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These activities on the one hand satisfy society’s needs and desires and on the other hand brings profit to business firms. Business include activities connected with production, trade, transport, finance, banking, insurance, advertising, and certain other activities related to industry and commerce. For example a ball pen necessitates a long chain of activities involved in bringing raw materials to the factory and the end product from there to the market constitute a business.

Thus, we can say that *business firm or unit is an economic unit which is engaged in the production or distribution or both the production and striation of goods and services for the purpose Of earning profits. * A business firm is an economic unit which is engaged in the production or distribution or both the production and distribution or both the production and distribution of goods and services for the purpose of earning profits.The business unit seeks to achieve more than one objective which may vary with the passage Of time. [pick] 1 . Maximum Profit :Making profit is the primary goal of any business enterprise.

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All the efforts of a firm are directed towards the achievement of this object. A firm can earn maximum profits at the point where Marginal Cost (MAC) and Marginal Revenue (MR.) are equal. Marginal cost means the cost incurred on the production of an additional unit of a commodity. Marginal Revenue is the revenue received from the sale of such additional unit. 2.

Maximize total sales revenue : Second most important object of a firm is to obtain maximum sales revenue. The attainment of this object does not mean to have the maximum sale in terms Of physical quantity but it means to obtain the maximum amount of revenue at the point when its marginal revenue is zero. No firm will take to increase its sales beyond this point, because beyond this point, the firm will be suffering a loss.

3. Minimum Cost : Another important object of a business firm is to minimize the cost of production of producing goods and services to that these goods and services may be provided to the consumers at minimum possible price.To attain this object, the business firm makes continuous use of various techniques of cost central. 4. Establish long-run survival: Long-run survival is a prime object of all the cuisines firms. For this purpose, every firm makes best efforts to provide best quality of goods and services to its consumers at reasonable prices. Some business firms change their marketing strategies and marketing approach from time to time so that they may maintain the demand of their products in the market.

5.Achieve Financial Soundness: No business firm can continue for long time if it is not financially sound. Banks and financial institutions stress upon financial soundness of the firms to grant them any sort of financial assistance.

Therefore, every business firm takes due care and precaution in he use of funds of the firm. 6. Achieve Economics self-sufficiency: A business firm cannot be successful in achieving its objects if it depends only upon external sources for the programmer of expansion and diversification.

A firm should be self- dependent in economic affairs.If complete self-dependence is not possible, dependence on external financial sources should be minimum, for this purpose, all the business firms try to re-invest major part of their profits in their business. 7. Maximum welfare and employees satisfaction – Some business firms aims at providing maximum facilities to their employees so that they may get axiom job satisfaction and thief efficiency and ability may be increased. Such firms spend huge amount on the welfare of their employees. The facilities of proper working conditions, canteen, education, training, incentive wage system, bonus etc. , are provided to the employees.This is an important object and very helpful in the achievement of pre-determined objectives of the firm because if the employees of a firm are satisfied they will contribute their best efforts to achieve the objectives of the firm.

8. Dominate the whole market: Some business firms have an object of nominating the whole market. Such firms provide goods and services to consumers at the lowest possible price. They provide best after-sale-services to the consumers.Such firms also aim at selling product to the maximum number of customers so that they can capture the market and establish their business empire. . Service to society: Business is a part of society and has several obligations towards it.

Some of them are . ; Providing employment ; Offer of better quality of life ; Contributing to the economic growth of the country This is the economic growth of the country beyond earning profit. It is an important institution in society. Et role of business is crucial.


Business Environment is a relationship between a business’s actions and its environment. Environment is the surroundings off business by which business influenced directly or indirectly.Where the political, economic, social and technological factors shopping a business environment are assessed by a business so as to devise future strategy. [pick] Political/legal factors – Business will be directly affected by the actions of government and other political events. These might be major events effecting the whole of the business community, such as a change of government. Similarly businesses will be affected by the legal framework in which they operate. Example include the laws preventing collusion between firms to keep prices up.Economic factors – Economic factors which have an economic impact on business.

Industrial production, agriculture, planning, basic economic philosophy, infrastructure, national income, per capital income, money supply, price level, population, savings, stages in the economic development and trade cycles are major factors which make up the total economic environment. There is close relationship between business and its economic environment. Social/cultural factors – This aspect of the business environment concerns social attitudes and values.

These includes attitudes towards working conditions and the length of the working day, equal opportunities for different groups of people, the nature and purity of products, the use and abuse of animals, role of family. The social/cultural environment is highly relevant for a business unit as the variety of goods it produces, the type of employees it gets and its obligation to society depend on the cultural atmosphere in which the firm operates. Technological factors – The pace of technological change had quickened.

This has had a huge impact not only on how firms produce products.The information technology revaluation is also enabling much more rapid communication and making it possible for many workers to do their job from home or while traveling. The division of the factors affecting a firm into political, economic, social and technological analysis and is widely used by business enterprise to audit their environment and to help them establish a strategic approach to their business activities.

We must also be aware of the fact that the business environment is constantly changing. To be successful, a business will need to adapt to these changes and, wherever possible, take advantage of them.Ultimately, the better business manages understand the environment in which they operate.


