1

Business A business, also known as an enterprise or a firm, is an organization involved in the trade of goods, services, or both to consumers. Businesses are prevalent in capitalist economies, where most of them are privately owned and provide goods and services to customers for profit. Businesses may also be not-for-profit or state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning. The etymology of "business" stems from the state of being busy, and implies commercially viable and profitable work. The term "business" has at least three usages, depending on the scope in which it is used. A business can mean a particular organization, while a more generalized usage refers to a particular market sector, i.e. "the music business". Compound forms such as agribusiness represent subsets of the word's the broadest meaning, which encompasses all activity by all suppliers of goods and services.

Basic forms of ownership Forms of business ownership vary by jurisdiction, but several common forms exist:

Sole proprietorship: A sole proprietorship is owned by one person and operates for profit. The owner may operate the business alone or employ other people. A sole proprietor has unlimited liability for all obligations incurred by the business, whether from operating costs or judgments against the business. All assets of the business belong to a sole proprietor, including, for example, computer infrastructure, any inventory, manufacturing equipment and/or retail fixtures, as well as any real property owned by the business. Partnership: A partnership is a business owned by two or more people. In most forms of partnerships, each partner has unlimited liability for the debts incurred by the business. The three most prevalent types of for-profit partnerships are general partnerships, limited partnerships, and limited liability partnerships. Corporation: The owners of a corporation have limited liability and the business has a separate legal personality from its owners. Corporations can be either government-owned or owned by individuals. They can organize either for profit or as not-for-profit organizations. A non-government for-profit corporation is owned by its shareholders, who elect a board of directors to direct the corporation and hire its managerial staff. A privately owned, for-profit corporation can be either privately held by a small group of individuals, or publicly held, with publicly traded shares listed on a stock exchange. Cooperative: Often referred to as a "co-op", a cooperative is a limited liability business that can organize for-profit or not-for-profit. A cooperative differs from a corporation in that it has members, not shareholders, and they share decision-making authority. Cooperatives are typically classified as either consumer cooperatives or worker cooperatives. Cooperatives are fundamental to the ideology of economic democracy.

Classifications Agriculture and mining businesses produce raw material, such as plants or minerals. Financial businesses include banks and other companies that generate profits through investment and management of capital. Information businesses generate profits primarily from the sale of intellectual property and include movie studios, publishers and internet and software companies. Manufacturers produce products, from raw materials or from component parts, then sell their products at a profit. Companies that make tangible goods such as cars, clothing or pipes are considered manufacturers. Real estate businesses sell, rent, and develop properties including land, residential homes, and other buildings. Retailers and distributors act as middlemen and get goods produced by manufacturers to the intended consumers, and make their profits by marking up their price. Most stores and catalog companies are distributors or retailers. Service businesses offer intangible goods or services and typically charge for labor or other services provided to government,consumers, or other businesses. Interior decorators, consulting firms and even entertainers are service businesses. Transportation businesses deliver goods and individuals to their destinations for a fee. Utilities produce public services such as electricity or sewage treatment, usually under a government charter. Management

The efficient and effective operation of a business, and study of this subject, is called management. The major branches of management are financial management, marketing management, human resource management, strategic management, production management, operations management, service management and information technology management. Owners may administer their businesses themselves, or employ of managers to do this for them. Whether they are owners or employees, managers administer three primary components of the business' value: its financial resources, capital or tangible resources, and human resources. These resources are administered in at least five functional areas: legal contracting, manufacturing or service production, marketing, accounting, financing, and human resources. Restructuring state enterprises In recent decades, various states modeled some of their assets and enterprises after business enterprises. In 2003, for example, the People's Republic of China modeled 80% of its stateowned enterprises on a company-type management system. Many state institutions and enterprises in China and Russia have transformed into joint-stock companies, with part of their shares being listed on public stock markets. Business process management (BPM) is a holistic management approach focused on aligning all aspects of an organization with the wants and needs of clients. It promotes business effectiveness

and efficiency while striving for innovation, flexibility, and integration with technology. BPM attempts to improve processes continuously. It can therefore be described as a "process optimization process." It is argued that BPM enables organizations to be more efficient, more effective and more capable of change than a functionally focused, traditional hierarchical management approach. Organization and government regulation Most legal jurisdictions specify the forms of ownership that a business can take, creating a body of commercial law for each type. The major factors affecting how a business is organized are usually:

The size and scope of the business firm and its structure, management, and ownership, broadly analyzed in the theory of the firm. Generally a smaller business is more flexible, while larger businesses, or those with wider ownership or more formal structures, will usually tend to be organized as corporations or (less often) partnerships. In addition, a business that wishes to raise money on a stock market or to be owned by a wide range of people will often be required to adopt a specific legal form to do so. The sector and country. Private profit-making businesses are different from governmentowned bodies. In some countries, certain businesses are legally obliged to be organized in certain ways. Limited Liability Companies (LLC), limited liability partnerships, and other specific types of business organization protect their owners or shareholders from business failure by doing business under a separate legal entity with certain legal protections. In contrast, unincorporated businesses or persons working on their own are usually not so protected. Tax advantages. Different structures are treated differently in tax law, and may have advantages for this reason. Disclosure and compliance requirements. Different business structures may be required to make less or more information public (or report it to relevant authorities), and may be bound to comply with different rules and regulations.

Many businesses are operated through a separate entity such as a corporation or a partnership (either formed with or without limited liability). Most legal jurisdictions allow people to organize such an entity by filing certain charter documents with the relevant Secretary of State or equivalent and complying with certain other ongoing obligations. The relationships and legal rights of shareholders, limited partners, or members are governed partly by the charter documents and partly by the law of the jurisdiction where the entity is organized. Generally speaking, shareholders in a corporation, limited partners in a limited partnership, and members in a limited liability company are shielded from personal liability for the debts and obligations of the entity, which is legally treated as a separate "person". This means that unless there is misconduct, the owner's own possessions are strongly protected in law if the business does not succeed. Where two or more individuals own a business together but have failed to organize a more specialized form of vehicle, they will be treated as a general partnership. The terms of a partnership are partly governed by a partnership agreement if one is created, and partly by the

law of the jurisdiction where the partnership is located. No paperwork or filing is necessary to create a partnership, and without an agreement, the relationships and legal rights of the partners will be entirely governed by the law of the jurisdiction where the partnership is located. A single person who owns and runs a business is commonly known as a sole proprietor, whether that person owns it directly or through a formally organized entity. A few relevant factors to consider in deciding how to operate a business include: 1. General partners in a partnership (other than a limited liability partnership), plus anyone who personally owns and operates a business without creating a separate legal entity, are personally liable for the debts and obligations of the business. 2. Generally, corporations are required to pay tax just like "real" people. In some tax systems, this can give rise to so-calleddouble taxation, because first the corporation pays tax on the profit, and then when the corporation distributes its profits to its owners, individuals have to include dividends in their income when they complete their personal tax returns, at which point a second layer of income tax is imposed. 3. In most countries, there are laws which treat small corporations differently than large ones. They may be exempt from certain legal filing requirements or labor laws, have simplified procedures in specialized areas, and have simplified, advantageous, or slightly different tax treatment. 4. "Going public" through a process known as an initial public offering (IPO) means that part of the business will be owned by members of the public. This requires organization as a distinct entity, and compliance with a tighter set of laws and procedures. Most public entities are corporations that have sold shares, but increasingly there are also public LLCs that sell units (sometimes also called shares), and other more exotic entities as well, such as, for example, real estate investment trusts in the USA, and unit trusts in the UK. A general partnership cannot "go public." Commercial law A very detailed and well-established body of rules that evolved over a very long period of time applies to commercial transactions. The need to regulate trade and commerce and resolve business disputes helped shape the creation of law and courts. The Code of Hammurabi dates back to about 1772 BC for example, and contains provisions that relate, among other matters, to shipping costs and dealings between merchants and brokers.[3] The word "corporation" derives from the Latin corpus, meaning body, and the Maurya Empire in Iron-Age India accorded legal rights to business entities.[4] In many countries it is difficult to compile all the laws that can affect a business into a single reference source. Laws can govern treatment of labour and employee relations, worker protection and safety, discrimination on the basis of age, gender, disability, race, and in some jurisdictions, sexual orientation, and the minimum wage, as well as unions, worker compensation, and working hours and leave. Some specialized businesses may also require licenses, either due to laws governing entry into certain trades, occupations or professions, that require special education, or to raise revenue for local governments. Professions that require special licenses include law, medicine, piloting

