Chapter First

1. Chapter First Introduction to Business (ITB) By: Musa Farooqi

2. Nature and Scope of Business Concept of Business • Literary business means the state of being busy • Technically the term business means all the commercial and industrial activities that provide goods and services for profit By: Musa Farooqi

3. Nature and Scope of Business Activities excluded from business • Social service activities • Personal consumption • Religious and other activities • Illegal activities By: Musa Farooqi

4. Nature and Scope of Business Definitions and characteristics of Business • According to Urwick and Hunt: Business is any service which other members of the community need and are within to pay for it • According to Davis: An activity in which different persons exchange something of value whether goods or services for mutual gain or profit • According to Ronal: The production or sells of goods and services to make profit By: Musa Farooqi

5. Characteristics of Business • Entrepreneur • Deals in goods and services • Involves production or exchange of goods • Series of deals • Desires to earn profit • Involves element of risk • Creation of utilities By: Musa Farooqi

6. Evolution of Business • Self production • Barter system; exchange of two different goods for equal value • Coins invention caused expansion of business in both Rural and Urban areas • 18th century, industry revolution increased the scale of production • To cope up with various demands of customer, the use of various machines were felt By: Musa Farooqi

7. Importance of Business in the Present Day of World • Mass production of goods • Expansion of market • Innovations • Fast means of communication and transport • Provision of credit by banks • Insurance • Employment • Business supplies services • Business has helped in raising standard of living • Source of revenue • Urbanization By: Musa Farooqi

8. Criticism of Business • Vast inequalities in wealth • Environmental pollution • Ignorance of human welfare By: Musa Farooqi

9. Objectives of Business Objectives of Business Human Objectives Social Objectives Economic Objectives By: Musa Farooqi

10. Economic Objectives The major economic objectives to be achieved by business are; • Earning of profit • Creation of market • Innovation By: Musa Farooqi

11. Social Objectives The main social objectives of business are as follows; • Supply of standard quality of goods • Avoidance of anti-social practice • Provision of more employment • Cooperation with the government • Avoidance of slums and pollution By: Musa Farooqi

12. Human Objectives The business activity is carried on/by people (entrepreneurs) through the people (employees) and for the people (customers) A business which overlooks the human factor cannot prosper and ultimately suffers losses. The human objectives of business are; • Employees should be fairly reward • A healthy environment for developing new skills and abilities of employees • Equal implementation of policy • Right person for the right job along with required resources By: Musa Farooqi

13. Components of Business Business Industry Commerce By: Musa Farooqi

14. Industry The term “industry” refers to that part of business activity which is concerned with the extraction, production, or fabrication of products Consumer’s goods: final consumer (laptop, vehicle etc) Capital goods: used for the further production of wealth (machinery, tools etc) Intermediate goods: half finished goods (thread, wood etc) By: Musa Farooqi

15. Types of Industry Extraction Industry: Extraction Industry is that industry which purifies the materials from below the surface of earth such as; fisheries, oil etc Genetic Industry: It is that industry which is engaged in reproducing and multiplying various species of animas and plants for selling in the market for profit such as; poultry, farm etc Constructive industry: It is that industry which is engaged in construction of buildings, dams etc Manufacturing Industry: It is that industry which is attached in converting raw material or semi-finished products into finished products Service Industry: It is that industry which is engaged in provision of intangible goods which cannot be touched such as doctors, teachers etc By: Musa Farooqi

16. Commerce • It is connected with buying and selling of goods • It includes all those activities which are related to the transfer of goods from the place of production to the ultimate consumers Two categories of commerce • Trade • Aids to trade By: Musa Farooqi

17. Trade Trade means buying and selling of goods Types of trades • Internal trade • External trade • Wholesale trade • Retail trade By: Musa Farooqi

18. Types of Trade Internal trade: The trade which is restricted within the boundary of country is called internal trade External trade: The trade which is exercised among various countries. It is also called foreign trade Wholesale trade: The trade in which the goods are purchased in large quantities from producers and then resale them to retailers Retail trade: The trade which is related to sale of goods and services to the final consumers By: Musa Farooqi

