BBA Principle of Business Organisation Notes

 

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BBA Principle of Business Organisation Notes

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Principle of Organisation

1. Principle of Objectives : An organisation in every part of it should be directed towards the accomplishment of basic objectives. Every member of the organisation should be well familiar with its goals and objective. Common objectives create commonness of interests.
2. Principle of Division of Work : The total task should be divided in such a manner that the work of every individual in the organisation is limited. The activities of the enterprise should be so divided and grouped as to achieve specialization. The allocation of tasks should be on the basis of qualification and aptitude.
3. Principle of Unity of Command : Each person should receive orders from only one superior and be accountable to him. This is necessary to avoid the problems of conflict in instruction, frustration, uncertainty and divided loyalty and to ensure the feeling of personal responsibility for results.
4. Principle of Spam of Control : No executive should be required to supervise more sub-ordinates then he Can effectively manage on account of the limitation of time and ability. There is a limit on the number of subordinates that the executive can effectively supervise.
5. Principle of Scalar Chain : Authority and responsibility should be in a clear unbroken line from the highest executive to the lowest executive. The more clear the line of authority from the ultimate authority in an enterprise to every sub-ordinate position, the more effective will be the decision making and organisation communication.
6. Principle of Delegation : Authority delegated to a individual manager should be adequate to enable him to accomplish result expected of him. Through delegation of authority coordination and decision making can take place as close as possible to the point of action.
7. Principle and Absoluteness of Responsibility : The responsibility of the subordinates to his superior is absolute. No executive can escape responsible for the delegation of authority to his subordinates.
8. Principle of Co-ordination : There should be an orderly arrangement of group efforts and utility of action in the pursuit of a common purpose. This would help in securing unity of effort.
9. Principle of Parity of Authority and Responsibility : The responsibility expected for a position should be commensurate with the authority delegated to that position and vice-versa. In addition authority and responsibility should be clearly defined for all positions.
10. Principle of Flexibility : The organisation must pursuit growth and expansion without dislocation of operations, devices techniques and environmental factors should be built into structure to permit quick and easy adaptation of the enterprise to change in its environment.
11. Principle of Efficiency : An organisation is efficiency it is able to accomplish predetermined objectives at minimum possible cost. An organisation should provide maximum possible satisfaction to its members and should contribute to the welfare of the community.
12. Principle of Continuity : The organisation should be so structured as to have continuity of operations. Arrangement must be made to enable people to gain experience in positions of increasing diversity and responsibility.
13. Principle of Balance : The various parts of the organisation should be kept in balance. It is essential to maintain a balance between centralization and decentralization between line and staff etc. Vertical and horizontal dimensions must be balanced. The structure is neither too tall nor too flat.
14. Principle of Exception : Every manager should take all decisions within the scope of his authority and only matters beyond the scope of his authority should be referred to higher levels of management, e.g., routine decisions should be taken at lower levels and top management should concentrate on matters of exceptional importance.

The Process of Organisation(Organisation Formation)

 

Organisation Structure : Before we study the various types of organisation structure like line and staff. Functional etc. it should be clear that organisation structure varies according to the size of the organisation, e.g., as number of employees increases HR department increases more.

 

S.B.U (Small Business Units) : S.B.U is that organisation which has less then 100

 

Medium Size (Enterprise) : More than 100 to 2000 employees.

Large Size Enterprise Business

 

Line and Staff Organisation

Because of the inherent drawback of line organisation and functional organisation centralizes too much. To eliminate the drawbacks of line organisation and functional organisation, they are rarely used in nure forms. The line organisation centralizes too much and the functional organisation diffuses too much. To eliminate the drawbacks of both types of organisation is envolved.

In this type of organisation structure there are two type of relationships— Line relationships and the staff relationship. Line relationship is a decision maker and staff person is an advisor.

“Staff is a group of men who have the strength, knowledge and time which the line manager may lock.”

“Line refers to those positions and elements of organisation, which have the responsibility and authority and are accountable for the accomplishment of primary objectives. Staff elements are those which have responsibility and authority for providing advice and service to the line in the attainment of objectives.”

Merits of Line and Staff Organisation

1. Specialised Knowledge : Line manager gets the benefit of specialised knowledge of staff specialists at various levels.
2. Reduction of Burden : Staff Specialists relieve the line manager for specialised functions like accounting, production, public relation etc.
3. Proper Weightage : There are well defined authorities and responsibilities given to manager so that many problems that are handled in the organisation can be properly covered and managed with the help of staff specialists.
4. Better Decisions : Staff specialists helps the line manager in taking better decisions by providing them with adequate information of right type at right time.
5. Flexibility : Line and staff type organisation has more flexibility because only those decisions are taken by taking view of experts.
6. Unity of Command: The expert staff provides special guidance without giving only orders. The only line manager has the right to give orders, i.e., one subordinate receives orders from one boss only.

