Marine Insurance Act,1963 “ An agreement whereby the insurers undertakes to indemnify
the assured, in the manner and to the extent thereby agreed, against losses incidental to marine
adventure. It may cover loss or damage to vessels cargo or freight.”

 TYPES OF MARINE INSURANCE POLICIES:

1.Voyage Policy:
o It is policy in which the subject matter is insured for a particular voyage irrespective of the time
involved in it.
o Risks begin only when the ship starts on voyage.
2.Time Policy:
o In this policy, subject matter is insured for a definite period of time against the perils / dangers
at sea.
o A time policy cannot be for period exceeding 1 year, butit may contain continuation clause.
o The continuation clause means that if the voyage is not completed within the specified time,
the risk shall be covered until the voyage is completed or till the arrival of the ship at the port.
3.Mixed Policy:
o This policy is the combination of time and voyage policy.
o Therefore, it covers the risks for both , particular voyage and for a specified period of time.
4.Valued Policy:
o Goods are insured for an agreed value between the insurer and insured.
o When it becomes difficult for the insurer to assess the value of the goods, then this policy is taken.
o In case of cargo this value means the cost of goods plus freight and shipping charges plus 10% to
15% margin of for anticipated profits.
5.Floating Policy:
o Floating policy is taken for a large sum covering several shipments.
o Mostly taken by exporters in order to avoid trouble of taking out a separate policy for every
shipments.
o This policy covers several shipments till the amount insured is exhausted.
6.Blanket Policy:
o Under blanket policy, the maximum limit of the required amount of protection is estimated which is
purchased in lump sum.
o The amount of premium is usually paid in advance.
o Covers all the risks.
7.Port Risk Policy:
o Port risk policy covers all the risks of a vessel while it is anchored at the port for a particular period of
time.
o Policy is applicable till the departure of the vessel from the port.
8.Composite Policy:
o This type of policy is purchased from more than one insurers.
o The liability of each insurer is separate and distinct.
o This policy taken when the amount of insurance is very high.

 COMMUNICATION
Meaning:
Communication is an art of exchanging ideas facts , information etc from one person to another. The
process of passing any information from one person to the other person with the help of some
medium is termed as communication.
There are different types of communication like post ,telephone mobile ,internet ,phone, TV and
media, Radio ,press media etc.

POSTAL SERVICES ( Traditional modes of communication)

In India, till 1837, the Postal services was used onlysolely for sending official mail. After 1837, the
Postal services were made available to the public.
  TYPES OF POSTAL SERVICES
1.MAIL SERVICES
1)Post Card:
 Postcard is the cheapest means of written communication.
 It is a card on both sides of which we can write our message.
 There are two types of postcards are available.
 One is 'Ordinary Post Cards' and the other is ' Competition Post Cards’.
 Ordinary post card is for messages and Competition post card are used to reply to the question of
the competition.

2) Inland Letter Card:

 Like post card , written message can be send using Inland letter card.
 Card is sold by post offices and used for sending messages within the country.
 Written portion of the inland card is folded and sealed.
 Only names and addresses of the receiver and the sender is open.
 A special type of card just like inland card is used for sending messages to foreign countries known as
‘aerogram'.
3) Envelope:
 Postcards are not suitable for sending confidential messages an inland card it is not possible to send
enclosure although it ensures secrecy of the message.
 A postal envelope or an ordinary envelope with postage stamps affixed on it can be used for sending
enclosures.
 It is a small size paper packet having one side open.
4)Parcel Post:
 The postal facility through which articles can be sent in the form of parcels is known as Parcel Post.
 It provides reliable and economical parcel delivery service.
 Postal charges vary according to the weight of the parcel.
5)Book Post:
 Printed materials, printed books, periodicals, greeting cards can also be mailed as book post.
 Envelopes containing books or documents should be closed but not sealed.
 It is mentioned in the face of the envelope as “Book Post”.
6).Telephones:.
 Telephone service was started by the Post and telegraph department in 1881.
 Talking to the same person in the l SimCity is called a local call and talking to a person in other city is
called a trunk call.
 iPhone is the best medium for quick communication both outside and inside of the country.
 Videsh SanncharNigam limited(VSNL), Bharat Sannchar Nigam limited (BSNL) etc.

2.SPECIALISED MAIL SERVICES

Post office offers various mail services having some extra advantages like sending mails faster, ensuring
certain delivery of mails,etc.
1.UPC (Under Postal Certificate:
 Pair office does not issue any receipt on ordinary letters.
 If a sender wants to have a proof that actually letters are posted, then a certificate can be obtained
from the post office on payment of prescribed fee.
 This is called as ' certificate of posting'..
 UPC is written on the face of the envelope.
2.Registered Post:
 The post office offers registered post facility through which one can send his letters and parcels.
 Mails are handed over to the post office affixing additional posters as registration charge.
 On receiving the mail the post office immediately issues a receipt to the sender which also serves as a
proof that the mail has been posted.
 “Acknowledgement Due Card” can be sent along with the registered mail.
 The envelope must be superscribed as” Registered post AD”.
3.Insured Post:
 While mails are in transit they can get damaged or lost, resulting in a loss to the sender.
 There is a provision that a sender can ensure the letter or parcel, so that , in case of any loss or
damage to the letter or parcel the post office shall compensate for it.
 Insured post is a type of mail service through which valuable articles may be sent after insuring these
up to a specific amount.
 the insurance premium is paid to the post office according to the value for which the mail is insured.
4.Speed post :
 Post office provides time bound as well as guaranteed mail delivery through its Speed Post Service.
 Under this service, letters, documents and parcel are delivered faster that is within a fixed time
frame.
 This facility is available at specific post offices.
5.Post Restante:
 When it is necessary to send letter to a person whose exact address is not known then you can send
it to the postmaster of that area in which the receiver resides. The these letters are called Post
Restante Letters.
 While sending such letters, you have to write 'Post Restante or Care of Postmaster' on the face of the
letters.
 With is indication , letters will retained with the post office at the receiving end or delivered to the
addressee.
 Post office retains such letters for a maximum period of 14 days and after 14 days it will return to the
sender.
 This facility is suitable for tourists and traveling salesmen.
6.VPP (Valuable Payable by Post):
 The valuable payable by post is for the person who wish to pay for articles sent to them at the time of
receipt of the articles and also to meet the requirements of traders and others who wish to recover
through the agency of post office.
 Registered parcel ,registered letters,, registered book packets and newspapers prepared with postage
of newspaper rates of postage and with registration fee may be transmitted by inland post as
valuable postal articles.
 The amount specified for remittance to the sender should not exceed RS 1,000.
3.MONEY REMITTANCE SERVICES
1.Money Order:
 A Money order is an order issued by the post office for the payment of a sum of money to the person
to whom it is sent through the post office.
 A 'payee'is the person named in money order as person to whom the money is to be paid.
 Advantages that the money is delivered at the house of the receiver.
2.Instant Money Order:
 Indian Post presents Instant Money Order (IMO) the instant online money transfer service which is
convenient, reliable and affordable.
 It is simple to send and receive money.
3.International Money Transfer:
 Money transfer service scheme is a quick and easy way of transferring personal remittances from
abroad to beneficiaries in India.
 Only inward personal remittances into India are permissible .
 Money transfer is now available through post offices in India which helps in instant remittance of
money from around 195 countries to India.
4.Money Gram:
 The department of post has enter into an International Co-operation Agreement with Money Farm
payment system, Inc., USA offer to the general public, the Money Gram International Money
Transfer service through selected post offices in India.
 This services has started from 29th September, 2011.
5.Money Order Videsh:
 Money OrderVidesh is a new offering of Indian Post to facilitate remittances to foreign countries and
receiving the remittances from foreign countries through the medium of post office.
 This service was started from 24th October,2009.
6.Electronic International Money Order Services:
 International Money remittance between people of India and the UAE become easier after Indian
Post and Emirates Post,signed an agreement to launch ElectronicInternational MoneyOrders through
postal network using secure InternationalFinancial System (IFS) of the UPU ( Universal Postal Union)
from February, 2008.
7.Foreign Exchange Services:
 The need arose for a logo on quality service provider for purchase and sale of foreign exchange. As at
many places there is no bank officer letters to avail foreign exchange.
 Indian Post with the network of more than 1.5 lakh post offices is best to offer Forex services in an
efficient and economical manner.
 Indian post is association with HDFC Bank provides, Forex services through selected post offices in
India.
WAREHOUSING
Meaning:
When the storage is done on a large scale in a specified manner, it is called warehousing. The place
where goods are kept is called 'warehouse' . Warehousing creates time utility and make goods
available at the time of requirements.
Definition:
A warehouse is defined as “an establishment for the storage or accumulation of goods”.
 FUNCTIONS OF WAREHOUSING
Warehouse preserves goods on a large scale in a systematic and orderly manner . They provide
protection to goods against heat, wind, storm moisture, etc. and cut down spoilage, wastage, etc.
1.Storage of goods:
 The basic functionof warehouses is to store large stock of goods.
 These goods are stored from the time of their production or purchase till their consumption or
use.
2.Protection of goods:
 Warehouse provides protection to goods from loss or damage due to heat, wind ,dust etc.
 It makes special arrangement for different products according to the nature .
 Reduce the losses due to spoilage or wastage during storage.
3.Financing:
 When goods are kept in warehouse, the depositor gets a receipt which act as a proof about the
deposit of goods.
 The warehouse, issues a document in favour of the owner of goods which is called a
warehouse- keeper’s warrant.
 Warrant and receipt are negotiable instrument and can be endorsed.
 Owner can raise finance from banks, financial institutions, etc.
4.Risk-bearing:
 Entire responsibility of the goods stores in warehouse is passed to the warehouse keeper, once
the goods handed over him.
 Thus, the risk of loss or damage to goods in storage is borne by the warehouse-keeper .
 He is bound to return the goods in the same condition.
 Warehouses take all the precautions to prevent the goods from any loss.
5.Grading and Branding:
 Warehouses also perform the functions of grading and branding of goods on behalf of the
manufacturer, wholesalers and the importer of goods.
 Provides facilities for packaging of goods .
6.Processing:
 Processing is required to make them consumable, therefore warehouse undertakes these
activities on behalf of the owners.
7.Transportation:
 Warehouses can provide transport facility to the bulk depositors.
 Collects goods from the place of production and sends good to the place of delivery on the
request of the depositor.
8.Time and Place Utility:
 Warehouses creates time utility by preserving the goods till it is demanded.
 Also creates place utility by providing the goods at the place. Of consumption.

