Management Essentials

Session I

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Introduction
• It is study of the methods, techniques and practices of efficient
organizations and management of business.
• The knowledge of this subject is essential not only for the commerce
students, but also for all those who want to enter into any line of
business.

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Meaning of Business
• A business may be defined as
an institution organized and
operated to provide goods and
services to the society with the
objective of earning profit.
• L.R. Dickson has defined
business as a form of activity
pursued primarily with the
object of earning profit for the
benefit of those on whose
behalf the activity is conducted

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Nature of Business
• Dealing in goods and services
• Production & Exchange
• Regularity
• Uncertainty & Risk
• Profit Motive

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Scope of Business
• The scope of business is very wide. It includes a large
number of activities which may be classified under two
broad categories, namely,
• Industry
• Commerce

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Objectives of Business
1. Economic Objectives
2. Social Objectives
3. Human Objectives
4. National Objectives
5. Global Objectives

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Economic Objectives
• Economic objectives of business refer to the objective of earning
profit and also other objectives that are necessary to be pursued to
achieve the
• profit objective,
• creation of customers,
• regular innovations
• best possible use of available resources.

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Social Objectives
• Social objective are those objectives of business, which are desired to
be achieved for the benefit of the society.
• Since business operates in a society by utilizing its scarce resources,
the society expects something in return for its welfare.
• Social objectives of business include:
• production and supply of quality goods and services,
• adoption of fair trade practices, and
• contribution to the general welfare of society and provision of welfare
amenities.

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Human Objectives
• Human objectives refer to the objectives aimed at the well-being as
well as fulfillment of expectations of employees as also of people who
are disabled, handicapped and deprived of proper education and
training.
• The human objectives of business include
• economic well-being of the employees,
• social and psychological satisfaction of employees, and
• development of human resources

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National Objectives
• Being an important part of the country, every business must have the
objective of fulfilling national goals and aspirations.
• The national objectives of business include:
• providing employment opportunity to its citizen,
• earn revenue for its exchequer,
• become self-sufficient in production of goods and services,
• Promotion of exports
• promote social justice, etc.

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Global Objectives
• It is basically creating competitiveness to face global competition.
• The basic global objectives are:
• To raise general standard of living
• Educing disparities among nations
• Making globally competitive goods and services available

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Meaning of Profession
• A Profession may be
defined as an occupation
which involves the
rendering of personal
services of a specialized
nature, based on
professional knowledge,
education and training
such as services rendered
by physicians, lawyers,
auditors.
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Meaning of Employment
• It means- the state of having a
paid job— it is work, especially
when it is done to earn money;
the state of being employed
• To hire someone is to
compensate them for their
services.
• The role of an employer is to
provide work for people who
are unemployed.
• If you're talking about
employment, you could say
things like: We're trying to hire
more women.

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Business Risks
• Risks are integral part of businesses.
• A lot of attention has been given to
trade-offs (opportunity cost) and
business risks by strategists.
• Bettis (1983) suggested that
managing business risk lies at the
heart of competitive strategy.
• Lintner (1965) separated risk in to
two parts
• Systematic, risk or market, risk
• business, or unsystematic, risk
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Systematic, risk or market, risk

• which captures the variation in a Stock's return ascribable to market-

wide forces.
• For eg: A stock market correction would wipe out wealth created by fund
managers and affects the whole company.

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Business, or unsystematic, risk
• Business, or unsystematic, risk, which reflects the variation in a
stock's return ascribable to firm-specific forces.
• For eg: a new competitor in the marketplace with the potential to take
significant market share from the company invested in

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Motives for reducing business risk
• There are three motives for business-risk reduction that are not
mutually exclusive:
1. First motive is to reduce the probability of bankruptcy in order to enhance
their job security and preserve their investment in firm specific human
capital.
2. Second motive is the cash-flow motive. A negative relation should exist
between cash flows and business risk.
3. The third motive for business-risk reduction stems from transaction costs,
such as brokerage fees and time costs, that prevent stockholders from
diversifying away business risk completely. A positive relation exists
between rates of return and business risk

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Industry
• The activities of extraction, production, conversion,
processing or fabrication of products are described as
industry.
• These products of an industry may fall under any one of the
following three categories:
• Consumer goods
• Capital goods
• Intermediate goods

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Primary Industries
• Extractive:- They extract or draw our their products from natural
sources such as earth, sea, air. The products of such industries are
generally used by manufacturing and construction industries for
producing finished goods. Farming, mining, lumbering hunting,
fishing, etc., are some of the examples of extractive industries.
• Genetic:- Genetic means parentage or heredity. Genetic industries are
engaged in breeding plants, and animals for their use in further
reproduction. For breeding plants, the seeds and nursery are typical
examples of genetic industries. In addition, the activities of cattle-
breeding farms, poultry farms and the hatchery come under the
category of genetic industries.

