BBA 1st Semester Business Organisation PDF

# Business Organisation BBA 1st Semester ## Maa Omwati Degree College Hassanpur - Exam Notes - Session:2021-22 - Subject: -Business Organisation - CLASS: B.B.A 1st Semester ## Business Organisation - Paper Code: BBA-101 - External Marks: 80 - Internal Marks: 20 - Time: 3 hrs ### Unit I - Busine...

# Business Organisation BBA 1st Semester ## Maa Omwati Degree College Hassanpur - Exam Notes - Session:2021-22 - Subject: -Business Organisation - CLASS: B.B.A 1st Semester ## Business Organisation - Paper Code: BBA-101 - External Marks: 80 - Internal Marks: 20 - Time: 3 hrs ### Unit I - Business - Concept, nature and scope, business as a system, business objectives, business and environment interface, distinction between business, commerce and trade ### Unit II - Forms of business organization - Sole proprietorship, partnership, joint stock company, types of company cooperative societies; multinational corporations ### Unit III - Entrepreneurship - Concept and nature; entrepreneurial opportunities in contemporary business environment; process of setting up a business enterprise; choice of a suitable form of business organization, feasibility and preparation business plan ### Unit IV - Government and business interface; stock exchange in India; business combination - concept and causes; chambers of commerce and industries in India FICCI, CII Association ## Business: An Introduction - **Economic Activities**: Business, profession, employment - **Human Activities** - Everybody remains busy in doing some activity as the others, like - Some people are busy in producing things - Some people are busy in buying and selling - Some are busy in the profession of law - Some are treating patients - Some are serving in factories - Some people are serving in Govt. offices - Some people are busy in propagating religion - Some people are busy in doing social work - All these activities are called human activities. If we look these activities carefully they can be divided into two parts. - There are some activities which are undertaken to earn money, and there are some other activities which are undertaken not for earning money, but for mental satisfaction. - The first type of activities are called **economic activities** while the second type of activity are called **non economic activity**. ## Human Activity - **economic activity** - business - profession - employment - **non economic activity** - religious - social work - etc. ## Economic Activity - **Business**: Business refers to that economic activity which is conducted on a regular basis to earn profit through production and sale of goods and services. - **profession**: Profession refers to that economic activity conducted by a person having some special knowledge and skills which are used impartially to serve different sections of the society. This includes legal practice, medical practice etc. - **Employment**: Employment is a kind of contract under which one works for others in lieu of remuneration, for example, working in factories or a government office. <start_of_image> Diagrams: - A diagram of Human Activities with Economic Activity and Non-Economic Activity branching out. - A diagram of Economic Activity with business, profession, and employment branching out. ## Business: In Depth ### Definition: - "Business may be defined as human activity directed towards producing or acquiring wealth through buying or selling goods." - **L.H. Haney** ### Characteristics of Business - an economic activity - exchange of goods and services - Regularity in Dealing - Profit motive - Elements of Risk - Creation of Utility - consumer satisfaction ## Profession ### Definition: - Profession is that occupation in which one professes to have acquired specialized knowledge which is used either in instructing, guiding or advising others. - **Websters Dictionary** ### Characteristics of Profession - Body of specialized knowledge and technique - Formalized method of acquiring training and experience - Establishment of representative professional association - Code of conduct - Priority of services over economic consideration ## Employment ### Definition: - Employment refers to that economic activity under which people work for others and receive remuneration in lieu thereof. ### Characteristics of Employment - Service to others - Personal service - Agreement - Servant - no need of capital - no risk - nature of employer ## Objectives of Business - **Economic Objectives** - Profit making - Creation of customers - Innovation - **Social Objectives** - High quality goods at fair price - Contribution to community development - Fair return to investors - providing employment. - **Human Objectives** - Human deals to employments - Participation of management - Development of human assets - **National Objectives** - Proper use of National Resources - Ensuring Social Justice - To obey the national priorities - Regular payments of taxes ## Social Responsibility of Business ### Definition: - "Social responsibility of business means responsibilities of business towards Customers, workers, shareholders and the community." ### Social Responsibility of Business towards various parties - **Towards Owners/Investors** - To ensure safety of the capital - To ensure proper dividend - Timely payment of dividend - Information about the progress of the organization by presenting correct accounts - To ensure the proper utilization of invested