 TYPES OF WAREHOUSES
Warehouse is a storage structured constructed for the protection of the quality and the quantity of
the stored goods.
1).Private Warehousing:
 This warehouse is owned and managed by the manufacturers or traders to store their own goods.
 Big business firms which need large storage capacity in a regular basis construct their own
warehouses.
 The private warehouses are licensed to private person only for the goods to be stored and import by
him.
 Facilities are provided therein are according to the nature of the products.
2). Public/Commercial Warehouses:
 This warehouses are established to provide storage facilities to the general public for payment of
certain fees.
 It may be owned by an individual ,partnership firm, company etc.
 They obtain license from the government and work as per the rules framed by the government.
 Facilities like packaging ,grading, branding, inspection etc.
3). Government Warehouses:
 Warehouses are owned, managedand controlled by the central government or public corporation
or local authorities.
 Central Warehousing Corporation of India, State Warehousing Corporation and Food Corporation of
India are example of agencies maintaining government warehouses.
4).Bonded Warehouses:
 Bonded warehouses are licensed by the government for storing imported goods till the custom
duty is not paid.
 They are located within the dock area .
 Operated by government or custom authorities.
 Warehouse keeper is required to undertakes the goods
 The goods are held in bond and cannot be withdrawn without paying the custom duty.
 This Warehouses are useful to importer and exporters.
 Central Warehousing corporation operates 75 custom bonded warehouses.
5).Duty Paid Warehouses:
 If an imported faces any problem in transportation of goods, after making payment of duty on
goods can be stored at the Duty PaidWarehouses.
 All the duty paid warehouses are public warehouse which are available to all the importers.
 Helps in taking proper care of goods which is taken for processing, re-packing etc.
6)Co-operativeWarehouses:
 This Warehouses is owned, managed and controlled by the co-operative societies.
 Mainly provide warehousing facilities at the rural areas.
 Useful for farmers and traders.
 Provide facilities at the most economical rates to the members.
7).Cold Storage Warehouses:
 These Warehouses provides facilities for perishable commodities like fisheries, poultry, dairy
products, vegetables, fruits, flowers, etc.
 Goods are stored and refrigerated at very low temperatures so as to persevere them .

 TRANSPORT
Meaning:
Transportation is the movement of people, animals and goods from one location to another.

 ROLE OF TRANSPORTATION
1.Helps in Production:
o Transport system helps the manufacturer to take the raw materials and other requirements
quickly from the places, where it is available to the production centres.
o Helps in movement of labour from their houses to their place of work.
o Makes possible quick dispatch and distribution of finished goods to the centres of consumption.
2.Expanding Markets:
o Reduces gaps between the producer and consumer.
o Helps to cover wider area of market places by making goods available on time.
o Transportation plays an important role in distribution and marketing .
o Air transportation helps in success of an international trade.
3.Create Place Utility:
o Transportation useful for carrying the goods from the place of its availability to the place of its
requirement.
o Eg. Apples are transported from Kashmir to throughout the country , Mangoes from India are
exported to different countries etc.
4.Creates Employment:
o Provides direct employment to transport owners ,drivers mechanics ,helpers and so on.
o Indirect employment by facility in the movements of goods and people from one place to another.
5.Stability of Price:
o Transport helps to maintain the prices of the goods by providing them on time and satisfying the
consumer demand for the goods.
o Helps to maintain balance between demand and supply of goods, which ensures stability of price.
6.Improves Standard of Living:
o Helps people to enjoy a better standard of living by providing them with goods of the choices from
faraway places or places of its availability.
o Transport gives an opportunity to people to on good amount of income.
7.Cost Reduction:
o Cost of production and distribution can be reduced by the help of efficient, cheap and quick means of
transport.
o Goods can be sold at low price which in turn increase demand and expand market.
o Increase in demand leads to large scale production and demand can be fulfilled by transporting to the
place of its demand and for consumption.
8.Provides help during Emergency:
o So badly affected during natural calamities like flood, earthquake, landslides etc. and also during riots
bomb blast accident fire etc.
o Helps can be provided through transportation by providing them the necessities like foods and
medical helps .
9.National Defence:
o Transport plays an important role in special role in the defence of the country.
o An efficient transport network system and ensures quick movement of troops, arms and ammunition
from one place to another.
10.Economic Development:
o Economic development of a country depends on a good network of transport system and industrial
development.
o New Industries established where there is a good network of transport.
o Due to industrialisation , employment opportunities have generated standard of living.
Chapter 3. Emerging Modes of Business
 E-BUISNESS
Meaning:
The term “e-business” i.e. electronic business is derived from the terms e-mails and e-commerce.
The concept of e-business emerged when IBM coined the term in late 19th century.
Definition:
Very open the terms E-Commerce and E-business are used as synonyms full. However, in actual
terms , e-commerce is a sub branch of e-business. e-commerce is the trading aspect of e-business
where it connects buyers and sellers on the internet .
e-business on the other hand includes manufacturing, buying selling and managing the entire
business on the internet.

 RESOURCE REQUIRED FOR SUCCESSFUL BUSINESS IMPLEMENTATION

The various types of e-business transaction are:
1.Consumer to Consumer (C to C):
 There are number of websites where consumer can buy and sell goods like book, apparel, electronic
goods, fashion jewellery, etc.
 Here consumer buy and sells goods and services to the other consumer.
 The process allows buyers and sellers to display information about their products and also permits to
rate them.
 The payment modes for transactions are secured through advanced technology like Pay Pal and Pay
Net.
2.Business to Consumer (B to C):
 Transportation under B to C are between business firms and consumers.
 Firms use their site for a range of marketing activities which includes promotion, product information
,reviews about the product service and delivery of the product at the doorstep.
 Cost of products and services is kept low through this method and the speed of transaction is also
faster.
 E.g. www.flipkart.com
3.Business to Business (B to B):
 Transactions between business firms come under this category.
 Business forms interact with each other for a variety of services.
 These include supply of ancillary parts components to manufacturers providing value added services
like catering and man power.

 ADVANTAGESAND DISADVANTAGES OF E-BUSINESS

 Advantages of e-business:
1.It is easy to set up e- business as compared to traditional business.
2.e- business does not require physical space. It requires highly qualified technical professionals.
3. Communication is easy as there is no face to face interaction.This results in easy approach.
4. Cost ofsetting up a business is comparatively low as compared to traditional business.
5. There is no communication between suppliers and consumers.
6. Relationship building is very strong in e-business.
7.The World Wide Web ( internet ) offers a lot of exposure to business on a global platform e-business.
8. There is a lot of support from the government free business.
 DISADVANTAGES OF E-BUSINESS
1.In the absence of face to face interaction with business form / sellers, many buyers is hesitate to carry
out transactions.
2.The personal touch of the sailor form is missing.This at times makes the buyer insecure.
3. The consumer is not able to handle the product business transactions. Most buyers want to touch and
feel the product before buying.
4. Sometimes the government monitoring can lead to interference in the business.
5. Transaction risk is high..

 ON-LINE TRANSACTION
Three stage in online transaction:
 Pre-Purchase/ Sale
 Purchase/ Sale
 Delivery stage
Pre-Purchase/Sale: It is based upon advertising and information about the product.
Purchase/Sale: It include price of the product ,price negotiation ,actual purchase or sale and payment.
Delivery Stage: After completing sale and purchase stage, this is the final stage.
 Steps involved in on-line transactions:
1.Registration:
 Registration is required for online transaction.
 A person needs to register with the online vendor filling up a registration form.
 Among various details to be filled in is a : password' related to the 'account' and 'shopping cart'
which is protected by password.
2.Placing an order:
 The online shopper can pick and drop the things in the shopping cart.
 Shopping cart maintain the records of the items that you have picked.
3.Payments:
 Payment can be done in a number of ways like:
 Cash on delivery (CoD): After physical delivery of goods, payments for the online goods
order is made.
 Cheque: The vendor collects the cheque from the customer and after realisation of the
check the goods are delivered.
 Net banking Transfer: It is an electronic facility of transferring funds through the internet.
Buyer transfer the agreed amount to the online vendor's account.
 Credit or Debit Cards: This is popularly known as 'plastic money'. They are mostly used for
online payments.
 Digital Cash: it is a form of electronic currency that exist only in cyberspace. It has no real
physical properties ,but offers the ability to use real currency in an electronic format.
  TRADITIONAL BUYING AND SELLING PROCESS
 Buyer selects the seller
 Buyer selects Goods to be purchased
 Buyer Negotiates the Price and Terms & Condition
 Actual sale of Goods by the seller
 Payment for the goods purchased
 Delivery of goods as per the terms & conditions
 Activity after Sale of the Product

 ONLINE BUYING AND SELLING PROCESS

 Buyer browses through the internet
 Selects the seller company and goods to be purchased
 Goes through terms & condition
 If it is suitable makes online payment
 Receives the information about Delivery of the Products and after sale service.

 PAYMENT MECHANISM

In e-business payments have to be made online. There is no physical exchange of cash across a
country. Payments have to be made through the website. This is done by e-commerce
application service provider called as payment gateway.
A payment gateway authorizes payments made online for anyone who is trading, buying or
selling.
 Working of a payment gateway
1.After placing an order , customers click on a button called 'SUBMIT' once the merchandise is
chosen.
2.The site then asks for the customer’s credit card details. Once the details entered, the
browser codes the information.
3.The transaction details are forward by the e-business website to the payment gateway. At this
stage again information is coded.
4.The payment gateway forwarded the information to the payment processor which is used by
the credit card issuing bank.
5. The payment processor sends the information to the card association (VISA, MASTER, AMEX)
6. The card association forwards the transaction to the card issuing bank.
7.The card issuing bank authorises the payment. Then it is sends request back through the same
process to the merchant website. Once the authorization is received, the sale is approved.
8.The entire process does not take more than 2-3 minutes depending upon the speed of the
internet connection.
9.If the internet connection is fails at any step the process following steps are taken, e.g. if
connection fails after the payment has been made but before the order is finalized, then the
payment is credited back to the card account within a stipulated time period.

 SECURITY AND SAFETY OF BUSINESS TRANSACTIONS

 Encryption is a process by which readable text information is converted into coded information
which can be read only through a special process.
 One of the well known methods of encryption is Secure Sockets Layers (SSL).
  There is another protocol know as secure HTTP (Hyper Text Transfer Protocol).
 SSL and s-HTTP have been approved by the Internet Engineering Task Force (IETF) as standards.

 OUTSOURCING
Outsourcing is the process of contracting a business functions to specialised agencies. In during so,
the company benefits in two ways:
1.It reduces it’s own cost.
2.It uses the expertise of the firm which specializes in a particular kind of services.

