Chapter- 1
INTRODUCTION
BUSINESS
The term "business" literally means to remain busy in some kind of activity. To remain busy does not mean that a person who is busy in playing cards, watching T.V., reading novels is a busy person. Here the busy person is that who remains busy in the economic activities to get financial gain and not that person who remains busy in non-economic activities.
Classification of business activities
The business activities are broadly classified into two groups :
A. Industry and
B. Commerce
INDUSTRY
The word "industry" refers to that part of business activities which relates to growing, extraction, production, conversion, processing or fabrication of goods. The industries produce different kinds of products for different purposes which may be classified as follows
(a) Primary products
(b) Semi-manufactured goods
(c) Manufactured goods
(i) Capital or producer's goods
(ii) Consumer's goods
(a) Primary products
Primary products include all the products or raw materials obtained from agriculture, forests, mines, animal husbandry and fisheries etc. The examples of primary products include wheat, rice, cotton, sugarcane, cereals, wood, metal ores, milk, fish, raw silk etc. The various raw drugs obtained from plants and animals also constitute the primary products.
(b) Semi manufactured goods
Semi-manufactured goods are those goods which are produced by one industry but cannot be consumed as such unless it is passed through another industry to undergo further manufacturing processes to obtain a finished product. For example capsule shells are manufactured in one kind of industry but filling is done in another kind of industry. Similarly pig iron, cotton yarn and pulp etc. are some of the examples of semi-manufactured goods.
(c) Manufactured goods
Manufactured goods are those goods which are ready for use by the consumers or other users. The examples of manufactured goods include cloth, shoes, sugar, paper, various medicines, machines, tools etc. The manufactured goods are further classified as (i) capital or producer's goods, (ii) consumer's goods.
(i) Capital or producer's goods are those goods which are used in the process of producing some other goods. The examples of producer's goods include pig iron, store items, machine tools and machinery etc. used for manufacturing other products.
(ii) Consumer's goods are those goods which are ready to use by the consumers and require no further processing. The examples of consumer's goods include drugs such as tablets, capsules, syrups, injections etc.; cloth, shoes, soap, T.V., Iridge. washing machine etc.
Classification of industries
According to the types of goods produced the industries are classified as follows:
1. Genetic industries
2. Extractive industries
3. Manufacturing industries
4. Construction industries
1.Genetic industries
The word genetic is derived from the term "genetics" which means heredity. It means genetic industries are concerned with the reproduction or multiplication of plants, animals and birds. The examples of genetic industries include plant breeding nurseries, cattle breeding farms, poultry farms and fish hatcheries.
2. Extractive industries
Extractive industries are those industries which are concerned with extraction or drawing out the products from natural sources such as soil, air or water, The products so obtained are generally used by other industries producing finished goods. Extractive industries include agriculture, mining, oil exploration, forestry. fishing etc.
3. Manufacturing industries
Manufacturing industries are those industries which are engaged in the production of goods. Here the raw materials or semi-manufactured products are converted into finished goods i.e. capital goods or consumer's goods. Generally the goods supplied by the extractive industries are used as a raw material for manufacturing industries. For example pharmaceutical, textile, jute, sugar, cement, engineering and steel industries are some of the examples of manufacturing industries which alter the form of raw materials to make them more useful to the consumers. Manufacturing industries may be further sub-divided as follows :
(a) Analytical industries
(b) Synthetic industries
(c) Processing industries
(d) Assembling industries
(a) Analytical industries
Analytical industries are those industries which are engaged in the analysis of one kind of basic material and after separating a number of products are obtained from the same material. For example crude oil is extracted from the earth which is subjected to fractional distillation. After fractional distillation it is separated into petrol, diesel, kerosene, gasoline and lubricating oil etc.
(b) Synthetic Industries
Synthetic industries are those industries where two or more than two materials are mixed together in a manufacturing process to make a new product. Products like various chemicals, drugs, soaps, cosmetics, paints, fertilizers, pesticides, cement etc, are produced by synthetic industries.
