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UNIT - IV
Introduction to Market &
Pricing policies
Introduction to Market
It is a process of Buying and selling about commodity
Its includes various commodities
Its includes goods and services
Meaning & Definition
A place where buying and selling of a products is done.
A certain place where buyers and sellers need and exchange their goods and
services.
Market may be defined as an arrangement of establishing effective relationship
b/w buyers and sellers of the commodities.
Meaning & Definition (contd..)
According to professor. Chapman, “The term market refers to necessarily to a place but always to a commodity and the buyers & Sellers who are in direct competitions with one another”.
Features of Market
Commodity Buyers and Sellers Area Relationship Service
Factors governing Market Structure
Number of Sellers Number of Buyers Product differentiation Conditions of Entry in the Market
Classification of Market
Classification
On the basis of Area On the basis of Time On the basis of competition
Local Market
National Market
International Market
Very Short term
Short term
Long term
Very Long term
Perfect Competition
Imperfect Competition
1.Monopoly2.Monopolisic 3.Duopoly4.Oligopoly
Perfect Competition Market
According to Bilas “The Perfect Competition is characterized by the presence of many firm. They all sell identically same product, that is a price taker”.
According to Ferguson “ Perfect Competition describes a market in which there is a complete absence of direct competition among economic groups”.
Perfect Competition Market (Tabular format)
Price per unit (Rs)
Demand for Sugar (Kgs)
Supply for Sugar (Kgs)
5 5000 25000
4 10000 20000
3 15000 15000
2 20000 10000
1 25000 5000
Perfect Competition Market (Diagram)
YY
OOXX
SS
SS
DD
DD
5 10 15 20 25
25000
20000
15000
10000
5000
Perfect Competition Market (Diagram)
1.Change in Demand
YY
OOXX
DD
DD
D1D1
D1D1
D2D2
D2D2
E2E2
EE
E1E1
M2 M M1
P1
P
P2
Perfect Competition Market (Diagram)
1.Change in Supply
YY
OOXXM2 M M1
P1
P
P2
E2E2
EE
E1E1
S1
S
S
S1
S2
S2
Features of Perfect competition
Large number of buyers & Sellers Homogeneous product Freedom of Entry & Exit Perfect Knowledge about Market Perfect mobility Absence of selling & Transport cost Uniform price
Price / Output determination in perfect competition
1.Shot run
YY
OO XXQ
C
F
MCMC
ACAC
AR=MR=PRICE=AC
OUTPUT
PRICE/COSTMC= Marginal Cost
AC=Average Cost
AR=Average Revenue
MR=Marginal Revenue
E=Equilibrium
EE
Price / Output determination in perfect competition
1.Long run
YY
OO XXQ
P
LMCLMC
LACLAC
AR=MR=PRICE=AC
OUTPUT
PRICE/COSTMC= Marginal Cost
AC=Average Cost
AR=Average Revenue
MR=Marginal Revenue
E=Equilibrium
LMC=Long run Marginal cost
LAC=Long run Average cost
Differences b/w Perfect competition and Imperfect competition
Points of Difference Perfect competition Imperfect competition
Number of Sellers Number of sellers is more than sellers in the imperfect competition
Number of sellers is lesser as compared to perfect market
Price There is same price of a commodity There are different prices of the same commodity
Average Revenue AR of all firms are the same AR Revenue is different firms for different prices
Factors of production Factors of production are mobile Factors of production are not mobile
AR (price) AR price is equal to MC Price is greater than MC
Un limited of capacity In long run full capacity of the firm is utilized
There is never full capacity of utilized
Selling cost Selling costs are zero or nil Selling costs quite substantial
Differences b/w Perfect competition and Monopoly
Points of Difference Perfect competition Monopoly
Number of Sellers There is large number of firms There is single firm
Price Taker/maker Firms are price taker Firms are price taker
MR AND AR Marginal revenue is equal to AR AR is greater than MR
Situation of MR and AR MR & AR are parallel to x-axis Both MR & AR down word sloping
Freedom There is freedom of entry or exit for firms
There is no freedom of entry or exit for firms
MC and AR MC=AR (Price) MC<AR (price)
Price discrimination Same price is charged from every customer.
There is price discrimination
Monopoly Competition
Monopoly form of market is most commonly found in public utility services such as transport, water & electricity supply.
Monopoly has been derived from the two Greek words “Monos & Polus” in this word Monos means Single and Polus means Seller (single Seller).