Everyday a number of decisions re made by us as individual or entrepreneurs. But all decisions relate to Business nature. Risk and uncertainty – Business firm works under risk and uncertainty, risk depends upon possibility and uncertainty is measurable risk. Every cuisines have profit risk, investment risk and product risk. And every business works under demand uncertainty, production uncertainty, profit uncertainty, price and cost uncertainty and also environmental uncertainty.

Profit Minimization – Profit is the main incentive, motivator, strong sustainer, objective indicator. The main aim of business is profit minimization and cost minimization, price is a growth of business. Competition – Today business nature is a became more competitive. Competition in price, good quality, satisfaction on consumer, first server in the market etc.

Competition in business protect to consumer. It provides best quality product at reasonable rate. Technology oriented – The rapid technological change has become a pre- condition for the survival f a company.Presently, technology orientation is quite strong in electronics, telecommunications, pharmaceutical, fine chemical and processing industries. In fact, companies wanting to build their future now here no choice but to engage in research and development (R & D) function. Change – The business has invented the strategy of making changes in product quality, design or packaging.

This strategy of offering differentiated reduces has been found quite effective to maintain its identity in the market. So according to time, changes must be there. For example color televisions have replaced black and white televisions.


[Pick] l) Internal Environment Business is normally under-taken for profit minimization. The internal factors are generally regarded as controllable factors because the company has control over these because the company has central over these factors; it can alter or modify such factors as its personnel, physical facilities, organization and functional means, such as marketing mix to suit the environment. The spirit of the internal environment of a firm is derived from its mission that states as to why and for whom does it exist. This provides the basic purpose of a firm’s existence and operations.Top management of the firm executes the mission through a strategy which is based mission through a strategy which is based on thorough planning in terms of clearly identified objectives to be achieved over a period of time. The entire process takes place within the framework of a value system and corporate culture and the persons occupying different line and staff positions here to fit themselves into he value and culture framework.

These factors establish the broad internal environment within which different departments of the firm operate in an interrelated manner.Determinants of internal environment ; Mission and vision of the organization ; Management philosophy and strategy ; Industrial relations ; Corporate culture and values ; Line and staff relations ; Governance standards and codes ; Quality central system ; Team spirit among employees ; Work culture and socio-economic background of employees design and coordination ; Quality of internal communication Compensation system and career progression of employees system of the organizationII) External Environment ; Job ; Central External environment of business consist of institutions, organizations and forces operating outside the Company. All these individually as well as collectively exercise their influence on the latter. Broadly external environment of business may be classified into (A) Micro Environment and (B) Macro Environment. The micro environment refers to such players whose decisions and action have a direct bearing on the Company. Since modern business broadly has two aspects, biz. Reduction and selling of goods, the micro environment of business can be divided accordingly.

The most prominent performs in the micro environment are the following: ; Suppliers of inputs ; Workers and their unions ; Customers ; Market intermediaries ; Competitors ; Public Input suppliers and workers together with their unions exercise influence on production-customers, market intermediaries and competitors affect sales operations of the business firm. The public may influence both production and sales. A. Micro Environment From the point of view of a Company’s business operations micro environment has great relevance. Usually the players in micro environment do not affect all the companies in an industry in the same way.Their decisions and actions visa-;-visa individual company often differ in accordance with the size, capability and strategies of each Company. For example suppliers of inputs are normally more accommodating if the Company is large.

However, they may not give the same concessions to relatively small companies. B. Macro Environment Macro Environment of a company refers to all those economic and non economic factors which exercise their influence on the business activity in mineral and thus determine opportunities that a company may have to promote its business. The role of macro environment from the point view of the business may be both positive and negative.This implies that the larger forces in the company’s environment to not always provide wider space for business operations.

Macro environment of business can be broadly classified into economic environment and non -economic environment. Since business is broadly divided on economic activity, economic environment of business- both national and global of strategic importance. In economic environment of the entry, country’s economic system, macro-economic scenario, phase of business cycle through which the economy is passing, organization of the financial system and economic polices of the government are the most important elements. Economic system of the country determines the parameters of the business activity.Macro-economic scenario refers to price situation, levels of saving and investment, fiscal, monetary and balance of payments situations and overall growth activity.

These factors broadly determine the prospects of business activity. In a recessionary situation business firms encounter steep all in effective demand which inevitably leads to business slow down. Developed financial system is now a precondition for efficient manipulation of financial resources for business. Economic policies of the gobo. , particularly the Industrial, trade, fiscal and monetary policies shape the opportunities for business.

However, at times, these policies are used by the governments to regulate the operations of business firms.Now because of liberalizing from the point of view of the Company’s business, global economic environment is as much important as the national economic environment. The notable features of present day global environment are globalization, underdevelopment of Russia and East Europe, recession in Japanese economy, slow recovery in the LISA, Regional Economic Groupings, protectionism, global slowdown and dominance of the multinational corporations. Business, despite the fact that it is an economic activity, is also influenced by its Nan-economic environment political system, ideology of the government, legal framework, social system, cultural values, demographic factors, level of technological development and natural and physical environment of the country constitute non-economic environment of business.

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