(c) Processing industries
Processing industries are those industries in which the raw materials are processed through different stages of production to produce the final product. In the processing industries the analytical and synthetic methods may also be used. Drugs and pharmaceutical industries, paper, textile, sugar and steel industries are some of the examples of processing industries.
(d) Assembling industries
Assembling industries are those industries where the parts or components are assembled to make a useful product. The parts or components required in assembling may be produced by the assembling industry itself or obtained from other industries engaged in the manufacture of required components. Such industries are known as ancillary industries. For example production of cars, scooters, watches, television, radio, computers, X-ray machines, E.C.G. machines etc. are the typical examples of assembling industries.
4. Construction industries
Construction industries are those industries which are engaged in the construction of roads, buildings, canals, bridges, dams etc. The products of other manufacturing industries such as iron, cement, bricks, stones, marble, wood, glass, rubber etc. are used by the construction industries. Construction industries are extremely important and useful for the economic development of any nation.
B. COMMERCE
The main object of an industry is to produce goods and services for the satisfaction of human wants whereas commerce is concerned with the distribution of goods to the consumers and users according to their tastes, needs and conveniences. It includes all those activities which are related to the transfer of goods from the place of production to the ultimate consumers. Thus commerce serves as a valuable link between the producer and the consumer. Now a days commerce consists of a complex well developed system of transport, insurance, warehousing and other similar activities which facilitate trade.
In the words of Evelyn Thomas "Commercial occupations deal with the buying and selling of goods, the exchange of commodities and the distribution of the finished products."
Problems in commerce
Hindrance Time
Hindrance of person
Hindrance of Exchange
Hindrance of Place
Hindrance of Knowledge
Hindrance of loss Risk
Hindrance of damage
Components/subdivisions of commerce Commerce has the following components/subdivisions
1. Trade and
2. Aids to trade.
1. Trade
Trade means buying and selling of goods, A trader purchases goods to be sold to other traders or consumers at a profit. So he appoints some dealers or distributors for the distribution of goods known as traders. Thus traders act as intermediaries between producers and consumers.
Classification of trade
The trade is generally classified into following categories :
a. Internal trade
b. International trade
a. Internal trade
Internal trade is also known as home trade because buying and selling is done within the boundaries of the country which may be (i) local trade i.e. the goods are purchased and sold at a particular place; (ii) state trade i.e, the goods are traded only in a particular state; (iii) interstate trade i.e. the goods are bought and sold from one state to another state. The payments involved in trading are made in nation's own currency directly or through the banking system.
Internal trade may be further sub-classified as follows :
(i) Wholesale trade and
(ii) Retail trade.
(i) Wholesale trade
In wholesale trade the wholesalers buy the goods in large quantities directly from the manufacturers and sell them in smaller quantities to retailers who are in direct contact with the consumers. Thus wholesalers serve as a link between the manufacturers and retailers.
(ii) Retail trade
When the goods are distribuled in small quantities to the consumers it is known as retail trade. Retailing is the final stage in distribution of goods and involves direct selling to the ultimate consumers. The persons who deal in retail sale of goods are known as retailers, Retail trade may be conducted through shops, departmental stores, multiple shops, co-operative stores, super bazars, vendors etc. A retailer is a direct link between wholesaler and consumer.
b. International trade
International trade is also known as foreign trade or external trade. When the goods or services are exchanged between two or more than two countries then it is known as foreign trade. Exchange of goods takes place by making the payments in the currency of the country concerned called foreign exchange. Movement of goods is done through international system of transport. Foreign trade plays a vital role in the economic development of a country. Through imports a country is enabled to obtain plant, machinery and equipment, components, raw materials and technical know-how which are extremely important for the economic development of any country specially for the under- developed and developing countries if they wish to remove poverty from their countries.
Classification of foreign trade
Foreign trade may be further classified as follows
(i) Import trade
(ii) Export trade
(iii) Entrepot trade
(i) Import trade
When the trader buying the goods from foreign countries to his own country it is known as import trade. For example when India buying goods from Japan, USA, or any other country it is known as import trade.
(ii) Export trade
When the goods of one country are sold to other countries it is known as export trade. For example India sells goods like drugs, cloth, readymade garments, tea, coffee etc. to other countries, It is known as export trade.
