POBM Unit 1 Notes PDF

# Principles of Business & Management ## Unit 1: Business and its Environment ### Meaning of Business * Business is an organized effort by an individual or a group of individuals. * It is a systematic attempt by business persons to produce goods and services and sell them in the market, to reap t...

# Principles of Business & Management ## Unit 1: Business and its Environment ### Meaning of Business * Business is an organized effort by an individual or a group of individuals. * It is a systematic attempt by business persons to produce goods and services and sell them in the market, to reap the reward by way of profit. * It satisfies multiple and complex needs of the society. ### Concepts of Business * **Business as an economic activity** * The object of business is to sell goods or services for profit. * Economic activities are undertaken to generate an income. * Business is an economic activity because it is carried on as a means of earning money. * Businessmen make money by producing and selling commodities which help to satisfy human wants. * Business activities involve the use of scarce resources, such as raw materials, labor, capital, and other factors of production. * A business-man provides the necessary funds from his personal and other sources to meet the capital requirements of his business. * Business activities satisfy the needs of the public by making available goods and services. * **Business as an economic unit** * A business firm is essentially a transformation unit. * It transforms input into outputs of goods or services, or a combination of both. * The nature of input requirements and the type of output flows are determined by the size, structure, location, and efficiency of the business firm under consideration. * Business firms may be of different sizes and forms. * They may undertake different types of activities such as mining, manufacturing, farming, trading, transport, banking, etc. * The motivational objective underlying all these activities is the same viz., profit maximisation in the long run. * Profit is essentially "a surplus value" - the value of outputs in excess of the values of inputs or the surplus of revenue over the cost. * A business firm undertakes the transformational process to generate this "surplus value". * The firm can grow further if the surplus value is productively invested. * The firm, therefore, carefully plans the optimum allocation of resources (i.e., men, money, material, machines, time, energy, etc.) to get optimum production. * The entire process of creating, mobilization, and utilization of the surplus constitutes the economic activity of the business firm. * **Business as a decision-making process** * Decision-making involves making a choice from a set of alternative courses of action. * Choice is at the root of all economic activity. * The question of choice and evaluation arises because of the relative scarcity of resources. * If the resources had not been scarce, an unlimited amount of ends could have been met, but the situation of resource constraint is very real. * A business firm thinks seriously about the optimum allocation of resources because resources are limited in supply and most resources have alternative uses. * The firm, therefore, intends to get the best out of given resources or to minimize the use of resources for achieving a specific target. * In other words, when "input" is the constraining factor, the firm's decision variable is the "output". * And when "output" is the constraining factor, the firm's decision variable is the "input". * Whatever may be the decision variable, procurement or production, distribution or sale, input or output, decision-making is invariably the process of selecting the best available alternative. * That is what makes it an economic pursuit. ### Objectives of Business All business activities are guided by objectives. They are further classified as **A. Economic Objectives** and **B. Social Objectives**. #### A. Economic Objectives: * **Earning Profit**: Profit is required for the survival of the business and for its growth. * **Searching New Customers**: Business organizations have to work hard to create new customers and also to maintain existing customers. * **Innovations**: It is a development or positive change which results into improvement in product or process of production. It has to spend money on R&D (Research and Development), market survey, use of technology etc. * **Best Possible Use of Resources**: Resources are scarce and have alternative uses. They should be used to their maximum and should not be wasted. Optimum use of resources ultimately leads to increasing profits. #### B. Social Objectives: * **Supplying Quality Products**: Every business has to provide quality products to its customers. Quality means a combination of purity, safety, durability, utility etc. * **Avoiding Unfair -Trade Practices**: Unfair trade practices like black marketing, misleading advertisements, wrong measurement etc., should be avoided. It is important for survival and growth of a business unit. * **Employment Generation**: Business is a socio-economic institution. Business should create jobs for skilled and unskilled people. It should provide employment opportunities to economically backward and divayang persons. * **Welfare of Employees**: Skilled and unskilled workers are the part of the society. So if employees are properly taken care of, it brings welfare to the society. This can be achieved by providing fair and regular remuneration, good working conditions, impartial personnel policies, offering incentives etc. * **Help to Solve Social -Problems**: Due to rapid industrialization, many social problems arise like traffic jams, growth of slums, air and water pollution etc. Businesses should be aware of this and should try to reduce them. * **Contributing to the Welfare of the Society**: Business houses should take care of the general welfare of the society. For that they should give donations for a good cause, offering scholarships for higher education etc. ### Latest trends in Business: #### Trend 1: Sustainable, Resilient Operations * **Every organisation must seek to eliminate or reduce the environmental costs of doing business.** * Decarbonizing the supply chain is a sensible place to start, but forward-thinking businesses are looking beyond the supply chain to improve sustainability across all business operations. * And of course, sustainability is linked to resilience, since resilience means being able to adapt and survive for the long term. * Any business that ignores sustainability is unlikely to do well in this age of conscious consumption. **The Benefits of Sustainability in Business:** * **Reduces Business Costs**: "Greening" your business takes an initial investment, but, over time, you'll save money by prioritizing sustainability. You can reduce your business costs by going green. * **Improves Business' Reputation**: Reputation management in business is about establishing a good image by aligning messages with actions. People view sustainability as a plus, and companies with green values are eager to showcase them because of that fact. * **Provides Competitive Advantage**: Companies with sustainability baked into their strategy perform better than those that don't. * **Increases Bottom Line**: You can earn more money and boost your bottom