FYBCOM SEM I COMMERCE PAPER I - PowerPoint Presentation

1. FYBCOM SEM ICOMMERCE PAPER IPROF. ANUJA BAPAT

2. SYLLABUSMODULE I: BUSINESSIntroduction to Business: Concept, Functions, Scope and Significance of business, Traditional and Modern Concept of business.Objectives of Business: Steps in setting business objectives, Classification of business objectives, Reconciliation of Economic and Social objectivesNew Trends in Business: Impact of Liberalization, Privatization and Globalization, Strategy alternatives in the changing scenario, Restructuring and Turnaround Strategies.

3. Introduction to businessThe term “Business” refers to commercial activities relating to production and distribution of goods and services for economic gain i.e. profit.“Business is an institution organized and operated to provide goods and services to society under the incentive of private gain.” –B.O.Wheeler.

4. Nature/Feature of Business

5. Functions of businessProduction FunctionInventory ManagementMarketing FunctionSales FunctionFinance FunctionHuman Resource ManagementResearch and DevelopmentPublic RelationsCorporate PlanningCorporate Social Responsibility

6. Scope of businessBusiness Industry Commerce Primary Trade Genetic Aids to Trade Extractive Manufacturing Construction

7. Scope of commerce Commerce Trade Aids to TradeInternal Retail WholesaleExternal Import Export Entrepot Warehousing Transport Communication Insurance Banking Advertising Salesmanship Mercantile Agents

8. Significance/importance of businessRole of businessTo business firms1.Achievement of objectives2.Corporate image3.Customer satisfaction4.Competitive Advantage5.Efficiency of business6.Expansion of business7.Economies o scale8.Optimum utilization of resources9.Research and development10.Relationships with society11.Social status To consumersAvailability of quality goods and servicesGoods at good priceBetter facilities and servicesCustomer satisfactionHigher standard of livingStatus to the customersTo society1.Economic growth2. Employment3. Regional development4. Revenue to the Govt.5.Social order6.Standard of living7.Capital formation8.Competition benefits to society9.Infrastructure development10.International relations

9. Difference between traditional and modern concept of businessPointsTraditionalModern MeaningIt places emphasis on profits.It aims to achieve a balance between profits, customer satisfaction and societal interest.Marketing researchDo not place emphasis on marketing research or customer feedback.Gives importance to marketing research and customer feedback.Nature of decision making reactive decisions in response to competitors decision.proactive decisions to gain competitive advantageOpportunity seekingadhoc search for new opportunity.ongoing search for new opportunities.

10. Difference between traditional and modern concept of businessPointsTraditionalModern Orientation is producer or seller oriented a customer and society oriented Pricing methodscost oriented pricing methodsmarket oriented pricing methodsPromotion Mixlimited emphasis gives importance Quality of ProductsFirms hardly place emphasis on R&D to improve quality and to develop new products.Professional managers place a lot of emphasis on R&D to improve quality and to develop new products.Area CoverageCaters mostly local market.operate over a large market even at global level.

11. Objectives of businessIt’s the aims of an organization. The objectives can be short term, medium term and long term. It includes: Sales, market share, profits, corporate image etc.“Objectives are the goals, aims or purpose that organization wish to achieve over varying period of time.”- Dalton E. McFarland

12. Steps in setting business objectives

13. Analyze internal environment:Physical, financial, human resources, policies and strategies, working conditions, management, Strengths and Weaknesses.2. Analyze external environment:Government policies, competitor’s strategies, consumer tastes and preferences, events in the international environment, technological development etc, Opportunities and threats.3. Values and beliefs of top management:Mission statement, vision of the organization, mentality of the top management etc4. Involvement of employees:Management by objectives (MBO), co-operation and commitment from sub- ordinates in achieving goals.

14. 5. Past performance of the firm:Provides direction, past objectives and developments.6. Setting of objectives: (SMART)SpecificMeasurableAttainableRealisticTime bound7. ImplementationOrganizing resourcesDirecting sub- ordinatesMotivating sub- ordinates8. Review Objectives are achieved ORDeviations : corrective measures, resetting of objectives etc

15. Classification of business objectives

16. I. Organic objectives of businessA. Survival: basic and primary objective to prevent from closure or exit from the market. The problems can be due to competition, changes in consumer behavior, technology etcProblems can be solved by:A. Cost reductionB. Customer relationship,C. Competitive advantage, D. Constant monitoring,E. Optimum utilization of resources F. Obtaining employees suggestions.

