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Chapter No#01 INTRODUCTION TO BUSINESS

In every day life the people perform different activity. All

such activities are classified into two major categories.

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INTRODUCTION TO BUSINESS

1) Economic activities: Economic activities are those which are inspired by the objective of earning money;

this is required by people to satisfy their day to day needs of life. For example Business, profession and

employment are the major types of economic Activities

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INTRODUCTION TO BUSINESS

2) Non-economic activities: All those activities which are inspired by many motives Other than earning money. For example family-obligation activities, religious activities and social welfare activities

Business: Business is that economic activity which consists in providing goods or Services for the satisfaction of human wants on a systematic and regular basis; with View to earning profits.

OR

Any legal activity to earn money is called business.

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Characteristics of Business

1) Deals in goods and services:

Every business enterprise whether it is carried on a small or a large scale deals in goods and services. The

good may be consumer goods.

Or capital goods or it may be in the shape of services.

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Characteristics of Business

2) Production / exchange of goods: An important characteristic of business is that it

Involves production or exchange or sale of goods and services for earning of money.

3) Desire to earn profit: The primary purpose of the business is to earn profit. With out Profit the business cannot survive.

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Characteristics of Business

4) Must be legal: The business must be legal. It must be according to

the rule and Regulation of the country.5) Involves element of Risk:

There is an element of risk and uncertainty in every Business.

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Private sector Organization: The Private sector organizations/ enterprise are those organizations that have a clear aim of seeking profit for

their owner.Public sector Organization:

Public sector organizations are those that are run by the state. These are the nationalized industries. These

organizations are owned by the state on behalf of the community and their objective is to provide a service

rather than a profit for the owner.

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Types of Business Organization Types of Business Organization Types of Business Organization Types of Business Organization

:

1) Sole trader2) Partnership

3) Limited liability Company

9Photo by Francesco Maldovian

1) Sole trader: A business owned by a single person is

called sole proprietorship or Sole trader.

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Characteristics of Sole trader

1) Owner ship: The business is owned by a single person.2) Finance: Only the owner is responsible for providing finance.3)Management and Control: The owner has full control overall activities of the business.

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:

•Risk: The proprietor himself bears all the risk. No body else has any stake in the business•Profit and Loss: The Sole Proprietor enjoys all the profits; he or she is personally liable for all the debts of the business.

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Partnership: “Partnership is the relation between two or more than two persons (but not more than 20) who have agreed to share

the profit of a business carried on by all or any one of them acting for all”

Partnership: “Partnership is the relation between two or more than two persons (but not more than 20) who have agreed to share

the profit of a business carried on by all or any one of them acting for all”

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Elements of Partnership

1) Association of at least two persons: there must be at least two persons to form a

partnership. 2) Contractual relation: Their must be an

agreement between the partners.3) Earning of profit: the agreement must be to

share profit/ loss of a business.

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(click to advance)

Partnership deed:

An Agreement in written form is called partnership deed. Partnership deed is a document which is signed

by all the partners.Partnership deed contains the following points.

1) Name and location of the business.2) Nature of the business

3) The amount of capital put into the business by each partner.

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4) Method of sharing the profits and losses of the business.

5)The role of each partner.6)Retirement and admission of a new

partner.7)Length or life of the business.

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Limited Liability Company (Joint Stock Company):

A legal Entity distinct from the share holders who own the company.

•A company has a separate legal status.•It can make a contract.•It can sue and be sued.

•The share holders enjoy limited liability. •The company can own and hold property in its own

name.

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Registration of company:

There are three basic documents require for a company registration:

1) Memorandum of Association: it is also known as a charter of the company. It contain the

following information•Name of the company

•Location of the company( state, province, city )•Objectives of the company

•Capital of the company

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Articles of Association:

• Articles of Association define the rules and regulation of the company. It contains the following information.

• Amount of share capital issued.• Rights of shareholder regarding voting,

dividend.• Rules regarding appointment of directors• Number, Qualification and powers of the

directors.

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Classification of Company:

• Private Limited Company:

The Company that cannot issue the share to the general pubic. The minimum number of member must two and the maximum number of member cannot exceed fifty.

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Public Limited company

• The company that can issue the share to the general public. The minimum number of member seven and there is no limit for maximum number of member but cannot exceed the number of share.

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Annual general meeting• According to company ordinance section 158,

every company will conduct a general meeting of its member every year. The notice of the annual general meeting shall be sent to shareholders at least 21 days before the date of the meeting. The annual general meetings, shall in the case of a listed company, be held in the town in which the registered office of the company is situated.

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Conti…..• According to company ordinance

section 305, a company may be wind up by the court if it does not hold two consecutive annual general meetings.

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Extra-Ordinary general meeting:

All the meetings other than annual general meeting are called extra-Ordinary general meeting. The

directors may at any time call an extra-ordinary general meeting to consider

any matter which they think it necessary. Or it may call at the

shareholder request.

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Annual reports of Companies:The Annual report is the source of providing

information to the shareholders and other interested parties. Annual report is a requirement

of:

• The Company Act , according to company law company is liable to prepare the annual report.

• Professional accountancy standards, mean for external auditors.

• Stock exchange requirement, company also forward their annual report to stock exchange market.

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The Annual reports of a company consist of:

1) Financial statementsa) Balance sheet, it shows company financial position. At

specific date. Simply we can say it provide information regarding company assets, liabilities and owner equity.

b) Profit and loss account/ income statement. It shows profit and loss of the company during a given time period.

c) Cash flow statement. It show the inflow and out flow of cash in the organization.

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The Annual reports of a company consist of:

2) Reports from:a) The Chairman

b) The Directors

c) The Auditors

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1) Chairman’s report:The Chairman’s report will include the

following items:1) A review of results, including information on

divisional and product performance. To know about total assets of the company, liabilities, owner capital.

2) A summary of the financial results. Either we are going profit or lost.

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3) Statement of dividends payment. It provide information regarding dividend that how much dividend they are going to pay to share holder and when did they will pay the dividend.

4) Details of acquisitions, how much assets we acquired. eg machinery, equipments, building, vehicle etc.

5) An explanation of steps taken to improve efficiency mean future planning.

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2) Directors Report:

1) The director’s report, separate from the chairman’s report. It contains the following items:

2) Review overall activities of the business. A brief review regarding overall activities of the business e.g which unit of the business generate revenue

3) Details of changes in fixed assets. Fixed means those assets which life is more than one year. How much change occur in these fixed assets.

