T.Business CH.1-1

CHAPTER - ONE
BASIC CONCEPTS OF
BUSINESS AND MANAGEMENT
LEARNING OBJECTIVES
 At the end of this lesson, you should be able to:
 Understand Basic concepts of Business Organization
 Identify and explain Types of Business Organizations
 Know the Basic concepts of management
 Functions of management
Business Organization
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Basic concepts of Business Organization
 A Business Organization is made up of two or more people

working together co-operatively within identifiable boundaries to
accomplish a common business goal or objective.
 Organizations are Open Systems; they interact with the

surrounding environment.
 Business Organization has a set of goals and objectives to be

achieved.
 Business Objectives and Goals:
 Objectives: Are precise, well‐specified targets that are measureab

le and a business enterprise intends to achieve them by a given ti
me. Eg. “Increase sales by 40% per year”
 Goals: Are general statements about the direction in which a busi

ness enterprise intends to go, without stating specific targets to be
reached by particular times.
 Mission of an enterprise is the highest level statement of goals (a

nd objectives). E.g.. A vague statement such as “Be a market lead
er”
 Long‐term goals: relate to extended periods, usually five years or

more into the future.
 Intermediate goals: deal with one to five years.
 Short‐term goals: (likely objectives) deal with period of less than

or up to a year.
 Hence, a business organization should be structured in the most

effective and efficient way to fully utilize its resources.
 The Structure of an organization is usually depicted by its

organizational structure, which identifies its management
structure according to the hierarchy, authority structure, and
reporting relationships.
 Effectiveness: A measure of the appropriateness of the goals

chosen (are these the right goals?), and the degree to which they
are achieved.
 Efficiency: A measure of how well resources are used to achieve

a goal.
 Organizational Components
 People
 People are the main component of any organization that has to be

managed.
 Organizations must identify the need spectrum of individuals and

take suitable steps for its fulfilment to enable them to perform
effectively so that they complete their allotted task in time.
 People
 Relationship between the workers, with subordinates and

superiors should be established based on full understanding and
complete faith based on mutual trust so that it is easy to
communicate and understand each other’s views.
 People
 Work teams and Groups play a vital role in the organization.
 It is the team goals, accomplishment of which contribute towards

achieving organizational goals.
 Apart from the above, adequate consideration should also be

given to competitors, regulatory agencies, labour force, suppliers
and resource persons.
 Structure
 There are two types of organizations, formal and informal.
 Informal organizations do not have a specified structure.
 Formal organizations are build based upon the objective set for it.
 Structure
 Organizational structure in such organization is hierarchical in

nature, with people at each level having their own objectives,
which contributes towards fulfilment of over all organizational
objectives.
 In such organisation people at lower levels report to higher level

managers.
 Structure
 Organizational structure in such organization is hierarchical in

nature, with people at each level having their own objectives,
which contributes towards fulfilment of over all organizational
objectives.
 In such organisation people at lower levels report to higher level

managers.
 Jobs
 Job is an assignment assigned to an individual. It encompasses

various tasks within it.
 Adequate delegation, supervision, application of various control

techniques makes the job simpler for the manager.
 External Environment
 When we talk about managing people in the organization, what

we have to study and manage is the influence of culture and its
impact on the individual.
 A manager should examine as to how he is going to cope up with

the changes.
 External Environment
 Study of external environment is very wide and encompasses

economic, cultural, social, government rules and regulations,
legal aspects, political climate, demographics and its impact.
 Manager must therefore keep in mind the internal and external

factors and make the best amalgam and work to achieve
organizational effectiveness.
 Technology
 Managing technology is an important job of any management. It

is an important element of any unit.
 Selection of technology, procurement, installation, operation and

maintenance is important and no compromise should be made in
procuring latest or advanced technology.
Necessity of Business organization
 Complexity of industry
 Growing competition
 Optimum utilization of resource
 Fixation of responsibility and authority
 Reduced labour problem
 Coordination and directing efforts

