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Title: Chapter 14: Stress and Burnout


1
UNIT - IV
Introduction to Market Pricing policies
2
Introduction to Market
  • It is a process of Buying and selling about
    commodity
  • Its includes various commodities
  • Its includes goods and services

3
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.

4
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.
5
Features of Market
  • Commodity
  • Buyers and Sellers
  • Area
  • Relationship
  • Service

6
Factors governing Market Structure
  • Number of Sellers
  • Number of Buyers
  • Product differentiation
  • Conditions of Entry in the Market

7
Classification of Market
Classification
On the basis of Area
On the basis of Time
On the basis of competition
Local Market
Very Short term
Perfect Competition
Imperfect Competition
Short term
National Market
1.Monopoly 2.Monopolisic 3.Duopoly 4.Oligopoly
Long term
International Market
Very Long term
8
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.

9
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
10
Perfect Competition Market (Diagram)
Y
D
25000 20000 15000 10000 5000
S
D
S
O
5 10 15 20 25
X
11
Perfect Competition Market (Diagram) 1.Change
in Demand
Y
D1
D
E1
D2
P1 P P2
E
E2
D1
D
D2
O
X
M2 M M1
12
Perfect Competition Market (Diagram) 1.Change
in Supply
S2
Y
E2
S
E
P1 P P2
S1
S2
E1
S
S1
O
X
M2 M M1
13
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

14
Price / Output determination in perfect
competition 1.Shot run
MC
Y
AC
ARMRPRICEAC
C
MC Marginal Cost ACAverage Cost ARAverage
Revenue MRMarginal Revenue EEquilibrium
PRICE/COST
F
E
O
X
Q
OUTPUT
15
Price / Output determination in perfect
competition 1.Long run
LMC
Y
LAC
ARMRPRICEAC
P
MC Marginal Cost ACAverage Cost ARAverage
Revenue MRMarginal Revenue EEquilibrium
LMCLong run Marginal cost LACLong run Average
cost
PRICE/COST
O
X
Q
OUTPUT
16
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
17
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 MCAR (Price) MCltAR (price)
Price discrimination Same price is charged from every customer. There is price discrimination
18
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.

19
Types of Monopolies
  • Basically 2 types
  • Simple Monopoly
  • Discriminating Monopoly
  • Another 2 types
  • Private Monopoly
  • Public Monopoly

20
Causes responsible for emergence of Monopoly
  • Natural factors
  • Legal factors
  • Social factors
  • Cost factors
  • Heavy investment

21
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

22
Price discrimination under Monopoly competition
Y
Revenue
AR
MR
O
X
Quantity
23
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

24
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

25
Curve analysis
  • Revenue Curve (under Perfect)
  • Revenue Curve (under Monopoly)
  • Revenue Curve (under Monopolistic)

26
Curve analysis (contd..)
Under perfect Market
Under Monopoly Market
Under Monopolistic Market
Y
Y
Y
R E V E N U e
R E V E N U e
R E V E N U e
AR
AR
MR
MR
O
O
O
X
X
X
Quantity
Quantity
Quantity
27
Oligopoly
  • Oligopoly is an important form of imperfect
    competition
  • Oligopoly means few and poly means sellers.
  • Oligopoly refers only few sellers or firm.

28
Types of Oligopoly
  • Discriminating oligopoly
  • Pure oligopoly

29
Features of Oligopoly
  • Few firms
  • Nature of the product
  • Inter dependence of firm
  • Complex market structure
  • Selling costs

30
Duopoly
  • Duo means two and poly means seller
  • Its a two seller market
  • It a second important market in the imperfect
    competition

31
Pricing methods
  • Its a part of value of commodity
  • Price include profitcost
  • Its capacity of a product or commodity in the
    market

32
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.

33
Objectives of pricing
  • To maximize the profit
  • To increase sales
  • To increase the market share
  • To satisfy the customers
  • To meet the competition

34
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.

35
Types of pricing methods
  • Cost based pricing methods
  • 1. Cost plus pricing
  • 2. Marginal cost pricing
  • Competition based pricing
  • 1. Sealed big pricing
  • 2. Going rate pricing

36
Types of pricing methods (contd..)
  • Demand based pricing
  • 1. Price discrimination
  • 2. Perceived pricing

37
Types of pricing methods (contd..)
  • Strategy based pricing
  • 1. Market skimming
  • 2. Market penetration
  • 3. Two part pricing
  • 4. Block pricing
  • 5. Commodity bundling pricing
  • 6. peack load pricing
  • 7. Cross subsidization pricing
  • 8. Transfer pricing

38
Strategies of pricing
  • Pricing matching
  • Promoting brand loyalty
  • Time- Time pricing
  • Promotional pricing
  • Target pricing

39
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40
UNIT I11INTRODUCTION TO MARKETS AND PRICING
STRATEGIES
41
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.
42
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
43
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

44
Classification on the basis of Area covered or
location Local market National
market International market
45
Classification on the basis of time very short
period market Short period market Long period
market
46
Classification on the basis of degree of
competition Perfect market Imperfect
market Imperfect market take several
forms Monopoly Duopoly Oligopoly Monopolistic
competition
47
Types of competition
  • Competition is of two types
  • Perfect competition
  • Imperfect competition

48
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.
49
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

50
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
51
FEATURES OF 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

52
  • 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.

