itb chapter _ 01

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INTRODUCTION TOINTRODUCTION TOBUSINESSBUSINESS

CHAPTER # 01CHAPTER # 01

FOR BBA 1FOR BBA 1STSTSEMESTERSEMESTER

ByBy

Muhammad BilalMuhammad Bilal

Lecturer in Management SciencesLecturer in Management Sciences


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Concept of BusinessConcept of Business

In the literary sense the term business meansIn the literary sense the term business meansthe state of being busy.the state of being busy.

Technically the term business is defined as allTechnically the term business is defined as allthe commercial and industrial activities thatthe commercial and industrial activities thatprovide goods and services to the people andprovide goods and services to the people andare undertaken for profit.are undertaken for profit.

So we can say that business combines human,So we can say that business combines human,material, technological and financial resourcesmaterial, technological and financial resourcesfor profit.for profit.

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Activities excluded fromActivities excluded from

businessbusiness Social service activities:Social service activities:

All the activities for sake the social service, not forAll the activities for sake the social service, not for

profit like setting up free hospitals, free educationalprofit like setting up free hospitals, free educationalservices, etcservices, etc

Personal consumption activitiesPersonal consumption activities

Religious and other activities:Religious and other activities:

Like offering of prayers, taking family members toLike offering of prayers, taking family members todinner.dinner.

Illegal activities:Illegal activities:

Only legal economic activities should be included inOnly legal economic activities should be included in

business.business. 3


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Characteristics ofCharacteristics of

BusinessBusiness1.1. Entrepreneur:Entrepreneur:

An entrepreneur is a person who combines the factors ofAn entrepreneur is a person who combines the factors ofproduction to produce goods and services for profit.production to produce goods and services for profit.

2.2. Deals in goods and servicesDeals in goods and services3.3. Involves production or exchange of goodsInvolves production or exchange of goods

4.4. Series of dealsSeries of deals

Business consists of producing or purchasing and sellingBusiness consists of producing or purchasing and sellingof goods on continuous and regular basis.of goods on continuous and regular basis.

5.5. Desire to earn profitDesire to earn profit

6.6. Involves element of riskInvolves element of risk

7.7. Creation of utilities (place, form and time utility)Creation of utilities (place, form and time utility)

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Fast means of communication and transport:Fast means of communication and transport: Help traders to serve the customers at right time.Help traders to serve the customers at right time.

Provision of credit by the bankProvision of credit by the bank Insurance:Insurance:

various types of business risk can be insured now.various types of business risk can be insured now.

EmploymentEmployment

Business supply services:Business supply services: Like banking, finance, insurance, medical andLike banking, finance, insurance, medical and

health care serviceshealth care services

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Criticism on BusinessCriticism on Business

Vast inequalities in wealth:Vast inequalities in wealth:

It has widened the gap between poor andIt has widened the gap between poor and

rich segments of societyrich segments of society

Environmental pollutionEnvironmental pollution

Ignorance of human welfare:Ignorance of human welfare:

Indulging in unethical activities like hoarding,Indulging in unethical activities like hoarding,black marketingblack marketing, dumping, dumping of productsof products

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Objectives of businessObjectives of business

Objectives can be classified asObjectives can be classified as

Economic objectivesEconomic objectives

Social objectivesSocial objectives

Human objectivesHuman objectives

National ObjectivesNational Objectives

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Economic objectivesEconomic objectives

Earning of profitEarning of profit In the words of PetterF.D Ruckerthe problem of anyIn the words of PetterF.D Ruckerthe problem of any

business is not the maximization of profit but thebusiness is not the maximization of profit but the

achievement of sufficient profit to cover the risk ofachievement of sufficient profit to cover the risk ofeconomic activities and thus to avoid losseseconomic activities and thus to avoid losses

Creation of marketCreation of market The more customers are created, the wider will be theThe more customers are created, the wider will be the

market for goods and larger the profits.market for goods and larger the profits.

InnovationInnovation

Technological improvementsTechnological improvements

Best possible use of resourcesBest possible use of resources

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Social objectivesSocial objectives

Supply of standard quality of goodsSupply of standard quality of goods

Avoidance of anti social practices likeAvoidance of anti social practices like

smuggling, overcharging, hoarding etcsmuggling, overcharging, hoarding etc

Provision of more employmentProvision of more employment

Cooperation with govt.Cooperation with govt.

