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Business Oragainsation and BUSINESS SYSTEM

Concept of Business Organisation Functional Areas of Business Concept of Business system Business- Open System Features of Business system Sub- systems of Business Organisation Institutional framework Business system as apart of Economic System Types of Economic System Business Objectives

Concept of Business Organisation


The term business organisation is very often used in different senses. It is used to represent a business enterprise such as Tata Iron and Steel Co., Reliance Industries, Maruti Udyog, Indian Oil Corporation, etc. Business organisation is a subject of study, Business organisation is the effective coordination of various components or sub-systems of the business enterprise. It embraces planning and control of production, procurement of materials, distribution of products, management of personnel, etc.

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Organisation is the harmonious combination of various factors of production for the purpose of acquisition of wealth. It may also be defined as the technique of conducting industrial and commercial activities for the achievement of certain objectives through production and exchange of goods and services. Organisation is one of the basic functions of management. It involves the determination and provision of whatever capital, materials, equipment and personnel may be required for the achievement of certain predetermined goals.. Thus organisation is a process of integrating and coordinating the efforts of manpower and material resources for the accomplishment of certain objectives.

FUNCTIONAL AREAS OF BUSINESS


In order to achieve its objectives, a business enterprise performs many functions, which may be broadly grouped under the following headings : Production, Marketing, Finance and Personnel. In big business organisatipns, there are separate departments to look after these functional areas. These functions are interdependent and inter-related. For instance, production department depends upon marketing department to sell its output and marketing department depends upon production department for the products of required quality to satisfy its customers. Thus, there must be proper integration of various functional areas of business to achieve its objectives. This can be achieved by the management of the enterprise by effective planning, organisation, direction and control.

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1. Finance Function. It deals with arrangement of sufficient capital for the smooth running of business. It also tries to ensure that there is proper utilisation of resources. It takes many important decisions such as raising capital from various sources of finance, investment of funds in productive ventures and levels of inventory of various items. Production Function. It is concerned with transformation of inputs like manpower, materials, machinery, capital, information and energy into specified outputs as demanded by the society. The production department is entrusted with many activities such as production planning and control, quality control, procurement of materials and storage of materials. Marketing Function. It is concerned with distribution of goods and services produced by production department. A business can perform this function efficiently only if it is able to satisfy the needs of the customers. For this purpose, the marketing department guides the production department in product planning and development. It fixed the prices of various products produced by the business. It promotes the sale of goods through advertisement and sales promotion devices such as distribution of samples and novelty items, holding contests, organising displays and exhibitions, etc.

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Contd with finding suitable Personnel Function. This function is concerned


employees, giving them training and fixing their remuneration and motivating them. The quality of human resources working in the enterprise is a critical factor in the achievement of business objectives. Therefore, it is necessary that the work-force is highly motivated and satisfied with the remuneration and facilities provided by the business. Purchase Function. Traditionally, purchasing is considered a part of the production function. But in big organisations, there may be a separate department to perform complicated purchase activities such as inviting tenders choosing the sources of supply, making transport arrangements and import of raw materials and machines and equipment. Public Relations Function. Modern business houses want to be in touch with the public and government through their public relations departments. This department organises publicity campaigns to increase the image and goodwill of the business in the society. Legal Function. In a big organisation, the legal department may be organised to ensure that the business house is abiding by the rules and regulations framed by the government. It also gives advice to the management in case of disputes with the customers, suppliers and even government over various commercial matters.

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Concept of Business System


"A system is an assemblage or combination of things or parts forming a unitary whole". The things or parts are known as sub-systems and are so interlinked that a change in one part brings changes in other parts also. The sub-systems are closely interdependent and inter-related to form a co-ordinate whole. It is the system as an integrated body or organization that has interaction with the external environment. In other words all the sub-systems of a system operate together while responding to the forces in the external environment.

