Evolution of Business

Short Questions

1.

What are the pre-requisites for a successful business?

For a business to be successful it should meet certain requirements. The pre-requisites of a

successful business are explained as below:

Setting objectives: A business should first determine its objectives. It points out the way to
achieve the pre-determined objectives. It explains what to do, where to do, what will do and who
will do. These form the base of a business. All the objectives of a business should be clearly set
up so that it can guide the resources towards the business objectives

Good management: Good management is an important aspect of a successful business. It is the

art and science of utilizing the resources of an organization. A business can only achieve its
objectives if the resources are utilized properly. The existence of an effective and efficient
management is a must for every successful business.

Adequate capital: Before establishing a business it is essential to understand the adequate

capital required. The required capital should be made available at all times so that it does not
hamper business activities. Capital is needed for buying fixed assets and performing day to day
activities. Thus, to achieve business goals an appropriate capital structure should be maintained.

Modern technology: Modern technologies can be used to produce well finished products at a
lower cost. Thus, the business organization should adopt modern equipments and machineries in
each and every field.

Research: A business should always facilitate research activities. Research aids the business in
creating new innovative ideas and products. Thus, a successful business should always provide
facility for research.

Proper location, layout and size: A proper location indicates access to electricity, road, water
and etc. a proper layout indicates optimum organization of machines and equipments in the
office space. These two factors play a pivotal role in smooth functioning of a business.

Employee morale: The employee morale should be at the highest level to effectively achieve
business goals. The employees should always be treated as the most precious assets. Continuous
efforts should be made to encourage and provide satisfaction to them.

Leadership: The leadership of the business should be efficient and dynamic. The organizational
objective is achieved though a cycle of management functions such as planning, implementing
and controlling. And efficient and dynamic leader is the one who has farsightedness, courage,
initiative and aptitude for change in performing those management functions.

Marketing system: A business should have the best marketing system to be successful. The
marketing aspect is more important than production. A proper marketing system ensures mass
production, effective promotion, customer satisfaction and proper distribution system.

2.

What do you mean by industry? Trace out the development of industry.

Industry can be defined as the process of producing goods and services through certain process
by utilizing human force, money and machine. It includes all those activities that produce goods
and services. Since the primitive ages, human beings have been engaged in producing goods and
services to satisfy their wants and needs. At first, the human needs were limited, they used to
hunt animals for food and hide. And as time passed they started domesticating animals for meat
and milk. Then they started to cultivate lands for food. Thus, the history of industry can be traced
back to the start of human civilization. The evolution of industry can be explained from the
following points:

Handicraft stage: The handicraft stage was the beginning stage of industrial evolution. As the
needs of human beings went on increasing people started to produce products of their
convenience. They used locally available raw materials to produce goods. This gave birth to
handicrafts. The goods they could not produce were exchanged with the goods they produced.
They used simple handmade tools so; the production was at the minimal level.

Guild stage: A guild indicates an organized group of traders or craftsmen. There were two
guilds, namely: merchant guild and craft guild. The merchant guild was the association of
merchants who were engaged in regulating business and standardizing their products.
Meanwhile, the craft guild was the association of skilled craftsmen who tried to maintain the
quality and quantity of production. The guild system ushered a lot of growth of industries but it
gradually vanished due to favoritism, rigid vision, restriction on the entry of new members and
etc.

Domestic system: The failure of the guild system gave birth to the domestic system. With the
passage of time, the population kept on increasing, as result craftsmen were unable to supply
products due to lack of men and material. But in the 18th century a group of new entrepreneurs
emerged who gave necessary materials to the individual craftsmen to produce goods and were
paid on the basis of piece wage. As the owner of the business they were liable to all the risks.
This system brought division of labor in the industry.

Industrial revolution: Industrial revolution refers to the drastic changes made in the field of
production in Britain during the 18th and 19th century. It was the result of scientific inventions
that changed the tools and techniques of production. Industrial bought changes in every level of
the production stage. The results were mass production, standardization of products,
development of capitalism and etc.

Present stage: Today’s age is the age of mass production. Since the dawn of the 20th century
great technological revolutions have taken place. Developments such as mechanization,
computerization and automation have resulted in standardization, quality control, searching
market and etc.

3.

What do you mean by commerce? Trace out the evolution of commerce.

