Chapter

Business, Trade
&
Commerce
 Section
1
History of Trade and
Commerce
History of Trade and Commerce

Trade and commerce have played a

vital role in making India as a major
actor in the economic word in
ancient times
History of Trade and Commerce
Commercial cities like Harappa and
Mohenjodaro were some examples
for the business development of
ancient India
 History of Trade and Commerce

These civilizations had established

commercial connections with
Mesopotamia and traded in gold, silver,
copper, gemstones, beads, pearls, sea
shells etc.
Mesopotamian Civilisation
Present day Iraq, Kuwait, Iran and Syria
History of Trade and Commerce

There were different types of

coins and weighing practices
during that time
 Indigenous Banking System
As economic life progress, metallic money had
been introduced which in turn accelerated the
economic activities

Documents such as Hundi and Chitti were in

use for carrying out transactions in which
money passed from hand to hand
 Indigenous Banking System

Hundi as an instrument of exchange, it

involved a contract which warrant the
payment of money, the promise or order
which is unconditional and capable of change
through transfer by valid negotiation
 Indigenous Banking System
Indigenous banking system played a
prominent role in lending money and
financing domestic and foreign trade with
currency and letter of credit

With the development of banking, people

began to deposit precious metals with
lending individuals functioning as Bankers
 Hundies practiced by Indian Merchant Communities

Name of Hundi Category Function

Dhani-jog Payable to any persons – no liability over who

received the payment

Darshani Payable to a specific person (someone

Sah-jog
respectable). Liability over who received the
payment.
Firman-jog Payable to order

Dekhan-har Payable to the presented or bearer.

Payable to any person – no liability over who

Dhani-jog
received the payment, but payment over a fixed
Muddati term.
Firman-jog Payable to order following a fixed term.

Drawn against dispatched goods. If goods lost in

Jokhmi transit, the drawer or holder bears the costs and the
drawee carries no liability.
 Rise of Intermediaries
Intermediaries played an important role
in the promotion of trade. They helped
the producers especially in foreign
trade.

They consist of commission agents,

brokers and distributors for wholesale
 Transport
Land Transport and Water Transport were
popular in
ancient times

Roads as a means of transportation had

assumed key importance in the process of
growth especially in inland trade
Eg: The northern trade route from Bengal to
 Transport
Maritime trade was another important
branch of global trade
network

Muziris (ancient harbor) in Malabar Coast

(near to the present-day Cochin) has a
long history of international maritime trade
 Transport
Calicut was also an important market for
Chinese to acquire items like frankincense,
pepper (black gold), pearls, cotton etc.

Pulicat on Coromandel Coast (Tamil Nadu)

was a major port in the 17th century
Textiles were the principal export item from
Pulicat to Southeast Asia
 Trading Communities
Different trading communities strengthened
in ancient India and they dominated trade
in different parts of the country

Punjabi and Multani - Northern region

Traders Bhats - Gujarat and
Mahajan Rajastan
Chatt - Western India
- South India
 Merchant Corporations
They were autonomous corporations (guilds)
formed to protect the interests of the
traders

These corporations were organised on formal

basis, framed their own rules and code of
conduct, which even kings were supposed to
accept and respect
 Merchant Corporations
The guild chief directly dealt with the king or
tax collectors and settled the market toll
(tax) on behalf of its fellow merchants at a
fixed sum of money
Major Trade Centres
 Major Trade Centres
1
Pataliputra
Patna in Bihar today
Commercial town and major centre for
export
of stones
 Major Trade Centres
2
Peshawar City in
Very popular for exportPakistan
of wool and for the
import of horses. Major transactions
between India, China and Rome in the
first century
 Major Trade Centres
3
Taxila
City in Pakistan, also called
Thakshashila Popularly known as the
city of financial and commercial banks
 Major Trade Centres
4
Indraprastha
Located in the region of present-day
New Delhi
It was a commercial junction where most
routes leading the east, west, south and
north converged (joined)
 Major Trade Centres
5
Mathura City in
UP and people
It was an emporium of trade
here subsisted (lived) on
commerce

Many routes from South India touched

Mathura and Broach (Bharuch in
 Major Trade Centres
6
Varanasi City in UP
Well known centre for textile industries
and became famous for gold silk cloth and
sandalwood workmanship

It had links with Taxila and

Bharuch
 Major Trade Centres
7
Mithila City in
Bihar the seas by boats,
The traders in this city crossed
through Bay of Bangal to the South
China

They established trading colonies in South

 Major Trade Centres
8
Ujjain City in
MP
Different verities of clothes were exported
to different centres.

