 I welcome all the learners to KK Handic State upon University. Today we will discuss about nature and purpose of business. This is the first unit of become first semester and the name of the course is Business Organization and Business Ethics. So learners, let's start with business. What is business? Let us take the examples of a shop, a hotel, a restaurant. A shop may itself grocery, furniture, computer. A hotel provides accommodation and food. And a restaurant provides tea, coffee, snacks. All these are related to business. So you can take some other examples also like a computer shop selling computer. A furniture house selling furniture, etc. All these we term as business houses and business. So these are all business and generally we see that selling activities are involved. Means we purchase and the salesman sell that product which we need. So a business may be defined as an activity which is related to sales, purchase, production, distribution and services. So if these activities are undertaken then we can turn a particular organization as a business organization or it is a business. So sales means you have to sell something. For that we have to purchase something. This is sale and purchase. We have to produce something for purchasing for selling. You have to distribute all these goods or services among the consumers and you have to provide services. For example the hotel provides services in the form of providing accommodation, in the form of providing food, etc. So where all these activities are involved we can term it as a business. And the important aspect is that in all these activities the main aim is to earn profit. So a business involves or it connected with sales, purchase, production, distribution and services and these are aimed at or these are undertaken with the motive of earning profit. So in a word it can be termed as an economic activity. So business is an economic activity related to all these aspects that we have discussed. So what is economic activity? Economic activity that is related to production, distribution, consumption, etc. So the goods produced, these are consumed and these are distributed. So all these are termed as economic activities. The goods produced are directed towards the end consumers where consumption takes place. For that you have to distribute the goods. So economic activity related to production, distribution and consumption directed to the final consumers. And in this process the businessmen or any person involved in these activities earn an income in the form of profit, in the form of interest, etc. So this is termed as economic activity. So anybody involving in these activities like distribution for example a wholesaler or the producer, the manufacturer these activities are undertaken to sell the goods and services and these are directed to the final consumers and in this process they earn some profit and these are termed as economic activity. On that basis we can define business as an economic activity related to production, distribution, sales, etc. and these are undertaken with the motive of earning profit. So let's turn to our discussion to another topic that is features of business. So by understanding these features we can identify what is business or what is not business. First of all business is an entrepreneurial activity. So who is an entrepreneur? Entrepreneur is the person who foresee a business opportunity. We have to forecast whether there is any opportunity to start a business means for business we have to earn profit. Whether there is any opportunity to start a business venture. Then the entrepreneur takes the responsibilities of the business. He have to start the business, he have to earn profit and he have to sell the goods to the consumers. So all these involves certain responsibilities and those responsibilities are undertaken by the businessman. So he is an entrepreneur. The entrepreneur have an arc for innovation. He have to find something new. Something new have to be offered to the consumers in the face of competition. And another aspect is that the entrepreneur combines the factors of production. Factor of production are land, labour, capital and management. All these factors are combined by the entrepreneur. He takes the responsibility for the business on the basis of the opportunities identified. So entrepreneur is the person who undertakes business activities. So he can be termed as businessman but he have to be an entrepreneur means he have to look for something new always. The next feature of business is profit earning. So if there is no element of profit earning, there is no business. So if we are undertaking a business venture, our aim is to earn profit. This is one of the features. So a social function, a social activity, a religious activity is not business because there is no element of profit earning. So to be business there must be element of profit earning. The next is ricks and uncertainty. So a businessman have to face various ricks and uncertainty. We have already stated that the aim of business activity is to earn profit but in the process of earning profit, we cannot say that there will be no loss. Definitely there may be loss. So these are the ricks and the businessman have to undertake, have to perform all these activities in the face of uncertainty. So there may be loss but the entrepreneur but the businessman have to undertake these ricks and uncertainty. So business involves ricks and uncertainty. As there is certain prediction have to be done, some business activities have to be undertaken, the entrepreneur ask for innovation, new things. So there may be loss but there is an element of ricks and uncertainty always in the business. The next feature of business is continuity of transactions. Let us take an example. Suppose we have a bicycle and we have to sell it for an amount of Rs. 30,000. So I sold the bicycle and I got the amount so the transaction is over. The next day I have nothing to sell because I have only one bicycle, I have not purchased it, I have just sell it and the transaction is over. This kind of transaction is not business. To be a business transaction there must be continuity. So if a shop selling bicycle, always sell bicycle for that it purchase bicycle and the sell function continues means the transactions going on, going on, going on. So this term of transaction