The process of organization
 Determination of Objectives:-
 The objectives should be clear precise and complete because the

entire organization is to be built around the objectives of the
enterprise.
 Objectives decide the purpose of organization and the nature of

the work to be accomplished through the organization.
 Determination of Activities
 From the objective of the company the principle activities are

determined.
 The work load is broken down in to component activities that are

to be performed by all the employees.
 The activities are so split to determine the job which can

performed by an individual
 Identifying and Classifying the Work Activities
 To attain the benefits of specialization and division of labour

every company will separate its activities on the basis of primary
function finance, engineering, purchasing, production, sales and
industrial relations.
 Delegation of authority
 The right given to superior for directing and guiding the action of
his subordinates to extract from them is called authority.
 Delegation of Responsibility
 Responsibility may be described as the obligation and

accountability for the performance of delegated duties.
 Responsibility always flow from subordinates to superior.
 Establish inter relationships
 It is necessary to integrate group of activities through authority

relationships horizontally and vertically and through organized
information or communication systems.
 Establish inter relationships
 It establishes harmony of efforts of different individuals and

groups avoiding the conflicts arising out of it.
 Providing Physical Facilities and Right Environment
 It is necessary to provide right type of physical facilities and

create right environment for the smooth running and prosperity of
the organization.
 Providing Physical Facilities and Right Environment
 Physical facilities
 Machinery, tools, equipment's and infrastructure
 Right environment
 proper lighting ventilation, heating, cooling arrangements at

the work place, reasonable hours of work, rest, pauses, safety
devices, job security, job satisfaction and above all human
approach by the management.
 Preparation of organization chart
 Organization chart is the graphic means or record which shows

the formal organization structure it shows the formal superior
subordinate relationships.
 It show who supervise and control whom and how the various
departments are interrelated.
Types of Business Organizations
 The type of ownership selected depends up on the following

factors:
 Size and nature of the business to be started
 Market competition and scope of the articles in the market
 Capital required to start the business, limitations and

restrictions by the government in connection with grant of
loans, foreign exchange and other things
 Modern world is carried out by the following three types of

business organization as
 Sole proprietorship,
 Partnership and
 Corporation.
 Sole proprietorship
 A sole proprietorship is the easiest and simplest form of business

ownership.
 It is owned by one person.
 There is no distinction between the person and the business.
 The owner shares in the business’s profits and losses. The entire
authority and responsibility are of his own.
 Sole proprietorship Applications
 This form of ownership is most satisfactory in the following

cases:
 For small scale business requiring small capital
 Where the risk covered is not too heavy
 Where management by one person is possible
 Where local market is available

 Advantages
 Simple and Easy  Better Labour Relationship

 Least Legal Formalities  Personal Attention to Customers
 Quick Decisions and Prompt Actions  Small Capital

 Flexibility
 Quality Production
 Disadvantages
 Limited Capital  Cannot Compete with a big business

 Short Life
 Unlimited Liability
 Division of Labour is not possible
 Personal Limitations
 Small Income
 Partnership
 is defined as, “the relation between two or more persons who

have agreed to share profit of a business, carried on by all or any
of them acting for all.
 Formation :
 Partnership can be formed either verbally or by written

agreement.
 Partnership
 Formation :
 The written agreement is known as “Partnership Deed” that states

the duties of each partner, who makes the final decision, and how
profit and losses will apportioned.
 Partnership
 Advantages
 Easy Formation
 More Capital
 Diverse Talent
 Less Possibility of Error of Judgment
 Prompt Decisions
 Partnership
 Disadvantages :
 Unlimited Liability
 Short Life.
 Insufficient Capital.
 Disagreement and Less Secrecy.

 Corporation
 A corporation is a form of business where the business

organization is chartered by a state and acts as a separate entity
from its owners.
 The owners, called shareholders, are individuals who own shares

of the corporation’s stock.
 The stock can be owned by one individual or many individuals.