It had trade connections with Taxila and

 Major Trade Centres
9
Surat City in
Gujarat
It was an emporium of western trade
during
Mughal period

They were also famous for gold boarder

 Major Trade Centres
10
Kanchi
Present day Kanchipuram in Tamil
Chinese came here Nadu
to purchase pearls,
glass and rare stones and in return they sold
gold and silk
 Major Trade Centres
11
Madura City in Tamil Nadu
It was the capital city of Pandya dynasty who
controlled the trade of pearl and fisheries of
the Gulf of Mannar (shallow in between India
and Sri Lanka)
 Major Trade Centres
12
Broach
Present day Bharuch in
It wasGujarat
a major trade centre in Western
India
 Major Trade Centres
13
Kaveripatta
Present day Kaveripattanam in Tamil
Nadu
It was scientific in its construction as a city and
provided loading, unloading and strong facilities of
merchandise

It was also famous for perfumes,

cosmetics, scents, silk, wool, cotton and
 Major Trade Centres
14
Tamralipti
City in West Bengal (Kolkata)
It was one of the greatest ports
connected both by sea and land

It was linked by road to Banaras (UP) and

Taxila
 Major
Exports
and
Import
s
 Major Exports and Imports
Export Items:
Spices, wheat, sugar, indigo, opium,
sesame oil, cotton, parrot, live animals
and animal products etc.

Spice
s
 Major Exports and Imports
Import Items:
Horses, animal products, Chinese silks,
linen, wine, gold, silver, copper,
etc.

Chinese
silks
Position of Indian Subcontinent
in World Economy
(1AD to 1991)
 India in World Economy

From 1st to 7th centuries, India was

estimated to have the largest economy
in the world
The country was often referred as
‘Swarnabhumi’ and ‘Swarnadweep’ by
many writers and travelers like
Megasthenes, Faxian (Fa Hien), Xuanzang
(Huen Tsang) etc. because of its prosperity
 India in World Economy

During 18th century, the British empire began

to take roots in India, thereby the Indian
economic condition was slowly changed
from being an exporter of processed goods
to the exporter of raw materials and buyer
of manufactured goods
India begins to

Reindustrialise
 India begins to Reindustrialise
After independence, the process of
rebuilding the Indian economy have been
started
As a part of this the first five year
plan was implemented in 1952.

5 Year Plan
 India begins to Reindustrialise

Due importance was given to the

establishment of modern industries, modern
technological and scientific institutes, space
and nuclear programs
 India begins to Reindustrialise

To overcome the problems of lack of capital,

rise in population, huge expenditure on
defence, inadequate infrastructure etc. India
relied heavily on borrowings from foreign
sources and finally, agreed to economic
liberalization in 1991

Liberalization
 India begins to Reindustrialise

The Indian economy is one of the fastest

growing economies in the world today
The high growth sectors have been identified,
which are likely to grow at a rapid pace
 India begins to Reindustrialise

The recent initiatives of the Government of

India such as ‘Make in India’, ‘Skill India’,
‘Digital India’, Foreign Trade Policy 2015-
20 etc. is expected to help the economy in
terms of exports and imports and trade
balance
Section 2

Nature and Concept

of Business
Concept of Business
The term business is derived from the word
‘busy’.
Therefore, business means being busy.

Business refers to an occupation in which

people regularly engage in activities related
to purchase, production and / or sale of goods
and services with a view to earn profits
Concept of Business
Business is defined as the “repeated buying and
selling or manufacturing of goods and services with
an intention to earn profit which involves the creation
of wealth.”