19. Commerce Aids to trade The activities which facilitate in the purchase of goods and services are called aids to trade. The following aids is essential for expansion of the trade • Transport • Insurance • Warehousing • Banking • Advertisement • Mercantile By: Musa Farooqi

20. Aids to trade Transport: The means through which the goods are carried from one place to another place such as; railways, ships etc. Transports along with widening of goods it also increases mobility of labor and capital. Insurance: Insurance makes sure the recovery of risk of damage of goods due to fire, flood, earthquake or etc Warehousing: It is a large storeroom used for storage of goods which are produced in anticipation of demand Banking: The commercial banks finance the traders to help them in buying and selling goods Advertisement: Advertisement makes popular or aware the customer about the product and as well it help customers in choosing of goods of their tastes Mercantileagent: The agents or parties connect/influence both buyers and sellers in completing transaction of goods for their commission By: Musa Farooqi

21. Functions of a modern business What is business? Business is an economic activity which is related to production and distribution of goods and services for earning of profit as well indirectly help in production and exchange of goods such as transport, insurances, banking, warehousing etc Values and demands of society is changed • People expect more; merely earning profits • Business should reduce ill of society; unemployment, environmental pollution, education backwardness, lack of medical facilities • In simple words; business along with earning profit it should also serve the society By: Musa Farooqi

22. Functions of a modern business The current business is changing rapidly due to globalization. It is increasing in size, number, form and etc. Followings is the main functions performed by a modern business Production function: Services or goods are produced per the wants and demands of customer for profit. Being in the age of mass production and specialization, the survival of business lines in the best use of resources, quality goods and competitive prices in the market By: Musa Farooqi

23. Functions of a modern business Financial function: In financial function, the security of money is ensured for operation purposes. The continues flow of money or fund is required for stability of business. The two main sources of funds could be 1. owner’s capital 2. borrowed capital. Most of the small business are running on their own resources and some of them especially big business is carried on joint sock companies or shares Management function: Management is essential for the progress of business. Management bring efficiencies and effectiveness in organization thorough planning, coordinating, motivating. Simply management is getting things done through others By: Musa Farooqi

24. Functions of a modern business Innovation function: Innovation means creation of new facility through new method. The innovation which is created by individual should be given practical shape by organization Organizational function: Organizational structure means the creation of various departments along with smooth reporting system per the demand of organization needs. Sound organization helps in the elimination of duplicate activities in the business, efficient use of specialized talent, economic use of equipments, economies in transportation and distribution, encourages product growth and profit By: Musa Farooqi

25. Functions of a modern business Controlling function: basically, in controlling the past and present activities of employees are checked by comparing the actual work with standard or benchmark. Incase of deviation a quick correction measure is taken Motivation function: Human is one of the important resources of organization through which success and failure of organization can be attributed. The performance of employees can be heightened through motivation factor. By: Musa Farooqi

26. Functions of a modern business Risk taking function: Risk is indivisible in business. The manager must know that risk is inevitable; it is going to be happened at any time as risk comes due uncertainties and usually it is difficult to know uncertainties. In order to avoid possible risk, the manager must have some precautions to avoid them and guard against them to limitize the losses to some extent Marketing function: through marketing the product of organization could be popularized among the customer which expedite the selling and buying of product. By: Musa Farooqi

27. Functions of a modern business Social responsibilities function: During the production of products, the industry emits some hazardous smokes which causes air and water etc polluted and this pollution causes various lethal diseases to human society. In order to curb this problem, business should play an active role in reducing ills of the society Forces inducing to be socially responsible are as follows • The pressure of public opinion • Force of trade unions in industry • The growing public opinion about maintenance of the quality of life and prevention of pollution • The threat of public regulations and fear of nationalization of business By: Musa Farooqi