capital - To treat different types of shareholders equally. - **Towards Employees** - Giving them appropriate remuneration - Providing clean working atmosphere - Respecting mutual's dignity - Giving them a share of profit - Giving security of service - Giving participation in management - Adopting incentive giving system - Solving labour problems in time - Providing for their education and training - Providing opportunity for promotion and development. - **Towards Consumers** - It is meaningless to think about business without consumers. - Consumers are as important for business as it is equally important for business to perform some functions for them. - To make available good quality goods at cheap rate - To bring out reality in advertisement - To avoid adulteration - To provide after sale service - To make goods available to the taste of the consumer - To be civil and polite to consumers - **Towards government** - To ensure the progress of the country government makes certain laws and creates a tax structure. - A manager should have the following responsibilities towards the governments: - To pay taxes honestly - To observe rules laid down by the Govt. - Helping the Government by establishing new industries - Not to exploit government machinery by unfair means. - **Towards Community** - A manager is himself a social being and the people of society have the following expectations from him: - To make available opportunities for employment - To avoid polluting the environment. - To contribute to the raising of the standard of living - To be a partner in social development by establishing charitable institutions. - Not to resort to indecent advertisement. ## Scope or Classification of Business Activity - All the activities which are undertaken in connection with the production of things and carrying them from the place of production to the place of consumption are called business. - In short the "activities connected with the production are called industry and the activities connected with the transport of goods produced from the factories to the consumer are called commerce." ### Types of Industries - **Primary Industry** - _Agriculture_ - Genetics - Animal husbands -Poultry farming - Plantation - _Extractive Industry_ - Mining - Quarrying -Fishing - Logging - **Secondary Industry** - _Manufacturing Industry_ - Sugar - Cement - Textile - _Construction Industry_ - Buildings - Roads - Bridges - **Service Industry** - _Banking_ - _Insurance_ - _Advertising_ - _Warehousing_ - _Transportation_ ## Commerce - Commerce refers to the sum total of all those activities which are engaged in the removal of hindrances of person, place, time, risk, finance, and information in the exchange of commodities. Diagram: - A diagram showing place of production, commerce, and place of consumption. ### Components of Commerce - **Trade** - **Auxiliaries to trade** - **Commerce** ### Trade - Trade means buying and selling of goods with the purpose of getting profit. - In other words trade means exchange of goods and services for the purpose of mutual profit of both buyer and the seller. - Home Trade - Local level - National level - Foreign Trade - Imported - Exported #### Home Trade - When the buying and selling of things takes place within the national boundaries, it is called home trade. #### Local Trade - Local trade is limited to some village town or district. - This trade includes things of daily use and things of perishable nature, which could be fruits, sweets, milk, vegetables, etc. - This is trade on the local level. #### State Trade - When a trader starts trading above the local level and trades on the state level, it is called trade on the state level. - For example, a trade among different districts, like trade in coins, pulses, utensils, etc. - This is trade on the state level. #### Interstate Trade - When trade is carried on among different states of the country it is called interstate trade. - When a trader from Haryana trades with the traders from Uttar Pradesh, Punjab, Himachal, or any other state, this buying and selling is called interstate trade as it is trade on the national level. #### Wholesale Trade and Retail Trade - Both wholesale trade and retail trade have been shown in the end of the section ‘Home Trade’ which was followed by local level, state level, and national level. - This means that wholesale trade and retail trade are carried on at all the three levels of trade. #### Wholesale Trade - The wholesale trade means the buying of goods in large quantities from the producers or manufacturers or their authorized dealers and selling the same in small quantities to the retailers. - Later on, the retailers sell these things to the consumers as per their need. #### Foreign Trade - When the conduct of trade crosses the national boundaries and reaches the foreign lands foreign trade is born. - The importance of foreign trade is increasing everyday. - The reason is because no single country can produce all the things it requires. - Hence, it has to depend on other countries for something or the other. #### Import Trade - When a businessman of a country buys some goods from the businessman of another country, it is called import trade. #### Export Trade - When the trader of one country sells something to the trader of another country, it is called export trade. #### Entrepot Trade - When a country imports some goods from another country and then exports the same good to some third party (country), it is known as entrepot trade. ### Auxiliaries to Trade - Commerce includes not only trade but also various other auxiliaries or aids or subsidiary activities. - All those activities which are taken to overcome the hurdles appearing in the way of trade are called aids to trade. ### Hindrances - Hindrances of persons - Hindrances of place - Hindrances of time - Hindrances of risk - Hindrances of finance - Hindrances of information ### Solutions - Middlemen - Transport or warehousing - Communication - Insurance - Banking - Advertising ### Business and Environment Interface - "The analysis and diagnosis of the business environment is compulsory for the survival and growth of the business." - Business environment interface is the area in which the business and environment affect each other. - Business and its environment are closely interrelated and mutually interdependent. - Thus, for the successful operations and development of any business organization, it is essential to understand the environment for which the business organization is located. - The business organization is dependent upon its environment for the resources necessary for its existence. - On the contrary, the business organization provides goods and services as desired by the environment. ### Meaning of Business Environment - Business environment means the sum total of those factors which influences the business and over which business have no control. ### Characteristics of Business Environment - Totality of external forces - Specific and general forces - Inter-relatedness - Dynamic nature - Uncertainty - Complexity - Relativity ### Importance of Business Environment - First mover advantage - Warning signals - Taping useful resources - Coping with rapid changes - Assisting in planning and policy - Improvement in performance ### Components of Business Environment - **Internal Environment** - Objectives - Policies - Organizational structure - Management information system - Production method - Production capacity, etc. - **External Environment** - **Micro Environment** - Customers - Suppliers - Competitors - Public - Middlemen - Market intermediaries - **Marco Environment** - Economic Environment - Political environment - Social environment. - Legal regulatory environment - Technological environment ## Forms of Business Organisation - "From the association standpoint, the various forms of business organization are as such children whose father is economic expediency and whose mother is the law." - In the ancient times business area was conducted on a small scale and therefore sole trade was the most popular form of business organization. - Gradually, with the advancement of civilization and the corresponding increase in the human needs, business is now being done on a large scale. - This large scale of business has resulted in many problems such as the capital, management, responsibility, etc. - Similarly, government interference is being felt in the business of public interest. - The solution of all these problems gave birth to various forms of business organization. ### Meaning of Forms of Business Organisation - The forms of business organization are related with ownership, and ownership is a legal concept which determines the authority and responsibility of the owners. - The authority and responsibility of the owners keep changing along with the changing forms of ownership. ### Forms of Business Organisation - Sole trade - Partnership - Joint Stock Company - Cooperative Society - Public Corporation - Government Company ## Sole Trade (Proprietorship) - Sole trade is the oldest form of business organization. - All the present-day forms of business organization are developed from this system. - This is popular not only in India but also in foreign countries: "Sole proprietorship refers to that form of business organization which is owned by a single individual who is solely responsible for its management and receives all profits and losses." - According to **Dr. John A. Shubin, “Under the sole proprietorship forms of organization, a single individual organizes, has title to, and operates the business in his own name.”** ### Features/Characteristics of Sole Trade - Individual ownership - Sole management - Unlimited liability - Freedom in selection of business - Free from legal formalities - Secrecy - No separate legal entity of the business - Undivided risk - Close relationship between ownership and management - Suitable for some specialized businesses ### Advantages of Sole Trade - **Convenience:** The study of advantages of Sole Trade has been divided into two parts: - **First, economic advantages** - **Second, social advantages** ### Economic Advantages - Easy formation - Quick decisions - Personal contact with customers - Direct motivation - Personal control - Benefit of secrecy - Economical use of resources - Benefit of inherited goodwill - Increase in self-confidence - Effective coordination - Loan facilities - Savings of taxes - Minimum government intervention ### Social Advantages - Independent living - Decentralisation of economic power - Development of personality - Increase in employment - Healthy competition - Training to run big business - Base for big business - Development of small and cottage industries - Proper utilization of limited resources - Equal opportunity to all. ### Disadvantages/limitations of Sole Trade - Unlimited liability - Limited source of capital - Unbalanced management - Secrecy causes suspicion - Unstable existence - Loss due to hasty decision - Limited possibility of growth - Unsuitable for large businesses ### Suitability of Sole Trade - Where the scope of trade is local - Where personal attention is required - Where special personal skill is required - Where prompt decisions are essential. - Other situations ## Partnership Organisation - "When you are considering a partner, do not be in too great a hurry, give yourself time to test him. Choosing partners is like choosing a wife - marry in haste and repent at leisure - in either case, there is need for second thought and keen knowledge." ### Partnership - Partnership means that form of organization in which two or more than two persons willingly join and agree to run some lawful business. - They all invest capital in business - make use of collective managerial ability and share profit and loss among themselves. ### Definitions of Partnership - According to **Dr. J.A. Shubin, "Two or more individuals may form a partnership by making a written or oral agreement that they will jointly assume full responsibility for the conduct of a business."** ### Characteristics of Partnership - _Statutory Characteristics_ - More than one person - Existence of business - Contractual Relationship - Profit motive and sharing of profit - Principal-Agent Relationship. - _General Characteristics:_ - Unlimited liability - No separate individuality - Utmost good faith - Restriction on transfer of interest ### Types of Partnership - General and limited partnership - Partnership at will and particular partnership - Legal and illegal partnership. ### Evaluation of Partnership - **Merits of Partnership** - Easy Formation - More financial resources - Balanced Decisions - Benefits of Specialization in management - More Flexibility - More credit facility - Secrecy - Personal Contact - Self motivation - Coordination in different activities - Benefits of unlimited liabilities - Division of risk - **Demerits of Partnership** - Lack of prompt decision - Difficulty in transfer of interest - Lack of harmony - Lack of continuity - Limited resources - Risk of implied authority - Lack of public faith - More wastage ## Joint Stock Company - "Members may come, members may go, but the company goes on forever" - Just as the partnership organization came into existence to remove the weakness of the sole trade, similarly a new business organization was born in the form of company organization with a view to eliminate the weaknesses of partnership organization. ### Meaning of Company - Company is that form of business organization which is willingly established by some person for earning profit under the company act. - Many persons jointly invest capital in a company and therefore, it is also called joint stock company. - Its capital is divided into transferable shares, which means that its shares can be generally bought and sold. - Liability of its members is limited. The business of a company is stable and its business is run through a common seal. ### Definitions of Company - According to **Prof. L.H. Kaner, "Company is an artificial person created by law having separate entity with a perpetual succession and common seal."** ### Essentials or Characteristics of Company - Incorporated association of persons - Artificial legal person - Separate legal entity - Perpetual succession - Limited liabilities - Common seal - Transferability of shares - Separation of ownership and management - Limitation of action - Company is not a citizen ### Advantages of Company - Huge financial resources - Efficient management - Scope for growth and expansion - Limited Liability - Continuity - Share transfer facility - Division of risk - Public confidence - Benefit to industrial research - Democratic organization - Encouragement to small savings - Avenues of investment for financial institutions - Facility to get loan ### Limitations of Company Organisation - Difficulty in Formation - Excessive government control - Oligarchic management - Lack of motivation - Delay in decisions - Conflict among investors - Lack of secrecy - Encouragement to Monopoly ### Types of Companies - Company can be classified from different points of view in the following ways. - **Classification on the Basis of Incorporation:** - _Chartered Company_ - _Statutory Company_ - _Registered/Incorporated Company_ - **Classification on the Basis of Liability of Members:** - _Company with Unlimited Liability_ - _Company limited by Shares_ - _Company limited by Shares - Guarantee_ - **Classification on the Basis of Ownership:** - _Government Company_ - _Holding Company_ - _Subsidiary Company_ - **Classification on the Basis of Nationality** - _Indian Company_ - _Foreign Company_ - **Classification on the Basis of Transferability of Shares** - _Private Company_ - _Public Company_ - _Privileges and exemptions available to a private company_ ### Privileges and Exemptions available to a private company - Minimum number of members - No restriction on allotment of shares - Filing of prospectus or statements in lieu of prospectus - Commencement of business - Number of Directors - Statutory Meetings - Quorum of meetings - Qualification shares - Retirement of Directors - Loan to Directors - Managerial Renumeration - Appointment of Directors - Proxy of members - Further issue of shares - Inspection of Annual Accounts ## Cooperative Societies - “Cooperative is not simply a form of partnership, but