 Needforoutsourcing
a.Today serviceall over the world are becoming highly specialised.
b.With increasing global competition, most companies are focusing on showcasing their products and
improving the quality.
c.Many non-core areas are being outsourced to firms who have an especially skilled work force.
 Advantages of Outsourcing
 It leads to better efficiency and effectiveness.
 The companies are able to focus their attention on improving the quality of the product.
 Outsourcing leads to cost reduction for the company. The cost of outsourcing services is much
less than keeping such a large work force on the rolls of the company.
 Manpower true outsourcing is available at a lower cost.
 Investment requirements of the company are reduced.
 Outsourcing helps in knowledge sharing between organisations.
 It stimulates entrepreneurship, employment and exports in the country from where outsourcing
is done.
 Focus on core activity.
 Specialised services.
 Disadvantages of Outsourcing
 There is always a danger of the misuse of company information by the contractor.
 Many companies compromise on the quality of outsourcing in order to cut costs. This is
especially seen in the IT sector where companies try to get cheap manpower from the other
countries.
 In some cases, companies ignore ethical issues related to outsourcing.
 The quality of the outsourced service is sometimes not up to the mark
 Exploitations of employees.
 Problem of sensitive information.
 Chapter 4. Social Responsibility of Business

CONCEPT OF SOCIAL RESPONSIBILITY

Meaning:
Social responsibility refers to all such duties, obligations of business directed towards welfare of
society. Profit making is not the sole function.
Definition: (The international seminar on social responsibility held in Delhi in 1965 )
“ Social responsibility of business has responsibility to the customers, worker’s, shareholders and the
community.”
 CASES (NEED) FOR SOCIAL RESPONSIBILITY
Every organisation should always make balance between profit and social responsibility. Profit
organisation should not be only sole aim.
1.Concept of Trusteeship:
 Commercial organisation are part of society, they operate within the society.
 Activity which is not good for public is not good for business.
 A Business must be held in trust, legally and morally for the benefit of people.
 Businessman are considered to be trustee of society, therefore business is a social venture.
2.Changing Expectations of Society:
 World is changing, growing and expanding very rapidly.
 Awareness about rights and knowledge is increasing among the peoples.
 Business must operate as per expectations of the society and should provide what they want.
3.Projecting Favourable Public Image:
 A business which response favourably to social need create a good market reputation and goodwill.
 Also imprints good public image.
 Such organisation are always about to get good support from public.
4.Protection of Environment:
 Business uses natural wealth and human resources to produce goods and services.
 They should avoid environmental pollution and ecological imbalance.
 Their practice should be eco friendly and not affect the interest of society and environment.
 “Syngenta” has started a project “ Krishi Shakti Kendra” to various places in India to protect
environment.
5.Better and Optimum Utilization of Resources:
 Generally large business has huge surplus resources in terms of finance ,manpower ,talent and
functional expertise.
 Business should use all the resources for expansion and also for society’s benefit.
 That should be proper balance and avoid wastages..
6.Trade Union's Pressure:
 Nowadays ,workers have become conscious of the rights and privileges.
 Trade union are growing fast and play important role in business environment.
 Employees expect management to provide fair wages and other benefits, for their efforts towards
the business.
7.Growth of Consumer Movement:
 Consumer movement is the movement against business malpractices.
 Consumers when organised cannot accept any injustice by business.
 They have reached voice against unfair trading practices.
 They expect good quality product at reasonable prices.
8.Government Control:
 Government has enacted various laws such as Consumer Protection Act, Air Pollution Act and Food
Adulteration Act, etc.
 There are as many as 30 environmental legislation in India.
 Business unit should carry all activities within legal moral and social limits.
 Business must contribute share for society.
9.Long Term Self Interest:
 If business organisation ignore social responsibility ,they may not be able to earn good profit in long
term.
 Employee Menon work heartly, investors and shareholders will not show positive response.
 Consumers may refuse to buy low quality products at high prices.
10.Complexities of Social Problems:
 Government is over burden with social, economically and political problems.
 Government has limited capacity and finance to deal with them.
 A progressive and social awareness can help government in solving social problems such as child
labour ,education and health facilities to poor etc.
 They can help regarding pollution control, population control and ecological imbalance by accepting
social obligations.
11.Globalization:
 Globalisation provides more opportunities and challenges to business.
 It contributes economical growth, increased specialisation, circulation of ideas and language.
 International trade barriers have reduced and resulted in global distribution of goods and services.
12.Role of Media:
 Media plays an important role in public life.
 Media has power to speak against wrong policies of business ,it is very vibrant and active.
 Media can raise voice against business malpractices and exploitation of consumers, through
televisions and newspaper making them aware about unfair trade practices.

 RESPONSIBILITIY TOWARDS DIFFERENT INTEREST GROUPS:

Business is conducted with the help of various interest groups such as investors, owner ,employees
,consumer ,Government and Society at large.

 RESPONSIBILITY TOWARDS OWNERS

Business should be conducted on Profit basis for prosperity and growth of owners. Following are the
responsibilities towards owners.
1.Reasonable Profit:
 Business should focus on basis aim of earning profit and growth.
 It will bring financial stability of enterprise.
2.Exploiting Business Opportunity:
 Business should be ready to take every possible opportunity to deal with.
 Should be alert to find such opportunities.
3.Expansion and Diversification:
 Business should always be developing and growing ,then it will expand and result in diversification.
 company should undertake research and development project to face market competitions.
 This will able to pay high returns to shareholders.
4.Careful use of Capital:
 Available capital should be used carefully and efficiently by the management.
 Risk factors is involved in policies.
 Management should give attention to the safety of the capital.
5.Minimizing Wastages:
 Business organisation can maximize profitability by minimizing Wastages.
 No financial loss should be allowed.
6.Fair Practices on stock Exchange:
 All sorts of unfair trade practices related to stock exchange should be avoided such as misusing the
secret information, artificially increasing the prices of shares etc.
 Such practices should be strictly prohibited.
7.Efficient Business:
 Resources should be utilised at optimum level.
 Best use of resources will increase efficiency and help increasing profitability.
8.Periodic Information and Creating Confidence:
 Owner should get complete and accurate information about the financial position.
 Company should disclose information through report circulars, statement of profit etc.
9.Effective use of shareholder's Funds:
 Shareholder’s funds must be utilised in the best possible manner.
 It should give short term and long term returns on time.
10.Creating Goodwill :
 Management should develop and maintain good public image.
 A well reputed company commands a lot of respect and trust in the share market ,labour market and
consumer market.
 Manufacturing world class products.
 Proper distribution and after sale service.
 Enlisting shares on stock markets.
 Performing its social responsibility towards various interest groups.

 RESPONSIBILITY TOWARDS INVESTORS

Investors provide finance to company which is considered as backbone of the business.

Business should fulfil following responsibility towards investors.

1.Return on Investment:
 Investors invest their money in business and except risk factor.
  They should get fare returns on investment regularly in form of interest. Following points
should be considered:
 Fair returns on investment.
 Safety of investment.
 Steady appreciation of business.
2.Proper Disclosure of Information:
 Management should present full and factual information to investors.
 They should get regular reports, circulars and statement of profit.
 This will ensure that their investment is safe.
3.To Maintain Transparency:
 Investors provide working capital to run business efficiently.
 Business should maintain high degree of transparency in its operation.
4.Handling Grievances:
 A company should handle investor’s grievances if any.
 All queries regarding any other issue must be answered satisfactorily way.
5.Proper Conduct of Meetings:
 Company should call meetings of investors regularly to provide information about business.
 Proper notice of meeting should be sent.
 In period of crisis, investors should be taken into confidence.
6.To Maintain Solvency and prestige:
 Business should maintain sound financial position, solvency, prestige and goodwill to satisfy
investors.
 Continuous efforts should be taken for research, innovation and expansion programme.
 RESPONSIBILITY TOWARDS EMPLOYEES
Employees are human resources that must be treated with dignity and respect.
1.Job Security:
 Some companies employ workers on temporary basis for us together.
 Security of job provides mental peace and employees can work with full dedication and
concentration.
 It will raise their moral and loyalty towards organisation.
2.Fair Remuneration:
 Must pay adequate wages and other incentives like bonus, overtime allowance, etc.
 Remuneration should be fixed according to nature and importance of work.
3.Good Working Condition:
 The employee should be provided with good working condition such as adequate lightning ventilation
drinking water etc.
 Proper working hours(shift wise if any) with lunch breaks, rest pause, etc.
4.Protect Health and Provide Safety Measures:
 Business should protect health and hygiene of employees.
 Canteen facilities, medical facilities as well as proper sanitation must be provided.
 Proper maintenance of machines and premises must be done to prevent accidents.
 Safety equipments like hand gloves, industrial shoes, helmets, goggles mask etc.
5.Promotion and Career Opportunities:
 Business should offer adequate opportunities and promotion to the talented employees.
 They should give proper information about qualification, skills and experience required to obtain
promotion.
 Increases awareness among employees and they will feel motivated.
 Employees who have exceptional talent should offered with career opportunities.
6.Workers Participation in Management:
 Workers should be encouraged to participate in management through various schemes such as
common suggestion system to save cost, quality circles, profit sharing, etc.
 It will raise their moral and give them a sense of belongingness.
7.Education and Training:
 Organisation should make every possible attempt to educate employees.
 “Introduction training” and “Refresher training” is conducted to keep employees updated on latest
development.
 Training makes employee confident and also increase efficiency.
8.Proper Grievances:
 Proper grievances process to handle employee complaint.
 All queries should be sorted quickly .
 Employees must feel satisfied.
9.Recognition of Trade Unions:
 To maintain industrial peace is the responsibility of commercial organisation.
 ‘‘Divide and Rule” policy should not be followed.
 They should not suppress formation of worker’s union.

 RESPONSIBILITIES TOWARDS CONSUMERS

Ultimate goal of business must be satisfaction of Consumer's wants. To protect their interest,
business should perform following responsibilities.
1.Good Quality Products:
 Enterprise should provide higher quality of goods and services.
 Every organisation have its quality control department so that inferior products can be rejected.
 International Standard Organisation, ISO is the latest trend towards quality control.
2.Consumer Safety:
 While manufacturing the products, health and safety of consumer should be the prime factor.
 Consumer should warned of any unsafe good.
3.Changing Fair Prices:
 The product and services should be available to consumers at fare prices.
 They should not be cheated by changing unreasonable prices.
 Maximum Retail Price (M.R.P) Inclusive All taxes should be printed on every packed product. Retailer
should not charge any extra amount.
4.Services Regarding Products:
Organisation should consider following services to customers about the goods or products:
 Regular supply of goods at the right price and right place.
  Provide sufficient quantity and quality of goods as per demand.
 A large variety of products should be provided to consumers.
 The goods must meet the needs of consumer of different classes, taste ,purchasing power etc.
 Quick and efficient after sale services should be provided especially in case of consumer durable
products.
5.Research and Development:
 The organisation should adoptnew methods and techniques of production and distribution.
 They should conduct research and development to improve the quality of goods and reduce cost of
production.
 It will minimize final prices.
6.Accurate Information:
 Accurate information should be provided to the customers through advertising, packing and labelling.
 Information should includes contents of product, side effects, date of manufacturing and expiry, MRP
etc.
 Provide printed leaflet to avoid damage or improper use of product.
7.Customer Service Cell:
 Complaints of the consumers must be attend .
 Quick and effective services regarding grievances should be provided.
 Suggestions of the consumers should be welcomed.
8.Advertising Ethics:
 advertisement of products should convey facts of product its uses, merits, demerits etc.
 False, misleading and vulgar advertisement should be avoided.
9.Avoid Consumer Exploitation:
 Unfair trade practices should be avoided.
 They should not take undue advantage of certain situations and create artificial scarcity of goods.

 RESPONSIBILITIES TOWARDS GOVERNMENT

Government provides incentives for industrialization. It also declared many policies related to
business. Following are the responsibilities of organisation towards government.
1.Timely Payment of Proper taxes:
 The government has levied various taxes on business units such as excise duty, sales tax ,corporate
tax etc.
 The tax revenue helps the government to provide infrastructure and other welfare facilities.
 Therefore, business should pay taxes accurately as per the provisions.
2.Respecting Rules and Regulation:
 Business unit should follow various laws and regulations created by government.
 They can make suggestions to government to modify the rules if it is in interest of the society.
3.Earning Foreign Exchange:
 Large business should enter in export trade to earn foreign exchange.
 They should enable government to import capital goods and technical know how.
 All rules and regulations should be followed strictly.
4.Political Stability:
 For economic growth the national security ,political stability is required.
 Business units should not support those group 4 individual who are interested in creating political
disturbance.
5.Implementation of Socio-Economic Programmes:
 The government declares various policies for achieving economic, social and industrial progress of
society.
 Business organisation is expected to help the government in the implementation of socio-economic
programmes.
 They should provide expert advice and the required funds.
 Helping government during natural calamities.
 Should not seek any favour from government officials.
 Providing economic and other help to welfare schemes of the government.

