BUSINESS ADMINISTRATION

Class XI

Study Material
1. Introduction to Business 1.1. Concept, Nature and Type
of Business
1.2. Forms and Structures of
Business Organization.
1.3. Learning Trade
Associations and Chamber of
Commerce.
2. Business Environment 2.1. Understanding business
environment
2.2. Constituents of business
environment
2.3. Internal and External
Factor affecting functional
decisions of Business
2.4. SWOT & PEST analysis.
3. Business Plan 3.1. Understanding what is a
business plan & its need in a
business.
3.2. Planning the required
outcomes from a business plan.
3.3. Writing a business plan &
key ingredients of it.
3.4. Updating & Enhancing a
business plan
3.5. Business plan tools &
Sample business plan
4. Products & Services 4.1. Identifying Consumer
needs
4.2. Concept, Characteristics
and Classification of Products.
4.3. Introduction to Growth of
 Service sector
4.4. Concept, Characteristics
and Classification of Services.
4.5. Difference between
Products and Services.
5. Workplace Environment 5.1. Communication
5.2. Teamwork and Group
dynamics
5.3. Leadership and Motivation
5.4. Human Resource
5.5. Encourage trust and
confidence
5.6. Contribute to positive
outcomes for organization.
6. Technology in Business 6.1. Impact of Technology in
Business.
6.2. Introduction to MS Office.
6.3. E- Commerce
6.4. Working with Internet.
6.5. Virtual Enterprise.
6.6. Social Networking.
7. Value, Ethics & Environmental 7.1. Introduction to Business
Issues Ethics and Values.
7.2. Environmental analysis
and Strategic Management.
Unit 1 : Introduction to Business
1.1 Concept, Nature and Type of Business

 Introduction:

All Human beings where ever they may be require different type of goods and
services to satisfy their needs. Business is a major economic activity in all modern
societies concerned with production and sale of goods and services required by the
people. It is aimed at earning money by satisfying human demands.

 Meaning:

Literal meaning of Business is “BUSY”.

Business is defined as an economic activity

involved in the production and sales of goods and services

undertaken with the motive of earning profit

by satisfying human needs in the society.

 Characteristics of Business activities:

 An Economic activity: It means an activity aimed at earning money. Business is

also aimed at earning money or livelihood by satisfying human needs.
 Production and procurement of goods and services: Every business enterprise
must either manufacture the goods or it acquires from producers. Goods may be
consumer goods or Capital goods. Services means facility offered to consumers
like banking, insurance etc.
 Sale or exchange of goods and services: Business involves transfer or exchange of
goods and service for value.
 Dealing in goods and services on a regular basis: It should be a regular activity.
One time sale or exchange will not be considered as business.
 Profit earning: Business always aims at earning profit.
 Uncertainty of earning: There is always a possibility of less amount of profit or
even loss in business.
 Element of Risk: There is always a possibility of Uncertainty of earnings.
  Comparison of Business, Profession and Employment:

Basis Business Profession Employment

1. How to Start? Based on Getting Getting an

entrepreneurs membership of a appointment
/owners professional body letter
decision

2. What is its nature? Providing Rendering of Performing work

goods and personalized expert as per service
services to the services contract
public

3. Qualification/Who No minimum Requires Requires

can start? qualification qualification and qualification and
training in a training
specific field

4. Return/What will Profit Professional Fees Salary

you get?
5. Capital/How much Requires Requires limited No capital
you need to start? capital as per capital required
the size of the
Business

6. Risk involved More risk Less risk No risk

7. Transfer of Interest Is possible Not possible Not possible

– Can you transfer? with some
formalities
8. Code of conduct No code of Professional code Code of conduct is
conduct is of conduct to be prescribed by the
prescribed followed employer to be
followed

Classification of Business Activities:

 Industry: Production or processing of goods and services. It is concerned with

changing the form of the products. It gives form utility to the products. It is
classified into the following:
 Industry

(Producing or processing of Goods as well as breeding of animals)

1. Primary 2. Secondary 3. Tertiary

Extraction and Processing the Support services

production of natural materials got in the to primary and
resources and primary industries secondary
reproduction and industries
development of
living organisms,
plants etc.

1. Primary Industry

a. Extractive Industry b. Genetic Industry

Mining, lumbering, Breeding plants and

hunting and fishing animals, Poultry
operations farming and fish
hatchery
2. Secondary Industry

a. Manufacturing Industry b. Construction Industry

Production and Construction of

processing of goods Buildings, dams,
creating form utilities bridges, etc.,

2.a. Manufacturing Industry

(i). Analytical (ii). Synthetical (iii). Processing (iv).

Assembling
Industry Industry Industry
Industry
Separates Combines Involves series Assembles
different various of activities different
elements from ingredients components
Eg., Sugar and
the same
Eg., Cement, Paper Eg., Television,
materials
Textiles, etc., Car, Computer,
Eg., Petrol,
Diesel,etc.,
 Commerce: It includes all those activities which are concerned with removing
all the hindrances in the movement of goods from the manufacturer to the
consumers. It includes the following activities.

COMMERCE

INDUSTRY TRADE

Commerce includes the following activities :

1. Industry
2. Trade – Export, Import
3. Transport and communication
4. Banking
5. Insurance
6. Advertisement
7. Packaging
8. Warehousing etc.,
 Trade : Trade means exchange of goods and services between sellers and buyers
with profit motive.

 Auxiliaries to Trade:

1. Transport and communication : Physical movement of goods from the place

where there is no demand to the place where there is demand. Creates place
utility to the product.

2. Banking and Finance : Helps in removing financial hindrances. Facilitates production,

buying and selling by providing funds by way of loans.

3. Insurance: It facilitates business by ensuring compensation for various types of risks.

4. Warehousing: It keeps the goods in tact till they are in demand. It creates time utility
to the product.

5. Advertising: It provides information about availability of goods and services. It

induces the consumers to buy the product.
 Role of Profit in Business:
 It is source of income for the business man.
 It provides funds for expansion
 It is an indicator of efficiency of business man.
 It builds up reputation.
 Innovation

Productivity
Innovation
Physical and
vvity
financial resources

Objectives of Business
Earning profits

Manager performance and

development

Worker performance and

attitude

Social Responsibility

 Business Risk: It refers to the possibility of inadequate profits or even losses due
to uncertainties or unexpected events.

Nature Of Business Risks

 Business risks arise due to uncertainties

 Risk is an essential part of business
 Degree of risk depends upon the nature and size of
business
 Profit is the reward for risk taking.

 Causes of Business Risks:

 1. Natural Causes : Risk may be due to Flood, earth quake, lightning, heavy
rains etc.
2. Human Causes: It includes dishonesty, carelessness or negligence of
employees, strikes, riots, etc.
3. Economic Causes: It includes uncertainties relating to demand for goods,
competition, price, collection of dues from customers, changes in economic
policies etc.
4. Other Causes: It includes political disturbances, mechanical failures etc.

 Basic factors to be considered before starting a Business:

1. Selection of Line of Business: Based on the requirements in the market
nature and type of business to be selected.
2.Size of the Firm: Based on the amount of funds available and demand for
the product in the market size of the firm i.e small scale or medium or large
scale to be decided.
3.Choice of form of ownership: Based on the amount of capital required,
legal formalities to be filled in, liability of the owner, etc. the form of
ownership is to be decided.
4.Location of the Business enterprise: Based on the availability of raw
material and infrastructure facilities location of the Business is to be
selected.
5.Financing the Proposition: Requirement of Capital and its sources must be
decided.
6.Physical facilities: Availability of physical facilities including machines and
equipment, building and supportive services to be considered before
starting a business.
7. Plant layout: Plant layout should draw to show the arrangement of these
facilities.
8.Competent and committed worked force.: Every business needs work
force. So careful planning should be about selection, training and
motivation of employees.
 9. Tax Planning: Tax liability and its impact on business to be considered.
10. Launching the enterprise: After fulfilling the formalities entrepreneur
can launch the business.

FORMS OF BUSINESS ORGANISATION

Sole proprietorship Partnership Hindu Undivided Co operative

Company

Family Society

Meaning Of Sole Proprietorship:

Sole means only

Proprietor means owner

Merits of sole proprietorship:

1. A sole proprietor can take decision quickly.

2. Information can be kept secretly without any leakage.

3. No need to share profits.

4. He gets self satisfaction for the work he has done.

5. Easy to start and to close because of less rules and regulations.

  Partnership
Types of Partners :

1. Active partner: An active partner is a partner who gives capital,

participates in management, shares the profits and losses and has
unlimited liability.
2. Sleeping partner: A Partner who do not take part in the business
activities.
3. Secret partner: A partner who has association with the firm but unknown
to the public.
4. Nominal partner: A partner who allows his name to be used by the firm
5. Partner by estoppel: A person who by behaviour sets an impression to
others that he/she is a partner of the firm.
6. Partner by holding out: A person who is not a partner but allows himself
to be represented as partner in a firm.

Consequences of Non Registration:

1. A Partner of an unregistered firm cannot file a case against the firm or

other partners.
2. The firm cannot file a case against third parties.
3. The firm cannot file a case against the partners.

Types Of Companies
 COMPANY

PRIVATE PUBLIC

 Public Company:
1. Members: Minimum 7, Maximum unlimited
2. Minimum number of directors: 3
3. Minimum paid up capital: 5 lakhs.
4. Index of members: Compulsory.
5. Transfer of shares: Shares can be transferred easily from one person to
another.
6. Invitation to public: It can invite the public to purchase the share and
debentures
 Private Company:
1. Members: Minimum 2, Maximum -50.
2. Minimum number of directors: 2
3. Minimum paid up capital: 1 lakh
4. Index of members: Not compulsory.
5. Transfer of shares: Shares cannot be transferred from one person to
another.
6. Invitation to public: It cannot invite the public to purchase the share and
debentures.

 Memorandum of Association:
1. It defines the objects for which the company is formed.
2. This is the main document of the company.
3. This defines the relationship of the company with outsiders.
4. Every company has to file Memorandum of Association.
5. Alteration of Memorandum of Association is difficult.
Articles of Association:

1. It defines the objectives of the company that are to be achieved.

2. This is the subsidiary document of the company.
3. Articles define the relationship of the members and the company.
4. It is not necessary for the public limited company.
5. It can be altered by passing a special resolution.

Learning Trade Associations and Chamber of Commerce

Trade Associations

A trade association, also known as an industry trade group, business

association or sector association, is an organization founded and funded
by businesses that operate in a specific industry. An industry trade association
participates in public relations activities such as advertising, education, political
donations, lobbying and publishing, but its main focus is collaboration between
companies, or standardization. Associations may offer other services, such as
producing conferences, networking or charitable events or offering classes or
educational materials. Many associations are non-profit organizations governed by
laws and directed by officers who are also members.

Chamber of Commerce

Characteristics

A Chamber of Commerce and Industry is

an autonomous organisation of
businesses and individuals
aimed at promoting commerce and industry.
It may be a private set-up with voluntary membership (as in Singapore)
or one established under public law, with compulsory membership (as in
Germany) or one regulated under public law status with voluntary
membership (as in Japan).

It could take the form of ...

• a national establishment eg. the Thai Chamber of Commerce
• a provincial body eg. the West Java Chamber of Commerce and Industry
• a town or district setup eg. the Dhaka Chamber of Commerce
• an ethnic grouping eg. the Singapore Chinese Chamber of Commerce and

Industry.
Mission

Despite their wide diversities, Chambers of Commerce and Industry generally

share a common mission, which is to promote, develop and further the economic
well-being of members by providing
• a collective voice in advocacy to represent and
protect members' interests
• quality services to help members enhance their
competitiveness and succeed in their businesses
thereby contributing significantly to the economic progress of the
nation.

Agenda

To achieve their mission, Chambers of Commerce and Industry have on their

agenda, a broad range of functions and services. These include ...
• representation
• networking
• information services
• business and trade development
• training and consultancy services
• membership development
• special export promotion services, etc.
The following table lists in general, the range of activities*1 covered under the various
functions .

Functions Activities
Representation hold regular dialogues with government to advocate, provide
feedback on, and help fine-tune policies and legislations
affecting business practices
serve on statutory boards and government committees to
help formulate policy guidelines and set standards that will
enhance business climate and members' competitiveness
Networking forge strategic alliances with local and foreign business
organisations to establish and develop mutually beneficial
relationships via Memoranda of Understanding, Joint
Consultative Committees, etc.
join a global network of Chambers of Commerce to facilitate co-
operation (eg. ASEAN-CCI, CACCI, etc)
provide leadership to co-ordinate members' efforts to trouble-
shoot, address, solve common problems/issues affecting business
operations
 Functions Activities
Membership Build up a membership base through recruitment of new members
Development and retention of existing ones. This is achieved by ...
• launching membership drives to supplement on-going
recruitment
• sustaining members' interest by offering quality services,
enhancing membership status and privileges
• encouraging co-operation and fraternity amongst members by
organising social and sports events
Information provide relevant business information to members such as
Services information on business opportunities, technological
advancements, government rules and regulations, etc2
maintain a trade library for members' use
conduct market surveys and economic research and
circulate findings to members through newsletters,
economic bulletins, general membership circulars or IT
tools
 Functions Activities
Trade and publish a directory of members, their businesses and capabilities
Business process trade enquiries
Development operate a business matching center to provide services such as ...
• arranging buyer-seller meetings
• providing facilities and secretarial services for meetings
between trade visitors and members
identify trade and investment opportunities and help members
maximise these through
• organising trade and investment missions
• arranging meetings between members and visiting trade and
investment missions
• organising trade fairs and exhibitions
• co-ordinating members' participation in trade shows
maintain a product display center to showcase members' products
(product display centers are usually sited within the chamber's
premises for easy access to trade visitors but if finances allow, they
could be sited in major overseas markets as in the case of the
Hongkong Trade Export Council)
Special Export issue certificates of origin, ATA carnets
Services
Functions Activities
Training and operate a training center*3 that will offer human resource
Consultancy/ development programmes, skills and technological
Advisory upgrading courses, etc
Services organise meetings, conferences, workshops, seminars to
provide members with fora for exchange of views and
experiences
encourage member companies to enhance competitiveness
through • quality management - eg. set up quality circles; adopt
"good housekeeping" practices; help members to attain ISO
standards
• improved product design - eg. organise competitions to
reward good product and packaging designs
encourage members to computerise their operations and take
other IT initiatives to achieve greater efficiency
maintain a list of consultants, resource personnel, professionals,
etc to whom referrals can be made if members require their
services
Functions Activities
Training and render basic in-house consultancy services by Chamber staff - eg.
Consultancy/ on energy conservation, environmental issues, etc as in the case
Advisory of the German Chambers of Small Businesses
Services offer arbitration/mediation/conciliation services to help resolve
(cont'd) trade disputes

Other Services
In addition to the above list, some Chambers of Commerce and Industry offer special
services, eg.
• the Singapore Confederation of Industries (formerly known as the Singapore
Manufacturers' Association) operates the Singapore Article Numbering Council
which issues bar-codes to members
• the Pune Chamber of India operates an employment service to help their members
recruit qualified staff
• the Chamber of Commerce and Industry in Colombo conducts tea auctions
• the Chamber of Commerce and Industry in Angeles (Philippines) runs a credit
program

• the provincial Chamber of Commerce and Industry in Jogjakarta (Indonesia) offers

telecommunications facilities to its members and the general public.
CHAPTER TWO

BUSINESS ENVIRONMENT

COMPONENTS OF BUSINESS ENVIRONMENT

2. MEANING OF BUSINESS ENVIRONMENT

To begin with let's understand the meaning of business environment. We live in the
world which is completely dynamic. Rapid changes keep taking place and are frequent
because of the changes in social, political and economic environment.
These changes occur because of the advancement in technology
so the new ideas for a better society enriched with high standard of living

demands the business to be adjustable to these changes and it demands the business to
be very flexible to provide the right thing at right price at right time.

But the thing should be of high quality to ensure customer satisfaction.

So, these changes surround the business enterprise and influence it in various aspects.

A business organization is successful only when it quickly adapts itself to these

changes. As per Keith Davis "Business Environment is the aggregate of all conditions,
events and influences that surround and affect the business" It means that all the
happening in the surroundings of the business, affect it. So it is important for the
business to identify and understand these changes and change the business strategies
accordingly. In the words of Bayard O. Wheeler "business environment is the total of all
things external to business firms and industries which affect their organization and
operations"

And In the words of Dunham and Pierce "business environment represents a set of
conditions, circumstances and influences that surround and affect the functioning of
the organization. This environment is made up of different individuals (like customers,
local citizens etc); organizations (like suppliers, labor unions) and government bodies
(like regulatory agencies, legislators etc.)"

Both the definitions highlight on the external factors affecting the business. The
operations of the business enterprises are highly affected by the external
environmental factors. Customers, suppliers, labor unions and government bodies
form the business environment.

