Class 11 Business Studies Chapter 1- Business, Trade and Commerce

Notes On Chapter 1 of Class 11- Business, Trade and Commerce

1. Business, Trade And Commerce

2. Concept of business Business refers to an occupation in which people regularly engage in activities related to purchase,production and/or sale of goods and services with a view to earning profit.

3. ACTIVITIES AND ITS TYPES ECONOMIC ACTIVITIES: Those activities which we can earn our livelihood NON-ECONOMIC ACTIVITIES: Those activities which are performed out of love, sympathy, sentiment, patriotism, etc. ‹#›

4. CHARACTERISTICS OF BUSINESS ACTIVITIES

5. ‹#› AN ECONOMIC ACTIVITY It is undertaken with the objective of earning money or livelihood and not out of love, affection, sympathy or any other emotion

6. ‹#› PRODUCTION AND PROCUREMENT OF GOODS AND SERVICES Every business enterprise either manufactures the goods it deals in or acquires them from producers Goods are consumable items like sugar Services like transportation

7. ‹#› SALES OR EXCHANGE OF GOODS AND SERVICES If goods are produced not for the purpose of sale but for personal consumption, it can't be considered a business activity . Eg: Cooking food for family: Non- Economic Activity Cooking In a Restaurant: Economic Activity

8. ‹#› DEALINGS IN GOODS AND SERVICES ON A REGULAR BASIS Business involves dealings in goods or services on a regular basis. One single transaction of sale or purchase, therefore, does not constitute business.

9. ‹#› PROFIT EARNING One of the main purpose of business is to earn income by way of profit. No business can survive for long without profit.

10. ‹#› UNCERTAINTY OF RETURN This refers to the lack of knowledge relating to the amount of money that the business is going to earn in a given period. The amount of profit is not certain

11. ‹#› ELEMENT OF RISK Uncertainty associated with an exposure to loss Caused by some undesirable factors like accidents, theft, etc.

12. ‹#› QUESTION SESSION! Rama bought a readymade dress for rupees 5000. Her friend liked the design of dress very much, so Rama sold the same dress to her friend for rupees 5500 and made a profit of rupees 500. After completing her studies Rama opened a shop of selling readymade dresses for girls. Can transaction between Rama and her Friend be termed as business? State the features related to ‘a’ Can the sale of dresses on her shop be called as business? ANSWERS: i) No ii) "Regular basis” iii) Yes, as it is done on regular basis

13. ‹#› COMPARISON BETWEEN BUSINESS, PROFESSION AND EMPLOYMENT BASIS BUSINESS PROFESSION EMPLOYMENT Mode of Establishment Entrepreneur’s decision and other legal formalities Membership of a professional body and certificate of practice Appointment letter and service agreement 2. Nature of work Provision of goods and services of public Rendering of personalised, expert services Performing work as per service contract or rule of service 3. Qualification No minimum qualification is necessary Qualifications, Expertise and training in specific field as prescribed by the professional body is a must Qualification and training as prescribed by the employer

14. COMPARISON BETWEEN BUSINESS, PROFESSION AND EMPLOYMENT ‹#› BASIS BUSINESS PROFESSION EMPLOYMENT 4. Reward or return Profit earned Professional fee Salary or wage 5. Capital Investment Capital Investment required as per size and nature of the business Limited capital required No capital required 6. Risk Profits are uncertain and irregular; risk is present Fee is generally regular and certain; some risk Fixed and regular pay; little or no risk

15. COMPARISON BETWEEN BUSINESS, PROFESSION AND EMPLOYMENT ‹#› BASIS BUSINESS PROFESSION EMPLOYMENT 7. Transfer of interest Transfer is possible with some formalities Not possible Not possible 8. Code of conduct No code of conduct is prescribed Professional code of conduct is to be followed Norms of behaviour laid down by the employer are to be followed 9. Example Shop, factory Legal, medical profession, CA Jobs in banks

16. INDUSTRY Connected with the conversion of resources into useful goods Also includes activities related to producing or processing of goods as well as breeding of animals ‹#›

17. ‹#› PRIMARY INDUSTRIES These includes activities which are concerned with the extraction and production of natural resources. Primary Industries are further classified into: Extractive Industries Genetic Industries

