CBSE Study Material for Student

BUSINESS ADMINISTRATION
Class XI

Material Developed by –
Prof. ( Dr.) Alok Kumar Chakrawal , Department of Commerce & Business Administration, Saurashtra University, Rajkot
Dr. Ashu Lamba Gabrani,Assistant Professor at School of Business Studies,Vivekananda institute of Professional
studies
Mrs. Archana Koul, Principal DAV Centenary Public School, Chander Nagar, Ghaziabad .

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To understand the basic  Meaning of Economic  Explain the meaning of Interactive classroom
concept of Human & Non Economic Economic & Non teaching through lecture &
Activities & Business Activities Economic Activities. examples.
 Meaning of Business,  Define Business.
Employment &  List out characteristics
Profession. of Business.
 Concept of Business  Describe the role of
 Meaning & Definition profit in Business.
of Business.
 Characteristic of
Business.
 Scope of Business

To understand the  Types of Business  Enumerate the types  Interactive Lecture

classification of Business Operations. of Business Activity – Prepare a chart
Operations. Operations/activities on types of Business
Operations.

To know the meaning &  Functions of  Explain the various  Interactive Lecture
concept of Management of Management of strategic functions with discussion &
Business Operations. Business Operations. involved in examples.
Management of
Business Operations.

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A Case Study
Sania was a very talented girl who loved to do flower arrangements. On any Birthday or party or occasion
she would always gift her near & dear ones with a bouquet made by her. Seeing her interest & creativity
Sania’s mother advised her to contact a florist and sell her flower arrangements to that particular shop.
She approached many local florists but all denied saying that they don’t want any help. Dejected, she came
back & thought of a brilliant idea of starting her own florist outlet. In 2010 she started her own outlet at
home. Her flower arrangements were widely appreciated. Slowly and steadily she started getting orders
from hotels, for marriages, parties, functions, retail outlets, online orders. The orders picked up faster than
she could even dream of. Now she needed more money to buy flowers & other accessories. She borrowed
money from bank to cover all her expenses. In 2014 her sales increased manifold (almost 60%) from 2010.
Her success story is an example for all those people who have concept in mind & want to earn.

1.1 Human Activities

After reading Sania’s story it is clear that all human beings have different needs and to satisfy these
needs they perform any activity. Such activities are termed as ‘Human activities’. It can be divided
into 2 categories :—
(i) Economic Activities :- Those activities which aim at earning a livelihood are termed as
Economic Activities. It is concerned with proper allocation & use of Economic resources. For
example -
 Doctor, Lawyer, teacher working in their profession.
 Working in a factory or office.
 Production, distribution & consumption of goods & services.
Economic Activities can further be classified into 4 categories:-
1) Business
2) Profession
3) Employment
4) Services
(ii) Non-Economic Activities:- Activities undertaken to satisfy emotional, social and
psychological needs are termed as Non Economic Activities. They cannot be measured in
monetary terms. For example –
 Businessman working in old age homes on Sunday.
 Teacher teaching his/her own child.

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1.2 Types of Economic Activities : -

Economic Activities can be further classified into 4 types –
1. Business :- Business refers to those economic activities which are connected with
production, purchase, sale or distribution of goods or services with the motive of earning
profit. For example – Manufacturing, wholesale, shop owner etc.

2. Profession :- Profession refers to that economic activity which requires specialized knowledge &
skill to render service to various section of society. The individuals engaged in this activity are
called professionals. For example – Lawyer, Doctor, Painter etc.

3. Employment :- Employment refers to that economic activity where people work for others &
get some remuneration in return (like wages, salaries). People who are working are called
employees & who hire them for jobs are called employers. For example – Working in offices,
factories, school, shops etc.

4. Services :- It includes all economic activities whose output is not physical product or
manufacturing. It is generally consumed at the time it is produced. It provides convenience,
recreation, comfort for example – Health services, security services, consulting, airways,
hospitality etc.

1.3 Concept & Meaning of Business

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Business is an economic activity which is concerned with production, purchase, sale, distribution of
goods and services. It is done on regular basis to earn profit. The word business has been derived
from the word ‘BUSY’ hence business occupies the individuals and people to earn a livelihood.
Business is a wide term. It has become an integral part of society in modern times. Its scope is not
limited to only earning profits but also innovating new products or services & to see that it reaches
its prospective customers keeping their preferences in mind.