3. CURRENT INDIAN BUSINESS ENVIRONMENT

Before the Indian industrial policy of 1991, more about the current and more control of
commerce and trade was in the hand of public sector. Lot of problems like bureaucracy
and red tapism resulted in formation of Industrial policy of 1991 which emphasized on
Liberalization, Privatization and Globalization. Before the year 1991 India was hit by
economic crisis and accelerated growth of economy was required.
The current Indian business environment is the result of the Indian industrial policy of

(BuiCding (Businesses Across India

1991.
Earlier lot of restrictions were imposed by the Indian government like price control,
import license and foreign exchange control. This resulted in corruption.
inefficiency

The industrial policy encouraged liberalization and removed all the barriers of
unnecessary control and strict licensing. The liberalization encouraged simple
licensing and have reduced unnecessary restrictions on trade.
Other countries like Korea, Thailand and Singapore have adopted the policy of
liberalization for the growth of their economy.
The current Indian business environment is witnessing larger amount of foreign direct
investment.

This is because of simple licensing. The corporate giants in India are doing research on
the unexplored areas of trade. They are doing so to contribute to the Indian economy.

Privatization encourages private sector to set up more and more industries which were
earlier reserved for the public sector. Through this private sector contributes a lot to
the Indian economy. Globalization encourages free trade and exchange of goods,
services, capital, labor, expertise and technology amongst different countries. Indian
software engineers going abroad and foreign companies setting up production units in
India is the example of globalization. Globalization should result in making the world a
global village.
The Indian business environment is full of competition because of privatization and
globalization. The domestic businesses as well as international businesses face cut
throat competition to enter and survive in the Indian market. They can survive only
through customer satisfaction and providing high quality products. The increased
foreign direct investment in India has supplemented the domestic capital formation
and has improved the balance of payment.
insurance,
transportation,
health care,
consultancy,

and other service sectors contribute more than half of the national income in India. As a
member of WTO India will reduce the tariff and non-tariff barriers and reduce and repay
the foreign debt.
Indian business environment is committed to the Indian economy through promoting
increased living standards of the people in India.
The world economy witnessed recession in the year 2008-09. The stability of the banks
and financial institutions was questioned. India's
export sector, inflow of foreign investment, employment opportunities, capital
markets, domestic demand of capital and consumer goods were affected due to
economic slowdown. But the Indian private and public houses have struggled a lot to
bring the Indian economy in the better position again. It is a fact that the Indian
business environment is in much better position now and the Indian economy is
growing at pace now.

RELATIONSHIP BETWEEN BUSINESS AND BUSINESS ENVIRONMENT

The next topic of this lecture is Relationship between business and business
environment. Business environment are inter related. Environment can stop and
promote the growth of the business. Environment provides a platform to the business
to grow with the help of favorable changes. Environment can also create challenges or
problems for the business to grow. So business and environment are co related and
they share a mutual relationship.
 For example, when there is high competition business goes for rigorous marketing and
advertising and when the industry face recession then the production rate is cut down.
In this way when all the industries or to kept in simple, when all the businesses come
together they may pressurize the government to change the policies. In this situation,
businesses together control the external environment so there is a mutual relationship
between the business and the business environment. Business policies and strategies
should be dynamic.

Because the external factors like socio- economic, legal, political, cultural and
technological factors are not constant they keep changing and business should adjust
itself to the changes. The external factors keep providing opportunities and threats to
the business.

For example, government encourages business by imposing subsidy or reducing tax

but government also increases tax at times and this creates hindrance in the path of
growth for the business. So, it can be said that business and business environment are
inter related and there is a continuous cycle of inter relationship between the two.

5. CHARACTERISTICS OF BUSINESS ENVIRONMENT

The next topic of this lecture is Characteristics of business environment. The various
characteristics of business environment are:

• Complex
• Dynamic

• Affects other firms differently

• Long and short term impact

• Effect of external environmental factors

• Uncertainty

• Interdependency of components
• Combination of both internal and external environment.

Let's talk about the first characteristics of the business environment that is complex.
Business environment is complex because legal, political, socio cultural, economic and
technological factors affect the business in different aspects. These factors are
inseparable from the business so they are un-controllable and form the business
environment. So business environment is said to be complex.

The next characteristic of the business environment is dynamic. The external factors
affecting the business keep changing. So the business needs to frame policies and
strategies accordingly. Business is required to keep pace with the changing
environment.

The next characteristic of the business environment is it affects other firms differently.
Different factors of the external environment affects different businesses differently. A
change in external factor may be favorable for one business but it may be unfavorable
for the other businesses.

The next characteristic of the business environment is long and short term impact.
Every external environmental factor has both long and short term impact on the
productivity, profitability and the growth of the business.

The next characteristic of the business environment is effect of external environmental

factors. The effect of external factors on business is deep and is uncontrollable.
Sometimes it may be so intense that the business has to close down its operation
completely. For example, when government imposes ban on tobacco and alcohol, the
industries may run in loss and may result in the closure of the business all together.
The next characteristic is uncertainty. The changes in business environment are
constant and sudden. So the external factors are difficult to study and analyze.

The next characteristic of the business environment is Interdependency of the

components. The external factors of the business environment are interdependent on
each other. For example, the economic factor affects the social factor and the social
factor affects the economic factor.

The next characteristic is combination of both internal and external environment.

Business environment is the combination of both internal and external environment and
these factors surround the business as you can see here in this diagram. Business is
surrounded by internal environment which is in control of the business and external
environment which is not in control of the business. Together internal and external
factors form the business environment. Business has to change its policies and
strategies according to the changes in the external factors affecting the business.
Business should be flexible and adaptable to these changes.

6. COMPONENTS OF BUSINESS ENVIRONMENT

The next topic of this lector is Components of business environment. Now we will
study the various factors affecting the business or the component of the business
environment.

Look at this diagram:

The components of business environment or the factors affecting business
environment are divided into internal and external environment.

The internal environment is sub categorized into: • Capital

• Business objectives

• Management policies

• Commitment of human resources

• Internal work environment

• Brand image
• Labor management relationship
• Promotional strategies

Similarly the external environment is sub categorized into Micro and macro
environment as you can see in this diagram.

Micro environment is categorized into:

• Customers
• Suppliers
• Public

Macro environment is categorized into the following factors: • Economic

• Political
• Technological
Demographic
 Now look at this diagram,

The economic environment is composed of

This diagram will help you clearly understand what these factors in macro
environment are composed of.
The economic environment is composed of:
• Economic conditions
• Income level
• Distribution of income
• Trade cycles
• Market share
• Price level
• Industrial growth
• Rate of capital formation
• Economic policies
• Economic systems
• Capitalism
• Socialism
• Mixed economy

The other economic factors are divided in Banks, Insurance companies, Money market,
Capital market, Transportation and communication.

Now let's discussed the Political environmental factors. Now let's talk about the political
environment. Political environment is divided into:
• Political ideology of the government
• Political stability
• Relation of government with other countries
• Centre state relationship
• Welfare activities of the government
 Socio cultural environment is composed of:
• Attitude of people towards work
• Family system
• Caste system
• Religion
• Education
• Habits and preferences
• Languages
• Urbanization
• Customs and traditions
• Value system and
• Business ethics

Socio cultural environment is composed of

 Natural environment is composed of:

• Availability of natural resources

• Weather and climatic conditions
• Topographic factors like soil, land, rainfall, sea, rivers
• Location aspects
• Ecological factors like pollution and its control

Natural environment is composed of

Technological environment consists of factors like: Research and
development Innovation
Product technology and
Modernization

Technological environment consists of factors like

Demographic environment consists of: Population

size and growth Age composition Sex composition
Education level
• Urban rural population
• Family size and structure and
• Economic stratification of population

Demographic environment consists of

International environment consists of:

• Globalization
• International institutions like WTO, IMF and World Bank
• International agreements
• International terrorism
• Cultural exchange and
• Global financial crisis

International
environment consists of

So, these were the various

components of the business
environment and we will talk
about each component later, in
detail.
 7. INTERNAL ENVIRONMENT

Based on the diagrams discussed

earlier let's talk about the
components of the internal
environment. Internal
environment consists of the
factors which are in controlled of
the business or we can say that
the internal environment is the
environment within the
organization.

As you can see here in this

diagram, business is surrounded
by internal environment and the
next layer is external
environment together internal
and external environment form
the business environment.
The internal environment
includes components like:
• Capital
• Human resources
• Business objectives
• Management policies
• Commitment of human resources
• Internal work environment
• Brand image
• Labor management relationship
• Research and development base
and
• Promotional strategies
So, basically the internal
environment consists of 5 M's
which mean Man, Material,
Money, Machinery and
Management.

Let's talk about the first

components affecting the
internal environment that is
capital. Capital or financial
resources are required to start
and maintain the business
operations. Finance is the life
blood of the business. The
management is required to
skillfully utilize the financial
resources for the growth of the
organization. It is in control of
the business how to utilize the
financial resources. Optimum
utilization of the final resources
should be done by the business
management. So, it is the part of
the internal environment as it is
in control of the business.

The next component of internal

environment is Human
Resources. Efficient human
resources of the business takes
the business to great heights. The
quality of goods and services
provided by the business
depends entirely upon the
human resources employed in
the business. The brand image of
the business is also depended on
the human resources of the
business. So again it is an internal
factor which is control of the
business.
The next component of internal
environment is Business
objective. The objectives of the
business should be framed
keeping in mind that the external
environment is constantly
changing so the business needs
to adjust itself to the external
environment. The interest of all
the parties affecting the business
should be kept in mind especially
the interest of the society.

The next component of internal

environment is Management
policies. The board of directors
and the executives should
foresee the changes in the
external environment and form
the business strategies and
policies accordingly. They should
analyze properly the external
factors affecting the business.
And they should promote the
interest of workers, employees,
business owner and should
concentrate on the well being of
the society.

The next component of internal

environment is commitment of
human resources. Unsatisfied
workers results in low
productivity and they may even
go on strike and stopped the
production of the goods and
services altogether. This may
adversely affect the business. So
the management should time to
time interact with the workers
and employees, understand their
genuine demands and at the
same time reward them for their
good job by the employees or the
workers. This will promote them,
motivate them and will ensure
their commitment towards their
job.

The next component of internal

environment is Internal work
environment. Business should
promote healthier and happier
environment inside the
organization. It should encourage
high standard of living of the
workers and the employees. The
business should give them good
working conditions to the
workers and employees. This
factor is internal and is in
complete control of the business.

The next component of internal

environment is brand image.
Promoting the better brand
image is in the hands of the
business and it is completely in
the control of the business to
promote its brand. If the business
succeeds in providing quality
goods and services to the
customers and make the
customers happy then the
business builds the best brand
image. Remember customer is
the king of the market.

The next component of internal

environment is labor-
management relationship. Labor
management relationship as we
discussed earlier is in complete
control of the business.
Management should interact
with the workers on timely
bases.

Management should provide best

working conditions to the
workers. Management should
reward them for their good work
to keep them motivated and to
ensure the growth of the
business.

The next component of internal

environment is research and
development base. It is in the
hands of the business to utilize
the financial resources to
encourage research and
development in the organization
to understand the taste and
preferences of the customers.
Marketing strategies of the
business should be changed as
per the research conducted by
the business to understand the
taste and preferences of the
customers.

This will ensure winning of the

business in the competition and
larger market share of the
business. It is important for the
business to channelize its
financial resources in the
direction of research and
development.

The next component affecting

internal environment is
promotional strategies. It is in
control of the business to
formulate the strategies for the
promotion of its quality goods
and services. Top management
should foresee the changes in
external environment and
formulate the policies and
strategies by analyzing the
external environment which are
in the best interest of the
business and they should keep in
mind that business should be
ahead in the competition. So
these were the various
components of the internal
business environment. So, in this
lecture we have discussed the
meaning of business
environment, the relationship
between business and business
environment. We have also
discussed the current Indian
business scenario. We have
talked about the characteristics
of business environment. We
have also talked about the
components of business
environment and we have
discussed the internal
environment in detail.
SWOT analysis and PEST analysis

The SWOT analysis is an extremely

useful tool for understanding and
reviewing the company's position
prior to making decisions about
future company direction or the
implementation of a new business
idea. A SWOT analysis can be
completed by an individual within
the organization (provided they can
take an overview of the current
situation) but is often best
completed in a team or group. The
discussion itself is informative, and
the quality of the output is better if
perceptions are gathered from a
number of people.

The PEST analysis is a tool to

evaluate external factors. It is often
helpful to complete a PEST analysis
prior to a SWOT analysis, although it
may be more useful to complete a
PEST analysis as part of, or after, a
SWOT analysis. A SWOT analysis
measures a business unit; a PEST
analysis measures trends and
changes in the market.
A SWOT analysis is a subjective
assessment of information about the
business that is organized using the
SWOT format into a logical order
that helps understanding,
presentation, discussion and
decision-making. The four
dimensions are a useful extension of
a basic two heading list of pro's and
con's. The SWOT analysis template is
normally presented as a grid,
comprising four sections, one for
each of the SWOT headings:
Strengths, Weaknesses,
Opportunities, and Threats. The
SWOT template below includes
sample questions, whose answers
are inserted into the relevant section
of the SWOT grid. The questions are
examples, or discussion points, and
obviously can be altered depending
on the subject of the SWOT analysis.
Note that many of the SWOT
questions are also talking points for
other headings -use them as you find
most helpful, and make up your own
to suit the issue being analyzed.

A SWOT analysis can also be used to

examine different aspects of the
business, in our case examining the
businesses solutions, customers,
capabilities and organizational
capabilities. Each represents a
different element of the business,
and requires a separate assessment.
In the template provided we suggest
specific questions that need to be
answered relevant to each aspect of
the business. As you work with this
framework you may add questions
that are relevant to the specific
context of your business.
Importantly, the SWOT analysis can
include many different ideas that
make it difficult to process decisions.
It is therefore useful to define the
relevant level of significance you
will consider when including a
factor before completing the
analysis. That said, it is important
that you identify at least one factor
to go in each box, even if you cannot
determine the relative importance
of a factor. At the evaluation stage
you will be better able to determine
this, and will have to do this when
you use the summary sheet to
incorporate the most important
elements and prioritize the
outcomes. The first time you
perform a SWOT analysis it can be
challenging, but like most things, the
more you do it, the easier it gets.
A SWOT (2x2) matrix using
internal/external categories

Here is a typical extension of the

basic SWOT analysis grid into a
useful 'action-based' 2x2 SWOT
matrix. The SWOT analysis in this
format acts as a quick decision-
making tool, quite aside from the
more detailed data that would
typically be fed into business
planning process for each of the
SWOT factors. Here the 2x2 matrix
model automatically suggests
actions for issues arising from the
SWOT analysis, according to four
different categories:

Strengths (internal) Weaknesses (internal)

obvious natural priorities potentially attractive options
Likely to produce greatest ROI Likely to produce good returns if
(Return On Investment) capability and implementation are viable.
Likely to be quickest and easiest Potentially more exciting and stimulating
to implement. and rewarding than S/O due to change,
Opportunities Probably justifying immediate challenge, surprise tactics, and benefits
(external) action-planning or feasibility from addressing and achieving
study. improvements.
Executive question: "If we are not Executive questions: "What's actually
already looking at these areas stopping us doing these things, provided
and prioritizing them, then why they truly fit strategically and are
not?" realistic and substantial?"
Threats easy to defend and counter potentially high risk
(external) Only basic awareness, planning, Assessment of risk crucial.
and implementation required to Where risk is low then we must ignore
meet these challenges. these issues and not be distracted by
Investment in these issues is them.
generally safe and necessary. Where risk is high we must assess
Executive question: "Are we capability gaps and plan to defend/avert
properly informed and organized in very specific controlled ways.
to deal with these issues, and are Executive question: "Have we accurately
we certain there are no hidden assessed the risks of these issues, and
surprises?" - and - "Since we are where the risks are high do we have
strong here, can any of these specific controlled reliable plans to
threats be turned into avoid/avert/defend?"
opportunities?"
SWOT analysis template

Subject of SWOT analysis: (define the subject of the analysis here)

strengths
• Advantages of proposition?
weaknesses
• Capabilities?
• Disadvantages of proposition?
• Competitive advantages?
• Gaps in capabilities?
• USP's (unique selling points)?
• Lack of competitive strength?
• Resources, Assets, People?
• Reputation, presence and reach?
• Experience, knowledge, data?
• Financials?
• Financial reserves, likely returns?
• Own known vulnerabilities?
• Marketing - reach, distribution,
• Timescales, deadlines and pressures?
awareness?
• Cashflow, start-up cash-drain?
• Innovative aspects?
• Continuity, supply chain robustness?
• Location and geographical?
• Effects on core activities, distraction?
• Price, value, quality?
• Reliability of data, plan predictability?
• Accreditations, qualifications,
• Morale, commitment, leadership?
certifications?
• Accreditations, etc?
• Processes, systems, IT,
• Processes and systems, etc?
communications?
• Management cover, succession?
• Cultural, attitudinal, behavioural?
• Management cover, succession?
opportunities
• Market developments?
• Competitors' vulnerabilities? threats
• Industry or lifestyle trends? • Political effects?
• Technology development and • Legislative effects?
innovation? • Environmental effects?
• Global influences? • IT developments?
• New markets, vertical, horizontal? • Competitor intentions - various?
• Niche target markets? • Market demand?
• Geographical, export, import? • New technologies, services, ideas?
• Market need for new USP's? • Vital contracts and partners?
• Market response to tactics, e.g., • Obstacles faced?
surprise? • Insurmountable weaknesses?
• Major contracts, tenders? • Employment market?
• Business and product development? • Financial and credit pressures?
• Information and research? • Economy - home, abroad?
• Partnerships, agencies, distribution? • Seasonality, weather effects?
• Market volume demand trends?
• Seasonal, weather, fashion influences?
There is some overlap between PEST and SWOT. Similar factors appear in each. That said, PEST
and SWOT are certainly two different perspectives:

PEST tends to assess a market, including competitors, from the standpoint of a particular
proposition or a business. SWOT in business and marketing tends to be an assessment of a
business or a proposition, whether it is your own business or (less commonly) a competitor's
business or proposition.

