Scales of Business

Scales of business refers to the size of the business. 

1. Micro: The sector most encouraged in low income countries as it shows most promise for sustainable development, is potentially most viable for micro entrepreneurs and fills the most necessary niche in the economy is the initial processing of agricultural products. Where investment in plant and machinery doesn’t exceed 25 lakhs, or where service sector is concerned, 10 lakhs.
2. Small scale: Industries organized on a small scale and which produce goods with the help of small machines, hired labour and power. Capital resources invested on plant and machinery buildings have been the primary criteria to differentiate SSI from large and medium scale industries. Can be classified into registered and unregistered SSI.
3. Large scale: Those industries which require huge infrastructure, man power and influx of capital assets. Fixed asset of more than 100,000,000 rupees.
4. Public: Managed, owned and controlled by the government with a view to maximize social welfare and uphold public interest. Helps correct regional imbalances produced by the private sector being unwilling to move into certain fields, or attracted to more advantageous fields. 

Industrial sickness is defined all over the world as "an industrial company (being a company registered for not less than five years) which has, at the end of any financial year, accumulated losses equal to, or exceeding, its entire net worth and has also suffered cash losses in such financial year and the financial year immediately preceding such financial year." - Wikipedia (I'm lazy)

Incipient sickness: Continuous decline in gross output due to lack of demand and/ or shortage of working capital. 

BIFR - Board for Financial Reconstruction

BRPSE - Board for Reconstruction of Public Sector Enterprises 

IIP - Index of Industrial Production, used to measure industrial performance. 

MNC - Multinational Companies 

Corporation that has its management headquarters in one (home) country and operates in several other (host) countries.

MNCs typically go overseas because they possess some special advantage they want to exploit fully, on benefit from, such as avoiding barriers to import or employing cheaper foreign labor. 

Common models for MNCs

1. Positioning of executive headquarters in one nation while production facilities are located in one or more other countries: Allows the company to take advantage of benefits of incorporating in a given locality, while also being able to produce goods and services in areas where the cost of production is lower.
2. Basing the company in one nation and operating subsidiaries in other countries around the world: All functions of the parent company are in the country of origin, while the subsidiaries more or less function independently, outside of a few basic ties to the parent company.
3. Establishment of a HQ in one country which oversees a diverse conglomeration that stretches to many different countries and industries: includes affiliates, subsidiaries and even some facilities that report directly to HQ.

Disadvantages

1. Employment may not be as extensive as hoped – jobs may go to skilled workers from other countries rather than domestic workers.
2. MNCs may be footloose – locate in a country to gain the tax or grant advantage but move away when these run out – therefore no long term benefit.
3. Size and power of the multinationals can be used to exploit weak or corrupt governments. E.g.: Mittal in Liberia
4. Pollution and environmental damage – in countries with less rigorous regulatory authorities. E.g. Coca Cola in Kerala
5. De-Merit goods – production of non-beneficial good
6. Repatriation of profits
7. Outdated technology 
8. May charge heavy fees 
9. May develop monopolies 
10. May use resources recklessly 
11. Adverse effect on lifestyle/ culture: encouraging poorer people to buy things they don’t need
12. Avoid tax liabilities through transfer pricing - "In taxation and accounting, transfer pricing refers to the rules and methods for pricing transactions between enterprises under common ownership or control. Because of the potential for cross-border controlled transactions to distort taxable income, tax authorities in many countries can adjust intragroup transfer prices that differ from what would have been charged by unrelated enterprises dealing at arm’s length (the arm’s-length principle)." - Wikipedia
13. Brain drain in developing countries.