a movement for the uplift of people with limited means.” ### Meaning of Cooperative Organisation - Cooperation means working collectively. - The basic principle of cooperation is inherent in the statement “Each for all and all for each.” - In other words, cooperative organization is based on the principle that the small savings of different people should be collected, through a society, to suffice funds and help the needy members through giving them loans and achieve the benefits of a large-sized trade by purchasing goods in large quantity. - The registered takes place under the Cooperative Societies Act 1912 or under the state cooperative societies acts. - Bengal, Bihar, Orissa, Maharashtra, and Chennai have their own societies act. ### Definition of Co-operative Organisation - According to **Professor H.Calvert: “Cooperation is a form of organization, wherein persons voluntarily associate together as human beings on a basis of equality for the promotion of the economic interest of themselves.”** ### Characteristics of Co-operative Organisation - Voluntary Association - Open membership - Equality of voting rights - Democratic management - Service motive - Disposal of surplus - Cash trading - Compulsory Registration - Separate legal entity - Arrangement of finance - Government control ### Advantages of Co-operative Organisation - Easy formation - Limited liability - Stability - Democratic management - Lesser operating expenses - Tax advantages - State patronage - Supply of goods at a cheaper rate - Check on other businesses - Economic decentralization ### Limitation of Cooperative Organisation - Lack of capital - Incompetent management - Cash trading - Political interference - Lack of motivation - Lack of public confidence - Lack of secrecy - Mutual disputes ## Multinational Company - “Multinational companies help increase competition and remove domestic monopoly, which is evident from their name, that companies which are having their business in more than one country. - In our daily life, we hear about many such companies and also use their products in our daily life. - They include Ranbaxy, Wipro, Tata Motors, Asian Paints, Moser Baer, Cadbury, etc. - These are those multinational companies whose products are used in almost all the households". ### Meaning of MNCs - A multinational company which is registered in one particular country but whose products are produced and sold in various other countries. - They are also called global corporations. ### Definition of MNCs - According to **PBM, "A world trade corporation president, a multinational corporation is the one that 1. operates in many countries, 2. carries out research, development, and manufacturing in those countries, 3. has a multinational management and 4. has a multinational stock ownership."** ### Features of MNCs - Centralised management - Worldwide spread of business - Better quality products. - Large size - Access to International market - Special attention to advertisements ### Evaluation of MNCs - **Advantages of MNCs** - Increase in foreign investment - Increase in employment - Proper use of resources - Technical development - End of local monopoly - Managerial development - Increase export - **Disadvantages of MNCs** - Danger for Domestic industries - Repatriation of profits. - Intervention in local politics - Exploitation of material resources - No benefit to poor people ## Entrepreneurship - “Entrepreneurship besides providing self-employment to the entrepreneur also create opportunities for employment and profession.” - “Before going into the detailed study of entrepreneurship it is important to understand the terms having some analogy Entrepreneur, Entrepreneurship, and Enterprise.” ### Entrepreneur - It refers to the person who set up his/her business unit. ### Entrepreneurship - It refers to the process of setting up one’s own business unit. ### Enterprise - It refers to the outcome of entrepreneurship. Diagram: - A Diagram showing : - *Entrepreneurs* - *Entrepreneurship* - *Enterprise* ## Concept of Entrepreneurship - “Ship is one of the four major factors of production such as Land, Labour, and Entrepreneurship.” - There are many definitions of entrepreneurship. - If we examine the common elements of these definitions, we might find the following features ### Nature/Feature of Entrepreneurship - Systematic activity - Lawful and purposeful activity - Innovation. - Organisation of production - risk taking - Gap filling - Adaptability ## Need for Entrepreneurship - Facilitating the process of development - Sustaining the development - Providing Employment opportunity ## Functions of Entrepreneurship - **Function of Ent in relation to Economic development:** - Contribution to Gross Domestic product - Capital formation - Generation of Employment - Generation of Business opportunities for others - Improvement in economy efficiency - Increase the spectrum and scope of economic activities - Impact of local communities - Fastening the spurt of exploration, experimentation and daring - **Functions/Roles of Entrepreneurs in Relation to their Enterprise** - Developing exchange relationship - Perceiving market opportunity - Gaining command over scarce resources - Purchasing inputs. - Marketing of products and responding to competition - Political administration - Dealing with public bureaucracy - Managing human relations within the firm - Managing customers and suppliers’ relations - Management control - Managing finance - Managing production - Technology - Overseeing factory - Industrial engineering - Upgrading of the production process and product quality - Introducing new products ## Entrepreneurial Competencies - Initiative - Sees and acts on opportunities - Persistence - Information seeking - Concern for high quality of work - Commitment - Efficiency orientation - Systematic planning - Problem solving - Self-confidence - Assertiveness - Persuasiveness - Use of influencing strategy - Monitoring - Concern for employee welfare ## Choice of Form of Business Organisation - It can be said that sole trade is suitable for a small-scale business, partnership for a middle level business and company for a large-scale business. - Business organization has many forms such as sole proprietorship, joint Hindu family business, partnership, cooperative society, company, etc. - The question arises about the best form out of all these because every form of business organization has its advantages. - Therefore, no clear answer to this question can be given. - A particular form is successful in a special situation, while in other situations some other form may be successful. - **Prof. L.H. Haney has suggested that the following facts should be kept in mind:** - Capital requirement - Ability of owners - Facility in formation. - Continuity and stability - Tax liability - Managerial needs - Flexibility - Scale of Production - Legality - Need of Secrecy ## Basic factors to be considered for starting a business enterprise. - Selection of Business - Scale of Business - Place of Business - Forms of Business - Determination of Organisation Structure - Arrangement of personnel - Financial planning - Determination of Quantity of Capital - Arrangement of fixed Assets- Plant layout - Launching of Business ## Preparation of Business Plan - The business plan can reduce the fear of facing an unknown future. ### Meaning of Business Plan - The business plan is the formal written expression of the entrepreneurial vision. - It communicates more about the top management. - Entrepreneurs are judged by the way they organize, write and present the business plan. - Therefore, it must be concise, complete and informative. ### Elements of Business Plan - **Preliminary Section** - Cover page - Table of contents - Executive summary - Type of business - Company summary - Management. - Product/Service and Competition - Funds requested - Financial summary: - Financial statements - Financial resources - Exit - **Major Section** - Background and purpose - History - PMT configuration - The Resource based concept - Objectives - Short term - Long term - Market Analysis: - Overall market - Specific market - Competitive factors - Micro-environmental influences - Production Operations Strategy: - Production process - Resource Requirements - Quality assurance - Marketing: - Customer orientation - Marketing strategy and resources - Sales/office costs - Financial Summaries: - Financial Statements - Organisation and management - Key personal resources - Human Resource Management Strategy - Ownership - Form of business - Equity position - Deal Structure - Risk Factors - Summary and conclusions - Scheduling. ## Government and Business Interface - Both private and public sectors are necessary for the successful running of an economy just as two blades are essential to make a pair of scissors. ### Meaning of Public Enterprise of Public Sector - Public/Government enterprise means those enterprises which are established by the governments and whose ownership and management are also in the hand of the management (government). - These enterprises are either entirely owned by the government or their maximum ownership lies with it. - These are known by the name of State enterprise, public enterprise or public sector undertakings, government undertakings, etc. ### Features of Public Enterprise - State ownership - State control - Financial freedom - Service motive - Public accountability - Bureaucracy in management - Harmonious industrial relations - Useful for all the services - Monopoly in few sectors ### Rationale of Government in Business - Planned economic development - Sound industrial base - Balanced economic development - Need of finance for economic development - Decentralisation of economic power - Generation of employment - National self reliance - Model employer - Nationalisation of Sick Enterprises - Increase in healthy competition - Utilisation of natural resources - To stimulate research ### Forms of Public Enterprise - **Departmental Undertakings**: This is the most popular form of managing the public enterprise. - These enterprises are necessarily fully owned and controlled by the Government (central, state or local.) - And their management and control are with the ministry concerned. - The secretary of the department is its chief executive officer who works under the guidance and control of the ministry. - Every year its budget is prepared and government approval is obtained. - A report regarding the activities of these enterprises is prepared and sent to the Parliament/State Assembly. - The ministry concerned with the departmental organization is accountable for the success or failure of the department. #### _Features of Departmental Undertakings_ - Formation - Ownership - Management - Financing - Appointment - Separate Existence - Administrative autonomy #### _Merits of Departmental Undertakings_ - Easy formation - Effective