Strategic planning is not a precise science - no tool is mandatory - it's a matter of pragmatic
choice as to what helps best to identify and explain the issues. PEST analysis may useful before
SWOT analysis where it helps to identify SWOT factors. Alternatively PEST analysis may be
incorporated within a SWOT analysis, to achieve the same effect. PEST becomes more useful and
relevant the larger and more complex the business or proposition, but even for a very small local
businesses a PEST analysis can still throw up one or two very significant issues that might
otherwise be missed.

The four quadrants in PEST vary in significance depending on the type of business, for example,
social factors are more obviously relevant to consumer businesses or a B2B (business-to-
business) organization close to the consumer-end of the supply chain, whereas political factors
are more obviously relevant to a global munitions supplier or aerosol propellant manufacturer.
PEST analysis can be used for marketing and business development assessment and decision-
making, and the PEST template encourages proactive thinking, rather than relying on habitual or
instinctive reactions.

Here the PEST analysis template is presented as a grid, comprising four sections, one for each of
the PEST headings: Political, Economic, Social and Technological. Other than the four main
headings, the questions and issues in the template below are examples and not exhaustive - add
your own and amend these prompts to suit your situation, the experience and skill level of
whoever is completing the analysis, and what you aim to produce from the analysis. If helpful
refer to a list of these other 'headings', for example: Ecological/ Environmental, Legislative/or
Legal, Demographic, Ethical, Industry Analysis. Apply some strategic consideration and pressure
to the points you list under these 'additional' headings. Ask yourself what the effects of each will
be on the 'big four' (Political, Economic, Social, Technological). Often your answers will persuade
you that the original four-part PEST model is best and that using a more complex series of
headings makes it more difficult to complete the analysis fully and strategically.

The analysis can be converted into a more scientific measurement by scoring the items in each of
the sections. There are no established good or bad reference points - these are for you to decide.
Scoring is particularly beneficial if more than one market is being analyzed, for the purpose of
comparing which market or opportunity holds most potential and/or obstacles. This is useful
when considering business development and investment options, i.e., whether to develop market
A or B; whether to concentrate on local distribution or export; whether to acquire company X or
company Y, etc. If helpful when comparing more than one different market analysis, scoring can
also be weighted according to the more or less significant factors.
political economic
• ecological/environmental issues • home economy situation
• current legislation home market • home economy trends
• future legislation • overseas economies and trends
• international legislation • general taxation issues
• regulatory bodies and processes • taxation specific to product/services
• government policies • seasonality/weather issues
• government term and change • market and trade cycles
• trading policies • specific industry factors
• funding, grants and initiatives • market routes and distribution trends
• home market lobbying/pressure groups • customer/end-user drivers
• international pressure groups • interest and exchange rates
• wars and conflicts • international trade/monetary issues
technological
social
• competing technology development
• lifestyle trends
• research funding
• demographics
• associated/dependent technologies
• consumer attitudes and opinions
• replacement technology/solutions
• media views
• maturity of technology
• law changes affecting social factors
• manufacturing maturity and capacity
• brand, company, technology image
• information and communications
• consumer buying patterns
• consumer buying
• fashion and role models
mechanisms/technology
• major events and influences
• technology legislation
• buying access and trends
• innovation potential
• ethnic/religious factors
• technology access, licencing, patents
• advertising and publicity
• intellectual property issues
• ethical issues
• global communications

87
PEST becomes more useful and relevant the larger and more complex the business or
proposition, but even for a very small local businesses a PEST analysis can still throw up
one or two very significant issues that might otherwise be missed.

The four quadrants in PEST vary in significance depending on the type of business, eg.,
social factors are more obviously relevant to consumer businesses or a B2B business close
to the consumer-end of the supply chain, whereas political factors are more obviously
relevant to a global munitions supplier or aerosol propellant manufacturer.

All businesses benefit from a SWOT analysis, and all businesses benefit from completing a
SWOT analysis of their main competitors, which interestingly can then provide some feed
back into the economic aspects of the PEST analysis. The use of the compilation table
allows you to extract the most important elements of the SWOT analysis, and then rank the
relative importance of each in making strategic decisions.

88
CHAPTER - 3

BUSINESS PLAN

Chapter 1 - Introduction to Business Planning

Learning Objectives

By the end of this chapter, you should be able to:

 Define business planning.

 List the objectives and uses of a business plan.
 Explain how the objectives of a business plan intended for external audiences
differ from those intended for internal audiences.
 List and describe the key components of a business plan.
 List and describe the key steps in the business planning process.
 Define the key requirements of an effective business plan.
As we approach the twenty-first century, the need for business planning has never been
more apparent. Businesses today are confronted with increasing competitive pressures,
ever more demanding customers, and accelerating and discontinuous change.

Given the new economic realities, planning cannot be an abstract exercise or a ritualistic
activity. Planning must form the foundation for ensuring that the business takes those
actions required to establish and sustain a competitive advantage.

Planning within organizations usually takes three forms and is done at three levels, as
shown in Exhibit 1-1. Not all businesses engage in each form of planning. All businesses,
however, do some planning, even if it only involves two business owners or managers
thinking about and discussing what to do next. A safe generalization is that the larger and
more complex the environment of the business, the more likely it is that the business will
be engaged formally in all three types of planning.

Exhibit 1-1 - Planning Types and Levels

89
As the descriptions in Exhibit 1-1 suggest, all planning should flow from the company's
strategic plan and be tied back to it. This course presumes that an organization has a
strategic plan in place; it is designed to help implement a proactive and flexible approach to
the development of the second form of planning—the annual business plan.

DEFINITION OF A BUSINESS PLAN

To understand the concept of a business plan and the business planning process in general,
it is important to recognize that the plan is not a document. The plan may be presented
through a planning document, but the business plan itself should be a set of management
decisions about what a company will be doing to ensure success in the future. In its most
basic form, business planning is the process whereby a company makes the following
decisions:

 What products or services it will deliver

 Where it will compete
 Why the customer should do business with the company
 How it will organize and reengineer itself to accomplish its goals
Business planning is used, to some degree, by all organizations—large and small, for-profit
and not-for-profit—regardless of the nature of the business. The scope and complexity of
the business planning process and the resulting plan should mirror the size and complexity
of the company and its business. For smaller companies that operate in a fairly stable
business environment, the planning process may be an informal review of certain key
aspects of the company's performance by a handful of top managers. As a company
becomes larger, or as the business environment becomes less stable and less predictable,
the planning process becomes more formal, comprehensive, and complex. More personnel
are involved in reviewing and planning various aspects of the company's performance, and
the time horizon addressed by planning decisions may extend farther into the future.

As an illustration of formal versus informal business planning, contrast the neighborhood

gas station to an international petroleum company. For the neighborhood gas station, the
planning issues include appropriate inventory levels of a limited range of products, product

90
or service pricing, and cash flow management. The time horizon of the plan is no more than
1 year and frequently is only 1 month. All of the required information and decision-making
authority resides with the station owner.

In contrast, the planning process for the international petroleum company must address a
much broader range of issues—for example, the acquisition of raw materials; appropriate
inventory levels at several stages in a complex manufacturing process; cost control; pricing
for a wide range of products; investments in capital equipment, facilities, and new product
development; the search for nontraditional sources and alternative materials; the
management and motivation of thousands of employees; and the distribution of hundreds
of products to thousands of consumers. The information required for planning decisions
exists in formal data systems and in the brains of hundreds of management personnel. The
time horizon may extend more than 20 years into the future.

The key point is that, regardless of size, all businesses are engaged in some form of
business planning.

OBJECTIVES AND USES OF A BUSINESS PLAN

In general, a business plan is necessary to provide a clear, precise, and meaningful sense of
direction for a company for a specific period of time—usually 1 year. The preparation of an
annual plan forces management to think through its intended actions and shows how they
will affect various aspects of the business. Beyond these overriding purposes, a business
plan can have several different objectives that, in turn, relate very closely to the plan's
intended uses—both internal and external.

Internal Uses of a Business Plan

A business plan can provide several internal benefits for a company. First, it can improve
performance by identifying the strengths and weaknesses of the company's operation and
any potential or emerging problem areas. Improved performance also will result from
developing strategies that simultaneously build on the company's strengths and correct its
weaknesses.

91
Second, a business plan can communicate to management and staff clear expectations
regarding the company's performance and priorities. Third, for companies with multiple
divisions, units, or points of management responsibility, a business plan can effectively
coordinate and ensure consistency in the plans and operations of the various units or
divisions.

Fourth, a business plan provides a solid basis for measuring performance of the overall
company and of individual units and managers. It establishes a standard for deciding if
actual performance is good, bad, or indifferent. A business plan also establishes a
framework for reviewing key decisions in the ongoing management of the company. As
new developments and opportunities arise, a business plan provides a rational structure
for evaluating their impact on the operations and performance of the overall company and
its individual units.

Finally, and perhaps most important, a business plan and the process of developing it can
be used to educate and motivate the key staff—such as managers and supervisors—of the
company. Through participation in analyzing past performance, evaluating the impact of
trends and developments, and developing action plans for the future, managers and other
key staff can learn more about the total operation of a company and the relationship of
their specific areas of responsibility to the achievement of the company's overall goals.

External Uses of a Business Plan

A business plan has several uses in relationships with significant parties outside the
company. First, it can be used to educate outside parties regarding the objectives,
structure, and performance of the company. This use becomes important if the support,
either financial or nonfinancial, of outside parties is important to the company's success. A
clear example is the support of current or potential stockholders or investors.

Second, a business plan can be used to secure funding from outside investors, either
individual or institutional. If this use is intended, it is important to identify in advance the
issues and types of information that are of primary concern and interest to the investors.

92
A business plan also can communicate planned actions, deflecting competitive or
regulatory moves that may be under consideration by outside parties. By formalizing its
intentions in a business plan, a company commits itself to action. By communicating this
commitment to selected, significant outside parties, a company may preempt actions that
could have a negative impact on its own plans and actions.

Given the many different objectives and uses of the business plan, management must
decide whether it is desirable or necessary to distribute its plan. If the plan is to be
distributed, the specific structure and content will be affected by the intended uses and
target audience.

WHAT TO INCLUDE IN A BUSINESS PLAN

Every business plan—regardless of the company, the nature of its business, its size, or the
intended uses of the plan—should address a number of basic issues. These issues can be
organized according to five major business strategies:

1. Market strategy
2. Production or service strategy
3. Research and development (R&D) strategy
4. Organization and management strategy
5. Financial strategy
Descriptions of each strategy compose the major portion of a complete business plan. The
five strategies define the areas in which management must make future-oriented decisions
as part of an effective business planning process. Each strategy is highly interrelated and
must be consistent with the others. This basic relationship is illustrated in Exhibit 1-2.

Exhibit 1-2 - The Business Plan

93
Market Strategy

A market strategy addresses the following critical issues:

 What products or services will the company sell?

 Who are, or will be, the target customers of the company?
 What will be the company's policies regarding product or service pricing,
advertising and promotion, sales, and distribution?
By developing a market strategy, an organization is able to prepare estimates of revenues
and selling costs—but not production costs—for its products and services.

Several very important analyses underlie the development of a market strategy, including
the following:

 Preference, consumption, and purchasing behavior—that is, timing and volume—

of customer segments
 Usefulness of products or services to customers
 Satisfaction of customers with products or services
 Degree of competition within the industry for the same customer segments
These analyses are important in developing realistic estimates of what can be sold to
whom, when, in what quantities, and at what price, given the level of promotion, sales, and
distribution effort.

Production or Service Strategy

A production or service strategy addresses several critical issues: the process and
technology that will be used to produce and deliver the company's products or services;

94
the requirements for materials, equipment, and facilities; and the production schedule
required to support sales goals. It enables the company to determine estimates of
operating income profitability and to determine the level of sales and revenue that the
organization must attain before it can become profitable—that is, the breakeven point.

Similar to the market strategy, several important analyses underlie the development of a
production or service strategy:

 Identification and evaluation of both the fixed and variable production costs for
each product or service.
 Evaluation of required lead times for acquiring materials and the time required
for the actual production process.
 Assessment of supplier relationships regarding availability, quality, and cost of
materials and services.
 Evaluation of production efficiency and quality control.
 Assessment of production cost efficiency and its impact on overall production
costs.
These analyses are important to ensure that sales and revenue objectives are appropriately
meshed with the production or service capability of the company.

If sales goals significantly exceed the current capacity of an organization, they must be
adjusted downward or additional investments must be made to increase or expand the
production or service capacity. Sales and revenue goals should be high enough to cover
basic production and operating costs to ensure economic viability. If projected revenues do
not cover estimated production and operating costs, sales and revenue goals must be
adjusted upward or cost-cutting actions must be planned and undertaken. Reconciling and
balancing both market and production strategies are processes that may require several
iterations.

Research and Development Strategy

The R&D strategy addresses two key questions: What critical areas of the company's
business operation must be developed, maintained, or expanded to sustain a competitive

95
edge? Given trends in the marketplace and the operating environment of the company,
what investments are necessary to maintain or expand the competitive edge?

The need for a formal R&D strategy is determined, to a large degree, by the structure of the
company's operating environment. If the company operates in a highly competitive
environment, characterized by rapid and frequent technological change and requiring
medium- to long-range planning horizons, a formal R&D strategy is an operating necessity.
If the company operates in a more stable environment or in one where new product
introduction is not a primary determinant of market success, a formal R&D strategy is less
necessary. As the economy becomes more and more knowledge-and information-based,
fewer and fewer companies will have the luxury of not developing some type of R&D
strategy.

The need for and the scope of an R&D strategy flow from the market analysis. If the market
analysis indicates that the purchasing behavior of target customers is influenced by factors
other than price, the need for some level of R&D effort is indicated. The level of effort can
range from long-term new product planning and introduction to fine-tuning adjustments of
existing products and services.

Organization and Management Strategy

An organization and management strategy addresses several critical issues:

 Functions that must be performed and who will be responsible for performing
them
 Organization of functions to promote overall effectiveness, efficiency, and
productivity
 Management of the organization's processes and practices to ensure quality
products or services
 Staffing requirements in terms of numbers, skills, qualifications, and promotional
opportunities
 Procedures for guiding, motivating, and controlling the overall operation of the
company

96
Through the organization and management strategy, the company begins the process of
deciding how to implement its major business strategies. Who is in charge and who will do
the work, particularly regarding critical functions, are important concerns to outside
investors.

Several important analyses underlie the development of an organization and management

strategy. These analyses are important to ensure that the company effectively addresses
the "people" issues that are central to any company's success:

 Evaluation of management attitudes and beliefs regarding company values, the

treatment of employees, and key measures of company success
 Availability and cost of required staff capabilities, both within and outside the
company—for example, consultants and board members
 Historical strengths and weaknesses in the structure, organization, and
management of the company, including communications, interunit cooperation, and
employee morale and productivity
Financial Strategy

A financial strategy addresses three critical issues: (1) how business operations will be
managed financially to generate an adequate profit or to ensure ongoing economic
viability, (2) how excess revenues or profits will be used, and (3) how basic operating
funds and funds required for key investments will be generated. In effect, the development
of a financial strategy becomes a reality test for the other strategies in the business plan. A
financial strategy answers the overall question of what investments or expenses can be
made or incurred.