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4) Future research and development in the business. Report regarding future planning.

5) Details of the shareholders. How many shareholder the company have.

6) A statement of the company polices. Company rules regulation.

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3) Audit report:

It verifies the financial statements. It is prepared according with the Companies Act and that they give a true and fair view of the company’s affaires. To find out that the financial statement is fair, reliable.

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Franchise:

A Business in which right are purchased for selling goods or

services under specified trade name and with in a specified geographical

area. The location should be specified from franchisor to

franchisee.

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Conti

The company that provide license is called franchisor and those who want to buy their license is called franchise. It is a contractual relationship between franchisor and franchisee.

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Termination of business enterprise (activity):

Termination mean’s winding up business enterprise. A business enterprise involves

challenge and risk.

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Conti

It is necessary for entrepreneurs to be optimists (positive thinking), to make such strategies to

overcome problems and achieve the objectives of the organization. But a large numbers of business enterprises suffer decline and many of these will

be forced in closure.

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Symptom of declining1) Falling profit margins.

2) Increased debts.3) Decreasing liquidity means decrease in your

current assets. Liquidity means anything that easily converts to cash, bonds, shares etc.

4) Falling sale volume.5) High labor turnover.

6) Falling market share: Decrease in number customers.

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Major causes of failure

1) Failure in marketing process;2) Competition;

3) Lack of managerial skill;4) Lack of finance;5) Poor decisions;

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Bankruptcy:

when a business is unable to pay its debts than the court declare it as bankrupt. And ordered to sell out

all available assets of the business.

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Division of Business or Components of Business:

The scope of business is very wide. It covers activities related to production and distribution of goods and services with an aim to earn profit. The business activities are usually divided into two parts.

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CHAPTER NO =02

Industry and Commerce.

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a) Industry

The term “industry” refers to that part of business activity which is concerned with the

extraction (pulling out, with draw), production of products.

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Conti

The products which are produced or processed by an industry may either be

used by the final consumer or by another concern for further production. One is call

consumer products another is call producer or industrial products.

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Types of industry:

1) Extractive industry: Extractive industries are those industries which extract or produce raw material from above or below the surface of the earth, e.g Mining (Coal, petrol, gas etc),

fisheries (Fish form) forestry (Furniture), Agriculture (Fruits, vegetables)’ are some of

the examples of extractive industries.

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2) Genetic industries:

Those industries which are engaged in reproducing and multiplying certain species

(types, kinds) of animals and plant and selling them in market for profit are named as genetic industries. These include cattle breeding forms

like Australian cow, poultry farm, plant nurseries.

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3) Constructive industries:

Constructive industries as the name signifies are engaged in the

construction of building, canals, bridges, dames, roads etc.

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4) Manufacturing industries:

Manufacturing industries are those which are concerned of converting raw material or

semi-finished products. Like garments industries, shoes industries, cold drink

industries.

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Service industries:

• These industries are engaged in creation of intangible goods which can not be seen or touched. The provision of services of professionals such as doctors, lawyers, etc are example of service industries.

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B) commerce:

Commerce is a very important part of business. It is concerned with the buying and selling of goods. It include all those activities which are related to the transfer of goods from the place of production to the ultimate consumers.

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Categories of Commerce: Commerce can be classified into

two categories. a) Trade:b) Aids to trade:

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a) Trade: • Trade means buying and selling of

goods. It is the exchange of goods and services among buyers and sellers in which both the parties (sellers and buyers) are benefited.

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Types of trades:

• Trade may be classified as: • a) Internal Trade• b) External trade• c) Whole sale trade• d) Retail Trade

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a) Internal Trade:

The buying and selling of goods with in the boundary of a country is called internal trade

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b) External trade

When there is any purchase and sale of goods between two countries is foreign trade, or when your trade cross the national boundaries that’s called external trade.

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c) Whole sale trade

Whole sale trade involves the purchase of goods in large quantities from the producers and they resale to retailers. The retailers sells those goods to consumers.

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d) Retail trade

Retailing consists of all the activities which are related to sale of goods and services to the final consumers, here goods are sold in small quantities to the consumer.

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b) Aid to trades:• The activities which facilitate in the purchase of goods

and services are called aids (help) to trade. The aids which are essential for the expansion of the trade are,

• I) Transport • ii) Insurance• iii) Ware housing• iv) Banking• V) Advertisement• Vi) Mercantile agents

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I) Transport

The different means of transport e.g railways, ships, airline and road transport etc. Help in carrying goods from the place of production to centers of consumption.

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ii) Insurance

• Insurance is another important aid to trade. The risk of damage of goods due to fire, floods, earth quake, accident s are covered by insurance. Insurance thus helps in the expansion of trade. The amount which paid by the traders to the insurance companies is called premium.

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(iii) Warehousing:

Warehousing is a kind of storage. Nowadays most of the goods are produce in anticipation (expectation, hope) of demand. They are stored in safe places and released as and when demanded in the market . Warehousing thus help in our coming the barrier of time and creates time utility.

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iv) Banking:

The commercial banks play an important role in financing the various trade activities. They finance the traders for stock holding and transportation of goods. They provide loan to traders for various activities.

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v) Advertisement: Selling of goods is the most important and difficult

problem for the manufacturer. Advertisement about the product through newspapers, magazine, radio, television etc. has greatly helped the consumers in choosing the goods of their tastes. The consumer come to know about the quality and price of the good in a short time and pick up the product that suits them.

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• These are those brokers who acts as

agents between the producers and the consumers. They bring the sellers and buyers of goods together and help them in completing transaction of goods. These agents acts for commission .

Vi) Mercantile Agents:

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CHAPTER NO=05

• MARKETING RESEARCH.

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Marketing Research projects:

• Marketing research consist of projects to answer of managerial questions. The result of projects may be used to make particular decision. Marketing Research is usually done for the problems that occur for the first time as well as occur regularly.

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Conti• For example before launching a products the company

will try to know about the current product and market situation, it competitor, consumer buying behavior etc. Marketing research is also done by the companies after launching the products in order to know the performance of the different products in different areas, i.e. the products launched by the company, so marketing research give a clue to the company that what kind of changes are there to be include into the products.

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Marketing Research projects

Further

Study

Needed?

