PARTICIPANT

GUIDE
PARTICIPANT
GUIDE

Business Theory

Session 1:

Business Fundamentals

Participant Guide

Business Fundamentals

Business Theory

ThinkLink Learning
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All Trademarks & Trade names acknowledged.
First published by ThinkLink Learning in 2014

ThinkLink Learning 2014

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Business Theory

Table of Contents
Introduction to the guide .......................................................................................................... 3
Learning Objectives: .................................................................................................................. 4
Introduction to Business ............................................................................................................ 5
Business Classification ............................................................................................................... 8
Characteristics of Services ....................................................................................................... 11
Type of Activities ..................................................................................................................... 13
Sectors of Economy ................................................................................................................. 15
Commerce and Trade .............................................................................................................. 18
Business Objectives ................................................................................................................. 21
Summary.................................................................................................................................. 25
Web Resources: ....................................................................................................................... 25
Classroom Activity ................................................................................................................... 29

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Introduction to the guide

This Participant Guide (PG) is to be used as a hand-out for material and content referral as well as for assignment and
exercise. This document is a part of the complete program that includes classroom sessions, and self-study, hence the
program should be run in a particular pattern (to be discussed by the facilitator in the workshop).

Content includes:

Referral material

Topic description

Exercise (depending on the topic)

Home assignments

Case study/referral documents

Program curriculum:
This module has 17 chapters:
Session 1: Business Fundamentals
Session 2: Mission, Goals and Strategies
Session 3: Business Environment and Processes
Session 4: Stakeholders Analysis
Session 5: Communication and Information Flows I
Session 6: Communication and Information Flows II
Session 7: Fundamentals of Marketing
Session 8: Marketing of Logistics Services
Session 9: Financial Accounting
Session 10: Working Capital Management
Session 11: Products and Services Costing
Session 12: Budgeting and Reconciliation
Session 13: Business Plan and Sources of Funds
Session 14: Legal Framework for Logistics
Session 15: International Trade
Session 16: Corporate Social Responsibility
Session 17: Case Study

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Learning Objectives:

Describe the purpose and significance of business

Identify the types of business and activities

Identify the types of companies and key differences

Differentiate between industry, commerce and trade

Describe the key objectives of business

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Introduction to Business
Business:
Business is an economic activity, in which goods or services are purchased,
produced and sold in exchange of money. It is carried out on a regular basis
with the prime objective of making profit.
What is expense?
Investment incurred in running a
business (supply, wages, etc.).

What is cost?
The amount of money required
for each stage of production (raw
material)

What is profit?
Income that is left after all
expenses and costs are covered.

Total income (Expenses +

Cost) = PROFIT

Scenario:
A roadside vendor sells Rs 2000
worth of fast food every day.
Where the cost of the food is
Rs.800, the hawker rents the
stand for Rs 200 per day and
pays Rs 100 for the permit (per
day). He also has a helper with
him, whom he pays 100 and
keeps 200 as his own wages.

Business is as important to the human beings as any other activity. When we

look around, we observe examples of various businesses around us such as a
doctor treating a patient, a shopkeeper selling products, a manufacturer
producing products and a telecom operator providing phone services. The
purpose of the business is to satisfy needs of individuals and the society &
community for these products & services ranging from basic necessities to
convenience & luxury.
Business is also defined as the activity that provides goods and services to
consumers for the purpose of making a profit. Profit is the difference between
the revenue that the company brings in from selling goods / services and the
costs of generating this revenue.
Not-for-profit (non-profit) Business: An organization that has a purpose other
than returning profits to owners such as social, community or educational
services.

What is the profit of the business

(per day)?

Participants in business:
There are mainly four direct participants: owners, employees, customers and
suppliers.
Owners invest money into business, create/polish the business idea,
and bring together resources (money, people) needed to turn an idea into
business, hire employees.
Employees work for the company and help the company reach their
goals.
Customers buy products and services offered by the businesses to
satisfy their needs and wants.
Suppliers supply goods and services that the company uses to
produce goods and services that it sells to its customers.

