WORKSHEET 3- BUSINESS STUDIES (CLASS 11) Chapter 1 NATURE AND PURPOSE OF BUSINESS

 CHAPTER 1 NATURE AND PURPOSE OF BUSINESS

Why does the business require objectives?
Every business enterprise has certain objectives which regulate and generate its activities. Objectives are needed in every area where performance and results directly affect survival and prosperity of a business.

What are the objectives of business?

1.     Market standing refers to the position of a business in relation to its competitors. A business enterprise must aim at standing on stronger footing in terms of offering competitive products to its customers and serving them to their satisfaction. 

2.     Innovation: Innovation is the introduction of new ideas or methods in the way something is done or made. There are two kinds of innovation in every business i.e., (i) innovation in product or service; and (ii) innovation in the various skills and activities needed to supply them. No business enterprise can flourish in a competitive world without innovation. Therefore, innovation becomes an important objective. 

3.     Productivity: Productivity is calculated by comparing the value of outputs with the value of inputs. It is used as a measure of efficiency. In order to ensure continuous survival and progress, every enterprise must aim at greater productivity by the best use of available resources. 

4.     Physical and financial resources: Any business requires physical resources like plants, machines, offices, etc., and financial resources, i.e., funds to be able to produce and supply goods and services to its customers. The business enterprise must aim at acquiring these resources according to their requirements and use them efficiently. 

5.     Earning profits: One of the objectives of business is to earn profits on the capital employed. Profitability refers to profit in relation to capital investment. Every business must earn a reasonable profit which is so important for its survival and growth. 

6.     Manager performance and development: Business enterprises need managers to conduct and coordinate business activity. Various programmes for motivating managers need to be implemented. Manager performance and development therefore, is an important objective. The enterprises must actively work for this purpose. 

7.   Worker performance and attitude: Worker’s performance and attitudes determine their contribution towards productivity and profitability of any enterprise. Therefore, every enterprise must aim at improving its workers performance. It should also try to ensure a positive attitude on the part of workers. 

8.   Social responsibility: Social responsibility refers to the obligation of business firms to contribute resources for solving social problems and work in a socially desirable manner. Thus, a business enterprise must have multiple objectives to satisfy different individuals and groups, for its own survival and prosperity. 

Tertiary industries or Service industries 

They do not produce goods. These industries produce utility services and sell them at a profit. They help trade, industry and commerce. This term also includes auxiliaries to trade like banking, insurance, warehouse, advertisement etc. 

Starting a Business: Basic Factors

Selecting the line of business: The first thing to be decided by the entrepreneur is the line and type of business to be undertaken.

1. Scale or size of business: After deciding the line of business the businessman must decide whether he wants to set up large scale or small scale business.

2. Choice of form of Business organization: The next decision must be taken is to finalize the form of business i.e., to set up sole proprietorship., partnership or joint stock company.

3. Location of Business Enterprise: The entrepreneur has to decide the place where the enterprise will be located. Before taking this decision he must find out availability of raw materials, power, labour, banking, transportation etc.

4. Financial Requirement: The businessman must analyze the amount of capital he might require to buy fixed assets and for working capital (Day to day expenses) Proper financial planning must be done to determine the amount of funds needed.

5. Physical facilities: include machinery equipment building etc. This decision depends upon the size, scale and type of business activities he wants to carry on.

6. Plant layout: Showing the physical arrangement of machines and equipment needed to manufacture a product.

7. Competent and committed Workforce: The entrepreneur must find out the requirement of skilled and unskilled workers and managerial staff to perform various activities.

8. Tax planning: The entrepreneur must try to analyze the types of taxes because there are a number of tax laws in the country which affect the functioning of business.

9. Setting up of the Enterprise: After analyzing the above mentioned points carefully the entrepreneur can start the business which would mean mobilizing various resources and completing legal formalities.