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BUSINESS HISTORY NOTES UNIT-1 BUSINESS A business (also known as enterprise or firm) is an organization engaged in the trade of goods,

services, or both to consumers.[1] Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be notfor-profit or state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning. CLASSIFICATION OF BUSINESS

Agriculture and mining businesses are concerned with the production of raw material, such as plants or minerals. Financial businesses include banks and other companies that generate profit through investment and management of capital. Information businesses generate profits primarily from the resale of intellectual property and include movie studios, publishers and packagedsoftware companies. Manufacturers produce products, from raw materials or component parts, which they then sell at a profit. Companies that make physical goods, such as cars or pipes, are considered manufacturers. Real estate businesses generate profit from the selling, renting, and development of properties comprising land, residential homes, and other kinds of buildings. Retailers and distributors act as middle-men in getting goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services. Most consumer-oriented stores and catalog companies are distributors or retailers. Service businesses offer intangible goods or services and typically generate a profit by charging for labor or other services provided to government, other businesses, or consumers. Organizations ranging from house decorators to consulting firms, restaurants, and even entertainers are types of service businesses. Transportation businesses deliver goods and individuals from location to location, generating a profit on the transportation costs.

Utilities produce public services such as electricity or sewage treatment, usually under a government charter. TYPES OF GOVERNMENTAL SYSTEM Command system Dictatorship Free market system Make their own decision Mixed economy Combination of both

Types of market 1. Pure competition 2. Pure monopoly 3. Monopsony 4. Monopolostic competition 5. Oligopoly 6. Oligopsony 7. Price discrimination -These market structures are discussed below. 1.Pure competition: The market consist of buyers and sellers trading in a uniform commodity such as wheat, copper, or financial securities. No single buyer or seller has much effect on the going market price. A seller can not change more than the going price, because buyer can obtain as much they need at the going price. In a purely competitive market, marketing research, product development, pricing, advertising, and sales promotion play little or no role. Thus, sellers in these markets do not spend much time on marketing strategy. 2.Pure monopoly: In economics, an industry with a single firm that produce a product, for which there are no close substitutes and in which significant barriers to entry prevent other firms from entering the industry to compete for profit is called pure monopoly. Example: When the City Cell mobile service company first started their business in Bangladesh, they were the only mobile service provider then. Before the Grameen Phone came into the market, they enjoyed pure monopoly. There are two types of pure monopoly: 1. Regulated monopoly 2. Nonregulated monopoly

Regulated monopoly: The government permits the company to set rates that will yield a fair return. Example: Power Company. Nonregulated monopoly: Company is free to price at what the market will bear. Example: City Cell ( When it first introduced mobile service in Bangladesh). 3.Monopsony: This is the market situation where there is only one buyer in the market. When City Cell first introduced mobile service network in Bangladesh, they were the only mobile phone and its accessories buyer from Nokia and Motorolla in Bangladesh. 4.Monopolistic competition: In economics, the market consist of many buyers and sellers who trade over a range of prices rather than a single market price is called monopolistic competition. A range of price occurs because sellers can differentiate their offers to buyers. Sellers try to develop difference by using customer segments, and in addition to price, freely uses branding, advertising, and personal selling to set their offers apart. 5.Oligopoly: In economics, the market consist of few sellers who are highly sensitive to each others pricing and marketing strategies. There are few sellers because it is difficult for new sellers to enter the market. Each seller is alert to competitors strategies and move. 6.Oligopsony: In economics, oligopsony is a market where there is a small number of buyers for a product or a service. In this market structure, buyers have power over the seller. Because as there are small number of buyers, if they are united and pressure the seller to sell the product or service in a reasonable and affordable price, the seller must have to consider that. 7.Price discrimination: In economics, if one product or service has different price for different buyers which is provided by the same provider, then we call that price discrimination market strategy. A good example of this strategy could be the airlines company-Emirates. It has offered different prices for different category of passengers for the same destination. Such as, it has Student package for the