aircraft, selling liquor, radio broadcasting, selling investment securities, selling used cars, and roofing. Local jurisdictions may also require special licenses and taxes just to operate a business. Some businesses are subject to ongoing special regulation, for example, public utilities, investment securities, banking, insurance, broadcasting, aviation, and health care providers. Environmental regulations are also very complex and can affect many businesses. Capital When businesses need to raise money (called capital), they sometimes offer securities for sale. Capital may be raised through private means, by an initial public offering or IPO on a stock exchange, or in other ways. Major stock exchanges include the Shanghai Stock Exchange, Singapore Exchange, Hong Kong Stock Exchange, New York Stock Exchange and Nasdaq (USA), the London Stock Exchange (UK), the Tokyo Stock Exchange (Japan), Bombay Stock Exchange (India). Most countries with capital markets have at least one. Businesses that have gone public are subject to regulations concerning their internal governance, such as how executive officers' compensation is determined, and when and how information is disclosed to shareholders and to the public. In the United States, these regulations are primarily implemented and enforced by the United States Securities and Exchange Commission (SEC). Other Western nations have comparable regulatory bodies. The regulations are implemented and enforced by the China Securities Regulation Commission (CSRC) in China. In Singapore, the regulation authority is the Monetary Authority of Singapore (MAS), and in Hong Kong, it is the Securities and Futures Commission (SFC). The proliferation and increasing complexity of the laws governing business have forced increasing specialization in corporate law. It is not unheard of for certain kinds of corporate transactions to require a team of five to ten attorneys due to sprawling regulation. Commercial law spans general corporate law, employment and labor law, health-care law, securities law, mergers and acquisitions, tax law, employee benefit plans, food and drug regulation, intellectual property law on copyrights, patents, trademarks and such, telecommunications law, and more. Other types of capital sourcing includes crowd sourcing on the internet, venture capital, bank loans and debentures. Intellectual property Businesses often have important "intellectual property" that needs protection from competitors for the company to stay profitable. This could require patents, copyrights, trademarks or preservation of trade secrets. Most businesses have names, logos and similar branding techniques that could benefit from trade marking. Patents and copyrights in the United States are largely governed by federal law, while trade secrets and trade marking are mostly a matter of state law. Because of the nature of intellectual property, a business needs protection in every jurisdiction in which they are concerned about competitors. Many countries are signatories to international treaties concerning intellectual property, and thus companies registered in these countries are subject to national laws bound by these treaties. In order to protect trade secrets, companies may require employees to sign non-compete clauses which will impose limitations on an employees interactions with stakeholders, and competitors.

MEANING OF BUSINESS POLICY Business Policy is the study of the functions and responsibilities of senior management, the crucial problems that affect success in the total enterprise and the decisions that determine the direction of the organisation and shape its future. The problems of policy in business, like those of policy in public affairs, have to do with the choice of purposes, the moldings of organizational identity and character, the continuous definition of what needs to be done, and the mobilization of resources for the attainment of goals in the face of competition or adverse circumstance. It covers many aspects of business policy. Firstly, it is considered as the study of functions and responsibilities of the senior management related to those organizational problems which affect the success of the total enterprise. Secondly, it deals with the determination of the future course of action that the organisation has to adopt. Thirdly, it involves a choice of purposes and defining what needs to be done in order to mould the character and identity of the organisation. Lastly, it is also concerned with the mobilization of resources by the help of which the organisation can achieve its goals. The senior management consists of those managers who are primarily responsible for long-term decisions and carry designations such as Chief Executive, President, General Manager, or Executive Director. These are the persons who are not concerned with the day-to-day problems but are expected to devote their time and energy for thinking and deciding about the future course of action. Business policy, with its concern for determination of the future course of action, lays down a long-term plan which the organisation then follows. The senior management, while determining the future course of action, have a mental picture of the type of organisation they want their company to become. In deciding about the future course of action, the senior management are confronted with a wide array of decisions and actions that could possibly be taken. The senior management exercise a choice, depending on the given circumstances, and which, in their opinion, would lead the organisation towards a specific direction. Moving in a predetermined direction, the organisation attains the planned identity and character. Organisational decisions are not made in isolation and managerial actions cannot be taken without providing the resources necessary for them. The senior management, while deciding about the future course of action, concern themselves with the resources- financial, material and human that would be required for the implementation of the long-term plans.