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A business organisation may be viewed as a system which is created to satisfy society's needs and desires by the production and distribution of goods and services with a view to earn profits. a business system gets various inputs from the environment and transforms them into goods and services, (i.e., output) as required by the environment. Thus, it has exchange relation with the environment. A business system is composed of sub-systems such as : Production, Marketing/ Finance, Personnel, Research and Development, Legal and Management. These sub-systems are interdependent and inter-related. They must be properly coordinated if the business is to achieve its objectives effectively. The business system has external environment consisting of social, political, cultural, economic and other forces which affect business policies, plans and practices. Each sub-system of the business is influenced by these forces. To deal effectively with the environment, the various sub-systems operateas a coordinated whole or a single entity

Features of a Business System


Goal Oriented: A business system is directed towards the achievement of certain objectives. The important objective of a business is earning profits for survival and growth in the environment by supplying the goods and services required by the society. The business has other objectives also like providing good working conditions to workers, providing high quality goods to the society and contributing towards the achievement of national goals. Input-output: A business system imports inputs from the external environment and exports its outputs to the external environment. Its inputs include raw materials, capital, technology, labour and information whereas its outputs include the goods and services produced by it. Transformation Process: A business system is creative in nature a$ it transforms various inputs into outputs or goods and services desired by the customers. Open and Adaptive: A business is an open system in the sense that it influence's and is influenced by the environment. It can continuously adjust itself to the changing environment on the basis of feedback from the external environment". The structure and/sub-systems of the business change due to changes in the environment of the business.

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Feedback: The term 'feedback' means that which is fed back to the giver of information or goods. A Business provides goods and services to the society which in turn provides feedback to the business about the acceptability of its goods and services. On the basis of this information, the business can take corrective measures, whenever required. Sub-systems: A business is composed of various sub-systems like production sub-system, marketing sub-system, finance sub-system, personnel sub-system and managerial sub-system. These sub-systems are dependent upon one another. As a result, there is a continuous interaction among the sub-systems. Synergy: There is proper integration of various sub-systems of the business. As a result the contribution of the whole system is greater than the sum of the contribution of all sub-systems. This is called the law of synergy which implies that whole is greater than the sum of its parts. System Boundary: Each system has a boundary which separates it from other systems. A closed system has a fixed boundary whereas; the boundary of an open system (e.g., Delhi University) is flexible and invisible.

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Environment: A business organization functions under two sets of environment, namely, internal and external. The internal environment includes production sub-system, marketing sub-system, finance subsystem, human resource sub-system, etc. These sub-systems operate under the influence of external environment which is known as 'Supra System'. The external environment includes all those factors which lie outside the system such as economic, politico-legal, socio-cultural, investors, customers, suppliers, competitors, international factors, etc; A business system gets various inputs from the external environment and gives, in turn, its output to it. Control Mechanism: There are many control systems within a business system. The control systems are designed by the management. Management is an important force within a business which takes all important decisions and implements them. It is management which coordinates various organizational activities to convert inputs into outputs and to respond to environmental opportunities and constraints.

Environment

Business as an Open System


A system may be closed or open. A closed system is selfdependent and does not have any interaction with the external environment. For instance, mechanical systems are closed systems. A closed system concentrates on internal relationships only, i.e,interaction between sub-systems. On the other hand, an open system has active interface with the environment through the input-output process. It can respond to changes in the external environment through the feedback mechanism. A business is an open system as it has a continuous interaction with the environmental forces such as suppliers, customers, competitors, government, etc. It obtains inputs, such as raw materials, labour, capital, technology and information from the environment. Operations are performed upon the inputs to produce desirable outputs which are supplied to the environment (i.e., customers).

Sub-systems of a Business Organisation


A business organisation is an open adaptive system as it influences and is influenced by its environment continuously. It receives inputs from the environment in the form of raw materials, labour, capital, information, etc. and transforms them into output (i.e., goods and services) which is supplied to the environment. In order to carry out its operations effectively, a business generally reates certain departments which are known as sub-systems. The important sub-systems of a business firm are :

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1. Production system Consisting of production function; i.e., plant layout, production planning, quality control, materials handling, etc. 2. Finance system Dealing with finance function ; i.e., procurement of funds, investment, distribution of dividend, etc. 3. Marketing system Looking after marketing function ; i.e., product planning and development, packaging, pricing, promotion, distribution, etc. 4. Human resource system Dealing with the human resources ; i.e. recruitment, selection, training, compensation, welfare, personnel records, etc. 5. Research and Development (R & D) system - Monitoring the discovery of new ideas, technology, methods, etc. All the sub-systems must be properly integrated and closely co-ordinated so that the entire system functions as an objectives for which the business has been set up.

