Unit One- Business PDF

Unit One- Business BASIS ECONOMIC ACTIVITIES NON-ECONOMIC ACTIVITIES (1) Meaning Activity performed to earn a That activity is performed out livelihood. of...

Unit One- Business BASIS ECONOMIC ACTIVITIES NON-ECONOMIC ACTIVITIES (1) Meaning Activity performed to earn a That activity is performed out livelihood. of love, sympathy, sentiments, patriotism, etc. (2) Purpose Undertaken to earn money Undertaken to satisfy and satisfy physiological psychological or emotional needs. needs. (3) Types Business, profession, and Social responsibility, religious employment. responsibility, personal satisfaction, etc. (4) Benefits Money and wealth. Self-satisfaction. (5) Examples A worker working in a factory. A boy helping an old man to cross the road. Definition and Concept of Business  A business (activity) is a commercial activity which involves providing goods or services with a primary motive of earning profits.  The business concept is the fundamental idea behind the business. The business model, plan, vision, and mission are developed based on this concept. Uber and OLA, for example, was started on the concept of aggregating taxi drivers and providing their services on demand under one brand. Every other business strategy was developed based on this concept. CHARECTERISTICS OF BUSINESS Objective Of The Business  The business objective is what makes the business go on and conduct its activities in a long run. It is the reason why the business exists. While most of the people argue that profit making is the core objective of every business. Few have come up with the new underlying objective.  According to the traditional concept, business exists only to earn profits by providing the goods and services to the customers.  According to the modern concept, the underlying objective of every business is customer satisfaction as this is what results in most profits. If the customer is satisfied, business excels. Continued  1. Getting and Staying Profitable  Maintaining profitability means making sure that revenue stays ahead of the costs of doing business. Focus on controlling costs in both production and operations while maintaining the profit margin on products sold.  2. Productivity of People and Resources  Employee training, equipment maintenance and new equipment purchases all go into company productivity. Your objective should be to provide all of the resources your employees need to remain as productive as possible.  3. Excellent Customer Service  Good customer service helps you retain clients and generate repeat revenue. Keeping your customers happy should be a primary objective of your organization. Continued  4. Employee Attraction and Retention  Employee turnover costs you money in lost productivity and the costs associated with recruiting, which include employment advertising and paying placement agencies. Maintaining a productive and positive employee environment improves retention.  5. Mission-driven Core Values  Your company mission statement is a description of the core values of your company. It is a summary of the beliefs your company holds in regard to customer interaction, responsibility to the community and employee satisfaction. The company's core values become the objectives necessary to create a positive corporate culture.  6. Sustainable Growth  Growth is planned based on historical data and future projections. Growth requires the careful use of company resources such as finances and personnel.  7. Maintaining a Healthy Cash Flow  Even a company with good cash flow needs financing contacts in the event that capital is needed to expand the organization. Maintaining your ability to finance operations means that you can prepare for long-term projects and address short- term needs such as payroll and accounts payable. Continued  8. Dealing with Change  Change management is the process of preparing your organization for growth and creating processes that effectively deal with a developing marketplace. The objective of change management is to create a dynamic organization that is prepared to meet the challenges of your industry.  9. Reaching the Right Customers  Marketing is more than creating advertising and getting customer input on product changes. It is understanding consumer buying trends, being able to anticipate product distribution needs and developing business partnerships that help your organization to improve market share.  10. Staying Ahead of the Competition  A comprehensive analysis of the activities of the competition should be an ongoing business objective for your organization. Understanding where your products rank in the marketplace helps you to better determine how to improve your standing among consumers and improve your revenue.  11. Creation of utility – a. Time b. Place c. Form/Design d. Possession https://youtu.be/h89uOvUDVO4 Types Of Business  Businesses can be classified into but are not limited to 4 types. These are –  Manufacturing- Manufacturing businesses are the producers who develop the product and sell it either directly to the customer or the middlemen to conduct sales.  Examples of manufacturing businesses are steel factories, plastic factories, etc.  