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Functional Areas in Business

Let us take an example of a company manufacturing and selling refrigerators and see what functional areas exist in the
business.

First of all, the business needs to identify the customer needs in terms of size of the refrigerator (70 / 165 / 210 /
320 litres); type (frost free / single door / side doors); designs / colours etc. it also needs to decide the price and
promote the product to the customers. This part of the business is handled by the Marketing function. The role of
marketing is identifying and responding to customer needs, developing benefits and features of products, price and
quality evaluation and controls, promotion and delivery of products, keeping and attracting customers and satisfying
customer needs.

Having known the type and features of the product to be developed, the business needs to create drawings and
specification of the product as well as the parts and components that go into it e.g. rating and type of compressor.
This part of business is handled by the Research and Development function. This function is concerned with new
product developments as well as improvements to existing products or product lines.

Now that the product has been developed, it needs to be manufactured as per the customer demand, quality
standards and agreed timelines. It is handled by the Operations function. This function is responsible for designing
and overseeing processes that convert resources into goods and services, controlling the quality and ensuring
timely operations.

Supply Chain Management handles sourcing of raw materials and components required for manufacturing goods.
Once the finished goods are ready, they are distributed to the customers through a network of warehouses.

The goods, once produced, need to be sold to the customer through various channels e.g. distributors, wholesalers
and retailers. It is the responsibility of the Sales function to make sure that goods are sold to end customers in
return for money. A sale is the act of selling a product or service in return for money or other compensation.

To purchase goods, customers or the channel partners (distributors / retailers) place the orders. The role of the
Customer Service function is to ensure that goods are delivered on time and also to respond to the enquiries of the
customers on delivery, quality and feedback. Nowadays customer expectations are very high. When people contact
a business they expect a prompt, polite and knowledgeable response. Unless they get a high level of service they
are likely to take their demand to other businesses in the future.

In order to run the business i.e. buying materials, paying salaries, meeting expenses etc., funds are needed. The
role of the Finance function is to obtain and manage company funds effectively.

The business owners and their shareholders need to know the financial health (sales revenue, profits, cash flow
etc.) of the business. The role of the Accounting function is to monitor, measure and report the financial and
managerial information.

Finally, the businesses need a team of people that set goals, make strategies, organize resources, make important
decisions, evaluate performance and take corrective actions. The team that oversees the overall direction of the
business and manage these functions is called Management.

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Business can be classified based on

various factors:
1.
2.
3.
4.

Nature of business
Size of business
Presence
Ownership

Non-profit organizations work

Non-profit organizations work around

the world to accomplish philanthropic
missions and provide services for
people in need. Non-profit
organizations appear similar to their
for-profit counterparts in a number of
ways, but there are distinct differences
beneath the surface.

Features of Business:

Such organizations exist to serve a

humanitarian or environmental need,
and their complete workforce is geared
toward this one goal.

Key features that define a business are:

Key Features:

Benefits of business:

Non-profit organizations usually:

Business is important for any society or a nation. The businesses provide

employment to people so that they can satisfy their wants & improve their
living standard as well as creates wealth for the society and the mankind.

Get tax exemption under section 501(c)

(3) of the IRS tax code.
Employ a core group of salaried
employees and a large pool of
volunteers

How do non-profit organizations

work?

Non-profit organizations obtain majority

of their income from donations &
grants. Donations come from
individuals / groups / trust fund(s) and
other organizations.

1.
2.
3.
4.

It has the primary objective of earning profit.

It provides sale or exchange of goods and services.
It drives the entire workforce towards common goal.
It involves risk and uncertainty.

The key benefits of the business are:

1.
Generates employment.
2.
Provides quality goods and services as per consumer
demand.
3.
Utilizes the resources and converts them to usable &
productive goods / services.
4.
Gives return to the investors on their capital investment.
5.
Provide opportunities to grow and expand business.
6.
Promotes social interest (sponsoring cultural programs,
trade shows, etc.).
7.
Sponsors various Science & Technology research
programs.