Commerce can be defined as all those activities of selling and buying products that result in trade
activities such as transportation, warehousing, banking and other ancillary services. The
evolution of commerce can be trace out in the following stages:

Self-sufficient economy: In the primitive ages, the human wants were less. They could satisfy
their wants of food and cloth through hunting and foraging. This age is known as the self-
sufficient period.

Primitive barter economy: In this stage the humans were somewhat civilized. Any goods in
excess were exchanged with the goods they could not produce. Moreover, the population of
humans started increasing so did their wants. So, they started producing similar goods in large
amount and exchanged the surplus with other products needed. However, due to the absence of
communication of transportation and communication, actual trade did not take place.

Money economy: Since, the barter system was not flexible enough a medium of exchange called
money was created in this stage. Coins and paper notes were created as a medium of exchange.
After the rise of money, people started producing goods in mass quantity and traders started
performing activities that assisted quick transfer of produced products. Slowly people started
selling goods at a particular place which later became market.

Town economy: After the introduction of money, business grew by leaps and bounds. Division
of labor and specialization of work was encouraged in this stage. As a result a certain type of
class of traders emerged who lived in a certain place called market where products were
produced, bought and sold. Gradually these small markets started to grow into towns. Wholesale
and retail business started to grow.

National economy: Town economy led to the development of ancillary services of trading such
as communication, warehousing, transportation and banking. It ushered the growth of the
economy to national level. They started to produce products not only for the local markets but
for the national market too. Hence, the national economy came within the reach of business
activities.
Global economy: As the economy started to grow, it started to inspire the growth of airways,
waterways, railways and communication. As a result the national boundaries were narrowed
down into one single large economy. Thus, the producers started to produce for the global
market too. International trade came into existence. To develop and regulate international trade
many countries have entered into multilateral, bilateral trade agreements.

4.

Environment and the business have deep relationship. Comment.

Environment and the business have deep relationship. Yes, it is completely true. They are
interrelated to each other. The environment of the business is the aggregate of events and
conditions which influence the activities of business organizations directly or indirectly. A
business established and functioning in a society is constantly surrounded by environmental
factors. It is the circumstances under which a business exists. It is the force that creates
conditions and influences on the capacity of a business firm to compete in the market.
Environment influences the life and development of a business. It is essential to monitor
environmental changes for the smooth functioning of business.

Today’s world is very competitive world. A efficient and dynamic also cannot save business if
he does not study the environmental factors surrounding the business. If environmental factors
are not dealt quickly with, it results in failure. The leaders of the business however must know
that the environment of a business differs from industry to industry and market to markets.

Thus, we can say that environment and business indeed have a deep relationship. Business
environment is concerned with factors that influence the activities of the business. The internal
environment provides strength and weakness to the business whereas the external environment
provides threats and opportunities to the business.

5.

Discuss the qualities of a good businessman.

A businessman can be deemed a good businessman if he/she possess the following qualities:

Managerial Skills: A businessman is responsible for all the business activates. So he should
have suitable managerial skills.

Hard working: A businessman must work very hard to develop and run his or her business. He
should be able to work for long hours without breaking his or her concentration.
Courteous: A businessman must talk with his subordinates, colleagues and customer politely
and with respect. Customer always appreciates a courteous businessman.

Decision power: A businessman has to make many decisions regarding her or his business. An
important decision must be made quickly and correctly to advance his or her business.

Ability to Plan: Planning is very important part of any business activity. A successful
businessman must plan for the future and execute it successfully according to their vision.

Long Questions

1.

What do you mean by business environment? How does a business interact with its internal and
external environment?

The environment of the business is the aggregate of events and conditions which influence the
activities of business organizations directly or indirectly. A business established and functioning
in a society is constantly surrounded by environmental factors. It is the circumstances under
which a business exists. It is the force that creates conditions and influences on the capacity of a
business firm to compete in the market. Environment influences the life and development of a
business. It is essential to monitor environmental changes for the smooth functioning of business.

According to Keith Davis – business environment is” the aggregate of all conditions, events, and
influences that surround and affect a business.”

The business environment consists of two environments- internal environment and external
environment. The business is constantly reacting with these two environments. The internal
environment consists of:

Employees:The employees are the human resource of an organization. They are the most
important assets of the organization. Employees resist change but the business has to mobilize
them to achieve business goals. The management is continuously interacting, motivating and
encouraging the employees to achieve business goals.