1.4 Definition of Business : The term business has been defined differently by many scholars.

“Business may be defined as human activity directed towards producing or acquiring wealth
through buying and selling goods.” — Lewis H. Haney

“Business is an institution organized and operated to provide goods and services to society
under the incentive of private gain.” — B.O. Wheeler

1.5 Characteristics of Business :

Business is an important economic activity. It possesses various characteristics which makes it
distinct from other activities.
i) : Business is an economic activity undertaken to earn money for
livelihood. It satisfies human needs through production, Sale or distribution of goods & services.
Example : Sale of toys in the shop.
ii) : For any business it is essential that there is
sale or exchange of goods & services for money worth. Goods purchased or produced for
personal use cannot be termed as Business Activity. For Example : The owner of the toy shop
sells his toys to the customer, it is a business activity, but if he gives a toy from his shop to his
child then its not business activity as he is not getting any money in return.
iii) : Business involves exchange of goods & services on regular basis. One
single transaction of sale or purchase cannot be termed as business. For example : A person
sells his old air conditioner and buys a new one is not a business activity. But if he continuously
deals in sale and purchase of air conditioner, it will be considered as business activity.
iv) : Business includes all the activities
concerned with manufacturing goods, purchasing goods or providing services like
transportation, banking for satisfaction of human needs. For Example : Purchasing cloth from
the manufacturer and manufacturing shirts to sell in the market.
v) : Profit earning is one of the main motive of a business activity. Earning profit
is essential for survival of the business. Businessman is always thinking to maximize his revenue
(profit) by increasing his sales or minimizing his costs. For example: A property dealer purchases
a home at Rs. `85 lakh and sells for ` 95 lakh. ` 10 lakh is his profit in this transaction which he
will use in expansion of his business.
vi) : Today’s Market is ‘Consumer Oriented’ i.e. Consumer is the king
in the market. So businessman has to satisfy his consumers in all respects to run his business
successfully. For example : Reliance industries provide consumer oriented service i.e. to provide
good service to the consumers is their priority.

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vii) : The businessman starts his business with profit motive but he is
not sure whether he will earn profits or incur losses. Every product depends on the efforts of
the businessman, market conditions, demands of the product, political scenario etc. For
example : Sahara airlines started with a boom, earning profits every year. But due to unrealistic
policies and programs it started incurring heavy losses & finally had to wind up its business.
viii) : All Business activities carry some element of risk. Risks can be caused by
factors like change in technology, fashion, increased competition, theft, fire etc. Nokia which
was once a leading mobile company is now facing a tough competition from Samsung and Apple
to survive in the market.

1.6 Scope of Business

Profit is the main objective of every economic activity. According To Peter F Drucker “A business
must achieve sufficient profits to cover the risk of economic activity & thus to avoid loss” Profit
plays a very vital role in the Business. It is the return, which every businessman expects to get,
on what he has invested in business.

SCOPE

Survival Growth & Reward for risk Measure of Goodwill and

Expansion bearing efficiency reputation

The following reasons justify the role of profit in the business :

1) – The entrepreneurs engage in business activities to earn profits as a means of
livelihood. Everyone has to satisfy his needs & hence no one is expected to undertake
business activity without any earnings. Business can survive only when there are adequate
profits.
2) – Profit not only provides funds for growth & expansion but also
motivates businessman to think of diversification & re-invest for expansion.
3) – Profit motivates businessman to take risks, higher the
risk, higher is the possibility of earning more profits. In the eventuality of loss due to any
risk, he does not stop the business. He runs the business assuming profits in future.
4) – Profit is considered as an index for judging the performance of
the business enterprise if profits are higher it indicates the efficiency of management.
5) – Higher profitability builds reputation of the business.
Goodwill creates market standing which helps to raise loans and obtain credit for further
expansion.

Conclusion
The scope of business should not be restricted to earning profits only. Profit is extremely
important for any business enterprise but not the sole objective.

2.1 Types of Business Operations

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The spectrum of business is very wide and covers various forms of Business Operations which aim
at facilitating the production & distribution of goods & services. The business operations can be broadly
classified on the basis of ownership, scale of business or nature of business.

Types of Business Operations

On the basis of scale of operations On the basis of ownership On the basis of nature of activities
Small scale Sole Proprietorship
Medium scale Partnership
Large scale Cooperative societies Industry Commerce
Joint Hindu Family Manufacturing Trade
Joint Stock Company Extractive Auxiliaries
Genetic to Trade
Construction (services)
2.1.1 On the basis of scale of operation
1. Small Scale Business – A small scale business is an undertaking in which the investment in
fixed assets, plant & machinery, whether held on ownership term or on lease, should be more than 25
lakhs, but should not exceed Rs. 5 crore in case of marketing sector. In case of service sector the
investment can be more than 10 lakhs but less less than 2 crores. However this investment limit is varied
by the Government from time to time. Registration of such business is not compulsory but if registered
with Commissioner of Industries then they can avail Financial Assistance. There is easy Mobilization of
Capital, Entrepreneurial Skill and other Sources Small Scale Business are a big support to Medium Scale &
Large Scale Units. A Small Scale unit is generally a Sole-Proprietorship or may be Partnership. The area of
operation is generally localized catering to local demand. These units are mostly Labour Intensive with
Smaller Capital Investment. For Example – Chemicals, Shoes, Bicycles, Readymade Garments, Consumable
Goods, Sports Goods, Plastic Products, Leather Products, Processed Food, Spices .

