Business Studies 6 Marks Question

i. The concept referred to above is Pricing. Price is the value that is put to a product or service and is the result of a complex set of calculations, research and understanding and risk taking ability. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors.
ii. The four factors discussed in the above case related to the concept so identified are:
a. Product Cost: The total cost of product includes production, selling and distribution costs. In the long run the firm strives to cover all their costs. The cost sets the minimum level or floor price for a product. In addition to that firm aims to earn a profit margin over and above the costs.
b. The Utility and Demand: It is necessary to anticipate the utility and demand of a product, while fixing the price, as if a product is offering higher utility, one can easily charge high price from the customer. Whereas, if utility is low, one cannot charge a high price for such products.
c. The extent of Competition in the Market: The price of a product can be set up to the higher limit, if the extent of competition is low in the market, and vice-versa. Competitors’ price, their reactions, their product, quality and features must be considered before fixing the price.
d. Government and Legal Regulations: To protect the interest of general public, the government has all the rights to control the prices of various products and services by including the products in the category of essential commodities such as drugs, some food items, LPG, etc.

Formal organization is a network of set rules, set responsibilities and a clear account of all the job positions. Features of the formal organization are as follows:
i. Defined inter-relationship: It is a sort of arrangement which clearly defines the mutual relationship. Everybody knows their authority and responsibilities. This clearly shows who will be reporting to whom. In case one violates this relationship, he can be there and then held responsible for the same
ii. Based on rules and procedures: It is important to observe all the pre-determined rules and procedures in the formal organization. The objectives laid down under planning are thus achieved.
iii. Based on the division of work: The chief basis of formal organization is the division of work. It is this that connects the efforts of different departments with each other.
iv. Deliberately created: It is deliberately created in order to achieve the objectives of the organisation in an easy manner.
v. It is more stable: Changes cannot be introduced because of the needs of individuals and their wishes. Therefore, it is more stable.

The various features of Business Environment which are discussed above are:
i. Uncertainty: However with the passage of time it has found entrance of new service providers in the market which were not expected at one stage of time. The changes in the business environment cannot be predicted accurately because of future uncertainties.
ii. Dynamic nature: The company has decided to adapt to such continuously changing circumstances.
iii. Relativity: Thus it understands that conditions are different in different countries. The type of force which is discussed above is General Force-Legal (Traffic rules), Technological (Technical aspects). Business Environment differs from place to place, region to region and country to country.

The various dimensions of business environment are explained as follows:
1. Economic Environment: Economic environment consists of GDP (Gross Domestic Product), interest rates, inflation rates, increase or decrease in disposable income of people, share market indices and increase or decrease in value of rupee are some important economic factors which affect working of a business firm. A business firm is primarily an economic organization and its welfare and survival is ultimately dependent on economic environment and market conditions. For example; increase or decrease in the rate of interest will affect the demand for product and services, increase in disposable income of people will create demand for products and services.
2. Social Environment: Social environment is also uncontrollable force which affects the performance of an enterprise. Social environment includes social forces i.e. values, social trends, customs, traditions and society’s expectations from business etc. if any business organization does not adapt the social environment then it will lead to the dissatisfaction among its customers and rejection of its products.
For example; celebration of Diwali, New Year, and Christmas etc. provides business opportunities to greeting card companies, sweets and confectionery manufacturers etc.
3. Political Environment: Political stability and peace in the country would provide a healthy business environment and new opportunities for growth and development. It sends a signal of strength, confidence to various interested groups and investors. Political instability will have negative impact upon business and there may be uncertainty of business activities. Attitudes of government officials towards business may have either positive or negative impact upon business. For the growth of business and economy, political stability is necessary.
4. Technological Environment: Technological environment include the scientific improvements, methods, innovations, techniques and approaches adopted by a business firm for production of goods and services and its distribution. Technological environment provides new ways of producing goods and services and new methods and techniques of operating a business firm. For example; technological advancement in computers and electronics has change the method of advertising a product, airline companies like Jet Airways and Air India have internet and World Wide Web pages where customers can look for flight and book their tickets online.
5. Legal Environment: Legal environment means framework of laws and various legislations within which a business firm organizes its business activities. It is necessary for all business firms to obey the law of land. Legal environment consists of various legislations passed by the Parliament and State Legislatures, administrative orders issued by the government authorities, court judgments and decisions rendered by various commissions and agencies at every level of the government (Central, State or Local). Proper knowledge of these rules and regulations is necessary for the better business performance. For example; a business firm cannot advertise alcohol beverages on Television. It is prohibited, on the packets of cigarettes, it is compulsory to provide a statutory warning “Cigarette smoking is injurious to health”.

Staffing is that part of the process of management which is concerned with obtaining, utilising and maintaining a satisfactory and satisfied workforce. Importance of staffing are as follows:
i. Obtaining competent personnel: It helps in discovering and obtaining competent personnel for various jobs.
ii. Higher performance: It ensures higher performance, by putting right person on the right job.
iii. Continuous survival and growth: It ensures the continuous survival and growth of the enterprise through the succession planning for managers.
iv. Optimum utilisation of human resources: It helps to ensure optimum utilisation of the human resources. By avoiding overmanning, it prevents under-utilisation of personnel and high labour costs. At the same time it avoids disruption of work by indicating in advance the shortages of personnel.
v. Improves job satisfaction: It improves job satisfaction and morale of employees through objective assessment and fair reward for their contribution.

Selection is the process of carefully screening the candidates out of a large number of applicants who offer themselves for the appointment so as to choose the most appropriate person for the job.
Main steps of the selection process adopted by big oraganisations are:
i. The preliminary: Applications forms are scrutinized on the basis of qualifications and whose conditions are not acceptable to the organisation are not called for preliminary interview.screening.
ii. Selection tests: Through these test, ability and skill of the candidate are measured. It includes proficiency tests, psychological tests, mental ability etc.
iii. Employment Interview: Having successfully cleared all tests, the candidate is called for the final interview. An interview is a phase of testing on the basis of face to face interaction between the interviewer and the applicant.
iv. Reference and background checking: Gather more information about the candidates from those persons whose names are mentioned in the column of "References'', candidate's friends or previous employer.
v. Selection decision: Candidates who clear Selection tests, Employment interview and Reference checks are selected. The opinion of the concerned manager where the selected employee has to work is sought.
vi. Medical Test: The candidate is put to a medical examination with three aims: a) physical fitness b) infectious disease c) excessive expenditure on the treatment of the employees.
vii. Job offer: Letter of appointment mentioning the date by which a candidate has to report on duty is handed over to the appointee.
viii. Contract of employment: After the acceptance of job offer by a selected candidate, he signs various documents like Contract of Employment. It includes various details such as pay, allowances, work rules etc.