18. ‹#› EXTRACTIVE INDUSTRIES These industries extract or draw products from natural sources. Example: Farming, mining, etc. GENETIC INDUSTRIES These industries are engaged in breeding plants and animals for their use in further reproduction. Example: Breeding of Animals

19. ‹#› SECONDARY INDUSTRIES Deals with using materials which have already been extracted at the primary state. TYPES OF SECONDARY INDUSTRIES: Manufacturing Industries Construction industries

20. ‹#› MANUFACTURING INDUSTRIES: Engaged in producing goods through processing of raw materials. They are divided into four broad categories. They are: Analytical Industry Synthetical Industry Processing Industry Assembling Industry CONSTRUCTION INDUSTRIES: These industries are involved in the constriction of buildings, dams,bridges, roads as well as tunnels and cannels

21. ‹#› TERTIARY INDUSTRIES: These are concerned with providing services to primary and secondary industries as well as services to trade. The activities may include: Transport Banking Insurance Warehousing Communication Packaging and Advertising

22. ‹#› QUESTION SESSION! Timber industry is what type of industry? Primary Secondary Tertiary Manufacturing Planting a sapling is related to what type of industry? Manufacturing Construction Genetic Extractive ANSWERS: 1) Primary 2) Genetic

23. ‹#› COMMERCE Commerce includes all those activities which are necessary for facilitating the exchange of goods and services. There are two types of activities in this: Trade Auxiliaries to Trade

24. TRADE Trade is an essential part of commerce It refers to sale, transfer or exchange of goods.it helps in making the goods produced available to the consumers or user. If goods are purchased from another country, it is called import trade. If the goods are sold to other countries, it is known as export trade. If goods are imported from export to other countries, it is known as entrepot trade. ‹#›

25. ‹#› AUXILIARIES TO TRADE These are the activities which assists trade. Provides facilities like transport, banking, insurance, warehousing, advertising . Not only helps trade but also industry and hence the whole business activity.

26. ‹#› TRANSPORT AND COMMUNICATION Goods are produced in particular location but is required by many parts of the country Transportation - Removes this hindrance Communication removes the hindrance of exchange of information between the producers, traders and consumers

27. BANKING AND FINANCE Funds are necessary to conduct business activities. This hindrance is removed by banking. Other facilities- Collection of cheques, remittance of funds to different places, etc. Commercial banks helps exporters in collecting money from importers. ‹#›

28. INSURANCE No Businesses can avoid risks. Insurance provides protection for all kinds of risks for a business activity. Risks may include theft of goods, accidents like fire, etc. ‹#›

29. WAREHOUSING Helps business firms to store their goods and use them when needed. It prevents the loss or damage of goods with its storage facilities. ‹#›

30. ADVERTISING It is one of the most important method of promoting one’s goods. Helps in informing the consumers about the firm’s goods. For promoting sales, the info about the goods, i.e, price, features must reach targeted consumers ‹#›

31. QUESTION SESSION! ‹#› The service of commerce which provides protection to businessman is called: Insurance Advertisement Banking Trade Name the tertiary activity which removes the hindrance of knowledge. ANSWERS: 1) Insurance 2) Advertising

32. OBJECTIVE S OF BUSINESS An objective is the starting point of business

33. ‹#› OBJECTIVES OF BUSINESS Refers to all that the business people want to get in return for what they do. The business people need to fulfill several objectives, including social responsibility, survival and prosper in the long run. Earning profit is not the only objective of business firms But it is the main objective of a business.

34. ‹#› Why is profit regarded as the main objective of business? It is a source of income for business persons. It can be a source of finance of meeting expansion requirements of business It indicates the efficient working of business It can be taken as the society’s approval of the utility of business It builds the reputation of a business enterprise

35. MULTIPLE OBJECTIVES OF BUSINESS A business requires multiple objectives to balance a number of needs and goals Neglecting other objectives due to the obsession with profit earning is harmful for a good business. Objectives are needed in every area where performance and results affect the survival and prosperity of business. ‹#›

36. MARKET STANDING: It refers to the position of an enterprise in relation to its competitors. ‹#› INNOVATION: It is the introduction of new ideas or methods in a way something is done or made. There are two kinds of innovations in business: Innovation in product or services Innovation in various skills and activities needed to supply product and services

37. PRODUCTIVITY: It is ascertained by comparing the value of output with the value of input. A measure of efficiency. ‹#› PHYSICAL AND FINANCIAL RESOURCES: Every business requires resources (eg: machines) and funds to be able to continue it. They should use them effectively.