Service- This type of business deals in selling intangible goods to the consumers. Unlike tangible goods, services cannot be stored or separated from the provider. Service firms offer professional services, expertise, commission-based promotions, etc.  Examples include salons, schools, consultancy etc.  https://www.startupindia.gov.in/content/sih/en/international/go-to-market- guide/types-of-businesses.html Continued  Merchandising- Merchandising is a middlemen business strategy where the business buys products from a manufacturer, wholesaler, or other partners, and sells the same at the retail price. It is usually known as a ‘buy and sell’ business as they make profits by selling the products at a price higher than their cost price.  Examples of a merchandising business are grocery stores, supermarkets, distributors etc.  Hybrid- Hybrid businesses have the characteristics of two or more types of businesses explained above. For example, a restaurant develops its own dishes (manufacturing), sells the products like cold drinks which are manufactured by other businesses (merchandising), and provide service to the customers (service). Changing Business Landscape  https://www.facebook.com/watch/?v=2941771199285341  https://indianexpress.com/article/technology/opinion-technology/auto mation-and-ai-in-a-changing-business-landscape-6428342/ https://www.forbes.com/sites/forbesbusinessdevelopmentcouncil/2022/0 3/10/five-tech-trends-that-will-impact-businesses-in-2022-and-beyond/?s h=575209e40581 https://www.businessnewsdaily.com/8564-future-of-marketing.html What is a profession?  The word “profession” means different things to different people. But at its core, it’s meant to be an indicator of trust and expertise.  Traditionally, a “professional” was someone who derived their income from their expertise or specific talents, as opposed to a hobbyist or amateur. This still carries through to fields today, such as sport.  But given today’s fast-changing environment of knowledge and expertise, it’s now generally understood that simply deriving an income from a particular task might make you an “expert” or “good at your job” – but if you’re a “professional”, this has a broader meaning.  There’s a long history of attempts to clarify this meaning, and to define the functions of professions. These attempts typically centralize around some sort of moral or ethical foundation within the practice of a specific and usually established expertise.  A profession is a disciplined group of individuals who adhere to ethical standards. This group positions itself as possessing special knowledge and skills in a widely recognised body of learning derived from research, education and training at a high level, and is recognised by the public as such. A profession is also prepared to apply this knowledge and exercise these skills in the interest of others1.  A professional is a member of a profession. Professionals are governed by codes of ethics, and profess commitment to competence, integrity and morality, altruism, and the promotion of the public good within their expert domain. Professionals are accountable to those served and to society2.  Professionalism comprises the personally held beliefs about one’s own conduct as a professional. It’s often linked to the upholding of the principles, laws, ethics and conventions of a profession as a way of practice.  Professionalization is the pattern of how a profession develops, as well as the process of becoming a profession. What is Employment?  Employment is an agreement between an individual and another entity that stipulates the responsibilities, payment terms and arrangement, rules of the workplace, and is recognized by the government.  For e.g.  Jonathan’s Shipyard is looking to hire a new batch of employees. The organization proceeds to rent out an ad in the local newspaper to spread awareness about open job positions. They filter the remaining candidates, so that only the ones most suitable for the position remain. Once Jonathan’s Shipyard has completed the interview process, they make job offers to the finalists. They each accept the offer. However, in order for their employment to be official Jonathan’s Shipyard must follow the proper procedures.  They verify each candidate’s residency as an American citizen, collect two forms of identification, and have the candidates fill out the corresponding tax forms for IRS and financial reporting purposes. Once the finalists have completed these steps, the employer has the candidates sign a formal agreement that states both parties acknowledge and accept the terms and conditions of the employment. Jonathan’s Shipyard also acknowledges that if any of the terms in the agreement do not adhere with United States’ employment law then they may be subject to civil injunction, fines, and even criminal charges. Business Risks  Business risk refers to a threat to the company’s ability to achieve its financial goals. In business, risk means that a company’s or an organization’s plans may not turn out as originally planned or that it may not meet its target or achieve its goals. Types of Risks in Business  Risks come in different forms. Below are the different types of business risks:  1. Strategic risk- Strategic risks can occur at any time. For example, a company manufacturing an anti-mosquito lotion may suddenly see a decline in its sales because people’s preferences have changed, and they now want a spray mosquito repellent rather than a lotion. To deal with such risks, companies need to implement a real-time feedback system to know what its customers want.  2. Compliance risk- Compliance risk involves companies having to comply with new rules that are set by the government or by a regulatory body. For example, there may be a new minimum wage that must be implemented immediately.  