These organizations engage in a range

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Business Classification
Small Scale Industry
Small scale industries receive
many concessions and benefits
from the government such as loan
on easy terms, sales and
marketing support.

Although business is always classified as an economic activity in which goods

or services are purchased, produced and sold in exchange of money; you
would find that not every business has similar nature. Hence, to understand the
basic nature of any business it is best to classify it as either a For-profit or a
Non-profit business.

1. For-profit business
2. Non-profit business

Large Scale Industry

Iron and steel industry

Petro-chemicals
Energy & power
Pharmaceuticals
Textile industry
Automobile manufacturing
IT industry
Telecom industry.

1. For profit business:

For-profit business is when goods or services are
purchased, produced and sold to meet and satisfy the
customer / consumers demand for the purpose of making
profit (money).All the manufacturing and service industry falls
into this category.

2. Non-profit business:
Non-profit businesses do not necessarily have profit as the primary
motive; however it works toward certain social goals. For example, raising
money for social and human welfare would fall under this category.
Classification based on business or organization size:
1. Small scale enterprises or industries

The Indian economy heavily

depends on these large industries
for:
a.
b.
c.

Countrys economic growth

Foreign currency
Employable opportunities

Classification in terms of
presence within or across
nations:
1.

National

2.

Multinational

2. Large scale enterprises or industries

Small scale enterprises

Business that employees less than 500 employees.

Business with an investment less than 1 Crore.
Business that produce/manufacture goods at small/medium qts
Business owned by single or few partners.
Example: Departmental store, small eateries, Poultry farms etc

National organizations are the one

that have their presence in one
nation/country only. Multinational
organizations are the one that
have their business spread across
more than one country.

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Large scale enterprises

Business employing large number of people (more than 500).

Business that requires high capital investment.
Business that produces/manufactures goods at large scale
Examples: Reliance industries, Tata Motors, Aditya Birla Group etc.

Classification based on

business output:

Business

Goods

Services

Goods
In economics, goods are tangible materials that satisfy human wants and provides utility, for example, a consumer
making a purchase. Commodities may be used as a synonym for economic goods but often refer to marketable raw
materials and primary products.
There are many different kinds of goods. Consumer goods are those such as food and clothing that satisfy human
wants or needs. Producer goods are those such as raw materials and tools, used to make consumer goods. Capital
goods are that machinery, used in the production of commodities or producer goods.

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Service
According to Lovelock (2004), service is any act, performance or experience that one party can offer another; one that
is essentially intangible, and does not result in the ownership of anything. Its production may or may not be tied to a
physical product.
The service can be understood in various concepts. Some of the common service concepts are:
Service industries and companies: Classified within the service sector whose core product is service (eg;
Bank)
Service as products: Represent the wide range of intangible product offerings that customers value and pay
for. Sold by service and non-service companies. (eg; Savings Account in a bank)
Customer Service: Service provided in support of companys core products (typically not charged for)
(eg; Supporting opening an bank account, activating accounts offline & online)
Hidden services: Another way of thinking about products and services (eg; Paying for utility bills & other
services
through the bank account without physical presence)
The broad definition of services implies that intangibility is a key determinant of whether an offering is a service. The
following figure shows the tangible versus intangible elements in

The term service refers to an intangible activity which full fills a certain need or a want, and just as in case of a
physical product a customer needs to have a want and the monetary ability to acquire a service. Any organization
which fulfils its customers needs by providing a certain service rather than a physical product is known as a service
organization. Some of the examples of services organizations are given below:

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Characteristics of Services
4BU

There are five main characteristics which are associated with services. The following figure shows these characteristics:

1. VARIABILITY
When you go to a bank, do you get same level of service every time? Or, does every customer of the bank get
the same level of service? Does every branch of the bank provide same level of service? Compare it with a
product, such as noodle of a particular brand and flavour.
Wherever and whenever you buy it, you can expect to get same
taste every time. In the production and marketing of physical
products, companies have increasingly paid special attention to
ensuring consistency in quality, feature, packaging, and so on.
More often than not all customers can be sure that every bottle
of Coke he/she buys, even in a life-time of purchases, will not
vary. The provision of services, however, invariably includes a
large measure of the human element. Indeed, with many
services, we are purchasing nothing else but the skills of the
suppliers. Because of this, it is often very difficult for both
supplier and consumer to ensure a consistent product or quality of service. Services are highly variable
because they are not only dependent on the customers and the service providers but also on the place and time
at which they are provided. Since service depends upon individual customers, it can be said that no two
services are exactly same and that services are always unique. For this reason service providers face a lot of
problems trying to deliver standardized services. Even the customers are Aware of this problem and hence,
look at previously provided services and their results. Therefore it is very important to have a consistency in
every service provided. Proper training and constant monitoring of customer feedback is important in achieving
high standards of services.

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2. INTANGIBILITY
Physical products in the store are widely displayed for customers
to see, feel, touch, weigh or sniff at before deciding whether or
not to buy. Compare this with the choice of the service of say, an
insurance policy. You cannot touch, see or smell the products
before choosing, although clearly you can make some
assessment based on past experience, word of mouth, or even
the location and decor of the insurance office. Services are
intangible and do not appeal to the senses like look or smell.
This causes problems for customers and providers both in
evaluating the value and quality of the service. Thus, customers
tend to look at other attributes like the surroundings or the decorum of the place where service is provided.

3. INSEPARABILITY
A key distinguishing feature of service marketing is that the service provision and provider are inseparable from
the service consumption and consumer. For example, we cannot take a hotel
room home for consumption; we must consume this service at the point of
provision. Similarly, the hairdresser needs to be physically present for this
service to be consumed. In other words, service provider and the actual
service cannot be separated from each other. For example when a doctor
performs an operation he has to be physically present to perform the service,
and the same way the customer also has to be present to obtain a service
unlike in case of a physical product where he need not be present physically.
Services are produced and consumed simultaneously. This has implications
both for channels of distribution and scale of operations. Inseparability of production and consumption increases
the importance of the quality in services. Therefore, service marketers not only need to develop task-related,
technical competence of service personnel , but also , require a great input of skilled personnel to improve their
marketing and inter personal skills. For example, the role of a surgeon is not only to have an expertise in
performing a surgery but also to gauge patients state of mind and make him or her feel relaxed before the
surgery.

4. PERISHABILITY
Services are highly perishable compared to physical products.
Services cannot be stored. Their consumption takes place
simultaneously as when they are produced. In other words, services
have zero inventory. Once sold, they stand sold and cannot be
returned. Service providers cannot improve their supply chain to
improve the service frequency.
A vacant seat on a plane is lost forever; similarly a partly-used
operation theatre will take longer to recover the cost of building it.
Unlike services, goods once produced can be stored and sold later. Companies produce and store goods for
the peak seasons such as festivals, which is not possible in case of services.

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5. NON-OWNERSHIP
The final distinguishing feature of a service is that, unlike a physical product, the
consumer does not secure ownership of the service. Rather the customer pays
only to secure access to or use of the service. Again the hotel room is a good
example. Similarly, with banking services, although the customer may be given a
cheque book or a credit card, they serve only to allow the customer to make use
of what he or she is actually buying, namely, bank services.

Type of Activities
Activities which human beings undertake are known as human activities. These may be cultivating land, growing plants,
rearing animals, teaching in a school or college, working in a factory or office, watching television, listening to radio,
reading newspaper, worshipping in a temple, playing football, etc. Business is a complex process that includes multiple
activities, and each of these activities may be divided into two broad
categories asa.

Economic activities; and

b.

Non-Economic activities

a. Economic Activities
Activities, which are performed with an objective to earn money, are
known as economic activities. For example, a farmer grows crops to sell
them, a factory or an office employee works and gets wage or salary, a
businessman earns profit through buying and selling goods.
For example,

Economics-the study of
how scarce resources are used
to produce outputs-goods and
services- that are distributed
among people. Resourcesinputs used to produce outputsland
and
other
natural
resources,
labour
(physical/mental),
capital
(buildings,
equipment,
and
money), entrepreneurship.

