Business Studies Overview

Cheatsheet Content

### Nature & Purpose of Business - **Definition:** An activity involving the production and exchange of goods and services with the primary motive of earning profit. - **Characteristics:** - Economic activity - Production or procurement of goods & services - Sale or exchange of goods & services - Dealing in goods & services on a regular basis - Profit earning - Risk bearing - Creation of utility - **Objectives:** - **Economic:** Profit earning, market standing, innovation, productivity. - **Social:** Quality goods at fair prices, employment generation, community service, environmental protection. - **Human:** Employee welfare, fair dealings with workers. ### Forms of Business Organisation - **Sole Proprietorship:** - **Features:** Single owner, unlimited liability, easy formation/dissolution, lack of business continuity. - **Suitability:** Small businesses, personal services. - **Partnership:** - **Features:** Two or more owners, partnership deed, unlimited liability (generally), shared profits/losses. - **Types:** General, Limited Liability Partnership (LLP). - **Hindu Undivided Family (HUF) Business:** - **Features:** Governed by Hindu Law, continuity, Karta (head) has unlimited liability, coparceners have limited liability. - **Cooperative Societies:** - **Features:** Voluntary association, service motive, democratic management, limited liability. - **Types:** Consumer, producer, marketing, housing, credit. - **Company:** - **Features:** Separate legal entity, perpetual succession, limited liability, large capital base. - **Formation:** Promotion, Incorporation, Capital Subscription, Commencement of Business (for public companies). - **Types:** - **Private Company:** Min 2, Max 200 members, restricts share transfer, cannot invite public for shares. - **Public Company:** Min 7 members, no limit on max, can invite public for shares, freely transferable shares. ### Public, Private & Global Enterprises - **Private Sector Enterprises:** Owned, managed, and controlled by individuals or groups of individuals (e.g., Sole Proprietorship, Partnership, Company). - **Public Sector Enterprises:** Owned and managed by the government. - **Departmental Undertakings:** Directly managed by ministry (e.g., Railways). - **Statutory Corporations:** Created by a special act of parliament (e.g., RBI, LIC). - **Government Company:** Min 51% paid-up capital held by government (e.g., SAIL, BHEL). - **Global Enterprises (MNCs):** - **Features:** Huge capital resources, advanced technology, product innovation, marketing strategies, international operations. ### Business Services - **Banking:** - **Types of Accounts:** Savings, Current, Fixed Deposit, Recurring Deposit. - **E-banking:** EFT, ATM, Debit/Credit Cards, Mobile Banking. - **Insurance:** - **Principles:** Utmost good faith, insurable interest, indemnity, subrogation, contribution, mitigation. - **Types:** Life insurance, Fire insurance, Marine insurance, Health insurance. - **Postal & Telecom Services:** - **Postal:** Mail, financial services (e.g., Post Office Savings Bank), allied services. - **Telecom:** Cellular, Fixed Line, Internet, Broadband. - **Warehousing:** - **Functions:** Storage, price stabilization, financing, risk bearing. - **Types:** Private, Public, Bonded, Co-operative. - **Transportation:** Facilitates movement of goods and people. ### Emerging Modes of Business - **E-Business (E-commerce):** - **Scope:** B2B, B2C, C2C, Intrabusiness E-commerce. - **Benefits:** Worldwide reach, elimination of middlemen, lower costs, speed, convenience. - **Limitations:** Low personal touch, security issues, need for connectivity, legal issues. - **Outsourcing:** - **Definition:** Contracting out non-core activities to third parties. - **Features:** Cost reduction, focus on core activities, access to specialized skills. - **Types:** KPO (Knowledge Process Outsourcing), BPO (Business Process Outsourcing). ### Social Responsibility of Business & Business Ethics - **Social Responsibility:** Obligation of business to pursue policies, make decisions, or follow lines of action which are desirable in terms of the objectives and values of society. - **Arguments For:** Public image, government regulation avoidance, long-term interest of firm, resource utilization, healthy environment. - **Arguments Against:** Profit maximization objective, burden on consumers, lack of social skills, lack of broad public support. - **Responsibility Towards Different Interest Groups:** - **Shareholders:** Fair return on investment, safety of investment. - **Employees:** Fair wages, good working conditions, career opportunities. - **Consumers:** Quality products, fair prices, after-sales service. - **Government:** Pay taxes honestly, obey laws. - **Community:** Environmental protection, employment generation, contribution to social welfare. - **Business Ethics:** - **Definition:** Principles and standards that guide behavior in the world of business. - **Elements:** Top management commitment, publication of a code, establishment of compliance mechanisms, employee involvement, measuring results. - **Ethical Dilemmas:** Situations where a choice must be made between two or more conflicting ethical principles.