Define the objective

Conduct situation analysis

Conduct informal investigation

nNoEnd Project and Report Results

Yes

Plan and conduct formal investigation

Analyze data and report results

Conduct follow-up

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Marketing research Project is usually categories in six steps.

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1) Define the Objective:It means what is the objective of the project? What

we expect from conducting the project? Usually research is conducted by someone other than

marketing managers; it is usually used to solve the problem which may relate to identify the current or

expected position of the market or product. For example if TOYOTA want to launch a new model of

its new car so Marketing Research is required to know about the performance of the previous cars

and what kind of changes customer need in that model.

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2) Conduct a Situation Analysis:

In this second stage the researcher tries to identify the surrounding of the problem which includes market, competitor, and the whole industry.

Situation analysis is the background investigation which refines or shows the clear picture of the problem.

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Conti Here information is obtained by mean of library (if

some data is available regarding this type of problem or any previous research for this problem is available),and

information from company officials.In this step researcher defines the problem and develop hypotheses, hypothesis is the supposition or idea of the researcher which would suggest a possible solution. For example young people spent more money on clothing

or education or entertainment.

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3) Conduct an informal investigation:

After the recognition of the problem, the researcher will try to collect primary data, which is normally

collected from the company (people inside or outside the company), middlemen, and

advertisement agencies and in the last from the customers.

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Conti

It is critical stage which tells the researcher whether to go ahead or not, means to continue his study or

not.Mystery shoppers are also used, which are sometime

company top officials visited their own stores or branches to know about the behavior of the sale staff, or the behavior of the consumers for their

products.

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4) Plan and conduct formal investigation

• If the researcher wants to continue his or her study for the project then what kind of information is needed and how to collect it.

• Select the sources of information i.e. primary or secondary data. Researcher use primary data for the current project and secondary data which are already gathered for some other purpose.

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Source of secondary data

• Researchers use to collect this kind of data from:

1) Firms reports.2) Firms web site3) Reports of the professional organization

related to the research, universities, business publications or magazines like business recorder etc, or any good library.

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Sources of Primary data:

• Researcher use primary data when secondary data is not available or not sufficient for the research purpose, than researcher obtain primary data by interviewing customer, sales people, and distributors.

•

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Conti

• Every method has its own strength and weaknesses so that is why more than one method may be used. For example observation may be used to develop hypotheses about customers, shopper’s behavior and a survey may be used to test these hypotheses etc.

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Primary Data-collection Method:

• There are three widely used methods of gathering primary data:

i) Observationii) Surveyiii) Experimentation

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i) Observation

• In this method data is collected by observing the action of a person. Information may be gathered by personal observation or mechanical observation. In personal observation researcher acts as a customer in order to know what brands sales people and customer prefer. In mechanical observation scanners are used in retail stores to record purchase, eye cameras which record people response that how they behave while purchasing.

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Merits of observation method:

i) In observation methods usually the parties being observed are unaware that they are being observed so they behave normally.

ii) It can provide highly accurate data about behavior in given situation.

iii) Observation methods eliminate bias result.

iv) There is no direct interaction between the observer and observe, so researcher can observe them for a long time.

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Demerits of observation method:

i) It tells us the reason “what happens” but it cannot tell “why” it happens.

ii) Observation cannot explore the attitude, opinion, knowledge, personality.

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ii) Survey method:

• A survey consists of gathering data by interviewing people. Researcher can conduct it by contacting a person by telephone, mail, or internet. The advantage of survey method is that information comes directly from the people you are interested in.

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Types of survey method:

i) Telephone survey: In this we can contact people more rapidly as compare to other sources. Fewer interviewers can contact many people within less time.

• Limitation of telephone survey:i) The time is very short for this type of survey. Due to which the

researcher cannot gather accurate information.ii) It also difficult to keep the contact number of all customers to

whom you are going to find information.

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2) Mail survey:• it is a type of survey in which the researcher send a

questionnaire to potential respondent , in which the researcher write different types of questions regarding their research and ask them to complete that questionnaire and then return it back.

• Traditionally in this type of survey the questionnaire is sent by post but now internet is mostly use for this purpose. In this survey, because of absence of interviewer the answer are more likely to be frank and honest.

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3) Internet survey:

• In research internet plays an important role. And researcher takes a lot of information from internet. A lot of important information is present on internet. And the researcher can easily access the data. The reply of respondent is also quick on internet and low cost occurs on this type of survey.

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Experimental Method: An experiment is a method of gathering primary data in which the

researcher conducts an experiment to gather data for their research. For example the researcher compares various bundles of product to see the response of customers. That which product they give prefer and why. Another example of experimental method is that if a product is not selling in the market. Now the researcher conducts an experiment to reach a final conclusion. In this they will test different things. For example they will bring some changes in the quality, that either it is due to quality, sometime they change the shape of the product to solve the problem. Like these the researcher conducts experiment to reach a final conclusion.

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5) Analyze the data and present a report:• Here the researcher will analyze all the data that they gather from

primary source as well as from secondary source. The research will be accurate if the data is correct and according to requirement of research. After analyzing the data than they come to the conclusion about the problem. That where the problem exist. Than they give recommendation based on their research. That how they can solve these problems.

• Conclusion and recommendation is an important step in research project. If the researcher did not give conclusion and recommendation than the research will be aimless.

• After finding the conclusion and recommendation than the researcher forward their research project to their supervisor in a final shape.

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6) Conduct a follow up:

• Researchers should follow up their studies to know whether their result and recommendations are being used are not. With out follow up, the researcher has no way of knowing that the project is on target or not.

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ETHICAL ISSUES IN MARKETING RESEARCH:

Through Marketing research, companies learn more about consumer needs, wants and demands, resulting in more satisfying products and services and stronger customer relationships. However the misuse of marketing research is also harmful. Marketer face increasing variety of ethical issues related to the collection and use of research information. Some of them are as following.

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1) Privacy in data collection:

During the research, the researcher use different type of methods for collecting data. Like observing customers with the help of hidden cameras, or collecting data through scanners, through credit cards or check cashing records. But to collect data through such a way is unethical. Because the person did not aware about it. And the researchers follow him. Means they are interfering in their personal activities. Which is unethical?