Monopoly is that market situation in which a firm has the sole right over production or sale of product & it has no competition in the market.
Types of Monopolies
Basically 2 types
Simple Monopoly Discriminating Monopoly
Another 2 types Private Monopoly Public Monopoly
Causes responsible for emergence of Monopoly
Natural factors Legal factors Social factors Cost factors Heavy investment
Important features of Monopoly
Single producer or seller No close substitute of the commodity No firm can enter the market Price Discrimination is possible Firm can adopt independent price policy
Price discrimination under Monopoly competition
YY
OOXXQuantity
Revenue
MRAR
Monopolistic competition
Monopolistic competition is mixture of monopoly and perfect competition.
In this market situation both elements of monopoly and perfect competition
Under this firm produce differentiated products which are close substitute but not substitute
Features of Monopolistic competition
Many sellers Freedom of entry or exit Elements of both monopoly and Perfect competition High cross elasticity of demand Independent price policy
Curve analysis
Revenue Curve (under Perfect) Revenue Curve (under Monopoly) Revenue Curve (under Monopolistic)
Curve analysis (contd..)
YY
OO XXQuantity
R
E
V
E
N
U
e
YY
OO XXQuantity
R
E
V
E
N
U
e MR
AR
YY
OO XXQuantity
R
E
V
E
N
U
eMR
AR
Under perfect Market Under Monopoly Market Under Monopolistic Market
Oligopoly
Oligopoly is an important form of imperfect competition
Oligopoly means few and poly means sellers. Oligopoly refers only few sellers or firm.
Types of Oligopoly
Discriminating oligopoly Pure oligopoly
Features of Oligopoly
Few firms Nature of the product Inter dependence of firm Complex market structure Selling costs
Duopoly
Duo means two and poly means seller It’s a two seller market It a second important market in the imperfect
competition
Pricing methods
It’s a part of value of commodity Price include profit+cost Its capacity of a product or commodity in the
market
Meaning of Pricing
Pricing is not an exact science. Pricing decisions, more often, are done by trial error. Pricing include discount and concession benefit
Pricing is an important exercise. Under pricing will result in losses.
Objectives of pricing
To maximize the profit To increase sales To increase the market share To satisfy the customers To meet the competition
Pricing policies
The firm bas to formulate pricing policies, particularly when it deals in multiple products.
The pricing policies are intended to bring consistency in the pricing pattern.
Types of pricing methods
Cost based pricing methods1. Cost plus pricing2. Marginal cost pricing
Competition based pricing1. Sealed big pricing2. Going rate pricing
Types of pricing methods (contd..)
Demand based pricing1. Price discrimination2. Perceived pricing
Types of pricing methods (contd..)
Strategy based pricing1. Market skimming2. Market penetration3. Two part pricing4. Block pricing5. Commodity bundling pricing6. peack load pricing7. Cross subsidization pricing8. Transfer pricing
Strategies of pricing
Pricing matching Promoting brand loyalty Time- Time pricing Promotional pricing Target pricing
UNIT I11
INTRODUCTION TO MARKETS
AND PRICING STRATEGIES
What is a Market?
Market is defined as a place or point at which buyers and sellers negotiate their exchange of well-defined products or services.
Market
Market is any area over which buyers and sellers are in close touch with one another, either directly or through dealers, that the price obtainable in one part of the market affects the prices paid in other parts. - Benham
MARKET CLASSIFICATION
Classification on the basis of Area covered or location
Classification on the basis of time &
Classification on the basis of degree of competition
Classification on the basis of Area covered or location
Local market
National market
International market
Classification on the basis of time
very short period market
Short period market
Long period market
Classification on the basis of degree of competition
Perfect marketImperfect market
Imperfect market take several formsMonopolyDuopolyOligopolyMonopolistic competition
Types of competition
Competition is of two types
Perfect competition
Imperfect competition
PERFECT COMPETITION
A market structure in which all firms in an industry are price takers and in which there is freedom of entry into and exit from the industry is called Perfect Competition.
The market with perfect competition condition is known as perfect market.
FEATURES OF PERFECT MARKET
Large number of buyers and sellers Price taker Homogeneous products The firms are free to enter or leave the
industry Perfect Mobility of factors of production Perfect knowledge No publicity cost Uniform prices AR curve is parallel to X axis
IMPERFECT COMPETITION A market structure in which all the firms in the industry are price makers and in which there lies restrictions to enter in to the industry is called Imperfect Competition.