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Secondary Industries
• Manufacturing Industries:- These are engaged in
producing goods through the creation of what is known
as ‘form utility’ Such industries are engaged in the
conversion or transformation of raw materials or semi
finished products into finished products. They are of 4
types:
• Analytical (Creating products from raw material), synthetic
(creating product from combination of various ingredients),
Processing (industries where the primary production
processes are either continuous) & Assembly Line (industrial
arrangement of machines, equipment, and workers)
• Construction Industries : They are concerned with the
making of constructing of buildings, bridges, dams,
roads, canals, etc. These industries use the products of
manufacturing industries such as Iron and Steel,
Cement, Lime, Mortar etc., and also the products of
extractive industry such as stone, marble, etc.
• The remarkable feature of these industries is that their
products are not sold in the sense of being taken to the
markets. They are constructed and fabricated at fixed sites

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Types of Business Entities
& their relevance
Session II
SOLE PROPRIETORSHIP

• A sole proprietorship is a
business owned and
operated by one
individual.
• The shops or stores which you see in
your locality — the grocery store, the
vegetable store, the sweets shop, the
chemist shop, the paanwala, the
stationery store, the telephone booths
etc. come under sole proprietorship.
Advantages
 Easy to start
 No registration
 No profit sharing
 Easy decision-making
 Easy to windup
 Secrets (information about business techniques)
 No corporate taxes
Disadvantages
 Unlimited liability
 Employee benefits i-e Medical insurance premiums not
deductible(taxes)
 Raising funds
 Limited Life
 Loss in absence
Suitability of Sole Proprietary
• For business where capital required is small and risk involvement is not
heavy, this type of firm is suitable.

• It is also considered suitable for the production of goods which involve

manual skill e.g. handicrafts, jewellery, tailoring, hair-cutting, etc
Partnership
• A Partnership is a legal relationship
formed by the agreement between two
or more individuals to carry on a
business as co-owners.
• Each member of such a group is
individually known as ‘partner’ and
collectively the members are known as a
‘partnership firm’.
• These firms are governed by the Indian
Partnership Act, 1932.
Types of partner
• Limited partner- it is a part-owner of a company whose liability for
the firm's debts cannot exceed the amount invested.
• General partner- unlimited liability and have full management control
of the business

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Characteristics of Partnership Firm

• Number of Partners: 50 in case of a private company, as per companies act 2013.

• Contractual Relationship: The agreement in writing is known as a ‘Partnership
Deed’.
• Competence of Partners: Minors and insolvent persons are not eligible.
• Sharing of Profit and Loss: In absence of an agreement, they share it equally.
• Transfer of Interest: No partner can sell or transfer his interest in the firm to anyone
without the consent of other partners.
• Voluntary Registration: Registration of partnership is not compulsory. But since
registration entitles the firm to several benefits, it is considered desirable.
Types of partnerships
• Unlimited liability- no limit to liability of partners
• Limited partnerships- partnerships where one partner is general and
another is limited
• Limited liability partnership- a partnership type where the partner's
liabilities are limited to the amount they put into the business.

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Advantages
 Relatively easy to start
 The ability to raise funds
 More skilled persons
 Loss sharing
 No Loss in absence
Disadvantages
 Unlimited liability
 Profit sharing
 Conflicts
 Limited life
 Transferability is difficult
 Suitability of Partnership Firms
• Such firms are most suitable for comparatively small business such as retail
and wholesale trade, professional services, medium sized mercantile houses
and small manufacturing units.
Joint Stock Company
• a voluntary association of persons to carry on business.
• Members of a joint stock company are known as shareholders and the
capital of the company is known as share capital.
• The companies are governed by the Indian Companies Act, 1956.
• Tata Iron & Steel Co. Limited, Hindustan Lever Limited, Reliance Industries
Limited, Steel Authority of India Limited, Ponds India Limited etc.
Features of Joint Stock Company
1. Artificial Person.
2. Separate Legal Entity.
3. Common Seal.
4. Perpetual Existence.
5. Limited Liability.
6. Transferability of Shares.
8. Membership: Minimum membership of two persons and maximum fifty is
known as a Private Limited Company.
• But in case of a Public Limited Company, the minimum is seven and the
maximum membership is unlimited.
Advantages of Joint Stock Company
• 1. Limited Liability.
• 2. Continuity of existence.
• 3. Benefits of large scale operation.
• 4. Professional Management.
• 5. Social Benefit.
Disadvantages of Joint Stock Company
1. Formation is not easy.
2. Control by a Group.
3. Excessive government control.
4. Delay in Policy Decisions.
Suitability of Joint Stock Company
• A joint stock company is suitable where the volume of business is
quite large, the area of operation is widespread. Capital
requirement is also large.
• Certain businesses like- infrastructure development, banking and
insurance.
Co-Operative Organizations
• In cooperative societies, members
participate in different capacities as
producers, consumers, workers, and
managers.
• Cooperative societies are not form of
business organization, but they are a
movement to uplift poor and weak
through mutual help.
Definitions of Cooperative Societies
• “ A society which has its objects the promotion of the economic
interests of its members in accordance with cooperative principles”
Co-Operative Societies Act 1912, Sec 4