Demerits of Line and Staff Organisation

Although line and staff organization are suitable for a large organization some times drawbacks also arrises in this  system such as :

1. Some time line and staff may differ in opinion for taking a particular decision this may result in conflict due to which decision making is delayed.
2. The staff people may feel themselves statusless without the authority of taking decisions.
3. Since staff people are not accountable (responsible) fully for the results they may not be performing their duties well.

Economic Activities

Meaning of Activites

The human activities related to production, exchange, distribution, and consumption of wealth are known as economic activities. These activities may be undertaken to produce something for own consumption or to earn income to buy goods from the market. They may be pursued by individuals or groups either on a large scale or on a small scale. All economic activities are directly related to money, i.e., their primary objective is to earn money and to create wealth.

Example

A doctor attending to his patients and a shopkeeper selling goods to his customers etc.

Features

The main characteristics of economic activities are as follows :

1. All economic activities are directed toward producing goods and services for the satisfaction of human wants.
2. Economic activities ensure proper allocation of scarce resources.
3. Economic activities involve the optimum utilization of the factors of production.
4. All economic activities result in the creation of wealth.

Non-Economic Activities

Meaning: Besides, economic activities there are certainly other activities which are not undertaken to create wealth but are undertaken to satisfy social, religious, cultural and sentimental requirements. Such activities are termed as non-economic activities. The motive behind non-economic activities may be love, sympathy, religion, patriotism etc.

Example

Housewives cooking food for the family, a farmer producing food grains for his own family, donations by rich men to the various charitable organization, etc., may be quoted as examples of non-economic activities.

Features

The main characteristics of non-economic activities are given hare under :

1. Non-economic activities are undertaken to get some sort of social, cultural, religions or recreational satisfaction.
2. The result of non-economic activities cannot be measured in terms of money.

Function of IFCI

 

Function of SSC

BBA Principle of Business Organisation Notes :-

1. To provide loans to small and medium scale industrial concens for a maximum period of 20 Years.
2. To provide guarantee of loans used by companies which are available within a period of 20 Years.
3. To Subscription to the debentures floated by industrial concern.
4. To assist the small scale sector in backward areas.
5. To underwrite the issue of shares, stocks, debentures, bonds etc., by industrial concerns, which have to be disposed of within 7 years.

IFSC (Industrial Finance Corporation of India) : IFCI was set up on 1st July 1948 under the IFCI Act of parliament, of provide medium and long term financial Assistance to industrial concerns.

Function of IFCI

To provided medium and long term loans in loan to industrial concern for :

1. Setting up of new industrial undertakings.
2. Expansion or diversification of existing concerns.
3. Modernization and renovation of existing concerns.
4. Meeting working capital requirements.
5. Meeting existing liabilities.
6. To grant loans to industrial concerns repayable within 25 years.
7. To underwriter shares, stocks, debenture, bones etc.
8. To subscribe directly to the shares and debentures of public Ltd. Co.

IFCI (Industrial Finance Corporation of India) : Industrial Finance Corporation of India was the first financial set up in India in 1948, with the aim of providing medium and long-term finance to industrial concerns in the country.

Objectives : The primary objective of IFCI is to make medium and long-term credits more readily available to industrial concerns in India, particularly in the circumstances where normal banking accommodation is inappropriate to capital issue channels is impracticable.

Management : The head office of the IFCI is in New Delhi. It has its regional and branch offices in other part of the country. The management of the IFCI is vested in a Board of Directors consisting of one full-time chairman appointed by the Central Government in consultation with the board.

It has 12 Directors of which two of the directors are nominated by the Central Government, four by the IDBI, two by scheduled commercial Banks, two by Co-operative Banks and the committees to assets in its efficient functioning.

Functions The IFCI performs the following functions :

• Granting loans and advances to or subscribing to debentures of approved industrial concerns, repayable within a period of 25 years.
• Guaranteeing loans raised by industrial enterprise from scheduled banks or state co-operative banks, which are repayable within a period of 25 years.
• Underwriting of shares, debentures, bonds or stocks issued by industrial concerns and corporation,
• Subscribing directly to the shares of industrial concerns eligible for assistance from the corporation.
• Acting as an agent for the Central Government and the world Bank (IBRD) in respect of loans granted by them to industrial concerns.