The market with imperfect competition condition is known as imperfect market
Sellers and buyers Nature of commodity No uniform prices (price discrimination) Entry is restricted No perfect knowledge Price maker Publicity cost AR curve is downward sloping [MR curve is
always below AR curve]
FEATURES OF IMPERFECT MARKET
Features of MONOPOLY
Single seller & large number of buyers No close substitutes Entry restricted Price discrimination AR curve is downward slowing from left to
right In monopoly firm & industry are one and
same. i.e., single firm represents the whole industry.
Features of MONOPOLISTIC competition
In this market many firms produce differentiated products. (e.g. Anacin, Disprin, Saridon)
Goods produced are close substitutes to each other
No restriction to enter in to the market
Price & out put determination in MONOPOLY
Monopoly is form of imperfect market.
No uniform prices (price discrimination)
AR curve is downward sloping [MR curve is always below AR curve]
Units of Output Q
Total fixed
cost TFC
Total variable cost TVC
Total cost
(TFC + TVC =)
TC
Average variable
cost (TVC / Q)
AVC
Average fixed cost
(TFC / Q) AFC
Average cost
(TC/Q) AC
Marginal cost MC
0 60
- 60 - - - -
1 60 20 80 20 60 80 20
2 60 36 96 18 30 48 16
3 60 48 108 16 20 36 12
4 60 64 124 16 15 31 16
5 60 90 150 18 12 30 26
6 60 132 192 22 10 32 42
Cost & out put relationship
PRICE OUTPUT DETERMINATION UNDER MONOPOLY
PRICING
Pricing is not an exact science, more often, are done by trial & error.
Pricing is an important exercise, Under pricing will result in losses and over pricing will make the customers run away.
To determine price in a scientific manner it is necessary to understand pricing methods & procedures.
PRICING OBJECTIVES
Maximize profits Increase sales Increase market share Satisfy customers Meet the competition
PRICING METHODS
Cost Based Pricing Methods Cost plus pricing (full cost or mark up) Marginal cost pricing (break even or
target profit pricing) Competition Oriented Pricing
Sealed bid pricing Going rate pricing
Demand Oriented Pricing Price Discrimination (differential
pricing) Perceived value pricing
PRICING METHODS Strategy Based Pricing Methods
Market Skimming Market Penetration Two part pricing Block pricing Commodity Bundling Peak load pricing Cross Subsidization Transfer pricing (internal pricing
technique) Limit pricing
Types of Business Organizations
What is business?
An activity which is initiated with an objective to earn profit is called business.
Business activity involves production, exchange of goods and services to earn profits
Business may be defined as “human activities directed towards acquiring wealth through buying & selling goods”.
L.H.Haney
Features of business Entrepreneur Exchange of goods and services Profit motive Risk and uncertainty Creates utilityUtility may be Form utilityPlace utilityTime utility
Forms of business organizations
The following are forms of business organizations Based on ownership
1. Sole trader or proprietorship
2. Partnership
3. Joint stock company
4. Cooperative society
Factors affecting the choice of form of business organization
Before we choose a particular form of business organization, let us study what factors affect such a choice?
The following are the factors affecting the choice of a business organization:
Easy to start and easy to close: The form of business organization should be such that it should be easy to start & close. There should not be hassles or long procedures in the process of setting up business or closing the same.
Division of labour: There should be possibility to divide the work among the available owners (specialization).
Large amount of resources: Large volume of business requires large volume of resources. Some forms of business organization do not permit to raise larger resources. Select the one which permits to mobilize the large resources.
Liability: The liability of the owners should be limited to the extent of money invested in business. It is better if their personal properties are not brought into business to make up the losses of the business.
Secrecy: The form of business organization you select should be such that it should permit to take care of the business secrets.
Transfer of ownership: There should be simple procedures to transfer the ownership to the next legal heir.
Continuity: The business should continue forever and ever irrespective of the uncertainties in future.
Quick decision-making: Select such a form of business organization, which permits you to take decisions quickly and promptly. Delay in decisions may invalidate the relevance of the decisions.
Personal contact with customer: Most of the times, customers give us clues to improve business. So choose such a form, which keeps you close to the customers.
Flexibility: In times of rough weather, there should be enough flexibility to shift from one business to the other. The lesser the funds committed in a particular business, the better it is.
Taxation: More profit means more tax. Choose such a form, which permits to pay low tax.