Maruti Udyog manufacturing cars.

Dominos selling Pizza.
Farmer producing crops to sell them for a profit.

b. Non-economic Activities
Activities, which are not performed to earn money but to get some satisfaction, are called non-economic activities.
These activities are performed to discharge social obligation or for physical fitness or for recreation. People visiting
places of worship, providing relief to the victims of flood and earthquake, engaging in sports activities, gardening,
listening to radio or watching television are all examples of non-economic activities.
For example,

Organization helping flood victims

Charity soccer / events
Official gathering / carnivals, etc.

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Exercise 1
1. What is the purpose of economic activities?
______________________________________________________________________________________
_____________________________________________________________________
What is the outcome of such activities?
______________________________________________________________________________________
______________________________________________________________________

Business Activities: Business Activities refer to all the activities in a company that enable the business to
achieve its economic and non-economic objectives.
Business activities are broadly classified into two main categories:
a. Industrial activities, and
b. Commercial activities

a. Industrial activities: These activities are related to production or extraction of goods through utilization of various
resources. Growing crops and plants, extracting oil, natural gas and minerals from the surface of the earth,
processing raw materials into finished and semi-finished goods, construction of buildings, dams and bridges are
examples of industrial activities.
Example:

Growing crops

Extracting natural resources (oil, natural gas, etc.).

Manufacturing of automobiles, consumer goods, industrial products etc.

b. Commercial activities: Commercial activities include all those business activities, which are undertaken for selling
or exchanging goods & services, and for facilitating their availability for consumption and use. Thus, it includes trading
activities and other service activities like transport, banking, insurance, warehousing etc.. These service activities are
known as auxiliaries to trade or aids to trade. They facilitate the business by carrying goods from the place of production
to the place of consumption, providing finance, undertaking risk, systematic storing of goods etc.
Example:

Buying and selling of goods by wholesalers, dealers, retailers, also called as Trading.
Activities and other service activities like transport, banking, insurance, warehousing etc. that support
the trading activities.

Advertising and promoting.

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Sectors of Economy
Based on the dependence of a sector on the natural resources directly or indirectly they are classified as:
1. Primary sector
2. Secondary sector
3. Tertiary sector

1. Primary Sector
Industries engaged in extracting, producing and processing natural resources such as minerals, plants, agriculture or
animals are called primary industry. These industries use natural resources as raw materials and produce finished
goods.
Examples:
Mining
Oil Extraction
Dairy Farming
Poultry Farming
Horticulture
Fisheries etc.
2. Secondary Sector
Industries that use the products produced by primary industry as the raw materials and produce variety of goods are
called secondary industry.
Examples:
Iron (primary source - iron ore).
Wood Furniture (primary source wood/trunk).
Breakfast Cereals (primary source cereals/grains).

3. Tertiary Sector
Sectors providing services to the consumers are called tertiary industries.
Examples:
Healthcare
Banking
Insurance
IT services
Transport, etc.

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Link between Primary, Secondary and Tertiary Industries:

Secondary industry:
Textile Mill

Primary indstry:
Cotton crop
production

Image 3

Tertiary industry:
Apparel Store

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Exercise 2

Identify the primary and secondary industries for the following tertiary industries:

Primary Sector

Secondary Sector

Tertiary Sector

1) ________________________

_________________________

Transport Industry

2) ________________________

_________________________

Healthcare Industry

3) ________________________

_________________________

Retail Industry

4) ________________________

_________________________

Insurance Industry

Exercise 3

1. Business benefits only the shareholders and doesnt contribute to the development of a nation.
a) True
b) False.
2. The activities that include production and extraction of goods are called _____________ activities.
3. A business group contributing money to the Prime Ministers relief fund is _______________.
4. Social responsibility is one of the important features of the business.
a) True
b) False