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Human objectivesHuman objectives

Employees working in a business shouldEmployees working in a business should

be fairly rewardedbe fairly rewarded

Healthy climate or environment should beHealthy climate or environment should be

created for developing of new skillscreated for developing of new skills

Employees satisfactionEmployees satisfaction

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National objectivesNational objectives

Every business whether operating on small orEvery business whether operating on small orlarge scale must have an obligation towards nationlarge scale must have an obligation towards nationalso. It should help in achieving national goalsalso. It should help in achieving national goals

such as:such as: Social justiceSocial justice

Increasing value added goods for exportsIncreasing value added goods for exports

Finding out better and cheaper substitutes forFinding out better and cheaper substitutes forimportsimports

Should help to increase the foreign exchangeShould help to increase the foreign exchangereserves to meet the import bills.reserves to meet the import bills.

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Division of Business orDivision of Business or

Components of BusinessComponents of Business Business activities can be divided intoBusiness activities can be divided into

two partstwo parts

Industry or industrial activitiesIndustry or industrial activities

Commerce or commercial activitiesCommerce or commercial activities

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Meaning of industryMeaning of industry

The term industry refers to that part of business activityThe term industry refers to that part of business activitywhich is concerned with the extraction, production orwhich is concerned with the extraction, production orfabrication of products.fabrication of products.

Consumer goods:Consumer goods: Goods produced by an industry which are used by the finalGoods produced by an industry which are used by the final

consumers are called consumer goods.consumers are called consumer goods.

Capital goods:Capital goods: Goods produced by industry and is used for further wealthGoods produced by industry and is used for further wealth

generation by other company like plant, machinerygeneration by other company like plant, machinery

Intermediate goods:Intermediate goods: Good produced by an industry are further processed intoGood produced by an industry are further processed into

finished products by another company like plastic etcfinished products by another company like plastic etc

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Types of industryTypes of industry

Manufacturing industry:Manufacturing industry: Which are concerned with converting the rawWhich are concerned with converting the raw

material to finished products. Like textilematerial to finished products. Like textile

industry, automobile industryindustry, automobile industry Constructive industry:Constructive industry:

They are engaged in the construction ofThey are engaged in the construction ofbuilding, canals, bridges, dams etc.building, canals, bridges, dams etc.

Service industry:Service industry: They are engaged in creating intangible goodsThey are engaged in creating intangible goods

which cannot be seen or touched like serviceswhich cannot be seen or touched like servicesof doctors, lawyers, teachers etcof doctors, lawyers, teachers etc

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CommerceCommerce

Commerce is concerned with the buyingCommerce is concerned with the buying

and selling of goods. It includes alland selling of goods. It includes all

activities which are related to the transferactivities which are related to the transferof goods from the place of production toof goods from the place of production to

the final consumer.the final consumer.

Scope of commerceScope of commerce TradeTrade

Aids to tradeAids to trade

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Scope of CommerceScope of Commerce

Commerce

Trade Aids to Trade


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TradeTrade

Buying and selling of goods, it includes exchange of goods andBuying and selling of goods, it includes exchange of goods andservices among buyers and sellers in which both the parties areservices among buyers and sellers in which both the parties arebenefited.benefited.

Types of tradeTypes of trade

Internal trade:Internal trade: The trade within the boundaries of the countryThe trade within the boundaries of the country

External trade:External trade: Purchase and sale of goods b/w two countries called foreignPurchase and sale of goods b/w two countries called foreign

trade.trade.

Wholesale tradeWholesale trade To purchase goods in large quantities for resale to retailers.To purchase goods in large quantities for resale to retailers.

Retail tradeRetail trade Activities related sale of goods and services to the finalActivities related sale of goods and services to the final

consumers.consumers.

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Aids to tradeAids to trade

The activities which facilitate in the purchase ofThe activities which facilitate in the purchase ofgoods and services are called aids to trade.goods and services are called aids to trade.

Essentials aid for business expansion are followEssentials aid for business expansion are follow TransportTransport

InsuranceInsurance

WarehousingWarehousing

BankingBanking AdvertisementAdvertisement

Mercantile agents (sells good of the company toMercantile agents (sells good of the company toconsumers for commission)consumers for commission)

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Functions of a ModernFunctions of a Modern

BusinessBusiness Production function:Production function: Producing goods and services that satisfy humanProducing goods and services that satisfy human

wants and sell them at profit.wants and sell them at profit.