These are the parameters against which we can evaluate each of the available forms of business organizations.
Factors affecting the choice of form of business organization
1. Ease of formation and closure2. Specialization/division of labor3. Scope to raise large finances4. Extent of liability5. Transfer of ownership6. Continuity7. Pace of decision making8. Personal contact with customers9. Degree of flexibility10. Degree of taxation
Sole trader
“ a sole trader is a person who carries on business exclusively by and for himself, he is not only the owner of the capital of the undertaking, but is usually the organizer and manager, takes all profits or responsible for all losses”.
James Stephenson
Features of sole trader
Easy to start & close Unlimited liability High degree of flexibility Quick decisions Limited area of operations Direct access with customers No continuity Business secretes can be guarded well
Advantages of sole trader form of business Easy to start and easy to close Personal contact with customers directly Prompt decision-making High degree of flexibility Secrecy Low rate of taxation Minimum interference from government Transferability
Disadvantages of sole trader form of business
Unlimited liability Limited amounts of capital No division of labor No continuity Inadequate for growth and expansion More competition Low bargaining power
Partnership
According to section 4 of Indian partnership act 1932
“The relation between two or more persons, who have agreed to share profits of the business carried on by all or any one of them acting for all”.
Features of partnership Unlimited liability Number of partners Division of labor Joint and several liability Transfer of ownership Dissolution Implied authority Utmost good faith and mutual trust
Partnership Deed
The written agreement among the partners is called partnership deed.
Partnership deed contains terms & conditions governing the working of partnership
Contents of partnership1. Names and addresses of the firm and partners2. Nature of the business proposed3. Duration4. Profit sharing ration of partners5. The amount of salary or commission payable to the
partners6. Procedure to value good will of the firm at the time of
admission of a new partner, retirement of death of a partner
7. Allocation of responsibilities of the partners in the firm8. Procedure for dissolution of the firm9. Rights, Obligations and Liabilities of partners.
Kinds of partners
Active partner or working partner: Sleeping partner Nominal partner Partner by estoppels Partner by holding out Minor partner
Active Partner: Active partner takes active part in the affairs of the partnership. He is also called as working partner.
Sleeping Partner: Sleeping partner contributes to capital but does not take part in the affairs of the partnership.
Nominal Partner: Nominal partner is partner just for namesake. He neither contributes to capital nor takes part in the affairs of business. Normally, the nominal partners are those who have good business connections, and are well placed in the society.
On the strength of his name business may get more credit in the market.
Partner by Estoppel: Estoppel means behavior or conduct. Partner by estoppel gives an impression to outsiders that he is the partner in the firm. In fact he neither contributes to capital, nor takes any role in the affairs of the partnership.
Partner by holding out: If partners declare a particular person (having social status) as partner and this person does not contradict even after he comes to know such declaration, he is called a partner by holding out and he is liable for the claims of third parties. However, the third parties should prove they entered into contract with the firm in the belief that he is the partner of the firm. Such a person is called partner by holding out.
Minor Partner: Minor has a special status in the partnership. A minor can be admitted for the benefits of the firm. A minor is entitled to his share of profits of the firm. The liability of a minor partner is limited to the extent of his contribution of the capital of the firm.
Right of partners To take part in the management of business To express his opinion To inspect books of accounts To share profits as per agreement To receive interest on capital at an agreed rate of
interest from the profits of the firm To receive interest on loans, if any, extended to the
firm. To be indemnified for any loss incurred by him in the
conduct of the business To receive any money spent by him in the ordinary
and proper conduct of the business of the firm.
Duties of the partners
To act honest and be faithful to other partners.
To give correct information and true accounts to fellow partners
Not to engage in any activity which competes the firms business
Not to transfer share with consent of all other partners.
Joint stock company
According to section 3 (1) of the Indian companies act 1956 “a company means a company formed and registered under this act.
It is like a artificial person created by the law with perpetual succession and common seal.
Features of joint stock company Artificial person Separate legal existence Voluntary association of persons Limited Liability Capital is divided into shares Transferability of shares Common Seal Perpetual succession Ownership and Management separated Winding up The name of the company ends with ‘limited’
1. Artificial person: The Company has no form or shape. It is an artificial person created by law. It is intangible, invisible and existing in the eyes of law.
2. Separate legal existence: it has an independence existence, it is separate from its members. It can sue other if they are in default in payment of dues, breach of contract with it, if any. Similarly, outsiders for any claim can sue it.