38. EARNING PROFITS: This is one of the main objective of a business Every business must earn a reasonable profit which is so important for its survival ‹#› MANAGER PERFORMANCE AND DEVELOPMENT: Every business firm needs managers to coordinate the activities Therefore the performance and development of manager is essential in a business activity

39. WORKER PERFORMANCE AND ATTITUDE: Every enterprise must aim at improving its workers’ performance They should also try to ensure a positive attitude on the part of workers. ‹#› SOCIAL RESPONSIBILITY: It refers to the obligations of business firms to contribute resources for solving social problems.

40. QUESTION SESSION! ‹#› ABC Ltd. is charging very low price which is just covering their cost so that it can remain in competitive market. ABC Ltd. is achieving which is organisational objective? Survival Profit Growth None of the above Which of the following cannot be classified as an objective of business? Investment Productivity Innovation Profit Earning ANSWER: 1) i) Survival 2) i) Investment

41. ‹#› BUSINESS RISKS: It refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events. It may be due to the change in tastes of the customers or due to the increase in competition from other producers. Shortage of raw materials may also lead to risks.

42. ‹#› TYPES OF BUSINESS RISKS: Speculative risks: It involves both the possibility of gain as well as loss. Arises due to the changes in market conditions, etc. Pure Risks: It involves only the possibility of loss or no loss For example: chance of fire, theft, etc.

43. ‹#› NATURE OF BUSINESS RISKS Natural calamities, change in demand and prices, changes in government policies and prices, improvement in technology etc., are some of the examples of uncertainty which create risks for business because the outcomes of these future events are not known . Business risks due to uncertainties: Risk is an essential part of every business: Every business has some risk.No business can avoid risk,although the amount of risk may vary from business to business.

44. Nature of business and size of business are the main factors which determine the amount of risk in a business. NATURE OF BUSINESS RISKS ‹#› Degree of risk depends mainly upon the nature and size of business Profit is the reward for risk taking “NO RISK NO GAIN”. Greater the risk involved in a business,higher is the chance of profit.

45. CAUSES OF BUSINESS RISKS ‹#› NATURAL CAUSES HUMAN CAUSES ECONOMIC CAUSES OTHER CAUSES

46. QUESTION SESSION! ‹#› Business risk is not likely to arise due to: Changes in Governmental policy Good management Employee’s Dishonesty Power failure What does risk Implies? Predictable Happenings Danger of loss Favourable outcomes Chances of profits ANSWER: 1) Good management 2) Danger of loss

47. STARTING A BUSINESS-BASIC FACTORS ‹#› SELECTION OF LINE BUSINESS: The first thing to be decided by an entrepreneur is the nature and type of business to be undertaken. SIZE OF THE FIRM: Size of the firm or scale of business operations; which determines the level of production and consequently the volume of sales.a business may be carried on a large scale or in a moderate scale or in a small scale.

48. STARTING A BUSINESS-BASIC FACTORS ‹#› CHOICE OF FORM OF OWNERSHIP The choice of the suitable form of ownership will depend on such factors as the line of business, capital requirements, liability of owners, division of profit, continuity of business, transfer of interest and so on. LOCATION OF BUSINESS ENTERPRISE An important factor to be considered is that the place where the enterprise will be located.good location decisions can significantly boost a company’s long term performance. FINANCING THE PROPOSITION Financing is concerned with providing the necessary capital for starting,as well as , for continuing the proposed business.

49. STARTING A BUSINESS-BASIC FACTORS ‹#› PHYSICAL FACILITIES Availability of physical facilities, including machines and equipment , building and supportive services is an important factor to be considered at the start of the business. PLANT LAYOUT The entrepreneur should draw a layout plan showing the arrangement of the facilities.

50. STARTING A BUSINESS-BASIC FACTORS ‹#› COMPETENT AND COMMITTED WORKED FORCE Every enterprise needs competent and committed workforce to perform various activities so that physical and financial resources are converted into desired outputs. TAX PLANNING There are a number of tax laws in the country and they influence almost every aspect of the functioning of modern business. LAUNCHING THE ENTERPRISE The entrepreneur should go ahead with actual launching of the enterprise after the decisions relating the above factors have been taken.

51. ‹#› THANKYOU!