RESPONSIBILITIES TOWARDS COMMUNITY, PUBLIC IN GENERAL

Business is a part of society and should follow certain duties towards society.
1.Provide Employment Opportunities
 Business should provide good job opportunities to young and where educated people in society.
 Maximum efforts should be taken to generate employment.
2.To Prevent Pollution:
 Working of business units results in air, water and noise pollution.
 Carbon particles ,dust, harmful gases chemicals create a position.
 Harmful chemicals cause water contamination.
 All types of pollution should be controlled by adopting best possible measures.
3.Better and Maximum Use of Resources:
 All types of resources are owned by the society.
 Business should use scare natural resources such as raw materials of iron, Steel, fuels etc.
 It should be managed carefully.
4.Help to Weaker Section of Society:
 Economically weak people need financial and medical help from the business unit .
 Business organisation should need to uplift such section of society.
 Should give donation to institutions which are providing such facilities.

5.Loaction of Industries:
 Industries should be preferably located in industrial zones.
 It will minimize the adverse effect on residential areas.
6.Providing Help at the time of natural calamities:
 Business should provide financial assistance to public at the time of natural calamities like floods,
storms, earthquakes etc.
7.Raising Standard of Living of the society:
 Business society can contribute to increase the standard of living of the society.
 It includes construction and maintenance of roads, creating public gardens, public library, charitable
hospitals etc.
8.Protest Anti-Social Activities:
 Business organisation should not involve any anti-social activities like smuggling, association with
underworld people, bribing etc.

 BUSINESS ETHICS
Meaning:
The word “Ethics” is the discipline dealing with what is good and what is bad with moral duty. The
word “Ethics” is derived from the Greek word “Ethos” which means character. Ethics is a branch of
social science.
Definition-Dr.C.B.Manoria
“Businessmen integrity so far as his conduct or behaviour is concerned in all fields of business as well
as towards the society and other business.”

 Concept and Meaning of Business Ethics:

 Business ethics is also known as “Corporate Ethics” is a form of applied or professional ethical that
examines ethical principles and morals.
 Business ethics is a critical, structured examination of how people and institutions should behave
in the world of commerce.

o Basic concepts of business

 Honesty
 Integrity
 Fairness
1.Honesty refers to ethical advertising and a reasonable cost for quality product or service. Company has
to keep its word.
2. Integrity refers to keep promises. Dependability and Transparency are basis of integrity ethics.
3.Fairness refers to the simplest form of treating all people in commercial dealings equally and fairly. It
may be buyer or employees or supplier.

 FEATURES OF BUSINESS ETHICS

1.Business ethics is a code of conduct evolved for regulating the activities of business towards society and
other business units.
2.Business ethics is a relative term. It may differ from country to country.
3.It protects the interests of all the constituents of the society. It creates healthy and competitive business
atmosphere. It work for section of society.
4.Business ethics isapplicableto all business organisation whether small or large sole trading.
5. It calls for the importance of fair treatment with the Consumers, Workers , Suppliers, Shareholders,
Competitors , Government and Community at large. It promotes principles of honesty, sincerity, fairness
and justice.
6. Business ethics define the social ,legal , cultural and economic limits within the business.
7. Business ethics underlines the condition to be satisfied by any course of action to be taken by business.
Provide guidelines to the business.

 ELEMENTS OF BUSINESS ETHICS

1.Trustworthiness:
 Top to bottom, organisation must work to maintain trustworthiness.
 They should believe in company’s reliability and quality.
 Business runs on character, fairness, truth, honour and ability.
2.Honest Service Delivery:
 Empty promises decline reputation of Company.
 It is better to be honest about what you can do.
 “Idea” mobile company’s formula is remarkable” under commitment and over delivered.”

3.Confidentiality:
 Business organisation should follow strict written internal confidential policy.
 Consumer’s information and confidential records should not be disclosed.
 Should not use wrong means to obtain information from competitors about certain formula or
method of production.
4.Openness:
 Business should follow principle of openness.
 Opinion and feedback from clients and team should be welcomed.

 Glance
 ISO 14001-2004 is an environmental management standard.
 ISO 14005-2010 EMS including use of environmental performance evaluation.
 ISO 14006-2011 EMS provides guidelines for incorporating eco-design.
Chapter 5. Consumer Protection
Meaning:
The word 'consumer' is derived from the Latin word 'consumere' which means , 'to eat or drink'. The
consumer is one who consumes uses any commodity or service available to him either from natural
resources or through market.

 IMPORTANCE OF CONSUMER PROTECTION

Consumer protection means safeguarding the interest of the consumers analysing them to exercise their
rights. protection of the interest of consumers with the help of various laws is a recent development.
The following points emphasise the importance of consumer protection:
1.Seller dominant market:
 If the market is dominated by sellers then the consumers choice as well as his welfare get the last
preference.
 All the transactions are finalized in favour of sellers, middleman and manufacturers.
 If there is shortage of goods then the buyer will have to buy a product at the price quoted by the
seller.
2.Ignorance of consumers:
 ignorance of consumers about their rights ,market condition, price level, product details ,etc. result
into consumer exploitation.
 Many time consumers do not even realise that they are being cheated.
3.Tendency of the consumers:
 Majority of the consumers get attracted towards the products of cheap price, discounts ,various
schemes,etc.
 This weakness of the consumers leads to their exploitations without their knowledge.
4.Unorganised Consumers:
 Consumers are neither organised not united.
 Producer and sellers are in superior position as compared to the consumers.
 An individual cannot fight against powerful traders. Thus, it is easy to exploit an organised and
widely spread consumers.
5.Nature of Products:
 Modern products are the end results of complicated production processes.
 It is beyond the capacity of poor and illiterate consumers to just the quality of safety aspects of a
product.
6.Lack of Information:
 Distance between producer and consumer is vast.
 It is impossible to establish direct contact between producer and consumer.
 It is difficult to get reliable information about the product before it is purchased.
7.Lack of participation of consumers:
 It is observed that certain decisions which directly affect consumers interest are taken without any
consultation with consumers or their organisation.
 Only a strong consumer movement can pressurize various organisations to allow consumer
participation in the decision making process.
8.Increase in consumption rate:
 Compared earlier period, consumption rate is increased due to increase in population as well as
tendency of the people to lead a comfortable life.
 Results into mass production, many varieties increase in price unfair trade practices etc.
9.To restrict unfair trade practices:
 When more and more consumers start taking support of consumer protection act (1986) to
resolve their grievances then it will automatically pressurized the manufacturers, middleman and
traders for not conducting the trade by unfair means.

 RIGHTS OF CONSUMERS
15th March is observed as every year as “Consumer Rights Day” throughout the world. This is
because on this day in the year 1962, the president of U.S.A John Kennedy declared certain rights
(1st four rights) of consumers. Some more rights were added later on by the International
Organisation of Consumers Union.
The Consumer Protection Act, passed in the year 1986.
Along with that , two more rights were added by the Amendment Act in 1993 and 2002.
Following are the various rights of Consumers:.
1.Right to safety:
 It is one of the basic rights of the consumers. It protects them against the marketing of those
goods and services which are hazardous to their life and property.
 Traders should assure that the goods to be sold will not cause any damage to life or property of
the company.
 If the product sold is hazardous, then the trader should recall the product and modify it or he
should compensate the consumer for damage.
2.Right to Information:
 Consumers should get correct information about the ,price quality, purity, quantity ,ingredients etc.
of the goods to be purchased.
 he should be properly instructed about the use of the product and risk involved in improper use of
the product.
 Product wrapper should contain the information regarding date of manufacturing, date of expiry,
ingredients used ,price etc.
 It assures safety of consumer as well as the article itself.
3.Right to Choose:
 The Right to Choose enables a consumer to select a suitable product from among the available
variety in the market at a competitive price.
 This right restricts monopolistic tendency in the market.
  No sailor can compel consumer to buy a particular product or services.
4.Right to be heard:
 This right assures that consumer grievances and complaints will be heard and will reduce due
consideration at appropriate forums.
 This right allows a consumer to express his view about the product or services bought by him.
 Every consumer has the right file a complaint and be heard about it.
5.Right to Redressal:
 This right enables a consumer to seek redressal against unfair trade practices or unscrupulous
exploitation.
 This right is assures proper legal arrangement to attend to his complaint and to get it redressed.
 It is done through consumer Protection Act, 1986 under which district forum, state commission and
national commission established.
6.Right to Education:
 This right entitles the consumer to know about consumer rights, market practices and remedies
available to them.
 This knowledge creates awareness among consumer and they can protect themselves from unfair
trade practices in the better way.
 Consumer awareness and education are very essential to stop malpractices in the market.

7.Right to Healthy Environment:

 As a human being the consumer has the right to lead his life in a healthy way.
 They must have clean and pollution free environment in the present as well as the future.
 Measures like Public Interest Litigation can be used.
8.Right to Protect Against Unfair Trade Practices:
 This right offers protection to consumers against any kind of unfair trade practices.
 Consumers can raise their voice against wrong measurements, artificial shortage, exorbitant prices,
etc.
 It was incorporated by the Amendment Act, 1993
9.Right to Protect Against Spurious Goods:
 This right has been added to the consumer protection act by the Amendment Act 2002.
 According to this right consumers are protected from marketing of spurious and hazardous good. It
protects public health and life.

 CONSUMER RESPONSIBILITIES
A responsible consumer is the one who takes active part in consumer protection.
1.Critical Awareness:
 It is the responsibility of the consumers to be alert and questions about the price and quality of the
goods and services he buys and uses .
 Consumer should look, listen and ask questions.
2.Action:
 It is the consumer’s responsibility to be assertive and act to ensure that he gets a fair deal.
  When something is wrong, one should act to put it right. One should value relationship with others
in the community.
3.Social Concern:
 It is the responsibility of a consumer to be aware of the impact of his use of goods and services on the
citizens.
 Disadvantages and powerless groups whether in the local, regional or international community.
4.Environmental Concern:
 The consumer should understand environmental and other consequences of his consumption.
 He need to make sure that the production, use and disposal of goods and services do not harm the
environment.
 It is a collective responsibility to conserve natural resources and protect the earth for future use.
5.Sustainable Consumption:
 The consumer, before buying goods or before availing services should satisfy himself about the need
for the same and also should consume only up to his requirement and should not let goods or
services waste.
6.Working Together:
 A consumer should shoulder the responsibility to promote and protect the interest of consumers.
 One should organise them and work together for the welfare of all consumers at large.
A Consumer should take care
1.Before Buying
 Planning in advance
 Enquiring about past performance of product/service
 Enquiring about past performance of product/seller service provider.
2.While Buying
 Asking for demonstration regarding how to operate/use the product/service.
 Enquiring about after-sales service and ensuring availability, phone number, address and e-mail of
service centre.
 Reading and knowing the contents of guarantee/warranty card.
 Insisting for bill with serial number, address, phone number etc.
 Obtaining guarantee/warranty card.
3.After Buying:
 Using product as per instruction given in user manual
 Keeping bills and guarantee card safely.
 In case of fault inform dealer and service centre. Do not meddle or try to repair it at own.