2. Medium Scale Organisation – Medium scale business is an undertaking in which the investment
in fixed assets, plant & machinery should be more than 5 crore but not to exceed 10 crore in case of
manufacturing sector. But in case of service sector investment can be minimum 2 crore & maximum limit is
Rs. 5 crore. The business is mostly privately owned but managed by owner & some professionals in key
roles. Limited sources of capital, limited customer base generally catering to local & region at large.
Technologically advanced as compared to small scale business organization. They can employ more people
in the business if its expanding. Medium scale business typically results from slow & steady growth of small
business. As the organization earns more revenue, it sets aside capital for building, equipment more
employees thus bridging the gap between small business & large corporations.

The Government of India now regulates the small scale & medium scale business under MSMEs
(Micro Small & Medium Enterprises Act 2006). It provides a legal framework & defines the specific roles of
the related institutions.

3. Large Scale Business Organisation – The industries or organizations with fixed assets of more
than 10 crore are called large scale organizations. These could be manufacturing units or other which use
both indigenous & imported technologies. All capital goods and consumer goods can can be produced
through large scale industries. Mostly the investment is done through Public Investors. The units are more
capital intensive & technologically advanced. These Business Organization have Structured Governance,

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Professional Management, Diverse Markets, Wide range of Funding Rources. Companies like Reliance, Tata
Group, Infosys Technology, Mahindra Group etc. all the large scale business organizations.

2.1.2 On the basis of Ownership

1. Sole Proprietorship – Sole Proprietorship refer to a form of business organization which is
owned, managed and controlled by an individual. Here sole means ‘only’ and the proprietor mean ‘owner.’
The Proprietor bears all the risks, invests capital and enjoys all the profits. He takes all the decision,
employs staff and procures all the resources required to run his business. He has the sole right to control
the business operations. This business is carried out on small scale where customers demand personalized
services.

2. Partnership – Partnership is that form of business organization in which two or more

persons agree to pursue a lawful business for the purpose of earning profit. The persons who for
partnership are called ‘partners’ and the business is conducted with the name of the ‘firm’. The capital is
invested by the partners in an agreed ratio and even the profits and losses are divided as decided in
partnership deed. The minimum no. of partners can be 2 and maximum can be 20 in case of ordinary
business and 10 in case of banking business.

3. Hindu undivided family Business – Hindu undivided family or Joint Hindu Family business is a
special type of business organization which is governed by the provisions of Hindu Succession Act, 1956
under Hindu Law. The business is owned and carried on by the members of Hindu Undivided Family. The
property is managed and held by the senior male member as the Head of the family known as ‘Karta’. The
basis of membership in the business is birth in a family and 3 successive male generations can be members
of the business. Now even women have been given equal right in inheritance of ancestral property
according to Hindu Succession (Amendment) Bill 2004.

4. Cooperative Societies – Cooperative Society is a voluntary association of persons who join

together for mutual help, economic & social interests. The registration of cooperative society is
compulsory under the Cooperative Societies Act, 1912. The capital of cooperative societies is raised from
its members through issue of shares. The organization is established primarily with a view to render service
to its members and not earn profits. There are various types of Cooperation Societies like Housing
Cooperative Societies, Consumer’s Cooperative Societies, Credit Cooperative Societies etc.
5. Joint Stock Company – It is considered to be the most suitable form of organization for
operating business activities on large scale. “A Company is an artificial person created by law having a
separate entity with perpetual succession and common seal”. It is governed by the Companies Act, 1956
and without registration no company can come into existence. The shareholder are the owners of the
company. The Board of directors are elected as representatives who manage the affairs of the company on
behalf of the members. It has a separate legal entity. Company can be classified as Private Company and
Public Company.

The minimum number of members to start a Private Company is 2 and maximum is 50 whereas Public
Company has to have 7 minimum number of members and no limit for maximum.

2.1.3 On the basis of nature of a activities

1. Industries - The activities of extraction, production, processing, Conversion of products
are described as industry. Industry produces both Consumer goods and Producers goods For Example -
Automobile Industry, Electronic Industry, Steel Industry etc.