EVOLUTION OF BUSINESS POLICY The Genesis of Business Policy The origins of business policy can be traced back to 1911, when Harvard Business School introduced an integrative course in management aimed at the creation of general management capability. This course was based on case studies which had been in use at the school for instructional purposes since 1908. However, the real impetus for introducing business policy in the curriculum of business schools (as management institutes or departments are known in the US) came with the publication of two reports in 1959. The Gordon and Howell report, sponsored by the Ford Foundation, recommended a capstone course of business policy which will give students an opportunity to pull together what they have learned in the separate business fields and utilize this knowledge in the analysis of complex business problems. The Pierson report, sponsored by the Carnegie Foundation and published simultaneously, made a similar recommendation. In 1969, the Americal Assembly of Collegiate Schools of Business, a regulatory body for business schools, made the course of business policy a mandatory requirement for the purpose of recognition. During the last four decades, business policy has become an integral part of management curriculum. From the US, the practice of including business policy in the management curriculum spread to other parts of the world. Evolution Based on Managerial Practices The development in business policy as arising from the use of planning techniques by managers. Starting from day-to-day planning in earlier times, managers tried to anticipate the future through preparation of budgets and using control systems like capital budgeting and management by objectives. With the inability of these techniques to adequately emphasis the role of future, longrange planning came to be used. Soon, long-range planning was replaced by strategic planning, and later by strategic management: a term is currently used to describe the process of strategic decision making. Strategic management is the theoretical framework for business policy courses today. Policy-making became the prime responsibility of erstwhile entrepreneurs who later assumed the role of senior management. The Indian Scenario Formal management education started in India in the late fifties and gained an impetus with the setting up of the Indian Institutes of Management (IIMs) and the Administrative Staff College of India in the early sixties. In the formative years of the IIMs, the curriculum and philosophy of management education were borrowed substantially from the Americal business schools. The IIM, Ahmedabad based its teaching methodology on the Harvard model of developing and

using case studies as the major tool. With the setting up of three more IIMs at Bangalore, Calcutta and Lucknow and the creation of university departments, management education has experienced an unparalleled growth in the last three decades. The All India Management Association, New Delhi, which is a national body for the promotion of scientific management in India, and offers a popular correspondence course in management, has also recently induced a course on business policy in the curriculum. The contents of the curriculum, teaching methodology, etc. for business policy course varies among institutions. Different nomenclature used for the course title include, besides business policy; corporate planning, corporate strategy and planning, management policy and, lately, strategic planning or strategic management. The course contents of Indian system of management are drawn heavily from foreign, mostly Americal literature, the Indian system of management can be developed, based an Indigenous research but the dependence on Americal sources will have to be accepted. The Nature of Business Policy The Business Policy nature has the following features:I. II. III. IV. V. It is the process of upgrading its product mix. It promotes joint ventures with other concerns. It promote divested from one business to another due to price hikes due to heavy Taxes/Duties on its present product remitting in losses to business. It promote major expansion program. From the happenings reported above, we see that when a company either upgrades its product mix, promotes a joint venture, divests in another company, undertakes an expansion program me or takes such similar action having a long-term impact on its future operations and status, it is the result of senior management decisison-making. The senior management, in any organisation, is primarily responsible for guiding the future course of action and providing a sense of direction. Toward these ends, business policy attempts to inculcate in one the capability for senior management.

Importance of Business Policy Business policy is important as a course in management curriculum and as a component of executive development programmes for middle-level managers preparing to move up to the senior management level. A study of business policy fulfils the needs of management students as well as those of middle-level managers.

