BUSINESS ORGANIZATION

AND SYSTEMS
BBA I SEMESTER I
CHAPTER I
 Business Meaning: any activity which results in profit
can be termed as business. This profit making activity
can be in form of trade or production or distribution.
 Definition: business may be defined as an activity
which is continuously carried for economic gain, with
the associated risk in producing and selling goods and
services.
 The chief characteristics of business are:
Continuous activity, trading activity, objective
to make profit, should have an element of risk,
activity should be concerned with physical
products or services rendered for economic gain.
Concept of business
 Traditional concept: Profit Maximization
 Today's concept:
creation of customers
innovative new products
marketing
customer satisfaction
customer retention
social responsibility
values,viability,public visisbility
Scope of business
 Business involves wide range of activities which can be
divided into
1. Industry: heavy industry, construction, machine tools,

genetic, agro based, production of consumer goods like

food products, health care, FMCG etc.
2. Agriculture

3. Commerce: trading wholesale and retail, export import.

4. Services:banking,insurance,transport,advertising,

salesmanship,healthcare,legal,educational,entertainme
nt, hospitality,personal care.
Industry definition: “A group of firms of different sizes
producing identical product.”
Importance of business
 Creates wealth,better standard of living.
 Satisfaction of wants and requirements.
 Remove cultural and political diffrences
between nations
 Continuous flow of goods and services
 Employment
 Utilisation of human skills and resources.
 Industries provide better infrastructure
 Contribute to national income and GDP
Meaning and scope of
commerce
 Commerce is connecting link between primary producers
and ultimate consumers
 It helps in delivering right goods to right person at right time
and at right place.
 It is dynamic process which is ever changing, ever moving,
ever developing
 Commerce is an integrated activity having many processes
and activities like trade ,transport, banking ,insurance ,agency
services etc.
 These sub activities help in removing the hindrances of person,
place, time risk and finance.
 Definition: Thus commercial activity involves buying and
selling of goods,the axchange of commodities and the
distribution of finished products.
 Commerce is a dynamic activity ,major sub
activities of commerce are:
1. Trade: it mainly involves buying and selling

activities. A producer of goods cannot reach

millions of consumers personally to sell his
product therefore he takes help of
middleman like wholesalers and retailers.
Thus trade involves direct and indirect
selling and buying activites.Trade can be of
two types inland or home trade and foreign
trade.
2.Banks:banks provide necessary fixed
and working capital for running the
trade.
They provide short term and long term
finance .
accepting deposits from the public at
lower rates of interest and advancing
the same to the needy people at a
higher rate of interest is the bankers
gain.
3. Transport: the producers and consumers are
distant, this is place hindrance in order to
remove this transport activity is developed.
Movement of goods from one place to another
is possible through various modes of transport
like air, water, roadways, railways.
4.Insurance:The produced goods need to be
kept in safe custody they have to be protected
from fire, theft and other damages .Insurance
covers the risk hindrance of business
4.Agency services: this refers to the
services rendered by individuals for the
smooth conduct of business. There are
middlemen or commission agents
Evolution of business
1.Hunting and fishing stage: wants and need were
few, did not require clothes, ate flesh of animals
and fruits, lived in caves, moved from one place to
another, used stones as weapons for hunting.
2. Pastoral stage: man started rearing domestic
animals like cattle, sheep, goats etc. Animals gave
him food, he fed them with grass.
3.Agricultural stage: people started settling near
grasslands, concept of village economy developed.
Agriculture became primary activity , concept of
private property came in. There was division of
labour and several handicrafts emerged.
4. domestic stage: population increased, development
of villages, middle man and merchants emerged who
provided raw material to craftsmen. Merchants sold
the products to ultimate consumers.
5.Barter stage : exchange of goods for goods.
problems: need for double co-incidence, splitting of
goods was difficult, there was no common value of
measure, goods could not be stored.
6.Money economy: money was introduced, commodities
were introduced as money. Metals like copper,
bronze,silver,gold were used for manufacturing coins
of different values then proper money was introduced.
7. Town economy: development of towns,
market, large scale transactions took place,
manufacturing began.
8.Factory stage: demand of goods and services
increased. To meet this factory system was
introduced. Industrial revolution started in
England which spread to other countries.
Variety of goods were produced in large scale.
Two major class of people emerged the rich or
capitalist and poor or labour class.
International market became open.
INDUSTRIAL REVOLUTION
 Period from 1765 to 1785
 Inventions took place
 Increase in quality and quantity of products.
 Inventions like cotton gin, water frame, power loom,
spinning jenny in textile industries took place
 Cottage industries became obsolete.
 Bad working conditions.
 Unions formed.
 Mass production, easy availability, reduced prices of
goods.
 Factory system- mechanization, use of tools machinery.
Effects of industrial
revolution:
 Good effects:
1. Increase in volume