 WAYS AND MEANS OF CONSUMER PROTECTION

We have the Consumer Protection Act and many other legislation passed by the government to
protect the interests of consumer, consumer exploitations is not over.
1.Lok Adalat:
 It also prefer as People’s Court.
 It is established by government to settle disputes by compromise.
 It is held by State authority, District authority, Supreme Court Legal Service Committee, High Court
Legal Service Committee or Taluka Legal Service.
  It accepts cases pending in regular courts and can be settled by compromise.
 No court fees are charged.
 Resolution of disputes by Lok Adalat gets statutory recognition.
 Some organisations hold lok Adalats , regularly e.g. Railway, Electricity Boards, Telephone Exchanges,
Insurance Companies in public sector.
2.Public Interest Litigation (Janahit yachika):
 Under this scheme many person can approach court of law in the interest of public.
 It does not involve any individual interest.
 Its aim is to provide legal remedy to unrepresented groups of the society.
3.Redressal Forums:
 Under the Consumer Protection Act,1986, Consumer Disputes Redressal Agencies have been
established by the State and Central Government.
 These agencies are District Forum, State Commission and National Commission.
 The main objective of these forums is to protect the rights of the consumers and to offer speedy
and inexpensive redressal for consumer complaints.
4.Awareness Programmes:
 The government of India has adopted various publicity measures to increase the level of consumer
awareness.
 The society in general observes World Consumer Right Day on 15th March and National Consumer
Day (India) on 24th December.
 Various Consumer related programmes are telecast on TV channels. E.g. Jago Grahak jaogo.
5.Consumer Organisation:
 Many Consumer organisations active throughout the world is well as in India.
 It is necessary to strengthen the consumer movement.
 By consumer for consumer.
6.Consumer Welfare Funds:
 It is created by the Department of Revenues for providing financial assistance to voluntary consumer
movement in rural areas.
 The money is used in education, complaint handling, counselling, guidance, etc.
7.Legislative Measures:
 Indian Government has passed many acts to protect consumers.
 Some of them are Drug Control Act 1950, Prevention of Food Adulteration Act, 1954. Essential
Commodities Act,1955.

 DISTRICT FORUM
Meaning:A consumer disputes redressal forum working at district level.
Monetary jurisdiction: It can entertain cases where the value of goods / services and the compensation
claimed is less than or up to rupeestwenty lakh.
Duration: Every member should hold office for a term of five years or up to the age of 65 years
whichever is earlier.
Nature of Complaints: Only original cases can be entertained which are within the local limits of a
district.
Members: other than president it has minimum two members and one shall be female.
Area Covered: It covers a particular district.
President: District judge or equivalent.

 STATE COMMISSION
Meaning: A consumer disputes redressal forum working at state level.
Monetary jurisdiction: It can entertain cases where the value of goods / services and the
compensation claimed is more than rupeestwenty lakh and up to one crore.
Duration: Every member should hold office for a term of five years or up to the age of 67 years
whichever is earlier.
Nature of Complaints: It can entertain original cases and also appeals against the order of District
forum within the geographical limits of the state.
Members: other than president it has minimum two members and one shall be female.
Area Covered: It covers a particular state.
President: High Court judge or equivalent.

 National Commission
Meaning: A consumer disputes redressal forum working at national level.
Monetary jurisdiction: It can entertain cases where the value of goods / services and the
compensation claimed is more than one crore.
Duration: Every member should hold office for a term of five years or up to the age of 70 years
whichever is earlier.
Nature of Complaints: It can entertain original cases and also appeals against the order of state
commission.
Members: other than president it has minimum four members and one shall be female.
Area Covered: It covers entire country.
President:Supreme Court judge or equivalent.
 Chapter 6. Principles of Management
Introduction
Management is everywhere. It is practiced in every type of organisations. To get correct results,
management is to be done scientifically.
Meaning:
Principles of management are the statements of fundamental truths. Distance tricks and guidelines to
managers to take decisions.
Definition:
“A basic generalisation that is accepted as true and that can be used as a basis of reasoning or conduct”.
 NATURE OF PRINCIPLES OF MANAGEMENT
1.Management principles are universal:
 Management principles are universally applicable.
 Can be applied everywhere and in all situations.
 Applicable to all the types of business, organisations, irrespective of size of business, nature of
business etc.
2.Management principles are flexible:
 Management principles are flexible in nature.
 They can be changed and modify according to the situations.
 These principles can be bend to suit the requirements.
3.Cause and effect relationship:
 Principles of Management are the base for taking decisions.
 They determine the cause or reason for a particular effect.

4.Management principles are aimed at influencing human behaviour:

 Management is a group activity.
 Aims at achieving certain goals through a group of human beings.
 These principles are designed to influence human beings.
5.All principles are of equal importance:
 All principles of management are equally important.
 All are practiced simultaneously to get a perfect result.
6.Management principles are relative in nature:
 Management principles are the principles of social science.
 Principles are applied in different ways in different situations.
 It is not exactly principles of science.

 SIGNIFICANCE OF PRINCIPLES OF MANAGEMENT

1.Management principles help to improve understanding:
 These principles helps the manager to understand the organizations.
 Study of these principles, help in understanding of the situations and problems.
2.Help in increasing the efficiency:
  By using these principles organisations can increase the efficiency of the employees.
 Principles can guide the managers about handling the human resources, reducing the
wastage,etc.
3.Help to develop the objective approach:
 This principles helped the manager to developed and objective approach.
 Thus the manager can identify the problem in correct manner and can provide solution in an
objective manner.
 It helps to develop confidence in the mind of the manager.
4.Help to co-ordinate and control:
 Management principles give the guidelines for better
co-ordination and control .
 Manager can exercise better control over the organisation by applying this principles.
5.Understanding social responsibility:
 in modern world more importance is given to understand the social responsibility of business
organisation, because it is a part of the society.
 This principles helps the manager to understand his responsibility.
 Business organisation should not only work for profit making but towards the society too.
6.Research and Development:
 Principle of management a dynamic.
 The nature go on changing along with the changes in the business world.
 Principles give encouragement to research and development in the organisation.

 HENRY FAYOL'S PRINCIPLES OF MANAGEMENT

Henry fayol (1841- 1925):
Henry fayol was a French mining engineer. He worked as a director of mines also. After conducting
many experiments in management, he developed 14 principles of management. These principles are
explained in his famous book 'General and Industrial Administration'. Due to his contribution to
management, is called 'The father of Modern Management'.

 Principles laid down by fayol are as follows:

1.Princples of Division of Work:
o Photos of should be divided into smaller sub parts.
o Work should be assigned to different employees as per their capacities, skills and interest.
o Division of work leads to specialisation.
2.Principles of Authority and Responsibility:
o Authority is always accompanied by responsibility.
o Authority and responsibility always go hand in hand.
o Authorised person is always responsible for the work done.
3.Principles of Discipline:
o Discipline is the most essential thing in the organisation.
o Employees must obey and respect the rules that govern the organisation.
o Helps to achieve the goals set in the organisation.
4.Principle of Unity of Command:
 o Employee should receive orders from one superior was only.
o Principle of unity of command tries to avoid confusion.
o It is applicable from top management to bottom.
o One man one boss.

5.Principle of Unity of Directions:

o Unity of command explains about single person getting direction from a single person.
o Unity of direction explains about a group working with the same objectives under the direction
of a single person.
o One had one plan and many hands one brain.
6.Principles of Subordination of Individual Interest to General Interest:
o The interest of an individual must be given less importance than the interest of the whole
organisation.
o Manager should always consider the interest of the whole group rather than the interest of a
single employee.
o If the organisation prosperous automatically the employee will prosper.
7.Principle of Remuneration:
o The principle states that the employees must be paid affair wages for the services.
o While paying remuneration the skill ,expertise, knowledge tenure etc. of the employees should
be considered.
o When employees paid fair remuneration then they show greater productivity and give more
output.
8.Principle of Centralisation:
o Centralisation refers to the concentration of power or authority.
o In small organisation power is vested in one hand or few hands.
o But in large organizations, Centralisation becomes difficult and then there is decentralisation of
power or authority take place.
o According to this principle, there must be a proper balance between Centralisation and
decentralisation in the organisation.
9.Principle of Scalar Chain:
o It is also known as chain of command and chain of communication.
o Usually there is a particular system of communication in the organisation.
o It is through a chain. e.g. The manger will inform to the departmental head, then departmental
head will informs to supervisor, then supervisor will inform the foreman , foreman will informs
the worker.
o On the other hand, communication can flow from the worker to the manager which is known as
scalar chain.
o Sometimes cross communication i.e. the communication is not exactly following the chain ,
should be allowed. This is known as 'Gang Plank'.
o It a avoid delays.
10.Principle of Order:
o Right place right materials and right materials at right place .
 o Right person should be at right place and right place should have right person . Work should be
divide according to the requirements.
11.Principle of Equity:
o Fair and equal treatment to all the employees.
o Manager should be kind and fair to their subordinates.
o No discrimination should be made among employees.
o Employees working at same level but in different departments should be paid same wages.
12.Principle of Stability of Tenure:
o Stability of tenure ensures job security to the employees.
o Which creates a sense of belonging among the employees.
o There should not be any uncertainty in the mind if the employees.
13.Principle of Initiative:
o Initiative refers to taking the first step.
o Also means thinking of new ideas.
o Manager should encourage the employees to take initiative.
o The employees should come up with the new ideas and manager should welcome them .
14.Principle of Esprit De Corpse:
o Esprit de Corpse means unity is strength.
o Management is a group activity.
o Human resources are great asset of the organisation.
o They should creates team spirit.
o If worker works with unity then the goal can be achieved easily.

 F.W. TAYLOR’S SCIENTIFIC MANAGEMENT

F.W. Taylor (1856- 1915):
Frederick Winslow Taylor was an American mechanical engineer. He developed the scientific
management theory. He experimented in the Midvale Steel Company in USA in early 20thcentury. His
scientific management is accepted initially in USA and then in European countries and all over the
world. Due to his scientific approach towards the management, he is called as 'father of Scientific
Management'.
Taylor’s principles are based on four areas:
A.Observation and analysis of each task.
B. Determination of the standard of work.
C. Selecting and training people to perform the jobs.
D. Ensuring that the work is done in the most efficient manner.

 PRINCIPLES OF SCIENTIFIC MANAGEMENT

1.Development of Science for each part of men's job:
o Manager should use scientific method to determine every activity performed by employees. For
this he should consider the following points:
1. To calculate the time required for each job by observing the employee.
2. To determine how much work and employee perform in a day.
 3. To find out the best way to do a particular job.
4. Instead of using trial and error method for determining the job use systematic way
such as data collection analysis of data and then drawing conclusions.
2.Scientific Selection, Training and Development of workers:.
o Selection of employees is an important task , therefore the selection procedure should be perfect
and systematic. For this certain points should be considered:
i.The procedure of selection should be scientific. It means this election should not be based on judgement
of a single person.
ii. The physical, mental, technical or other qualities required for the job should be clearly define. This
makes the selection easier.
iii. The employees should be selected on the basis of tests and interviews.
iv. The employees should be train from time to time. Training makes employees capable to survive in the
job.
v. The managers should provide opportunities for development of workers having better capabilities.
vi. The manager should develop each employee in such a way that the employees shows maximum
efficiency.
3.Co-operation between Management and Employees:
o To achieve the objectives of goals that should be proper cooperation between employees and
management. The relation between them should be harmonious. Following points should be
considered:
I. In the organisation the emphasis should be given to cooperation between management and workers and
not to individualism.
II.The goals can be achieved effectively only by co-operation.
III. The Interest of the management and the workers should be one and the same . They should harmonise.
4.Division of Responsibility:
o While dividing the work there should be the division of responsibilities between manager and
employees.
o This can be done in the following way:
I.The nature and roles played by different levels of managers and employees should be determined
properly.
II. The managers should be given the responsibility of planning whereas the workers or employees should
concentrate on the execution.
5.Mental Revolution:
o This principle focuses on the complete change in the attitude of the management and employees as
regards their relations are concerned.
I.The manager should create a suitable working condition for the employees
II. All the problems should be solved scientifically.
III. The employees should perform their jobs carefully and with devotion.
IV.The employees should use the resources carefully. They should not waste the resources.
V . On the other hand management should provide fair remuneration to the employees and boost up their
morale.
6.Maximum prosperity for Employer and Employees:
o The aim of scientific management is to give maximum prosperity to the employer and employee.
Through the following points:
I .Each employee should be given proper opportunity to attain his highest efficiency.
II. The employees should be given maximum output.
III . There should be the optimum utilisation of resources.