Thus, we can visualize a wheel within a wheel, and further wheel within wheel known as network of systems. As said above, training and development in sub-system of the personnel system which is turn is a sub-system of the business system. The business itself is a sub-system of the socio-economic system of the country. Each sub-system is closely related with the biggest system of which it is a part.

Each sub system has a number of further sub systems. For eg-, human resource system (a sub-system of a business firm) has the following sub-systems i. Recruitment and selection; ii. Training and development; iii. Wage and salary administration ; iv. Employee welfare and services ; v. Personnel records and research, etc.

BUSINESS SYSTEMS - INSTITUTIONAL FRAMEWORK


Business Systems comprises of several inter-locking subsystems that we call industry and commerce. Industry is comprised of many sub-systems such as manufacturing firms, mixing firms, construction firms, etc. Commerce includes various firms engaged in exchange of goods and services and providing various services such as transportation, insurance, storage, financing, advertising/ etc. Each firm, in turn, consists of many subsystems such as production, marketing, finance and personnel as shown in Fig. 2.4. Every sub-system can be further broken down into sub-systems. Thus, there is a structure of sub-systems in the business system of any country.

BUSINESS SYSTEMS - INSTITUTIONAL FRAMEWORK


Business system may be described in terms of the institutions that operate for the production and distribution of want satisfying goods and services. An industrial system can be described by listing and relating the different institutions like manufacturing units, mining units, construction units, etc. that comprise industry and commercial system includes, suppliers, retailers, wholesalers, freight companies, credit agencies, public warehouses, banks, investment bankers, So by necessity when we deal with a system/ it is to be treated as a separate legal entity under separate managerial control distinct from the other sub-systems in the industry.

Institutional Framework

Business as a Part of Economic System


The economic system of a nation represents the business system that involves a network of activities concerned with production and distribution of goods and services for satisfaction of human needs. Thus, economic system is a broader system consisting of business firms and government institutions which direct and facilitate the utilisation of economic resources. Business is a sub-system of the economic system of the country. Economic system aims at utilising the limited national resources to meet the unlimited wants of the people. The business system of a country cannot be studied without reference to the economic system of which it is a part. The economic system of the country provides economic environment of business. Business is influenced by overall economic system consisting of ownership of factors of production, economic planning (centralised or decentralised), fiscal commercial and industrial policies of the government, etc.

Under a capitalist economy, business is largely operated by entrepreneurs for private profit. Decisions relating to production, distribution and consumption are made through market forces of demand and supply without much interference by the Government. But in a communist or socialist economy, all business decisions are dictated and regulated by the central agencies of the Government. The business cannot take independent decisions here. However in a mixed economy like India, the businessmen have freedom of choice and action in certain industries. Some industries are reserved exclusively for the public sector. The private sector business enterprises have to be guided by the government budgetary, industrial and commercial policies..

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TYPES OF ECONOMIC SYSTEMS


An economic system denotes the economic relationships which arise in the community from the organisation of production and distribution. In other words, an economy refers to the system in which people organise their activities and form institutions whereby the economic resources, namely: land, minerals, power, raw materials, labour, capital/ and other inputs of production, are utilized for satisfying the needs of the people living in the society. The fundamental problem for an economy is to provide answers to the following three fundamental questions: (a) What things will be produced ? (b) How will things be produced ? (c) For whom will things be produced ? There are two basic economic systems, namely : (i) capitalism, and (it)communism. Some countries also follow the combination of both the systems. For example, in India we have mixed economic system where both public and private sectors co-exist. A brief account of these economic systems is given below.