can be termed as business transaction. A single transaction of sale though it may be for a profit cannot be termed as business because there is no continuity. One transaction earn profit and over. This is not business. To be business that transaction must continue regularly. Then in the process you may earn profit or sometimes you may face loss. So let us go to the next feature that is creation of utility. Utility means usefulness. For example, this is the pain. This is some utility for me. I can write with this pain. Suppose somebody offers you food when you are hungry. So you have utility for that food. And suppose you are not hungry, then somebody offers food, then there is no utility for you for food. So this is utility, the usefulness of a particular product or particular service. So business creates different types of utility like form utility. Form utility means converting the raw materials to finished products. So in this process the business change the form and give another form to a particular product. This is form utility where raw materials changes form and become a finished product which can be consumed by the final consumer. Next is place utility. Place utility is created by transportation. So from the place of production where production takes place we can send the goods to the place of consumption where consumers are there. So by transportation the business creates place utility by transferring the goods. And the third one is time utility. Time utility means when goods are not required in the market, these are stored in warehouses. And when these are needed, these are offered, these are sold in the market and in this way the time utility is created by storing the goods in warehouses. And business creates all these three forms of utility. Let us discuss the next feature of business that is consumer satisfaction. Consumer satisfaction means a consumer to whom you have sold goods must be satisfied with the product or the service that you have offered. Without consumer there is no business. Who will purchase your product? So the business must satisfy all its consumers to continue its business activities in the market. Then the next one is serving social needs. The business is a part of the society. Therefore it have to serve certain social needs. It have to deliver its social responsibilities. So this is also a feature of business that business being a part of the society must discharge its social responsibilities. We will discuss this social responsibility in the last part of this session. Let us discuss the objectives of business. The objectives of business can be classified as economic objectives, human objectives and social objectives. Let us first discuss the economic objectives. Economic objectives the first point that we are going to discuss is profit earning. We have already discussed profit earning is the primary motive of every business. So this is the economic objective. If there is no profit there is no business. Because without profit a business cannot run. How the businessman will meet his expenses without profit? So the primary objective, primary economic objective of business is to earn profit. The next objective of business is production of goods. So for a business to earn profit there must be some exchange of goods and services. For this exchange of goods and services there must be production. Business must be produced in the factory which can be exchanged to the consumers. And in the process of buying and selling means in the process of exchanging the business earns profit and the final consumer gets the product. Then the third one is technological improvements. We have already discussed that a businessman is an entrepreneur. He has an art for innovation. So business always tries to find out something new. The new product, the new machinery where cost of production is lower. So this kind of innovation, this kind of technological advancement have to be brought into the business to face the competition in the market. So technological improvements, innovations these are the objectives of the business. Then we can discuss the human objectives of business. Human objectives relate to welfare of employees. Employees are part and parcel of the business. So if a business earns profit it is because of the employees that are working in that particular organization. In this process the business is also required to satisfy its employees. How a business can satisfy its employees? Besides salary or the wages, the business can offer bonus, some other allowances, a share in the profit, provision of education for the children of the employees, etc. There are different schemes through which employees can be satisfied. So that employee can feel that the business is doing something for us and will also work for the business and in this process the business earn its profit. Next is satisfaction of consumers. So business without satisfied consumers cannot run in the market. It cannot sell any product without consumers. So consumers have to be satisfied with quality goods and reasonable price. Then the next one is satisfaction of shareholders. Shareholders are the owners of the business. These persons have invested money in the business and it is the responsibility of the business to give a fair return in the form of dividend to the shareholders. So business must give fair return to the shareholders and this is one of the objectives of business. Then we can discuss here the social objectives of business. Number one supply quality goods. A business have to supply, have to produce standard quality goods. A business have to produce the quality goods which will satisfy the need of the consumers. Without good quality products the business cannot run in the long term. At the same time it have to charge reasonable price from the consumers. The economic aim of the business is to earn profit but earning profit is not permitted by surging exorbitant prices for the products. So the pricing strategy must be reasonable so that business can earn profit but at the same time it can serve the social objectives by keeping the price at a reasonable level. Then cooperation with the government like paying taxes then meeting all the obligations required by the regulatory authorities etc. So these are the different objectives that we have discussed and these objectives have to be attained by a business organization to be successful in the competitive market. So let us turn to another aspect of business. That is the factors that we need to consider before starting a business. Suppose you are going to start a business in that case you have to consider certain factors that need due consideration otherwise the business may suffer loss or business have to close down in the future but we have discussed already in the features that continuity of transaction is very much important to term it as a business and profit earning is the main motive. So let us start a discussion on the factors that we need to consider before starting a business. 