1. 1. Business: Meaning Simple meaning of business is state of being busy in any work Illustrated Oxford Dictionary states the following Meanings: 1.One,s regular occupation, profession 2. A task or duty 3. A reason for coming, example: what is your business? 4. A matter 5. Buying & selling 6. A commercial firm.
2. 2. Business in Business Terminology Business is any effort for the purpose of earning money,, Business involves the acts like production, buying & selling(trade),distributing the products(commerce) which are exercised for business motive Business is an activity of people directed towards satisfying human wants at a profit ,, The goal of a business is to be profitable! Profit = Revenues - Expenses Profits go to the business owners and are a major incentive and reward for success.
3. 3. Business in Business . Skinner and Ivancevich : Business is the exchange of goods, services, or money for mutual benefit or profit. Keith Davis: Business may be defined as any form of commercial activity to satisfy the economic wants of people at a profit. Professor Owen : Business is any enterprise engaged in production and distribution of goods for sale in a market or rendering services for a price.
4. 4. Branches of Business Business Commerce Trade Home Trade 1.Wholesale 2.Retail Foreign Trade 1.Import 2.Export 3.Re-export Auxiliary Acts 1.Tranport 2.Banking 3.Insurance 4.Warehousi ng Industry 1.Constructio n 2.Manufactur ing 3.Extruction 4.Genetic Direct Service 1. Doctor 2.Engineer 3.Consultant 4.Lawyer 5.Teacher
5. 5. Branches of Business-Commerce
6. 6. Branches of Business-Industry
7. 7. Branches of Business-Industry
8. 8. Branches of Business- Direct Service
9. 9. Illegal Efforts are not Business !
10. 10. Private Enterprise: The American Business System A Business or businesses not under government control. An Economic system in which citizens are allowed to own capital and property and to run their own business with a minimum of state interference-OBD-403 Similar Term: Free Enterprise. Features: 1.Rights to private property 2.Right of freedom of choice. 3.Right to profit 4. Rights to compete
11. 11. Factors of Production The Resources used to provide goods and services are the factors of production 1.Land 2.Labour 3.Capital 4.Entrepreneurship
12. 12. Factors of Production Land Labour Entrepreneurship Production Process Finished Goods Capital
13. 13. How Private Enterprise Functions ? The Factors of production are owned by individuals in households. House Hold:Household is any person or group of people living under the same roof and functioning as an economic unit Key Works: Involvement of people in business for profit.(combination of resources) Creation of jobs and income for households. Purchase of goods and services by households, which in turn support business and make it profit.
14. 14. How Private Enterprise Functions Income Factors of production Finished Goods and Services Business Households Consumer market demand
15. 15. Income received for the factors of production: Factors of production Income received Land Rent Labour Wages/Salaries Capital Interest Entrepreneurship Profit
16. 16. Economic System An economic system is the method society uses to allocate its resources(land,labour,capital,entrepreneurship) to satisfy its needs. What distinguishes one economic system from another is the control of the factors of production and the interaction of business,government and consumers.
17. 17. 1.Capitalism 2. Mixed Economy 3. Communism 4. Socialism 5. Modern Economic System.
18. 18. Capitalism Capitalism : Is an economic system where the factors of production are in private hands. Key terms: Pure capitalism/market economy: One in which economic decisions are made freely according to the market forces of supply and demandAdam smith Laissez-faire policy: No Interfere of Government.
19. 19. Capitalism The economic questions are- What is to be produced? How much will be produced? Who will produce it? How much will it cost? Who will get it? In pure capitalistic economy and individuals use resources as they choose.
20. 20. Mixed economy: Mixed economy: Evolved by USA, Which is an Economic system based on a market Economy with limited government involvement. Here the government has two economic tools: The power of Tax The power to spend
21. 21. Communism: Communism: In this economic system the government controls the factors of production, land , labor and capital are under the control of government and Entrepreneurship is supplied by the government. Supply And Demand, Competition Have No Influence.
22. 22. Socialism: Socialism: Economic system in which much ownership is private, by the government controls the operations and direction of basic industries. This control and direction are based on the belief that there are contain products and services that everyone should have.
23. 23. A suitable combination of capitalism and Socialism Islamic Economic System: Islamic economics refers to the economic system that conforms to Islamic scripture and traditions. The central features of an Islamic economy are summarized as the following: (1) "Behavioral norms and moral foundations" derived from the Quran and Sunna, (2) Zakat ,tax as the basis of Islamic fiscal policy, and (3) Prohibition of interest. Islamic movements and authors generally describe an Islamic economic system as neither socialist nor capitalist, but as a "third way," an ideal mean with none of the drawbacks of the other two system
24. 24. Comparing Economic System: Comparing Economic System: Pure Communism China Republic Soviet Union Sweden France United Kingdom Canada United States Pure Capitalism
25. 25. Unincorporated Business: Business other than company There are three basic forms of business Sole proprietorship Partnership Corporation Sole proprietorship: Business owner by individual, oldest and most common form of business. sole proprietorship accounted for almost 80 percent of all businesses in united states However, They have less than 10 percent to total sales. They have Only 18 percent of the profits when compared with partnership and corporations.