Shareholders: The shareholders are the owner of the organization. They are the ones who have
invested their money in the business. They elect the board of directors who are responsible for
managing the business, formulating and implementing strategies. Both shareholders and board of
directors are actively involved in day to day operation of the business.

Culture: The organizational culture includes the norms and values of the organization. It refers
to the set of behaviors and practices which are acceptable by the organization. It assists in
binding the employees and business with formalities.
They have a very strong influence upon the decisions implemented by the business. Successful
businesses have a very good organizational culture that treat the employees in a friendly way,
respects consumers and provides a healthy work environment.

Unions: Unions are the association of employees established to solve the problems and
grievances of member employees. The business management is constantly interacting with these
unions to create a proper working environment for the employees and provide optimum welfare
services.

The external environment of business includes the following:

Economic environment: The economic environment includes economic policies, monetary

policies, industrial policies, etc of an economic system. These factors directly create condition of
competition, profit and loss. The business is always interacting with various economic
components such as business cycle, GNP trends, consumption pattern and interest rates.

Socio-cultural environment: The socio-cultural environment concerns the values, beliefs, and
culture surrounding the business. The society and culture of people differs from country to
country. Such differences can be clearly seen in office work places. The business should be able
to understand these differences. Moreover, it should also be able to consider the tradition, beliefs,
values and attitudes of the society while producing products.

Technological environment: The technological environment consists of the tools and

techniques used in the production process. It consists of the new techniques and new approaches.
The manager should keep a constant eye in the technological changes. Changes in technology
have always created vast opportunities for business.

Political environment: It indicates the influence of political ideologies upon a business. The
government and strategies of political parties effects the business organizations. They create both
challenge and opportunities for the business. An organization can never grow in a turbulent
political system. Political environment consists mainly of Capitalism, Socialism and mixed
economy.

Legal environment: The legal environment is concerned with the laws and regulations of a
particular country. It consists of the laws passed by the legislative body of the country. Legal
forces often try to restrict autonomy of an individual firm, and, at the same time, they also
provide facilities and basic incentives to run a firm. The business is obliged to follow the rules
passed that are passed legally.

2.

Describe the evolution of business in the world.

The evolution business in the world can be traced with the development of its two constituents-
industry and commerce. The following points trace out the evolution of industry and commerce
which eventually points out the evolution of business:

The evolution of industry can be explained from the following points:

Handicraft stage: The handicraft stage was the beginning stage of industrial evolution. As the
needs of human beings went on increasing people started to produce products of their
convenience. They used locally available raw materials to produce goods. This gave birth to
handicrafts. The goods they could not produce were exchanged with the goods they produced.
They used simple handmade tools so; the production was at the minimal level.

Guild stage: A guild indicates an organized group of traders or craftsmen. There were two
guilds, namely: merchant guild and craft guild. The merchant guild was the association of
merchants who were engaged in regulating business and standardizing their products.
Meanwhile, the craft guild was the association of skilled craftsmen who tried to maintain the
quality and quantity of production. The guild system ushered a lot of growth of industries but it
gradually vanished due to favoritism, rigid vision, restriction on the entry of new members and
etc.

Domestic system: The failure of the guild system gave birth to the domestic system. With the
passage of time, the population kept on increasing, as result craftsmen were unable to supply
products due to lack of men and material. But in the 18th century a group of new entrepreneurs
emerged who gave necessary materials to the individual craftsmen to produce goods and were
paid on the basis of piece wage. As the owner of the business they were liable to all the risks.
This system brought division of labor in the industry.

Industrial revolution: Industrial revolution refers to the drastic changes made in the field of
production in Britain during the 18th and 19th century. It was the result of scientific inventions
that changed the tools and techniques of production. Industrial revolution bought changes in
every level of the production stage. The results were mass production, standardization of
products, development of capitalism and etc.

Present stage: Today’s age is the age of mass production. Since the dawn of the 20th century
great technological revolutions have taken place. Developments such as mechanization,
computerization and automation have resulted in standardization, quality control, searching
market and etc.

3.

“Successful business depends upon the consideration of pre-requisites of successful business.”