 Corporation
 Unlike proprietorships and partnerships, the company can pay for

benefits rather than the individual.
 Corporations have perpetuity because if an owner, shareholder,

dies, the business does not cease to exist.
 Corporation
 Advantages  Disadvantages
 Limited liability  More difficult to start than

proprietorships and
 Profits and losses belong to the corporation
partnerships
 Perpetuity of business
 Two tax levels for corporations
 Ability to buy and sell assets
 Business is own legal entity

Basic concepts of MANAGEMENT
 Management: is the attainment of organizational goals in an

effective and efficient manner through planning, organizing,
staffing, directing and controlling organizational resources.
 Organizations: People working together and coordinating their

actions to achieve specific goals.
 Goal: A desired future condition that the organization seeks to

achieve.
Basic concepts of MANAGEMENT
 Resources are organizational assets and include:
 Man
 Machinery
 Materials
 Money
 Managers - to meet its goals.

MANAGEMENT characteristics
 Management is a distinct process.
 Management is an organized activity
 Management is dynamic.
 Management is a purposeful activity
 Management principles are universal in nature
 Management integrates human and other resources
 Management is decision making

Universality of management:
FUNCTIONS OF MANAGEMENT
 The management process involves performance of certain

fundamental functions.
 They have become widely accepted functions of management

every where. They are
 Planning  Directing
 Organizing  Communication
 Staffing  Controlling.
 PLANNING
 Planning is determining the objectives and formulating the

methods to achieve them.
 A job well planned is half done.
 Planning is deciding in advance:
 What to do  Where to do and

 How to do  Who will be responsible for doing is
 Why to do planning.
OBJECTIVES OF PLANNING
 Planning in organization serve to realize the following objectives:
 To reduces uncertainty
 It gives a specific direction to the organization
 To bring economy in the management
 Helps the organization to tune with the environment
 To achieve the pre determined goals
 Directed towards efficiency

 STEPS OF PLANNING
 Determining the goals or objectives
 Planning is not possible with out definite objectives.
 It is always desirable to express the objectives or goals in

quantitative for all the key areas of the business like production,
profit, productivity, market share etc.
 The time frame in which the objective have to be achieved must

be specified.
 Forecasting to assist planning
 It is an estimate of future event achieved by systematically

combining and casting forward in a predetermined way data
about the past.
 Forecasting plays a crucial role in the development of plans for

the future.
 Forecasting to assist planning
 It is an essential tool for the organization to know what level of

activities one is planning before investment in inputs i.e. man,
machines and materials be made.
 Deciding alternative courses of actions
 The objective can be fulfilled by more than one course of action .

 Deciding alternative courses of actions
 For example if we want to increase the profit we can
 Increase the price and sales,
 Keeping price constant,
 Reduce cost of production by adopting improved techniques,
 Reducing waste
 Optimum utilization of resource.

 Evaluating the alternatives
 The advantage and disadvantage of each alternatives are

weighted against the other alternatives.
 Selection and implementation of best plan
 After the evaluation of different alternative plan in terms of result

the best feasible and economical plan is selected.
 Controlling plans
 Once the plan is implemented, it is constantly monitored and

results are obtained as feed back from time to time.
 The draw backs and short comings are removed as early as

possible.
 Future plans are framed in the light of this experience.

 ORGANIZING
 It is the function of identifying the required activities, grouping

them into jobs, assigning jobs to various position holders, and
creating a network of relationship, so that the required functions
are performed in a coordinated manner, leading to the
accomplishment of desired goals.
 STEPS OF ORGANIZING
 The logical sequence of steps in organizing is mentioned below:-
 Determination of activities
 Division of activities Grouping activities according to

available resources
 Fitting individuals in to jobs
 Developing relationships in terms of authority and

responsibility
 STAFFING
 Staffing may be defined as a process of recruiting and equipping

the people to handle various positions and perform assigned tasks
in line with the structure and the overall goals of the organization.
 Staffing function involves
 Man power planning,
 Recruitment, Selection,
 STAFFING
 Staffing function involves
 Training and Development and
 Performance Appraisal.
 Directing
 Directing is the process and techniques utilized in issuing

