Organisation of Commerce and Management वाणिज्य संघटन व व्यवस्थापन

Quick summary

Human activities are either economic (to earn money) or non-economic (for love, social service or religion). This chapter explains economic activities — business, profession and employment — the objectives of business, the role of profit, and the classification of business activities into industry and commerce (trade and auxiliaries to trade).

Key points

• Non-economic activities: done out of love, affection, religion, patriotism or social service, not for money (mother cooking for family).
• Economic activities: done to earn a living — business, profession, employment.
• Business: regular production or purchase and sale of goods and services to earn profit; involves risk and uncertainty.
• Profession: specialised knowledge and skill, membership of a professional body, code of conduct, fees (doctor, lawyer, CA).
• Employment: working for others under a contract of service for salary or wages.
• Business objectives: economic (profit, creating customers, innovation), social (quality goods at fair price, fair wages, employment, avoiding pollution), human (welfare of employees, job satisfaction), national (self-reliance, balanced regional development).
• Profit is the reward for risk; it is needed for survival, growth, expansion, goodwill and efficiency.
• Industry creates goods: primary (extractive — mining, fishing; genetic — poultry, nursery; agriculture), secondary (manufacturing and construction), tertiary (services — transport, banking, hotels, tourism).
• Commerce removes the gap between producers and consumers. It includes trade (home — wholesale and retail; foreign — import, export, entrepot) and auxiliaries to trade (transport, banking, insurance, warehousing, advertising, communication), which remove hindrances of place, finance, risk, time and information.

Important terms

• Business – economic activity for profit with risk.
• Profession – occupation needing special knowledge and professional body membership.
• Auxiliaries to trade – activities that help trade (aids to trade).
• Entrepot trade – importing to re-export.

Formats and formulas

5 important questions

Q1. Distinguish between economic and non-economic activities.

Economic activities are done to earn money (business, profession, employment); non-economic activities are done for love, religion or social service without money motive.

Q2. Explain any four objectives of business.

Earning profit, creating customers, supplying quality goods at fair prices, and employee welfare.

Q3. Explain the role of profit in business.

Profit is the reward for risk; it helps survival, growth, expansion, efficiency and goodwill.

Q4. Classify industries with examples.

Primary: agriculture, mining, poultry. Secondary: manufacturing, construction. Tertiary: banking, transport, tourism.

Q5. What are auxiliaries to trade? Name them.

Activities that help smooth flow of goods: transport, banking, insurance, warehousing, advertising and communication.

Exam tip

Draw the classification chart of business (industry and commerce) — it gives a complete answer in one picture.

Quick summary

Trade means buying and selling of goods and services for money. This chapter explains internal (home) trade — wholesale and retail trade with types of retailers — and international trade — export, import and entrepot trade — along with the export and import procedures.

Key points

• Internal trade: buying and selling within the country; no customs formalities; payment in national currency.
• Wholesale trade: buying in bulk from producers and selling in smaller lots to retailers. Services of wholesalers: to manufacturers (bulk orders, storage, finance, risk bearing, market information) and to retailers (credit, variety, storage, quick supply).
• Retail trade: selling in small quantities directly to consumers. Types: itinerant (hawkers, pedlars, street traders, cheap-jacks, market traders) and fixed shop (general stores, speciality shops, department stores, chain stores/multiple shops, malls, super markets, mail-order and e-retailing).
• International trade: trade between countries. Types: export trade, import trade, entrepot trade (import for re-export).
• Export procedure (main steps): receiving enquiry and order, obtaining licence/IEC code, letter of credit, production or procurement, pre-shipment inspection, excise/customs clearance, shipping order, loading and mate's receipt, bill of lading, preparing invoice and documents, sending documents through bank, receiving payment.
• Import procedure: trade enquiry, import licence/IEC, foreign exchange, placing indent/order, letter of credit, receiving shipment advice, bill of lading documents, customs clearance (bill of entry), taking delivery, making payment.
• Documents: Import-Export Code (IEC), letter of credit, bill of lading, mate's receipt, shipping bill, certificate of origin, bill of entry.

Important terms

• Wholesaler – link between manufacturer and retailer.
• Retailer – last link in the chain of distribution.
• Letter of credit – bank's guarantee of payment to the exporter.
• Bill of lading – document issued by the shipping company acknowledging receipt of goods; also a document of title.