students, Honeymoon package for the couples which are of lower price than their regular one. BUSINESS ENVIRONMENT Meaning: - The term Business Environment is composed of two words Business and Environment. In simple terms, the state in which a person remains busy is known as Business. The word Business in its economic sense means human activities like production, extraction or purchase or sales of goods that are performed for earning profits. On the other hand, the word Environment refers to the aspects of surroundings. Therefore,Business Environment may be defined as a set of conditions Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization. Business Environment has two components: 1. Internal Environment 2. External Environment Internal Environment: It includes 5 Ms i.e. man, material, money, machinery and management, usually within the control of business. Business can make changes in these factors according to the change in the functioning of enterprise. External Environment: Those factors which are beyond the control of business enterprise are included in external environment. These factors are: Government and Legal factors, Geo-Physical Factors, Political Factors, Socio-Cultural Factors, Demo-Graphical factors etc. It is of two Types: 1. Micro/Operating Environment 2. Macro/General Environment Micro/Operating Environment: The environment which is close to business and affects its capacity to work is known as Micro or Operating Environment. It consists of Suppliers, Customers, Market Intermediaries, Competitors and Public. (1) Suppliers: They are the persons who supply raw material and required components to the company. They must be reliable and business must have multiple suppliers i.e. they should not depend upon only one supplier. (2) Customers: - Customers are regarded as the king of the market. Success of every business depends upon the level of their customers satisfaction. Types of Customers: (i) Wholesalers (ii) Retailers (iii) Industries (iv) Government and Other Institutions (v) Foreigners

(3) Market Intermediaries: - They work as a link between business and final consumers. Types:(i) Middleman (ii) Marketing Agencies (iii) Financial Intermediaries (iv) Physical Intermediaries (4) Competitors: - Every move of the competitors affects the business. Business has to adjust itself according to the strategies of the Competitors. (5) Public: - Any group who has actual interest in business enterprise is termed as public e.g. media and local public. They may be the users or non-users of the product. Macro/General Environment: It includes factors that create opportunities and threats to business units. Following are the elements of Macro Environment: (1) Economic Environment: - It is very complex and dynamic in nature that keeps on changing with the change in policies or political situations. It has three elements: (i) Economic Conditions of Public (ii) Economic Policies of the country (iii)Economic System (iv) Other Economic Factors: Infrastructural Facilities, Banking, Insurance companies, money markets, capital markets etc. (2) Non-Economic Environment: - Following are included in non-economic environment:(i) Political Environment: - It affects different business units extensively. Components: (a) Political Belief of Government (b) Political Strength of the Country (c) Relation with other countries (d) Defense and Military Policies (e) Centre State Relationship in the Country (f) Thinking Opposition Parties towards Business Unit (ii) Socio-Cultural Environment: - Influence exercised by social and cultural factors, not within the control of business, is known as Socio-Cultural Environment. These factors include: attitude of people to work, family system, caste system, religion, education, marriage etc. (iii) Technological Environment: - A systematic application of scientific knowledge to practical task is known as technology. Everyday there has been vast changes in products, services, lifestyles and living conditions, these changes must be analysed by every business unit and should adapt these changes.

(iv) Natural Environment: - It includes natural resources, weather, climatic conditions, port facilities, topographical factors such as soil, sea, rivers, rainfall etc. Every business unit must look for these factors before choosing the location for their business. (v) Demographic Environment :- It is a study of perspective of population i.e. its size, standard of living, growth rate, age-sex composition, family size, income level (upper level, middle level and lower level), education level etc. Every business unit must see these features of population and recongnise their various need and produce accordingly. (vi) International Environment: - It is particularly important for industries directly depending on import or exports. The factors that affect the business are: Globalisation, Liberalisation, foreign business policies, cultural exchange. SECTORAL DIVISIONS OF BUSINESS FORMS OF ORGANISATIONS While establishing a business the most important task is to select a proper form of organisation. This is because the conduct of business, its control, acquisition of capital, extent of risk, distribution of profit, legal formalities, etc. all depend on the form of organisation. The most important forms of business organisation are as follows: Sole Proprietorship Joint Hindu Family Business Partnership Joint Stock Company Co-operative Society Sole Proprietorship Meaning When the ownership and management of business are in control of one individual, it is known as sole proprietorship or sole tradership. It is seen everywhere, in every country, every state, every locality. 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 STD/ISD telephone booths etc. come under sole proprietorship. It is not that a sole tradership business must be a small one. The volume of activities of such a business unit may be quite large. However, since it is owned and managed by one single individual, often the size of business remains small. Characteristics:

1. Ownership : The business enterprise is owned by one single individual, that is the individual has got legal title to the assets and properties of the business. The entire profit arising out of business goes to the sole proprietor. Similarly, he also bears the entire risk or loss of the firm. 2. Management : The owner of the enterprise is generally the manager of the business. He has got absolute right to plan for the business and execute them without any interference from anywhere. He is the sole22 :: Commerce (Business Studies) decision maker. 3. Source of Capital : The entire capital of the business is provided by the owner. In addition to his own capital he may raise more funds from outside through borrowings from close relatives or friends, and through loans from banks or other financial institutions. 4. Legal Status : The proprietor and the business enterprise are one and the same in the eyes of law. There is no difference between the business assets and the private assets of the sole proprietor. The business ceases to exist in the absence of the owner. 5. Liability : The liability of the sole proprietor is unlimited. This means that, in case the sole proprietor fails to pay for the business obligations and debts arising out of business activities, his personal property can be used to meet those liabilities. 6. Stability : The stability and continuity of the firm depend upon the capacity, competence and the life span of the proprietor. 7. Legal Formalities : In the setting up, functioning and dissolution of a sole proprietorship business no legal formalities are necessary. However, a few legal restrictions may be there in setting up a particular type of business. For example, to open a restaurant, the sole proprietor needs a license from the local municipality ; to open a chemist shop, the individual must have a license from the government. Joint Hindu Family Business Meaning The Joint Hindu Family ( JHF) business is a form of business organization found only in India. In this form of business , all the members of a Hindu undivided family own the business jointly. The affairs of business are managed Forms of Business Organisation by the head of the family, who is known as the KARTA . A Joint Hindu Family business comes into existence as per the Hindu Inheritance Laws of India. In a joint Hindu family business only the male members get a share in the business by virtue of their being part of the family. The membership is limited up to three successive generations. Thus, an individual, his sons(s), and

his grandson(s) become the members of a Joint Hindu Family by birth. They are also called Co-parceners. The term co-parceners implies that such an individual has got the right to ask for a partition of the Joint Hindu Family business and to have his separate share. A daughter has no right to ask for a partition and is, therefore, not a co-parcener. Characteristics : 1. Legal Status : The Joint Hindu Family business is a jointly owned business just like a jointly owned property. It is governed by Hindu Law. It can enter into partnership agreement with others. 2. Membership : There is no membership other than the members of the joint family. Inside the family also, it is restricted only to male members who are co-parceners by birth. 3. Profit Sharing : All co-parceners have equal share in the profits of the business. In the event of death of any of the co-parcener, his wife can claim share of profit. 4. Management : The management of a joint Hindu family business is in the hands of the senior-most family member who is known as the karta. He has the authority to manage the business and his ways of managing can not be questioned by the co-parceners. 5. Liability : The liability of each member of the Joint Hindu Family business is limited to the extent of his share in the business. But the liability of the karta is unlimited as, it extends to his personal property. 6. Fluctuating Share : The individual share of each co-parcener keeps on fluctuating. This is because, every birth of a male child in the family adds to the number of co-parceners and every death of a co-parcener reduces the number. 7. Continuity : A Joint Hindu Family business continues to exist on the death of any co-parcener. Even on the death of the karta, it continues to exist as the next seniormost family member becomes karta. However, a Joint Hindu Family business can be dissolved any time either through mutual agreement between members or by partition. Partnership Meaning A partnership form of organisation is one where two or more persons are associated to run a business with a view to earn profit. Persons from similar background or persons of different ability and skills, may join together to carry on a business. 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, 1932.28 :: Commerce (Business Studies)