Example; A factory, A retail shop,

Commission agents, brokers
Concept of Business
People undertake various activities to
satisfy their needs

These activities can be classified into two, they

are
Economic Activities and Non-Economic Activities
Economic
Non-Economic
Activities Activities

Human
Activities
Economic
Activities
 Economic Activities

Activities undertaken to earn money or

money’s worth and related to
production and exchange of wealth

Eg; Running a factory, Retail shop, Cultivating

land etc.
 Economic Activities

Characteristics of Economic Activities

a. Related to Production of Wealth

 Economic Activities

Characteristics of Economic Activities

b. To Satisfy Human Wants

 Economic Activities

Characteristics of Economic Activities

c. Expectation of Earning Money

 Economic Activities

Characteristics of Economic Activities

d. Basis for Economic Development of the

Society
Non-Economic Activities
 Non-Economic
Activities
Activities which are undertaken not for any
reward but for the personal satisfaction

Example: A mother looks after her

children, A house-wife cooks food for
the family, Visiting Temples etc.
Differences Between
Economic Activities &
Non-Economic
Activities
 Economic Activities Vs.
Non-Economic
Activities
To earn money or
money's worth For personal

satisfaction

Economic Non-Economic
Activities
Activities
 Economic Activities Vs.
Non-Economic
Activities
It can be measured
In terms of money It cannot be
Measured in
Monetary terms

Economic Non-Economic
Activities
Activities
 Economic Activities Vs.
Non-Economic
Activities
Money is
the reward Mental satisfaction
Is the reward

Economic Non-Economic
Activities
Activities
 Types of
Economic
Activities
 Types of Economic Activities

Business Profession Employment

Characteristics of
Business
 Characteristics of Business

1. An Economic Activity
It is undertaken with an object of earning
money or livelihood but not for love,
affection etc.

Eg: Purchase and sale of articles by a shop

 Characteristics of Business

2. Production or Procurement of Goods

and Services
Every business
should either
produce or acquire
the goods in
which it deals
Goods may consists of capital goods and consumer
goods Eg: Capital Goods: Machinery, Furniture,
Consumer Goods: Sugar, Pen, Notebook etc.
 Characteristics of Business

Services may include facilities offered to

consumers like transportation, banking,
electricity etc.
 Characteristics of Business
3. Sale or Exchange of Goods & Services
There should be sale or exchange of
goods or services between the seller and
buyer

Goods produced for personal consumption is not a

 Characteristics of Business
4. Dealing in Goods & Services on a
Regular Basis
A single transaction cannot be treated as a
business

Eg: A persons sells his old scooter even at a profit

cannot be treated as a business as there is no
 Characteristics of Business
5. Earning Profit

The business activity must be intended to

earn profit

Businessman should take all possible efforts to

maximise the profit by increasing sales volume
or reducing cost
 Characteristics of Business
6. Uncertainty of Return

No business can predict its future profit

 Characteristics of Business
7. Element of Risk
Every business is subject to risk due to
various reasons

Eg: Change in fashion, fire, theft, natural

calamities etc.
 Characteristics of Business
1. Economic Activity
2. Production of Goods and Services
3. Sale or exchange of Goods and Services
4. Regular Dealings
5. Earning Profit
6. Uncertainty of Return
7. Element of Risk
Comparison of Business
Profession & Employment
Business – Profession - Employment

1 Mode of establishment

Business Profession Employment

Based on Membership Appointme

entrepreneu of nt
r's Decision professional Order
body
Business – Profession - Employment

2 Nature of work

Business Profession Employment

Providing Performin
Rendering g work as
goods and
personalised per
services to
expert service
the public
services contract
Business – Profession - Employment

3 Qualification

Business Profession Employment

Prescribe As
No prescribed
d
minimum by the
qualificati
qualificati employer
on and
on
training
Business – Profession - Employment

4 Reward of return

Business Profession Employment

Salary
Profi Fee or
t s Wage
Business – Profession - Employment

5 Capital investment

Business Profession Employment

Large Limite
capital d No
based on capit Capit
the size of al al
business
Business – Profession - Employment

