Introduction – IEED

PRESENTATION

BY

NAME - PROF. MOHAMMAD ATHAR HAYAT

B.E – Mechanical Engineering - India

M.S – Robotics –United Kingdom

COLLEGE :- ST. VINCENT COLLEGE OF ENGGINEERING AND TECHNOLOGY

 Syllabus

Unit 1.

Industrial economics, Types of Business structures, top and bottom line of the
organization, economic analysis of business, economics of operations, economic prudence
in business.

Unit 2.

Market structures- Monopoly, Oligopoly, and Monopolistic competition. Pricing strategies,

business integration- forward backward integration, economies of scale, diseconomies of
scale, liberalization, privatization and globalization. Business cycles, optimum size of firm.
 Syllabus

Unit 3.

The functions of central bank and commercial banks, Foreign Direct Investment, Free
trade vs. Protectionism, Capital formation, Inflation, Recession and stagnation, Inclusive
growth, Public-Private partnership for development, Multiplier effect, Accelerator effect.

Unit 4.

Entrepreneurship meaning, Major Motives Influencing an Entrepreneur, Factors Affecting

Entrepreneurial Growth. Project Formulation, Product development, Market Survey and
Research, Demand forecasting techniques, Techno Economic Feasibility Assessment –
Preparation of Preliminary Project Reports – Project Appraisal – Sources of Information –
Classification of Needs and Agencies.
 Syllabus

Unit 5.

Need – Sources of Finance, Term Loans, Capital Structure, venture capital. Angel funding,
Financial Institution, management of working Capital, Costing, Break Even Analysis, Network
Analysis Techniques of PERT/CPM – Taxation – Direct, Indirect Taxes.

Unit 6.

Sickness in small Business, Major problems faced by SSIs, Foreign Direct Investments
and threat to SSI, Technical consultancy organizations, safeguard measures against
variation in currency value, Government Policy for Small Scale Enterprises, tax holidays,
and incentives to SSIs.
 Course Outcome

CO-1.
Apply the economic terminology and correlate it with current industrial scenario in
manufacturing and service sector.

CO-2 .
Outline the relation between business, market, cost and society which will be helpful for
decision making in business.

CO-3.
Demonstrate the effect of economic processes and measures taken by government to
control the prices of products and services

CO-4.
Take entrepreneurship as a career option.
 Economics

Definition of Economics

F.A Walker :- “ Economics is that body of knowledge which related to wealth”

J S Mill :- “ The practical science of production and distribution of wealth”

Economics is a social science concerned with the production, distribution, and consumption of goods and
services. It studies how individuals, businesses, governments, and nations make choices on allocating resources
to satisfy their wants and needs, trying to determine how these groups should organize and coordinate efforts to
achieve maximum output.
 Types of Economics

Economics can generally be broken down into macroeconomics, which concentrates on the behaviour of
the aggregate economy, and microeconomics, which focuses on individual consumers and businesses.
Microeconomics:-
Microeconomics focuses on how individual consumers and firm make decisions; these individuals can be a
single person, a household, a business/organization or a government agency.
Macroeconomics:-
Macroeconomics studies an overall economy on both a national and international level. Its focus can
include a distinct geographical region, a country, a continent, or even the whole world.
 Business Structure

When Starting a business , the factors of production (men, material and machines) in a plant is an important
parameter for the purpose of producing goods or services and selling them at profit.

The types of business structure depends upon the following factors:-

•Size and nature of the business to be started

•Technical difficulties

•Market competition and scope of the articles in the market

•Capital required to start the business and means to collect funds

•Limitations and restrictions put forth by the government in connection with grant of loans, foreign exchange and

such other things.

 Types of Business Structure

Types of Business structure :-

The most common forms of business are :-

1. Sole proprietorship

2. Partnership

3. Joint Stock :- a) Private limited company b) Public limited company

4. Co-operative societies

5. Public corporation
 Sole proprietorship

The simplest structure is the sole proprietorship, which usually involves just one individual who owns and operates the
enterprise.