Voluntary association of persons: The Company is an voluntary association of persons who want to carry on business for profit.
Limited Liability: The shareholders have limited liability i.e., liability limited to the face value of the shares held by him.
In other words, the liability of a shareholder is restricted to the extent of his contribution to the share capital of the company.
The shareholder need not pay anything, even in times of loss for the company, other than his contribution to the share capital.
Transferability of shares: In the company form of organization, the shares can be transferred from one person to the other. A shareholder of a public company can sell his holding of shares at his will. However, the shares of a private company cannot be transferred. A private company restricts the transferability of the shares.
Common Seal: As the company is an artificial person created by law has no physical form, it cannot sign its name on a paper, so, it has a common seal on which its name is engraved.
Every document or contract should be affixed by the common seal, otherwise the company is not bound by such a document or contract.
Perpetual succession: ‘Members may comes and members may go, but the company continues for ever and ever’ A. company has uninterrupted existence because of the right given to the shareholders to transfer the shares.
Ownership and Management separated: The shareholders are spread over the length and breadth of the country, and sometimes, they are from different parts of the world.
To facilitate administration, the shareholders or promoters elect Board of directors, which looks after the management of the business.
Winding up: Winding up refers to the putting an end to the affairs of the company. Because law creates it, only law can put an end to it.
The name of the company ends with ‘limited’: it is necessary that the name of the company ends with limited (Ltd.) to give an indication to the outsiders that they are dealing with the company with limited liability.
Formation of Joint Stock company
There are two stages in the formation of a joint stock company. They are:
1. To obtain Certificates of Incorporation
2. To obtain certificate of commencement of Business
Certificate of Incorporation: The certificate of Incorporation is just like a ‘date of birth’ certificate. It certifies that a company with such a name is born on a particular day.
The promoters have to file the following documents, along with necessary fee, with a registrar of joint stock companies to obtain certificate of incorporation:
Memorandum of Association Articles of association
Memorandum of Association: The Memorandum of Association is also called the charter or constitution of the company.
It outlines the relations of the company with the outsiders.
If furnishes all its details in six clause such as (i) Name clause(ii) Situation clause(iii) Objects clause (iv) Capital clause and (v) Liability clause(vi) Subscription clause.
Articles of association: Articles of Association furnishes internal rules procedures governing the internal conduct of the company.
The registrar of joint stock companies verifies whether all these documents are in order or not. If he is satisfied with the information furnished, he will register the documents and then issue a certificate of incorporation, if it is private company, it can start its business operation immediately after obtaining certificate of incorporation.
Certificate of commencement of Business: A private company need not obtain the certificate of commencement of business. It can start its commercial operations immediately after obtaining the certificate of Incorporation.
A public limited company can start its operations only when the certificate of commencement of Business is obtained
The following formalities have to be full filled to obtain
certificate of commencement of Business Seek permission from SEBI (to issue
prospectus) File the prospectus with the registrar Collecting the minimum subscription Allotting shares.
Advantages of Joint Stock Company
Mobilization of larger resources Separate legal entity Limited liability Transferability of shares Economics of large scale production
Continued existence Institutional confidence Professional management
Disadvantages of Joint Stock Company
Ownership and management are separated Very difficulty in formation of a company High degree of government interference Delay in decision making Higher taxes
Cooperative societies A cooperative society is a society registered under the
cooperative societies act. It is an association of the weak who come together to
uplift themselves from weakness to strength through organized efforts.
The philosophy of the cooperatives movement is to improve their economic conditions through collective efforts.
The cooperative societies Act 1904, provided a legal basis for the formation of cooperative credit societies in the villages and urban areas for granting loans to their respective members.
Features of cooperative societies
It is a voluntary association Separate legal existence Compulsory registration Open membership irrespective of caste,
religion etc Service motive, the objective is not to make
profits.
Public enterprise It is a form of organization where government
participates in the business. when the government takes part in the
business public enterprise is set up. There are certain areas such as defense,
infrastructure, heavy industries and so on where private participation is not possible, and hence government had to enter in the business.
Objectives of Public enterprise
To accelerate the rate of economy growth To speed up industrialization To increase infrastructural facilities To promote balanced regional development To increase employment opportunities To promote economic welfare.
Forms of Public enterprises
Departmental undertaking
Public corporation
Government company
Departmental undertaking This is the earliest from of public enterprise.