6 Risk

Business Profession Employment

Hig Littl No
h e Ris
Ris Ris k
k k
Business – Profession - Employment

7 Transfer of interest

Business Profession Employment

Not Not
Transferabl Transferab
Transferab
e le le
Business – Profession - Employment

8 Code of conduct

Business Profession Employment

Profession
No code
al code of Laid down
of
conduct by the
conduct
followed employer
is
prescribe
d
Business – Profession - Employment

9 Examples:

Business Profession Employment

Jobs in
CA, Legal, banks,
Shop, Medical insurance,
Factory Profession Govt.
etc. etc. departments
etc.
 Comparison: Business, Profession and Employment
Basics Business Profession Employment

Mode of Entrepreneur’s Membership of Contract

1
Establishme decision and legal a professional of
nt formalities body employme
nt

Rendering
2 Nature of work Providing goods personalized As per the
and services to and expert contract
the public service

Prescribed
3 Qualification No minimum Prescribed by
qualification by
the professional the employer
qualification
body

4 Reward or return Profit Fees Salary or wages

5 Capital High Limited No capital

Investment
 Comparison: Business, Profession and Employment
Basics Business Profession Employment

6 Risk High Limited risk Little risk

7 Transfer of Possible Not possible Not possible

interest

8 Code of conduct Not prescribed Prescribed by Laid down by

the the employer
professional
body

Jobs in banks,
CA, Legal,
9 Examples Shop, Factory etc. insurance,
Medical govt.
Profession etc. departments
etc.
 Classification of
Business
Activities
Classification of Business Activities

Industry Commerce
Classification of Business Activities
Classification of Business Activities
Industry

Industry refers to that part of business

which is concerned with the production
of goods and
material

An industry may be classified into primary

industry, secondary industry and
tertiary industry
Types of
Industries
 Types of Industries
Primary Industry

Engaged in extracting,
producing and processing of
natural resources

Eg: Extractive
industries and
genetic industries
Classification of Primary
Industries
Classification of Primary Industries
Extractive

Industries
They
are
engage
d in the
extracti
on
( collec
tion) of
Eg:
useful Mining, fishing, quarrying
Classification of Primary Industries
Extractive

Industries
The products of these industries are
either directly consumed or used as
raw materials by other industries

Coa
l
Classification of Primary Industries
Genetic
Industries
Engaged in the reproduction
or multiplication of plants and
animals

E.g. Plant nurseries, Poultry farms, cattle

breeding farms etc.
 Types of Industries
Secondary Industries

They are concerned with the

materials which have already been
produced at the primary stage
Oil Refinery

Eg: Manufacturing industries

and Construction
industries
 Classification of
Secondary
Industries
 Classification of Secondary Industries
Manufacturing
Industries
Engaged with the conversion of
raw materials into finished
goods

E.g: Cotton into textiles, timber into

furniture etc.
Classification of Secondary Industries
Manufacturing
Industries

They change the form of goods i.e.

raw material into finished goods
and thus create form utility

Raw Materials
for
Cement
Classification of Secondary Industries
Manufacturing
Industries
They produce Consumer Goods,
Industrial Goods and Capital
Goods
 Types of
Manufacturing Industries
 Types of Manufacturing Industries
a Analytical Industries

Analyses and
separates
different
elements from
the same
materials
 Types of Manufacturing Industries
b Synthetical Industries
Combines various ingredients into a
new product

Eg: Cement is produced from Lime,

Silica, Magnesia etc.
 Types of Manufacturing Industries
c Processing Industries
It involves successive
stages for manufacturing
finished products
Paper Making Process

Eg: Sugar, Paper

 Types of Manufacturing Industries
d Assembling Industries
Assembles different component
parts to make a new
product

Eg: Car, T V, Computer, Mobile Phone

Classification of Secondary Industries
Construction
Industries
Engaged in the construction of
buildings, dams, roads,
bridges etc.