Sole proprietorship is most satisfactory in the following cases

1. Small scale business
2. Risk cover is not too heavy
3. Management by one man
4. Local market availability
 Sole proprietorship - Advantages

Advantages:-

1. Simple and easy

2. Least legal formalities
3. Quick decisions an prompt actions
4. Quality production
5. Better labour relationship
6. Personal attention to customers
7. Small capital
8. Maintenance of secrecy
9. Incentive
10. Flexibility
 Sole proprietorship – Dis-Advantages

Dis-Advantages:-

1. Limited Capital
2. Unlimited liability
3. Personal Limitations
4. Small Income
5. Cannot compete with a big business
6. Short life
 Partnership

When the business is owned and operated by several individuals then it is called partnership.
 Types of Partnership

1. General Partners

2. Limited partners

3. Active or managing partners

4. Sleeping and silent partners

5. Nominal partners

6. Minor partners
 Partnership Advantages

1. Easy formation
2. More Capital
3. Diverse Talent
4. Less possibility of error of judgement
5. Prompt decisions
6. Large Economics
7. Personal factor
8. Divisions of labour
9. Simple dissolution
10. Cautious and sound approach
 Partnership Dis-Advantages

1. Unlimited liability
2. Short life
3. Insufficient capital
4. Disagreement
5. Less secrecy
6. Non- transfer of partnership
7. No direct relation between efforts and rewards
8. Lack of public confidence
 Distinction between sole proprietorship and
partnership.

PARAMETERS sole proprietorship partnership

Membership One man business Minimum -2 and maximum -50

Formation No agreement Agreement is required for its formation

Capital Limited Large

Registration Not necessary Necessary under the act 1932

Risk/Profit •Individual owner •Risk spread out amongst the partners

•Enjoys the entire profit •Profit is shared according to the agreement
Management Individual owner Shared by the partners

Secrecy Easily maintain the secrets of the Partner may withdraw from the firm and can
business establish his own enterprise with knowledge
and secretes of the business
Division of labour Not possible The partners divide the work among
themselves. Division of labour is thus
possible to some extent.
 Joint Stock Company

Company :-
A company is an artificial person having an independent legal entity and a perpetual succession with a distinctive
name and a common seal having a common capital divided into shares of fixed value which are transferable and
carry limited liability.

Joint Stock Company:-

The joint stock company is legal business owned by the shareholders having limited liability, and managed by an
elected “Board of Directors”.
Formation of Joint Stock Company
Organizational Structure of Joint Stock Company
 Types of Joint Stock Company

• Private limited company.

This type of company can be formed by two or more members. The
maximum number of members is limited to 50 (Excluding the
employees)

• Public limited company:-

As its name indicates, the membership of public limited company is
open to general public. The minimum number of person required
to form a pubic limited company is seven.
 Advantage of Joint Stock Company

1. Economies of large scale

2. Limited liability
3. Huge capital
4. Share transferable
5. Economies administration
6. Democratic
7. Permanent existence
8. Legal control
9. Risk spread out
10. Mobilization of scarce saving
11. It creates huge employment possibilities.
12. accelerated economic growth of the country is possible through industrialization
 Dis-Advantage of Joint Stock Company

1. Dishonest directors may exploit the shareholders

2. Legal complexities

3. It is democratic in theory only.

4. Delay in decisions

5. Favorisms

6. Difficult labour relations

7. Lack of initiative and personal interest

8. Concentration of economic power

9. Misuse of internal information.

10. Liquidation.
 Comparison between Public and private limited Joint Stock
Company

PARAMETERS Private Limited Joint stock company Public limited Joint Stock Company

Membership Confined to close friends and relatives Open to general public

Limits to Membership Minimum -2 and maximum – 50 Minimum -7 and no limit

Election of Directors No need of holding a meeting to elect Shareholders elect the directors
director
Resale of Shares Shares cannot be resold or transferred Shares can be resold or transferred

Audit of accounts No legal process is required Legal process is required

Minimum capitals Any amount Minimum lay –down capital is legally

required.
Name It has to use private limited at the end of It has to use limited at the end of its name
its name
Number of Directors Minimum -2 Minimum - 3

Legal control Less legal control Regulations are more strict

 Comparison between Partnership and Joint Stock
Company

Partnership Joint Stock Company

Liability of the members is unlimited Liability is limited to the value of their share

Minimum number of shareholders is 2 and maximum number

Minimum number of partners is 2, and maximum is 50 in private limited
number is 20 And in public limited minimum number of members is 7 and
there is no maximum limit.

Limited capital Large amount of capital can be collected

Managed by partners managed by elected board of directors

Short life and partnership may come to an end due to

Permanent existence
death or retirement of any partner

Formation and functioning involves very large legal

Registration process is simple and its not compulsory
 Co-operative Organizations

• Definition :- Co-operation is a form of organisation, wherein persons, irrespective of caste,

creed and religion, voluntarily associate together, as human beings, on the basis of equality
for the fulfilment of their common economic interests.
Features of Co-operative organizations:-
1. Voluntary organisations
2. Open membership
3. Economic and democratic management
4. Profit is not important
5. Spirit of co-operation
6. Unity
7. Common interest
8. Co-operative status
 Types of Co-operative Organizations

1. Producers co-operative society

2. Consumers co-operative society

3. Housing co-operative society

4. Credit co-operative society

 Types of Co-operative Organizations

Producers co-operative society :

In this form of co-operative , the workers wish to be their own masters and the business is
owned by them. They elect their own mangers.