17. B. growthExpansion of business activities: new products or expanding existing product line or entering new markets.Internal Growth StrategiesProduct developmentMarket developmentMarket penetrationExternal Growth StrategiesMergersAcquisitions or takeoversJoint ventures

18. C. prestigePrestige or recognition in the market.Good corporate image.TCS, Infosys, Wipro etc.Ways to earn prestige:Quality productsRight pricePromotion mixCSR activitiesCorporate culture activitiesAfter- sales service

19. II. Economic objectives

20. III. Social objectivesCustomers: quality products, right price after- sales service.Dealers: supply on time, training to staff of dealers, incentives.Employees: wages and incentives, working condition, welfare facilities.Financial institutionsGovernment: taxes and duties, rules and regulations, aids to welfare activities.Shareholders: dividend regularly, information about progress and prospects, bonus sharesSuppliers: payment of dues, quality of supplies, trade terms.MediaCompetitors

21. IV. Human objectives

22. V. National objectives

23. Reconciliation (Balance) between social and economic objectivesBusiness is a part of society and so it has to balance between its social obligations and economic objectives.

24. Objectives can be reconciled by:Profit and Price (right prices with consumer’s interest)Profit and Research & Development (improvement in quality and reduction in costs and goods at lower prices)Profit and After- sales service (training and motivating employees for better services)Profit and Employees welfare (working conditions, welfare facilities, wages and salaries)Profit and taxes (pay taxes and duties to the government without any manipulation)Profit and Shareholder’s Interest: fair returns to shareholders in the form of dividendProfit and Social Development: part of profit to be utilized for social developmentBusiness Expansion and Social Interest: employment generation, better customer service, pollution control measuresBusiness Expansion and Competition: no negative tacticsBusiness Expansion and Supplier: no exploitation of suppliers

25. Distinguish between economic and social objectivesPointsEconomic ObjectivesSocial ObjectivesMeaningRelate to economic or financial aspects of the firmRelate to responsibilities of business towards the various stakeholdersPurposeHigher returns to the firmTo earn goodwillPrimary/SecondaryThey are the primary objectives of businessThey are the secondary objectives of businessScope Narrow scope. Achieved by only business firmsWider scope. Achieved by business and non business organization.Support from publicPublic may not support those firmsPublic strongly support those firmsOrigin Since longGained importance in 20th centuryinterestSatisfy’s the interest of the ownerSatisfy’s the interest of the society

26. New trends in businessLiberalization: Reduction of Government controls on the private sector.Privatization: Dereservation and Disinvestment of public sector.Globalization: Interlinking of domestic economy with the world economy. Reduction or withdrawals of custom duties, quotas, restrictions etc. and allow free flow of goods and services.NIP - New Industrial Policy - 1991

27. Impact of liberalizationPositive ImpactAbolition of Phased Manufacturing ProgrammeLiberalization of Industrial LocationsBroad Banding of IndustriesCompetition Act 2002DelicensingNegative ImpactAbolition of Phased Manufacturing ProgrammeLiberalization of Industrial LocationsBroad Banding of IndustriesDelicensingDomestic contents RM100% RM import - allowing6 industries – license – pollution created - Permission – locate - industryCar, tempo, truckSS > DD

28. Impact of PrivatizationPositive ImpactBenefits of DereservationBenefits of DisinvestmentNegative ImpactProblem of DereservationProblem of DisinvestmentPRODUCTIONSS > DDRECESSION

29. Impact of globalizationPositive ImpactReduction of Custom DutiesForeign Exchange Management Act, 1999Liberalization of Foreign Investment.Negative ImpactProblem for Domestic CompaniesProblem of Foreign InvestmentProblem of Foreign TechnologyGOODS SERVICESGOVT. BARRIERS XFREELY FDILPG

30. Strategy alternatives I Stable Growth Strategy II Growth Strategy III Retrenchment Strategy IV Combination StrategyLONG TERM PLANMKT SHARE 2%+ 2%+ 2%+ 2%PRODUCTS 12345MARKETS 134REDUCING/SELL UNITSAll the above strategies, followed Growth & retrenchment A B C X D

31. I. Stability strategyReasons:Performance levelProfitsRisk FactorResourcesEnvironment ExpertiseMarket ShareManagement PhilosophyMarket share 7%satisfactoryhappyGrowth x = risk xFinance HumanMachineriesExpert knowledgeLess Internal ExternalStable/favourableCA, legal advisor, company secretaryMkt share 10 %traditional