Formats and formulas

5 important questions

Q1. Explain the services of wholesalers to manufacturers.

They place bulk orders, store goods, give finance, bear risk and supply market information.

Q2. Explain any three types of itinerant retailers.

Hawkers and pedlars move from place to place; market traders sell at weekly bazaars; street traders sell from footpaths at busy places.

Q3. Distinguish between wholesale and retail trade.

Quantity, buyers, capital and price — see the table above.

Q4. Explain the export procedure (main steps).

Enquiry and order, IEC and licence, letter of credit, procurement, inspection, customs clearance, shipment with bill of lading, sending documents and receiving payment.

Q5. What is entrepot trade? Give an example.

Importing goods and re-exporting them to another country, e.g., an Indian trader importing goods from Japan and re-exporting them to Africa.

Exam tip

Learn import and export procedures as numbered steps — they are 8-mark questions and order matters.

Quick summary

Small Scale Industries (SSIs), now called Micro, Small and Medium Enterprises (MSMEs), use small investment, local resources and more labour. This chapter explains their meaning and definition, importance, advantages, challenges, and the steps in setting up a small scale business.

Key points

• Small scale industries are classified under the MSMED Act, 2006 on the basis of investment.
• Textbook limits (investment in plant and machinery / equipment):

• (Note: from July 2020 the Government revised these limits using both investment and turnover. Write the textbook figures in the board exam unless told otherwise.)
• Importance: large employment with less capital, balanced regional development, use of local resources and skills, equitable distribution of income, contribution to exports and GDP, promotes entrepreneurship, supports large industries as ancillaries.
• Advantages: easy to start, quick decisions, personal touch with customers, flexibility, low overheads, less risk.
• Challenges: shortage of finance, lack of raw materials, outdated technology, marketing problems, competition from large firms, lack of skilled labour, infrastructure problems, delayed payments, government procedures.
• Steps in setting up a small business: (1) select the product/service; (2) decide the form of ownership; (3) select the location; (4) market survey and project report; (5) arrange finance; (6) registration and licences (Udyog Aadhaar/Udyam, GST); (7) arrange land, building, machinery; (8) recruit staff; (9) procure raw materials; (10) start production and marketing.

Important terms

• MSME – Micro, Small and Medium Enterprises.
• Ancillary unit – small unit supplying parts to a large industry.
• Project report – detailed plan of a proposed business.
• Working capital – funds for day-to-day operations.

Formats and formulas

Use the table above for MSMED Act limits (manufacturing and service).

5 important questions

Q1. Define small scale industry as per MSMED Act, 2006.

A manufacturing unit with investment in plant and machinery above ₹25 lakh up to ₹5 crore (small); micro up to ₹25 lakh; for services, small is above ₹10 lakh up to ₹2 crore.

Q2. Explain the importance of small scale industries (any four points).

Large employment, balanced regional development, use of local resources, contribution to exports.

Q3. State any four challenges faced by small scale industries.

Shortage of finance, outdated technology, marketing problems and competition from large industries.

Q4. Explain the steps in setting up a small scale business.

Select the product, choose form of ownership and location, prepare project report, raise finance, register and get licences, arrange plant and staff, start production and marketing.

Q5. State any three advantages of small scale industries.

Easy to start, quick decision-making and personal contact with customers.

Exam tip

Remember the investment limit table — it is asked as 'complete the table' or 'state the limits'.

Quick summary

Business can be owned and organised in different forms. This chapter covers private sector forms: sole trading concern, partnership firm, Joint Hindu Family business, co-operative society and joint stock company — their meaning, features, merits, demerits and types.