Ex. Agricultural and cottage industries

Consumers co-operative society

The consumers living in a particular area combine together. Each contributes a small capital.

A store is opened in which articles of common use are stocked and sold at reasonable prices.

Ex. Colleges and schools in India

 Types of Co-operative Organizations

Co-operative Credit society :

Its objective is to finance the poor cultivators by providing loans at low rate of interest for the
development of land, purchase of agricultural machinery, fertilizers etc.

Housing co-operative society

Housing co-operative societies are formed for the purpose of getting plots or constructing
houses for the needy persons, government provides great facilities , for this purpose.
 Comparison between Co-operative and Joint Stock
Company

Parameters Co-operative society Joint Stock Company

Formation Minimum member 10 Minimum members 2 for private and 7 for public ltd.

Capital limited Large capital

Distribution of Its main purpose is to serve members,

Profit motive
profit profit is not important

Short. It may be dissolved if the

Lift common need is fulfilled, and Permanent existence
members may lost their interest

Transfer of A member can withdraw his share

 Public Co-operation

A public corporation is a body created by a law of parliament with its powers, duties, and
liabilities defined in the written law. Public corporations try to combine the public interest of
the government body and the autonomous management of the public sector.
 Top line and Bottom line of Organization

The bottom line and the top line are two of the most important figures on a company’s income statement.

The top line refers to a company's revenues or gross sales.

Companies that see a surge in top-line growth are usually experiencing an increase in sales or
revenues. There are various ways a company can grow its top line.

For example, the marketing team might launch a new ad campaign that successfully brings in customers
and increases sales by 20% over the previous quarter. The company could come out with a new
product that generates additional revenue or a company could increase prices. A company could also
increase its top line through an acquisition of another company. A strategic acquisition can lead to
greater market share, which in turn boosts top-line growth.
 Top line and Bottom line of Organization

The bottom line is a company's net income, or the "bottom" figure on a company's income statement

A company can increase its bottom line through the reduction of expenses. A
company's products could be produced using different input goods or with more efficient methods.
Decreasing wages and benefits, operating out of less expensive facilities, utilizing tax benefits, and
limiting the cost of capital are ways to increase the bottom line.

For example, a company finding a new supplier for raw materials that resulted in a cost savings of millions
of dollars would give a boost to the company's bottom line. Conversely, if a company's bottom line
shows a decrease from one period to the next, it's an indication the company has suffered a dip in
income or a surge in expenses.
 Economic Analysis of Business

Economic analysis involves assessing or examining topics or issues from an economist’s

perspective. Economic analysis is the study of economic systems. It may also be a study of a
production process or an industry. The analysis aims to determine how effectively the
economy or something within it is operating. For example, an economic analysis of a
company focuses mainly on how much profit it is making.

Template.net:-
Economic analysis involves comparing at least two alternatives in achieving, for example, a
certain goal under specific constraints and assumptions.

FBSMY.com:-
“Economic is the study of economic systems or a production process. The aim is to determine
whether it operates effectively and how profitable it is.”
 Economic analysis – methods

Cost/benefit analysis

This type of economic analysis tries to determine a project’s feasibility. Some people may refer to it as
a feasibility study.

Cost/Effectiveness

In this type of analysis, we weigh a project’s effectiveness against its price. In this case, however, a low
cost does not necessarily mean superior effectiveness.
 Economic Prudence in Business

Prudence is defined as the act of being careful, often with money. An example of prudence is checking
your bank account before you spend money. noun.

Good judgment or wisdom gained from experience and knowledge, expressed in a realistic and frugal
attitude. Prudence, however, is not the same as grave caution or wariness concerned only with
preserving the status quo. If there is no real cause for fear, prudence lies in avoiding excessive
deliberations and in the readiness to sacrifice today's gain for tomorrow's greater gain.
 Economic Prudence in Business

Four steps to financial prudence in Covid times

• Focus on boosting your cash reserves

• Top up your insurance plans
• Servicing home loan
• Invest sensibly
 Summary

1. Discuss about the syllabus and its course outcome

2. Basics of economics
3. Types of economics
4. Business structure

5. Sole proprietorship

6. Partnership

7. Joint Stock :- a) Private limited company b) Public limited company

8. Co-operative societies

9. Public corporation

10. Top and bottom line of organization

 Summary

10. Economic analysis of Business.

11. Economic Prudence in Business