2. Improved quality

3. Less per unit cost

4. Minimum human efforts

5. Continuous method of production

6. Specialization

7. Infrastructure development

8. Increased plant capacity

9. Increased standard of living

10. Contribution to national income , GDP

11. Increased productivity.

 Bad effects:
1. Unemployment –human efforts replaced by mechanical

devices
2. Transfer of skill and intelligence from man to machine.

3. Bad working conditions, accidents

4. Pollution

5. Shift of population from rural to urban areas.

6. Huge financial investments in machines

7. Trade cycle

8. Emergence of capitalism

9. Unionism

10. Complex labour mangement relations.

Globalization
 Process of international integration
 Process of combination of economic,
technological, socio-cultural and political
forces.
 It happens through international trade,
FDI, capital flow, migration, flow of
technology.
Effects of globalization
 Industrial-wide range of foreign products, better quality
 Financial-increased FDI, foreign exchange
 Economic-
 Political-
 Informational-increase in information flow from remote areas
because of technological advances.
 Cultural-cultural diffusion
 Ecological- envt changes, global warming, climate change
 Social-greater international travel and tourism, immigration
 Technical-telecommunication, Internet, satellites, wireless
telephones, fiber optic cables
 Legal-international laws, copyrights, patents, world trade
agreements, global crime fighting, international criminal court.
Advantages of globalization:
 Increased free trade between nations
 Increased investments of developed nations in developing
nations
 Corporations have Greater flexibility to operate across
boarders.
 Increased flow of communication and vital information
 Greater ease of speed of transportation for goods and
people
 Reduction in cultural barriers
 Greater interdependence of nation-states
 Env protection awareness increased in developed nation
 Consumers have wide variety of goods at cheaper rate
 Go for volumes and not for margins. A firm today
has to achieve economics of scale and scope in
Production, Marketing and almost in its entire
operations. They should not only produce for local
markets but hunt for market opportunities in
different countries. Overseas marketing is a high
cost , high risk alternative but Indian firms have to
understand that there is no other road. N the
domestic markets, they will have to look at rural
markets and the ways to penetrate them through
a change in Packaging or change in price
structure.
 Innovation : Innovation is a creative process, it
encourages creative thinking. It is both outward
and inward looking simultaneously. Today the
pressure for innovation on a continuing basis is
substantially high. With the technology and
customers changing rapidly there is no other way
but to be alive to these changes and continuously
innovate.
 Entrepreneurial Spirit : Entrepreneurship is a
driving force of all change and growth.
Entrepreneurial organizations are far more
competitive, they are value creators.
 Strategic Leadership : Jack Welch, Bill Gates,
Narayana Murthy are all strategic and visionary
leaders. Each of them had a long term vision of
creating future and changing the paradigms in
the industry. They dreamt of taking the
organization to the top in the rank, not only in
their own industry but worldwide.
 Organizational Culture and Climate: Organization
should believe in empowering people,
continuously learning, building leadership and
teamwork. All the will bring healthy atmosphere.
Disadvantages
 Economic disruption in one country effects all nations
 Increased problems to preserve cultural heritage
 War between countries for short of resources
 Negative effects on culture and attitude
 Economic depression in one country can trigger
adverse reaction across the globe
 Companies face much greater competition. This can
put smaller companies, at a disadvantage as they do
not have resources to compete at global scale
 Human, animal and plant diseases can spread more
quickly through globalization
MNC
 Multinational corporation or transnational corporation is a corporation
enterprise that manages production or delivers services in more than one
country.
 They play an important role in globalization.