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2)Privacy(confidential) in data use:

During the research the researcher collect a lot of information regarding their customers. But some time these information goes into the hand of other people and they misuse it. Which is unethical? For example when a research conduct a research regarding their product. They collect different information from different type of people. When an organization publish their annual reports. Sometime they mention regarding that information. And when it goes into the hand of other peoples and they misuse it. Which is unethical. So care must be taken that the data will not be misuse.

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3)Intrusiveness(disturbance , interference):

• All marketer research wants to gather data through different sources from their customers. But sometime it create problem for customers and the researcher disturb them. Which is unethical? For example telephone surveys sometime disturb people. If telephone survey conduct around dinner time. Which disturb the interviewer? Like the researcher try to collect data during the purchasing time. Which disturb people and this is unethical. Another example is that if the researcher sent a questionnaire to a person at working time. Which disturb the individual?

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4) Deceptive(deceiving) implementation:

Sometime the researchers collect data for their research through a wrong way. Like a researcher went to a shopping center want to collect information. He acts like a customer and asks different questions from his fellow shoppers regarding their view about the product. Which is unethical.

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5) False representation:

Sometime the researchers present false description in front of their customers. For example a researcher comes in front of a customer and tells him that he want to collect some information regarding the product. But after securing the cooperation of consumer. He attempt for the sale of their product or request for donation. This is unethical?

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Product and the product Mix:

CHAPTER NO =06

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Development of new product: The development of a product can be possible

through product improvements, product modifications and new brands through the firm’s own Research and development efforts. Product development is most important due to the rapid change in consumer tastes, technological development and competition in the market. That’s why companies try to bring some innovation in their products that attract customers toward it. Every company tries to bring some changes in their product to compete in the market.

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New product strategy• To achieve strong sale and healthy profit

every producer of business goods or consumer goods try to develop such a strategy through which they capture the market and gain competitive advantage.

• And this strategy should guide the producer in every step in the process of developing a new product.

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New product development process:

1) Idea generation:- New product development starts with idea

generation. The systematic search for new product ideas.

Major source for new product ideas include internal sources and external sources.

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a) Internal idea sources: Using internal sources, the company can find

new ideas through formal research and development; it can be obtain from the executives, scientists, engineers, manufacturing staff and sales people.

Some companies have developed successful “entrepreneurial” that encourage employees to think up and develop new product ideas.

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b) External idea sources Good new-product ideas also come from

customers. The company can analyze customer questions and complaints to find new products that better solve consumer problems. The firm can obtain new ideas from competitors, distributors and suppliers these are also the main source of new ideas for the firm. Other ideas sources include trade magazines, seminars, new consultants, and advertising agencies.

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2) Idea screening: Screening new-product ideas in order to select

good ideas and drop poor one as possible. The purpose of idea generation is to create a large number of ideas. In idea screening the firm selects the best one which is according to the situation and demand of customer.

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3) Concept development and testing After development of idea and than screening

the next step is to develop concept from that idea they have generated. Means the idea that present in their mind convert it into meaningful form. Concept development means that how the idea should be converted into practical form to bring innovation in the product Concept

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Concept testing: Testing new product concepts with a group

of target consumer to know about their response to the product. Here at this stage the firm presents their product just for testing in the market. That how the customer give response to their product.

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4) Marketing strategy development:

Designing a marketing strategy for a new product based on the product concept and testing. Here the firm prepares marketing strategy that how they promote their product with the passage of time. What will be the price, distribution channel, of the product?

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5) Business Analysis: It is the review of the sale, cost and profit for

new a product to find out whether these factors satisfy the company objectives. If they do, the product can be move to the product development stage. To estimate sale, the company might look at the sale history of similar products and conduct survey of market opinion. After hat they estimate minimum and maximum sale to assess the range of risk. After preparing the sale forecast, management can estimate the expected costs and profits for the product.

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6) Product Development:

Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product. At this stage the organization decide to launch their product. The idea that they generate now the organization gives a practical shape.

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7) Test Marketing: Here the firm tests their product into market.

To know about the response of the customers. Test marketing gives the marketer experience with marketing the product before going to great expense of full introduction. It lets the company test the product and its entire marketing program, like , advertizing strategy, distribution, pricing, packaging etc.,

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8) Commercializing: Test marketing gives management the

information needed to make a final decision about whether to launch the new product. If the company goes ahead with commercialization, introducing the new product into the market. Here the company decides to launch their product.

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Producer’s Criteria for New Products development:

Here are guidelines that some producers use for development of new product:

1) Market Demand: 2) Financial criteria: 3) Compatibility with environmental

standard: 4) Marketing structure:

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1) Market Demand:

There must be adequate market demand. The producer needs to find out that how much the demand of the product in the market. And according to that they prepare their new product. If the demand of new product is low in the market so the firm will not be successful to achieve their target.

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2) Financial criteria: The product must satisfy key financial

criteria. Like the firm have sufficient finance for making new product to launch in the market. Another criteria which is also most important that this product will gain sufficient profit for the producer or not.

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3) Compatibility with environmental standards:

The product must be compatible with the environmental standard. The key question include “Does the production process avoid polluting the air or not? The product that the producers are going to present in the market either it is according to the culture, life style of the people of that area or not.

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4) Marketing structure: To know that the new product will be fit into

the company’s present marketing structure. Mean the marketing strategy of the company, the product will be adjust in that or not, or this product needs new marketing strategy.

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New Product Adoption:

New product adoption process is the set of successive decision an individual or organization makes before accepting a new product. Product adoption means how the individual react to that product either he is ready to buy or not. And the customer goes through product adoption process before deciding about that product.

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Stages in Adoption Process:

A customer goes through six stages in the Adoption process. While deciding to purchase something or not.

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1) Awareness: The first stage in the adoption process is the

awareness of the product. That how much the individual aware about the new product. How much he now about it.

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2) Interest: After the awareness the next step is

interest. That how much the customer takes interest in the product?

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3) Evaluation:

Here the customer will evaluate the product. If he shows some interest in that product. At evaluation stage he will compare the product with some alternative product also, like comparing in price, packaging, and color.

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4) Trial: After comparing the product. If the

customer decide to take it. So at this stage the customer will try that product to know about the result. If the result is positive than the customer move to the next stage.

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5) Adoption: At this stage the customer will look

the result of trail. If it is positive than the customer decide to buy that product.

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6) Confirmation: After adoption of the product. When

the customer use it, if he is satisfied from that Product. He thinks the decision that he take was correct.