(iii) Entrepot trade
Entrepot trade is also known as re-export trade. It involves the import of foreign goods of one country with the idea of exporting the same to other countries and making profit in the process. For example if a trader of India imports goods from Singapore, Japan and China and sells the same to any other country with a margin of profit it is known as entrepot trade.
2. Aids to trade or functions of commerce or branches of commerce
Various branches of commerce are given below :
(i) transport
(ii) Warehousing
(iii) Banking
(iv) Insurance
(v) Packaging
(vi) Advertising and publicity.
(i) Transport
Transport removes obstacle of place. It is the process of carrying goods and persons from one place to another. It is concerned with carrying the goods from the places of production to the places of their consumption. There are various modes of transport available for moving the goods, drugs and pharmaceuticals from one place to another which include road, rail, air, water, pipeline transport etc. Out of all these modes of transport, railways are considered as the most effective means of movement of goods because:
(a) It is cheaper for bulky goods to be carried over long distances.
(b) The goods are more safe than in road transport since they are carried in covered wagons and not in make-shift arrangements like in road transport.
(c) Since the railways are government controlled so the freights are less.
(ii) Warehousing (storage)
Warehousing removes the hindrance of time. Warehouses are the places where goods are stored. Storage is the process of keeping, holding and preserving the goods which are to be used at a later stage. When this process is done at a large scale and in a specialized manner it is termed as warehousing.
Need and Importance of Storage
1. Now a days the goods are continuously produced. All the goods are not immediately sold so the unsold goods will have to be stored.
2. Storage of raw materials is necessary to ensure uninterrupted production.
3. Many drugs are used in a particular season but they are produced throughout the year so they will have to be stored for sale as and when required.
4. Storage is necessary to take the advantage of bulk buying.
5. It is done in anticipation of demand.
6. Certain goods which can get higher prices in future are stored for a longer period. For this purpose perishable goods like fruits, vegetables etc. can be stored in cold storage.
7. Storage is necessary for wholesalers as well as retailers for regular supply to the consumers. Thus from the above discussion it is clear that warehouses remove hindrance of time in trade by storing the goods which may be supplied to the consumers as and when required.
(iii) Banking
Hindrance of finance is removed by banking. Finance or capital is the life blood of any business. Without finance it is not possible to run any marketing activity. A large amount of money is required for the production and marketing of goods and services. Finance is needed for the purchase of machinery, raw materials, carrying production operations, meeting transportation, storage and insurance expenses. The wholesalers and retailers also need finance for purchasing, storing, giving credit to their customers and for meeting day to day expenses. The finance can be raised from own sources, commercial banks, shares. debentures, financial institutions, trade creditors etc. The banks provide the facilities of overdraft, cash credits, discounting of the bills of exchange and a lot of other services to the customers thus removing the hindrance of finance in trade.
(iv) Insurance
Insurance removes the hindrance of risks. In marketing process many kinds of risks are involved at every stage. From the time of production to the time of disbursement of goods to the actual consumer they are exposed to many risks on account of unavoidable circumstances e.g. fire, accidents, theft, storm, floods, earthquake, price .eduction, changes in demand and supply conditions, non- recovery of credit sales, dishonesty of employees and partner(s), strikes, lockouts and pilferage etc. Risks due to natural calamities like pests, rain, hailstorm, lightning, fire, floods, drought, earthquakes etc. are the most destructive type of risks and can be covered by insurance. Losses due to dishonesty, strikes, lockouts and pilferage can be minimised by developing cordial relations and understanding between employers and employees. Risks due to price reduction, changes in demand and supply conditions, non-recovery of credit sales and other risks can be minimised by thorough analysis of market trend, government policies and reputation of creditors. Outstanding payments may be collected by improving methods of collection or by adopting other suitable means of collection. All the above mentioned risks are covered by insurance companies provided the necessary insurance has been done and premiums have been regularly paid. An insurance company performs a useful service by compensating the traders for the losses due to fire, theft, flood or other natural calamities etc. Thus insurance companies protect the traders from the fear of loss of goods. The insurance companies charge a nominal insurance premium for the risks covered. There are various types of insurance policies to cover the risk of losses. For example life insurance policy covers the risk of life, fire insurance policy covers the risk of losses due to fire, marine insurance policy covers the risk of loss or damage during shipment of goods or passengers.