 TECHNIQUES OF SCIENTIFIC MANAGEMENT

1).Time Study:
 This technique helps the manager to calculate the time required to perform a particular job.
 The time study is based on the speed of average worker.
 Every part of the total work is studied in details and the time required to perform is calculated.
 This enables the manager to ascertain the standard time taken to complete a specific job.
2). Motion Study:
 Motion Study is the close study of body movements.
 Manager should study body motion such as hands ,leg and other body parts because it helps to
understand the required movements for doing the job.
 This technique is used to eliminate the unnecessary movements.
3).Functional Foremanship:
 This technique refers to the guidance given to the workers by specialist foreman.
 A single worker is supervised by different supervisor. For doing a particular job and will be supervised
by different supervisor.
 This technique is the exceptional to the fayol's principle of unity of command.
 Fayol says that there should be one boss for the worker but Taylor says that work can be done
accurately by this method.
4). Standardisation:
 Standardisationin production implies (I) Selecting the standard tools and equipments for production.
(II) maintaining standard working condition at the place of work.
 The management should provide goods quality of tools and equipments for the production and good
working condition to the employees.
 This technique minimise the cost of production and make best use of available resources.
5).Different Piece Rate Plan:
 There should be discrimination between efficient and inefficient workers.
 Payment should be made according to the performance of the workers.
 Standard is fixed for production.
 Those who produce more than the standard should be paid more in the form of incentive and those
who perform less should be paid less as penalty
6).Other Techniques:
Some other techniques are also suggested which includes the use of instruction cards, strict rules of
discipline, and use of charts ,graph slides etc.
 Chapter 7. Functions of Management

 Meaning
Management functions are run by the managers functioning at all levels. Management is a process in
which managers plan, organise, direct, motivate, co-ordinate and control to achieve well defined
goals.

 Definition: Luther Gullick

He has given a keyword “POSDCORB” where P stands for Planning, O stands for Organising, S stands
for Staffing, D standsfor Directing, Co for Co-ordination, R for Reporting and B for budgeting.

 PLANNING
Meaning:
Planning is the basic, foremost, fundamental and primary important function of management. It is a
process of setting goals and choosing the means to achieve this goals. “Well Plan is Half Done”. If
you fail to plan then you planning to fail.

Definition by James Stoner:

“ Planning is the process of establishing goalsand a suitable course of action for achieving those
goals.”

 NATURE OF PLANNING
1.Primary Function:
 Planning is a primary and basic functions of management.
 It acts as a base to other functions of organising, staffing, directing,co-ordinating, controlling, etc.
2.Intellectual Process:
 Planning is an intellectual process.
 It involves intelligence, imagination and creative thinking.
 A manager needs to use his foresight, sound judgement and imagination.
3.Goal Oriented:
 Planning is made to achieve desired goals.
 Provides direction for achievement of goals.
4.Future Oriented:
 Planning is always done by keeping in mind the future needs.
  Goals can be achieved through proper planning and thinking.
 Needs to think about future, analyse it and predict it.
5.Continuous Process:
 Planning is a never ending function due to its dynamic nature.
 Plans are subjected to revaluation and reviews in the light of new requirements and changing
conditions.
 Planning can never come to end till business exist.
6.Pervasive Functions:
 UniversallyApplicable.
 Scope of planning may differ from one level to another.
 Top level is more concerned about planning.
 Middle level may be more specific in departmental plans and lower level plans for the
implementation of the same.
7.Dynamic Functions:
 Constantly changing.
 Future is unpredictable, planning must provide enough scope to cope with the changes in market
demands, competition, government policies etc.
8.Involves Options and Decision Making:
 Essentially involves options among various alternatives but only one suitable options among the
available alternatives can be used.
 Decisions making is an integral and inseparable part of planning.
9.Designed For Efficiency:
 Planning leads to accomplishment of objectives at the minimum possible cost.
 It avoid wastages and ensures optimum utilisation of available resources like men, money, material,
methods and machines.
 Good planning also saves time ,efforts and money.
10.Planning is the Basis of Control:
 Without the basis of planning, controlling activities become baseless and without controlling,
planning becomes a meaningless exercise.
 Planning precedes controlling and controlling succeeds planning.
 Both are inseparable from each other.

 IMPORTANCE OF PLANNING
Planning is an important function of management. It act as a base for the achievements of goals.

1).Provides direction:
 Planning helps to perform all the activities in smooth and systematic manner.
 Proper direction for the achievement towards the desired goals is given by planning.
2). Reduces risks and uncertainties:
 Planning helps to reduce these risk and uncertainties is it involved anticipation of future events and
prepare for possible risk.
3). Increase Efficiency:
 Good planning leads to proper and efficient working of the employees.
 Planning helps to define the objectives with reference to available resources.
 Plans of efficient if they achieve that purpose at reasonable cost.
 Minimum input maximum output.
4).Integrated process:
 All the departments are interconnected and hence their plan needs to be integrated with each other
in order to achieve the desired result.
5).Provide clear objective:
 Learning begins with determination of objectives.
 Learning makes clear the purpose of objectives and more specific.
6).Improves morale of employees:
 Planning brings order and discipline in an organisation.
 Employees know in advance as to what is expected of them and how to achieve that.
 Thisbrings healthy attitude towards work, which in turn boost the confidence moral and efficiency in
them.
7).Helps in optimum utilisation of resources:
 Effective planning leads to proper location of resources for various activities.
 Also facilitates optimum utilisation of resources which brings higher efficiency and better results.
8). Encourage Innovation:
 Manager get support unities by providing suggestion for improving performances.
 planning is basically a decision making process which involves creative thinking and imagination that
ultimately leads to innovation and in turn growth and prosperity.
9).Facilitates Controlling:
 Planning provides predetermined goals against which actual performance is compared.
 If planning is the root, controlling is the fruit.
 An effective controlling is possible with well thought plans.
10).Facilitates Co-ordination:
 Co-ordination is essence of management and planning is the base for it.
 All managerial functions lead to co-ordination in the organisation.
 Planning revolves around the organisation.

 ORGANISING
Meaning:
Organising brings together physical ,financial and human resources and develop productive
relationship amongst them.

Definition by Mc Farland:
“Organisation is an identifiable group of people contributing their efforts towards the attainment of
goals.”
  NATURE OF ORGANIZING
1).Organising as a process:
 Organising is a step-by-step process which consists of 8 steps,
 Fixes the common objectives.
 Identify all the activities.
 Grouping of related activities.
 Defining the responsibilities.
 Delegating authority to staff members.
 Relationship between superior and subordinates.
 Provision of requirements for achieving the objectives like money, machines, materials
etc.
 Co-ordination for achieving the common objectives of the organisation.
2). Division of Work
 Organisation is centred on the concept of specialisation of division of work.
 The division of work is assigning responsibilities activities among specific individual or group of
people.
 It and also increases the efficiency and effectiveness of employees.
3). Co-ordination:
 Organisation is a means of creating co-ordination among different departments.
 Creates good relationship and ensures mutual cooperation among individual employees.
 Coordination increases success rate and desired goal can be achieved.
4).Goal Oriented:
 Every organisation has its own objective and goals.
 Organisation is the function employed to achieve individual goals of the employees with overall
objective of the firm.
5).Grouping of Individuals:
 Individuals form a group and the groups form an organisation.
 Individuals are grouped into departments and their work is co-ordinated and directed towards
achievement of organisational goals.
6).Integration:
 The organisation device the entire work and assign the tasks to individuals in order to achieve the
organisational objectives.
 Collectively these tasks at the final stage is called Integration.
7).Continuity:
 An organisation is a group of people in which they work together to achieve the goals.
 Organising is a never ending process.
8).Common Targets:
 Top level management set the overall goals for an organisation.
 It is an collective efforts from all the employees to achieve the common target set by an
organisation.
9).Decisions Making:
 Top management has a right and power to take decisions.
  It is a of a manager to get the things done from the subordinates in the most effective manner.
10).Authority and Responsibility:
o A manager can discharge his responsibility properly only when he has been given proper
authority to take right decision.

 IMPORTANCE OF ORGANIZING
1).Specialisation:
 Work is divided into units a d departments.
 Division of work is leads to Specializations of activities.
 Maximum work in minimum possible time.
2).Well defined job:
 Organizing helps in putting right individual on right job according to their qualification, skills and
experience.
 This helps in clarifying the roles of individuals.
3).Proper Authority:
 Organising clarifies the position and power of every managers.
 Their power should be clarified in order to avoid misuse of power.
4). Responsibility:
 Co-ordination between authority and responsibility is very important.
 Responsibility attached to every authority.
5).Effective Administration:
 Organisation structure haves in define the right job to the right individual.
 Role of each and every employee is well defined in an organisation.
6).Job Satisfaction:
 Clarity of power help in increasing job and mental satisfaction and thereby sense of security in an
organisation.
7)Dynamic Functions:
 Manager should use his talents, knowledge and then take decisions.
 This helps to work independently.
8).Facilitates Growth:
 Efficiency is possible by clarifying the position of the managers, coordination between authority and
responsibility and concentrating on specialisation.
 All these leads to the path of progress and growth of an organisation.
9).OptimumUtilization of Resources:
 Not only man power is used the optimum but also machines and other resources are used to
maximum level so that the desired results are achieved.
10).Innovation:
 Division of work and specialisation brings the best out of the employee.
 They enjoy freedom of expression at work by contribute in the innovative ideas and creative
thinking.
  STAFFING
Meaning:
Staffing is that part of the process of management which is concerned with acquiring, developing,
employing ,appraising ,remunerating and retaining people, so that right type of people are available
at right position and right time in the organisation.
Definition by Theo Haiman:
“The staffing function pertains to the recruitment, selection, development, training and
compensation of subordinate managers.”

 NATURE OF STAFFING
1.Imporant Managerial Function:
o Staffing function is the most important managerial functions along with planning ,organising
,directing and controlling.
o The functioning of these four functions depends upon the manpower which is available through
staffing function.
2.Pervasive Activity:
o Staffing function is carried out by all the managers and in all the organisation.
o It relates from top to middle and finally to lower management.