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Commerce and Trade

Commerce:
1) You may get up in the morning and have your favourite cup of Brazilian coffee, sitting in front of a TV that
has been manufactured in China. Have you ever wondered how goods from various parts of the Globe reach
your home? Why would Brazil sell coffee and China sell computers to India? A simple explanation is that
each side expects to derive profit. For example, those goods that are cheaper to produce (and thus, are in
abundance) in a particular country are exported (sold), and those that are more expensive to produce (or are
not available at all) are imported (bought). This is called international trade and all the activities that support
and regulate the exchange of goods are called Commerce.
2) Commerce is a branch of business. It is concerned with the exchange of goods and services. It includes all
those activities, which directly or indirectly facilitate that exchange. Commerce looks after the distribution
aspect of the business. Whatever is produced must be consumed and to facilitate this consumption there
must be a proper distribution channel. Here comes the need for commerce, which is concerned with the
smooth buying and selling of goods and services.
3) Goods produced in a factory change number of hands before they reach the end consumer. (see example
below)

Manufacture

Seller

Custom

Distributor

Retailer

Consumer
Trade :
Buying and selling of goods & services either
for cash or on credit. The person who buys
goods for the purpose of selling is a trader.
For example, a shopkeeper who buys goods
from a distributor or a wholesaler in bulk and
sells it to the individual consumers is a trader.
There are also two types of trade, i.e.
Domestic Trade (done within a country) and
International Trade (done with other
countries).

Trade

Domestic

International

Trdae

Tradel

Wholesale

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Import

Export

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Domestic Trade:
Refers to buying and selling goods or services within the boundaries of a country. The payment is done in the currency
of the country, Indian Rupees for Indian domestic trade e.g.. Domestic trade is again divided into wholesale and retail.

Wholesale:
A trader that buys goods from a company in a bulk quantity and sells it to
the smaller traders, is called a wholesale trader. They do not sell directly
to the end consumers. There are wholesale markets in every city where
such trade happens. One of such wholesale market for electronic goods
in Delhi is Lajpat Rai market. Can you find out wholesale markets for
various categories of products in your city?

Retail:
A trader who buys in bulk from a company or a wholesaler and sells it to
the end consumer, is called a retail trader. All the shopkeepers,
departmental stores or company outlets are examples of retail. All the big
outlets for the consumers such as Big Bazar, Reliance, Spencer and
Croma, which do retailing on a large scale & have a proper infrastructure
of storing, moving and displaying goods are called Modern Retail.

Difference between Wholesale Trade and Retail Trade

Wholesale Trade

Retail Trade

Wholesale traders buy goods from a company in a

bulk quantity and sell it to the smaller traders.

Retail Traders buy bulk from a company or a

wholesaler and sell it to the end consumer.

Wholesale traders do not sell directly to the end

consumers.

Retailers sell directly to the end consumers.

Example: Metro Cash and Carry outlets in

Bangalore and Mumbai sell only to the small
retailers in those cities. Similarly there are multiple
small and big wholesalers for every product in a
city or a town.

Example: All the shopkeepers, departmental

stores or company outlets are the example of
retail.

International Trade: If the buying & selling of goods happens across the boundary of the country, it is called
international or foreign trade. The payment is done in international currencies such as US Dollar, Euro, Pounds etc.
The international trade is further classified as:
Import: Goods or services purchased from foreign country for selling in own country.
Export: Goods or services sold to another country.
Entrepot: Goods imported from one country for the purpose of exporting to other country with or without making
any change. For example, some companies import parts and components from other countries, assemble them
into finished product and then export to other countries.

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Electronic Commerce:
What is common between the companies whose logo are shown below? You must have used their sites to buy
products or service.

If the buying and selling of goods and services happens over the internet or other computer networks, it is called
electronic or e Commerce. Even the payments are electronically transferred from the buyers to sellers account. There
are number of websites available that provides this facility including listing features & details of the products, price of
the products, availability and delivery time, payment options etc.