They use the products of

manufacturing industries and
extractive industries
 Types of Industries
Tertiary Industries

They are providing support

services to primary and
secondary industries and it form
part of commerce
Insuranc
e

Eg: All service activities which are auxiliaries

to trade like transport, banking,
insurance etc.
Commerce
Commerce
It is concerned with buying, selling and
distribution of commodities and it is an
organized system for exchange of goods and
services in between the businessman and the
customers
Commerce
It is also concerned with the marketing
aspects of business, i.e. supply of right
type of goods to the right persons, at
the right time and at the
right price

:. Commerce includes trade and aids to

Commerce

Commerce

Trad Aids to
e Trade
Commerce

Definition

The sum total of all those activities

which are involved in the removal of
hindrances in the process of exchange
of goods
Functions of
Commerce
Functions of Commerce
1. Removal of Hindrance of Person
It refers to the lack of contact
between the producers and
customers

Here the trader acts as an intermediary among

them and customers are able to find out the
products which they are wanted from the
market
Functions of Commerce
2. Removal of Hindrance of Place
Producers and customers are in distant
places, hence the commodities should
be transferred from the production
centre to the customers

This problem can be solved by the

system of commerce by means of
transport, packing and insurance
Functions of Commerce
3. Removal of Hindrance of Risk
Goods and properties of business are
subject to various risk such as fire,
theft, damage etc.,

They can be protected by

Functions of Commerce
4. Removal of Hindrance of Time
There may be a gap between the
production and consumption as the
production is carried out in anticipation of
future demands
Therefore, it becomes necessary to
store the goods until they are sold

This problem can be solved by

Functions of Commerce
5. Removal of Hindrance of Knowledge
Knowledge of customers about the
products and services offered by business
organisations is a major problem in
business

Advertising helps in the removal of

hindrance of knowledge among
Functions of Commerce
6. Removal of Hindrance of Finance
The problem of finance can be handled by
banks, which form part of
commerce

It will also help the businessman in

exchange of money between different
persons at different places
 Functions of Commerce
1. Removal of Hindrance of Person
2. Removal of Hindrance of Place
3. Removal of Hindrance of Risk
4. Removal of Hindrance of Time
5. Removal of Hindrance of
Knowledge
6. Removal of Hindrance of Finance
 Make in India

It is an initiative launched by the

Government of India on 25th September
2014, to encourage national and
multinational companies to manufacture
their products in India.
 Make in India
Its major objectives are job creation and
skill enhancement in 25 sectors of the
economy.
Some of them are, Automobile, Aviation,
Biotechnology, Chemicals, Construction,
Defense, Electrical Machinery, Food processing, I
T, Oil and Gas, Media and Entertainments,
Mining, Railways etc.
Trade
Trad
e
Buying and selling of goods, which
involves the exchange of commodities
for money or money’s worth
Types of Trade

Trad
e

Home Foreign
Trade
Trade
Types of Trade

Home Trade
It is also known Mumb
as domestic ai

trade or
internal trade Kochi

Buying and selling of goods within the

country and both the buyer and seller
should belong the same nation
Types of Trade

Home

Trade
Wholesale Retail
Trade
Trad
e
 Types of Trade
a Wholesale Trade
Buying and selling in large
quantities

A wholesaler buys goods directly

from the producers and sells them
to the retailers
 Types of Trade
b Retail Trade
Buying and selling of goods in small
quantities

A retail trader buys goods from the

wholesalers and sells them to the
customers
Types of Trade

Foreign
Trade
Export Import

Entrepot
Types of Trade
Foreign Trade
It is also known as External
trade or international
trade

It involves the buying and selling of

goods and services in between the
persons belonging to two or more
countries
 Types of Trade
a Export
Sale of goods to foreign
countries
 Types of Trade
b Import
Purchase of goods from foreign
countries
 Types of Trade
c Entrepot
Importing goods from one country for the
purpose of exporting them to some
other countries

Englan Indi Chin

d a a
 Types of Trade

Home Trade Foreign Trade

Wholesale Trade Retail Trade

Export Trade Import Trade Entrepot Trade

A i d s t o Tr a d e
(AuxiliariestoTrade)
Aids to Trade

The activities which assist trade are

called Aids to Trade or Auxiliaries
to Trade
 Aids to Trade
Aids to trade includes Bankin
Transport, Insurance, Warehousing, g,
Advertising etc.