3.Continuous Activity:
o It includes recruitments, transfers, promotions etc. Of the employees.
o certain trainings are also given to the employees from time to time so as to perform better.
4.Efficient Management of Personnel:
o Human resources can be efficiently managed by your system that is recruitment, selection,
placement, training and development providing remuneration etc.
o All this provides a motivational force to the employees.
5.Right men at Right job:
o It can be done through proper recruitment procedure and then finally selecting the most suitable
candidate as per the job requirements.
o Staffing aims act selecting the right man for the right job at the right time.
6.Essential at all Levels:
o Staffing function is performed by all the managers depending upon the nature of business, size of the
company, qualification and skills of managers.
o In medium and large organisations, it is performed specially by the Human Resources or Personnel
Department.
7.Related with Human Resource Management:
o Mainly related with the people and not like planning, organizing, etc. which is related with paper
work.
o It is concerned with managers and employees

8.Social Responsibility:
 o Functions are related with the recruitment, selection, training etc. of the people, so it becomes the
social responsibility.
9.Result Oriented:
o Certain training is also provided to employees so that they brings more excellent results for the
Organisation.
10.Motivation:
o Employees accomplish their targets in the given time may be rewarded with monetary or non-
monetary incentives by the organisation.
o Constant motivation to the employees by providing them with timely trainings, promotions, etc.

 IMPORTANCE OF STAFFING
1.Effective Managerial Function:
o The most vital asset is people who make other resources moving.
o They perform various activities in the organisation in different functional areas like production,
marketing, finance etc.
2.Builds Relationship:
o Helps to build proper human relationships in the organisation.
o Smooth human relation is the key to better communication and co-ordination of managerial efforts.
3.Human Resource Development:
o Skilled and experienced staff is the best asset of a business concern.
o Helps to inculcate the corporate culture into the staff which in turn ensures smooth functioning.
4.Long Term Effect:
o Qualified , Efficient and well- motivated staff is an asset of the organisation.
o Proper choice of employees can lead the organisation towards the path.
5.Essential Contribution:
o Staff selection should be based on the ability of the prospective employees to meet the future
challenges.
o The contribution of the staff in future should be taken into consideration.
6.Improves Efficiency:
o Training and development programmes for the employees of an organisation.
o It improves organizational productivity.
o Through proper selection organization get quality employees.
7.Maintains Harmony:
o Staffs performance is regularly appraised and promotion should given on merit.
o For all these, certain rules are made and duly communicated to all concern.
o This brings about peace and harmony.
8.Provides job Satisfaction:
o Helps in providing job satisfaction to the employees keeping their morale high.
o With proper training and development ,their efficiency improves .
9.Better Performance:
 o In order to perform better than the other employees, they develop competence and perform better
to meet the challenges of their job.
10.Optimum Utilisation of Human Resource:
o Staffing function tries to utilise human resources more efficiently and effectively.
o Training and development programmes helps the employer to improve their performance.

 DIRECTING
Meaning:
Directing is a process in which the managers instruct , guide, communicate, inspire , motivate and
oversee the performance of the workers to achieve predetermined goals. Directing is said to be heart
of management process. A few philosophers call Direction as “Life Spark of an enterprise.”

Definition by Urwick and Brech:

“ Directing is the guidance, the inspiration, the leadership of those men and women that
constitute the real case of responsibilities of management.”

 NATURE OF DIRECTING
1.Pervasive Function:
o Directing is required at all levels of the management.
o Manager should provide guidance and information to his subordinates.
o It is a function related from top level of Management to lower level.
2.Executive Function:
o Directing function is carried by all managers and executives.
o A subordinate always gets instructions from his superior only.
3.Human Factor:
o Directing is related with human beings unlike other four factors i.e. money, machines, material and
methods.
o Human factor is complex and behaviour is unpredictable, direction becomes important.
4.Continuous Activity:
o Direction is a continuous activity as it continues throughout the life of an organisation.
o The manager has to give directon to the staffs but it will not end with these , he has to guide them
until the goal is achieved.
5.Creative Activity:
o Directing helps in converting plans into performance.
o A manager need to have a creative and innovative thinking, so that he can guide and motivate his
subordinates with new ideas.
6.Delegate Function:
o Human behaviour is unpredictable by nature and conditioning the people’s behaviour towards the
goals of an organisation.
7.Flows from Top level to Bottom level:
o Includes providing instructions which flows from top to bottom.
o It starts from top level and ends with lower level of subordinates.
8.Facilitates Co-ordination:
o Co-ordination brings harmony and balance between employees and activities.
o Manager has to provide direction to their respective departments.
o Subordinates should follow the instructions and work towards the achievement of goals. These is
possible through co-ordination.
9.Dual Objective:
o Direction helps to achieve dual objectives of an organisation .
o On the one hand it aims at getting things done through other and on the other hand , it provides
opportunity for the manager to prove their leadership qualities.
10.Psychological Factor:
o Directing function is directly related to an individual working in an organisation
o It deals with their feelings, emotions, etc.

 IMPORTANCE OF DIRECTING
1.Initiates Action:
o Direction is a point from where theactin starts, staffs understand their jobs and do according to the
instructions given.
o Plans can be implemented only when the actual work starts, the direction becomes beneficial.
2.Integrated Efforts:
o The superiors are able to guide, inspire and instruct the subordinates to work.
o It is through direction the efforts of every department can be related and integrated with others.
3.Means of Motivation:
o Manager use motivational techniques to improve the performance of the subordinates.
o Motivation is also helpful for the subordinates to give the best of their abilities which ultimately helps
in growth.
4.Provides Stability and Balance:
o Effective leadership, communication, supervision and motivation provides stability and maintains
balance in the different parts of the organization.
5.Adopting Changes:
o Directing functions help in making changes in internal and external environment.
o It is a role of manager to communicate for the possible changes very clearly to the staffs like new
technology, production techniques, management policies, etc.
6.Efficient Utilization of Resources:
o Directing helps to utilise all the resources to the optimum level.
o Proper direction helps the employees, gives guidance and motivate him in a right manner to perform
his job.
o Reduces wastage and increase efficiency.
7.Team Work:
o Proper direction brings team spirit.
o Combined efforts of all the employees brings success to the organization.
o Manager gives direction as well as he motivate his employees to achieve the targets.
8.Increase Efficiency:
o Proper direction leads to motivation which leads to increase work efficiency and reduce wastages and
increase quality.
o New techniques , methods can be adopted to increase efficiency.
9.Exploring Potential of Individual:
o Every individual has their own potential and capabilities.
o Direction helps to utilise their abilities to their best by providing them encouragement.
10.Co-operation:
o Co-operation always exist between different departments and different people for the betterment of
the organization.
o Co-operation is necessary from top level to the bottom level.

 CO-ORDINATING
Meaning:
Co-ordination is the unification, integration, synchronisation of the efforts of group members so as to
provide unity of action for achievement of common goals. Co-ordination is rightly treated as the
essence of management.

Definition by Henry Fayol:

“Co-ordination is an act to harmonise all the activities of a concern so as to facilitate its working and
its success.”

 NATURE OF CO-ORDINATING
1.Team Work:
 Co-ordination is a group effort and not individual effort.
 To achieve the common objectives, all have to work in a team and this is possible through co-
ordination.
2.Continuous Activity;
 It is a continuous process and not a one time job.
 Co-ordination among employees is needed at each and every step from planning function to
controlling function of management.
3.Dynamic Process:
 It is dynamic because functions themselves are dynamic and may change over a period of time.
 These changes are implemented immediately ,if required, so as to achieve the desired target in a
given period of time.
4.Intergration:
 There is always a need of integrated efforts from all the employees to perform various functions.
 Integrated efforts lead towards the success of an organisation.
5.Pervasive Function:
 Co-ordination is required at all the levels of Management and in all the departments.
 Co-ordination is applicable to all the superiors at the top levels to the subordinates at the lower level
6.Responsibility:
 It is the responsibility of all the managers to make the needs efforts at all the levels to have
coordination among themselves as well as with their employees.
7.Synchronization of Efforts:
 Manager tries to synchronise the efforts of his subordinates with each other toachieve the goals.
 Through various functions he try to achieve this synchronisation so that each efforts contributes
positively towards the organizational goals
8.Co-ordination is different from Co-operation:
 The concept of co ordination is much broader then co-operation.
 The basic objective of co-ordination is the synchronisation of efforts of individuals so that no efforts
goes in waste.
 On the hand, the basic objective of cooperation is to protect the interest of members of a group
specially from the threats and helping each other.
9.Common Objectives:
 Common objectives of the employees organisations to achieve their targets on time.
 A timely completion of task is possible through proper co-ordination.
10.Essence of Management:
 Coordination is an essence of management as it is required in every function.
 Basic responsibility of the manager to co-ordinate with subordinates for the achievement of the goal.
 Coordination between top level management to the middle level managers and from themiddle level
managers to the lower level employees is very essential at every point of time.

 IMPORTANCE OF CO-ORDINATING
1.Integrated Efforts:
 Co-ordination is related to integrated group efforts.
 It is only a team work under guidance, direction and motivation of the manager to encourage them.
 This reduce conflicts between employees and increase team spirit.
2.Creative Force:
 It is a group effort of all employees and not individual, that helps in co-ordinate with each other and
forms a creative force, as to achieve the desired results.
 Combined efforts of all the employees can help an organisation to overcome it’s limitations and
achieving organizational objectives.
3.Unity of Direction:
 Different departments perform different activities, therefore co-ordination brings together for
achieving common goals and objectives.
 Thus , co-ordinating gives proper direction to all the departments of the organisation.
4.Facilitates Motivation;
 Co-ordination gives an opportunity to the employee to take initiative, bring creativity in work and
perform better.
  Employees also get job satisfaction and encouragement to give their best.
 They get monetary and non monetary incentives from the organization.
5.Optimum Utilization of Resources:
 Co-ordination helps to bring together all the resources of the organisation.
 It helps to make optimum utilisation of resources i.e. human and non-human while achieving the
objectives.
 It helps to minimise the wastage resources.
6.Achievement of Objectives:
 Co-ordination helps to reduce wastages, delays and other organizational problem to a great extent.
 Ensures smooth working of the organisation in the process of achieving goals.
7.Improve Relations:
 Co-ordination develops good relation between top, middle and lower level.
 There is always dependence of one person with other like production department has to depend on
purchase department, sales department has depend on production department.
8.Higher Efficiency:
 Efficiency can be measured in terms of Returns and Costs.
 Higher efficiency is the result of higher returns and low costs due to optimum utilisation of resources.

9.Improves Goodwill:
 Higher efficiency means low costs and higher sales leading to higher returns.
 This lead to better prices of shares in the market.
 Better returns also helps to build a good image in the market and corporate world.
10.Specialisation:
 All the departments of the organization are headed by specialised professionals in their respective
fields.
 Co-ordination among specialised professionals can lead the organisation towards achieving the
targets.

 CONTROLLING
Meaning:
According to modern concepts, control is foreseeing action whereas earlier concept of control was
used when errors were detected. Control in management means setting standards , measuring actual
performance and taking corrective action.

Definition by Philip Kotler:

“ Control is the process of taking steps to bring actual results and desired results close together.”