Capitalist System
A capitalist system is that economic system in which free enterprise competition and private ownership of the property guided by the profit motive generally prevail. Under capitalism, the means of production and distribution are controlled by private owners who operate them to earn profit. The important features of a capitalist economy are as follows :

Existence of Private Property. A capitalist economy is a free enterprise economy or a free market economy in which there is freedom of private ownership of property and means of production. The right to own property also carries with it the right to determine its use. Freedom of Enterprise. There is a freedom of choice of occupation in a capitalist economy. The individuals have the right to determine the use to which any unit of productive resources shall be put. Profit Motive. Profit motive acts as the basic incentive for enterprises under capitalism. People invest capital into business to earn profit. Profit is the guiding force in making decisions regarding use of resources. The owners of means of production enter those fields which yield maximum profit. Naturally, costs and prices are compared for making business decisions. More resources flow into those channels where profits are higher. Free Competition. There is competition at all levels in a capitalist economy. There is competition among sellers to sell, among buyers to purchase and among workers to get employment. It is because of this competition that the forces of demand and supply are always in action in the market.

Price Mechanism. Under capitalism, the allocation of economic resources is determined by profit motive in conjunction with the price mechanism. There is a free interplay of the forces of demand and supply. The price mechanism decides the levels of consumption, production and distribution. Thus, the whole economic system revolves around the price mechanism. Consumer's Sovereignty. Customer is king under the capitalist system. The businessman produces the goods and services to satisfy the needs of customers. The customer or consumer has the liberty to buy any commodity. He is free to spend his income in any way he likes. Role of Government. The Government is a protector of private property under capitalism. The role of the government is limited to the operation of public utilities to avoid unhealthy competition and to provide essential services to the public economically.

Collectivist or Socialist Sysfm


The collectivist system is characterised by the conscious setting of goals for the economy as a whole and an authority to administer it. The socialist system can be defined as a system of economic organisation in which there is public ownership and management of the basic industries and public control of the distribution of income. By public ownership is meant that the large and basic industries are owned and controlled by the government. Under communism (authoritarian socialism), the consumption pattern may be regulated by the government. The features of the socialist system are as under :

Public Onwership. All the factors of production are owned by thegovernment. It is the government which determines the utilisation of factors ofproduction for the production of goods and services. The private entrepreneurshave no role to play. Central Planning. Socialism stipulates the central authority which canset and accomplish socio-economic goals. Such an authority may be the PlanningCommission or some other organ of the Government. Such authority fixes thepriorities for the nation and it has the power to direct the use of economicresources to achieve socio-economic objectives. Allocation of resources to variousproductive activites is also the responsibility of this authority. Social Welfare. The main goal of socialistic system is social welfare.Every person in the country is ensured a decentj.tandard of living. The dispartiesin income are reduced to a considerable extent. The determinants of social welfareare quality diet/ health, education, old age security, etc.

Mixed Economy
Mixed economy is the term used to describe a comPromise between Capitalistand socalist economic systems. The idea underlining the policy of mixed economy is to combine the advantages of capitalist system, namely : increased productivity, |improvement in the efficiency of utilisation of resources, progress of science and }technology, and the advantages of the socialist system, like reduction of inequalityof income, regulation and control of private property/ and provision of socialsecurity, etc. The distinctive mark of mixed economy is that a well defined role is assignedto the public sector to ensure faster development of the economy and egalitariandistribution of national income. Although the private sector is permitted to baseits activities on the profit motive, exploitative character of this motive is effectivelyctirbed by the government. In a mixed economy, the government has to play animportant role in the economic sphere. It must ensure faster economicdevelopment and must, to that end, undertake to provide social overheads,industrial climate, and industrial base. It must also ensure that the fruits ofeconomic development are as widely distributed as is fair and possible. It musttake adequate steps to make certain that inequalities between man and man,class and class, and region and region, are reduced to the minimum. In India, we have a mixed-economic system where both the public andprivate sectors co-exist. The characteristics of a mixed economy are describedbelow:

Co-existence of Public and Private Sectors. In a mixed economy, some fields of production are exclusively allotted to the public sector while others are open to the private sector. In India, some sectors like defe nce, nuclear energy-and public utilities, are reserved for the public sector. In other areas, both the private and public sectors can set-up their units. Central Planning. In a mixed economy, there is a great role of central planning. In India, we have Planning Commission which is responsible f6rdrafting 'five year plans'. The plans are prepared keeping in view the political ideology, resource constraints and social aspirations of the nation. Each plan lays down the socio-economic objectives, sets physical targets, specifies the sources of funds for implementing the plan and also prepares specific programmes for implementing the plan. Economic Welfare. The purpose of mixed economic system is faster economic development accompanied by a sufficiently rapid increase in opportunities for employment. In addition, the public sector undertakes to reduce inequalities by starting industries in the less developed regions and by opening employment opportunities for backward classes,