To highlight the importance of business policy, we consider four areas where this course proves to be beneficial. From the viewpoint of the Course itself Business policy seeks to integrate knowledge and experience gained in various functional areas of management. It enables the learner to understand and make sense of the complex interaction that takes place between different functional area. Business policy deals with the constraints and complexities of the real-life business. In contrast, the functional area courses are based on a structured, specialized and well-developed body of knowledge resulting from the simplification of the complexity of the overall taks and responsibilities of management. For the development of a theoretical structure of its own, business policy cuts across the narrow functional boundaries and draws upon a variety of sources; other courses in management curriculum and from a wide variety of disciplines like economics, sociology, psychology, demography, political science, etc. In doing so, business policy offers a very broad perspective to its learners. Business policy makes the study and practice of management more meaningful as one can view business decision-making in its proper perspective. For instance, in the context of business policy, a short-term gain for a department or a sub-unit is willingly sacrificed in the interest of the long-term benefit that may accrue to the organisation as a whole.

For the Understanding of Business Environment Regardless of the level of management where a person is, business policy creates an understanding of how policies are formulated. This helps in creating an appreciation of the complexities of the environment that the senior management faces in policy formulation.

By gaining an understanding of the business environment, managers become more receptive to the ideas and suggestions of the senior management. Such an attitude on the part of managers makes the task of policy implementation simpler. By being able to relate the environmental changes to policy changes within the organisation, managers feel themselves to be a part of a greater design. This helps in reducing their feelings of isolation.

10

For Understanding the Organisation Business policy presents a basic framework for understanding strategic dicision-making while a person is at the middle level of management. Such a framework, combined with the experience gained in working in a specialized functional area, enable a person to make preparations for handling general management responsibilities. This benefits the organisation in a variety of ways. Business policy, like most other areas of management, brings to the organisation and also to its managers, the benefit of years of distilled experience in strategic decision-making. Case study, which is the most common pedagogical tool in business policy, provides illustrations of real-life business strategy formulation and implementation. For personal Development A study of business policy offers considerable scope for personal development. It is a fact of organizational life that the different sub-units within an organisation have varying value and importance at different times. It often happens that a company which adopts a productionorientation as a matter of policy gradually shifts emphasis to marketing may be due to increased competition. Executives within the production departments have lesser opportunities for career advancement as compared to their colleagues in marketing in the changed situation. In this case, it is beneficial for an executive to understand the impact of policy shifts on the status of ones department and on the position he or she occupies. In extreme cases, many positions become redundant due to policy shifts and retrenchment is inevitable. Business India cautions executives, especially those who work for multinationals. It says that persons who have devoted their lives working for one company suddenly find bewildering changes at head offices in the UK and US and adds that reorganizations and changes at the top level can have a dramatic impact on individuals. It is only too common for divisions of a company to be shut down worldwide, or to be sold off to another company. An understanding of business policy enables the executives to avail an opportunity or avoid a risk with regard to career planning and development. For a career choice, a study of policy provides adequate grounding for understanding the macro factors and their impact at the micro level. By gaining an understanding of such an impact, an executive is better placed to identify growth areas. For instance, in the current business situation in India, a career in computer industry, especially in software, would offer better personal growth opportunities than, say, in the steel industry. Business policy, offers a unique perspective to executives to understand the senior managements viewpoint. With such an understanding, the chances of a proposal made or an action taken by an executive being appreciated by senior managers is decidedly better. An interesting by-product of business policy course is the theoretical framework provided in the form of the strategic management model. The applicability of this model is not limited to

11

business alone. It can be applied to organizations like services, educational institutions, family, government, public administration and to many other areas. In fact, the model provides powerful insights in dealing with policy-making at the macro level as well as at an individual level through self-analysis. The importance of business policy stems from the fact that it offers advantages to an executive from multiple sources. Apart from the intangible benefits, an executive gains an understanding of the business environment and the organisation he or she works in. Such an understanding can help considerably in career planning and development. Purpose of Business Policy The purpose of business policy is three-fold: I. II. III. To integrate the knowledge gained in various functional areas of management; To adopt a generalist approach to problem-solving; and To understand the complex interlinkages operating within an organisation through the use of systems approach to decision-making and relating them to changes taking place in the external environment. In order to make the study of business policy purposeful, the specific obujectives need to be defined.