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The industries can be of following types –

1) Extractive Industries – These industries extract products from natural sources like earth, water, air
etc. The products of these industries are used by manufacturing & construction industry. For
example : farming, mining, fishing, lumbering etc.
2) Genetic Industries – These industries are engaged in breeding plants & animals for their use in
further reproduction. For example – Plant in nurseries, horticulture, poultry farms etc.
3) Manufacturing Industries – These industries are concerned with the conversion & transformation of
raw materials and semi finished products into finished products. Articles of daily use are mostly
produced by manufacturing units. For example – Oil, Cars, Fertilizers, Medicines, Textile, Television,
Paint etc.
4) Construction Industries – These industries are engaged in construction of buildings, dams, roads,
canals etc. These industries create the basic infrastructure for development. For example – DLF
Construction Company.

2. Commerce
The term commerce refers to all those activities that facilitate the transfer of goods & services from
producer to consumers. Facilitating services like transportation, warehousing, insurance, banking,
advertising, packaging help the smooth & easy transfer of goods from manufacturer to end user.
Commerce can be divided into 2 broad categories :
(i) Trade (ii) Auxiliaries to trade

Trade – Trade is that branch of commerce which is concerned with the sale, transfer or exchange of
goods & services. All the commercial services like transportation, storage, insurance, banking etc.
revolve around trade. It is nucleus of all commercial activities. Trade is of following types :
a) Internal Trade – It consists of buying & selling of goods within the boundaries of a country. It is
also known as domestic trade or inland trade. It can be further classified into
i) Wholesale Trade – It refers to sale of goods of specific variety in large quantities. They buy
in bulk from manufacturer and then sell in small quantities to the retailers. For Examples –
Biscuits manufactured by Parle-G is bought in bulk by the distributors all over the country.
ii) Retail Trade – It refers to purchase of goods in small quantities from wholesaler and finally
their sale to final consumers. For Example – Parle-G Biscuits sold by shop keepers in the market
to consumers.

b) External Trade – It consists of the exchange of goods & service between nations. It is also
known as Foreign Trade or International Trade. It involves use of foreign currency &
transportation like shipping & airways. It can be further classified into
i) Import – Purchasing goods from Foreign country for home consumption. For Examples –
LED lights are purchased from China for domestic use.
ii) Export – Selling domestic product in foreign countries. For Examples – Rice is exported to
other countries from India.
iii) Entreport - Import of foreign goods with a view to re-export them.

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Auxiliaries to Trade
Commerce includes several auxiliary services which help in exchange of goods & services. Following are the
aids to trade :-
i) Transportation – It performs the function of carrying goods from producers to wholesalers,
retailers and finally consumers. It creates place utility and connect the world efficiently.
ii) Warehousing – It performs the function of storing the goods both for manufacturers & traders
till they decide to sell the goods. It creates time utility.
iii) Insurance – It provides a cover against loss of goods in the process of transit or storage. The
producers & traders can get their products insured & avoid risk of loss due to fire, theft etc. It
removes hindrance of risk.
iv) Banking – Banks offer credit facility to needy producers at reasonable interest. Banks facilitate
in easy, safe & quick transfer of money. It removes hindrance of finance.
v) Advertising – It helps in awareness creation & idea formation. It helps to highlight – distinctive
features & utility of different products. The customer can choose the product according to their
needs & obtain better value for money. It removes hindrance of information.

3.1 Management of Business Operations

The types of Business Operations cannot be managed if the entrepreneur doesn’t assemble or
coordinate various factors of production like human resources, material, money, machines to keep the
enterprise running. The ultimate success of any business depends upon how the business operations are
being managed by the entrepreneur. Different business activities require different kind of entrepreneurial
skill.

The term ‘Operations’ describe the processes and resources that we use to produce the highest quality
products or services as efficiently as possible.

Business operations typically include four key areas :

 Location : Where you do business – Physically and online.
 Equipment : The tools you need to get the job done.
 Labour : The human side of business operations.
 Process : The way you get business done, including your systems for quality control and improvement.

The importance of each of these areas depends on the nature of the company. For example, physical
location is critical to a retail outlet that lives by walk-in-customers, while physical location may not matter
a bit to an Internet-based company.

Every business organization regardless of the company, nature of its business, size or type or location have
to perform a few strategic activities so that the Business process or workflow of the organization is smooth
and it flows uninterrupted. Each strategic activity is highly inter related and must be consistent with the
other. The following major activities are involved in management of Business operations -

1. Strategic planning – Planning is an important and basic requirement of any business. Strategic
Planning is a broad plan for bringing the organization from its present position to the desired position in

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