Key points

• Sole trading concern: owned, managed and controlled by one person. Features: single ownership, unlimited liability, all profit to owner, no separate legal entity, easy formation and closure, secrecy. Merits: easy start, quick decisions, direct motivation, secrecy. Demerits: limited capital and skill, unlimited liability, lack of continuity.
• Partnership (Indian Partnership Act, 1932): relation between persons who agree to share profits of a business carried on by all or any of them acting for all. Features: agreement, 2 to 50 partners, unlimited liability, mutual agency, profit sharing, restriction on transfer of interest.
• Types of partners: active, sleeping (dormant), nominal, partner by estoppel, secret, minor (only for benefits), partner in profits only.
• Types of partnership: partnership at will, particular partnership, limited liability partnership (LLP).
• Joint Hindu Family business: governed by Hindu Law; membership by birth; Karta (eldest member) manages; Karta has unlimited liability, co-parceners' liability is limited to their share. Systems: Mitakshara and Dayabhaga.
• Co-operative society (voluntary association for mutual benefit): open membership, democratic management (one member, one vote), service motive, limited liability, state control, distribution of surplus. Types: consumers', producers', marketing, credit, housing, co-operative farming societies.
• Joint stock company: an artificial person created by law, with separate legal entity, perpetual succession, common seal, limited liability, transferable shares, separation of ownership and management. Types: private company, public company, one person company, government company, etc.

Important terms

• Unlimited liability – owner's personal property can be used to pay business debts.
• Mutual agency – each partner is an agent of the firm and others.
• Karta – manager of a Joint Hindu Family business.
• Perpetual succession – company continues regardless of change in members.

Formats and formulas

5 important questions

Q1. Explain any four features of a sole trading concern.

Single ownership, unlimited liability, all profits to owner, easy formation and closure.

Q2. Explain the types of partners.

Active partner manages business; sleeping partner only invests; nominal partner lends his name; minor partner gets only benefits of partnership.

Q3. State the features of a Joint Hindu Family business.

Governed by Hindu Law, membership by birth, management by Karta, Karta's unlimited liability, continuity.

Q4. Explain the features of a co-operative society.

Voluntary open membership, democratic management (one member one vote), service motive, limited liability, state control.

Q5. Explain any four features of a joint stock company.

Artificial person, separate legal entity, limited liability, perpetual succession.

Exam tip

Compare forms in a table — 'distinguish between partnership and company' is a regular 4-mark question.

Quick summary

Besides private businesses, the government also runs business enterprises (public sector), and some giant companies operate in many countries (multinational corporations). This chapter explains departmental organisations, statutory (public) corporations, government companies and multinational corporations — their features, merits and demerits.

Key points

• Public sector enterprises are owned, managed and controlled by central/state governments or local bodies to serve the public.
• Departmental organisation: run as a department of a ministry, e.g., Post Office, Railways, defence industries, radio. Features: managed by government officers; minister responsible to Parliament; financed by annual budget; revenues go to treasury; government budgeting, accounting and audit; no separate legal entity.
• Merits: direct control, secrecy in defence matters, revenue to government, public accountability. Demerits: red tape and delays, no flexibility, lack of initiative, frequent transfers, political interference.
• Statutory (public) corporation: created by a special Act of Parliament or state legislature, e.g., LIC, RBI, Air India (earlier), MSRTC. Features: separate legal entity, own finances, autonomy in management, service motive, accountable to legislature, employees are not civil servants.
• Merits: autonomy and flexibility, quick decisions, professional management, public accountability. Demerits: political interference despite autonomy, monopoly may lead to inefficiency, lack of motivation for profit.
• Government company: registered under the Companies Act, 2013; at least 51% of paid-up capital held by central/state government(s); private investors can hold up to 49%. Examples: SAIL, BHEL, HAL. Features: separate legal entity, management by Board (government nominees), own funds, audit by auditors appointed with CAG's role.
• Multinational corporation (MNC): company with headquarters in one country and operations in many countries, e.g., Unilever, Coca-Cola, Microsoft. Features: huge size, worldwide operations, centralised control from headquarters, advanced technology, strong brands, aggressive marketing.
• MNC merits: foreign capital, technology, employment, exports, quality products. Demerits: profit taken out of the country, harm to local industries, exploitation of resources, interference in policies.

Important terms

• Public sector – enterprises owned by government.
• Special Act – law passed to create a particular corporation.
• Autonomy – freedom to manage own affairs.
• Holding company – parent company that controls subsidiaries (MNC headquarters).

Formats and formulas

5 important questions

Q1. State any four features of a departmental organisation.

Managed by a government department; financed by budget; no separate legal entity; minister responsible to Parliament.

Q2. What is a statutory corporation? Give examples.

A public enterprise created by a special Act of Parliament/state legislature with separate legal existence, e.g., LIC, RBI.

Q3. Define government company and state its features.

A company in which at least 51% of paid-up capital is held by government(s), registered under the Companies Act, 2013; separate legal entity, board management, own funds.