Characteristics: 1. Number of Partners : A minimum of two persons are required to start a partnership business. The maximum membership limit is 10 in case of banking business and 20 in case of all other types of business. 2. Contractual Relationship : The relation between the partners of a partnership firm is created by contract. The partners enter into partnership through an agreement which may be verbal, written or implied. If the agreement is in writing it is known as a Partnership Deed. 3. Competence of Partners : Since individuals have to enter into a contract to become partners, they must be competent enough to do so. Thus, minors, lunatics and insolvent persons are not eligible to become partners. However, a minor can be admitted to the benefits of partnership i.e. he can have a share in the profits. 4. Sharing of Profit and Loss : The partners can share profit in any ratio as agreed. In the absence of an agreement, they share it equally. 5. Unlimited Liability : The partners have unlimited liability. They are liable jointly and severally for the debts and obligations of the firm. Creditors can lay claim on the personal properties of any individual partner or all the partners jointly. Even a single partner may be called upon to pay the debts of the firm. Of course, he can get back the money due from other partners. The liability of a minor is, however, limited to the extent of his share in the profits, in case of dissolution of a firm. 6. Principal-Agent Relationship : The business in a partnership firm may be carried on by all the partners or any one of them acting for all. This means that every partner is an agent when he is acting on behalf of others and he is a principal when others act on his behalf. It is, therefore, essential that there should be mutual trust and faith among the partners in the interest of the firm. 7. Transfer of Interest : No partner can sell or transfer his interest in the firm to anyone without the consent of other partners. 8. Legal Status : A partnership firm is just a name for the business as a whole. The firm means partners and the partners mean the firm. Law does not recognise the firm as a separate entity distinct from the partners. 9. Voluntary Registration : Registration of partnership is not compulsory. But since registration entitles the firm to several benefits, it is considered desirable. For example, if it is registered, any partner can file a caseForms of Business Organisation :: 29 against other partners, or a firm can file a suit against outsiders in case of

disputes, claims, disagreements, etc. Joint Stock Company Meaning: A Joint Stock Company form of business organisation is a voluntary association of persons to carry on business. Normally, it is given a legal status and is subject to certain legal regulations. It is an association of persons who generally contribute money for some common purpose. The money so contributed is the capital of the company. The persons who contribute capital are its members. The proportion of capital to which each member is entitled is called his share, therefore members of a joint stock company are known as shareholders and the capital of the company is known as share capital. The total share capital is divided into a number of units known as shares. You may have heard of the names of joint stock companies like Tata Iron & Steel Co. Limited, Hindustan Lever Limited, Reliance Industries Limited, Steel Authority of India Limited, Ponds India Limited etc. The companies are governed by the Indian Companies Act, 1956. The Act defines a company as an artificial person created by law, having separate entity, with perpetual succession and a common seal. Characteristics: 1. Artificial Person : A Joint Stock Company is an artificial person in the sense that it is created by law and does not possess physical attributes of a natural person. However, it has a legal status. 2. Separate Legal Entity : Being an artificial person, a company has an existence independent of its members. It can own property, enter into contract and conduct any lawful business in its own name. It can sue and can be sued in the court of law. A shareholder cannot be held responsible for the acts of the company. 3. Common Seal : Every company has a common seal by which it is represented while dealing with outsiders. Any document with the common seal and duly signed by an officer of the company is binding on the company. 4. Perpetual Existence : A company once formed continues to exist as long as it fulfils the requirements of law. It is not affected by the death, lunacy, insolvency or retirement of any of its members.32 :: Commerce (Business Studies) 5. Limited Liability : The liability of a member of a Joint Stock Company is limited by guarantee or the shares he owns. In other words, in case of payment of debts by the company, a shareholder is held liable only to the extent of his share. 6. Transferability of Shares : The members of a company are free to