3. Financial risk- Financial risk is about the financial health of the company. Can the company afford to offer installment payments to its customers? How many customers can it offer such an installment scheme? Can it handle business operations when two or three of these customers are not able to make their payments on time?  4. Operational risk- Operational risk occurs within the business’ system or processes. For example, one of its production machines may break down when the target output is still unmet. What will the company do if one of its machine operators has an accident during work hours?  Market risk-Those arising from any of the markets that a company operates in, such as where the business gets its inputs, where it sells its products and where it gets its finance/capital  Market risk reflects interest rate risk, currency risk, and other price risks  Health and safety risk Health and safety risks include loss of employees' time because of injury and the risks of having to pay compensation or legal costs because of breaches. Health and safety risks can arise from: Lack of health and safety policy Lack of emergency procedures  Human risk  Human risks in business can arise from employees' failure to perform their essential duties in the workplace. Human risks can arise from factors employees can't control, like health issues, or intentional actions like theft or fraud. When a business faces human risks, it can experience a loss of profits.  Security risk  A business can experience a security risk if it fails to create or follow cybersecurity strategies. Ineffective training for employees, lack of software testing and insufficient policies for security updates can put vital information of the organization at risk  Causes of Business Risks  There are basically three causes of business risk:  1. Natural causes  Natural causes of risk include flooding, earthquakes, cyclones, and other natural disasters that can lead to the loss of lives and property. For example, a delivery truck is on its way to deliver the order of a customer but is met with a cyclone along the way, causing an accident. In order to counter such causes, businesses need to take out comprehensive insurance coverage.  2. Human causes  Human causes of risk refer to negligence at work, strikes, work stoppages, and mismanagement.  3. Economic causes  Economic causes involve things such as rising prices of raw materials or labor costs, rising interest rates for borrowing, and competition. How to Manage Business Risks  1. Avoid the risk  It may sound ironic to suggest avoiding the risk when we say that it is inevitable. But what is meant here is that companies should avoid specific risks when possible. Managers should think of alternatives in order to not have to face the risk.  2. Prevent the risk  In the example of the delivery truck above, it would help prevent the risk if companies check on the weather prior to sending out deliveries in order to make sure they reach their destination safely. If there is a deemed risk, then they should act to prevent it from happening – for example, by halting deliveries during severe weather.  3. Contain the risk  Sometimes, there are risks that cannot be avoided or prevented. Companies can choose to contain said risks while putting up safety nets. For example, since all businesses need to access the internet, where hackers abound, they may put stronger firewalls and other protective measures in place to ensure their company’s safety. Techniques to Assess Business Environment and Associated Risks  SWOT Analysis  PESTLE Analysis  Michael Porter’s Five Force Model : https://youtu.be/mYF2_FBCvXw  Zomato SWOT Analysis (2023) | Business Strategy Hub (bstrategyhub.com)  https://youtu.be/7qrahnx94nc  https://youtu.be/C5Fl-1AOqOU  https://youtu.be/TtBTvg_QyCY - ZARA Porters Five forces  https://www.financialexpress.com/industry/100-us-firms-may-shift-bas e-to-uttar-pradesh-from-china/1943604/  https://economictimes.indiatimes.com/news/economy/policy/japan-to- offer-incentives-to-companies-shifting-base-from-china-to-india-nikkei/ articleshow/77943780.cms  https://economictimes.indiatimes.com/news/politics-and-nation/pakist ans-most-favoured-nation-status-crapped/articleshow/68018002.cms  https://economictimes.indiatimes.com/topic/corruption-scams-in-india  https://economictimes.indiatimes.com/topic/corruption-scams-in-india  https://www.outlookindia.com/outlookmoney/finance/five-financial-sca ms-that-rocked-india-4082  https://bloncampus.thehindubusinessline.com/