Advantages of e Commerce:
a. Low cost of business: e Commerce can connect a business with a large number of customers across the
globe, at a fraction of a cost that is required to reach so many customers in a traditional way of setting up
physical outlets at every place and stocking goods in each outlet.
b. Wider Choice of Goods: The customers have a wider choice of goods & services to select from.
c. Convenience: The customers can purchase goods right from home or office using internet and do not
physically need to go to any outlet.
d. Quick Response to Customers: The goods to end customers can be reached directly without routing
through the distributor or wholesalers. The customers get better service, faster transaction, fewer
shortages of the products etc.

Exercise 4
Fill in the blanks
1. Trade matches the gap between producer and _________________.
2. Commerce consists of activities that include trade and __________________________.
3. A trader imports washing machine in India for exporting to neighbouring countries. This trade is
called ____________________.
4. A trader in Chawri bazar buys goods in bulk to sell to the smaller retailers. The trader is a
____________________.
5. Ramesh buys household grocery from a _______________.
6. Easy Trade.com allows traders to buy and sell goods on internet, also known as
_______________.

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Business Objectives
A business has four main objectives:

Growth vs. Market Share

1.
2.
3.
4.

Economic objective
Social objective
People objective
National objective

If the business grows at the same rate

as its sector, they retain their market
share. If the business grows more than
its sector, this leads to an increase in
market share and vice versa.

Growth vs. Profit

Growth requires part of profit to be
invested in the business as higher
growth leads to higher profits.

To sustain continuous growth of

business, lot of investment is required.
These investments may seem to be
reducing profits; however they yield
higher profits in future.

Some common examples of such

investment are:

Marketing / advertisement

Infrastructure

Information technology, etc.

1. Economic objective
Economic objective is the primary objective of any business that leads to
the growth of business, earning profit and providing value to shareholders.
Economic objectives are:
a. Profits:
- Required for business growth.
- Provide return to the investors.
- Act as cushion against any future risks.

b.
-

Growth:
To increase sales revenue.
To be competitive in the market.
To expand customer base.

Higher growth
leads to more
profit

Growth requires part of profits to be

invested in the business

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2. Social objective
Business should contribute to the improvement of wellbeing of the society
and should not engage in any activity that harms the society or its
environment in any manner.
Organizational approach towards
Corporate social responsibility
(CSR):

Philanthropic approach

Few of the socially active

organizations have taken the
philanthropy approach. This
includes monetary donations and
aid given to local organizations
and impoverished communities in
developing countries.
E.g. Bill and Melinda Gates
Foundation.

Community based development:

Social objectives are:

a. Value for Money
- Improve quality and features.
- Provide customized product/services.
- Make product/services consumer friendly.
b. Corporate Social Responsibility:
Corporate Social Responsibility (CSR) ensures that a company's
business model should be socially responsible and environmentally
sustainable. Examples of activities undertaken under CSR are:
- Sponsor research programs.
- Participate in charity events for social welfare.

- Invest on education, healthcare, safe drinking water, etc.

This approach involves

corporations to work with local
NGOs or communities for social
welfare.
E.g. Marks & Spencer.

CSR into Corporate Strategy

On the other hand, other

organizations who do not support
a philanthropic approach,
introduce the CSR values into their
corporate strategy.

Bill & Melinda Gates foundation with an annual endowment of

$37.1bn focuses on Education, Healthcare & Poverty via various US
as well as Global Health & Development Programs.

c. Business Ethics:
All the business need to adhere to laws of the country and follow
ethical ways of doing business. They should adapt fair trade practice,
should not discriminate against any gender, caste or a race. They should
not make false claims or mislead public for their personal gain.

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3. People objective
U

Every business employs people to run and manage its operations. The human objective of the business
therefore includes well-being of their employees, providing opportunities for their development & growth,
making the work environment conducive & safe, and providing social security benefits such as insurance,
medical cover, pension etc.
People objectives are:
a. Employee well-being:
-

Fair compensation for the services.