26. 26. A Sole-proprietorship is a form of organization in which an individual produces independently with his own capital,skill and intelligence and is entitled to receive all the profits and assumes all the risks of ownershipM C SHUKLA Sole-proprietorship-76% corporate-16% partnership-8%
27. 27. Advantages of sole-proprietorship a) Ease of formation b) Retains all profit c) Freedom of decision making d) Personal satisfaction e) Ease of dissolution f) Tax advantage g) Sound management h) Self reliance i) Change in business area j) Minimum expense k) No government control
28. 28. Disadvantages of sole-proprietorship : 1.Unlimited liability 2.Limited fund for expansion 3.Lack of business and management skill 4.Difficulty in attracting consumers and employees 5. Limited life 6.Lack of separate entity 7.Lack of status 8.Whims of the owners 9.Limitation of personal capacity 10.Problem of risk distribution.
29. 29. Causes of popularity of sole-proprietorship business in Bangladesh 1) Investment of small capital 2) Easy formation 3) Agriculture based economy 4) Limited infrastructure 5) Effects of river 6) Supply of essential goods 7) Way of livelihood 8) Lack of industrial loan.
30. 30. Partnership : An association of two or more people formed for the purpose of carrying on a business Partnership is the mutual relationship established among the agreed persons for the purpose of distributing profit reached at by the business operated by the partners or any single partner on behalf of all partners--------partnership act-1932. Members Types Minimum Maximum Banking business 2 10 Other than banking 2 20
31. 31. Formation of partnership business oFormed as per partnership act-1932 Steps: 1.Gathering of members 2.Determination of the nature of the business 3.Performance of contract 4.Registration(not mandatory) Partnership Deed: contract among the partners
32. 32. Advantages of Partnership Business: 1.Ease of formation 2.Pooling of knowledge and skill 3.More funds available 4.Ability to attract and retain employees 5.Tax advantage-only on personal income 6.Sharing of risk 7.Collective efforts 8.Goodwill 9.Free from regulation 10.Easy dissolution
33. 33. Disadvantages of Partnership Business: 1.Unlimited liability 2.Limited life 3.Potential conflict between partners 4.Ownerships are not transferable 5.Want of good faith 6.Lack of initiative 7.Lack of separate entity 8.Uncertainty of duration 9.Delay in decision making 10.Problem of maintaining secrecy.
34. 34. Types of partnership business: Partnership General Partnership Partnership at Will Particular Partnership Part. For Particular Term Part. For Particular Purpose Limited Partnership
35. 35. Types of partnership business Explation : General partnership:A business formed by two or more persons who are agreed upon profit distribution and bearing unlimited liability Partnership at will: Partnership at will is one for which no fixed term has been agreed. Any partner can end partnership at any time provided that notice is given of the intention to do so to all the other partners Particular partnership :A partnership formed for specific term or purpose. Partnership for particular term :It is formed for particular term. Partnership for particular purpose : It is formed for particular purpose. Limited partnership: A partnership consisting general and limited partners. Limited partner is a partner whom liability is limited only to the extent of his investment.
36. 36. Persons not capable of being partners : Minor (below the age 18 years) Person of unsound mind. Insolvent person Government employee Alien enemy Foreign ambassador President
37. 37. Joint Venture : Joint : A place at which two things or parts of a structure are joined. Venture : An under taking of a risk. Joint venture Is nothing but a commercial undertaking entered into by two or more parties specially for short term Example :Hero-Honda Key terms: Silent partner: A partner who assumes no active role in managing the firm , but who may be known to the general public as a partner. Secret partner: A partner who may be an active manager but does not want his identity revealed to the general public. Sleeping partner : A partner who is both silent and secret . This person is only interested in investing funds in the company. Nominal partner : A person who is neither a part-owner of the partnership or an active participant in the firms affairs.
38. 38. Bajaj motor Cycle (Indian )
39. 39. Hero-Honda (India- Japan Joint Venture )
40. 40. The Modern Corporation/Company: A Corporation is a legal form of business organization created by government and considered an entity and apart from its owner. Company formed under the Companys Act. Corporation/Company/Joint Stock Company: Company means a company formed and registered under this Act or any existing company Act. 1994- 2(1) Existing Company means Company formed as per Company Act 1913.
