Business Studies 6 Marks Question

a. The feature of services being discussed above is 'Inconsistency'. It means unlike goods, services are not standardised. It may differ from individual to individual and is based on consumer demands and expectations. Moreover, the quality of services may also vary depending upon the approach of the service providers. The efficiency of a dedicated and committed service provider will be more.
b. The three other features of services are:
i. Intangibility: Like goodwill of a business, services are intangible in nature. They cannot be touched. Since they are purely experiential is nature the quality of services cannot be determined before consumption. Therefore, it is essential that the service providers work deliberately towards creating desired services in order to ensure that the consumer undergoes a favourable experience. For example, watching a movie should be a pleasant experience for the audience.
ii. Inseparability: The presence of the customer is required and his/her interaction with the process of providing services has to be managed. It is the simultaneous activity of production and consumption, thereby making both of them inseparable.
iii. Inventory: Unlike goods, services cannot be produced and stored beforehand. The services have to be performed as and when a consumer asks for it. Services are perishable therefore, the marketers may keep an inventory of the related goods but not the services itself. For example, a beauty salon may only keep a ready stock of accessories like a comb, water dispenser, hairdryer, scissors, etc. which are needed to provide a haircut service to a client, but the service itself cannot be stored.

i. The two types of capital being described above are as follows:
a. Fixed capital: 'he will need funds to buy land and building, machinery and furniture and fixtures'. Fixed capital refers to the capital invested in fixed assets of a business. It is raised from long-term funds that remain invested in the business for a period of more than five years.
b. Working capital: 'funds will be required to meet day-to-day operations such as maintaining stocks, bills receivables and for meeting current expenses like salaries, wages, taxes, and rent.' Working capital refers to the capital invested in meeting the day-to-day needs of a business that are met through short-term funds. Short-term funds are those funds that are required for a period of not more than one year.
ii. The factors that are likely to affect the fixed capital requirements of a business are stated below:
a. Nature of business: The fixed capital needs of a manufacturing concern are higher than that of a trading concern.
b. The scale of business: When the scale of a business is large it will require more fixed capital or vice-versa.
iii. The factors affecting the working capital requirements of a business are stated below:
a. Growth Prospects: A business having expansion plans will require more working capital.
b. Credit allowed: If a business sells goods on credit, its working capital requirements will be more as compared to a business which only allows cash sales.

a. Jagat has promoted his business organization in the form of Sole proprietorship. A sole proprietorship form of business organisation which is owned, managed and controlled by an individual who is the recipient of all profits and bearer of all risks.
b. The four features of a sole proprietorship form of business organization are described below:
i. Ease of formation and closure: A sole proprietorship form of business organisation is not covered by a separate law. As a result, it is easy to form or close down it with minimum formalities.
ii. Unlimited liability: The liability of a sole proprietor is unlimited because in the eyes of the law the owner and his business are one and the same. Therefore, the personal assets of the sole proprietor may be utilised to settle the claims of the creditors if the business assets are insufficient to meet the debts.
iii. Sole risk bearer and profit recipient: A sole proprietor is not expected to share the gains of his business with anyone and remains the sole recipient of it and also the risk of failure of a business is borne all alone by him.
iv. Lack of business continuity: Since a sole proprietorship business doesn't have a separate legal entity the death, insolvency or insanity of the sole proprietor may adversely affect the business and lead to its closure.

Promoters make an application to the Registrar for the incorporation of the company. The application must be accompanied with the following documents:
i. The Memorandum of Association duly stamped, signed and witnessed by at least seven members in case of a public company and of two members in case of a private company.
ii. The Articles of Association duly stamped and witnessed as in case of the Memorandum.
iii. Written consent of the proposed directors to act as directors and an undertaking to purchase qualification shares.
iv. The agreement, if any, with the proposed Managing Director, Manager or Whole-Time Director.
v. A copy of the Registrar's letter approving the name of the company.
vi. A statutory declaration affirming that all legal requirements for registration have been complied with. This must be signed by an advocate of a High court or Supreme Court or a signatory to the Memorandum of Association or a Chartered Accountant or Company Secretary in whole-time practice in India.
vii. A notice about the exact address of the registered office may also be submitted along with these documents. However, if the same is not submitted at the time of incorporation, it can be submitted within 30 days of the receipt of the Certificate of Incorporation.
viii. Documentary evidence of payment of registration fees.

The following factors govern the choice of mode of entry into international business
i. Ease of Entry:- Some modes of entry into an international business like exporting involve lesser formalities than others such as going for joint ventures, franchising or wholly-owned subsidiaries. Thus, initially exporting is the mode generally adopted tor entry into international markets.
ii. Associated Risk:- Risk of international exposure is higher in joint ventures and wholly- owned subsidiaries as more investment is involved and socio-economic conditions of the host country along with political and regulatory concerns become more important. Therefore, some other modes like licensing or contract manufacturing might be chosen to reduce risk.
iii. Efforts Involved:- Time and effort one needs to put in is another factor that determines the mode of international business. A mode like exporting, licensing and franchising involves lesser effort than joint venture or wholly-owned subsidiary.
iv. Degree of Control:- If a firm wants to exercise full control over the operations in foreign countries; it goes for a wholly-owned subsidiary. Similarly, the degree of control is higher in franchising as compared to licensing and so on.
v. Nature of Business:- If the business requires the firm to be in close contact with the customers in the foreign markets, wholly-owned subsidiary or joint venture is more suitable while if the products can be supplied from a distance, modes like exporting can suffice. The nature of products being manufactured and the availability of raw material also determines the mode of entry into international business.

Features of the WTO (World Trade Organization):
a. It governs trade in goods, services and intellectual property rights among the member countries.
b. It is a body created by an international treaty with the approval of the governments and legislatures of the member states.
c. The decisions of the WTO are made by the governments of the member nations on the basis of consensus.
d. Unlike the GATT, it is a legal entity.
e. Unlike the International Monetary Fund (IMF) and the World Bank (WB), it is not an agent of the United Nations.
Structure of the WTO:
1. Ministerial Conference: The topmost decision making body WTO is the Ministerial Conference. It meets once in two years.
2. General Council: The second level of WTO is the General Council. It consists of members, ambassadors and heads of delegations. It meets several times a year in Geneva.
3. Other Councils: There are many other types of the council like Goods Council, Services Council, IP Council etc. These councils deal with specific issues.
Objectives of the WTO:
i. Optimum utilization of resources: To facilitate efficient and fuller use of the world's resources for sustainable development.
ii. Durable training system: To provide an integrated, viable and durable trading system.
iii. Reduction of tariffs: To ensure a reduction of tariffs and other trade barriers imposed by different countries.
iv. Helps in improving the standard of living: To encourage activities which result in improving the standards of living, creating employment, growth of income etc.
Functions of the WTO:
i. Reducing trade barriers
ii. Mitigating grievances
iii. Supervising Trade-Related Intellectual Property Rights
iv. Settling disputes
v. Following the rules