Unit 1 : Introduction to Business Operation

Auxiliaries to Trade
Commerce includes several auxiliary services which help in exchange of goods & services. Following are the
aids to trade :-
i) Transportation – It performs the function of carrying goods from producers to wholesalers,
retailers and finally consumers. It creates place utility and connect the world efficiently.
ii) Warehousing – It performs the function of storing the goods both for manufacturers & traders
till they decide to sell the goods. It creates time utility.
iii) Insurance – It provides a cover against loss of goods in the process of transit or storage. The
producers & traders can get their products insured & avoid risk of loss due to fire, theft etc. It
removes hindrance of risk.
iv) Banking – Banks offer credit facility to needy producers at reasonable interest. Banks facilitate
in easy, safe & quick transfer of money. It removes hindrance of finance.
v) Advertising – It helps in awareness creation & idea formation. It helps to highlight – distinctive
features & utility of different products. The customer can choose the product according to their
needs & obtain better value for money. It removes hindrance of information.

3.1 Management of Business Operations

The types of Business Operations cannot be managed if the entrepreneur doesn’t assemble or
coordinate various factors of production like human resources, material, money, machines to keep the
enterprise running. The ultimate success of any business depends upon how the business operations are
being managed by the entrepreneur. Different business activities require different kind of entrepreneurial
skill.

The term ‘Operations’ describe the processes and resources that we use to produce the highest quality
products or services as efficiently as possible.

Business operations typically include four key areas :

 Location : Where you do business – Physically and online.
 Equipment : The tools you need to get the job done.
 Labour : The human side of business operations.
 Process : The way you get business done, including your systems for quality control and improvement.

The importance of each of these areas depends on the nature of the company. For example, physical
location is critical to a retail outlet that lives by walk-in-customers, while physical location may not matter
a bit to an Internet-based company.

Every business organization regardless of the company, nature of its business, size or type or location have
to perform a few strategic activities so that the Business process or workflow of the organization is smooth
and it flows uninterrupted. Each strategic activity is highly inter related and must be consistent with the
other. The following major activities are involved in management of Business operations -

1. Strategic planning – Planning is an important and basic requirement of any business. Strategic
Planning is a broad plan for bringing the organization from its present position to the desired position in

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future. Top management should identify who will be involved in the planning process, provide opportunity
for proper participation, give responsibility for developing and implementing the plans.

2. Financing Decision – Finance is the life blood of any business organization. There must be a
continuous flow of funds for the business to commence its operations, to continue operations & for
expansion or growth. Finance is an important operative function of business. The business firm has to raise
funds from several sources at reasonable cost & ensure its effective utilisation so as to generate adequate
profits.

3. Market research and development- In recent years, competition in most of the industries has
increased due to growing industrialization, expanding size of operations, liberalization. The business
organization have to be fully aware of marketing environment & formulate company policies keeping in
mind the target customers, pricing, sales promotion and after sales service.

4. Logistics decisions - Logistics decisions is concerned with the proper movement of material from
source of supply to place of procedure and movement of finished product from the factory to the
customer. It helps to provide product to the customer at right place and at right time. The business firm
has to design and operate a quick, accurate and efficient order processing system to retain customers and
ensure repeat order.

It includes decision regarding transportation, warehousing, order processing, inventory management,

procurement, vendor management etc.

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5. Technological decisions – Information Technology is a boon to any business organization. Through

Information Technology they can perform many functions & activities in lesser time & at lesser cost. To
improve the quality of decisions, managers require very fast processing & transmission of huge mass of
data. I.T. helps in collecting, processing & communicating information very quickly & effectively.

6. Internal process review - It is easy to focus only on the day to day running of your business
especially in early stages. But once the business expands a regular review of the progress, internal process
policy and procedures can help the business to identify its position in the market. This review highlights the
assessment of core business activities, finance, business efficiency and competitor analysis.

7. Maintaining Customer Relationship – Maintaining good customer relationship is growing in

importance due to the challenging business environment faced by organization throughout the world
today. The aim should be to maximize profit over the long run through the satisfaction of customer’s
wants. All the plans, policies & operations of business enterprise should be oriented towards customer.
Every business decision is made with a prior knowledge of its impact on the customers as ‘consumer is the
king’.