A financial strategy answers questions such as the following:

 Does the planned level of operations generate a sufficient level of revenues or

profits to support the investment?
 Can the level of planned operations generate a sufficient cash flow to sustain
operations? If not, can the shortfall be covered from other sources?

97
  Do the levels of investment (expenses) and returns (revenues) maintain economic
solvency and viability?
As with the other strategies, several analyses underlie the development of a financial
strategy. They establish a framework for evaluating the financial viability of the marketing,
production or service, R&D, and organization and management strategies. The analyses
include the following:

 Historical information regarding the time relationship between the incurrence

and payment of costs and the receipt of revenues—that is, the cash flow problem
 Policies of the company and its suppliers and customers regarding payments and
collections
 Historical performance of the company on key financial indicators
 Composition of assets and liabilities, including future financial obligations
 Value and current usefulness of assets
 Cost and availability of funds from external sources
HOW TO PREPARE A BUSINESS PLAN

Although the business plan strategies are highly interrelated and the development of the
individual strategies is definitely an iterative process, a basic series of steps can and should
be followed in developing the plan. Exhibit 1-3 summarizes these steps.

Exhibit 3 - The Business Planning Process

98
Step 1: Organizing the Planning Process

Many business planning efforts fall flat because inadequate attention is given at the outset
to organizing and energizing the planning activity. Several considerations are involved.
First, a company's management must define and clearly communicate its commitment to
the planning effort. This commitment should include a statement of the objectives and
anticipated uses of the business plan. Second, all key parties must be involved in the
planning process. Top management should identify who will be involved, including outside
parties; determine the appropriate form and timing of the involvement; provide the
opportunity for proper participation; and ensure that participation occurs. Third,
responsibilities for developing and implementing the plan should be precisely defined and
assigned. Finally, the steps and process for completing the plan should be timed and made
an integral part of the work schedule. An overall timetable for developing the plan,

99
including intermediate milestones, should be established. Sufficient time should be
incorporated into the timetable so that staff can effectively perform both planning and
ongoing work responsibilities.

If these considerations are adequately addressed in the organizing phase, the planning
process becomes a high priority and a feasible activity for the company and its staff. The
result is a high-quality business plan with shared ownership.

Step 2: Diagnosing the Situation

The first analytical step in the planning process is to assess and evaluate what a company is
currently doing in relation to its operating environment. The first part of this analysis is to
assess the company's current capabilities— that is, its strengths, weaknesses, and
historical performance. The second part is to assess external marketplace developments—
that is, threats and opportunities—and their impact on the future performance of the
company.

Information from both parts of the analysis is critical to an effective planning process. For
some companies, it is important to monitor external developments continually and
evaluate performance in light of responsiveness and adaptability to any developments.
These companies typically have the resources as well as the desire to invest in a high level
of research and analysis. Other companies prefer to evaluate marketplace developments in
light of their specific impact on current performance and capabilities. This approach, which
requires significantly less effort and resources, reflects a lower perceived need for timely
external review. The specific approach that a company takes depends on the competitive
setting, management's preferences, the availability of resources to support ongoing
evaluations of the external environment, and the frequency and significance of external
developments on the company's performance.

Step 3: Setting Goals

The situational diagnosis produces a set of findings about what is being done and an
assessment of the adequacy of existing strategies in terms of current performance and

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future developments. The results of the situational analysis are used in two separate, but
related, ways in the goal-setting step of the planning process. First, the results define
specific areas and levels of improvement in the company's operations and management.
They also establish performance standards for each key dimension of the company's
operations and management. By setting goals, the company is defining the parameters of
its overall business strategies for the future.

Within each strategy—marketing, finance, and so forth—goals should be established for

each operating dimension in which performance improvement is necessary or appropriate.
Goals should address both current and potential strengths and weaknesses, as well as
future or emerging opportunities. Across all strategies, goals should be supportive of each
other and mutually attainable.

Typically, goals are first established for each strategy area. When viewed collectively, some
of these goals may conflict with those of other strategies. Conflict often occurs with
marketing and production goals, or with R&D and financial goals. For a business plan to
work, conflicting goals must be reconciled and a consistent overall goal framework
established.

Because assumptions on which the plan may be based are not perfect predictors of the
future, the company should develop alternative goals and strategies based on other feasible
assumptions. These alternatives are the bases for contingency planning. Adequate
attention to these considerations should yield a good, feasible set of goals and performance
standards for the company.

Step 4: Developing Operating Plans

Operating plans should be developed for each of the operational strategies— that is,
marketing, production or service, research and development, and organization and
management. The purpose of this step is to translate the strategies into specific business
and operating plans for each of the operating components of the company. Each
component's objectives and strategies will vary somewhat, but the operating plan for each
component should spell out in fairly specific terms the performance objectives for the

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component and provide a clear, overall indication of how the objectives will be
accomplished.

Step 5: Developing a Financial Plan

The development of a financial plan flows from the performance objectives and strategies
of each of the operating components. These objectives and strategies provide estimates of
revenues and expenses. A financial plan must use this information to produce several pro
forma and supporting schedules that can be used to evaluate and manage the financial
performance of the company. Pro forma schedules are standard accounting statements
prepared by the company's accounting department and are minimum requirements for
internal management and external users. The three pro forma schedules are as follows:

1. Quarterly, and frequently monthly, income statements for the period addressed
by the business plan, reflecting the relationship among revenues, expenses, and
profits generated
2. Quarterly and annual balance sheets, reflecting the relationships among short-
and long-term assets and liabilities and owners' equity or level of investment
3. Monthly cash flow summaries, reflecting the impact of business operations on the
cash position of the company
Supporting schedules provide a more complete description or explanation of the financial
figures included in the pro forma schedules. Two of the more common supporting
schedules are the monthly sales and revenue projections. These projections are obtained
from the marketing operating plan and monthly departmental budgets that reflect planned
expenses and expenditures for production and overhead operations. Beyond these
schedules, a financial plan should include summaries of planned financial performance
according to selected indicators of profitability, growth, solvency, and return on
investment.

The results of a financial analysis provide an indication of the adequacy and attainability of
the operating objectives and strategies from the perspective of available financial
resources. Based on the results of the financial analysis, it may be necessary to reevaluate

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and revise the operating objectives to support more satisfactory and viable financial
performance.

Step 6: Writing the Business Plan Document

The preparation of a formal business plan document is a requirement if external uses of the
plan are anticipated. A formal document should be prepared, even if the intended uses of
the business plan are strictly internal, in order to provide a written record of the
management decisions that have been made during the planning process.

Preparing the planning document has three objectives. First, it brings closure to the
planning process. Second, it communicates the seriousness of the planning process and a
commitment to resultant objectives and strategies. Finally, the planning document
provides a tangible framework for evaluating subsequent activities, accomplishments, and
opportunities.

Preparing the business plan document is an exercise in writing, but not in creative writing.
The document should simply and concisely present the analyses and decisions that have
been made during the planning process. In general, the longer the planning document is
and the more verbiage it contains, the more the document will reflect decisions that have
not been made, rather than those that have.

The document should be organized according to the major strategies of the business plan
or at least those strategies that are relevant to the company's operation. The document
should begin with an executive summary, which briefly highlights each major section. The
document also should include a brief assessment of the company's market position and
business outlook. The assessment is important to validating the assumptions that will be
reflected in the business plan strategies.

SUMMARY

A business plan is a set of management decisions that define what a business will do to try
to be successful in the future. The business plan spells out goals and strategies in five key

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areas: marketing, production or service, research and development, organization and
management, and finance. The plan is developed employing a six-step process: (1) organize
the planning process; (2) diagnose the situation; (3) set goals; (4) develop operating plans;
(5) develop a financial plan; and (6) write the plan document.

Business Plan Tools and Sample Business Plan

This Template is a powerful interactive tool you can use to write your own business plan
in a comfortable and easy step-by-step fashion. Simply read the instructions and
suggestions accompanying each section and then answer the questions posed.

Writing a business plan in any mode is a demanding process that usually takes several
weeks at the least. We suggest you write your business plan in stages, perhaps one section
at a time, saving your data after each session as described above.

1. Before You Begin

We know you're anxious to begin writing, but we suggest you read some useful
information on the length of a business plan and what's right for you.

2. To Save Your Data

You can post your answers right online in the space provided here. After you complete a
section, press the apply button, and your answers will be set up in appropriate business
plan format, with the right headings accompanying your answers.

To save your data for later use, YOU MUST COPY IT AND ENTER IT INTO YOUR OWN
WORD PROCESSING PROGRAM, OR SAVE YOUR ONLINE DATA AS AN HTML DOCUMENT.
NOTHING YOU WRITE ONLINE WILL BE STORED FOR YOU ONLINE FOR LATER ACCESS. IF
YOU FAIL TO COPY YOUR DATA, YOU WILL LOSE IT.

3. You're Ready to Begin Writing

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Cover Sheet

The cover sheet needs to provide all the necessary contact information about the business.
(For Investor version: the last thing you want to do is get prospective investors interested
in your business, and then be unable to get in touch with you because your cover sheet is
missing your phone number.)

The name of the business:

Month and year the plan is being completed:

Name of the chief executive officer:

Exact title of the chief executive:

Address of the company, including street,

city, state, and zip code:

Company's Web site address:

Phone number, with area code:

Fax number, with area code:

E-mail address:

Table of Contents

To make your business plan easy to follow for a prospective financing source, a detailed
table of contents--showing all sections and sub sections, with page numbers--is an
important feature. A detailed table of contents will give readers the ability to turn to their
areas of greatest interest first, whether it be the financial projections, the management
team, or the market analysis of the product or service.

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Listed here are the topic areas we suggest for the table of contents. You need to fill in the
page numbers after you copy the topics into your word processing program, and adjust the
topics if you change any of the names or add new topics.

 Executive Summary
 The Company
 Strategy
 History
 Management Team
 The Market
 Product and/or Service
 Sales and Promotion
 Applying Technology
 Business Risks
 Summary Financial and Operating Statements
 Appendix

Executive Summary

The executive summary should be a brief synopsis--two pages maximum--of the business
concept that gives the reader a clear initial understanding of your business and its validity.

It is not an abstract, introduction, preface, or random collection of highlights.

It is the business plan in miniature, and as such should be able to stand alone as an initial
business description.

It helps you:

 Crystallize your thoughts

 Set priorities
 Provide the foundation of the full plan. Once you've written this summary, it makes
writing the rest of the plan much easier.

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If done right, it captures readers' attention, makes them want to read more, and conveys a
flavor about the rest of the plan.

Assignment: Now it's time to write your own initial Executive Summary. Remember, no
more than two pages. We've purposely avoided providing our usual question-and-answer
approach so that you can employ a more free-form style, and give it the "spin" and
excitement that captures your business and its plan for success.

Begin Writing:

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The Company

This is the section of the business plan that captures your strategy, identity, and
philosophy. It is about your future, past, and present.

1. Determining your strategy?

Strategy is really a buzzword for your company's overall approach to producing and selling
its products/services--and its goals for maximizing success. What is your "business model"-
-its approach to the market and sales, and how will that change?

Most important is that your strategy be believable. Thus, there needs to be consistency
between what's happened in the past and your strategy for the future. If your business has
grown at 10% a year for each of the past four years, and you are now projecting 50%
annual growth, you must have a pretty compelling explanation of what it's doing differently
to justify the change.

Assignment: In no more than three paragraphs, summarize your company's strategy.

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2. Describing the company's history.

Here's where you provide the background of the business, answering such questions as:

 How did you come upon the idea for the business?
 What forces have helped you succeed thus far?
 What principles do you use to run your business?
 What obstacles have you overcome to succeed?
 If you plan for expansion, how will you dedicate the funds you are seeking for
financing?

Assignment: In a maximum of three paragraphs, describe your company's history. Of

course, if you are a start-up, this section of your plan will be shorter, devoted to a brief
explanation of how you came up with your idea.

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3. Describe the management team.

A key issue for any business is whether the people running the company have what it takes
to enable the company to fulfill its strategy.

(For investor version only)

Investors, in particular, look especially closely at the management team, and make
judgments about its likely success by virtue of what the members of the team have
accomplished in the past.

The two most common management team problems are:

1. The "one-man-band" syndrome. The company doesn't really have a management

team because the president won't delegate or bring qualified senior people aboard.
2. Or everyone comes from same background.

Be sure you are making the most of your resources--using everyone's experience and
capabilities to their fullest in your descriptions.

Assignment: Provide a one-paragraph summary of your company's management team,

explaining what makes it especially qualified to execute the company's business plan.

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Assignment: Next, provide descriptions for each member of the management team, up to
two paragraphs each.

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CHAPTER 4 : PROJECT AND SERVICES

4.1 Indentifying Consumer Needs

Understanding customers is the key to giving them good service. To give good
customer care you must deliver what you promise. But great customer care involves
getting to know your customers so well that you can anticipate their needs and
exceed their expectations

To understand your customers well, you need to be attentive to them whenever you are in
contact with them. The potential rewards are great: you can increase customer loyalty and
bring in new business through positive word-of-mouth recommendation.

There are three main ways to understand your customers better. One is to put yourself in
their shoes and try and look at your business from their point of view. The second way is to
collect and analyse data in order to shed light on their buying behaviour. The third way is
simply to ask them what they think.

Put yourself in your customers' shoes

Understanding customers requires you to take a hard look at the points at which your
customers have contact with your business. These include meetings and visits, phone calls,
correspondence and deliveries. Do your premises look scruffy, is your receptionist
unfriendly or do your phones ring off the hook? All these things can make a customer feel
disappointed.

The most common customer complaint is being kept waiting. If you're slow to return calls
or fulfil orders, then you're in danger of losing customers. Above all, customers want you to
deliver what you have promised and surpass their expectations.

As a small business, you can offer a personal service. If you remember a customer's name
and recall your last conversation with them, you will have brightened up their day. They
will also tell their friends what a great service you provide.

Understanding your customers and improving your service must be a priority throughout
your business. Everyone from the front desk to the delivery staff should focus on exceeding
customer expectations.

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Using data to understand your customers

Your database or customer relationship management system (CRM) holds valuable

information about your customers that will help you to understand their needs.

Investigate the data you hold on your customers, it can tell you a lot. Look for patterns so
you can see when your customers typically make orders. You can also use the data to
analyse your performance. Check how quickly you're responding to orders or delivering
goods.

CRM systems are more sophisticated than simple mailing lists. Because they hold
information about customer behaviour and preferences they can improve customer
satisfaction and retention. They can help you to identify customer needs more effectively,
allowing you to up-sell and cross-sell, increasing profitability.

Ask your customers what they think

Conduct a customer satisfaction survey and you will make your customers feel valued. You
will also gain valuable insights. But don't ask for feedback if you are not prepared to make
changes. When you do make improvements, tell your customers what you have done as a
result of their feedback.

Customer surveys can tell you things you may not know, including human factors such as
staff behaviour. Not everyone complains when they are dissatisfied. Instead, they tell their
friends about their bad experience and take their business elsewhere. Unless you
proactively consult your customers, you may never discover where you are going wrong.

As well as asking for feedback, set up a customer contact programme to ensure you keep in
touch with your clients. A good customer contact strategy will allow you to listen to your
customers and tell them more about what you offer.

4.2 Concept , Characteristics and classification of Products

Product Classifications

Individual Product Decisions

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 Brand Decisions

Selecting a Brand Image

Packaging

Labelling

PLC

PRODUCT - Everything that goes with the purchase.

- Ranges from the tangible (products) to the intangible (services).

PRODUCT CLASSIFICATIONS

- Durable Goods

- Non-Durable Goods – consumed during use - soap, food.

 Services - selling performance

 Continuum between Services and Goods – McD’s

- Consumer Goods - bought for personal use.

 Convenience - Freq. purchase, min. effort, buy on price or brand.

 Impulse Goods - no preplanning, not on your list, going shopping while hungry or
without a list leads to more impulse buying, as do in-store displays and sale items.

 Shopping - Considerable time & effort, durable/big ticket, comparisons made.

 Specialty - unique. Cust. will go out of their way to find, little or no comparison
shopping, price relatively unimportant.

 Unsought - Cons. don't seek out or don't know about. Life ins., encyclopedias.

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  Industrial Goods - diff. by use.

INDIVIDUAL PRODUCT DECISIONS - decisions about developing & Marketing

individual products.

Product Quality

 Select quality level that supports your position in the target mkt. This is a major
factor.
 QUALITY is how well the product meets the cons. needs. If you think a pen will last 3
weeks and it lasts 3 months your satisfied; vice versa and you are not.

Product Features

 Add or delete features to create diff. models to meet the needs of diff. segments.
 Consumer/user research important for deciding to change features that will solve
problems and make sales.

Product Design

 Not nearly enough ergonomics or human engineering.