(v) Packaging
Packaging removes the risk of spoilage. Packaging is the process by which the pharmaceuticals are suitably packed so that they retain their therapeutic effective- ness from the time of their packaging till they are consumed. Packaging may be defined as the art and science which involves preparing the articles for transport, storage, display and use. An utmost care might have been taken during the formulation of any preparation but if it is not packaged properly the whole aim may be lost. Different shapes and sizes of containers made from different materials are used for packing different types of formulations. Therefore a careful consideration must be given for the selection of packaging material. Properly packaged materials will be protected from deterioration and spoilage. Thus the risk involved due to spoilage will be removed.
(vi) Advertising and publicity
Advertising and publicity removes the hindrance of knowledge or information gap about the availability and uses of goods between traders and consumers. The main object of advertisement is to create demand and to increase the sales. The various methods used for advertisement are : T.V., radio, newspapers, magazines, wall posters, pamphlets, free samples, trade fairs, exhibitions, balloons and window display etc. Thus trade, transport, warehousing, banking, insurance etc. are the different branches of commerce.
ELEMENT OF ECONOMICS
In order to study the elements of economics, it becomes necessary to understand what economics is. Economics is a social science which deals with the economic problems of an individual. It also deals with the proper use and allocation of resources for the achievement of various human wants and maintenance of growth with stability. With the overall growth of industry and increased standard of living the human wants are also increasing day by day. No doubt the human wants are unlimited but the financial resources to satisfy them are limited. Therefore the desires will have to be satisfied with limited resources. To earn money every person is engaged in some kind of economic activities e.g. business, profession or employment. A businessman earns profits, a doctor charges fee for his services and an employee gets salaries from the employer, a labourer gets wages from his master etc. There are some non-economic activities which are related to social, psychological and religious sentiments. The examples of such activities are a housewife looking after the household, a person playing cards, a person engaged in social activities etc. Such non-economic activities do not generate any income or profit
In order to study the elements of economics the following aspects of economics may be taken into consideration:
1. Economic activities
2. Economic system.
1. Economic activities
To satisfy the various needs with limited resources the following economics can be adopted:
(i) In an industrial house drug store economy can be adopted in the purchase of raw materials/drugs i.e. only the required raw materials and that too according to economic order quantity are purchased. The limited number of technical and non-technical persons are employed.
(ii) Only those types of products and services are produced which are economical and profitable.
(iii) Buying and selling of goods and services should be done economically ie. at the time of buying any product minimum rate should be quoted but at the time of selling a product it must be sold by taking into consideration the margin of profit.
2. Economic system
An economic system denotes the economic relationships which arise in the community from the organisation or mode of production and distribution. The economic system should be simple and easy for human beings to satisfy their wants but it all depends on the kind of economic system which is adopted by a particular country that how the resources are allocated, prices are fixed etc.
TYPES OF ECONOMIC SYSTEMS
There are three economic systems :
(a) Capitalist system
(b) Socialist system
(c) Mixed economy
(a) Capitalist system
According to capitalist system there is freedom of every kind. The producers are Tree to acquire any property and to produce any product. The consumers are free to use any product and in any amount to satisfy their wants. They are also at liberty to spend their income in any way they like. According to this system the means of production and distribution are generally in the hands of private owners who operate them to earn profits. In this system the role of government is to protect the producers and consumers so as to avoid unhealthy competition among producers and to provide essential services to the public economically.
(b) Social system
According to this system the large and basic industries are owned and controlled by the government. Even the distribution is also controlled by the government.
(c) Mixed economy
In mixed economy the activities of both the systems i.c. capitalist system and social system are used. It means some economic activities are controlled by the government and some economic activities are kept open for the public. The advantages of capitalist system include better economic development, increased production and improvement in science and technology sphere. The advantages of socialist system include reduction of inequality of income, large and basic industries come under the purview of the government and there is fair distribution of consumer goods.