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Product Mix:

The set of all product lines and items that a particular seller offers for sale. It means all those products that a company offers for sale into the market. For example P&G (Proctor and Gamble)

produce different brands. So the combination of all these brands that P&G offer to the market for sale

are called Product Mix.

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A company product Mix has four important dimensions:

1) Width2) Length 3) Depth

4) Consistency

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1) Width:

Product mix width refers to the number of different products lines the company carries.

Means the different brands that they offer like P&G have 250 brands in the market. And these brands are organized into many product lines.

Like beauty care, health care, food and beverages products.

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2) Length:

Product mix length refers to the total number of items the company carries within its product lines. Like P&G carries many brands within each

line. For example P&G offer to the market seven laundry detergents, six hand soap, five shampoos, and four dish washing detergents.

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3) Depth:

Product line depth refers to the number of versions offered of each product in the line. Like

P&G’s Crest toothpaste comes in 13 varieties, including “Crest Multi care, Crest Cavity

protection, Crest Sensitivity protection, Crest Dual Action Whitening” etc.

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4) Consistency:The consistency of the product mix refers that how

closely related the various product lines. Product lines are consistent insofar as they are consumer products that go through the same distribution channels. For example most of the cosmetic products go through the same distribution channels. The consistency will be less if the products perform different function for the customer. Means the nature of the products are

different. Like cosmetic products and electronic products.

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Chapter 03 Principles of Micro Economics

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Introduction Adam Smith Definition: Adam Smith the father

of modern economics in 1776 in his book “The Wealth of Nations” defines it as “Economics is an enquiry into the nature and causes of wealth of nations.” The early economists called economics, the Science of Wealth.

Study of Wealth: Economics is the study of wealth only. It deals with consumption, production, exchange and distribution of wealth.

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Marshall’s Definition: (1842-1924) Marshall was famous economist at the

Cambridge University who wrote a book “Principles of economics” in 1890. The Marshall defines economics in the following words.

“Economic is the study of mankind in the ordinary business of life, it examines that part of individual and social action which is most closely connected with the attainment and with the use of material requisites(basic) of well-being”

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Main points: • Ordinary Business of Life: - by ordinary business of life, Marshall

means those economic activities of a man which are mostly concerned with wealth getting and wealth using.

• Importance to the study of man: - welfare definitions have accorded more importance to the study of man than to wealth. Wealth is the means to satisfy human wants.

• Study of social man: - Economic is the study of social human being.

• Study of material requisites: - economics studies those activities of the man which are closely connected with the attainment and with the use of material goods concerning human welfare.

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Robbin’s Definition:• Robbin’s an English economist give a new

definition in his famous book, “Nature and Signification of Economic Science” in 1932.

• According to Robbins, “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

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Main Points of the Definition:

1) Ends- Unlimited Wants: ‘Ends’ here refers to human wants. Our wants are unlimited in number. As one’s want is satisfied immediately, another arise. This chain of wants is endless. That stage never reaches when all the wants of a person are fully satisfied. We have to choose between more urgent and less urgent wants.

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Conti….. 2) Scarce Means: Most of the means or resources

which can be used to satisfy wants are limited in supply. So we are bounded to satisfy the unlimited wants with limited resources.

3) Alternative Uses: we can use the resources alternatively. We have the choice to use the resources alternatively. To satisfy most urgent want first and less after that.

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Demand

Demand is the desire to purchase a good or service, back by ability and willingness to pay for the product.

Key element in demand:1)Desire: the first important thing in demand that

there should be desire for a product. 2)Ability: After desire, there should be the ability to

buy the product. Means the customer should have the buying power to purchase the product.

3)Willingness: It means that the customer is ready to buy that product or not.

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Law of demand:

• According to the law of demand, other thing remaining the same(income, price of complementary products, Substitute products, population, fashion, culture etc)when price increase demand will decrease and when price decrease demand will increase.

• The relationship between demand and price will be negative. One increase it effect the other and it will decrease and so on.

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• For example the price of apple is 100 AFS, a person consume 1 kg. As price decrease from 100 AFS to 50 AFS, the demand of that person increase from 1 kg apple to 3 kg apple.

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A Demand Schedule

Price Quantity demand 100 1 kg 80 2kg 50 4kg 30 6kg

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Demand Curve

100 80 50 30 1 2 4 6

price

Quantity Demand

Demand Curve

Downward Slop

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Conti

• This diagram shows the relationship between quantity demand and price. Which shows negative relationship between price and demand. As price decreases from 100 to 80, demand of the product increase from 1 to 2 kg. Again as price decrease from 80 to 50, demand increase from 2 to 4 kg. it clearly shows that when price decrease demand will increase and when price increase demand will decrease.

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Factors that effect law of Demand

• There are some factor that effect law of demand.1)Income:2)Substitute product:3)Complementary products:4)Fashion:5)Taste:6)Culture:7)Population:8)Necessities of life:

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1) Income:

• If income of a person increase or decrease it effect the law of demand. For example the price of an apple increase from 80 to 100 but the same time income of the person also increase from 10000 AFS to 13000 AFS, so here he will not reduce consumption of apple because his income also increase with the increase in price.

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2) Substitute products:

• Some the change in price of substitute product also effect law of demand. For example coffee and cold drink both are substitute, if the price of coffee decrease so it effect the demand of cold drinks with out change in their price.

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3) Complementary products:

• Complementary products also effect law of demand. For example car and oil both are complementary product. If the price of petrol increase it will effect the demand of cars. If the price of cars increase it will effect the demand of petrol.

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4) Fashion:

• Those product that become a part of fashion, if price of these product increase still people did not reduce consumption, because of fashion. So we can say that those product that become fashion , so it effect law of demand.

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5) Taste or Habit:

Those product that become a taste of people it also effect law of demand, because if price increase of decrease than consumer did not care about that. For example the taste of cigarette.

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6) Culture:

• Those product that become a part of culture it also effect law of demand. If price increase, consumer did not care about that. For example, shalware kamees.

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7) population

• Population also effect law of demand. If price increase and population also increase so the demand of that product will not decrease. Because with the increase in price demand of people also increase due to increase in population.

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8) Necessities of life:Necessities of life also effect law of

demand. Because with out these product we can not survive. So if price increase we can not stop consumption of these product for example, water, flour, medicines etc.