Under this form, the affairs of the public enterprise are carried out under the overall control of one of the departments of the government.
The government department appoints a managing director (normally a civil servant) for the departmental undertaking. He will be given the executive authority to take necessary decisions
The departmental undertaking does not have a budget of its own. As and when it wants, it draws money from the government exchequer and when it has surplus money, it deposits it in the government exchequer.
Examples for departmental undertakings are Indian Railways
Department of Posts All India Radio Doordarshan Defense undertakings like DRDL, DLRL, ordinance
factories, and such.
Features of Departmental undertaking
Under the control of a government department: It is subject to direct ministerial control.
More financial freedom: The departmental undertaking can draw funds from government account as per the needs and deposit back when convenient.
Like any other government department: The departmental undertaking is almost similar to any other government department
Budget, accounting and audit controls: The departmental undertaking has to follow guidelines underlying the budget preparation, maintenance of accounts, and getting the accounts audited internally and by external auditors.
Public corporation A public corporation is defined as a ‘body corporate created by an Act of Parliament or
Legislature and notified by the name in the official gazette of the central or state government. It is a corporate entity having perpetual succession, and common seal with power to acquire, hold, dispose off property, sue and be sued by its name”.
Examples of public corporation are 1. Life Insurance Corporation of India,2. Unit Trust of India3. Industrial Finance Corporation of India,
public corporation
It is also called as statutory corporation It can formulate its own budget It can recruit staff at different levels based on
the necessary specialization It has total freedom in planning,
management, & control of its operations
Government company Section 617 of the Indian Companies Act1956
defines a government company as “any company in which not less than 51 percent of the paid up share capital is held by the Central Government or by any State Government or Governments or partly by Central Government and partly by one or more of the state Governments and includes a company which is subsidiary of government company as thus defined”.
Features of government company
1. Like any other registered company: the government company has separate legal existence. Common seal, perpetual succession, limited liability, and so on. The provisions of the Indian Companies Act apply for all matters relating to formation, administration and winding up.
2. Shareholding: The majority of the shares are held by the Government, Central or State, partly by the Central and State Government's, in the name of the President of India.
3. Directors are nominated by the government.
4. Subject to ministerial control: Concerned minister may act as the immediate boss. the minister issue directions for a company and he can call for information related to the progress and affairs of the company any time.
UNIT - VUNIT - V
BUSINESS & BUSINESS & NEW NEW
ECONOMIC ENVIRONMENTECONOMIC ENVIRONMENT
It’s Should be a economic activityIt’s Should be a economic activity
It’s a Process of commoditiesIt’s a Process of commodities
It’s Relating to societyIt’s Relating to society
It’s Concerned production, purchases, sales, goods and servicesIt’s Concerned production, purchases, sales, goods and services
It must have profit motiveIt must have profit motive
Introduction to BusinessIntroduction to Business
Business units have their own separate & Independent entity.Business units have their own separate & Independent entity.
It may be managed & controlled by private entrepreneur.It may be managed & controlled by private entrepreneur.
According to w.o wheeler Business unit is a concern company or a enterprise According to w.o wheeler Business unit is a concern company or a enterprise which buyer & seller, it own by one person or group of persons & it managed which buyer & seller, it own by one person or group of persons & it managed under specific self or operating policies.under specific self or operating policies.
Meaning and DefinitionMeaning and Definition
Easy to start Easy to closeEasy to start Easy to close
Division of laborDivision of labor
Large amount of resourcesLarge amount of resources
LiabilityLiability
SecrecySecrecy
Transfer of ownershipTransfer of ownership
Management & ControlManagement & Control
Continuity Continuity
Quick decision makingQuick decision making
flexibilityflexibility
Choices of Business OrganizationsChoices of Business Organizations
Availability of Raw materialsAvailability of Raw materials
Transport facilitiesTransport facilities
Communication facilitiesCommunication facilities
Financial facilitiesFinancial facilities
Insurance facilitiesInsurance facilities
Ware house facilitiesWare house facilities
Factors of Business OrganizationFactors of Business Organization
PRIVATE SECTORPRIVATE SECTOR
PUBLIC SECTORPUBLIC SECTOR
JOINT SECTORJOINT SECTOR
Forms of Business OrganizationForms of Business Organization
PRIVATE SECTORPRIVATE SECTOR
Sole traderSole trader
Partnership firmPartnership firm
Joint Hindu familyJoint Hindu family
Co operative societyCo operative society
Joint stock companyJoint stock company
Forms of Business OrganizationForms of Business Organization
PUBLIC SECTORPUBLIC SECTOR
Departmental organizationsDepartmental organizations
Public corporationPublic corporation
Government companiesGovernment companies
Forms of Business OrganizationForms of Business Organization
JOINT SECTORJOINT SECTOR
Private sectorPrivate sector
Public sectorPublic sector
Forms of Business OrganizationForms of Business Organization
Profit motiveProfit motive
No state participationNo state participation
Private ownershipPrivate ownership
Independent ManagementIndependent Management
Characteristics of Characteristics of Private sectorPrivate sector
Government controlGovernment control
Service motiveService motive
Separate ownerSeparate owner
AccountabilityAccountability
Characteristics of Characteristics of Public sectorPublic sector
Joint share capitalJoint share capital
Combined ManagementCombined Management
Mixed ownershipMixed ownership
Characteristics of Characteristics of Joint sectorJoint sector
According to Peterson “Ti has no legal existence a part from the proprietor According to Peterson “Ti has no legal existence a part from the proprietor himself he is the firm.himself he is the firm.
