11th Class Business Studies Evolution And Fundamentals Of Business Evolution and Fundamentals of Business (Notes)

Evolution and Fundamentals of Business

Facts that Matter

• People need different types of goods and services wherever they live.
• Most of the businesses aim at earning money by satisfying people's demand for goods and services.
•  Business influences our daily life in many ways. 
• In 1000 AD South Asia contained an estimated 75 of the world's 267.33 million people (28.05%), and who individually generated an estimated average of 450 (1990 dollars) PPP per annum, and collectively produced 33,750 million, of the world's 121,208 million (27.84%), the largest regional contribution.
• First estimation of India's national income by Dadabhai Naoroji in 1868.
• In 1952, India's economy had a 3.8% share of world income.
• In 2014, India's economy is 7.376 trillion (purchasing power parity), the third largest in the world in terms of real GDP.

History of Commerce in India

• History of commerce can be traced back to the very start of transaction in prehistoric times.
• Even under barter system trading existed. Taxes were also levied by kings in the form of goods and services. 
•  Historian Peter Watson and Ramesh Manickam dates the history of long-distance commerce from circa 150,000 years ago
• In historic times, the introduction of currency as a standardized money, facilitated a wider exchange of goods and services.
• The circulation of a standardized currency provides a method of overcoming the major disadvantage to commerce through use of a barter system, the "double coincidence of wants" which means if you want something from a person, that person should also be in need of a thing or a service which you can provide, necessary for barter trades to occur.

Indigenous Banking in India

• From the ancient times in India, an indigenous banking system has prevailed. The businessmen called Shroffs, Seths, Sahukars, Mahajans, Chettis etc. had been carrying on the business of banking since ancient times.
• These indigenous bankers included very small money lenders to shroffs with huge businesses, who carried on the large and specialized business even greater than the business of banks.
• Indigenous bankers do not constitute one homogeneous category. The Banking Commission (1972) had grouped them under four main sub-groups Gujarati shroffs, Shikarpuri or Multani shroffs, Chettiars of the South, and Marwari Kayas of Assam.

Indigenous Bankers and Commercial Banks

• The indigenous bankers do not normally have contacts with other joint stock banking institutions in the country. Because, they are operating mostly on their own funds and not depend upon deposits from the others. Previously, during the busy seasons, they used to rediscount the bills with commercial banks and thus, the funds from the original sector of the money market pass into the indigenous or unorganized sector of the money market.
• They also borrow from the commercial banks against demand promissory notes. The banks extend credit facilities to the approved indigenous bankers and the banks fix limits for the loan amount. Such facilities are not extended to them now because of RBI restrictions.

Rise of Intermediaries 

•  Intermediaries posted a 10% increase in retail current value sales in 2017. Growth was driven by increased awareness of the potenital of the online platform for bookings, which supported the development of online travel agents. Online travel agents drove value sales growth due to the convenience they offer in terms of bookings, alongside heavy discounts and first-hand feedback and reviews. 

History of Transport in India Land Transport 

• Transport in Ancient times were centered around Carts (drawn by various drift animals or in some cases by Humans/slaves) and it was not much different in India.
• But the system of road transport was actually developed very early in Ancient Indian civilizations as earlier as Mohenjo-Daro, as with evident on cave paintings on the walls of excavated sites.
• During and around the Bronze age, to be more precise during the time of Great Epics (Ramayana and the Mahabharata) the arrival of Chariots changed the way of transportation in India, these were drawn by 1 or more horses depending upon the load carried.
• These chariots were decorated with gemstones, and painted fabulously and were used only by the Rich & Ruling class. Commoners still used bullock and ox carts, and were in most part pedestrians.
• Presently there are trucks, buses, tempos and so on as a means of road transport.

    

    Water Transportation

• Boats have been in use since times of Ramayana. Even Harappa civilization had water transport in the form of boats.
• Around 3000 BCE regions around the Indus Valley Civilization began to show extensive maritime trade activities which were both lengthy (in terms of distance) and frequent. Mesopotamian inscriptions clearly speak about Ships from Indus Valley carrying opper, hardwoods, ivory, pearls, carnelian, and Gold, during the region of the famous 'Sargon of Akkad'.
• The world's first Dock at Lothal (established around 2400 BC) was a marvel to most modern day experts, as it was properly designed away from the currents to avoid the depositing of silt.