Financial function :Financial function :

Secure finances to operate the businessSecure finances to operate the business Management function:Management function:

Getting things done through planning, coordinating,Getting things done through planning, coordinating,motivating and controlling the efforts of others tomotivating and controlling the efforts of others toachieve the business objectives.achieve the business objectives.

Innovation function:Innovation function: organizations need new ideas.organizations need new ideas.

Organizational function:Organizational function: Modern business should have a sound organizationalModern business should have a sound organizational

structure. Use of specialized talents.structure. Use of specialized talents.

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Controlling function:Controlling function:

Purpose of controlling is to examine the past and present activities.Purpose of controlling is to examine the past and present activities.

Motivating function:Motivating function:

To motivate the employeesTo motivate the employees

Risk taking function:Risk taking function:

Every business faces risks and uncertainties.Every business faces risks and uncertainties.

Marketing function:Marketing function:

Business function that direct the flow of goods and services fromBusiness function that direct the flow of goods and services from

producers to consumers.producers to consumers.

Social responsibility function:Social responsibility function:

Business should take care of the society like environmental pollutionBusiness should take care of the society like environmental pollution

should be reduced.should be reduced.

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Role of profit in businessRole of profit in business

Source of incomeSource of income

Continuity of businessContinuity of business

Expansion of businessExpansion of business

Reward of risk bearingReward of risk bearing

Profit and economic developmentProfit and economic development

Profit acts as a measure of efficiencyProfit acts as a measure of efficiency

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Qualities of a SuccessfulQualities of a Successful

BusinessmanBusinessman The modern business is very complex dueThe modern business is very complex due

to scientific and technological developmentsto scientific and technological developments

fast changes are taking place in everyfast changes are taking place in everybusiness field. As the business worldbusiness field. As the business worldchanges the businessman has to acquirechanges the businessman has to acquirethe basic developing skills for effectivethe basic developing skills for effective

organization of the business units.organization of the business units. Some qualities of a successful businessmanSome qualities of a successful businessman

are mentioned below.are mentioned below.

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Qualities of a Successful BusinessmanQualities of a Successful Businessman

Knowledge of businessKnowledge of business

Ability to plan and organizeAbility to plan and organize

ForesightForesight Ethical standard:Ethical standard:

There should be no cheating or fraud in aThere should be no cheating or fraud in abusiness activities.business activities.

Initiative and creativity:Initiative and creativity: Businessman should have the ability to takeBusinessman should have the ability to take

initiative by producing new thing and newinitiative by producing new thing and newmethods of marketing the products.methods of marketing the products.

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Qualities of a successful businessmanQualities of a successful businessman

Adaptability to changeAdaptability to change

Industrious (hardworking, active)Industrious (hardworking, active)

Sound financial managementSound financial management

Technical skillTechnical skill Team spiritTeam spirit HonestHonest

Conceptual skills:Conceptual skills: He should be able to coordinate and integrate both theHe should be able to coordinate and integrate both thetechnical and human skills. When new production decision aretechnical and human skills. When new production decision aretaken the executives of production, finance, marketing,taken the executives of production, finance, marketing,research should be involved for the achievement of commonresearch should be involved for the achievement of commonobjectives.objectives.

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Problems before establishingProblems before establishing

a new businessa new business Selection of businessSelection of business

Demand for the productDemand for the product

Size of business unitSize of business unit

Provision of capitalProvision of capital

LocationLocation

Selection of physical facilities (land, building,Selection of physical facilities (land, building,machinery)machinery)

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Plan layout:Plan layout: Setting up of machines and equipment of the factorySetting up of machines and equipment of the factory

because it facilitates the flow of work and there will bebecause it facilitates the flow of work and there will beeffective utilization of men, material and machines.effective utilization of men, material and machines.

Selection of staff:Selection of staff: Right persons should be selected for the right job.Right persons should be selected for the right job.

Office equipmentOffice equipment Chairs, tables, computers, calculators , air conditionsChairs, tables, computers, calculators , air conditionsetcetc

Fulfillment of legal requirementsFulfillment of legal requirements


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itb chapter _ 01

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