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8. Employee enrichment - Human resources are the only resource which has an unlimited potential
for empowerment and development. Sound organization adopts right strategies for attracting, developing,
retaining and utilizing human resources. A competent & dedicated team of employees can help an
enterprise in achieving its goals efficiently & effectively.

9. Innovation & Creativity — Innovation implies doing new things or doing things that are already
being done in new ways. It involves creativity & thought process to transform idea or resource into some
useful applications. To survive and succeed in this competitive environment it’s imperative for any
organization to conceive something original and unique.

SUMMARY
 Human Activities: Economic (Aim to earn livelihood by use of economic resources) and Non –
Economic Activities (Aim to satisfy emotional, social and psychological needs).
 Types of Economic Activities – Business, Employment, Profession and Services.
 Business - Buying & selling of goods & services for profit on regular basis.
 Scope of Business: Survival, Growth, Reward for risk taking, measure of efficiency and creates
goodwill.
 Business operations: describe the processes and resources that we use to produce the highest
quality products or services as efficiently as possible.
 Types of Business Operation –
 On the basis of scale of operations – small scale, medium scale and large scale.
 On the basis of ownership – The Proprietorship, Partnership, Cooperative Societies, Joint
Hindu Family, Joint Stock Company.
 On the basis of nature of activities – Industry – Manufacturing, Genetic, Extractive
Construction. Commerce – Trade and Auxiliaries to trade.

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1. Business
2. Profession
3. Service
4. Employment
5. Business risk
6. Industry
7. Business Operations
8. Commerce
9. Strategy
10. Business Goals
11. Auxiliaries to trade
Innovation

I. Choose the correct answer:-

1. The activities which are performed to earn livelihood are called ……………………….

a) Religious activity, b) Economic activity, c) Human activity

2. The economic activity which requires specialized knowledge and skill to render services are called ……………………..

a) Profession, b) Business, c) Employment

3. The element of risk is highest in ……………………….

a) Economic activity, b) Business, c) Services

III. Match the following

1. Joint Hindu Family 1. Teacher teaching his own child

2. Banking 2. ‘Karta’ is the Head of the family

3. Large Scale Industry 3. Re-export

4. Entreport 4. Investment of more than 10 crore

5. Non Economic Activity 5. Removes hindrance of finance

IV. Answer the following briefly:-

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1. Briefly explain how business operations are critical to the success of any business.

2. Manoj invested his savings in a piece of land in 2005. In 2015 he sold his Land at a good profit. Will his purchase
and sale of land considered as business? Give reasons in support of your answer.

3. Describe briefly the role of profit in business.

4. Distinguish between Interval & External Trade.

5. Explain various auxiliaries to trade.

V. Answer in detail.

1. Explain the various strategic functions involved in Management of Business Operations.

2. Enumerate the various types of Business Operations.

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 Unit 2 – Business Environment

To understand the  Meaning of Business  Explain the meaning  Interactive lecture

meaning, nature and Environment. of Business with examples.
characteristics of  Definition of Environment.
Business Environment. Business  List out the features
Environment. of Business
 Nature of Business Environment.
Environment.  Elucidate the nature
 Features of Business of Business
Environment. Environment.

To Understand the  Factors of Internal  Explain in detail  Interactive lecture

various factors affecting Environment. various factors of
Business Environment.  Factors of External Internal
Environment. Environment.
 Describe the factors
of External
Environment.
 What is the
difference between
internal & external
elements of Business
environment?

To understand the basic  Meaning of  Explain in detail the  Interactive Lecture

concept of Environmental meaning & concept Activity – Prepare a
Environmental Analysis. Analysis. of SWOT Analysis. SWOT analysis for any
 Meaning of SWOT  Enumerate the firm.
Analysis. advantages &
 Advantage & disadvantages of
Disadvantage of SWOT Analysis.
SWOT Analysis.

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 Unit 2 – Business Environment

India’s Capital Delhi tried to get a handle on its growing pollution problem. Older diesel vehicles were
banned from New Delhi in 2015, by Supreme Court. Vehicle registrations for diesel powered vehicles
manufactured at least 10 years ago were cancelled or were not renewed. WHO (World Health
Organization) ranked Delhi’s air the 11th most polluted city in the world. The diesel cars primarily emit
harmful gases, CO2, unburned fuel, NO2 etc. Diesel vehicles are the main contributors to smoke and the
particulate matter. This causes cough, bronchitis, and pulmonary edema. The fine soot particles remain
suspended in the air for long before getting settled, which are carcinogenic & lead to cancer.