Discuss.
“Successful business depends upon the consideration of pre-requisites of successful business.”
This statement can be explained with the help of following points:

Setting objectives: A business should first determine its objectives. It points out the way to
achieve the pre-determined objectives. It explains what to do, where to do, what will do and who
will do. These form the base of a business. All the objectives of a business should be clearly set
up so that it can guide the resources towards the business objectives

Good management: Good management is an important aspect of a successful business. It is the

art and science of utilizing the resources of an organization. A business can only achieve its
objectives if the resources are utilized properly. The existence of an effective and efficient
management is a must for every successful business.

Adequate capital: Before establishing a business it is essential to understand the adequate

capital required. The required capital should be made available at all times so that it does not
hamper business activities. Capital is needed for buying fixed assets and performing day to day
activities. Thus, to achieve business goals an appropriate capital structure should be maintained.

Modern technology: Modern technologies can be used to produce well finished products at a
lower cost. Thus, the business organization should adopt modern equipments and machineries in
each and every field.

Research: A business should always facilitate research activities. Research aids the business in
creating new innovative ideas and products. Thus, a successful business should always provide
facility for research.

Proper location, layout and size: A proper location indicates access to electricity, road, water
and etc. a proper layout indicates optimum organization of machines and equipments in the
office space. These two factors play a pivotal role in smooth functioning of a business.

Employee morale: The employee morale should be at the highest level to effectively achieve
business goals. The employees should always be treated as the most precious assets. Continuous
efforts should be made to encourage and provide satisfaction to them.

Leadership: The leadership of the business should be efficient and dynamic. The organizational
objective is achieved though a cycle of management functions such as planning, implementing
and controlling. And efficient and dynamic leader is the one who has farsightedness, courage,
initiative and aptitude for change in performing those management functions.

Marketing system: A business should have the best marketing system to be successful. The
marketing aspect is more important than production. A proper marketing system ensures mass
production, effective promotion, customer satisfaction and proper distribution system.

4.
What do you mean by business? What factors do you consider before starting up a new business?

Business is the state of remaining busy. In economic terms it can be defined as the process of
production, buying and selling of commodities for monetary benefits. It is a human activity
concerned with earning profit and generating wealth. Business consists of two major activities-
industry and commerce.

Various factors should be considered before starting up a business. The important factors are
explained below:

Selection of business: Businesses are of various types. The businessman should already decide
what form of business he wants to conduct. It is difficult change business overtime as it requires
huge amount of capital and time. The businessman should consider the following factors before
selecting a business:

Personal ability, knowledge and skill

Degree of risk

Profitability

Availability of resources

Possibility of growth and expansion

Competition

Laws

Investigation

The businessman should make a detailed investigation to find out the difficulties and possibilities
of further development. Detailed investigation helps to find out the taste and preferences of the
intended target consumers. It is difficult to ascertain what will happen in the future. Thus, present
scenario helps to find the profitability of earning profit. If it is found feasible and profitable then
only the businessman can take decision about business.

Form of business organization: There are various forms of organizations to choose from. There
are sole concerns, partnerships, co-operatives, Joint Stock Company and etc. each form has its
own sets of merits and de-merits. The businessman should choose the form of business on the
basis of his ease and comfort.

Provision of capital: Capital is the key aspect of business. No business can run without capital.
From buying fixed assets to performing day to day routine activities, capital is always essential.
The amount of capital differs from one organization to another. However, provision of adequate
capital is a must before establishing a business.
Location: A suitable location should be selected before establishing a business. Proximity to raw
materials, transportation, security and all other factors should be considered. The nature of
business and climate of the location should also be considered. It is better to establish business
nearer to the customers and industrial organizations in cheaper area but have access to facility
too.

Employees: Employees play an important role in the success and failure of a business. The
required employees depend upon the nature, size and activities of the business. A businessman
first need to ascertain the number of employees needed and the level of skill they require. So,
while starting a business the availability of skilled employees is a must.

Office equipments: The office equipments should be selected as per the nature, size and
activities of the business. Office equipments are required for the smooth functioning of the office
management, administration, and control of the business. The availability and cost of equipments
such as telephone, furniture, computers, etc should be considered.

Government policy: The government of the country passes laws and policies for creating a good
environment for business. While establishing a business a businessman should consider the rules,
regulations and procedures stated by the law. The impacts of the government policies should be
analyzed beforehand.

5.