Q4. Explain any four features of MNCs.

Huge size, operations in many countries, centralised control, advanced technology and strong brands.

Q5. State any three demerits of MNCs.

Profit repatriated abroad, threat to local industries, exploitation of natural resources.

Exam tip

Remember which law creates each form — ministry order, special Act, or Companies Act — it is the key difference examiners look for.

Quick summary

Small businesses, farmers, artisans and developing countries need finance and support. This chapter explains institutions that support business: SIDBI, NABARD, KVIC, Women's Self Help Groups (SHGs) and the World Bank — their introduction and features/functions.

Key points

• SIDBI (Small Industries Development Bank of India): established on 2 April 1990 under the SIDBI Act, 1988; initially a subsidiary of IDBI. It is the principal institution for promotion, financing and development of the MSME sector, gives direct and indirect (refinance) assistance and venture capital (SIDBI Venture Capital Ltd., 1999).
• NABARD: came into existence on 12 July 1982 under the NABARD Act, 1981; apex institution for agriculture and rural development finance; refinances co-operative banks and RRBs; inspects RRBs and co-operative banks; supports rural infrastructure and SHG–bank linkage.
• KVIC (Khadi and Village Industries Commission): All India Khadi and Village Industries Board set up in 1953; KVIC created by the KVIC Act, 1956, and established in April 1957. It plans, promotes and organises khadi and village industries, gives finance, training, raw material and marketing support, and creates rural employment.
• Self Help Group (SHG): small group of similar people (10–20, often women) who save regularly, create a common fund and give collateral-free loans to members. Based on 'helping each other' and 'unity is strength'. In India, SHGs began with MYRADA (Credit Management Groups) in 1985; RBI accepted SHGs as an alternative credit model.
• Features of SHGs: voluntary, small size, regular savings, internal lending, collective decisions, bank linkage, women empowerment.
• World Bank: international organisation giving finance, advice and research to developing countries. It is not a bank in the usual sense; it comprises the IBRD (International Bank for Reconstruction and Development) and the IDA (International Development Association). Functions: long-term loans for development, infrastructure, poverty reduction, technical assistance.

Important terms

• Refinance – loan given to banks against loans they have already given.
• Venture capital – finance for new, risky but promising businesses.
• Collateral-free loan – loan without security.
• IBRD / IDA – the two institutions of the World Bank.

Important dates and people

• 1953 – All India Khadi and Village Industries Board.
• 1956/1957 – KVIC Act / KVIC established.
• 12 July 1982 – NABARD.
• 1985 – SHGs begin through MYRADA.
• 2 April 1990 – SIDBI.

5 important questions

Q1. Explain the functions of SIDBI.

Finances MSMEs directly and through refinance to banks, provides venture capital, promotes and develops small industries.

Q2. Explain the role of NABARD.

Apex bank for rural credit; refinances co-operative and regional rural banks; funds rural infrastructure; supervises RRBs and co-operative banks; promotes SHGs.

Q3. State the functions of KVIC.

Plans and promotes khadi and village industries, provides finance, training, raw materials and marketing help, and generates rural employment.

Q4. What is a Self Help Group? State its features.

A small voluntary group that saves regularly and lends to members without collateral. Features: small size, regular savings, internal loans, bank linkage, women empowerment.

Q5. Write a note on the World Bank.

An international institution made up of IBRD and IDA that provides long-term finance, advice and research to developing countries for development and poverty reduction.

Exam tip

Learn the full forms and founding years of SIDBI, NABARD and KVIC — they are common 1-mark questions.

Quick summary

No business works in isolation; it is affected by many forces inside and outside it. The sum of these forces is the business environment. This chapter explains its meaning and importance, internal and external dimensions, and the New Economic Policy of 1991 (LPG) and its impact on Indian business.