transfer the shares held by them to anyone else. 7. Formation : A company comes into existence only when it has been registered after completing the formalities prescribed under the Indian Companies Act 1956. A company is formed by the initiative of a group of persons known as promoters. 8. Membership : A company having a 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. 9. Management : Joint Stock Companies have democratic management and control. Even though the shareholders are the owners of the company, all of the them cannot participate in the management process. The company is managed by the elected representatives of shareholders known as Directors. 10. Capital : A Joint Stock Company generally raises a large amount of capital through issue of shares. Co-operative Society Meaning Any ten persons can form a co-operative society. It functions under the Cooperative Societies Act ,1912 and other State Co-operative Societies Acts . A co-operative society is entirely different from all other forms of organization Forms of Business Organisation discussed above in terms of its objective. The cooperatives are formed primarily to render services to its members. Generally it also provides some service to the society. The main objectives of co-operative society are: (a) rendering service rather than earning profit, (b) mutual help instead of competition, and (c) self help in place of dependence. On the basis of objectives, various types of co-operatives are formed : a. Consumer co-operatives : These are formed to protect the interests of ordinary consumers of society by making consumer goods available at reasonable prices. Kendriya Bhandar in Delhi, Alaka in Bhubaneswar and similar others are all examples of consumer co-operatives b. Producers co-operatives : These societies are set up to benefit small producers who face problems in collecting inputs and marketing their products. The Weavers co-operative society, the Handloom owners cooperative society are examples of such co-operatives. c. Marketing co-operatives : These are formed by producers and manufactures to eliminate exploitation by the middlemen while marketing their product. Kashmir Arts Emporium, J&K Handicrafts, Utkalika etc.

are examples of marketing co-operatives. d. Housing Co-operatives : These are formed to provide housing facilities to its members. They are called co-operative group housing societies. e. Credit Co-operatives : These societies are formed to provide financial help to its members. The rural credit societies, the credit and thrift societies, the urban co-operative banks etc. come under this category. f. Forming Co-operatives : These are formed by small farmers to carry on work jointly and thereby share the benefits of large scale farming. Besides these types, other co-operatives can be formed with the objective of providing different benefits to its members, like the construction co-operatives, transport co-operatives, co-operatives to provide education etc. Characteristics: 1. Voluntary association : Individuals having common interest can come together to form a co-operative society. Any person can become a member of such an organisation and leave the same. 2. Membership : The minimum membership required to form a co-operative society is ten and the maximum number is unlimited. At times the cooperatives after their formation fix a maximum membership limit.36 :: Commerce (Business Studies) 3. Body corporate : Registration of a society under the Co-operative Societies Act is a must. Once it is registered, it becomes a body corporate and enjoys certain privileges just like a joint stock company. Some of the privileges are: (a) The society enjoys perpetual succession. (b) It has its own common seal. (c) It can own property in its name. (d) It can enter into contract with others. (e) It can sue others in court of law. 4. Service Motive : The primary objective of any co-operative organisation is to render services to its members in particular and to the society in general. 5. Democratic Set up : Every member has a right to take part in the management of the society. Each member has one vote. Generally the members elect a committee known as the Executive Committee to look after the day to day administration and the said committee is responsible to the general body of members. 6. Sources of Finances : A co-operative organisation starts with a fund contribute by its members in the form of units called shares. It can also raise loans and secure grants from the government easily. One fourth of the profits of the co-operative are transferred to its fund every year.

7. Return on capital : The return on capital subscribed by the members is in the form of a fixed rate of dividend after deduction from the profit.


Once an entrepreneur understands some of the factors that influence growth and development, he can choose a suitable way for achieving it. Business growth can take place in many ways. Broadly, various types of growth can be divided into two broad categories organic and inorganic growth. Organic Growth It can also be termed as internal growth. It is growth from within. It is planned and slow increase in the size and resources of the firm. A firm can grow internally by ploughing back of its profits into the business every year. This leads to the growth of production and sales turnover of the business. Internal growth may take place either through increase in the sales of existing products or by adding new products. Internal growth is slow and involves comparatively little change in the existing organization structure. It can be planned and managed easily as it is slow. The ways used by the management for internal growth include: (i)intensification; (ii) diversification and (iii) modernization. Inorganic Growth it can also be termed as external growth. It involves a merger of two or more business firms. A firm may acquire another firm or firms may combine together to improve their competitive strength. External growth has been attempted by the business houses through the two strategies (a) mergers and acquisitions and (b) joint ventures. Merger again can be of two types: (i) a firm merges with other firm in the same industry having similar or related products. This type of merger leads to coordination problem between the two firms (ii) a firm merges with another firm in altogether different lines of business and have little common in their products or proceses such a merger is known as conglomerate merger. Inorganic growth is fast and allows immediate utlization of acquired assets. There is no risk of overproduction as the capacity of the industry as whole 142 remains unchanged. Merger leads to combination of independent units to control competition, to gain economics of scale and also sometimes, to modernize production facilities. But merger also leads to social problem of