32. II. Growth strategyInternal GrowthExternal GrowthIntensificationDiversification1. Market Penetration2. Market Development3. Product Development1. VerticalForwardBackward2. Horizontal3. Concentric4. ConglomerateCollaboration or Joint VentureMerger and AmalgamationsTakeovers or AcquisitionsABFOREIGN COLLABERATIONABB sharesMaximum 30%Finance institutionCar dealercustomerIron & steelelectronicPharma textileABAB70%

33. Foreign collaborationImportance to domestic companyImportance to foreign collaboratorCapitalSkills DevelopmentTechnology TransferCompetitive AdvantageCorporate ImageEconomies of ScaleExpansion of BusinessRecovery of R & D ExpensesGoodwill in Foreign MarketInputs at Lower PricesIncentivesHigher ReturnsIndiaJapanGrow, expand, technology, m/c, R&DLARGE SCALEC.P.U. BULK PURCHASE, bulk distribute, heavy discount, fixed cost same, variable cost increases,---- total cost / no. of units manufacturingJapan Mfg unitTechnology R&D costITax holidayUSAUKSSingapore

34. Merger and amalgamationReasons/ Advantages:Competitive AdvantageDiversificationEconomies of ScaleFinancial BenefitsGrowthHigher Market ShareIncrease in GoodwillRevival of sick unitsEfficiencyB5%A12%AB17%R&D, technology- efficiency Higher returns at a lower costLARGE SCALE PRODUCTIONC.P.U.PROFIT/REVENUEB LTD. REVITAL TRAINING, MACHINARIESSave the taxProfit----taxProfit – training, m/c, E = R/CHERO –CYLESHONDA - BIKESAB

35. Takeover and acquisitionAdvantages:Easy Entry in Overseas MarketGrowth and ExpansionHelps to face Competition Market ShareGoodwillEconomies of ScaleTax BenefitsFinancial ResourcesXYSHARES

36. III. Retrenchment strategyDivestment Strategy: Dropping some of the products, markets or functions.Liquidation Strategy: Sell entire business unit. Close down the business.DISTRIBUTIONOUTSOURCESLOGISTICS UNITS/FACTORS --CLOSEReduction in no of activities.

37. Divestment Strategy - ReasonsAttractive offer from other firmBetter alternative for investmentConcentration on core businessDebt servicing problemMismatch of businessNegative cash flowsObsolete productsProblem of competitionTechnology up gradationReturns to shareholdersPharma – medicines and drugs,Health tonics, drinks, xDebt – loan burdenCloth/textilegarmentsFashion designingChemical goodsIncome< expensesoutdated

38. Liquidation Strategy Reasons:Accumulated lossesOffer for better priceDifficult to manage due to decline sales and low profitsFuture of business not certainDoes not match with current line of businessLegal Aspect:Compulsory winding up under the court orderVoluntary winding up: members, creditorsVoluntary winding up under the supervision of the court

39. Restructuring strategiesMergers: Horizontal, Vertical, ConglomerateTakeoversPurchase of Division: one of the unit is purchasedDivestiture:Demerger: one company split into several cos.Going Public: Pvt. Co is converted public ltd. coDebt-equity Swap: Converting debt capital into equity.Leveraged Buyout: step by step you purchase the another company.Buyback of Shares: co. purchases their own shares from the market.Changes - split of one company into two or three companiesPvt co. --------public ltd. coConverting borrowed capital into equity capital

40. Restructuring strategies10. Business Process Reengineering: change the manufacturing process11. Downsizing: reducing the no. of employees from the org.12. Outsourcing: some activities of the organization/business you get it done from outside13. Rehabilitation schemes:Settlement with CreditorsDivestmentStrict Control over CostsStreamlining of Operations…Changes 1000 workers 400 removed workersCar industryBody, engine, glass, tyers , seats, Size, shape, width No good performance

41. Turnaround strategy - essentialsCommunicationAvailability of ResourcesLeadershipLong-term ApproachReview of the Situation: Evaluation- internal and external : govt. policies, customer likes, technology, labour – management relationship. Support from Various Parties: employees, sh holders, creditors, suppliers……Viability of Business: feasibility, Convert a loss making unit into profit making once again.Quick, clear and complete

42. Turnaround strategy - stepsSetting up a Turnaround Committee: management people, consultants, employees – core committeeIndentifying the Causes of Losses: internal, externalInvestigation of Causes: detailed analysis: employees, customers, dealersAlternative Solutions: downsizing, debt –equity swap, divestment, concentrate profitable segmentAnalysis of Alternatives: cost – benefit analysisSelection of Best Alternatives: Communication of Turnaround Strategy: Organization and Allocation of Resources: ImplementationReview