Reward commendable performance.
Provide benefits such as PF (Provident Fund), pension, health & life
coverage, etc.

b. Employee development:
- Invest on skill building trainings and workshops.
- Provide opportunities to take higher responsibility and challenges.
- Arrange counselling or coaching sessions if needed.
- Equip employees with the required infrastructure.
- Motivate to learn and grow.
4. National Objective
U

Business is the backbone of a countrys economy. National objectives are:

a. Provide employment:
By providing employment to people, it not only help them to survive but also help them to improve their standard
of living. As people earn more, their purchasing power increases and they demand more products or services.
This helps the business to grow further and employ more people.

b. Grow nations wealth:

The Gross Domestic Product (GDP) that is used as a measure of
wealth of a nation, is directly impacted by the goods and services
produced by various business operating in country. The higher the
GDP per capita (Total GDP divided by population of a country) the
more prosperous is the nation. The business that focus on exports of
goods and services help country to earn foreign exchange and
achieve balance of trade with other countries.

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GDP Comparison for major economies (figs. for the year 2010):

United States

: USD 14.5 Trillion

China

: USD 5.8 Trillion

India

: USD 1.6 Trillion

Exercise 5
Please select the appropriate business objective (people, economic, social, and national) against each of the
following statements:

Business activity
1

A business must ensure that the product or service sold to the

customers is worth its cost.

A business should ensure that it pays all the due taxes to the
government on time.

A company has provided schooling facility for the children of

its employees.

A company organized a meeting of its shareholders to discuss

its performance.

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Business Objective

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Summary

Business is an economic activity in which goods or services are purchased, produced and sold in exchange of
money.

Businesses can be for Profit and not for Profit

Businesses can be for selling Goods, Services or both

Characteristics of Services businesses that makes it more challenging are: Variability, Intangibility,
Inseparability, Perishability, Non-ownership

Business not only help the owners earn profits but also serves the National, Economic and Social cause

GDP is the measure of the health of economy

Sectors of economy are: Primary, Secondary and Tertiary

All the three sectors are linked to each other and play an important role in the economy of a country

Trade is buying and selling of goods and services

Commerce is the branch of business that support and regulate the trade

E Commerce is f the fastest growing channel of trade that has many advantages over the traditional channels of
trade

Web Resources:

Evolution of e Commerce (Video) : http://www.youtube.com/watch?v=LW4X3b_j0eE

Business Objectives: http://www.informationbible.com/article-objectives-of-business-23.html

International Trade Bodies http://commerce.nic.in/resourcecenter/internationaltradebodies.asp?id=12

Public Sector Undertakings http://commerce.nic.in/aboutus/aboutus_autonomousbodies.asp#b13

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Students Activities
Quick Games
Identify the brand by the logo:

Brand Logo

Brand Name

Brand Logo

01

11

02

12

03

13

04

14

05

15

06

16

07

17

08

18

09

19

10

20

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Brand Name

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Can you identify the brand name by its tagline/slogan?

Brand Tagline/Slogan
01

There are some things that money cant buy, for everything
else theres...

02

The Best a Man Can Get

03

Experience Life, Beautifully Arranged

04

Where do you want to go today?

05

Between Love and Madness lies Obsession

06

The Ultimate Driving Machine

07

High Performance. Delivered

08

Forever New Frontiers

09

Think Outside the Bun

10

A Passion to Perform

11

When it Rains, it pours

12

ON DEMAND

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Brand Name

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13

A Positive A++itude

14

We are Building a New Technology Company

15

Born in Japan Entertaining the World

16

Welcome to Cashless World

17

Das Auto

18

Journalism of Courage

19

Like. No. Other.

20

At the edge of the world, his journey begins

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Classroom Activity

Pick any industry e.g. food, automobile, furniture and discuss the following with your group:
Plot all the business activities right from obtaining the materials to reaching to end consumer or user.
Classify each of these activities as:

Primary, Secondary, Tertiary Industries

Industrial or Commercial Activities

Agencies engaged in Trading and Commerce

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