 Placement of controls - car, 3.5" eject button and on/off button on computer,
labeling of controls.
 Cords - should always be a place to wind them, plus length sufficient, and the right
length to wind properly.
 Buttons for setting watches - label
 Buttons for setting clocks - forward and backward.
 Should watch how people use things.

BRAND DECISIONS

- Branding adds value.

- Branding is a L-term strategy.

- Needs consistent Advertising.

- Needs consistent quality.

- Must deliver on all claims.

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- Powerful brands have BRAND EQUITY or a consumer franchise - people will seek these
out and pay more.

- BRAND = Name + Mark.

- Name - vocable

- Brand Mark - symbol for product.

- Service Mark - symbol for service.

- Trademark - Legally protected brand . . .

- Can lose TM if word falls into common usage:

- Escalator - Trampoline

- Dry Ice - Cube Steak

- High Octane - Cornflakes

- Kerosene - Mimeograph

- Shredded Wheat - Linoleum

- Nylon - Lanolin

- Thermos

- Defending trademarks

- some who have - Kleenex, Xerox, Band-Aid, Jello

- In danger - Rollerblades, Spackle, Stairmaster,

WeightWatchers, Crayola.

Branding

- most products today are branded.

- Branding saves time & effort for cons. and inspires confidence.

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- For sellers and wholesalers branding makes ordering easier and allows them to target
diff. segments with diff. products.

Brand Sponsor Decisions

- Manuf. Brand (Nat'l Brand) - Dominate the market.

- Private Brand (Store brand, Dealer brand, distrib. brand) – increasingly popular, so now
there are premium store brands in addtion to the medium and low price/quality store
brands. Some Say Nat'l brands are out, but private labels play off of nationals. If premium
privates move up to nat'l status another level of privates would be added.

- Privates often get 10-15% more profit per unit for store, but price is 10-20% lower. It is
possible to lose money on a per unit basis, but can make more total profit if privates outsell
nat'l.

- Privates may outsell Nat'ls because retailer controls shelf space, shelf height, and endcaps
(end of aisle).

- Co-Brands – Lunchables & Taco Bell -- enhances name recognition.

- Non-brands - generics - peaked in early '80's - strongest in non-food areas, paper goods,
trash bags.

- some "generics" are really privates.

Brand Name Decisions

- Ind. Brandnames -

- Blanket Family Name - GE

- Separate Family Names – Kenmore & Craftman.

- Combined Family & Ind - Kellogg's

Brand Extension Decisions

- How many different products can one name cover? Careful not to dilute the brandname so
it is meaningless to cons.

- Arm & Hammer has been successful with baking soda, deodorant, laundry detergent,
tooth paste, and carpet deod. – Try that with Tide toothpaste, or Rembrandt carpet deod.,
or Crest laundry detergent.

- Tide and Ivory have added products in their narrow lines though.

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- Bic Pantyhose??? Even though disposable like other Bic products it didn’t make it.

Multibrands

- for the same mkt.

- Gain shelfspace

- catch brand switchers

- added competition

- each brand gets its own following

- but, diet Coke and Tab?, Miller High Life and Genuine Draft?

Brand Repositioning

- Can be tough

- Olds - not your father's . . .

- Cadillac Cimarron & Allante

SELECTING A BRAND NAME

- Bib-label, lithiated, lemon-lime soda -- the original name of 7-Up!!

- Name criteria

- evoke positive mental image

- evoke positive emotional reaction

- suggest product function or benefits

- be easy to pronounce

- Simple

- sound appropriate

- be distinctive

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- be registrable (unique)

- Possibly, translate well

4.3 Introduction of Growth of Service Sector

Services comprise a set of economic activities like transportation, trade, tourism,

communications, banking and insurance, real estate, public administration, defence and so
on. According to an Adrian – Payne four factors are responsible for growth in the service
sector. They are: demographic, social, economic and political.

Demographic changes: The life expectancy has raised which in turn, is producing an
expanding retired population. This sector has created a new demand for travel and leisure,
as well as for healthcare, nursing and life insurance. The need for infrastructural support
services has increased due to the development of new towns and regions.

Social changes: The number of women’s in work force has increased, and this has led to
traditional domestic functions being performed outside the home. The rise in number of
double income household has created a greater demand for consumer services, including
retailing, real estate and personal financial services. With the growing income, the standard
of life has improved. Smaller families with double income spend ore on entertainment,
travel and hospitality services.

The aspiration levels have increased due to communication and travel. As a result, both
children and adults are making new demands on learning establishments, so that they can
develop the skills needed in order to compete. In the complex and fast changing
environment. This has opened avenues for knowledge and information based services.

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Economic changes: The demand for communication, travel and information services has
increased due to globalisation. This has been filled by the rapid changes brought about by
new information technology. Increased specialization within the economy has led to
reliance on specialist service providers For e.g. advertising and marketing research have
now become specialist functions providing support to all the sectors of the economy.

Political and legal chap : The size of the government has grown creating a huge
infrastructure of service departments. With the growth in international trade, the demand
on legal and other professional services have increased, cutting across national boundaries.

Manufacturing firms handing over repair and maintenance, data processing, where rousing
and logistics services to specialised sources, which they earlier used to perform in- house.
The liberalization has also created a new avenue for growth. The slow growth of
agriculture and industry and the presence of widespread unemployment have driven
people to seek work in the informal services. This is particularly true in the urban areas,
where petty pavement retail trade, transport, another is repair and service establishments
have proliferated.

Since the overall growth of the economy is now dependent on the service sector, the pace
of productivity growth in services becomes critically important. Therefore, the government
is taking an initiative in the sector.

REASONS FOR THE GROWTH OF SERVICES IN INDIA:

Economic affluence: One, of the key factors for the growth of demand for services is the
economic affluence. According to the NCAER study the size of the middle income consumer
is raising fast and the percentage of the very poor household’s declining. The rural
households in the upper income category is growing at a much faster pace than the urban
households in the corresponding categories. The Economic liberalisation Process has had a

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positive impact on the Indian households. Their income as well as their expenditure has
been pushed, creating a demand for many goods and services.

Changing Role of Women: Traditionally the Indian woman was confined to household
activities. But with the changing time there has been a change in the traditional way of
thinking in the society. Women are now allowed to work. They are employed in defence
services, police services, postal services, software services, health services, hospital
services, entertainment industries, Business Process Outsourcing and so on.

The percentage of working women has been growing rapidly. The changing role of women
has created a market for a number of product and services. Earning women prefer to hire
services in order to minimise the innumerable roles that they are required to perform. The
demand by woman is forcing service organisations to be more innovative in their
approach.

Cultural Changes: Change is the underlying philosophy of culture place of change in Indian
culture is not uniform. However, during the last century the factors of change are
prominent. The emergence of the nuclear family system in place of the traditional joint
family system creates a demand for a host of services like education, health care,
entertainment, telecommunication, transport, tourism and so on. There has’ been a marked
change in the thought Processes relating to investment, leisure time perception and so on
which has created a huge demand for services.

I.T. Revolution: For the last 15 years India’6aste,en occupying a vital position in the area
of Information Technology. IT became one of the key service businesses of the country.
India has the largest software skilled population in the world. The domestic market as well
as the international market has grown substantially. Realising the potential for this area
many state governments have made IT as their most, prioritized segment states such as

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Karnataka, Andhra Pradesh, Madhya Pradesh Maharashtra and Delhi have already
achieved substantial progress in Information Technology the In Ile years to come ‘Lille IT
enabled se Aces will have a bright future. The growth. of’ population, industrialization and
indiscriminate consumptions have affected the, natural resources, environment and the
ecological balance. Due to this there is an imbalance of the ecology various service
organisations have been promoted in order to take up social marketing. Thousands of
crores of rupees are being spent on safeguarding the rare animals and birds, water
pollution, conservation of oil & energy and research to develop new technologies that can
promote effective use of natural resources and safeguard the environment.

Development of Markets: During the last few decades the wholesaler and the retailer
population has grown in the country. Urban India has become a cluster of wholesaling and
retailing business. In the Semi – urban areas, retailing has spread to the nooks and corners
of the streets and in the rural areas retail business is significantly present. A new breed of
organisations, offering marketing services has come up. The government also offers
marketing services to the small-scale agricultural farmers, artisans and other traditional
business sectors such ‘as promotion of regulated markets, export promotion councils,
development boards etc.

Market orientation: The changing competitive situation and demand supply positions
has forced the manufacturing organisation to shift their philosophy from production
orientation to market orientation. Market is a service function that has been added in the
organisation. The pressures in the market has further forced the manufacturing
organisations to have marketing research, accounting, auditing, financial management,
human resource management and marketing research divisions – all of which are services
functions.

Health-Care Consciousness: In India, the healthcare market has grown substantially. The
increased life expectancy is the result of the consciousness of the people regarding the
health issues. The growth of fitness clubs, diagnostic centres, medical counselling, health-

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related information sites are the reflections of the growing demands for health care
services. The government as well as the social organisations has taken up the mass
campaigns in order to create awareness among the illiterate persons and the rural
population on health service. Hence, the growth of health related services.

Economic liberalisation: The economic liberalisation of the 1991 has brought many
changes in the Indian scenario. With the Disinvestment and the Privatisation policies the
state owned monopolies in many service areas came to an end Multinationals were
permitted to enter the Indian market. Liberal lending policies and lower interest rates
motivated many people to become self-employed. Different sectors like Banking, Insurance,
Power projects, Telecommunication, Hospitality sector, Health Services, Entertainment, Air
transport, and Courier services witnessed intense competition, due to the entry of
multinationals. The flow of time-tested service technology from various parts of the world
changed the attitude of the Indian consumer towards sources.

Rampant migration: One of the important reasons for the growth of services in India is
the rampant migration of rural to semi-urban and urban areas. Migration to urban areas
for the want of jobs and livelihood has resulted in the expansion of cities and townships
due to which businesses like real estates, rentals, transportation and infrastructure
services are rapidly expanding.

Export potential: India is considered to be a Potential source for services. There are a
number of services that India offers to various parts of the world like banking, insurance,
transportation co data services, accounting services, construction labour, designing,
entertainment, education, health services, software services and tourism. Tourism and
software services are among the major foreign exchange earners of the country and that
the growth rate is also very high as compared to the other sectors.

Service tax: The growth in the service sector attracted the attention of the government as
a tax generating source. Over the years, the number of services brought under service tax
has increased- Service tax is levied on hotels and restaurants, transport, storage and

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communications, financial services, real states, business services and social and personal
services.

4.4 Concept, Characteristics and Classification of Services

Services - A type of economic activity that is intangible is not stored and does
not result in ownership. A service is consumed at the point of sale. Services are one of the
two key components of economics, the other being goods. Examples of
services include the transfer of goods, such as the postal service delivering mail, and the
use of expertise or experience, such as a person visiting a doctor.

SPECIAL CHARACTERISTICS OF SERVICES

Services are said to have four key characteristics which impact on marketing programmes.

These are:
Intangibility
Inseparability
Heterogeneity
variability
Perish ability (simultaneous production/consumption)

It is helpful to consider each of these characteristics briefly:

Intangibility
Services are said to be intangible - they cannot be seen or tasted, for example. This can
cause lack of confidence on the part of the consumer As was apparent earlier, in
considering pricing and services marketing, it is often difficult for the consumer to measure
service value and quality. To overcome this, consumers tend to look for evidence of quality
and other attributes, for example in the decor and surroundings of the beauty salon, or
from the qualifications and professional standing of the consultant.

Inseparability

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Services are produced and consumed at the same time, unlike goods which may
bemanufactured, then stored for later distribution. This means that the service provider
becomesan integral part of the service itself. The waitress in the restaurant, or the cashier
in the bank,is an inseparable part of the service offering. The client also participates to
some extent in theservice, and can affect the outcome of the service. People can be part of
the service itself, andthis can be an advantage for services marketers.

Heterogeneity Invariability

Because a service is produced and consumed simultaneously, and because individual

peoplemake up part of the service offering, it can be argued that a service is always unique;
it onlyexists once, and is never exactly repeated. This can give rise to concern about service
qualityand uniformity issues. Personnel training and careful monitoring of customer
satisfaction andfeedback can help to maintain high standards.

Perishability

Services are perishable; they cannot be stored. Therefore an empty seat on a plane,
for example, is a lost opportunity forever. Restaurants are now charging for reservations
whichare not kept, charges may be made for missed appointments at the dental clinic.
Perishabilitydoes not pose too much of a problem when demand for a service is steady, but
in times of unusually high or low demand service organisations can have severe
difficulties.The above characteristics are generally referred to in many texts as being what
makesservices marketing so different. However, this assumption should be queried on a
number of grounds. Like all sweeping generalizations, generalizations concerning services
marketing donot always represent the full picture. Consider the question of tangibility. In
the main,services can be broken down into three main classifications:Rented goods
servicesConsumer-owned goods services Non-goods servicesSome of these categories
involve goods which are physical, and which contribute in someway to the service offering.
This gives rise to questions about the degree to which services can be classed as intangible.
Another way of classifying services is to consider the distinction between equipment-based

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services and people-based services. Examples of equipment-based services would
include:Vending machines Car and tool hire Airlines People-based services would
include: Nursery infant care Architects Legal servicesYet another distinction can be made
between consumed services, which are offered on a personal basis, and business-to-
business or industrial services. Some service providers may operate in both these market
sectors: Franchised child care services may offer local services to parents, and operate in-
company schemes. Hotels may cater for the tourist and the business or conference market.
Private health care programmes generally offer personal and corporate rates. On the other
hand, someservices such as industry-specific consultancy services or marine salvage
operate in quite closely defined market sectors.

Classification of Services

 Advertising, business management, business administration, office functions.

 Insurance, financial affairs; monetary affairs; real estate affairs.
 Building construction; repair; installation services.
 Telecommunications.
 Transport; packaging and storage of goods; travel arrangement.
 Treatment of materials.
 Education; providing of training; entertainment; sporting and cultural activities.
 Scientific and technological services and research and design relating thereto;
industrial analysis and research services; design and development of computer
hardware and software.
 Services for providing food and drink; temporary accommodation.
 Medical services, veterinary services, hygienic and beauty care for human beings or
animals; agriculture, horticulture and forestry services.
 Legal services; security services for the protection of property and individuals;
personal and social services rendered by others to meet the needs of individuals.

4.5 DIFFERENCE BETWEEN PRODUCTS AND SERVICES

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Products

Products are tangible and discernible items that the organization produces, including
digital file-based output. Examples of products from the Digitization Services Branch:

 digital files sent to a network storage system (NAS/SAN)

 new prints of motion picture film elements

 prints for exhibit purposes

 reference copies on DVD/CDs for the Reading Rooms or other clients

Services

A service is the production of an essentially intangible benefit, either in its own right or as a
significant element of a tangible product, which through some form of exchange, satisfies
an identified need. Sometimes services are difficult to identify because they are closely
associated with a good; such as the combination of a diagnosis with the administration of a
medicine. Examples of services from the Digitization Services Branch:

 consulting with clients on appropriate products for specific purposes

 providing advice on risk assessment and priority setting

 working on standards committees

 conducting training and other educational outreach

Chapter 5 :- Workplace Environment

5.1 COMMUNICATION
Communication is an aid used in everyday life be it personal or business. In the business
world, good communication is important for the daily operation of the company, but can
also affect sales and profitability. Without good business communication, the internal and

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external structure of a business can face numerous challenges that can ultimately lead to its
demise.

Types
The two primary forms of communication are one-way communication and two-way
communication. One-way communication in business is when the business sends out a
message to its customers or employees, but doesn’ t accept responses from the customers
or employees. One-way communication is important because it allows the business to
share information with the customers who can benefit from the company’s products or
services. One of the most common forms of one-way communications in business is
advertising, such as print ads in newspapers and magazines on billboards are examples.
Two-way communication occurs when customers can also respond to the company in
business communication. Social media marketing is a form of two-way communication has
gained in popularity because it not only allows businesses to communicate with its
prospects and customers, but it also allows the prospects and customers to respond.

Effects
When communication lines are open between a business and its customers, it can directly
affect the sales of the business. When a business effectively communicates to prospects and
customers how its products and services can benefit them, it converts prospects into
customers. Good communication ultimately boosts the bottom line of a business.

Identification
Good communication can take on several different forms. The three primary forms of
communication are verbal, written and expressed (body language). All three forms of
communication are used internally and externally in conducting business. Since each
person processes information differently, it is wise to communicate with a combination of
these forms of communication. For example, some people take in and process information
better when they hear it (verbal) while others process things better when they can see and
read it (written).rnrnFor this reason, many businesses send out information to their
employees and their customers in several different ways. A business owner may conduct
an employee meeting where an item is announced verbally so employees can hear the

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information and watch the body language of the presenter. In addition, an email memo may
go out to the employees as a follow-up to the announcement. In promoting its product, a
business may follow a similar pattern with its marketing communication to its prospects
and customers.rnrnAn email may go out that contains a video of the business owner
making the announcement and offering a special to buyersâ??customers can see and hear
the announcement. A written sales letter may be sent in the mail to the same audience a
few weeks later and weekly ads may also be printed in the local newspaper to cover
reaching those who need to see the information in writing.