These service enterprises facilitate

movements, finance, risk coverage,
storage, and sales
promotion of goods
 Aids to Trade
1 Transport and Communication
Usually production takes place in certain
locations and consumption all over
the country

This problem is removed by transport

through various modes such as road,
rail or water transport
Aids to Trade
Along with transport, Communication is
very essential, which helps the producers,
traders and consumers in exchange of
information

Postal service, telephones and other

modern means of communication may
be regarded as auxiliaries to business
Aids to Trade
2 Banking and Finance
All business concerns need fund for
acquiring assets, raw materials and
meeting day today
expenses

Finance is the foundation of all

business provided by
Aids to Trade
How banks help the business ?
Banks accept deposits from the public and
provide credit facilities for business

They lend money (O/D, CC, Loans),

discounting of bills, collection of cheques,
remittance facilities and various other
Aids to Trade
3
Insurance
Insurance provides protection against the
risk of loss due to accident, fire,
earthquake, theft, damage of goods in
stock and transit

On payment of a nominal amount called

premium, the amount of loss or damage is
compensated by the insurance company
Aids to Trade
4 Warehousing
Production is always in anticipation of
future demands, so that the products
are to be kept in good condition until
they are sold

Warehouses facilitates storage of

goods and stabilises prices by
Aids to Trade
5 Advertising
It helps to reach millions of
customers for promoting
sales and giving information about
the product

Thus advertising
makes possible
marketing of goods
and services on a
large scale
 A i d s t o Tr a d e
(AuxiliariestoTrade)

1. Transport and Communication

2. Banking and Finance
3. Insurance
4. Warehousing
5. Advertising
Objectives of
Business
 O b j e c t ive s o f B u s i n e s
a
Market Standing
It refers to the position of an enterprise
in relation to its competitors by
providing quality products and better
service to its customers
 O b j e c t ive s o f B u s i n e s
b
Innovations (Novelty)
Innovation means the introduction of
something new to the market. It may be
a new design, new quality for the
existing product, new method of
production etc.

1990's
 O b j e c t ive s o f B u s i n e s
c
Productivity
Every enterprise should aim at greater
efficiency and productivity by the best
use of available resources
d O b j e c t ive s o f B u s i n e s
Physical and financial
resources
Acquiring physical resources like
buildings, plant and machinery, offices
etc. and financial resources or fund for
its operations and ensure its efficient
use
 O b j e c t ive s o f B u s i n e s
e
Earning profits
Profit is regarded as the life-blood
business
of a to survive and to make
growth and development of the
enterprise
 O b j e c t ive s o f B u s i n e s
f
Manager performance and
development
The enterprise should take much
initiative to improve the efficiency of its
managers by conducting various
programs to motivate them
 O b j e c t ive s o f B u s i n e s
g
Worker performance and attitude
Every enterprise should aim at
improving its workers performance and
their positive attitude
 O b j e c t ive s o f B u s i n e s
i
Social responsibility
It refers to the social obligations of
business firms to contribute
resources for solving social problems
and to work in a socially desirable
manner
 ObjectivesofBusiness
a) Market Standing
b) Innovations
c) Productivity
d) Physical and Financial Resources
e) Earning Profits
f) Manager Performance
g) Worker Performance
h) Social responsibility
BusinessRisk
 BusinessRisk
Risk = Possibility of loss
It can be defined as the chances of
loss due to certain uncertain events
in the future
 BusinessRisk

Types of
Risk

Speculative Pure
Risk
Risk
 BusinessRisk
Speculative Risk
It involves both chances of gain or
loss.
If the market condition is favourable
it will result in gain, otherwise, loss.