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Shift in demand curve A shift of demand curve can also be caused by

a change other than price, such as a change in taste, population, fashion, price of complementary goods, price of substitute goods. For example price of complementary goods, car and oil. If price of car increase it will effect demand of petrol due to which the demand curve of petrol shift downward.

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Shift in Demand Curve

price

Quantity Demand

Demand Curve

D1D2

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Conti This diagram shows shift of demand curve. When

price of complementary product increase or decrease it shift the demand curve upward or downward. Here when the price of car increase it effect the demand of petrol due to which the demand curve shift downward. The diagram shows that when price of petrol was 40 Afs, the demand was 70. but when the price of car increase it effect the demand of petrol due to which the demand decrease to 60 Afs, which shift the curve downward.

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Extension or Construction of Demand

Extension of Demand: An extension of demand caused by a fall in price. When price decrease demand increase which extend the demand and curve moved upward.

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Extension of Demand

Price

Quantity Demand

P1

P2

D1 D2

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Construction of Demand Construction of demand caused

by a rise in price. When price increase demand decrease which is called construction of demnad.

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Construction of Demand

Price

Quantity Demand

P2

P1

D2 D1

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Elasticity of demand

Elasticity of demand measures the degree of change in demand of a commodity in response to a change in the price of the commodity, or change in the income of the consumer or change in the price of related goods etc.

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Types of Elasticity of Demand:

1) Price Elasticity of Demand.2) Income Elasticity of Demand.3) Cross Elasticity of Demand.

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1) Price Elasticity of Demand: Price elasticity of demand is percentage change

in quantity demanded divided by the percentage change in the price.

P.E = %age change in amount demanded / % change in price.

Suppose the price of a commodity increase from 20 to 25. quantity demand decrease from 50 to 40. which is equal to 5÷10 = 0.5 there for price elasticity of demand is 5%.

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2) Income Elasticity of Demand:

Income Elasticity is a measure of responsiveness of Potential buyers to change in income. It shows how the quantity demand change when the income of the buyer change.

Income Elasticity= %age change in the quantity demand / %age change in the Income

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3) Cross Elasticity of demand

It refers to the effect on demand for one product of a change in the price of another.

Means when the price of one product change, how much it effect the demand of another product. Formula,

% change in the demand for product x / % change in the price of product y.

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Conti…. suppose the price of coffee increase from 25 to 35,

due to which the demand for tea increase from 60 to 70.

Than Cross Elasticity is 10/10= 1 which shows that the demand is unitary

elastic.

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Cases of Elasticity: • There are five different cases of Elasticity.1) Perfectly Elastic.2) Perfectly Inelastic.3) Relatively Elastic.4) Relatively Inelastic.5) Unit Elastic.

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1) Perfectly elastic A small increase in the price, the quantity demand

fall down to zero. It is called Perfectly Elastic demand.

Mathematically Ed = ∞ because anything divided by zero is ∞.

But perfectly elastic is extreme case, because there is no concept of perfect competition in the real world.

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2) Perfectly Inelastic:• Perfectly Inelastic: A large increase in the price

did not change quantity demand. In this case change in the price has no effect on the quantity demand. Mathematically Ed = 0

perfectly inelastic product also counted in extreme cases. For example, Kohinoor Diamond, this type of product is considered perfectly inelastic, because if a large increase in the price, demand did not change.

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Conti… Suppose the price of Kohinoor diamond is 20

billion dollars quantity demand is 10, if price of this diamond increase to 100 billion dollars again demand is 10.

perfectly inelastic =% change in Qd / % change in price= 0/80= 0

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3) Relatively Elastic: Relatively Elastic: When the percentage change in

the quantity demand is greater than percentage change in the price, it is called Relatively Elastic. Mathematically Ed › 1

Suppose the price of a commodity increase from 20 to 25. quantity demand decrease from 50 to 40. which is equal to 10/5 = 2 there for price elasticity of demand is 2. It shows that the demand is relatively Elastic.

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4) Relatively Inelastic:• Relatively Inelastic: when a percentage change in

the quantity demand is less than percentage in the price, it is called Relatively Inelastic.

• Mathematically Ed ‹1 suppose the price of a product increase from 30 to 40

so the quantity demand decrease from 20 to 18. so Relatively inelastic=

% change Qd / % change in price = 2/10= 0.2 the elasticity is less than one which is relatively inelastic.

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5) Unit Elastic: Unit Elastic: When a percentage change in the

quantity demand is equal to percentage change in the price. Mathematically Ed = 1

As price change at the same percentage Qd also change, this is call unit elasticity.

Suppose the price of a product decrease from 50 to 40, quantity demand decrease increase from 10 to 20. so Unit Elasticity is equal to 10/10=1 this is call unit elasticity.

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Supply

Supply means the quantity offered for sale at a given price. We may define supply as a schedule of the quantity of a good that would be offered for sale at all possible prices, during a given period of time. The supply has direct relation with price and the relationship of price and quantity supply is positive. For example more quantity is offered for sale at high price. As price increase quantity supply increase and when price decrease quantity supply decrease.

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Law of Supply:

Other things remaining the same( cost of production) When the price of a commodity increase, the supplier supplies more and more commodity to market and when price of a commodity decrease the supplier decrease the supply of commodity. The quantity offered for sale varies directly with price that is the higher the price the larger is the supply, and vice versa.

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Schedule

P QS10 1212 1416 1618 2022 25

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Supply Curve

20

18 16 12

10 12 14 16 20 25

Quantity Supply

PriceSupply Curve

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Explanation

This diagram shows the relationship of price with supply. As price increase quantity supply also increase. Price increase from 10 to 12 quantity supply also increase from 12 to 14, again when price increase to 16 quantity supply also increase to 16 and so on. It shows that the producer try to increase supply as price increase.

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Elasticity of Supply:

Elasticity of supply measure the degree of change in quantity supply due to change in price. Means when the price of a commodity increase or decrease how much quantity supply change.

Measurement: PES= % change in Quantity Supplied / % change in

price PES = %∆Qs / %∆P

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Price Equilibrium:

The equilibrium price the amount that buyers wish to purchase is exactly equal to the amount that supplier are willingly to offer to the market. Simply we can say that the amount at which both buyer and seller are agree. The buyer want to purchase on that price, while supplier is ready to supply that product to the market on that amount.