The Indian Automakers were unhappy with this NGT’s (National Green Tribunal) Ban on diesel vehicles in
Delhi. The vehicles affected represent about 2% of company’s total monthly sales. There were many
external forces which affected the market like action taken by government, competitors etc. This lead to
emphasize on the fact that environment provides both constraint & opportunities to grow, expand or run
the business. To keep pace with changes in environment, every organization requires healthy interaction
with external environment.

1.1 Meaning of Business Environment

In the words of Keith Davis “Business Environment is the aggregate of all conditions, events and influences
that surround and affect it.”
According to Arthur Weimer “Business Environment encompasses the climate or set of conditions,
economic, social, political or institutional in which Business operations are conducted.”

The term Business Environment means the sum total of all individuals or organizations and other forces
that are controllable or outside the control of business enterprise but may affect its performances. The
economic, social, political technological and other forces which operate outside a business enterprise are
part of its environment. Business Environment consists of both specific and general forces.

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 Specific forces refer to those forces which are having direct effect on day to day working of the
business i.e. customers, competitors, investors etc.
 General forces refer to social, political, legal and other forces which have indirect effect on
business operations.

1.2 Nature of Business Environment

The nature of Business Environment can be explained by following approaches.
1. System Approach – Business is a system by which goods & services are produced for satisfaction of
wants, by using raw material, capital, labour etc. from the environment.
2. Social responsibility Approach – Business should fulfill its social responsibility towards several
categories of society like government, employees, consumers etc.
3. Creative Approach – Business brings about changes in the society by giving attention to the needs
of people. It gives shape to the environment by facing the challenges & availing the opportunities in
time.

Business Environment is characterized by following features.

1. - Business Environment is the totality of all the external forces which influence the
working and decision making of an enterprise.

2. - Different elements of business environment are closely interrelated and

interdependent. A change in one element affects the other element for example : Social pressure against
pollution (social environment), led to the enactment of anti-pollution laws (political environment).

3. - Business Environment is a relative concept. It differs from country to country and region
to region for example : Countries like USA and UK have different kind of education system from India.

4. - Business Environment is legally uncertain because it is very difficult to forecast future

uncertainties. Changes are taking place very frequently. For e.g. Advancement in mobile technology.

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5. - Business Environment is very complex. It’s difficult to know the impact of social, economic,
political and technological factors on change in demand of a product.

2.1
Business Environment is a combination of both internal and external environment. Business is surrounded
by an internal environment which is in control of the business and external environment which is not in
control of business.

Capital

Promotional
Human Resouces
Strategies

Internal
Environment

Management
Work Environment
Policies

Brand Image

Internal environment includes components like:

1. Capital
2. Human resources
3. Work environment
4. Brand image
5. Management policies
6. Promotional strategies

a) - Finance is the life blood of the business. The management has to skillfully utilize the financial
resources for growth of the organization. Optimum utilization of financial resources is one of the
controllable factors.

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b) - Efficient human resource of the business takes the business to greater heights.
The quality of goods and services provided by the business also depends upon the people employed in the
business. Therefore, it is an internal factor which is in control of the business.

c) - The board of directors should foresee the changes in external

environment and form business strategies and policies accordingly. The business owner should also keep in
mind business ethics and values so as to survive in the economy.

d) - Promoting the brand of the business is completely in the control of the

entrepreneur. If the business succeeds in providing quality goods and services to the customer’s then
business builds the best brand image.

e) - It is in the control of the business to formulate the policies and

strategies of promoting their business in this competitive world. They should work towards healthy
competition and fulfill their business objectives.

f) - Business should promote healthier and happier environment

inside the organization and provide good working conditions for the employees.

Economic
Environment

Legal Environment Social Environment

External
Environment

Technological Political
Environment Environment

Contemporary Business Environment is made up of the following elements.

1. Economic environment
2. Social environment
3. Political environment
4. Technological environment

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