Other Modes of Transport

•  Railways was introduced in 1850 by British in India.
• The first Indian, to have an airplane was the young Maharaja of Patiala, Bhupinder Singh, in 1910, who had a keen interest in aviation. Singh sent his Chief Engineer to Eurpoe for a study with orders to buy three planes, including a Bleriot monoplane and Farman biplanes, which arrived in the Punjab later that year.

Trade in India

• India is looked upon as a country with immense resources available through its length and breadth. India was famed for her fabulous wealth ever since the ancient times till the establishment of the British Empire.
• Indian trade history reflects that despite the frequent political upheavals during the 12th to the 16th centuries, the country was still prosperous.
• The political and economic policies followed by the Muslim rulers propagated the growth of towns in various parts of the country. These towns grew into trade and industrial centers which in turn led to the general prosperity.
• From the 16th to the 18th centuries, covering the two hundred years of Mughal rule, Indian urbanization saw further growth.

Exports and Imports

• Descriptions of the wide variety of excellent goods sold in the Indian markets of those days are found in the records of foreign travelers. India was well known for its textiles one of the chief items of export.
• Textiles from Gujarat were sent to the Arab countries and to South-east Asia.
• Trade history of India also shows hardwood furniture, embellished with inlay work was a very popular item for expert. Although the expensive carvings and inlays were inspired by the ornate Mughal style, the furniture was modeled on the European design.
• Carpets were used both in ancient and medieval India. But the skill of carpet weaving touched new heights only during the Mughal era in the 16th century.
• A larger variety of ornamental work in cut stones, ivory, pearl and tortoise shells were produced in South India. Pearl fishing was a major industry here. Indian arts and crafts patronized by Indian rulers, were unmatched for their beauty and skill and were very popular in the European countries.

Trade Partners

• History of Indian trade has extensive accounts about domestic trade in medieval India by the foreign travelers. With Delhi as a major trade centre, well - maintained roads linking various parts of the country facilitated domestic trade has been mentioned. River routes also promoted trade between different parts of the country.
• Different communities were known to dominate trade in various parts of the country. India's exports were seen to far exceed her imports both in the number of items as well as in volume. Arab traders shipped Indian goods to European countries through the Red Sea and the Mediterranean ports.

Position of Indian Sub - Continent in the World?s Economy

• Foreign trade was in the hands of both local and foreign merchants, as revealed by the Indian trade history.
• The magnitude of India's foreign trade during the medieval period can only be imagined. But India was always able to enjoy a favorable balance in her trade relations with other countries. With huge earnings from her exports of various commodities, the state coffers were amply stocked with gold and silver.
• By the time India gained Independence from the British in 1947, the economy was entirely geared to only trade. There were hardly any manufacturing facilities to suffice the needs of the growing Indian population.
• The past couple of decades in the history of Indian Trade have seen the country struggle to create manufacturing capacities across the board to be self sufficient. The government has been focusing on the same to enable broad basing the development to move the economy from an underdeveloped status to being a developed nation.
• India today stands at an over a trillion economy. Darjeeling tea, Indian khadi cotton, Bombay Duck, Kashmiri carpets, Indian spices and dry fruit are just a few of the famous gifts India has given to the world. The economic levels have improved in the urban and semi-urban areas.
• Indian trade history is remarkable. Indian trade has benefited and so has the world. The country has realized that at the end of the day, maximizing use of one's own resources is what makes all the difference

Role of Merchant Bankers in India

• Promotional activities
• Brokers in stock exchanges
• Project management
• Advise on modernisation and expansion
• Managing public issue
• Special assistance to entrepreneurs and small companies
• Services to PSITs
• Revival of sick units
• Portfolio management of sick units

Concept of Business

• Business refers to the occupation in which people regularly get themselves engaged in an activity with a view to earning profit.
• The activity may include production, purchase of goods for sale, or exchange of goods or supply of services to satisfy the needs of other people

Characteristics of Business

• It is an economic activity.
• It involves the production or procurement of goods and services.
• It includes the sale and exchange of goods and services for the satisfaction of human needs.
• It deals in goods and services on a regular basis.
• It aims at earning a profit.
• There is uncertainty of return.
• There is an element of risk.