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Schedule

price Qd Qs 10 80 30 12 70 45 16 60 60 18 50 70 20 40 80

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Diagram

20 18 16

14 12 10 20 40 60 80 100

EPrice

Qd/Qs

E is Equilibrium

point

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Explanation

the above schedule and diagram shows various prices of a product and its quantity demand and quantity supply. When the price was 10, the quantity demand of this product was 80 and the supplier supply 30 products to the market. As price increase quantity demand decrease and quantity supply increase. When price increase to 16, at this point the quantity demand and quantity supply both are same, which is call equilibrium price.

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Conti

On this price both buyer and seller are agree. In diagram demand curve intersect supply curve when price reach to 16 because this is the equilibrium price and point E is call equilibrium point.

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CHAPTER NO=07

• AN INTRODUCTION TO HUMAN RESOURCE MANAGEMENT.(HRM).

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HRM is the Management of people working in an organization, it is a subject related to human. we can say that it is the Management of

humans.

HRM is a managerial function that tries to match an organization needs to the skill s and abilities of its employees.

HRM is responsible for managing people in organization helping them perform their work and solving problems that arise.

What is HRM

Introduction to HRM

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Conti…HRM plays important role in creating organizations

and helping them survive. Our world is an organizational world.

We are surrounded by organizations and we participate in them as member, employees,

customers and clients.

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Purpose of HRM

1) Helps you avoid common personnel mistakes:Qualified HR managers utilize organization resources

in such a way that helps to avoid common personnel mistake like the following:

a. Hiring the wrong person for the job. b. Experiencing high turnover.

c. Finding employees not doing their best. d. Having your company taken to court because of

your discriminatory actions.

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2. Helps you get result through others: when you hire right person for the right job. They will perform their task efficiently. You will receive better quality result from your

subordinates.

3. helps you to gain Competitive Advantage:Human Resource is the main source of an organization that helps to gain competitive Advantage on your Competitors.

Because all organizations can have the same technology, they can possess same type of financial resources, same sort of raw material can be used. To produce goods and

services.

but the organizational source that can really create the difference is workforce of the organization.

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Major Activities under HRM:

The major Human Resource Management activities are as follows:

1) Integrating organizational planning with human resource requirement:

When an organization is going to plan for the objective of an organization. HRM plays an important

role in the achievement of the objective. Because without human being no one organization can achieve

their task efficiently

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Conti…

2) Human Resource Planning: Human Resource Planning is one of the most important activities of the human resource management. Human

Resource planning helps in meeting the requirements for the organization. It shows that how much human resource

is required for organization.

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Conti…3) Acquisition of Human Resource:

Acquiring human resource is yet another activity of HRM. It is to be done very carefully because everything depends on the people. Quality of the product and prestige of the organization depends on them. Organization has to acquire the people

with multidimensional skills and experience.

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Conti…

4) Managing Performance:

This is the duty and responsibility of HR department that they will evaluate performance of employees in the

organization. For this purpose they use different type of performance standard.

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Conti…

5) Training and development:

In order to improve the performance of individuals and group, training and

development activities are under taken. Training and development is important due

to the rapid change in technology.

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Conti…6) Compensation and benefits:

Compensation and benefits is an activity that determines salary and wage structure, other rewards and benefits to be

paid to the staff of the organization.

7) Health and safety provision:

Making adequate provision for health and safety of the employees, build a strong workforce. It’s the duty of HR

department that they will take care about the health of employees.

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The objectives of HRM:1) Organizational objectives: The main objective of HRM is to create such an environment in the

organization in which each and every person feel freely and friendly. HR department tries to create strong relationship among the departments and

solve conflict among the employee. Whenever the organization need human resource HR

department plan for that to hire right person for the right job.

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2) Functional objective:

HR department perform key functions in the organization regarding the

employees. Like hiring of employees, training and development of the employees, compensation and

benefits of employees etc.

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3) Societal objective:

Once our organization performance improves we will face no problems from external environment. Because if HR hire employees for the organization according to the criteria of the organization without discrimination like basis on religious, gender, age, culture etc. than the output of the organization will be improve. We will face no complaint from external environment.

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4)Personal objectives:

This is the major objective of HR department that it will assist employees in achieving their goals

efficiently and effectively. For this purpose HR department evaluate the performance of employees

after Six month or One year to know about the performance of the employees.

 

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Chapter No 08:

Leadership and motivation:

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Leadership and Motivation

Motivation: Motivation is a general term applying to the entire class of desires,

needs, wishes and similar forces that makes us work. Means it is a desire or wish of a

person that force them to perform that task. Motivation is a function of willingness and

ability (skills) to do the job.

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Conti

We can say that motivation is the inner drive that directs a person’s behavior towards goals. In HRM the term refers to person’s desire to do the best possible job or to exert (apply) maximum effort to perform the assign task. For example a person is thirsty, so this thirst motivates that individual toward water.

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Motivated worker in an organization

• Motivated workers devoted to be at work.• takes pride in their work.• does not display negative attitude toward the

organization.• Displays a high level of loyalty and gets

satisfaction out of work.

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Benefit to the organization:

• Higher productivity level.• Lower labor turnover.• Lower absenteeism.• Improve quality with minimum resources.• Greater willingness to accept rather than

resist change.

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The Motivation Theories

Different authors present different theories on motivation. Here we will discuss some of them as under:

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1) McGregor’s Theory X and Theory Y:

This theory Provide an insight into the nature of people in relation to their work and about their work behaviors. Moreover, this theory is based on the managers’ assumptions about the people they are managing.

Basically in this theory the author present that in organization we have two types of people. Some employees who did not want to do any work; they are lazy and avoid work. And the author gives the name of theory X. On other hand there are some employees in the organization who like challenging job. Naturally, they are hardworking. So, the author gives the name of Theory Y to these types of employees.

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Assumption of theory X and theory Y:

Theory X vs. Theory Y:Theory X Assumption:

• Average human beings have an inherent (natural) dislike of work and will try to avoid it.

• People must be controlled, directed and threatened to make them work. Means if these types of employees who dislike, they must be forced, controlled and threatened with punishment to achieve the task that are assign to them.

• People prefer to be directed, wish to avoid responsibilities, have relatively little ambition, and want security above all. Means these types of people always want direction from other, they did not try to do their own job himself and try to avoid responsibilities. Moreover, they want security above from all. Means job security.