Key points

• Business environment = all internal and external factors and forces that affect the working of a business.
• Importance: identifies opportunities and threats, helps planning and policy making, helps adapt to change, improves performance, builds image, helps tap resources, early warning of problems.
• Internal (controllable) factors: value system of founders/top management, mission and objectives, management structure, internal power relationships, human resources, company image and brand, physical assets and technology, finance.
• External (uncontrollable) factors:
• Economic – economic policies, growth, income, inflation, interest rates.
• Political – government stability, legislature, executive, judiciary.
• Legal – laws like Companies Act, Consumer Protection Act, GST.
• Socio-cultural – customs, values, festivals, lifestyle, education.
• Technological – new machines, computers, e-business.
• Natural – climate, natural resources, environment rules (e.g., plastic bag ban).
• Global – international trade, WTO, foreign competition.
• New Economic Policy, 1991: Liberalisation, Privatisation, Globalisation (LPG) — delicensing, reduced public sector role, disinvestment, foreign investment, lower import duties.
• Impact on business: more competition, wider choice for customers, rapid technological change, need for development of human resources, market orientation, pressure on public sector, more demanding customers, foreign tie-ups, faster growth.

Important terms

• Internal environment – factors within the firm that it can control.
• External environment – outside factors beyond the firm's control.
• LPG – Liberalisation, Privatisation, Globalisation.
• Disinvestment – selling government shares in public enterprises.

Key facts

5 important questions

Q1. Define business environment and explain its importance.

The total of internal and external forces affecting a business. Importance: identifies opportunities and threats, helps planning, adaptation to change and better performance.

Q2. Explain the internal factors of business environment.

Value system, mission and objectives, management structure, human resources, image, physical resources and technology — all controllable by the firm.

Q3. Explain any four dimensions of external environment.

Economic, political, legal and technological — see key points.

Q4. What were the main features of the New Economic Policy, 1991?

Liberalisation (removing controls), privatisation (reducing public sector), globalisation (opening the economy to world trade and investment).

Q5. State the impact of the new economic policy on business.

More competition, more customer choice, fast technological change, need for skilled people, foreign collaborations.

Exam tip

Give a real-life example for each dimension — examiners reward application.

Quick summary

Management is needed in every organisation — business, school, hospital or home. It means getting things done through and with people efficiently and effectively. This chapter explains the meaning, definitions and characteristics of management, the three levels of management, and whether management is an art, a science and a profession.

Key points

• Management: the process of planning, organising, staffing, directing and controlling to achieve goals effectively (doing the right task) and efficiently (with minimum cost).
• Definitions in the textbook: Mary Parker Follett — management is the art of getting things done through others; Henri Fayol — to manage is to forecast and plan, organise, command, co-ordinate and control; F. W. Taylor — knowing exactly what is to be done and seeing that it is done in the best possible manner.
• Characteristics: goal-oriented, universal, continuous process, group activity, dynamic, intangible, multi-dimensional, a system of authority, both art and science, needs co-ordination.
• Levels of management:
• Top level – Board of Directors, Chairman, CEO, Managing Director. Functions: set objectives and policies, long-term plans, overall control, represent the company.
• Middle level – departmental/functional managers (finance, production, marketing, HR managers). Functions: interpret policies, plan for departments, link top and lower levels, motivate and guide supervisors.
• Lower (operational/supervisory) level – supervisors, foremen, section officers. Functions: assign daily work, supervise workers, maintain quality and discipline, report to middle management.
• Management as an art: personal skill, creativity and practice. As a science: systematic body of knowledge, principles based on experiments. As a profession: specialised knowledge and formal education (MBA), professional bodies, code of conduct — though not fully a profession because there is no compulsory membership or licence.

Important terms

• Effectiveness – achieving goals.
• Efficiency – using resources economically.
• Operational management – lowest level of management.
• Code of conduct – rules of ethical behaviour.

Key facts

5 important questions

Q1. Define management. Explain any four characteristics.

Mary Parker Follett: the art of getting things done through others. Characteristics: goal-oriented, universal, continuous process, dynamic.

Q2. Explain the functions of top-level management.

Set objectives and policies, make long-term plans, approve budgets, appoint senior managers, overall control and represent the firm.

Q3. Explain the role of middle-level management.

Interpret policies from top management, plan for their departments, co-ordinate, guide and motivate lower-level managers.

Q4. Is management a science?

Yes, to an extent — it has systematic knowledge and principles based on observation; but its principles are flexible because they deal with human behaviour.

Q5. Distinguish between top and lower levels of management (two points).

Top level frames policies and plans; lower level executes daily work. Top level needs conceptual skills; lower level needs technical skills.

Exam tip

Draw the pyramid of levels of management — it is an easy diagram that adds value to the answer.