IV.

Objectives of Business Policy The objectives of business Policy can be derived from the purpose of business policy and can be explained in following terms:Objectives in terms of knowledge 1. The learners in business policy have to understand the various concepts involved. Many of these concepts like strategy, policies, plans and programmes are encountered in functional area courses too. It is imperative to understand these concepts in the context of business policy. 2. Knowledge about the environment external and internal and how it affects the functioning of an organisation is vital in understanding business policy. Through the tools of analysis and diagnosis, a learner can understand the environment in which a firm operates. 3. Information about the environment helps in the determination of the mission, objectives and strategies of a firm. The learner can understand the environment in which a firm operates. 4. Implementation of strategy is a complex issue and is invariably the most difficult part of strategic management. Through the knowledge gained in business policy, the learner is able to visualize how the implementation of strategies can take place.

12

(5) To learn that problems in real-life business are unique and so are their solutions is an enlightening experience for the learners. The knowledge component of such an experience stresses the generalization of approach to be adopted in problem-solving and decision-making. With a generalized approach, it is possible to deal with a wide variety of situations. The development of this approach is an important objective to be achieved in terms of knowledge. 5. To survey the literature and learn about the researches taking place in the field of business policy is also an important knowledge objective. Objectives in Terms of Skills 1. The attainment of knowledge should lead to the development of skills so as to apply what is learnt. Such application takes place by an analysis of case studies and their interpretation and by an analysis of the business events taking place around us. 2. The study of business policy should enable a student to develop analytical ability and use it to understand the situation in a given case or incident. 3. Further, business policy study should lead to the skills of identifying factors relevant in decision-making. The analysis of strengths and weaknesses of an organisation, the threats and opportunities present in the environment, and the suggestion of appropriate strategies and policies form the core content of general management decision-making. 4. The above objectives, in terms of skill, increase the mental ability of learners and enables them to link theory with practice. Such ability is important in managerial decision-making where a large number of factors have to be considered at once to suggest appropriate action. 5. Case analysis, as a part of business policy study, leads to the development of oral as well as written communication skills. Objecttives in Terms of Attitude 1. The attainment of knowledge and skill objectives should lead to the inculcation of appropriate attitude among the learners. The most important attitude, developed through the course, is that of a generalist. The generalist attitude enables the learner to approach and assess a situation from all possible angles. 2. Dealing in a comprehensive manner, a generalist is able to function under conditions of partial ignorance by using his or her judgment and intuition. Typically, case studies provide only a glimpse of the overall situation and a case analyst frequently faces a frustrating situation of working with less than the required information. Experience has shown that managers, specially in the area of long-range planning, have to work with incomplete information. A specialist would tend to postpone or avoid a decision under

13

such conditions but a generalist could go ahead with whatever information is available. In this way, he or she acts like a practitioner rather than a perfectionist. 3. To possess a liberal attitude and be receptive to new ideas, information and suggestions is important for a general manager. Dogmatism with regard to techniques is to be replaced with a practical approach to decision-making for problem-solving. In this way, a general manager acts like a professional manager. 4. An important attitude is to go beyond and think when faced with a problematic situation. Developing a creative and innovative attitude is the hallmark of a general manager who refuses to be bound by precedents and stereotyped decisions. The objectives of business policy, in terms of knowledge, skills and attitude could be further extended to the area of behaviour and performance. Having attained the objectives in the classroom, or in an executive development programme, the learner is expected to exhibit appropriate behaviour and good performance on the job. The structure of business policy, built through theoretical study and exposure to case studies, needs to be strengthened further through accumulation of experience as one moves up the managerial ladder. The richness and variety of experiences encountered in real-life business offer opportunities of testing, validating, and replicating the mental images and models developed in business policy course. Such an approach imparts an added impetus to the development of general management capability which is the sine qua non for a manager who wishes to succeed in his or her job and make a meaningful contribution to the organisation he or she works for. From the above we have seen that objectives of business policy can be set in terms of the knowledge gained, skills acquired, and attitude in calculated through study, which offers a basis for building up a mental structure which can help in a systematic aggregation of experiences when an executive is working at middle level. Such a structure help in the creation of general management capability.