instructions and making certain that operations are carried on as
originally planned.
 In simple words, direction can be described as providing

guidance to workers for doing work.
 Directing
 Steps in directing functions are:
 Issue of orders and instructions
 Guidance and training of subordinates
 Supervision of subordinates
 Directing
 Techniques of Direction
 There are mainly three techniques are used for direction:
 Consultative direction:
 Under this method, the supervisor has consultation with his

subordinates before issuing a direction.
 The consultation is made to find out the feasibility, enforceability

and nature of problem.
 Directing
 Free rein direction:
 The subordinate is encouraged to solve the problem

independently.
 The subordinate should take initiative to solve the problem.

 Directing
 Autocratic direction:
 It is opposite to free rein direction.
 The supervisor commands his subordinates and has close

supervision over them.
 COMMUNICATION
 Communication is a process in which information, ideas,

thoughts and feelings exchanges within two or more person.
 it is a process of sending and receiving information between two

or more people.
 The person who is sending message referred to as the sender,

while person who is receiving information is known as receiver.
 Organizational Communication
 Organizational communication includes all the patterns,

networks, and systems of communication within an organization.
 The functions of communication include controlling employee

behaviour, motivating employees, providing a release for
emotional expression of feelings and fulfilment of social needs,
and providing information.
 COMMUNICATION
 METHODS OF COMMUNICATION
 People communicate with each other in different ways that

depends on the message.
 There are three methods of communication are:
 Verbal Or written Communication
 Formal or informal
 Downward, upward or horizontal Communication

 COMMUNICATION
 Verbal Communication
 Is refers to that communication in which message is transmitted

verbally.
 Is that communication which formed orally like spoken of words.

 COMMUNICATION
 Verbal Communication
 It includes face-to-face conversation, speech, telephonic

conversation, videos, radio, television.
 It can be influenced by pitch, volume, speed and clarity of

speaking.
 COMMUNICATION
 Written Communication
 Effective writing involves careful choice of words, their

organization in correct order in sentences formation as well as
cohesive composition of sentences.
 Also, writing is more valid and reliable than speech.

 COMMUNICATION
 Formal Communication
 In formal communication, certain rules, conventions and

principles are followed while communicating message.
 Formal communication occurs in formal, official style and mostly

in written form.
 COMMUNICATION
 Formal Communication
 For example, when a manager asks an employee to complete a

task, that’s formal communication.
 Another example of formal communication occurs when an

employee communicates a problem to his or her manager.
 COMMUNICATION
 Informal communication
 is done using channels that are in contrast with formal

communication channels. It’s just a casual talk.
 It is established for societal affiliations of members in an

organization and face-to-face discussions. It happens among
friends and family.
 COMMUNICATION
 Downward communication
 Communication which flows from the superior to subordinates is

referred as downward communication. It is needed,
 To get things done
 To prepare for changes
 To discourage misinformation and suspicion

 COMMUNICATION
 Upward communication
 It flows from a subordinate position to superior position.
 That is, the subordinate work performance report, their opinions,

ideas and suggestions, complaints and grievances of
subordinates, etc.,.
 COMMUNICATION
 Horizontal communication
 It is the transmission of information between persons having he

same level of authority in the organization
 For example production manager informing maintenance

manager regarding a break down of a machine.
 COMMUNICATION
 ELEMENTS OF COMMUNICATION
 The process of communication involves the following elements:
 Sender or transmitter: The person who desires to convey the

message is known as sender.
 Sender initiates the message and changes the behaviour of the

receiver.
 COMMUNICATION
 Message:
 It is a subject matter of any communication.
 It may involve any fact, idea, opinion or information.
 It must exist in the mind of the sender if communication is to take

place.
 COMMUNICATION
 Encoding:
 The communicator of the information organizes his idea into

series of symbols(words, signs, etc.) which, he feels will
communicate to the intended receiver or receivers.
 COMMUNICATION
 Communication channel:
 The sender has to select the channel for sending the information.
 Communication channel is the media through which the message

passes.
 It is the link that connects the sender and the receiver.