Forms of Business Organization

Ideally speaking, a business organization ought to have the following characteristics:

1. Ease of formation
2. Adequacy of capital - when raising capital from the public, the conditions involved are safety of investment, fair return on investment and transferability of holding.
3. Limited liability
4. Direct relationship between ownership, control and management.
5. Continuity and stability 
6. Flexibility of operations
7. Distinct ownership
8. Lawful business
9. Separate legal personality
10. Dealing in goods and services 

Forms of business organization:

1. Sole Proprietorship - single ownership, no sharing of either profit or loss, unlimited liability, minimal formality.
2. HUF - Hindu Undivided Family, unique to India - All members (co-parceners) own the business jointly, and it is managed by the "karta", or head of the family. Governed by Hindu inheritance laws.
3. Partnership - 2-20 members; governed by the Indian Partnership Act, 1932. Unlimited liability; partners are agents for each other.
4. Company - A voluntary association of persons to carry on business that is given a legal status and subject to legal regulations. Each member contributes a share of capital – share capital – and are known as shareholders. The capital is divided into units called shares. Governed by the Indian Companies Act, 2013, defined under it as “an artificial person created by law, having separate entity, with perpetual succession and a common seal.”
5. Statutory Bodies and Corporations - Body created under an act of parliament or an act of state legislature – autonomous corporate body created and set up by statute. Its objectives, powers and functions are defined by statute – a combination of public ownership, public accountability and business management for the public. E.g.: LIC, ESIC
6. Co-operatives, Societies and Trusts - Organizations which undertake business activities with the prime objective of providing service to the members. Some amount of profit is essential to survive in the market, but that is not the prime directive.
7.  Limited Liability Partnership - Combines the advantages of company and partnership; i.e. ease of business with separate legal personality.

Choosing the correct form of business suited to one's needs requires factoring in of a number of variables including:

1. Nature of business
2. Volume of business
3. Area of operation 
4. Finance - initial and working capital 
5. Ownership and control
6. Liability 
7. Independence 

Non Profit Corporation - Owned privately but operating with different policies  under governance - can issue shares of stock but not for dividend disbursement. 

Business Environment

Business: An organized activity to achieve certain predetermined goals.

Predetermined goals of business can include:

1.  Making profit
2. Important position in society
3. Supply of goods and services
4. Creation of job opportunities
5. Offering better quality of life
6. Contributing to the economic growth of society

Change is an important part of business, and the success of every business depends on adaptation.

Specific and general forces affect enterprises - the former (investors, customers, competitors) affect the day to day functioning of enterprises, whereas the latter (sociopolitical conditions, laws) are common to all enterprises and are probably indirect in nature.

First mover advantage: early recognition of opportunities 

Threat identification: corrective and improvement measures to survive competition.

Adaptability: coping with rapid changes caused by the dynamic nature of business.

Vision statement: describes the desired future position of the company.

Mission statement: defines the company’s business, its objectives and its approach to reach those objectives. (How to attain vision statement.)

Business Environment: The aggregate of all forces, factors and institutions which are internally affecting the business through management structure and policies as well as which are external to and beyond the control of individual business enterprises, but which influence their functioning. It’s divided into internal and external but is mostly external.

Internal Business Environment: Factors within the control of the business - 6 Ms:

1. Money
2. Man
3. Marketing
4. Machinery (physical assets)
5. Management (structure and nature of)
6. Miscellaneous (E.g.: R&D, company image and brand equity, value system)

External business environment: Divided into micro and macro - factors not controlled by the business.

• Micro: Factors that have a direct bearing on the co. (E.g.: Consumers, Shareholders, Suppliers etc)
• Macro: Remote and uncontrollable factors - STEEP
• Sociocultural and demographics
• Technology
• Economic Conditions
• Ecology and Physical Env.
• Political and Legal 

Global Integration:

• Liberalisation: The process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises. (Easy foreign entry; availability of goods at competitive rates etc.)
• Privatisation: Transfer of ownership and/or management of an enterprise from the public to the private sector. (Improve PSU performance and reduce taxpayer burden.)
• Divestiture: privatization of ownership – through sales of equity.
• De-nationalization or re-privatization
• Contracting
• Franchising
• Liquidation
• Globalization: The growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows, and also through the more widespread and rapid diffusion of technology.
• Micro: concerning globalization of business and firm.
• Macro: concerning globalization of the world economy, achieved by globalization of national economies.