line by making your business more sustainable. #### Trend 2: Customer Relationship Management (CRM) * CRM is about acquiring, developing and retaining satisfied loyal customers, achieving profitable growth, and creating economic value in a company's brand. * CRM is an approach that integrates people, processes and technology to maximize the relations of an organization with its customers. * Firms make use of the development in communication and technology to collect information regarding product and its marketing to meet expectations of people. * Firms keep on developing customer's database to update their needs and designing marketing strategies to satisfy such needs. **Benefits of CRM are as follows:** * **Provide Better Customer Service**: CRM system gives advantages such as the ability to personalize relationships with customers. CRM maintains Customer Profiles, thereby treating each client as an individual and not as a group. * **Increase Customers Revenues**: Regular updation of customer information will help a firm to keep on revising its product and marketing strategy. Adaptation of product and its marketing to match the changing needs of a customer make the organization customer friendly resulting in increase the sales and revenue. * **Discover New Customers**: CRM systems help the organization in identifying potential Customers by keeping a track of the profiles of their existing client. * **Customer Loyalty**: Firms can gain loyalty to the customer by regularly understanding their needs and meeting their needs. * **Help Sales Staff Close Deals Faster**: CRM helps the business in closing deals faster through quicker and more efficient responses to customer needs and customer information. #### Trend 3: Business Process Outsourcing (BPO) * Business Process Outsourcing, popularly known as BPO, is the business strategy where one company hires another company to perform a certain task for them. * They outsource a certain job. * It essentially entails outsourcing one or more non-core business activities or processes to an external service provider. * There are two parties involved, the client company (the outsourced) and the external service provider or the vendor (the outsourcer). **One point to note is that only non-core activities are usually outsourced.** The companies do not part with their core competencies, they maintain all their focus on these like manufacturing, marketing etc. However non-core services like after sales service, customer relations, supply chain management, real-time accounting etc. can be outsourced to BPOS. **Advantages of a BPO:** * **Flexibility**: Outsourcing non-core activities to a BPO allows a company to be far more flexible. Firstly, the company does not have to invest in additionally fixed assets and can convert them to variable costs. * **Cost Effective**: Outsourcing some of the business processes and activities can be very cost effective for the client company. * **Speed**: One of the biggest advantages of BPOs is that they increase the speed of the business processes outsourced to them. * **Skilled Manpower**: When you outsource one of your business activities to a BPO, you are insured of exemplary services provided by skilled manpower. #### Trend 4: Knowledge Process Outsourcing (KPO) * Knowledge Process Outsourcing (KPO) is when difficult, high-level tasks get outsourced by a company to a vendor. * So the activities which the company will be outsourcing are core activities. * They require skills, technical knowledge, and expertise. * So a company outsources these tasks to another company (vendor) or a subsidiary company located in the same country or sometimes offshores for cost purposes. * KPO involves more core activities with specialised and technical work. The company outsources to KPO's for their skilled labour and subject expertise, not to lower their work burden. **Advantages of KPO:** * **Cost-effectiveness**: One of the biggest advantages of a KPO is obviously the cost advantage. * **Access to the best talent**: KPO's provide the company with the best, most knowledgeable and skilled professionals available in the global talent pool. * **Focus**: Outsourcing some of the processes, allows the company to focus on its core functions. * **Better Utilisation of Resources**: If the company outsources the process that is not at the core of their business strategy, it can use the resources it saves in better places. #### Trend 5: Digital Economy * Digital economy is defined as an economy that focuses on digital technologies, i.e. it is based on digital and computing technologies. * It essentially covers all business, economic, social, cultural etc. activities that are supported by the web and other digital communication technologies. * There are three main components of this economy, namely: e-business, e-business infrastructure, e-commerce. **Advantages:** * **Promotes Use of the Internet**: The massive growth of technology and the internet that began in the USA is now a worldwide network. So there is a dramatic rise in the investment on all things related - hardware, technological research, software, services, digital communication etc. * **Rise in E-Commerce**: The businesses that adapted and adopted the internet and embraced online business in the last decade have flourished. * **Digital Goods and Services**: Gone are the days of Movie DVD and Music CD's or records. Now, these goods are available to us digitally. * **Transparency**: Most transactions and their payment in the digital economy happen online. Cash transactions are becoming rare. This helps reduce the black money and corruption in the market and make the economy more transparent. #### Trend 6: Artificial Intelligence * Be it in the form of deep learning technologies, autonomous vehicles, or smart robots, artificial intelligence (or Al) is making its presence felt everywhere in the connected world. * The increasing volume and complexity of business data is driving the commercial adoption of artificial intelligence in business analytics tools in various industries. * The mainstream use of artificial intelligence and machine learning in business intelligence (or BI) is helping business enterprises to pull out actionable insights from large and complex datasets and deliver business recommendations that can be understood by any business user. **Here are a few ways in which businesses can avail of benefits of Al:** * **Automate business communication with customers through online chats, email marketing, and social media messaging that previously needed human agents.** * **Provide online shoppers with a personalised experience based on Al-driven data insights derived from customer behaviour and online purchasing patterns.** * **Achieve operational efficiency through various means including the adoption of Al-powered automation in inventory management and the use of artificial intelligence in robotics for automated hotel check-ins and in factory premises.** * **Make business predictions or sales forecasts based on customer data and buying patterns that can accurately estimate sales volumes, inventory management, and product demands.** * **Provide real-time help to customers where companies can use Al-powered mobile apps to communicate with large numbers of customers on a real-time basis or to provide personalised services to individual customers.** ==End of OCR for page 28==