1. Availability of raw materials So if you can locate your factory, your manufacturing unit in a place nearby to raw materials that will be beneficial for you. For example, limestone is available in Meghalaya in a very large quantity and if you have noticed most of the cement factories are located in Meghalaya because of the availability of raw materials. Therefore the cost of raw materials is minimum where your factory is located nearby places of where raw materials are available. Then transportation facility whether almost of transportation is available or not it may be road, it may be water, air, etc. if these facilities are available then you can locate you can start a particular business in that particular place so that you can avail the transportation facilities at minimum cost. 2. Communication facilities These facilities must also be available because you have to communicate at a very high speed nowadays. Internet services, mobile services must be there in that particular place where you want to start a business. 3. Financing facilities Finance is the lifeblood of business. Without finance you cannot run your business. So you must see whether financing facilities like banking and other institutions which provide long term finance as well as short term finance are available or not. 4. Insurance facilities This is another important aspect that you have to consider before starting a business. We have already discussed that business always faces certain risks and uncertainties. To cover those risks we have to ensure our business its machines, its products, etc. So insurance facilities must be available there. 5. Warehousing facilities Warehouse or go down is required to store the goods. It may be raw materials, it may be finished products you have to store because at a particular point of time there may not be demand in the market. So in that period of time you have to store the goods in your go down and when there is demand in the market you have to sell it. That is why warehouse plays an important role. 6. Marketing facilities Marketing all relates to selling, advertising, etc. The goods you have produced must be sold in the market. So you must tie up with the dealers, with the wholesalers, with the retailers, etc. So that you can sell to the final consumers. So the channel of distribution involving wholesalers, retailers, etc. you have to find it out, you have to make certain strategies how to sell the goods to the wholesalers, etc. All these factors have to be considered before you start your venture. Now we are towards the end of this discussion and here we will discuss the social responsibilities of business. We have already discussed that business is a part of society and therefore it has to discern certain social responsibilities when we have discussed the social objectives of business. Social objectives of business is also known as corporate social responsibility, CSR. CSR or corporate social responsibility is beyond the objective of earning profit. So it is beyond the economic objectives of business. Here the business have to serve the society as a part of the society. So the different activities may be undertaken to serve the social need or to discharge the corporate social responsibility. It may relate to environment protection. It may relate to health care of the community. It may relate to education and skill development. It may relate not to produce goods which are harmful to the society not to pollute the environment, etc. In this respect, we would like to share some additional information regarding CSR. The Companies Act 2013 have laid down certain provisions for CSR. According to these provisions, every private limited company or public limited company either with a net worth of rupees 500 crore or a turnover of rupees 1000 crore or net profit of rupees 5 crore need to spend at least 2% of its average net profit for the immediately preceding three financial years on CSR. So this may relate to eradicating hunger, poverty, malnutrition, promoting preventive health care, promoting education, gender equality, setting up of homes for women, senior citizens, then environmental sustainability, ecological balance, animal welfare, etc. So this have been prescribed by the Companies Act 2013. Then this act also specified the process for CSR. According to the provisions of Companies Act 2013, then the board of directors of the company need to constitute a CSR committee to formulate the CSR policy of the company and according to the policy the CSR activities will be undertaken. The CSR company must have at least 3 directors including an independent director. However, unlisted public companies and private companies that are not required to appoint an independent director from having an independent director as a part of the CSR committee. So these companies which are not listed are not required to appoint an independent director in the CSR committee. And the companies have also stipulated that the committee for a private company and a foreign company need to have a minimum of only 2 members. So these are all about the social responsibilities of business and that we have discussed here. The first unit is the N-Purpose of Business where we have discussed the features of business, the objectives of business that we have classified in the three forms. Economic objectives, then social objectives and human objectives. Then we have discussed a very important aspect that is the factors that we have to consider before starting a business. And lastly we have discussed the CSR corporate social responsibility of the business and certain provisions of the Companies Act 2013 in this regard. So thank you very much. We will meet again soon. Thank you.