Benefits
When the internal forces of a business are working toward communicating the same
message to vendors, suppliers and customers, good communication can also lead to a boost
in sales for the business. Essentially, good communication creates a win-win situation. The
customers who can benefit from the company receive the messages they need to make
them aware of the company and to make a purchase, which in turn boosts the sales of the
company.

Warning
Perception plays a pivotal role in good communication. Communication may only be
beneficial when the message the business is sending is the same as the one received by its
customers. If customers misinterpret the message, it can have detrimental effects on a
company’s sales.

IMPORTANCE OF EFFECTIVE COMMUNICATION IN BUSINESS ADMINISTRTAION

Communication is extremely important within a business and is what every good business
should be built upon, giving a business the power to send a message to employees,
prospective customers and the general public that they are one of the best at what they do.
Communication makes a business grow and develop, it gives a company the chance to
inform, educate or instruct. Both bilateral and downward communication is important
within business. Bilateral communication allows businesses to send messagesbetween
people on the same level or position within a company, while downward communication

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sees messages sent from superiors to subordinates. Both of these communication types
have a large role in the workplace.

There are three main types of communication in businesses: Internal, external

and business to business (usually abbreviated to B2B). The former is when messages are
sent from someone in the business to another person working for the same business.
External communication consists of messages sent from within one business to people who
are not working within the business. Business to business communication occurs when a
message is sent from one business to another. All information is sent and received via
communication of some sort. Without effective communication of this information, a
business will struggle with a lack of understanding,motivation and direction.

Effective communication will keep employees well informed and give a business a higher
productivity rate. Many companies that carry out staff satisfaction surveys find that
employees who are kept up to date with effective communication are more satisfied in
their role. Employees tend to have higher levels of job performance when there is a
congruence of individual needs and job characteristics that exist and are communicated
well. In turn, a happy and hard working team of employees helps give a business a
corporate image that the public will find impressive and appealing.

5.2 TEAM WORK AND GROUP DYNAMICS

INTRODUCTION
Work groups are a common arrangement within today's business organizations. Work is
being restructuredaround groups of all kinds and in all sizes of organizations. Managers ne
ed an understanding of groupbehavior and the concept of teams in order to appreciate wha
t groups can and cannot do within organizations and how groups function.

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Any one member in group can influence the behavior of the individuals in
the group and teamwork.
We willexamine some basic characteristics of groups including the types of work groups, th
e development ofinformal groups, and the manner in which groups operate.

UNDERSTANDING GROUP BEHAVIOR

Groups exhibit different behavior--
more than just the sum total of each group member's individual
behavior. In this section, we're going to look at various aspects of group behavior.

What is a Group?
A group is defined as two or more interacting and interdependent individuals who come to
gether toachieve particular objectives.

Groups differ from mere aggregates of individual because the latter have nointerdependenc
e, interaction, or common goal.
2.Groups differ from organizations because the latter involve systematic efforts and
are engaged in the production of goods and services.
3.Teamwork occurs when groups are able to work efficiently and effectively together
to achieve organizational goals.

IMPORTANCE OF GROUP DYNAMICS

Are the group dynamics at your workplace beneficial, or do the staff meetings fall apart at
the drop of a hat? The committee approach to business can be extremely effective – when
carried out properly. Discover expert management techniques that will establish teamwork
in your workplace and foster trust in your coworkers.

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One of the oldest debates in business circles are the pros and cons of group work. Many
argue that businesses have gone too far in the use of the committee approach for resolving
issues. Others say that teams are one of the best tools for involving employees in everyday
decisions. These supporters also claim that establishing strong group dynamics is an
ethical and moral way to manage an organization.

One of the main reasons businesses need committees is to exchange information with one
another. It is next to impossible to keep abreast of all the information, data and new
developments within a particular field. This includes reading relevant reports, books,
articles, research papers and attending conferences.

Examples of ineffective committees.

A committee cannot reach its efficiency potential until its members can function as a team.
There are many examples of ineffective teamwork: the boss dominates meetings and the
committee serves as a rubber stamp for his or her ideas; meetings are poorly run with no
common understanding of the outcome; or people attend meetings against their will.
Teamwork is the lifeblood of a successfully operated committee. There are five elements of
effective group dynamics:
 A personal desire to have the team accomplish something of value.
 A desire to learn from your teammates.
 A willingness to share the information.
 Recognizing that you must ask questions in a courteous and respectful way.
 All team members accept and rally around goals

5.3 Leadership and Motivation

There are at least two major influences that affect how individuals perform in their
environment. These influences include: i) the type of leadership that exists, and ii) personal
motivation. While neither is scientific in nature, there is significant research that identifies

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some theories and general conclusions about why people perform, how they perform, and
why some people display different behaviours that puts them in positions of leadership.

In addition to addressing leadership and motivation as theories rather than as scientific

fact, there are other issues about personal behaviour that must be considered. The most
basic concepts are that every person is (a) like every other person; (b) like some other
people; and (c) like no other person. A further explanation may help clarify this statement.
Every person is like every other person in that we have a need for food, water, shelter, etc.
We are like some other people in that we have similar personality traits which cause us to
be more dominant and aggressive, while others may be more passive and submissive.
Finally, we are unique in that no other person has the same genetic make-up, past
experiences, or view of the world. It is these differences that suggest an analysis of
leadership and motivation can result in general conclusions about behaviour and
performance.

Human behaviour is as much a reflection of the differences between individuals as it is a

reflection of their similarities. These individual differences are caused by a number of
influences and characteristics. For example, personality traits focus on individual
differences that make each person a unique human being. Our biological make-up
concentrates on how we function as a result of our evolution and human inheritance. Our
behaviour is largely influenced by the system of rewards and punishments that are present
in our environment. Our cognitive approach focuses on how our thinking and memory
affects our behaviour. The fact that we are here at this time with immediate influences, and
the ability to express a free will, may present the greatest influence
of all.

Any theories about leadership and motivation can be contradicted since these theories
have many exceptions. It is important that these theories are considered general
statements that have been confirmed through observational studies and are applicable
only to the extent that they reflect and are influenced by individual behaviour. We might

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ask: "Why should we even pursue these topics if there are so many inconsistencies,
exceptions, and variables that affect conclusions?". If we are searching for scientific
evidence that is universally applicable, we may be wasting our time, but if our goal is to
better understand human behaviour and its impacts on personal performance, the insights
gained from such theories and studies are invaluable.

Systems formerly made up of rules, regulations, and procedures are being replaced by
requirements for flexibility and customer service resulting in personal initiative,
empowerment, and greater levels of individual decision-making. To achieve this, it is
important to better understand human behaviour and some of the things that impact our
actions and reactions.

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Motivation

Motivation can be defined as "the extent to which persistent effort is directed toward a
goal".

Effort:
The first aspect of motivation refers to the amount of effort being applied
to the job. This effort must be defined in relation to its
appropriateness to the objectives being pursued. One may, for
example, apply tremendous effort to inappropriate tasks that do not
contribute to the achievement of the stated goals.

Persistence:
The second characteristic relates to the willingness of the individual to stay
with a task until it is complete. For example, an important task that
gets accomplished with effort but allows the person to rest on their
laurels for an extended period does not display persistence.

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Direction:
Is the effort directed towards the organization's goals or related to the individual's self-
interest? Direction is therefore measured in terms of how persistent effort is applied in
relation to the goals being pursued.

Goals:
There are two different kinds of goals being pursued simultaneously. They are individual
goals and organizational goals which may produce quite different results if they are not
compatible.

Next we should distinguish between motivation and performance. While there may be little
doubt about the motivation of the individual in terms of effort, persistence, and direction,
there may be a lot of questions about the individual's performance as it relates to the
organizational goals. The worker may be really busy and factors such as skill levels, task
understanding, and aptitude may negatively impact performance. On the other hand, self-
interest may create its own motivation not related to the organizational goals.

People may be motivated by factors in the external environment such as pay, supervision,
benefits, and job perks. This is referred to as extrinsic motivation. They may also be
motivated by the relationship between the worker and the task. This type of motivation is
called intrinsic motivation. These factors often exist simultaneously, but we will
distinguish between them as they relate to specific levels of motivation.

We will explore three theories of motivation that are based on human needs. In assessing
these theories, we will try and identify what motivates people.

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Maslow's Hierarchy of Needs

Abraham Maslow developed a theory that humans have five sets of needs that are arranged
in a hierarchy. He contends that people start by trying to satisfy their most basic or
compelling needs and progress toward the most fulfilling. These needs are as follows:

1. Physiological needs: These include the need for food, water, shelter,
clothing and money. Until an individual has access to these necessities, there can be
no further progress. These needs are very basic, and for the most part, society and
our social network have ensured that they are present. Intrinsic values include
personal comfort and satisfaction, while the extrinsic values are most often
provided by the organization, the community, or society.

2. Safety needs: These include security, stability, and a structured environment. Here,
the individual expects and pursues job security, a comfortable work environment, pension
and insurance plans, and freedom to organize in order to ensure continuation of these
benefits. Individual's main objective is to ensure that benefits are protected or employment
needs are being met rather than contributing to long-term organizational goals. Again, we
see a dependance on the external environment to provide these supports. Personal
motivation may include the peace of mind that can be provided as a result of these needs
being secured.

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3. Esteem needs: These include feelings of adequacy, competence, independence,
confidence, appreciation, and recognition by others. Again, the individual is driven
more by internal or intrinsic needs. The external environment is needed more to
provide recognition than to provide material rewards. At this point, the intrinsic
value is more important than that which can be provided by outside influences. The
ego seems to take over here and the need is to ensure that it is satisfied.

4. Self-actualization: This area is the most difficult to define and therefore, may be
the most difficult to explain. Why does the successful business person need to
pursue further wealth when they have already accumulated more than they will
ever need? The answer may lie in the fact that motivation is more internal and
therefore, even more individualistic. Different people have different ideas about
what they need to achieve in order to obtain true happiness. For the wealthy person,
money may no longer be the motivator, it may now be a need to exercise power or
the adventure and adrenalin rush created as a result of playing "high stakes games".
This becomes the intrinsic motivation. People who pursue self-actualization are
more accepting of reality, themselves, and others. Organizational requirements may
include the opportunity for creativity and growth. Frequently, individuals aspiring
to this level often operate outside existing organizations and instead build their own
structures to suit their individual needs.

In discussing this theory, it appears that the further up the scale an individual moves, the
more the rewards or motivators move from the external environment to an internal need.
It also becomes more difficult to influence motivation, since material rewards become less
relevant and internal rewards become more difficult to identify and address. In order to
enhance organizational performance, it is important that the organization recognize the
individual need and provide opportunities for satisfaction.

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Alderfer's ERG Theory

Clayton Alderfer developed another needs-based theory that supports in many ways, the
theory developed by Maslow, but consists of three rather than five basic needs. Alderfer
also sees his three levels which includes existence, relatedness, and growth (ERG) needs as
being hierarchical, and thus, influenced by personal growth and extrinsic and intrinsic
rewards.

1. Existence needs: These include needs that are satisfied by material substances or
conditions. They correspond closely to the physiological needs identified by Maslow
and those safety needs that can be satisfied by material rather than interpersonal
rewards or conditions. They include the need for food, shelter, pay, and safe working
conditions.

2. Relatedness needs: These are needs that may be satisfied by communication, or

exchange and interaction with other individuals. There is a dependance on feedback
from other organizational or community members to fulfill these needs. Thus, the
motivation is provided by a combination of intrinsic and extrinsic rewards. These
rewards include accurate and honest feedback, which may involve direction and
advice rather than unconditional pleasantness or agreement.

3. Growth needs: These are needs that are fulfilled by strong personal involvement
that fully utilizes our skills, abilities, and creativity. They include Maslow's
self- actualization as well as esteem needs that rely on intrinsic rewards.

Both theories are also similar because they are hierarchical, and individuals will
concentrate on the achievement of the lowest level of need that is not fully satisfied.

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Maslow contends that the lowest level of need must be satisfied before an individual can
proceed to the next higher level. Alderfer theorizes that if a higher level need is unsatisfied,
the individual will regress to a desire to satisfy lower-level needs. Maslow believes that
once a need is met, it is no longer motivational. Alderfer theorizes that while an individual
may have met a higher-level need in one's personal life, for example, they may still be
operating much lower on the scale where skills, aptitude, and knowledge may affect
performance and confidence.

1. Need for achievement: Individuals in this category have a strong desire to perform
challenging tasks well. They have a preference for situations where personal
responsibility can be taken for successful outcomes. The goals they set provide for
moderate and calculated risk, and the individual seeks performance feedback to
allow for modification and to ensure success.

2. Need for affiliation: People in this category display a need to establish and
maintain friendly, compatible relationships. They have a need to like other people
and want others to like them. They have an ability to create social networks that will
result in meeting these needs.

3. Need for power: People in this category have a strong need to have influence over
others. They wish to make a significant impact and impression on those with whom
they come in contact. This need for power corresponds in many ways to Maslow's
esteem needs where power is used to get attention or to build personal prestige.

Since this theory is non-hierarchical, the growth pattern between intrinsic and extrinsic
rewards that are a major part of the earlier theories, do not appear to contain the same
significance. McClelland contends that people will be motivated to seek out and perform

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well in jobs that match their needs. These needs may include either of the three categories
identified above and are not contingent on any progression from one category to another.

The testing of these three theories has resulted in some conclusions that help us identify
the strengths and limitations of each approach. While Maslow's theory is complicated and
contains more steps than the others, there is recognition of the progression from one level
to the other. Alderfer's three levels seem to be simpler, less rigid, and therefore, may be
more satisfactory to those who wish to understand and apply a model to individual
behaviour. Results of McClelland's research has been applied in organizational settings and
have been supportive of the idea that particular needs are motivational. Our former theme,
'when all else is consistent, the individual is different', suggests that the application of any
theory of motivation has strengths and weaknesses that allow insight into individual
motivation and provide escapes for those times when the theory will let us down. All
theories contribute to a better understanding of human behaviour in general, but specific
application of theory depends on factors that respond to individual needs.

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Motivational Goals

Carol Dweck theorizes that all goals a person might pursue fall into two distinct categories:
performance goals and learning goals. A performance goal is one in which the individual
is concerned with acquiring favorable judgement from his or her peers, supervisors, or
authority figures. A learning goal is one in which an individual uses feedback to increase
his or her competence.

If this theory is correct, it contains some further implications for motivation. Firstly, it
provides for a much better understanding of intrinsic and extrinsic rewards in relation to
performance. While favorable judgement from peers provides extrinsic rewards, the
intrinsic rewards come from both the acceptance of this judgement, and the direction that
it provides for further learning. The performer sees learning as a life-long process, thus
creating even greater levels of motivation.

Secondly, this theory provides a better understanding about failure and its impact on the
individual. Since we all fail sometimes, our ability to respond is an important factor in
motivation. A person with a learning goal will respond to failure by trying even harder to
succeed the next time. In contrast, a person with a performance goal may respond to failure
by concluding that they cannot complete the task and may therefore, give up.

Dweck further theorizes that some people believe that personal qualities such as
intelligence and ability are fixed and unchangeable. This belief may lead people with
performance goals to conclude that they don't have what it takes, and as a result, give up,
while others believe that intelligence and ability can change with time, education, and
experience. Their goal, therefore, is not to prove their competence but to increase it, thus

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success and failure are learning experiences that cause them to try even harder next time.
Failure may even be seen as creating a greater challenge.

Leadership

In many circles, there is continuous debate about whether leaders are born or developed. If
we reflect on our earlier discussion about motivation, we will see that humans are very
complicated and are made up of a number of traits. As with motivation, these influences are
both inherited and acquired from our environment and influences, and consequently,
leadership theories will continue to be debated in the future. We will continue this
discussion on the assumption that leadership can be developed. Furthermore, for the
purpose of this unit, we will not distinguish between leaders and managers, but will use the
term leader to apply to any earned or appointed role that carries with it the exercise of
power and influence over others.

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Leadership may be defined as: the influence that particular individuals (leaders) exert
upon the goal achievement of others (subordinates) in an organizational context. An
earlier unit on Board Governance addresses in a limited way, the impacts of leaders on
performance. We stated that leaders have an ability to see how different aspects of a
situation fit together and influence each other. They seek out alliances, opportunities, and
approach goals in a proactive way. They have a positive effect on others, which attracts
support from those who have similar needs for accomplishment. Their self confidence
creates a belief in other people's abilities, therefore, emphasis is placed on empowerment
and freedom.