Features of MNC s:
1. Activities are spread over large no of countries

2. They are managed on centralized authority basis

3. They expand by opening new units or taking over existing company

4. They undertake both manufacturing and marketing activities

5. They have dominated international trade and result in economic gains

6. They provide financial, technical, managerial, and other assistance to

developing nations
7. They are quality and cost conscious

8. They posses well developed research and development department.

9. They can be state owned or pvt

Advantages of MNCs
 Economic growth:
 Technology transfer:
 Manufacturing activities:
 Market expansion:
 Professionalism
 Foreign exchange
Threats of MNCs
1. Threat of transfer of outdated technology,
technology which is useless, discarded by
country of origin is transferred to host countries.
2. MNCs introduce their culture and pollute the
local culture.
3. MNCs take undue interest in political affairs
which is not liked by developing countries
4. Drain the hard earned foreign exchange
5. MNCs want to work on low risk, high profit
projects for investments ,they do not look for
the progress of developing countries.
Globalization and challenges for Indian
business in new millennium

 Customer centricism: giving importance to customers,

consider their psychology, emotions, concerns and
problems. It is involved in market segmentation coming
up with multiple brands for different markets ,doing
customer surveys and concentrating on customer
database and customer relationship management.
 Products/services quality:-Today people demand
world class quality at affordable price. To have best
quality people work on six sigma levels meaning
virtually a zero defect product. Organizations encourage
quality at every facet like recruiting, supplier selection,
technology selection, manufacturing process marketing
and sales.
Globalization and challenges for Indian
business in new millennium

 Go for volumes not for margins: Firms today have to

achieve economies of scale and scope in production,
marketing and almost all operations. They should not only
produce for local markets but tap foreign markets . Overseas
marketing requires high cost and high risk but Indian firms
have to understand that there is no other road. In the
domestic market they have to penetrate the rural market
through a change in packaging and price structure.
 Innovation: innovation is a creative process which
encourages creative thinking and organizational leadership
.innovation on continuing basis is important. With the
technology and customers changing rapidly, there is no
other way than to be alive to these changes and
continuously innovate.
Globalization and challenges for Indian
business in new millennium

 Entrepreneurial Spirit: Entrepreneurship is a driving

force of all change and growth. Entrepreneurial
organizations are far more competitive and vale
creators. Entrepreneurship and Entrepreneurial Spirit
in the organization can make an organization
competitive.
 Strategic Leadership: Jack Welch, Bill Gate, Narayan
Murthy are all strategic and visionary leaders. Each of
them had a long term vision for creating future and
changing the paradigms in the industry. They dreamt
of taking the organization to the top of the rank not
only in their own industry but worldwide.
Globalization and challenges for Indian
business in new millennium

 Organization Culture and Climate:

Organization should empower people,
encourage people to continuously learn,
should develop leadership and
teamwork.
RECENT TRENDS IN
BUSINESS
 MERGERS
 ACQUISITIONS
 FRANCHISING
 BPO AND KPO
 NETWORKING
 E COMMERCE
 INTELLECTUAL PROPERTY RIGHTS
Mergers and acquisitions
Introduction:
 It is a growth and expansion strategy adopted by

firms
 Growth can be internal or external.

 Internal growth involves acquiring new assets,

replacement of old technology, or establishing new

lines of products.
 External expansion involves mergers , acquisitions,

amalgamations, takeovers.
 They have become popular because of enhanced

competition , breaking trade barriers, free flow of

capital& golbalisation.
Mergers or amalgamations
Two forms:
 Merger through absorption:

combination of 2 or more companies into

an existing company. All companies
except one lose their identity. In such
merger.
 Merger through consolidation: a

combination of two or more companies

into new company. Here all companies
are legally dissolved and a new entity is
created.
Types of mergers
3 major types of mergers are:
 Horizontal mergers: same product line

 Vertical mergers: different stages of

production process
 Backward

 forward

 Conglomerate mergers: completely

different products
Features of mergers
 Combination of 2 or more companies
 Formation of ne company
 Shareholders are same
 Assets and liabilities are also combined
advantages
 Companies growth
 Economies of scale
 Technology transfer
 Financial stability
 Diversify risk
 Can compete in international market
 Greater investment in research and development
 Increase market coverage
 Less competition
 Increase managerial efficiency, innovation ,creativity
disadvantages
 Integration difficulties
 Cultural diffrences
 Management style,relationship
 Too much diversification
 Too large
Example of merger:Exxon-Mobil

 Big oil got even bigger in 1999, when Exxon and Mobil signed a $81
billion agreement to merge and form Exxon Mobil. Not only did Exxon
Mobil become the largest company in the world, it reunited its 19th
century former selves, John D. Rockefeller’s Standard Oil Company of
New Jersey (Exxon) and Standard Oil Company of New York (Mobil). The
merger was so big, in fact, that the FTC required a massive
restructuring of many of Exxon & Mobil’s gas stations, in order to avoid
outright monopolization (despite the FTC’s 4-0 approval of the merger).