 NATURE OF CONTROLLING
1.Planning is a basis of Controlling:
 Controlling is said to be checking the performance as per the planning.
 So planning precedes controlling and sets the standards and target of performance.
  Without planning, control is not possible.
2.Continuous Process:
 Controlling is a dynamic function of management.
 It involves continuous review of performance and is not a one time job.
 Controlling is needed at each and every stage so as to compare the performance with standards.
3.Pervasive Function:
 Control is exercised at all the levels of management and is done is every functional area and in each
department. Thus, control is all pervasive.
4.Action and Oriented Process:
 Action is the essence of control.
 The purpose of control is to take corrective action for improvement of performance.
 If there is actual deviation in comparison with the plans , then corrective measures should be taken.
5.Future Oriented:
 Control is futuristic in nature.
 It compares current performance and provides guidelines for the corrective action.
 Ensures future performance as per plans so that same mistakes should not repeat.

6.End Function:
 Controlling is an end functions which comes once the performance is made in accordance to the plan.
 If all the desired goals are achieved then control function brings an end to the task assigned.
7.Tools of Management:
Management adopts various techniques to control activities like
 Financial Control (Budgetary control ,control through costing, break-event )
 Operating Control (Quality control, techniques for quality control, quality control through
quality circle).
8.Delegation of Authority:
 Control action can be taken only by managers who are responsible for performance and have
authority to get the things done.
 He take corrective steps if there is any deviation in actual and planned activity .
9.Creativity:
 Managers should adopt new and modern controlling techniques for achievements of objectives.
 They have to be creative and innovative in their thinking.
10.Act as a guide:
 Control action is guided by adequate information from the beginning to the end.
 The information system is designed on the basis of control system.
 This system provides guidance in case of any deviation.

 IMPORTANCE OF CONTROLLING
1.Fulfilling Organizational Goals:
  Controlling function helps to measure the progress towards the goals and point out deviations, if any
suggests the corrective action towards the fulfilment of the goals.
2.Accuracy of Standards:
 A good control system helps management to verify the standards set are accurate or not.
 An efficient control system keep check on the changes taking place.
3.Efficient Use of Resources:
 By using control techniques, a manager reduce wastage and spoilage of resources.
 Ensures most efficient and effective use of the resources to achieve the task.
4.Improving Employee Motivation:
 Once organizational objectives are achieved then they are rewarded with monetary and non-
monetary incentives.
 This helps to motivate employees to perform more better in future.
5.Ensures Order and Discipline:
 Controlling function brings order and discipline in an organisation.
 It helps to reduce the bad behaviour on the part of the employees.
6.Facilitates Co-ordination:
 It focus not only on operating responsibilities of manager but also on his ultimate responsibility.
 All departments are interdependent on each other.
 There is always possibility to have a good relationship between all the departments.
7.Psychological Pressures:
 Control pressure puts a psychological pressure on the individuals to perform better.
 Their performance is evaluated with the targets set for them.
 They may also have a pressure to achieve the results on the standard time.
8.Organizational Efficiency and Effectiveness:
 Proper control ensures organizational efficiency and effectiveness.
 Factors of control like making managers responsible, motivating them for higher performance and
achieving co-ordination in their performance.
9.Corporate Image:
 Controlling function helps to improve the overall performance of the organisation.
 Progress is measured in terms of planned standards and actual performance, if there is any deviations
then corrective measures are applied.
 This builds a good corporate image and brings goodwill for the business.
10.Managerial Responsibility:
 Managerial responsibility is created through assignment of activities to various individuals.
 This process starts at the top level and goes to the lower level.
 A manager assigns activities to his staffs and control them.
 Chapter 8. Entrepreneurship Development
 CONCEPT AND DEINITION:
The word “entrepreneurs” is derived from the French word “entreprende”. It means
“to undertake”. The meaning of the term has changed considerably.
The oxford English dictionary defines an entrepreneur as the director or a manager who is successful
in setting a business. He is the one who provides the fourth factors of production,’enterprise’.
Definition by Cantilon: “ An entrepreneur is a person who buys factors services at certain prices with a
view to selling its product at uncertain prices.”

Definition of Entrepreneurship:
The term “entrepreneurship” is often used synonymously with “entrepreneur”. Though they are
the two sides of the same coin, conceptually they are different. The entrepreneur is essentially a
business leader and entrepreneurship is the function performed by him.
A.H. Cole: “ Entrepreneurship is the purposeful activity of an individual or a group of associated individuals,
undertaken to initiate, maintain or aggrandize profit by production or distribution of economic goods and
services.”
Enterprise can be defined as an undertaking or adventure involving uncertainty and risk and requiring
innovation.
 FUNCTION AND NEEDS OF ENTREPRENEUR
The Function oF an entrepreneur are many as they are the sole arranger o the organization.
1.Determinationof objectives:
 Determine the aims and objectives of the enterprise.
 Should change them as per required conditions and prefer advantages to the enterprise.
2.Innovation:
 Entrepreneur is basically an innovator who introduces new combination of means of production.
 Introduce something new in any branch of economic.
 Innovation implies doing new things .
 Innovation always involves problem solving from using his capabilities.
3.Good Relation:
 Development of enterprise depends on the efficient relations of the superiors, subordinates and all
employees.
 Co-ordination among employees of the enterprise will lead towards success.
4.Organizing funds:
 To keeps enterprise run successful the need of adequate financial resources.
 Good relation with the existing and potential investors has to be looked after.
5.Acquiring new technology:
 The requisition of new efficient technological equipment and the timely revision of it as new
machinery appears.
6.Develpoment of market:
 The entrepreneurs from time to time try different acts to develop the products.
 Always look forward to consumer’s demand.
7.Risk Bearer:
 Future is uncertain and unknown.
 He has to take risk in any circumstances
 If enterprise succeeds, he gets profit and if not then he has to bear losses.
 Risk is of two types i.e. Insurable and Non-insurable.
 Risk can be reduce by using his skills and good judgment sof the PREVAILING Environment.
8.Taking Decisions:
 He has to take wise decision to formulate a proper action plan.
 Economist Kilby Peter has enumerated 13 functions of an entrepreneur which are as follows:
1. Perception of market opportunities.
2. Gaining command over scare resources.
3. Purchasing inputs.
4.financial management.
5. Managing productions.
These are the some functions of an entrepreneur.
 CHARACTERISTICS OF ENTREPRENEUR:
There are certain characteristics of entrepreneurs. Some entrepreneurs may have some special
characteristics.
1.Achievable goals:
 Entrepreneurs have positive desires to achieve high goals.
 High self motivation keeps them strong and confident to face various obstacles.
2.future foresight:
 Entrepreneurs have good foresight to know about future market.
 He can take proper decisions according to the market situations.
3.Intellectual Capabilities:
 Mental ability consists of intelligence and creative thinking.
 These abilities are important for an entrepreneur because it helps him to take proper decisions.
4.Technical Knowledge:
 He should have sufficient technical knowledge about product and his plan to produce.
 Timely change of technology should always be updated to stay in market.
5.Hard work:
 He is always ready to work hard. Hard work always distinguish successful entrepreneur from the
unsuccessful one.
 At the start of any venture , entrepreneur has to work tediouslyfor long hours.
6.Highly optimistic:
 He always thinks positive in all activities.
 He is always optimistic with the market situations even in failure times.
 Such positive kinds of attitude always help him to achieve success.
7.Communication skills:
 An entrepreneur has to communicate with various parties i.e. customers, suppliers, creditors,
employees, etc.
 Therefore it is necessary to have a better understanding between sender and receiver.
8.Creativity:
 Creativity is the ability to bring something new into existence.
 Creativity is the prerequisite to innovation.
 Entrepreneur should be creative because ideas come through creative process where by imaginative
people bring them into existence, grow them and develop.
 CHARACTERISTICS OF ENTREPRENEURSHIP:
Entrepreneurship is a processof setting up a new business organisation. The following are the
characteristics of entrepreneurship:
1.Economic Activity:
 He produces a new product for the consumer as per their needs.
 It is a systematic plan activity as per the skills and knowledge of an entrepreneur.
 He feels the need to satisfy the need of the consumer and in exchange earn a better livelihood.
2.Innovations:
 Entrepreneurship is an innovation.
 The introduction of new combination of various factors of production is innovation.
 Entrepreneurship is of research and development to produce goods to satisfy the customers.
3.Creative activity:
 Innovation should have a strong support of creativity.
 Creativity is an essential part of entrepreneurship.
4.Organisation building:
 Various factors of production have to be organised.
 Different factors like place utility, time utility,form utility, etc. Has to be considered.
5.Managerial skill and leadership:
 Leadership and managerial skills are the most important facets of entrepreneurship.
 Other skills can be considered secondary.
 He should be able to lead and manage.
6.Risk bearing:
 Uncertainty is defined as a risk which cannot be insured against and is incalculable.
 An entrepreneur is a person who buys factors services at certain prices with a view to selling its
product at uncertain prices.
7.Gap filling functions:
 The most important feature of entrepreneurship is gap filling.
8.Skillfulmanagement:
 The success of any entrepreneurship depends on the management of the organisations.
 With professional management and skilled managers, entrepreneurship becomes a successful
activity.
DATES AND YEARS/ FACTS AND FIGURES
 1956- Hindu Succession Act.
 1994- Co-parcenary interest to females.
 1932- Indian Partnership Act.
 1985- Partnership Registration.
 1872- Indian Contract Act.
 1912- Indian CO-operative Societies Act.
 1960- Maharashtra State CO-operative Societies Act.
 1956- Indian Companies Act.
 1760- Industrial Revolution Act.
 1962- U.S.A Introduced 1stfour rights.
 1986- Consumer Protection Act.
 1949- Banking Regulation Act.
 1993- Right to protect against unfair Trade Practice.
 2002- Right to protect against spurious Goods.
 1975- Regional Rural Banks.
 1965- International seminar on Social Responsibility of business held on New Delhi.
 ISO 14001-2004- Environmental management standard.
 ISO 14005-2010- Environmental performance evaluation.
 ISO 14006-2011- Incorporating eco-design.
 24th December- National Consumer Day.
 15th March- World Consumer Day.
 E-Business-Email-E-Commerce-IBM-Late 19th century.
 PARTNERSHIP FIRM
 Minimum-2
 Maximum 10- in banking & 20- in Non-banking.
 JOINT STOCK COMPANY
 Minimum 2- in Private & 7- in Public
 Maximum 50- in Private & unlimited- in Public.
CAPITAL FUND
 Private-1Lakh
 Public- 5Lakh
 POINTS S.T.C J.H. f. B P. f J.STOCK CO-OP. SOC.
COM.
1. Formation Merits Merits Merits Demerits Merits
2.Liability Demerits Merits& Demerits Merits Merits
Demerits

3. Flexibility Merits Merits Merits Demerits Demerits

4.Stability& Demerits Merits Demerits Merits Merits
Continuity

5.Secrecy Merits Merits Merits Demerits Demerits

6.Separate Legal Demerits Demerits Demerits Merits Merits
Status

7.Govt.Interfear Merits Merits Merits Demerits Demerits

8.Decision Merits& Merits & Merits & Merits & Demerits
Making Demerits Demerits Demerits Demerits
9.Relation Merits Merits Merits Demerits Demerits
C&E
10.Capital Demerits Demerits Merits & Merits Demerits
Demerits
11. Relation Merits Demerits Demerits Demerits Demerits
Efforts & Reward
12.Governing ------- Hindu Indian Indian Indian Co-
Act succession Partnership Companies operative
act, 1956 Act, 1932 Act, 1956 society Act,
1912
Maharashtra
state co-
op.soc. Act,
1960

Content curation by
Chirag Vinod Kotadiya
An Edu-trainer