Market Mechanism. The output of the public sector has to be sold because there is no question of self-consumption. Even the goods produced in the private sector are largely marketed. A mixed economic system is therefore known for the market mechanism. Law of demand and supply plays an important role subject to the intervention by the Government. Role of Profit Motive. In a mixed economy, profit motive is allowed to play its role within certain limits. The private sector is permitted to function in such a manner that gains are made by an increase in efficiency and not by exploitation of customers and workers. The public sector is mainly guided by social interest. But an element of profit is also there. It is the profit motive which,in combination with the pricing system, determines the allocation of resources.But profit motive is not allowed unrestricted operation in a mixed economy. Role of Government. In a mixed economy, the government plays important role in the economic sphere. The public sector covers a substantial field and the government sees to it that it is administered and managed efficiently in the interest of social good. It must step in when and where private enterprise operates against the socioeconomic goals of the nation. It must see to it that industrial enterprises, public as well as private, are so located that all regions and classes march forward together on the road to economic development.

BUSINESS OBJECTIVES
Objectives give the business a clearly defined target. Plans can then be made to achieve these targets. This can motivate the employees. It also enables the business to measure the progress towards to its stated aims. The most effective business objectives meet the following criteria: S Specific objectives are aimed at what the business does, e.g. a hotel might have an objective of filling 60% of its beds a night during October, an objective specific to that business. M - Measurable the business can put a value to the objective, e.g.10 million sales turnover in the next half year of trading. A - Agreed by all those concerned in trying to achieve the objective. R - Realistic the objective should be challenging, but it should also be able to be achieved by the resources available. T- Time specific they have a time limit of when the objective should be achieved, e.g. by the end of the year.

The main objectives that a business might have are:


Survival a short term objective, probably for small business just starting out, or when a new firm enters the market or at a time of crisis. Profit maximisation try to make the most profit possible most like to be the aim of the owners and shareholders. Profit satisficing try to make enough profit to keep the owners comfortable probably the aim of smaller businesses whose owners do not want to work longer hours. Sales growth where the business tries to make as many sales as possible. This may be because the managers believe that the survival of the business depends on being large. Large businesses can also benefit from economies of scale.

Alternative Aims and Objectives


Not all businesses seek profit or growth. Some organisations have alternative objectives. Examples of other objectives: Ethical and socially responsible objectives organisations like the Co-op or the Body Shop have objectives which are based on their beliefs on how one should treat the environment and people who are less fortunate. Public sector corporations are run to not only generate a profit but provide a service to the public. This service will need to meet the needs of the less well off in society or help improve the ability of the economy to function: e.g. cheap and accessible transport service. Public sector organisations that monitor or control private sector activities have objectives that are to ensure that the business they are monitoring comply with the laws laid down. Health care and education establishments their objectives are to provide a service most private schools for instance have charitable status. Their aim is the enhancement of their pupils through education. Charities and voluntary organisations their aims and objectives are led by the beliefs they stand for. Changing Objectives A business may change its objectives over time due to the following reasons: A business may achieve an objective and will need to move onto another one (e.g. survival in the first year may lead to an objective of increasing profit in the second year). The competitive environment might change, with the launch of new products from competitors. Technology might change product designs, so sales and production targets might need to change.

OBJECTIVES
The various objectives of business may broadly be classified as follows : 1. Organic objectives 2. Economic objectives 3. Social objectives 4. Human objectives 5. National objectives The realization of economic and organic objectives helps the business directly and immediately whereas the social, human and national objectives help the business indirectly and in the long run.

Organic objectives
As an entity, a business enterprise has its own stages of infancy, childhood, and maturity. Like a human being, the first concern of "a business enterprise is to ensure its survival. When the enterprise is assured of its survival, it will aim at growth and expansion. To accomplish this objective, it will attempt to win prestige, recognition and goodwill from the society in which it operates. iness.