ExxonMobil remains the strongest leader in the oil market, with a huge
hold on the international market and dramatic earnings. In 2008,
ExxonMobil occupied all ten spots in the “Top Ten Corporate Quarterly
Earnings” (earning more than $11 billion in one quarter) and it remains
one of the world’s largest publicly held company (second only to
Walmart).
Acquisitions and takeovers
 Defined as acquiring effective control by
one companay over assets and
mangement of another company without
any combination of companies.
 When combination is willful,friendly it is
called as acquisition
 When it is forced unwilling it is called as
takeover
Features of acquisition
 Takeover of firm
 Elimination of ecess workforce
 New name
 Transfer of ownership ie assets and liabilities.

Advantages and disadvantages are same

as of mergers
Franchising
 Franchising is authorization to sell companies products
 Terms used:
 Franchisee: is a person with franchise or authority to
sell
 Franchiser: is the person who gives the authority. He
can be manufacturer , wholesaler , or service provider.
 Franchising: is the process of marketing and
distribution where franchiser gives permission to
franchisee to use his name , symbol , special
ingredients , or a store layout.He pays fees in the form
of royalties to the franchiser.
Benefits/advantages:
Disadvantages to
franchisees
 Initial investment is high
 Has to pay one time fees or royalty, even
monthly payments even if sales are not
good.
 Little freedom
 Threat from other franchisee in vicinity, who
may cross his own territory and encroach
other franchisee's territory.
 Conflicts
 Exist clause is not in favor of franchisee.
examples
 Food products: Mac Donald's
,Dominos ,Pizza hut, CCD, Baskin
Robbins, subway
 Courier service: DHL, DTDC, First flight,
Fed Ex
 Telephone services: BSNL, RELIENCE,
AIRTEL, IDEA
 Education: NIIT, Aptech, CMC, CMS, Kid
Zee
 Hotel Chains: Holiday Inn, ITC group,
Oberoi group of hotels.
 What is BPO?
 Business process outsourcing (BPO) is the
contracting of a specific business task, such
as human resources and customer service,
to a third-party service provider.
 This allows companies to focus on their
core business processes.
 BPO is implemented as a cost-saving
measure for tasks that a company requires.
 BPO helps and organization to concentrate
on its core competencies, improve
efficiency, reduce cost and improve
 BPO Categories

 It is often divided into two categories:

- Back Office Outsourcing which
includes internal business functions such
as billing or purchasing.
- Front Office Outsourcing which
includes customer-related services such
as marketing or tech support.
 Key Terms
 Key Terms:
- Offshore Outsourcing is BPO that is
contracted outside a company's own
country.
- Nearshore Outsourcing is BPO that is
contracted to a company's neighboring
country.
- Onshore Outsourcing is BPO that is
contracted with the company's own
country.
 Capabilities: Why go to
India?
 Language
 Major attraction for Multinationals
 Advantage over competitors
 Proficiency in English
 Educated Employees
 Large number of qualified workers
 Proven to be the best in the IT and
computer software fields
 Strong technical skills
 Eagerness to engage clients
 Produce around 100,000 engineers annually
 Capabilities: Why go to
India?
 Infrastructure
 Improvements have led to increasing
success
 Telecom facilities
 Power sector

 Government
 Realize potential for economic development
 Favorable policies have turned India into a
BPO/IT hub.
 Examples: Investment promotion, telecom
policy, IT Act
 Rules to Follow: What to Outsource

 Processes that do not add value to a

product or service.
 Highly repeated tasks with little
variation.
 Labor intensive tasks that do not require
a companies intellectual property nor
core competencies.
 Processes that will tie up large amounts
of capital in assets.
 Rules to Follow: What Not to Outsource