53
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

54
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

55
Cost out put relationship

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
56
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57
PRICE OUTPUT DETERMINATION UNDER MONOPOLY
58
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.
59
PRICING OBJECTIVES
  • Maximize profits
  • Increase sales
  • Increase market share
  • Satisfy customers
  • Meet the competition

60
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

61
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

62
Types of Business Organizations
63
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

64
Features of business
  • Entrepreneur
  • Exchange of goods and services
  • Profit motive
  • Risk and uncertainty
  • Creates utility
  • Utility may be
  • Form utility
  • Place utility
  • Time utility

65
Forms of business organizations
  • The following are forms of business organizations
    Based on ownership
  • Sole trader or proprietorship
  • Partnership
  • Joint stock company
  • Cooperative society

66
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

67
  • 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.

68
  • 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.

69
  • 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.

70
  • 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.

71
  • Factors affecting the choice of form of business
    organization
  • Ease of formation and closure
  • Specialization/division of labor
  • Scope to raise large finances
  • Extent of liability
  • Transfer of ownership
  • Continuity
  • Pace of decision making
  • Personal contact with customers
  • Degree of flexibility
  • Degree of taxation

72
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
73
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

74
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

75
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

76
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.

77
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

78
Partnership Deed
  • The written agreement among the partners is
    called partnership deed.
  • Partnership deed contains terms conditions
    governing the working of partnership

79
Contents of partnership
  • Names and addresses of the firm and partners
  • Nature of the business proposed
  • Duration
  • Profit sharing ration of partners
  • The amount of salary or commission payable to the
    partners
  • Procedure to value good will of the firm at the
    time of admission of a new partner, retirement of
    death of a partner
  • Allocation of responsibilities of the partners in
    the firm
  • Procedure for dissolution of the firm
  • Rights, Obligations and Liabilities of partners.

80
Kinds of partners
  • Active partner or working partner
  • Sleeping partner
  • Nominal partner
  • Partner by estoppels
  • Partner by holding out
  • Minor partner

81
  • 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.

82
  • 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.

83
  • 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.

84
  • 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.

85
  • 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.

86
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.

87
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.

88
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.

89
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

90
  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.

91
  • 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.

92
  • 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.

93
  • 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.

94
  • 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.

95
Formation of Joint Stock company
  • There are two stages in the formation of a joint
    stock company. They are
  • To obtain Certificates of Incorporation
  • To obtain certificate of commencement of Business

96
  • 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

97
  • 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
  • Name clause
  • Situation clause
  • Objects clause
  • Capital clause and
  • Liability clause
  • Subscription clause.

98
  • 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.

99
  • 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

100
  • 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.

101
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

102
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

103
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.

104
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.

105
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.

106
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.

107
Forms of Public enterprises
Departmental undertaking
Public corporation Government
company
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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

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  • 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.

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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.

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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
  • Life Insurance Corporation of India,
  • Unit Trust of India
  • Industrial Finance Corporation of India,

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  • 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

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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.

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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.

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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.
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UNIT - V
BUSINESS NEW ECONOMIC ENVIRONMENT
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Introduction to Business
  • Its Should be a economic activity
  • Its a Process of commodities
  • Its Relating to society
  • Its Concerned production, purchases, sales,
    goods and services
  • It must have profit motive

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Meaning and Definition
  • Business units have their own separate
    Independent entity.
  • It may be managed controlled by private
    entrepreneur.
  • 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 under specific self or operating
    policies.

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Choices of Business Organizations
  • Easy to start Easy to close
  • Division of labor
  • Large amount of resources
  • Liability
  • Secrecy
  • Transfer of ownership
  • Management Control
  • Continuity
  • Quick decision making
  • flexibility

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Factors of Business Organization
  • Availability of Raw materials
  • Transport facilities
  • Communication facilities
  • Financial facilities
  • Insurance facilities
  • Ware house facilities

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Forms of Business Organization
  • PRIVATE SECTOR
  • PUBLIC SECTOR
  • JOINT SECTOR

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Forms of Business Organization
  • PRIVATE SECTOR
  • Sole trader
  • Partnership firm
  • Joint Hindu family
  • Co operative society
  • Joint stock company

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Forms of Business Organization
  • PUBLIC SECTOR
  • Departmental organizations
  • Public corporation
  • Government companies

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Forms of Business Organization
  • JOINT SECTOR
  • Private sector
  • Public sector

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Characteristics of Private sector
  • Profit motive
  • No state participation
  • Private ownership
  • Independent Management

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Characteristics of Public sector
  • Government control
  • Service motive
  • Separate owner
  • Accountability

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Characteristics of Joint sector
  • Joint share capital
  • Combined Management
  • Mixed ownership

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Sole proprietorship
  • According to Peterson Ti has no legal existence
    a part from the proprietor himself he is the
    firm.
  • It s also called sole trade, single ownership,
    individual ownership one man business.