It s also called sole trade, single ownership, individual ownership one man It s also called sole trade, single ownership, individual ownership one man business.business.
Sole proprietorship Sole proprietorship
Easy formationEasy formation
Limited ResourcesLimited Resources
Un limited liabilityUn limited liability
Freedom of choices of the businessFreedom of choices of the business
Prompt decisionsPrompt decisions
Features of Features of Sole proprietorshipSole proprietorship
Advantages of Advantages of Sole proprietorshipSole proprietorship
Easy formationEasy formation
Prompt decisionsPrompt decisions
Secretary Secretary
EconomyEconomy
Personal touchPersonal touch
Freedom of good willFreedom of good will
Disadvantages of Disadvantages of Sole proprietorshipSole proprietorship
Limited resourcesLimited resources
Limited managerial efficiency Limited managerial efficiency
Unlimited liabilityUnlimited liability
Hasty decisions Hasty decisions
Temporary existenceTemporary existence
Evaluation of Evaluation of Sole proprietorshipSole proprietorship
MeritsMerits
Maintain the control of the businessMaintain the control of the business
Services of all specialistsServices of all specialists
Independent decisionsIndependent decisions
DemeritsDemerits
Lack of responsibilitiesLack of responsibilities
Increase in expensesIncrease in expenses
Risk will not to be sharedRisk will not to be shared
Partnership FirmPartnership Firm
According to Indian partnership act 1932- It is relation between According to Indian partnership act 1932- It is relation between persons who have agreed to share the profit of the business carried on by all or persons who have agreed to share the profit of the business carried on by all or any one of them acting for all.any one of them acting for all.
Features of Partnership firmFeatures of Partnership firm
Agreement b/w two & more personsAgreement b/w two & more persons
Legal businessLegal business
Profit motiveProfit motive
Unlimited liabilityUnlimited liability
Utmost good faithUtmost good faith
Mutual agencyMutual agency
Evaluation of Partnership firmEvaluation of Partnership firm
MeritsMerits
Easy formationEasy formation
More resources & TalentsMore resources & Talents
Legal protection to minorLegal protection to minor
Personal relationPersonal relation
Lesser riskLesser risk
flexibilityflexibility
Evaluation of Partnership firmEvaluation of Partnership firm
DemeritsDemerits
Unlimited liabilityUnlimited liability
Limited resourcesLimited resources
Lack of quick decisionsLack of quick decisions
Temporary lifeTemporary life
SlacknessSlackness
Lack initiativeLack initiative
Registration of partnership firmRegistration of partnership firm
The Name of the firmThe Name of the firm
Place & address of the firmPlace & address of the firm
Names of those places where the firm intends to workNames of those places where the firm intends to work
The names & full address of the all partnersThe names & full address of the all partners
The duration of the firmThe duration of the firm
Dates of which various partners joined the firmDates of which various partners joined the firm
Status of Minor partnerStatus of Minor partner
Right to share profit to the firmRight to share profit to the firm
Right to share the assets of the firmRight to share the assets of the firm
Right to understand the books of accountsRight to understand the books of accounts
Right to file suit in the courtRight to file suit in the court
Co-operative SocietiesCo-operative Societies
According to Seligman – “Co-privation in its technical scene means According to Seligman – “Co-privation in its technical scene means abandonment of competition in distribution & production & elimination of abandonment of competition in distribution & production & elimination of middleman of all kind”.middleman of all kind”.