If we agree with these statements, then leadership has two distinct aspects: i) the
individual who exerts influence, and ii) those who are the objects of this influence.
Successful leadership depends, to a large extent, on the environment and situation in which
these dynamics exist.

There are other issues that must also be acknowledged. There are two types of leaders:
emergent leaders - those who earn leadership positions through their expertise, skills,
abilities to influence others, or personal acceptability by the group; and assigned leaders -
those who are given power to exercise influence through appointment.

In general terms, both emergent and assigned leaders fulfill two different functions. They
must be able to provide social and emotional support to the group by listening,
acknowledging, team building, and supporting other members in the group. This is
referred to as social-emotional support. The second factor is to provide direction and
assistance to the group in accomplishing their tasks. Successful leaders have the ability to
identify and apply the appropriate strategy at the right time. A group that is confused about
the goals of the organization, for example, will not respond well to a social-emotional

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approach, nor will a group that is experiencing internal conflict and in need of team
building skills respond very positively to a request to improve individual performance.

What are the qualities that make successful leaders? The lack of able officers in both the
First and Second World War led to a search for leaders. This continued after the war to see
if there were personality traits that distinguished leaders from followers. While some
general characteristics of leaders emerged, there were no conclusions whether personality
traits made up the leader or if the opportunity for leadership produced the traits. The
biggest weakness in the trait approach to leadership identification is its failure to take into
account the task, the subordinate, and the setting or environment in which work is
performed.

The study of emergent leaders gives some good clues to what qualities appointed leaders
must have to be successful. Emergent leaders hold their position as a consequence of their
appeal to

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their subordinates. Their role is safe only as long as the group is attracted to these
attributes and conditions. Should these positions change, or the group finds other
influences, a lack of support or outside forces may undermine the leader's role. The role,
therefore, is dependant on performance and any real or perceived faltering will quickly
translate into lack of support. The present incumbent after losing support becomes
"dethroned" or replaced.

This fledgling type of leadership is what we most often observe in community groups and
organizations, politics, and citizen-led efforts. The leader is responsive to the group agenda
and is secure only as long as he or she remains responsive. Since most people are easily
influenced and may change their minds as a result of immediate or emerging needs,
support is difficult to maintain. Leaders who find themselves in this position tend to try
and "ride out the storm" before subjecting themselves to any formal leadership review.

Assigned leaders draw their power and influence from sources outside the group, and in
most cases, have been given some power to assign tasks, and hand out rewards and
punishments based on performance. Rewards may include compliments, tangible benefits,
and deserved special treatment. When well thought out, with clear criteria rewards that
compliment individual needs can be very motivational. On the other hand, leaders who
have no authority to provide rewards may attempt to create them by giving compliments
and praise and making promises they can't deliver. Over time, this tends to demotivate,
leads to a loss of loyalty, creates dissension and eventually causes the group to become
dysfunctional.

Punishments may include reprimands, unfavorable task assignments, and withholding of

raises, promotions, and other rewards. At best, punishments seem to have minimal impact
on satisfaction or productivity. At worst, punishments are seen as random, not contingent
on behaviour or performance and most often poorly administered. Leaders who have

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access only to punishments often resort to identifying degrees of unfavorable behaviour,
and dole out punishment accordingly.

The most important activities of leaders are those that clarify the path to various goals of
interest to subordinates, thus effective leaders form a connection between subordinate
goals and organizational goals. Since leadership is about increasing group performance
through motivation, the leader must be more concerned with job satisfaction and the

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 creation of a clear picture of how subordinates can gain rewards based on performance.
House's theory is concerned with four different kinds of leader behaviour. These include:

1. Directive behaviour: This includes scheduling work, maintaining performance

standards, and letting subordinates know what is expected from them.

2. Supportive behaviour: A leader displaying this behaviour is friendly,

approachable, and concerned with pleasant interpersonal relationships.

3. Participative behaviour: Leaders who practice this behaviour consult with their
subordinates, and consider their opinions.

4. Achievement-orientated behaviour: This behaviour encourages subordinates to

exert higher efforts and strive for a higher level of goal accomplishment. Leaders
demonstrating this behaviour express confidence that subordinates can reach these
goals.

Subordinate characteristics and environmental factors greatly influence the success, and
create the opportunity for successful leadership. Firstly, individual characteristics affect
the achievement levels that can reasonably be expected. Secondly, subordinates have
individual needs that must be met if their performance and motivation level is to remain
high. Thirdly, subordinate's aptitude and abilities will affect both the performance and the
response of other co-workers.

Environmental factors that impact on leadership include the following:

1. The appropriateness of the leader's style to the situation will have a major
impact on the behaviour of the group.

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2. Task clarity, urgency and subordinate empathy will affect performance and
motivation.
3. Leader qualifications and knowledge will build group confidence and loyalty.
4. There is probably no substitute for being in the right place at the right time.

Successful leaders will take advantage of the motivating and satisfying aspects of jobs
while offsetting or compensating for those factors that demotivate or dissatisfy. There is
evidence that this theory works better in predicting job satisfaction and leader acceptance
than increasing subordinate performance.

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We have seen in an earlier unit (Public Participation) that there are differing degrees or
levels of participation. These range from total involvement of subordinates in planning,
implementation, and evaluation to simple requests for assistance where such participation
is a necessary ingredient for success. Given this fact, we can easily see that participation
will not be successful in all situations. While public or community involvement will provide
much better results in compiling a strategic plan for the community, you would not apply a
public participation model if you were trying to escape from a burning building.

Public or community participation can contribute to the following:

1. Motivation: Participation can contribute to identifying and establishing group

goals and how they can be accomplished. It can also contribute to intrinsic
motivation by enriching subordinates jobs through variety, autonomy, and
empowerment.

2. Quality: There is an old saying that "two heads are better than one". In many cases
this is true of participation. Subordinates have knowledge and expertise that the
leader may not have, thus this combination of leader and subordinate expertise can
lead to higher quality processes and solutions. In addition, the qualities of
empowerment allow employees to take direct action to solve problems.

3. Acceptance: Participation can increase subordinates acceptance of the decision

since they were involved in making the decision in the first place. There is also a
better chance of subordinates seeing decisions as being more fair when they have
had input into these decisions.

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Participative leadership can also create problems. The time and energy spent in calling
meetings, soliciting ideas and training participants may affect deadlines. The involvement
of subordinates may be perceived as a loss or sharing of power, thus creating resentment at
the leadership level. This may affect the performance of leaders which in turn, may affect
subordinate performance. Some workers may not want to be involved in the decision-
making aspects of jobs. When the leader is distrusted or when a poor labor relations
climate is present, subordinates may see their participation as "doing management's job".
When governments attempt to involve the community in education reform, health care,
economic and social development, it may be perceived as "down loading", especially if
these activities are undertaken in conjunction with other programs and economic cutbacks.

It appears that broad-based participation in short-term projects may not be as

advantageous as implementing a participation model among a group of employees that will
be part of the same

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team for an extended period, and have become very knowledgeable and proficient at
their job. Inability to recognize this can lead to a lack of confidence in the process, the
leaders, and create resistance to participation.

Vroom's and Jago's Leadership Styles

What are some of the options available to leaders? Victor Vroom and Arthur Jago
maintained that there are three different types of leader behaviour. Leaders use either an
autocratic, consultative, or group decision-making style.

1. Autocratic: This style states that the leader solves the problem or makes the
decision using information available to him or her at the time. In some cases, the
leader may consult with subordinates to obtain information, but at no time does
subordinate input include decision-making. The decision is passed on to
subordinates for implementation.

2. Consultative: The leader shares the problem with subordinates and gets their
input. Subordinate involvement is seen as either a collective or individual request
for information which may or may not influence the decision. The leader reserves
the right to make that decision.

3. Group: The leader shares the problem with subordinates as a group, obtains their
collective input and tries to reach consensus on the solution. The leader acts as a
facilitator or chairman, trying not to influence input and accepting any solution
that the group may suggest.

With these three different approaches, we can also see that there are differing degrees
within this spectrum that the leader may apply. According to Vroom and Jago, the
approach depends on the situation or problem at hand. The leader's goal should be to
make the highest quality decision with the highest level of subordinate support.

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A single theory of motivation in isolation may provide some understanding of human
behaviour, but by combining these theories, one may see patterns that assist in
understanding why some people participate as they do. For example, the works of
Maslow and Alderfer to some extent may provide understanding of why some people
participate at higher levels than others and identify some of the rewards that may help
this level of participation to continue. Our observations of leaders when combined with
the leadership styles discussed in this unit will help us understand why some leaders
perform successfully, why some encounter difficulties and still others struggle with low
levels of support while displaying high technical abilities.

Understanding leadership and motivation opens our minds to new thought processes of
how people behave and why, helps understand some general principles of human
behaviour and allows us to use these theories as a guide for our participation, analysis
and understanding of group behaviour. This understanding can serve us best in selecting
individuals who display some of these qualities to fill specific roles in our organizations
and communities.

5.4 Human Resource

Human Resources (HR) is concerned with the issues of managing people in the
organisation.

The Human Resources department is responsible for many people related issues in an
organisation.

Under the HR department’s remit are the following roles:

 The process of recruiting suitable candidates for the organisation

 Identifying and meeting the training needs of existing staff

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  Ensuring employee welfare and employee relations are positive
 Ensure the working environment is safe for employees
 Raising awareness of current workplace legislation

The Human Resources Department also covers five key roles.

 Executive role – in this role the HR department are viewed as the specialists in
the areas that encompass Human Resources or people management.
 Audit role – in this capacity the HR department will check other departments and
the organisation as a whole to ensure all HR policies such as Health & Safety,
Training, Staff Appraisal etc are being carried out in accordance with the
company’s HR policy.
 Facilitator role – in this role, the HR department help or facilitate other
departments to achieve the goals or standards as laid out in the HR policies of the
organisation. This will involve training being delivered for issues that arise in the
areas relating to people management.
 Consultancy role – the HR department will advise managers on how to tackle
specific managing people issues professionally.
 Service role – in this capacity the HR department is an information provider to
raise awareness and inform departments and functional areas on changes in
policy.

5.5 ENCOURAGE TRUST AND CONFIDENCE

How do you build trust? Trust is earned when everyone's interests are considered and
respected. Communication is the key to do this. Following is a list of suggestions for
building and maintaining trust.

Building Trust:


Ensure open communication.

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  Tell the truth.

 Share good and bad information between all levels of the organization.

 Encourage creativity.

 Foster talent.

 Allow disagreement without negative repercussions.

 Maintain integrity.

 Make decisions that are fair and consistent.

Maintaining trust:

 Reward value added activity.

 Managers should say what they will do, and do what they say they will do, in a
nice manner, and be consistent.

 Reward pro trust behaviors.

 Punish breaches of trust.

Earning trust

 Be honest.

 Management embracing change.

 Lead by example.

 Management visible to all levels of the company.

 Improve training.

 Communication in as far advance as possible.

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  Try Workforce Reduction alternatives; such as,

 Voluntary severance, and early retirement.

In the end, organizations cannot earn, develop or retain employee trust; only people can.
Trust is an interpersonal experience, while organizations can define polices and practices
that promote trust; it is the behaviors of individuals, especially leaders that determines
the level of trust in an organization. Being honest is the easiest way to prevent loss of
trust. If you don't know the answer, say so. If you have a tough question, ask it. If you say
you're going to do something, do it, or provide an update as to why the schedule has
changed. It is the little things, which add up, that help earn and maintain trust within
organizations.

5 Strategies to Develop Confidence and Trust

It's a proven fact that building customer trust in your products, your service and your
company is a great way to increase profits and build a strong, dependable consumer
base. No matter what industry you are in, customer trust is among one of the most cost-
effective ways to keep the profits growing. When you build customer confidence, you can
charge fair prices for your products and services, even if your competitors are offering
some sort of special discount or deal. Customer trust overrides prices when it comes to
day-to-day business. Here are five ways that you can start building customer trust in
your small business:

1. Highlight Professional Accomplishments, Certificates and Awards.

If your company has been recognized by a professional association, the Better

Business Bureau, the local Chamber of Commerce, or other such organization, then
proudly display your commendations where customers can see them. This might
mean adding an extra space on your website for accolades. Certificates and awards
can be framed and posted for all to see onsite.

2. Share Testimonials.

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 Testimonials and letters can help build customer trust in your organization.
Customers are willing to look at other success stories and compare them to their own
lives. When customers see someone or something they can relate to, it builds
confidence in your organization. There are some creative ways you can foster
customer confidence with testimonials. For example, on your website, you can
include video testimonials, as well as written letters. You can also print quotes or
positive feedback from customers at the bottom of your store receipts.

3. Be Honest and Straight forward

The key to building customer trust through marketing and advertising is being honest
and straightforward. Don't develop messages that come with miles of fine print and
disclaimers. Create basic marketing campaigns that highlight your products and
services in a plain and simple fashion. Customer confidence is boosted when they see
an ad and find that the details are in direct alignment when they walk into the store.

4. Use the Power of One.

Customer trust is largely dependent on interactions with employees. Encourage

employees to develop personalized and genuine one-on-one relationships with
customers. In addition, employees must lead by example. They need to do what they
say the will do, such as returning a phone call or finding specifications regarding a
product. Customer confidence is strengthened by meaningful interactions with
others.

5. Uphold the Reputation of organization .

Reputation is everything when it comes to building customer trust. Certain industries

have a bad reputation that simply can't be avoided. Take the used car industry for
example. Dealers are known for being overbearing and putting a lot of pressure on
prospective buyers. They talk fast and it's tough to tell if a customer is truly getting
their money's worth. In this type of industry, protecting and changing the image is
vital for success.

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Customer trust is an important aspect of owning and operating a small business. Failure
to meet customer needs and start building customer trust is one of the fastest ways to
ruin a lucrative business opportunity. Treat your customers like gold in every aspect of
the business relationship, and you will be well on your way to success.

CHAPTER -6 – TECHNOLOGY IN BUSINESS

6.1 IMPACT OF TECHNOLOGY IN BUSINESS

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Technology provides a wide range of tools entrepreneurs can use to guide their new

companies through the startup and growth stages. Advances in

technology have revolutionized accounting, marketing, and sales practices for small
businesses. From laptop computers with Internet capabilities to printers, online file
storage, and web-based applications--technological advances impact small businesses
across various industries.

Technology has the potential to affect small business in several ways, depending on the
goals a business has in place, the products they chose to use, and how well
entrepreneurs and their employees adapt to new systems.

CREATING EFFICIENCIES

Businesses work closely with their clients to provide them products and services that
add value to their lifestyles. Going from an idea to a finished product or service requires
small business owners and their employees to collaborate with each other and external
vendors. With the ability to instantly connect, share information, and get feedback, e-mail
and instant messenger are beneficial technological advantages for small businesses.

Web-based project management programs offer an easy approach to keeping track of

projects, delegating tasks, updating team members and clients, tracking time, and sharing
documents in real-time. For small businesses, this means up-to-date information
available in a central hub, regardless of a person's location. Setting up and managing a
new accounting system can be a challenging task. Accounting software also assists

160
managers by creating informative reports and financial statements to increase decision-
making effectiveness.

Time management is crucial for any small-business owner. Freeing up time from
administrative tasks can allow you to focus on more productive activities, such as
drumming up new business and making vital contacts with potential partners. Advances
in computer and cell phone technology allow business owners access to in-depth
scheduling and customer relationship management software, enabling busy
entrepreneurs to hold "face to face" meetings online.

INSTANT CONNECTION WITH CUSTOMERS

Small business owners no longer have to mail surveys to customers and wait for weeks
for replies, nor do they have to call customers for feedback. Technology gives small
businesses the ability to connect with their customers via e-mail, through blogs, social
networks, and forums. Small business owners can take advantage of this instant
connection by getting feedback from customers and applying it to their businesses
quickly.

INTERNET

Technology allows businesses an option to set up online stores, rather than investing in
costly storefronts. With consumers migrating to the Internet to find everything from gifts
to groceries, the popularity of online shopping increases with the variety of products and
services. Businesses with storefronts can create online stores to expand their visibility
and reach target markets beyond their neighborhoods and surrounding communities.

The Internet has become a must have for small-business marketers competing against
established businesses. With advanced video and graphics editing software, small-
business owners can create professional marketing materials that reach thousands or
millions of online viewers. Entrepreneurs can take advantage of cost-efficient web

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marketing opportunities to spread targeted marketing messages to a broad audience or a
specific industry segment.

STARTUP COSTS

Despite the advantages gained by using technology, there are still challenges to the
businesses reliance on technology. One is the increase in startup expenses for new
businesses. Almost every new business requires computer workstations, multiple
telephone lines, and network infrastructure before it can begin operations. Bootstrap
entrepreneurs can often get away with using their own PCs and cellphones during the
startup phase, but serious new ventures by experienced entrepreneurs usually involve
large infrastructure projects to accommodate rapid growth.