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Features of Sole proprietorship
  • Easy formation
  • Limited Resources
  • Un limited liability
  • Freedom of choices of the business
  • Prompt decisions

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Advantages of Sole proprietorship
  • Easy formation
  • Prompt decisions
  • Secretary
  • Economy
  • Personal touch
  • Freedom of good will

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Disadvantages of Sole proprietorship
  • Limited resources
  • Limited managerial efficiency
  • Unlimited liability
  • Hasty decisions
  • Temporary existence

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Evaluation of Sole proprietorship
  • Merits
  • Maintain the control of the business
  • Services of all specialists
  • Independent decisions
  • Demerits
  • Lack of responsibilities
  • Increase in expenses
  • Risk will not to be shared

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Partnership Firm
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 any one of them acting for all.
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Features of Partnership firm
  • Agreement b/w two more persons
  • Legal business
  • Profit motive
  • Unlimited liability
  • Utmost good faith
  • Mutual agency

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Evaluation of Partnership firm
  • Merits
  • Easy formation
  • More resources Talents
  • Legal protection to minor
  • Personal relation
  • Lesser risk
  • flexibility

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Evaluation of Partnership firm
  • Demerits
  • Unlimited liability
  • Limited resources
  • Lack of quick decisions
  • Temporary life
  • Slackness
  • Lack initiative

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Registration of partnership firm
  • The Name of the firm
  • Place address of the firm
  • Names of those places where the firm intends to
    work
  • The names full address of the all partners
  • The duration of the firm
  • Dates of which various partners joined the firm

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Status of Minor partner
  • Right to share profit to the firm
  • Right to share the assets of the firm
  • Right to understand the books of accounts
  • Right to file suit in the court

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Co-operative Societies
  • According to Seligman Co-privation in its
    technical scene means abandonment of competition
    in distribution production elimination of
    middleman of all kind.
  • According to Horace Co-operative is an
    association of person as usually of limited
    means, who have voluntary joined together to
    achieve a common economic end through the
    formation of democratically controlled business
    organization.

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Features of Co-operative Societies
  • Registered society
  • Membership
  • Capital
  • Transfer of shares
  • Reserve fund
  • Mutual help
  • Government facilities
  • Equality of vote
  • Voluntary organization
  • Service motive

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Types of Co-operative Societies
  • Consumer co-operative societies
  • Producers co-operative societies
  • Credit co-operative societies
  • Miscellaneous co-operative societies

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Types of Co-operative Societies
  • Merits
  • Easy formation
  • Limited liability
  • Voluntary membership
  • Democratic management
  • Permanent life
  • Demerits
  • Limited capital
  • In efficient management
  • Mutual conflict
  • Absence of secrecy
  • No govt. control

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Joint Stock Companies
According to Hancey A Joint stock company is
a voluntary association of persons for profit,
whose capital is divided in to transferable
shares and ownership is required for its
membership.
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Types of Joint Stock Companies
On the basis of Incorporation
On the basis of Liability
On the basis of Ownership
Charted companies
Un limited
  • Public
  • Private
  • Government
  • Holding
  • Subsidiary
  • Foreign collaboration
  • Deemed
  • Other

Limited
Statutory companies
  1. By shares
  2. By Guarantee

Registered companies
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Evaluation of Co-operative Societies
  • Merits
  • Permanent existence
  • Limited liability
  • Availability of large capital
  • Transferability of shares
  • Economies of large scale
  • Tax relief
  • Demerits
  • Excessive legal formalities
  • Fraud by promotes
  • Speculation by shares
  • Lack of secrecy
  • Evils of large scale business

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Public Enterprise
  • Public enterprises or Public sector enterprises
    are owned, managed controlled by the
    government.
  • If may be central government, State government or
    local body individually or Jointly.
  • The whole or major part of capital is contributed
    by the govt.

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Forms of Public Enterprise
  • Departmental undertaking
  • Statutory Corporations
  • Government Companies

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Features of Govt. Departmental undertaking
  • Department of the government
  • Government Treasury
  • Staff from services
  • Full Government control
  • Meeting government needs

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Features of Statutory companies
  • Separate entity
  • Government control
  • Appointment of employees
  • Free from government budgeting
  • Managed by board of directors

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Features of Government companies
  • Formation
  • Separate legal entity
  • Source of capital
  • Management
  • Autonomy

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Changing business environment to post
liberalization scenario
  • Attention to world market
  • Improvement in work culture
  • Focus on capital / investment
  • Downsizing and right sizing
  • Awareness and stress on quality and RD
  • Scale economies
  • Brand building
  • Focus on business
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