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Theory Y Assumption:

• Work activities are as natural as rest or play. Means performing duties and responsibilities is a natural thing for these employees. They like challenging jobs. And they like to play with challenges.

• People will work willingly for the achievement of objectives to which they are committed. The task and responsibilities that are assign to him. They perform willingly these tasks.

• People will exercise self direction and self control they are committed to the objective. Means they did not want direction from other people. But they perform all their responsibilities by his own skills and abilities.

• People will not only accept responsibilities, but also seek it. Means they try to find out challenging job in the organization.

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2) Maslow’s Need Hierarchy Theory:

According to Maslow, human needs can be arranged into five levels. When one need of human being satisfied it motivate another need as for as another need or want satisfy than it create another one. And according to Maslow Human needs are in the form of a hierarchy, ascending from lowest to the highest.

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Maslow’s Hierarchy of Needs

Physiological Needs

Food, Water, Shelter, Sleep

Safety Needs

Security and protection

Social Needs

Affection, Belongings and Friendship

Esteem Needs

Power, Status, Self-respect

Self-

Actualization

Maslow’s Hierarchy of Needs

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1) Physiological needs:

These basic needs are needed to a person to survive in this world. These needs include needs for air, water, food, clothing, shelter; rest etc. the individual want to satisfy these basic needs first.

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2) Safety needs:

when the individual basic needs are satisfy. Then he wants safety. These are the needs to feel free from economic threat and physical harm. Here the person wants to overcome the financial problems and improve the economic condition. He also want protection in the society , that he feel free.

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3) Social needs:

• these needs are concerned with affection (care), belongingness, acceptance and friendship. Here he wants to become a part of society and makes friends. People known him and expend relationship with others peoples. He finds satisfaction in association with others and feels a real deprivation (lack, deficiency) when it is not possible

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4) Esteem Needs:

• These are the two types (a) the desire for achievement (b) the desire for status and recognition among the society. At this stage the person want to achieve something and he want some status and recognition in the society.

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5) Self-actualization Needs:

• Here it means that the person wants to be master in his own field. For example, a musician must make music, an artist must paint, a doctor must serve his patient. At this stage, the person feels free because he reaches to top level in his own field.

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3) Herzberg’s Two Factor Theory

• It is also called the Dual Factor Theory and The Motivation Hygiene theory.

1) Hygiene or Maintenance Factors: 2) Satisfiers or Motivators Factors:

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1) Hygiene (Cleanliness, sanitation or Maintenance Factors:

Hygiene factors represent the need to avoid pain in the environment. They are related to the condition under which a job is performed. It means the basic need necessary for our existence in the job. Such as pay, working conditions, relationship with supervisors, relationship with subordinates, company policies, Status, Security and other benefits.

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2) Satisfiers or Motivators Factors:

These factors are associated with positive feelings of employees about the job. Which can motivate us to do something more. Factors such as achievement, recognition, the work itself, responsibility, advancement, and growth. These factors satisfy employees with their jobs.

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4) ERG Theory (Clayton Alderfer)

• ERG Theory is similar as Maslow’s Hierarchy of Need Theory:

• Clayton Aldefer Classifies Needs into three broader classes:

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ERG

• Existence Needs: (Physiological and Safety Needs)

• Related Needs: (Social Needs)• Growth Needs: (Esteem & Actualization

Needs): Here he want power, status and self-respect.

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5) Skinner’s Reinforcement Theory:

Skinner’s represent Law of Effect: It means Behaviors having pleasant or positive affect are more likely to be repeated and behaviors having unpleasant or negative affect are less likely to be repeated.

Types of Reinforcement:1)Positive Reinforcement:2) Negative Reinforcement:

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Types of Reinforcement:

1) Positive Reinforcement: Techniques aimed at increasing a desired behavior by providing pleasant or rewarding consequences (penalty, cost). Means to motivate an employee through positive way.

2) Negative Reinforcement: Techniques aimed at increasing a desired behavior or decreasing an undesired behavior that involves providing unpleasant consequences. Means to motivate an employee through negative way. Through punishment, like motivation of an employee by stick. Showing some threats to the employee.

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6) The Equity Theory:

• This theory states that we prefer a situation of balance, or equity.

• Input: Employees contribution to the organization

• Outcome: Rewards employee receives from the organization.

• Outcome/Input Ratio: Comparison between rewards and efforts.

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Outcomes of Comparison in Equity Theory

• Equity: =

• A situation of equity exists when our rewards/efforts ratio is equal to others’ rewards/efforts ratio

• We feel satisfied when a situation of equity exists .

My Rewards Others’ Rewards

My Efforts Others’ Efforts

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Outcomes of Comparison in Equity Theory

• Inequity:

• When our rewards/efforts ratio is not equal to others’ rewards/efforts ratio, the situation is called inequity.

My Rewards Others’ Rewards

My Efforts Others’ Efforts

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Outcomes of Comparison in Equity Theory

• Inequity: <

• When our rewards/efforts ratio is less than others’ rewards/efforts ratio, we are under rewarded and may feel anger and dissatisfaction.

My Rewards Others’ RewardsMy Efforts Others’ Efforts

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Outcomes of Comparison in Equity Theory

• Inequity: >

• When our rewards/efforts ratio is greater than that of others, we are over rewarded and may experience blame and shame.

My Rewards Others’ RewardsMy Efforts Others’ Efforts

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ChapterNO#04

• Principle of Macroeconomics.

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Macroeconomics Theoryor

Macroeconomics• Macroeconomics theory or macroeconomics• Deals with the whole economy.It is also called

economics of aggregate like aggregate consumption, aggregate employment, aggregate production(NI) and general price level etc.

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Macroeconomics Variables and their functional Relationships.

• 1.Consumption Function• Or • Relation between consumption and income.• According to Keynes, the consumption(c) of the

economy depends upon the income(y) of the economy. Such relationship between consumption and income is known as consumption function.

• C=f(Y).

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2.Saving Functionor

Relationship between saving and income

• According to Keynes, the saving function(S) of the economy depends upon the income of the economy(Y). Such relationship between savings and income is known as saving function.

• S=f(Y)

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3.Income FunctionorRelation between Investment and Income.• According to Keynes, The NI of a country

depends upon the investment.• Y=f(I)

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4.Investment Functionor

Relation between income and Investment.

• According to prof.Clark, investment depends income of a country.Such relation between income and investment is called investment function.

• I=f(Y).