monopoly, problem of coordination, strain on capital structure, etc. Thus, external growth involves problem of reorganization. GROWTH STRATEGIES

ROLE OF ENTREPRENEURSHIP Entrepreneurship helps in the process of economic development in the following ways : 1) Employment Generation : Growing unemployment particularly educated unemployment is the problem of the nation. The available employment opportunities can cater only 5 to 10 % of the unemployed. Entrepreneurs generate employment both directly and indirectly. Directly, self employment as an entrepreneur and indirectly by starting many industrial units they offer jobs to millions. Thus entrepreneurship is the best way to fight the evil of unemployment. 2) National Income : National Income consits of the goods and services produced in the country and imported. The goods and services produced are for consumption within the country as well as to meet the demand of exports. The domestic demand increases with increase in population and increase in standard of living. The export demand also increases to meet the needs of growing imports due to various reasons. An increasing number of entrepreneurers are required to meet this increasing demand for goods and services. Thus entrepreneurship increases the national income.

3) Balanced Regional Development : The growth of Industry and business leads to a lot of Public benefits like transport facilities, health, education, entertainment etc. When the industries are concentrated in selected cities, development gets limited to these cities. A rapid development . When the new entrepreneurers grow at a faster rate, in view of increasing competition in and around cities, they are forced to set up their enterprises in the smaller towns away from big cities. This helps in the development of backward regions. 4) Dispersal of economic power : Industrial development normally may lesd to concentration of economic powers in a few hands. This concentration of power in a few hands has its own evils in the form of monopolies. Developing a large number of entrepreneurers helps in dispersing the economic power amongst the population. Thus it helps in weakening the harmful effects of monopoly. 5) Better standards of living : Entrepreneurers play a vital role in achieving a higher rate of economic growth. Entrepreneurers are able to produce goods at lower cost and supply quality goods at lower price to the community according to their requirements.When the price of of the commodies decreases the consumers get the power to buy more goods for their satisfaction. In this way they can increase the standard of living of the people. 6) Creating innovation : An entrepreneur is a person who always look for changes. apart from combining the factors of production, he also introduces new ideas and new combination of factors. He always try to introduce newer and newer technique of production of goods and services. An entrepreneur brings economic development through innovation. Entrepreneurship also helps in increasing productivity and capital formation of a nation. In short, the development of the entrepreneurship is inevitable in the economic development of the country. The Role played by the entrepreneurship development can be expressed in the following words :

" Economic development is the effect for which entrepreneurship is a cause " NEED FOR BUSINESS HISTORY

It is an important tool for understanding human nature and its past endeavours and can throw light on the present and future in many ways Historical study increases our understanding of humanity and has lessons for human aspirations, ambitions and organisations. Eg contemporary empowerment and subcontracting initiatives were better known in previous eras as the helper and putting-out systems. Historical study can develop communication skills (language ability, writing proficiency), an ability to evaluate evidence and a healthy scepticism to received opinion and propaganda It can provide management students with an overview of the development of the national and international economy and provide key insights into industrial structure and the evolution of business strategies. It can broaden business education by illuminating government-business relations, technology, corporate culture and business ethics Business and management history not only encompasses the study of organisational systems but its breadth of approach provides managers with insights into human behaviour operating under a variety of constraints and influences Modern managers operating in a world of high-speed decision-making need to be aware of how long-tem changes have affected enterprises. Business/management history is multi-disciplinary and concerned with longterm change and offers a more practical focus. Business/management history supplements management theorys principles for managing organisations by offering portrayals of reality against which those principles may be tested and experienced vicariously.