It arises due to change in demand and

supply, change in taste and habits of
 BusinessRisk
Pure Risk
Possibility of loss or even no loss.
If such events take place, it may
result in loss, non-occurrence of such
events results in absence of loss,
instead of gain

It arises due to fire, theft, earthquake,

 NatureofBusinessRisk
1
It arises due to
uncertainties
Lack of knowledge about what is
going to happen in
future
Govt.
P l o id
t ic

Policy
as

gs r
Av

Pa e
B a pe
Us

Eg: Change in demand, Govt. Policy,

Epidemic like Corona Virus
 NatureofBusinessRisk
2
It is an essential part of every business
Every business has its own
risks, no business can
avoid risk

Risk can be minimised but cannot be

 NatureofBusinessRisk
3
Degree of risk depends on the nature and
size of business

Eg: 1. Business dealing with fashionable items has

a high degree of risk
2. A large scale business has high risk than small
scale
 NatureofBusinessRisk
4
Profit is the reward for bearing risk
An entrepreneur takes risks
under the expectation of
higher profit
No risk
means
no gain
 Methodsof
dealing with Risk
 H o w to d e a lw i t h B u s i n e s s R i s k
Methods of dealing with risk:

1.Not to enter high risky transactions

2. Take precautionarymeasures like
fire fighting equipments etc.
3. Take an insurance policy to
cover various risks.
4. Take measures like provision for bad
debts, investment fluctuation fund
etc.
 Causesof
Business Risk
 CausesofBusinessRisk
1
Natural Causes
Risk due to natural
calamities

It may include damages from

flood, fire,
 CausesofBusinessRisk
2
Human Causes
It may arise due to certain human
activities

Eg: Theft, bad debt, mistakes,

accidents etc.
 CausesofBusinessRisk
3
Economic Causes
It includes uncertainties relating to
demand for products, competition, price,
change in technology, rise in interest
rate, higher taxes etc.
 CausesofBusinessRisk
4
Other Causes
Political disturbances, mechanical
failures, change in exchange rates,
etc. come under this category
 Natural

Causes
Other Causes Human
Causes of
Risk Causes

Economic
Causes
 Starting a
Business
BasicFacto
rs
Starting a Busines - Basic Factors
1
Selection of line of business
Nature and type of business that
an entrepreneur should choose to
start his business

Jeweller Textile
y s
 Starting a Busines - Basic Factors
2
Size of the firm
The promoter has to decide the size of
business, which may be either small
scale, medium scale or large scale
depends on the financial stability,
future demand etc.

Small Medium Large

scale scale scale
Starting a Busines - Basic Factors
3
Choice of form of ownership
The promoter must decide whether he
wants to start a sole proprietorship
concern, partnership firm, private
company, public company, or
cooperative society

Sole Partnershi
 Starting a Busines - Basic Factors
4
Location of business
It must be decided on the basis of availability
of land, electricity, water, accessibility
to market, transportation, scope for
expansion etc.

Unscientific location affects the

efficiency and profitability of
Starting a Busines - Basic Factors
5
Financing the proposition
(Capital needs)
The promoter has to decide
about the
requirement of capital and
its sources
Deposits SharesDebentures

Loans

He has to consider the sources like shares,

debentures or bank loans, cost of capital
Starting a Busines - Basic Factors
6
Physical facilities
It means the resources used to
convert raw material into
finished goods

Eg: Buildings, machines and equipments,

skilled and unskilled workers, good quality
raw materials etc.
Starting a Busines - Basic Factors
7
Plant lay out
A proper arrangement of machines,
equipment and workers will result in
reduction of wastages, better use of
available space, safety and security to
workers etc.
Plant
Lay out
of
Recyclin
g
Glass
Bottles
 Starting a Busines - Basic Factors
8
Competent and committed work force
A proper manpower planning is
necessary to calculate the number of
employees (skilled and unskilled) to be
appointed in various positions, and their
qualities
Starting a Busines - Basic Factors
9
Tax planning
It means to minimize the taxes through
better planning about location (tax free
zones), size of business etc.

Tax planning does not mean non-payment

of tax
 Starting a Busines - Basic Factors
10
Launching the enterprise
Finally the entrepreneur launch his
business by mobilizing necessary
resources, starting production process and
initiating sales promotion activities
 Starting a Busines Basic Factors
1. Selection of line of business
2. Size of the firm
3. Ownership
4. Location
5. Capital Needs
6. Physical Facilities
7. Plant Lay Out
8. Competent Work Force
9. Tax Planning
10. Launching the Enterprise