Discuss the internal and external reasons for business failure.

A business fails due to various reasons. The sources maybe both internal and external. The
internal and external reasons for business failure are as follows:

Internal reasons:

Irregularities and fraud: Irregularities and fraud in financial transactions leads to the downfall
of a business. The business may fail if the employees are dishonest and engage themselves in
embezzlement and misappropriation of business properties.

Mismanagement and control: The management should be competitive and should be able to
exert proper control over the organization. Weak and incompetent managers fail a business.

Lack of sufficient resources: Resources such as manpower and capital should be adequate
enough to operate a business. Business activities are interrupted if the resource flow dries up.

External reasons:

Competition: Sometimes, competition maybe intense in a particular market. A superior

competitor may lead a business to failure.
Domestic unrest and conflict: Conflict and lack of peace in the country may cause destruction
of business properties. Moreover, regular bandhas and strikes seriously affect the regular
activities of a business.

Change in demand: The tastes and preferences of the consumers keep on changing. If the
business fails to comply with these changes, the business will fail

Government policies: The plans and policies implemented by the government may sometimes
adversely affect the functioning of a business. Policies such as heavy tax rates and ban on certain
products may prove hazardous to a business.

Natural calamities: Natural calamities such as flood, earthquake and landslides are inevitable.
The losses inflicted by these calamities are huge and if the business cannot revive itself from
these losses it is sure to fail.

6.

What do you mean by business environment? Explain the components of business environment.

The environment of the business is the aggregate of events and conditions, which influence the
activities of business organizations directly or indirectly. A business established and functioning
in a society is constantly surrounded by environmental factors. It is the circumstances under
which a business exists. It is the force that creates conditions and influences on the capacity of a
business firm to compete in the market. Environment influences the life and development of a
business. It is essential to monitor environmental changes for the smooth functioning of business.

According to Keith Davis – business environment is “the aggregate of all conditions, events, and
influences that surround and affect a business.”

Broadly, the components of business environment into two as:

The internal environment:

Employees: The employees are the human resource of an organization. They are the most
important assets of the organization. Employees resist change but the business has to mobilize
them to achieve business goals. The management is continuously interacting, motivating and
encouraging the employees to achieve business goals.

Shareholders: The shareholders are the owner of the organization. They are the ones who have
invested their money in the business. They elect the board of directors who are responsible for
managing the business, formulating and implementing strategies. Both shareholders and board of
directors are actively involved in day to day operation of the business.

Culture: The organizational culture includes the norms and values of the organization. It refers
to the set of behaviors and practices which are acceptable by the organization. It assists in
binding the employees and business with formalities.

They have a very strong influence upon the decisions implemented by the business. Successful
businesses have a very good organizational culture that treat the employees in a friendly way,
respects consumers and provides a healthy work environment.

Unions: Unions are the association of employees established to solve the problems and
grievances of member employees. The business management is constantly interacting with these
unions to create a proper working environment for the employees and provide optimum welfare
services.

The external environment:

Economic environment: The economic environment includes economic policies, monetary

policies, industrial policies, etc of an economic system. These factors directly create condition of
competition, profit and loss. The business is always interacting with various economic
components such as business cycle, GNP trends, consumption pattern and interest rates.

Socio-cultural environment: The socio-cultural environment concerns the values, beliefs, and
culture surrounding the business. The society and culture of people differs from country to
country. Such differences can be clearly seen in office work places. The business should be able
to understand these differences. Moreover, it should also be able to consider the tradition, beliefs,
values and attitudes of the society while producing products.

Technological environment: The technological environment consists of the tools and

techniques used in the production process. It consists of the new techniques and new approaches.
The manager should keep a constant eye in the technological changes. Changes in technology
have always created vast opportunities for business.

Political environment: It indicates the influence of political ideologies upon a business. The
government and strategies of political parties effects the business organizations. They create both
challenge and opportunities for the business. An organization can never grow in a turbulent
political system. Political environment consists mainly of Capitalism, Socialism and mixed
economy.

Legal environment: The legal environment is concerned with the laws and regulations of a
particular country. It consists of the laws passed by the legislative body of the country. Legal
forces often try to restrict autonomy of an individual firm, and, at the same time, they also
provide facilities and basic incentives to run a firm. The business is obliged to follow the rules
passed that are passed legally.