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Introduction to Business

Introduction to Business. (Significance & Changing Concept of Business). Significance/Role/Importance of Business:.

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Introduction to Business

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  1. Introduction to Business (Significance & Changing Concept of Business)

  2. Significance/Role/Importance of Business: Business is important/significant as it touches all aspects of our life. It provides goods and services for meeting our needs and raises social welfare. It is the most creative socio-economic activity and also an inseparable part of human life. No society can survive, function smoothly & grow without the active support & participation of business. This suggests the significance of business. In addition, the significance/importance of business can be explained with reference to the following points: Com - 1 - Business Environment, Introduction to Business - Part 2

  3. Meeting consumer needs & promoting social welfare. • Enrichment of personal & social life. • Support to agriculture & allied activities. • Provides revenue to government. • Supports educational, cultural and social activities. • Facilitates industrial production & economic development. • Creates employment opportunities. Com - 1 - Business Environment, Introduction to Business - Part 2

  4. Need & Significance of Business: Business is useful to the society in general and the business firms and consumers in particular as it creates utilities. Let us see the benefits it offers to various groups: Com - 1 - Business Environment, Introduction to Business - Part 2

  5. A. To the Consumers: • Satisfaction of wants • Higher standard of living • Better services • Reasonable price • Better quality products Com - 1 - Business Environment, Introduction to Business - Part 2

  6. B. To the Business Firms: • Increase in profits • Increase in market share • Goodwill • Achieving objectives • Improvement of skills Com - 1 - Business Environment, Introduction to Business - Part 2

  7. C. To the Society: • Employment opportunities • Revenue to the government • Balanced regional development • Rapid economic growth • Providing social services Com - 1 - Business Environment, Introduction to Business - Part 2

  8. Changing Concept of Business: The term concept indicates the idea or philosophy behind any activity. Accordingly, concept of business may be defined as the philosophy or purpose of doing business. Over the years, there has been a change in the concept of business. The concept of business has changed from producer orientation and further to social orientation. Com - 1 - Business Environment, Introduction to Business - Part 2

  9. Changing Concept of Business: The adjoining diagram shows the changing concept of today’s business: The centre circle shows producer – oriented concept of business where emphasis is only on profit motive. The second circle includes the centre circle, which shows customer oriented concept of business. The third circle includes the first two circles, indicating societal oriented concept which balances the interests of the producer, customers & society at large. The centre circle is very small which signifies that producer oriented concept is a very narrow concept of business, whereas, the third circle is large which signifies that the societal concept is broader in scope. Com - 1 - Business Environment, Introduction to Business - Part 2

  10. Producer Oriented Concept: The traditional concept is also referred to as profit oriented concept. This concept was in existence in many parts of the world prior to 1950. The producer’s interest, i.e., profit motive was given prime importance. Business was undertaken with the sole objective of earning profit. Firms produced and sold goods, which they thought were good for customers. There was hardly any emphasis on customer satisfaction. The profit orientation concept holds that: • The customers will favour or buy those products that are widely available and are low in cost. • A business firm exists to undertake activities of production and/or distribution for a profit. Manufacturers concentrated on achieving high production efficiency and wide distribution coverage. They did not give much importance to the marketing aspect of business. Marketing was treated as a mere extension of production function, i.e., marketing performed the role of physical distribution of mass production. Reasons for Producer Oriented Concept: • Lack of competition. • Lack of professionalism in business. • Low consumers’ expectation. Com - 1 - Business Environment, Introduction to Business - Part 2

  11. Customer Oriented Concept: This concept came into existence at around 1950 and gained more importance during 1960s and 1970s. This concept placed emphasis not only on profit aspect, but also on customer satisfaction. Emphasis was placed not only on production but also on marketing. This concept holds that: • The key to achieving business objectives consists of identifying the needs and wants of target customers, and then satisfying their needs and wants more efficiently and effectively than the customers. Under this concept, there is a shift from profit orientation to consumer orientation. The target customer becomes the center of all business activities. Reasons for Consumer Oriented Concept: • Increase in competition. • Professionalism in business. • Growing customer expectations. Com - 1 - Business Environment, Introduction to Business - Part 2

  12. The Societal Oriented Concept: The 1980s & the 1990s witnessed the emergence of societal concept of business. Emphasis is placed not only on profit and customer satisfaction, but also on societal interest. Now-a-days, professional business firms not only produce and distribute want satisfying goods, but also environment friendly and consumer health-oriented products. Also companies are becoming increasingly conscious of their social responsibility towards various sections of the society. This concept holds that the organisational task is to: • Determine the needs, wants and interests of target customers. • Deliver the desired satisfaction more efficiently and effectively than competitors. • Preserve and enhance customers’ & society’s well being. The societal concept of business tries to bring a balance between: Company’s Profits + Customer Satisfaction + Societal Interest. Reasons for Society Oriented Concept: • Growing concern for environment. • High degree of professionalism in business. • Technological developments to produce eco-friendly goods. Com - 1 - Business Environment, Introduction to Business - Part 2

  13. Factors Responsible for the Changing Concept of Business: • Consumer Expectations • Consumerism • Increasing Competition • Technological Developments • Growing Concern for Environment • Globalisation of Business • Information Revolution • Service Revolution • Professionalism in Business Com - 1 - Business Environment, Introduction to Business - Part 2

  14. Traditional Vs. Modern Concept of Business: Com - 1 - Business Environment, Introduction to Business - Part 2

  15. Thank you Taruna R. Shroff Com - 1 - Business Environment, Introduction to Business - Part 2

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