 Processes that incorporate your core

competencies.
 Processes that require access to
intellectual property of your company.
 Non-labor intensive tasks.
 Processes that are associated with the
image of your company.
 Rules to Follow: BPO
Guidelines
 There are many BPO providers, so
research to find the one that best suits
your needs.
 Using one provider for multiple tasks will
help streamline your BPO.
 Have some measure to check and control
the output of your BPO.
 Communicate with your BPO.
 Pros of BPO
 English Language Proficiency
 Skilled Workforce
 Lower Wages
 Flexibility in Working Hours
 Suitable Human Resources
 Large Number of Graduates
 Cons of BPO

 Poor Infrastructure
 Cultural Differences
 Internal competition for resources
 Rising labor costs
 Political and religious instability
KPO(KNOWLEDGE PROCESS
0UTSOURCING)

 Outsourcing is transfer of organization’s repeated

non-core tasks.
 Business processes outsource to achieve cost
reductions while improving service quality.
 Locations are no constraints.
 There can done in same city, state of the same
country or in another country.
 It can be across borders, i.e. offshore outsourcing.
 Telecommunications and internet allow outsourcing
to another country at lower cost.
 Takes advantages of different time zones.
 Advantage of low labor cost across countries.
 Produced in the country with low labor cost
and transported digitally to customers with
higher labor cost.
 Provides employment to hundreds and
thousand of young men and women.
 Focuses on knowledge expertise therefore
requires high-end qualifications like M.B.A,
Engineering , law medical, accountant or
other highly skilled professionals.
Types of KPO Services
 Legal Services.
 Taxation Consultancy.
 Preparing Accounting Manuals.
 Assets record keeping and verification.
 Analysis of Management Information System.
 Network Management.
 Intellectual Property Research.
 Business And Market Research.
 Training and Consultancy.
 Research And Development.
 Medical Content and Services.
 Data Mining Services.
 Decision Support Systems.
 Engineering and Design Services.
 Pharmaceutical and Biotechnology.
 Education and Publishing.
Difference Between KPO and BPO

KPO BPO

1. Process – involves high end 1. Business Processes –

processes like valuation and Marketing, Accounting, Tax
investment research, legal and processing, HR hiring etc.
insurance claims.
2. Business Expertise.
2. Focus – Knowledge expertise.
3. Do not require specialized
3. Specialization – specialized
knowledge of Accounts, Finance,
knowledge ( English and Basic
Management. Computer Skills required).
4. Driving force – knowledge 4. Process driven.
driven. 5. Transaction processing, bank
5. Activities – Online teaching, accounts, selling of insurance
patent filling, legal and insurance policies, technical support –
claims, investment research. voice and email support.
Advantages of KPO
 Save cost.
 Job opportunities in developing
countries.
 Increase in flexibility thus enhancing
organizational productivity.
 Enhances organizational effectiveness.
Networking
 Business networking is a
socioeconomic business activity by
which groups of like-minded business
people recognize, create, or act upon
business opportunities.
 Business networking can be defined as a
socio-commercial activity in which
business and professionals who share
the same wave lengths, from networks
to communicate, exchange, or share
essential information related to business.
Types of networking
 Face to face business networking:
( for conversation, discussion
information exchange)
 Online business networking – using
electronic media for business promotion,
increase their contacts, contacting
prospective business partners, going
global.
E- Commerce/ online
trading
 Electronic commerce, commonly
known as E-commerce or ecommerce,
is trading in products or services using
computer networks, such as the Internet.
 E-commerce (electronic commerce
or EC) is the buying and selling of
goods and services, or the
transmitting of funds or data, over
an electronic network, primarily the
Internet.
E- Commerce
Types of E commerce
 B2B (Business-to-Business)

 B2C (Business-to-Consumer)

 C2B (Consumer-to-Business)

 C2C (Consumer-to-Consumer)

 B2G (Business-to-Government)
Advantages and
Disadvantages
Advantages Disadvantages
 24/7/365  Technical problems
 Flexibility  Legal issues
 Faster buying and selling
 No geographic limitations
 Cyber crimes
 Low operational cost and  No guarantee of
better quality of services product quality
 No need of physical set up
 Wide range of products
 Unable to physically
 Comparative analysis feel the product
 Easy to start and manage a  Lack of Personal Touch
business.