Survival : First of all a business enterprise tries to maintain its existence. Survival or stability objective implies the maintenance of a firm's competitive position or earning capacity or market standing. Unless an enterprise survives no other objective can be accomplished. Growth : Growth and diversification is one of the major objectives of business. Growth may be measured in terms of size, investment, market share, etc. Market share which a business enterprise commands reflects its standing in the market. A business enterprise may identify new customers, new products or new markets or increase its market share in the present market. Growth brings higher profits, economic and social power, etc. Prestige and Recognition: Prestige and recognition help to ensure the survival and growth of a firm. A business enterprise with good image or goodwill can easily attract customers, investors and competent employees.

Economic Objectives
Economic Objectives Business is an economic activity and, therefore, its major objectives are economic. Economic objectives refer to those goals which determine a person's conduct in the business part of life. Economic objectives of business are as follows : Profit-making : Risk is inherent in business and profit is the reward for undertaking risk. A business must earn profits in order to stay in business and to maintain intact the wealthproducing capacity of its resources. But profit making is not the sole objective of business. According to Henry Ford, "mere money chasing is not business". Example ___Ford could build up the world famous Ford Motor Co. because he aimed at providing a people's car. Profit through service rather maximum profits is the real aim of business. A business cannot survive for long if it aims solely at the enrichment of its owners. According to Drucker, "Profit is not an objective but a requirement that has to be objectively determined in respect to the individual business, its strategy, its needs and its risks.

Creation of Customers: Business can earn profits only when it provides goods or services which people are able and willing to buy. Every business enterprise is conceived in terms of a product or service that meets the needs of public. A business enterprise cannot survive unless there are enough people to buy the products and services offered by it. Customer is the generator of revenue for business. By paying for goods and services, customers determine what shall be produced and how much? In the words of Drucker, "There is only one valid definition of business purpose: to create a customer. It is the customer who determines what a business is....The customer is the foundation of business and keeps it inexistence..... and it is to supply the customer that society entrusts wealth-producing resources to a business enterprise.'" Customers can be created only when business supplies them what they want and at the price, place and time they desire. Business earns by satisfying the needs of the customers satisfaction of customers is an important objective of business Creating customers amounts to creating the market for goods and services.

Innovation: Modern business is highly dynamic and an enterprise can continue to be successful only by adapting itself to changes in its environment. A successful firm has not only to adjust itself to changing environment, it must on its own create conditions favorable to survival and growth. The highly competitive nature of modern business puts a premium on innovation and creativity which implies the introduction of new and better products, improved means of production and distribution, new technology, new methods and procedures of management, etc. Profits are the result of efficient performance in marketing, innovation and productivity. Innovation results in better and cheaper products and more employment for the society. Innovation is essential for the survival and growth of business. It is through innovations that business firms perform dynamic functions of growth, diversification and change in the economy. The most progressive or excellent companies allocate large amount of money on research and development for achieving the objective of innovation.

Social Objectives
The economic objectives of business can be realised only by serving the society. Business is an organ of society and it draws its resources from the society. Therefore, it must satisfy the wants and aspirations of society. A business enterprise can survive and grow only when it caters to the needs of the society. A really successful business can be built on the foundation, of social service. If a business enterprise serves the various sections of society, profits will follow automatically. Profits are, in other words, the reward which business receives by serving society. There is no conflict between profit-motive and service to society. It is through service that business earns profits. Social objectives of business refer to the obligations of business towards customers, employees, investors, suppliers, Government and the general public. The profits of business represent a social surplus in which all stakeholders must share in proportion to their contributions. The social objectives of business .are as follows :