Financial Resources 

BBA Principle of Business Organisation Notes :-

The financial resources of the IFCI consist of ownership capital borrowing from Central Government and borrowing from market by issue of bonds. The Industrial Finance Corporation (Amendment) Act, 1986 has increased the authorized capital to 259 crores from the earlier limit of 100 Crores. On June 30,1989 its paid up capital stood at 58 corores.

The IFCI is authorized to issue and sell bonds and debentures for raising its working capital. The total amount of bonds, debentures and contingent liabilities should not exceed ten times the amount of the IFCI ‘s paid up share capital and retained earnings.

The IFCI is also authorized to borrow from the Central Government, Reserve Bank of India and Industrial Development Bank of India and to Accept deposits from the public, state Government and Local Authorities for a period of less than 5 years. The total amount of such deposits should not Exceed 10 Crores at any time. It is also empowered to raise money from foreign credits in foreign Currency.

Area of Operation BBA Notes

BBA Principle of Business Organisation Notes :-

The IFCI provides assistance to public limited companies and co-operative societies engaged in the manufacture, preservation or processing of goods, or in the shipping, mining or hotel industry or in the generation or distribution of electricity or any other form of power.

The proprietary industrial concerns and firms are not eligible for financial assistance from the FICI, which may be granted for a maximum period of 25 Years in any of the forms mentioned above, while the effective rate of interest is 14 percent on rupee loans the concessional rate of interest on rupee loan for projects located in the notified less developed areas is 12.5 percent.

Responsibilities of Financial Management

BBA Principle of Business Organisation Notes :-

Financial management is varied as an integral part of over-all management rather than as a staff specially concerned with the fund-rasising operations only. Though all the important financial decisions are made by the top management, the financial executive is deeply involved in this process. His main responsibility is to provide all the necessary accounting information, analyze and discuss the various alternatives and to suggest suitable solutions. His responsibilities lie in the following spheres of finance function :

1. Financial Planning: It is the chief responsibility of a financial executive to make a sound financial forecast and then to play for achievement. He tries for efficient management so that the firm might not experience a financial crisis and defer its payments. The goodwill of the firm suffers severely and even the liquidation of the firm may be demanded by the creditors if the financial crisis continues for a long time.
2. Raising of Necessary Funds: Another main responsibility of financial management is to supply adequate funds to the firm for its various operations. A cost benefit analysis of various alternative sources must be made before raising funds from any particular source. Impact of additional financing on the risk, control, and income of equity shareholders should be evaluated in term of its costs and its impact on the capital structure, etc.
3. Controlling the use of funds: A business firm is basically a profit earning concern, whose earnings depend to a large extent upon the efficient utilization of funds. This requires sound investment decision, roper asset-management policies, proper depreciation provision and efficient management of working capital. there, effective control on cash-inflow and outflow should be maintained and financial checks should be followed.
4. Disposition of Profits: The proper disposition of profits is also an important responsibility for financial management. Regarding the allocation of net profits after payment of taxes a typical firm may be said to have two choices :
5. Efforts to Maximise Value: it is a regular and recurring responsibility of the financial manager to make continuous efforts to maximize the value of the firm for its shareholders. According to Prof. Solomon Ezra of Standard University the main goal of financial management is wealth maximization which depends to a large extent on the quality of decisions taken by a firm as evident from the following chart :
6. Responsibilities to Owners: Shareholders are the real owners of a concern. The fiancial manager has the prime responsibility to those who have committed funds to the enerprise. He maintains the owners adequately for the risk capital they provided.
7. Legal Obligation: The financial manager is under an obligation to consider the enterprise in light of its legal obligation. A host of laws, taxes and rules or regulations cover nearly every move and policy. Efficient financial management helps to develop a sound legal framework.
8. Responsibilities to Employees: The financial management must try to realize a healthy going industrial concern capable of maintaining regular employment at satisfactory rates of pay under favorable working conditions. He should be given ample opportunity to participate in the financial decision making valuable suggestions to improve the financial health of the firm. He should think over various suggestions seriously and give effect to them in a thrust to boost their morale. As the long term financial interests of management, employees, and owners are common, the financial management should safeguard the interest of all these.
9. Responsibilities to Customers: Financial management is necessary in order to make the payments of customer’s bill effective and ensure the creditors for the continued supply of raw materials.
10. Wealth Maximisation: According to, Proof, Solomon of Stanford University the main goal of the finance function is wealth maximization .if the financial management follows the wealth maximization goal, other goals may be archived automatically. The financial manager is responsible for maximizing the wealth of the shareholders.

To conclude, the financial manager is responsible not only to maintain the financial health of the organization but also to increase the economic welfare of the shareholders by utilizing the funds in an effective manner.

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BBA Business Low Question Paper 2018-2020

 

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