• “An association of adult persons, with limited resources and

belonging to a homogeneous group, who join together on a voluntary
and equal basis for realisation of their common economic interest in
democratic Way”
Characteristics of Cooperative Society
• Voluntary membership
• Open membership
• Finances
• Liability of members
• Democratic members
• Limited interest on capital
• Distribution of surplus
• Service motive
• Registration and legal status
• Education and training
Types of Cooperative societies
• Consumer’s Cooperative- Sahkari Bhandar
• Industrial Cooperative- Shree Mahila Gruha Udyog
• Marketing Cooperative- Sugarcane Co-operative Marketing Society
• Credit Cooperative- Punjab and Maharashtra Cooperative Bank Ltd
• Housing Cooperative- Kanungo Cooperative Group Housing
Society Ltd, Patpar Ganj
• Farming Cooperative- National Co-Operative Development
Corporation
Suitability of Cooperative Societies
• Generally it seems that a co-operative
society is suitable for small and medium
size operations.
• However, the large sized ‘IFFCO’ [Indian
Farmers and Fertilizers Cooperative] have
faced certain issues.
• The Kaira District Co-operative Milk
Producers' Union processing milk
under the brand name ‘AMUL’ are the
illustrious exceptions.
Limitations od cooperative societies
• Poor management
• Lack of spontaneity
• Lack of working capital,
• Lack of cooperative democracy and education,
• Weakness of supporting institutions and,
• In general, an inability to compete in a liberalized market economy

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Multinational Corporations
• A multinational company is one which is incorporated in one country
(called the home country); but whose operations extend beyond the
home country and which carries on business in other countries (called
the host countries) in addition to the home country.
• It must be emphasized that the headquarters of a multinational
company are located in the home country.
• A multinational corporation is known by various names such as:
global enterprise, international enterprise, world enterprise,
transnational corporation etc.

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Features of MNC
• Huge Assets and Turnover
• International Operations Through a Network of Branches
• Unity of Control
• Mighty Economic Power
• Advanced and Sophisticated Technology
• Professional Management
• Better quality of products
• Aggressive marketing and advertisements

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Trade
• Act of buying or selling the commodity is known as trade.
• In trade compensation is paid to seller by the buyer.

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Types of trade

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Characteristics of trade
• Frequent
• Short term gains/ aims at profitability
• Highly technical
• Purely an economic activity
• Customer centred
• Shrouded with uncertainty

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Types of traders
• Itinerant traders
• Non-itinerant traders

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Itinerant traders
• The traders are known as Itinerant traders when they do not have
fixed places to trade from.

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Non-itinerant traders
• The traders are known as non itinerant retailers when they have a
fixed place of business to operate.

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External trade/International trade
• When commodities and services are exchanged across international
borders or territories, it is called international trade.
• Trade like this accounts for a large portion of the country's GDP in
most cases.

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Types of international trades
• Export
• Import
• Entrepot

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Export
• To stimulate economy, it is important to sell products and services
across the national boundaries.
• When, products/services are sold beyond national boundaries, it is
known as export.
• Exports are one of the oldest forms of economic transfer and take
place on a large scale between countries.
• Exporting can boost sales and profits by expanding into new markets.
• It may even provide an opportunity to gain a significant global market share.
• Companies that export a lot are usually exposed to a lot of financial
risk.

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Import
• An import is a product or service manufactured elsewhere that is
purchased in your home country.
• Imported goods and services are appealing when domestic industries
are unable to produce comparable goods and services cheaply or
efficiently.
• Tariff schedules and free trade agreements frequently dictate which
goods and materials are less expensive to import.
• Economists and policy analysts disagree on the benefits and
drawbacks of imports.

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Export procedure
Step 1. Receipt Order
Step 2. Obtaining License and Quota
Step 3. Letter of Credit
Step 4. Fixing the Exchange Rate
Step 5. Foreign Exchange Formalities
Step 6. Preparation for Executing the Order
Step 7. Formalities by a Forwarding Agent
Step 8. Bill of Lading
Step 9. Shipment Advice to the Importer
Step 11. The Realisation of Export Proceeds

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Import procedures
• Step 1- Obtain IEC
• Step 2- Ensure legal compliance under different trade laws
• Step 3- Procure import licenses
• Step 4- File Bill of Entry and other documents to complete customs
clearing formalities
• Step 5- Determine import duty rate for clearance of goods

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 Thank You

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