Comparison of Business, Profession and Employment

Classification of Business Activities

Classification of Business Activities

Objectives of Business 

• Objectives of business means what the business people want to get in return for what they do.
• Primary objective of a business is to produce or distribute goods or services for a profit.
• But recently, it has become widely accepted that the motive of business is not to earn profits only.
• It has many other objectives which include:

Ø   Consumer satisfaction

Ø   Employee satisfaction

Ø   Innovation

Ø   Increase in productivity

Ø   Increase in goodwill.

Business Risk

The term 'business risk' refers to possibility of inadequate profits or even losses due to uncertainties, e.g. changes in tastes and preferences of consumers, strike, increased competition, change in Government policy, etc. These are of two types: speculative and pure.

Nature of Business Risks

• Business risks arise due to uncertainties.
• Risk is an essential part of every business.                                         
• Degree of risk depends mainly upon the nature and size of business.               
• Profit is the reward for risk - taking.                                              

Causes of Business Risks                                                       

• Natural causes                 
• Human causes                          
• Economic causes                 
• Physical causes
• Other causes.

Factors to be Considered while Starting a Business

• Selecting the line of business      
• Scale or size of business
• Choice of form of business organization
• Location of business enterprise    
• Financial requirement
• Physical facilities                
• Plant layout
• Competent and committed workforce                                          
• Tax planning
• Setting up the enterprise.

Words that Matter

1. Human Activity: The activity performed by a human being to meet his demands or needs is known as 'Human Activity'.                              
2. Economic Activities: Economic activities, which are undertaken to earn a living are called economic activities.
3. Non-economic Activities: Non-economic activities refer to those activities which are undertaken to satisfy social, psychological and emotional needs.
4. Business: Business refers to those economic activities, which are connected with production, purchase and sale of goods or supply of services with the main objective of earning profit.
5. Profession: Profession includes those activities, which require special knowledge and skill to be applied by individuals in their occupation to earn money.
6. Employment: Employment refers to the occupation in which people work for others and get remuneration in return, in the form of salary or wages.
7. Financing: It is concerned with mobilizing and utilizing funds for running a business enterprise.
8. Production: It involves the conversion of raw materials into finished products or generating services.
9. Marketing: It refers to all those activities which facilitate the exchange of goods and services from producers to the users or consumers, at a place they want, at a time they require and at a price they are prepared to pay.
10. Human Resource Management: It aims at ensuring the availability of working people who have the necessary skills to perform various tasks in enterprises.
11. Industry: Industry refers to economic activities, which are connected with conversion of resources into useful goods.
12. Commerce: Commerce is a wide term consisting of all those activities, which are necessary for sale, transfer or exchange of goods and services.
13. Primary industry: Primary industry includes all those activities, which are connected with the extraction and production of natural resources and reproduction and development of living organisms, plants, etc.
14. Secondary Industry: Secondary industry includes all those activities, which are connected with using the materials, which have already been extracted at the primary stage.
15. Tertiary Industry: Tertiary industry includes all those activities, which are concerned with providing support services to primary and secondary industries as well as activities relating to trade.
16. Trade: Trade refers to buying and selling of goods and services with the aim of earning profits.
17. Auxiliaries to trade: It refers to those activities which facilitate the purchase and sale of goods, which are meant for assisting trade.
18. Business risks: The term 'business risks' refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events.
19. Social objectives: Social objectives, which are desired to be achieved for the benefit of the society.
20. Human objectives: Human objectives refer to the objectives related to the individual needs of the employees of an organization.
21. Insurance: It refers to all those activities which are concerned with providing protection from various kinds of risks.
22. Advertising: It refers to all those activities which are concerned with providing information about the product to the consumers.
23. Merchant Bankers: Fundamentally, merchant corporations are financial institutions. They engage in business loans as well as underwriting. They mostly cater to large enterprises and individuals of high net worth. They perform a combination of consultancy and banking services. It was in 1967 that National Grindlays Bank introduced the concept of merchant banks in India.