28. Role of profit in business Profit is the oil that drives the wheels of business. Profit is the total revenue from sales minus the total cost of resources employed by the entrepreneur. The importance of profit in business can be judged from the following; Source of income: The mean aim of investment is profit through which the comfortable life of investor's families can be ensured Continuity of business: The continuity of business depends on earning. On other hand; loss causes the discontinuity of business Expansion of business: The reinvest part of profits in business expands and diversify business Reward of risk bearing: It is a reward for a risk successfully undertaken. Profit, therefore, is a reward for the future which is uncertain Profit and economic development: Economic development comes from earning profit and earning profit comes from developed economy; both are directly proportional Profit acts as a measure of efficiency: Earning profit is due to the efficiency of organization. Loss is the sign of inefficiencies of organization By: Musa Farooqi

29. Business Risk The unprofessional events which causes loss in a business is called business risk. Business risk cannot be avoided but it can be minimized by taking timely suitable measures by the businessman. The main causes of business risk in brief are as under Natural factors: The unavoidable natural factors which cause risk in a businesses are; earthquake, floods, famine etc By: Musa Farooqi

30. Business Risk Competition: For the scale of a product in the market and manufactures, the businesses indulge in cut throat competition by cutting down the price of goods which automatically increases the business risk Mismanagement: Due the lack of proper planning and control over the business, it increases the cost of production of goods, lower its quality and increases the business risk By: Musa Farooqi

31. Business Risk Change in demand: the sudden change in the demand of customer in the respect of selection of product can cause the business loss. An other University introduces a new course of study in-expensive fees structure Change in government policy: The sudden change of government policy such as monetary or taxes also causes risk to business By: Musa Farooqi

32. Business Risk Use of modern techniques of production: In case of installing heavy machinery and begin to use modern techniques or production hence this brings lower the per unit cost of production of goods, the similar small organization which is unable to introduce heavy machinery suffers from loss Human causes: business loss may also occur due the theft, forgery, lavish etc By: Musa Farooqi

33. Minimizing Business Risk • Market Research • Production of goods according to the new techniques • There should be effective advertisement for the sale of goods • A businessman can also minimize the risk by insuring his goods against fire, theft etc By: Musa Farooqi

34. Problems before establishing a new business Selection of business: Careful consideration should be made before selection of a new business as once a business is established, then it becomes difficult to change, so detailed investigations and utmost care should be taken up in the selection of business Demand for the product: Both the present and future demands of customers must be examined. Incase of irregular, seasonal and uncertain demands, the business will be low By: Musa Farooqi

35. Problems before establishing a new business Size of business unit: The scale of business is an important factor to be considered before establishing a business. Per the scale of business, the exact amount of finance, machinery, human resources and etc should be arranged accordingly Location: The selection of a suitable place for the establishment of a business is utmost importance for the success of a business. The availability of raw materials, trained labor, banking facilities, telephone, gas, cheap transport, etc By: Musa Farooqi

36. Problems before establishing a new business Selection of staff: A new business has to acquire adequate staff both skilled and unskilled for the operation of a business. The right person for the right job Office equipment: The provision of necessary materials such as telephone, vehicles, chairs, tables, computers, printers, etc Fulfillment of legal requirements: The legal requirements such as registration, standardization for product, ISO certified etc should be done effectively before establishing a business By: Musa Farooqi

37. Business Organization The two terms “Business” and “Organization” Business: The sharing of goods or services for the profit Organization: The combination of two or more than persons working for the same aim is called organization. Organization generally divided into two parts • Materialorganization 2. HumanOrganization Material organization: It is composed of materials such as; raw materials, tools, capitals, etc Human Organization: It is composed of human resources, the manpower, right person for the right job Business Organization: The combination of materials along with human, carrying a business is called business organization By: Musa Farooqi

38. Scope of Business Organization An organization is needed to determine what each person will do and how much authority each will have. Sole proprietorship business: The owner is the head. He is the decision figure. He is organizer, financer, operator, controller etc Partnership of business: Each partner is the decision holder in the area of their responsibilities. Company form of business: An organization chart of responsibilities is prepared. The duties and responsibilities of the personnel employed are defined, procedures are laid down By: Musa Farooqi

39. Importance of Business Organization • Product growth • Efficient use • Technological improvements • Creative thinking • Use of skilled salesman • Quick decisions • Recognition of problem • Fixing of responsibilities • Feed back • Marketing functions • Minimum costs By: Musa Farooqi