According to Horace – “Co-operative is an association of person as usually of According to Horace – “Co-operative is an association of person as usually of limited means, who have voluntary joined together to achieve a common limited means, who have voluntary joined together to achieve a common economic end through the formation of democratically controlled business economic end through the formation of democratically controlled business organization”.organization”.
Features of Co-operative SocietiesFeatures of Co-operative Societies
Registered society Registered society
MembershipMembership
CapitalCapital
Transfer of sharesTransfer of shares
Reserve fundReserve fund
Mutual helpMutual help
Government facilitiesGovernment facilities
Equality of voteEquality of vote
Voluntary organizationVoluntary organization
Service motiveService motive
Types of Co-operative SocietiesTypes of Co-operative Societies
Consumer co-operative societiesConsumer co-operative societies
Producers co-operative societiesProducers co-operative societies
Credit co-operative societiesCredit co-operative societies
Miscellaneous co-operative societiesMiscellaneous co-operative societies
Types of Co-operative SocietiesTypes of Co-operative Societies
MeritsMerits
Easy formationEasy formation
Limited liabilityLimited liability
Voluntary membershipVoluntary membership
Democratic managementDemocratic management
Permanent lifePermanent life
DemeritsDemerits
Limited capitalLimited capital
In efficient managementIn efficient management
Mutual conflictMutual conflict
Absence of secrecyAbsence of secrecy
No govt. controlNo govt. control
Joint Stock CompaniesJoint Stock Companies
According to Hancey – “A Joint stock company is a voluntary association According to Hancey – “A Joint stock company is a voluntary association of persons for profit, whose capital is divided in to transferable shares and of persons for profit, whose capital is divided in to transferable shares and ownership is required for its membership”.ownership is required for its membership”.
Types of Joint Stock CompaniesTypes of Joint Stock Companies
On the basis of Incorporation
On the basis of Liability
On the basis of Ownership
Charted companies
Statutory companies
Registered companies
Un limited
Limited
1. By shares
2. By Guarantee
Public
Private
Government
Holding
Subsidiary
Foreign collaboration
Deemed
Other
Evaluation of Co-operative SocietiesEvaluation of Co-operative Societies
MeritsMerits
Permanent existencePermanent existence
Limited liabilityLimited liability
Availability of large capitalAvailability of large capital
Transferability of sharesTransferability of shares
Economies of large scaleEconomies of large scale
Tax reliefTax relief
DemeritsDemerits
Excessive legal formalitiesExcessive legal formalities
Fraud by promotesFraud by promotes
Speculation by sharesSpeculation by shares
Lack of secrecyLack of secrecy
Evils of large scale businessEvils of large scale business
Public EnterprisePublic Enterprise
Public enterprises or Public sector enterprises are owned, managed & Public enterprises or Public sector enterprises are owned, managed & controlled by the government.controlled by the government.
If may be central government, State government or local body individually or If may be central government, State government or local body individually or Jointly.Jointly.
The whole or major part of capital is contributed by the govt.The whole or major part of capital is contributed by the govt.
Forms of Public EnterpriseForms of Public Enterprise
Departmental undertakingDepartmental undertaking
Statutory CorporationsStatutory Corporations
Government CompaniesGovernment Companies
Features of Govt. Departmental undertakingFeatures of Govt. Departmental undertaking
Department of the governmentDepartment of the government
Government TreasuryGovernment Treasury
Staff from servicesStaff from services
Full Government controlFull Government control
Meeting government needsMeeting government needs
Features of Statutory companiesFeatures of Statutory companies
Separate entitySeparate entity
Government controlGovernment control
Appointment of employeesAppointment of employees
Free from government budgetingFree from government budgeting
Managed by board of directorsManaged by board of directors
Features of Government companiesFeatures of Government companies
FormationFormation
Separate legal entitySeparate legal entity
Source of capitalSource of capital
ManagementManagement
AutonomyAutonomy
Changing business environment to post liberalization scenarioChanging business environment to post liberalization scenario
Attention to world marketAttention to world market
Improvement in work cultureImprovement in work culture
Focus on capital / investmentFocus on capital / investment
Downsizing and right sizingDownsizing and right sizing
Awareness and stress on quality and R&DAwareness and stress on quality and R&D
Scale economiesScale economies
Brand buildingBrand building
Focus on businessFocus on business