 COMMUNICATION
 Receiver:
 The person who receives the message is called receiver or

receiver is the person to whom the particular message is sent by
the transmitter.
 The communication process is incomplete without the existence

of receiver of the message.
 COMMUNICATION
 Feedback:
 Communication is an exchange process.
 For the exchange to be complete the information must go back to

whom from where it started (or sender), so that he can know the
reaction of the receiver.
 The reaction or response of the receiver is known as feedback.

 COMMUNICATION
 Brain drain: On whole process there is a possibility of

misunderstandings at any level and is called brain drain.
 It may arise on sender side if they do not choose the adequate

medium for delivery of message, by using default channel and it
may also arise when receiver does not properly decode the
message.
 COMMUNICATION
 IMPORTANCE OF COMMUNICATION
 Smooth and unrestricted running of the enterprise
 Quick decision and implementation
 Proper planning and coordination
 Maximum productivity with minimum cost
 Morale building and democratic management

 Controlling
 is the process of ensuring that the actual plan implementation

matches with the original plan.
 It is an on-going and dynamic function and linked with other

function of the management in a circular relationship.
 Controlling
 Types of Control
 Controlling
 Steps in Control Process
 The control process involves three basic steps as mentioned

below:-
 Measurement of performance against standards
 Comparing the actual performances with standards
 Taking corrective action:

 Steps in Control Process
 The control process involves three basic steps

as mentioned below:-
End of chapter-1
Thank you!

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CHAPTER - ONE

 Understand Basic concepts of Business Organization

 Identify and explain Types of Business Organizations

 Know the Basic concepts of management

 A Business Organization is made up of two or more people

 Organizations are Open Systems; they interact with the

 Business Organization has a set of goals and objectives to be

 Business Objectives and Goals:

 Objectives: Are precise, well‐specified targets that are measureab

 Business Objectives and Goals:

 Goals: Are general statements about the direction in which a busi

 Mission of an enterprise is the highest level statement of goals (a

 Business Objectives and Goals:

 Long‐term goals: relate to extended periods, usually five years or

 Intermediate goals: deal with one to five years.

 Short‐term goals: (likely objectives) deal with period of less than

 Hence, a business organization should be structured in the most

 The Structure of an organization is usually depicted by its

 Effectiveness: A measure of the appropriateness of the goals

 Efficiency: A measure of how well resources are used to achieve

 People are the main component of any organization that has to be

 Organizations must identify the need spectrum of individuals and

 Relationship between the workers, with subordinates and

 Work teams and Groups play a vital role in the organization.

 It is the team goals, accomplishment of which contribute towards

 Apart from the above, adequate consideration should also be

 There are two types of organizations, formal and informal.

 Informal organizations do not have a specified structure.

 Organizational structure in such organization is hierarchical in

 In such organisation people at lower levels report to higher level

 Organizational structure in such organization is hierarchical in

 In such organisation people at lower levels report to higher level

 Job is an assignment assigned to an individual. It encompasses

 Adequate delegation, supervision, application of various control

 When we talk about managing people in the organization, what

 A manager should examine as to how he is going to cope up with

 Study of external environment is very wide and encompasses

 Manager must therefore keep in mind the internal and external

 Managing technology is an important job of any management. It

 Selection of technology, procurement, installation, operation and

 Optimum utilization of resource

 Fixation of responsibility and authority

 Reduced labour problem

 Coordination and directing efforts

 The objectives should be clear precise and complete because the

 Objectives decide the purpose of organization and the nature of

 From the objective of the company the principle activities are

 The work load is broken down in to component activities that are

 The activities are so split to determine the job which can

 Identifying and Classifying the Work Activities

 To attain the benefits of specialization and division of labour

 Responsibility may be described as the obligation and

 Responsibility always flow from subordinates to superior.

 Establish inter relationships

 It is necessary to integrate group of activities through authority

 Establish inter relationships

 It establishes harmony of efforts of different individuals and

 Providing Physical Facilities and Right Environment

 It is necessary to provide right type of physical facilities and