40. Main Social Responsibilities of business to society Along with earning profit, business should has to shoulder the social responsibilities. Thus self-interest of earning profit and promotion of human will being should go together in business. The main obligations of business in brief are; A: Obligations to itself • Planning the business with foresight and honestly • Earning reasonable profit through lawful means • Keeping steady expansion and growth of business • Serving the society with vigor and zeal By: Musa Farooqi

41. Main Social Responsibilities of business to society B: To the shareholders • Fair and judicious use of capital • Payment of proper dividends • Holding annual meetings with the shareholders C: To the employees • Fair remuneration • Treating workers as human beings • Providing healthy work environment • Developing the skill of workers through proper education and training • Provision of retirement benefits • Proper motivation of the employees By: Musa Farooqi

42. Main Social Responsibilities of business to society D: To the suppliers of inputs • Prompt payment • No undue discrimination among suppliers • No harassment E: To the customer • Provision of goods in adequate quantity • Maintaining the standard and quality of goods • Changing reasonable prices • Attending complaints of the customers promptly • Bringing new and better products through research By: Musa Farooqi

43. Main Social Responsibilities of business to society F: To the government • Payment of due taxes • Observing the rules of enforced by the state from time to time • Donations to community development • Following the objects and ideals of the state • Supporting and strengthening the free enterprise system G: To the neighborhood • Must not pollute air and water • Should not misuse the local infrastructure • Maintain friendly relations • Contributing liberally to the uplift of the locality particularly in welfare institutions By: Musa Farooqi

44. Qualities of a successful businessman Business of today is full of challenges and complex due the fast changes of scientific and technological development. The businessman has to acquire the basic developing skills for effective organization of the business units. The basic personal skills or qualities which a good businessman must possess are as under Knowledge of business: A business man must have knowledge of trade, finance, marketing, income, tax laws which is important for the smooth running of business in effective way. Ability to plan and organize: Planning and organizing are backbone for the successful business By: Musa Farooqi

45. Qualities of a successful businessman Foresight: The businessman has an eye on the past performance of his business, its capacity to produce for the future demand and his products etc. The success of business lies in the ability to predict the future demands on current and past ability. Ethical standard: The ethical criteria should be kept in consideration for the successful business. A businessman who uses unethical practices will soon find himself without customers By: Musa Farooqi

46. Qualities of a successful businessman Initiative and creative: A business which creates and innovate in product for the facility of goods can find way in the market. Being innovative and creative is a priceless asset in the business world Steadfast and courageous: A businessman should be steadfast during the loss. He must have the tolerance to bear the initial setbacks and then will have close to the business soon By: Musa Farooqi

47. Qualities of a successful businessman Adaptability to changes: As the external environment is changing rapidly due new technology and science. The business must absorb the changes. Industrious: A business man must be cool and workaholic, the continuous hard-working provides success business Soundandfinancialmanagement: The cash inflow and out flow should be properly controlled by the business man as larger the business grows, the wider should be the source of finance available to. Incase of adequate capital is available but the entrepreneur has not the ability for sound management, the business will soon go into liquidation By: Musa Farooqi

48. Qualities of a successful businessman Technicalskills: For the efficiencies of business, the concerned business man should have the knowledge for carrying out and completing a particular job which has undertaken to perform Teamspirit: Team work is important for the competitive advantage, to build team work, the temper, attitude, behavior should be studied carefully and act accordingly By: Musa Farooqi

49. Qualities of a successful businessman Conceptualskill: A business man must have the big picture of organizationin consideration Honesty: A businessman should be honest in dealing with others By: Musa Farooqi

50. Difference between business, profession, and employment Business: It is an organized activity used to produce goods services to the society for profit. It is composed of many activities such as; purchase, sale, transport, finance etc. Business is useful for the society in the following ways. • Provides need materials to the people • It makes the income of people by providing the opportunity of employment • The research makes the best use of scarce of the country • Develop the country in the regard of economy • Improve the standard living of people By: Musa Farooqi