Quality Goods at Fair Prices : The first and foremost social objective of business is to provide regularly the goods and services of proper quality and quantity to consumers at reasonable prices. Today consumers are conscious of the quality of goods they buy. Therefore, business units must always maintain a continuous and adequate supply of articles of standard quality. Businessmen who keep their customers satisfied are likely to earn profits. Providing Employment: Another social objective of business is to create opportunities for gainful employment of the people. Sometimes this objective may conflict with the economic objective of cutting down costs and improving profits by introducing mechanization or automation. In a country like India, mechanization may have to be deferred or implemented gradually in stages without causing loss of job to anyone. Avoidance of Profiteering and Anti-social Practices: It is legitimate for a business enterprise to work for legitimate profit. But it must not over-charge the customers or indulge in profiteering at their cost. It is the social obligation of a business concern not to indulge in hoarding, black-marketing, adulteration and other anti-social practices. In times of scarcity it should ensure fair and equitable distribution. Moreover, business enterprise is expected to adopt socially responsible and ethical behavior with the suppliers, competitors, and other interacting groups of people. It should be fair in its dealings with all these groups.

Human Objectives
A business enterprise is an institution carried on by people (entrepreneurs and managers), through people (employees) and for people(consumers and public). Therefore, human factor pervades all business activities. Business is not an end in itself but a means towards human welfare. People are the most valuable asset of business and their well-being is its main concern. The success of a business depends upon the quality of people working in it. In order to win the cooperation of employees, business must fulfill their expectations. The human objectives of business arise from these expectations. The important human objectives of business are given below.

Fair Deal to Employees: The first human objective of business is to pay fair wages, salaries and incentives to the employees at different levels. Fair working and living conditions and security of the maximisation of profit, but the achievement of sufficient profits to cover the risks of economic activity and thus to avoid loss".' Business must try to earn at least the profit required to enable it to stay in business and to maintain the wealth-producing capacity of its assets. Profit is only one of the eight key areas on which the survival and growth of the business depends. These areas include marketing, innovation, productivity, social responsibilities, human organisation, physical resources and financial resources. Profit-making is essential in business because of the following reasons : Incentive : Profits provide the basic stimulus to establish and operate business enterprises. Profit is the driving force behind private enterprise. It is the return on capital and a reward for the risk of entrepreneurship. Survival: Profits cover the risks and costs of staying in business. Profits helps to maintain intact the revenue-generating capacity of business. Through profits, an enterprise can replace obsolete machinery and equipment. It can build reserves and gain strength to withstand competition and recession. Profits are needed 'to strengthen the capital assets base of business and as a shock absorber against trade cycles.

Growth : In order to expand and grow, an enterprise needs funds. Retained earnings or ploughing back of profits is an important source of capital for expansion and innovation. Profits provide the means of self-financing. Profits also help to attract new capital from outside sources. Unless fair profits are earned, a business decays and dies out sooner or later. A business enterprise which is not earning profits cannot attract investors. Even in a State-owned enterprise profits are considered necessary to finance expansion and other economic and social needs. Measure of Efficiency : Profit is an important measure of success in normal times. Profits are the criteria by which people evaluate the efficiency and performance of a business enterprise. Availability of reasonable profits over a long period of time indicates that the enterprise is successful and the society has appreciated the services rendered by it. Prestige : A losing concern has no goodwill or image in society. Accumulation of wealth through business earnings has enabled people to build business empires. Big business provides economic power and social status to businessmen. Society, too, can progress only when human effort yields profits because a losing organisation leaves less for all to share.

Conclusion:
Thus, earning of sufficient profits is necessary not only to pay adequate returns to the investors, but also to provide for the growth and diversification of the business, for maintaining stability and for feeding innovation. Profits bring prestige and power to business. After a point, profits induce businessmen to behave in a socially responsible manner. According to Drucker, profits serve three purposes :(a) It measures the net effectiveness and soundness of business efforts. It is the ultimate test of business performance.(V) It serves as the 'risk premium' which covers cost of staying in business, replacement, obsolescence, market risk and uncertainty.(c) It ensures adequate funds for future expansion and innovation thereby increasing the wealth of the country. However, profit is not the sole criterion of business. The early concept of business was based on the goal of profit maximisation as reflected in the slogan 'the business of business is to do business.' This concept later changed to 'profit with service.' The modern concept of business is founded on the goal of'profits through service'. Business earns money by supplying the goods and services which can satisfy human wants. Business may be carried on 'at no profit no loss basis' for the welfare of the general public.

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