41. 41. Types of Company Organization Company Chartered Company Statutory Company Registered Company Limited Company Limited By Share Private Limited Public Limited Limited By Guarantee Unlimited Liability Company Other Company 1.Existing Company 3.Non- trading Company 5.Alien Company 7.Government Company 2.Foreign Company 4.Domestic Company 6.Open Company
42. 42. Types of Company Organization: Chartered company : Company formed, before the introduction of company act,as per the order of emperor of great Britain. Example: East-India Company , Chartered Bank Of England. Statutory company: Company formed by the presidential order or law executed in the parliament. Example:Bangladesh Bank, Bangladesh Biman , BTV. Registered company : Company formed as per the company act- 1994 Registered companies can be - a. Limited Company :liability of share holders are limited by the nominal value of shares. Company limited by guarantee : share holders promise to take extra liability in addition to the share value at the time of dissolution. Company limited by share : liability of the share holders are limited up to share value.
43. 43. Types of Company Organization Private limited company Members Minimum 2, Maximum 50 Shares Not transferable Prospectus Can not be issued Public limited company : Members Minimum 7, Maximum limited by shares Shares Transferable Debenture Can Be Sold Prospectus Can Be Issued
44. 44. Types of Company Organization Unlimited company :Members of the company have unlimited personal liability. Other company : 1 .Existing company :Any company formed before the introduction of company act- 1994 and which is subject to the act existing earlier. Example : AB Bank 2. Foreign company :Any company registered as per company act-1994, which was initially formed in abroad by any other law. Example : Warid limited.
45. 45. Types of Company Organization 3. Non-trading company :Any organization that utilize its profit in social welfare in lieu of distributing it among the shareholders. 4.Domestic corporation :A company will be termed as domestic company/corporation at the state where it was chartered. 5.Alien corporation :A Firm incorporated in a country other than the one, in which it operates. 6.Open corporation :A corporation whose stock can be purchased by any one who can afford the price. 7.Close corporation :A corporation whose stock can not be purchased by general people,it is usually owned by a few individuals.
46. 46. Formation of joint stock company As per company act-1994 Taking initiative : Minimum members will take initiative. They are called promoters . In case private limited company at least two members and in case of public limited company at least seven members will take initiative. Promoters will - a. Determine the nature of company. b. Selection of name. c. Formulation of plan.
47. 47. Formation of joint stock company Preparation Of Documents : Two important documents are- a. Memorandum of association (Name , address , objects, Capital , liability ) like charter b. Articles of association for internal management ) Application for registration : Promoters collect specified forms and documents from the registrar office. The forms will be returned with following documents. a. One copy of memorandum of association signed by promoters
48. 48. Formation of joint stock company b. One copy of Articles of association signed by promoters c. Name , Address , Occupation of promoters w ho agree to be the directors. d. An Agreement of directors. e. An Agreement of directors stating their consent to purchasing supposed shares. f. A Declaration stating the share capital g. A Declaration ensuring the conformity with the law.
49. 49. Formation of joint stock company Collection of certificate of incorporation : If the company registrar is satisfied, he will clued the company name in registration book and will give the certificate of incorporation. Collection of commencement certificate : For getting the certificate of commencement following documents are to be submitted before the registrar- a. Prospectus b. declaration of minimum subscription b. Declaration of purchasing qualifying number of shares in cash b. Declaration by secretary or directors.
50. 50. Advantages of corporate business 1.Supply of huge capital 2.Limited liability 3.Distribution of risk 4.Efficient management 5.Benefit of large scale-business 6. Transferability of shares 7.Public confidence 8.Facility of small investment.
51. 51. Disadvantages of corporate business 1.Complexity in formation 2. Absence of direct relation relationship with the customers 3.Lack of personal investment 4.Nepotism and corruption 5.Problem of maintaining secrecy 6.Excess application of law 7.Complexity in decision making 8.Tax burden (double taxation )
52. 52. Business combination Business combination : The combining of two or more companies by means of acquisition or merger. Objects : 1.Greater Profitability 2.Efficiency 3.Achieving Competitiveness.
53. 53. Forms of Combination Business Combination Acquisition Merger 1.Horizontal Merger 2.Vertical Merger 3.Conglomerate Merger Amalgamation
54. 54. Forms of combination Explanation : Acquisition : Results when one firm buys a majority interest in another, but both retain their identities. Merger : A Merger occurs when two or more companies become a single enterprise; the controlling corporation retains its identity and absorbs the others. 1.Horizontal Merger :Occurs when one firm purchase other firms that produce similar or competing products. 2.Vertical Merger :Occurs when one firm unites with others that contribute to its products manufacture or distribution 3.Conglomerate Merger : Occurs when one firm buys other firms that make unrelated products.
55. 55. Acquisition
56. 56. Merger
57. 57. Horizontal Merger
58. 58. Back to Past.
59. 59. Vertical Merger
60. 60. Vertical Merger
61. 61. Conglomerate Merger
62. 62. Forms of Combination Amalgamation or consolidation : Amalgamation or consolidation occurs when one firm combines with others to form an entirely new company ; former identity is relinquished Example: Company A + Company B+ Company C = Company D