Technology offers many opportunities for a small business to market its products or
services. Electronic record keeping helps small businesses consolidate information
systems by using databases that link information in multiple ways. Electronic
communication systems such as email, websites, blogs and Twitter are invaluable
marketing tools, enabling a small business to stay connected with customers and
suppliers. Small-business technology can be complex or simple, depending on the
proprietor's comfort level and the benefits that technology can offer to the particular
business.

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6.2 INTRODUCTION TO MS OFFICE

1. General Description

Microsoft Office is powerful and popular application software that is used in

businesses around the world. Main components of the package include MSWord, MS
Excel, MS Power Point and MS Access.

2. General Eligibility

While extensive computer experience is not required to attend the class, it is

important to be able to type, and to be familiar with Windows prior to attending.

3. Hardware & Software required for Teaching

Hardware: Personal Computer or a terminal with 115MB free Hard disk space and
256MB RAM for reasonably good performance.

Software: MS Office with /Windows 2000/Windows XP Home & Pro.

4. Course objectives and content

Upon completion of this course students will be able to:

• Demonstrate an advanced knowledge of the Word Processing package,

MS Office and a knowledge of howto design & create effective and
structured documents like technical reports, letters, brochures, etc.,

• Demonstrate the skills in the appropriate use of various features of the

spread sheet package MS Excel and also to create useful spreadsheet
applications like tabulated statements, balance sheets, statistical charts,
business statements, etc.

• Demonstrate the skills in making an effective presentation with audio

and video effects using the MSExcel package

• Draw graphical pictures, flow charts, block diagrams etc., using the
drawing tools available in MS Word or MS Power Point and incorporate
them into documents and presentations.
• Understand the concepts of tables, records, queries, forms, reports, etc.,
and to develop small database applications using MS Access.

163
164
 Module 1: Basic Computer Concepts

1. Introduction

a. What is a Computer

b. Software and Hardware

c. Hardware Components

d. Hardware Accessories

e. Operating System Software

f. Software Applications

2. Working with Computers

a. Computer Terminology

b. Starting and Stopping the Computer

c. Using the Mouse

3. Computer Tools & Utilities

a. Disk Utilities

b. Files & Directories

c. Manipulating Files & Folders

d. Working with the Windows Environment

4. Computer Network

a. LAN

b. Internet

c. E-Mail

d. Browsers, E-Mail Clients

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 Module 2: Word
1 Introduction

a. Introduction to MSWord
b. Menus
c. Shortcuts
d. Document types

2 Working with Documents

a. Opening Files - New & Existing

b. Saving Files
c. Formatting page and Setting Margins
d. Converting files to different formats

i. Importing
ii. Exporting
iii. Sending files to others
e. Editing text documents

i. Inserting
ii. Deleting
iii. Cut, Copy, paste
iv. Undo, Redo
v. Find, Search, Replace
f. Using Tool bars, Ruler
i. Using Icons
g. Using help

3 Formatting Documents

a. Setting Font Styles

i. Font selection - style, size, color etc.,

 ii. Type face - Bold Italic, underline
iii. Case settings
iv. Highlighting
v. Special symbols
b. Setting Paragraph style
 i. Alignments
ii. Indents
iii. Line space
iv. Margins
v. Bullets and Numbering

c. Setting Page Style

i. Formatting
ii. Border & Shading
iii. Columns

iv. Header & footer

v. Setting Footnotes
vi. Inserting manual Page break, Column break and line break.
vii. Creating sections and frames
viii. Inserting Clip arts, pictures, and other files
ix. Anchoring & Wrapping
d. Setting Document Styles

i. Table of Contents
ii. Index
iii. Page Numbering, data &Time, Author etc.,
iv. Creating Master Documents
v. Web page

4 Creating Tables

a. Table settings
b. Borders
c. Alignments
d. Insertion, deletion
e. Merging
f. Splitting
g. Sorting
h. Formula

5 Drawing
 a. Inserting Pictures/Files etc.,
b. Drawing Pictures
c. Formatting &Editing pictures
d. Grouping and ordering
e. Rotating
Tools
a. Word Completion
b. Spell Checks
c. Macros
d. Mail merge
e. Templates
f. Using Wizards
g. Tracking Changes
h. Security

7 Printing Documents

a. Printing Documents

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 Module 3: MS Excel

1 Introduction

a. Spreadsheet & its Applications

b. Opening spreadsheet
c. Menus & Toolbars & icons
d. Shortcuts
e. Using help
f. Shortcuts

2 Working with Spreadsheets

a. Opening a File
b. Saving Files
c. Setting Margins
d. Converting files to different formats
i. Importing, Exporting and Sending files to others
e. Spreadsheet addressing

i. Rows, Columns & Cells,

ii. Referring cells and Selecting cells
f. Entering and Editing Data

i. Entering Data
ii. Cut, Copy, paste, Undo, Redo, Find, Search & Replace
iii. Filling continuous rows, columns
iv. Inserting - Data, cells, column, rows & sheets
v. Manual breaks
g. Computing data

i. Setting Formula
ii. Finding total in a column or row

170
iii. Mathematical operations (Addition, Subtraction,
Multiplication, Division, Exponentiation)
iv. Using other Formulas

171
 3 Formatting Spreadsheets

a. Formatting - Cell, row, column & Sheet

i. Alignment, Font, Border &shading
ii. Highlighting values
iii. Hiding/Locking Cells
b. Worksheet

i. Sheet Name
ii. Row & Column Headers
iii. Row Height, Column Width
iv. Visibility - Row, Column, Sheet
v. Security
c. Formatting - worksheet
i. Sheet Formatting & style - background, color , Borders &
shading
d. Anchoring objects
e. Formatting layout for Graphics, Clipart etc.,

4 Working with sheets

a. Sorting
b. Filtering
c. Validation
d. Consolidation
e. Subtotal

5 Creating Charts

a. Selecting charts
b. Formatting charts, label, scaling etc.,

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 6 Using Tools

a. Error Checking
b. Spell Checks
c. Macros
d. Formula Auditing
e. Creating & using Templates

f. Tracking Changes
g. Customization

7 Printing worksheet

Module 4: MS Power Point

1 Introduction

a. Opening new Presentation

b. Different presentation templates
c. Setting backgrounds
d. Selecting presentation layouts

2 Creating a presentation

a. Setting presentation style

b. Adding Text to the presentation

3 Formatting a presentation

a. Adding style
b. Color, gradient fills
c. Arranging objects
d. Adding Header & Footer
e. Slide Background
f. Slide layout

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4 Adding Graphics to the presentation

a. Inserting pictures, movies, tables, etc into the presentation

b. Drawing Pictures using Draw

5 Adding effects to the presentation

a. Setting Animation & transition effect

b. Adding audio and video

6 Printing Handouts

7 Generating standalone presentation viewer

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 Module 5: MS Access

1 Introduction

a. Database concepts
b. Tables
c. Queries
d. Forms
e. Reports

2 Opening & Saving database files

a. Creating Tables
b. Table Design
c. Indexing
d. Entering data
e. Importing data

3 Creating Queries

a. SQL statements
b. Setting relationship
c. Using wizards

4 Creating Forms

a. GUI
b. Form

5 Creating & printing reports

6.3 E- COMMERCE
Conducting business online. Selling goods, in the traditional sense, is possible to do
electronically because of certain software programs that run the main functions of
an e-commerce Web site, including product display, online ordering, and inventory
management. The software resides on a commerce server and works in conjunction
with online payment systems to process payments. Since these servers and data
lines make up the backbone of the Internet, in a broad sense, e-commerce means
doing business over interconnected networks.

The definition of e-commerce includes business activities that are business-to-

business (B2B), business-to-consumer (B2C), extended enterprise computing (also
known as "newly emerging value chains"), d-commerce, and m-commerce. E-
commerce is a major factor in the U.S. economy because it assists companies with
many levels of current business transactions, as well as creating new online
business opportunities that are global in nature.
Here are a few examples of e-commerce:

 accepting credit cards for commercial online sales

 generating online advertising revenue
 trading stock in an online brokerage account
 driving information through a company via its intranet
 driving manufacturing and distribution through a value chain with partners
on an extranet
 selling to consumers on a pay-per-download basis, through a Web site
6.4 WORKING WITH INTERNET

What is an Internet Application ?

Internet application is an interactive, compiled application that can be accessed

through internet or intranet. They can perform complex process either on client or
on server. In a server based application, the application uses HTTP internet protocol
to receive a request from a client, typically a web browser, process associated code
and return data to the browser.
There are two types of Internet applications in visual basic : server-based IIS
application and client-based DHTML application.

«Advantages of Visual Basic Internet Applications

It Reduce the cost of deployment per user. End user needs only a browser and in
case of DHTML application visual basic run-time is also needed.
No need to learn scripting or manipulate HTML tags to develop a highly functional
Web-based application. Visual basic programming can be used in these applications.
jg Designing and Coding can be separated which makes the applications easy to
maintain.
jg Download time can be reduced since the components need not to be downloaded
to
run the application. g Application state can be maintained between the client
requests. g Visual Basic debugging tools can be used for debugging the internet
applications.

«° System requirement for Internet Applications

^ For DHTML Applications At the

Developer end
? Internet Explorer 4.01 SP1 or later. ? Optional :
HTML Editor, image editors. At the End-User end
? Internet Explorer 4.01 SP1 or later.
 ? Visual Basic run-time (Msvbvm50.dll), which will be downloaded when
the application was executed first time. ? If the application is using
ActiveX controls then they are also to be
downloaded.

^ For IIS Applications At the

Developer end
? Internet Explorer 4.01 SP1 or later. ? Web Server capable of
running Active Server Pages. At the Deployment Computer
? Microsoft Internet Information Server.
At the End-User end
? Any Web browser but Internet Explorer 4.01 SP1 or later
«° Difference between IIS and DHTML applications

An IIS application is also similar to another type of Internet application you can
create in Visual Basic — a DHTML application. Like IIS applications, DHTML
applications also allow you to respond to events in an HTML page.

However, there are several key differences between the two types of applications:

? Dependency — DHTML applications are intended for use on intranets, and are
dependent on Internet Explorer 4.0 or later, while IIS applications can be
used on the Internet or an intranet. End users of an IIS application do not
need a specific operating system or browser.

? Object model — DHTML applications use a different object model than IIS
applications to access and work with the elements on an HTML page. While
IIS applications use the Active Server Pages object model, DHTML
applications use the Dynamic HTML object model.

? Location of processing — IIS applications are designed to perform most of

their processing on the Web server, but DHTML applications perform most of
their processing on the browser machine. You do not create any Web server
components when you create a DHTML application.

«° Other Internet technologies in Visual Basic

In addition to DHTML and IIS application, there are other types of Internet
functionality that can be added to the visual basic projects.
 g ActiveX Components that can be used on HTML pages, either as a part of an
IIS or DHTML application or not. ActiveX controls include ActiveX Controls,
ActiveX Code Components, ActiveX Documents.
g Internet extensions for Visual Basic applications. These include the Internet
Transfer control, the WebBrowser control and the WinSock Control.
 «° Steps to incoroporate Internet Extensions in Visual Basic Application.

^ Include the Microsoft Internet Control in your project

g Start the Visual Basic Project by clicking Start»Programs»Microsoft Visual

Studio>>Microsoft Visual Basic 6.0. Screen as shown in fig 1 will appear.

Fig 1

g Select Standard EXE project type and click Open.

g On clicking Project>>References, a dialog box similar to the fig 2
 Fig 2

Select Microsoft Internet Controls and click OK which add reference to the
project.

Investigating the Internet Explorer Object Model

Before actually using the IE object in the program, we can see the properties,
methods and events with the help of Visual Basic Object Browser

Use the Object Browser

g Click View>>Object Browser . The browser utility window will appear on the
screen as fig 3
 Fig 3

g In the Project/Library drop down list, click SHDocVw library.

The classes and members boxes will display the elements of the SHDocVw
library ( the objects associated with Microsoft Internet Controls)

6.5 VIRTUAL ENTERPRISE

Introduction

The idea of a virtual enterprise has gained some prominence in recent years. It
has primarily been seen as a confluence of both technical and organisational
ideas. On the one hand the technical background has been towards more open
and distributed systems which has, of late, been facilitated by the relative
usefulness of object based systems. On the other organisational developments
have emphasised the need for flexible and responsive economic units which
can act quickly to perform activities and exploit economic advantages.
Irrespective of the merits of the technical stream, and it is not yet clear
whether object based systems will produce the required degree of openness,
this paper argues that a large proportion of the world's productive effort is
already organised in the form of virtual enterprises. Moreover, documentary
evidence tells us that this form of organisation has been in existence for at
least five hundred years and probably stretches back for a couple of millenia or
three. This paper describes the practicalities of virtual enterprises. It focusses
on the economic imperatives that have led to the formation of these virtual
enterprises and suggests that some major organisational problems must be
overcome before any technically driven initiatives can be usefully employed. It
is curious to note that while some proponents see virtual enterprises as a
major step forward those organisations which currently operate in this way
are seeking ways to stop being virtual enterprises.

2. Virtual Enterprises (VEs)

With the increasing complexity of product development and intensifying

market competition, it is obvious that even large enterprises will no longer be
able to design and produce all the different parts of a product. There are two
reasons for this: firstly because the required skills are not all available within
the enterprise and secondly because of time constraints. This will lead in the
very near future to what is called a virtual enterprise (VE) (Hardwick and Bolton,
1997; Hardwick, 1998): a fragmented and geographically distributed set of
partners cooperating to achieve a common goal.

Virtual enterprises are being promoted in the computer software and

hardware industries as a new way of allowing firms to form business alliances
capable of producing products beyond the capability of any single firm. These
alliances may only last long enough to produce a single product and then be
amicably dissolved as the parties move on to other business opportunities
with different partners in a fast moving industry.
The paradigm of VE is an emerging area of research and technological
development for contemporary industries. The research area is growing and is
a multidisciplinary one that requires precise definitions of the concepts and an
agreement on the terminology used (Camarinha-Matos et al., 1998). So far,
there is no unified definition of this idea and indeed a number of different
terms are competing in the literature that either refer to the same concept or
to its different perspectives. Among others, the terms "extended enterprise",
"supply chain management", "electronic commerce", "cross border
enterprise", or "network of enterprises" are commonly used. These terms,
although not necessarily synonymous, represent related concepts. Through
reviewing the literature, Wijk et al. (1998) have tried to integrate several
definitions of virtual enterprise into one working definition. They define VE as:

primarily characterised as a network of independent, geographically dispersed

organisations with a partial mission overlap. Within the network, all partners provide
their own core competencies and the co-operation is based on semi-stable relation.
The products and services, which a Virtual Organisation provides are dependent on
innovation and strongly customer based. Besides that, a Virtual Organisation is
secondarily characterised by one identity, where the loyalty is shared among the
partners and the cooperation is based on trust and information technology. Next to
that, there is also a clear distinction between a strategical level and an operational
level

It is not the purpose of this chapter to investigate in detail the true meaning
and worth of virtual enterprises, that has been done elsewhere (Hale and
Whitlam, 1997; Hardwick and Bolton, 1997; Mowshowitz, 1997; Berendt,
1998; Camarinha-Matos et al., 1998; Travica, 1998; Wijk et al., 1998; Wolfgang
Appel et al., 1998). However, some initial comments relative to such
organisations are relevant given the discussion below. The simple definition of
a virtual enterprise is one which is built from both 'organisationally and
geographically distributed units'. While definitions are designed to be brief
and to the point this is just too terse, it ignores a host of other factors which
impinge on the structure of an enterprise, and indeed the industrial structure
within which it operates. Most of these factors are economic and financial in
nature; three examples will suffice at this point: the nature of ownership, the
nature of control of the enterprise and the manner in which work is allocated
within an industrial setting. More generally, the question of 'organisationally
distributed units' and that of 'geographically distributed units' is more
commonly known as 'vertical integration' and 'horizontal integration' - or
rather given the emphasis of virtual enterprise theory 'vertical disintegration'
and 'horizontal disintegration'.

The construction industry can be considered as a virtual enterprise (VE), and

is perhaps a model that can be emulated by other industries. The existence of
teams made up from many organisations working on a building project is
suggestive of the main ideas underlying virtual enterprises. This working style
is taken for granted in the construction industry. However, to others, it
appeared to be a revolutionary concept (Guss, 1996; Grilo et al., 1997;
Kornelius and Wamelink, 1998; O'Brien and Al-Biqami, 1998). Nevertheless,
other industries have moved ahead of the construction industry by pulling
their groups and teams together to use networked resources of digital data in
an active way (Doherty, 1997). The construction industry is only beginning to
explore the application of new tools and technology and so has much to learn.
The industry must now truly get to grips with the impact and opportunities
presented by the new communication technology.
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