control - Increase in government income - Decrease in tax burden - Easy financing - Proper utilization of funds #### _Limitations of Departmental Undertakings_ - Lack of prompt action - Lack of flexibility - Lack of incentive - Lack of competitive feelings - Increase in tax burden - More political interference - Red tapeism ## Statutory Public Corporation - Public corporations fall in the category of incorporated enterprises which are established under a special act of the parliament (state), assembly which provides for its management and method of running them. - Their powers and privileges are determined and their relations with the government departments are specified. #### _Features of Statutory Public Corporations_: - Public corporations have separate legal existence. - This means that they can purchase assets in their name, have contracts with other parties, and can be sued. - Their entire capital is provided by the government. - _Examples of statutory public corporations in India include:_ - The Life Insurance Corporation of India - The Reserve Bank of India - The Industrial development Bank of India - The State Bank of India, etc. #### _Features of Public Corporations:_ - Formation - Ownership - Management - Financing - Appointments - Separate Legal Equity - Administrative Autonomy. #### _Merits of Public Corporations_ - Autonomy in operation - Quick decisions - Efficient management - Social service motive - Protection of public interests #### _Limitations of Public Corporations_ - Incomplete operational autonomy - Lack of competitive feelings - Ignore service motive ## Government Company - Government company means a company which has a minimum of 51% of the paid-up share capital in the name of the central government or state government or partially the central government and partially one or more state governments. - For this way the government becomes a major shareholder in the enterprise, and makes use of all the rights of a shareholder through the medium of the ministry concerned or the Cabinet or the head of the state. ### _Features of Government Companies_ - Formation. - Ownership - Management - Financing - Appointment - Separate Legal Entity - Administrative Autonomy ### _Limitations of Government Companies_ - Incomplete operational autonomy - No continuity in policies - Lack of professional efficiency - Fear of public accountability ## Changing Role of Public Sector - No one can deny the fact that public undertakings are the very basis of economic development of a country. - At the same time, it is also true that they have many shortcomings, and it has becomes necessary to remove their shortcoming and difficulties for balanced economic development of the country. - The following steps are taken by the government: - Reducing the number of reserved industries - Professional Management - Implementation of memorandum of understanding (MOU concept) - Privatization of public enterprises - Revival through Board for Industrial and Financial Reconstruction (BIFR) - Provision for National Renewal Fund (NRF) ## Stock Exchange - “Stock exchange is a barometer of the economic development of a country.” - The economic development of any country depends on industries established in that country. - The more the industrial growth of the country, the more the country will be economically developed. - The question is how to measure the economic development of a country. - The answer is through the stock exchange. - Generally, all big business units are connected with stock exchange. - The reflection in the development of these business units can be seen in this market. - The commodity market does not take place in the market. **“The Wholesale trade means the buying of goods in large quantities from the producers or manufacturers or their authorized dealers and selling the same in small quantities to the retailers. Later on the retailers Sell these things to the consumers as per their need.”** - Foreign Trade - When the conduct of trade crosses the national boundaries and reaches the foreign lands, foreign trade is born. The importance of foreign trade is increasing everyday. The reason is because no single country can produce all the things it requires. Hence it has to depend on other countries for something or the other. ### Meaning of Stock Exchange - Stock exchange means an organized market where securities issued by companies, government organizations and semi-government organization are sold and purchased. - Securities include shares, debentures, bonds, etc. ### Definition - “Stock exchange are market place, where securities that have been listed therein, may be bought and sold for their investment or speculation.” - By Pule. ### Features of Stock Exchange: - Organized Market - Dealing in Securities issued by various concerns - Dealing only through authorized members - Necessary to obey rules and bye-laws. ### Functions of Stock Exchange: - Providing liquidity and marketability to existing securities - Pricing of securities - Safety of transactions - Contribute to economic growth - Spreading equity cult - Providing scope for speculation ## National Stock Exchange of India (NSEI) - The NSE has been established in the form of a traditional competitor stock exchange. - It is an exchange where business is carried on in the securities of the medium and large-sized companies and the government securities. - The stock exchange is fully competent. - The NSEI was established in the form