1. BUSINESS
ENVIRONMENT
Module 1:
Business – definition, characteristics, objectives,
classification
Sidharth V Menon
MBA 2015-2017
Batch B

2. DEFINITION
• Business is a set of organized economic activities related to production and
exchange of goods or services with the aim of achieving certain objectives.
• The main objective of business is to earn profit.
• It includes all those activities which are connected with production or
purchase of goods and services with the object of selling them at a profit.
• It is not related with the non-economic activities of person.

3. NEW CONCEPT
• According to Peter.F.Drucker, the objective of business is to create
customers.
• The customer is the master and to serve him well is the only purpose of
business. Business cannot survive without customers.
• Modern business aim at profit through service.
• According to Robert. N. Owens, “Business is an enterprise engaged in the
production and distribution of goods for sale in market or rendering service
for a price.”

4. CHARACTERISTICS OF BUSINESS
• Economic activity
• Sale, transfer and exchange
• Deals in goods and services
• Regularity in dealings
• Profit motive.
• Elements of risk
• Utility creation

5. OBJECTIVES
1. Economic objectives
• Earning Profits
• Creating customers
• Innovations
2. Social objectives
• Supplying desired goods at
reasonable prices
• Fair remuneration to employees
• Employment generation
• Fair return to investors
• Social welfare
• Payment of government duties

6. OBJECTIVES (CONT…)
3. Human Objectives
• Labor welfare
• Developing human resources
• Participative management
• Labor management cooperation
4. National objectives
• Optimum utilization of resources
• National self-reliance
• Development of small scale
industries
• Development of backward areas

7. CLASSIFICATION OF BUSINESS
BUSINESS
PRIVATE SECTOR PUBLIC SECTOR JOINT SECTOR

8. TYPES OF COMPANIES IN PRIVATE
SECTOR
Private sector
Sole
proprietorship
Partnership
Private limited
company
Co-operatives
Joint Hindu
Family
Joint stock
company

9. Sole proprietor
Key Features
• 1 owner
• 0 to any number of employees
• A Sole Trader is in the Private Sector

10. Pros and Cons
Pro’s
• Own boss
• Total control
• Greater opportunity for flexible
working
• Keep all profits
• Easy to set up – few legal
requirements
Con’s
• Unlimited liability
• No one to share decision making
• Lack of specialisation
• No continuity of existence
• Time off/holidays
• Limited finance

11. Partnership
 Features
• 2 - 20 owners
• 0 to any number of employees
• A Sleeping Partner - someone who invests money but takes no part in the day
to day running.
• A Deed of Partnership - lays out rules for running and dissolution of the
Partnership .eg :sharing of profits.

12. Pro’s and Con’s
 Pro’s
• Shared decision making
• Increased capital invested
• Increased specialisation
• Easy to set up – few legal
requirements
Con’s
• Unlimited liability
• Profits have to be shared between
partners
• No continuity of existence
• Partners may have disagreements
• Limited finance

13. Private limited company
Features
• Ltd after its name
• Owners called shareholders
• A separate legal existence from owners
• Shareholders who are family and friends
• Governed by two legal documents: Memorandum of Association, Articles of
Association

14. Private limited company (cont.…)
• Controlled by a Board of Directors
• Run by a Managing Director.

15. Pro’s and Con’s
 Pro’s
• Limited liability
• Greater availability of finance
• Specialization can occur
 Con’s
• More complicated to set up - legal
formalities
• Loss of individual control

16. Co-operatives
 Features
• All members can contribute to the running of the business, sharing the work
load, responsibilities and decision making.
• All members have one vote at important meetings.
• Profits are shared equally among members.

17. Pro’s and Con’s
 Pro’s
• Buying in bulk.
• Working together to solve
problems and make decisions.
• Good motivation of all members
to work hard as they will benefit
from shared profits.
 Con’s
• Poor management skills unless
professionals are employed.
• Capital shortages because no sale
of shares to the non-member
general public is allowed.
• Slow decision making if all
members are to be consulted.

18. Joint stock company
Features
• A JSC is a type of corporation or partnership involving two or more individuals
that own shares of stock in the company.
• Certificates of ownership are issued by the company in return for each financial
contribution.
• The shareholders are free to transfer their ownership interest at any time by
selling their shareholding to others.

19. Pro’s and Con’s
 Pro’s
• Huge financial resources.
• Limited liability
• Perpetual existence
• Transferability of shares
• Diffusion of risks
• Efficient management
 Con’s
• Difficulty in formation
• Delay in decision making
• Seperation of ownership and
management
• Speculation on shares
• Too many regulations

20. THANK YOU!