MANAGEMENT
Management is the process of conducting and managing the various business activities. Every business organisation, whether a drug store, hospital pharmacy, industry or any other organisation, has its own management. Without sound and experienced management it is not possible to run the business effectively. When the principles and practices of management are applied to pharmaceutical industry and drug stores, it is known as "Pharmaceutical Management". There a number of definitions of management given by different authors but according to George R. Terry, "Management is a distinct process consisting of planning, organising, activating and controlling performed to determine and accomplish the objectives of the organisation by the use of human beings and other resources. Management is an art and science of performing the different activities of the organisation. It is an art of getting the things done through and by the people working in the organisation. It is also a function of working with people and co-ordinating their efforts so as to accomplish the objectives of the organisation. Management is a science because it proves, predicts, defines, measures and utilizes knowledge. To accomplish certain goals of the organisation the different activities are looked after and controlled by senior persons individually known as "Managers. In other words, a manager is a person who performs the managerial functions of planning, organising, staffing, controlling and directing.
Elements of management or functions of management
The followings are the main elements or functions of management :
1. Planning
2. Organising
3. Staffing
4. Directing
5. Controlling
6. Co-ordination
1. Planning
One of the most important function of a management is to give a serious thought about planning because all the other functions of management depend on planning. Before starting any hospital pharmacy it is very important to plan the things. Without sound planning it is very difficult to achieve the desired aims. Therefore a sound thinking must be given that what is to be done, when and where it is to be done and how it is to be done according to the funds available. What type of products are to be formulated, type of building and equipment required. The number of pharmacists, skilled and lay personnels required, their salary etc. Provisions for the supply of good quality of raw materials and finished products and facilities for the testing of these materials.
2. Organising
"An organisation may be defined as the arrangement of persons in any field so that they act as one body and work together to fulfill the common goal." Better the organisation better would be the achievement of the common objectives. Similarly loose organisation would lead to unhappy and serious results. Therefore it is the most important task of the management to build a strong organisational structure and to fit the right person in the right place in order to achieve the goals efficiently and economically.
3. Staffing
It is the function of the management that the right persons are selected for specific kind of job. The staffing functions involve recruitment, selection, training, development, compensation, dismissal etc. The staff of hospital pharmacy comprises of registered pharmacists , skilled persons, lay persons and clerical staff. All the staff members must know their duties and place of work. They should discharge their duties and responsibilities in the best way because all of them are engaged in the health care of the patient is one way or the other. All the employees must have good relations with both intra- and inter-departmental employees.
4. Directing
Alter planning, organising and staffing it is in the foremost function of the management to give proper direction to its employees to work efficiently and effectively to fulfill the objectives of the organisation. To give proper direction and command to its employees, a manager must be in a position to command or control a group of persons. For this purpose he must have leadership qualities and must be able to influence, motivate and persuade the people.
5. Controlling
The manager should have full control on the workers working under him, that means everything is done according to the rules and instructions issued to them. At the same time there should not be undue interference in their work which is likely to lose all initiative and enthusiasm to do work sincerely and honestly.
6. Co-ordination
Co-ordination means that all the working units as well as employees/workers of the organisation work in complete harmony to fulfill the goals of the organisation. The management should watch carefully that everybody in the organisation understands the objectives of the organisation and work in full co-ordination with others to achieve the business objectives.
Multiple choice questions
1. Business means :
Trade and commerce
Buying and selling of goods
Industry and commerce
Commerce
2. Business is concerned with:
(a) Economic activity
(b) Non-economic activity
(c) Both (a) and (b)
(d) None of the above
3. Business activities include:
(a) Industry and commerce
(b) banking & finance
(c) None of the above
4. Transport removes the hindrance of
(a) Persons
(b) Banking and finance
(b) Time
(c)None of the above
(d) Place
5. Banking removes the hindrance of :
(a) Place
(b) finance
(c) Risk
6. Warehousing removes the hindrance of :
(a) Time
(c) Persons
7. Insurance removes the hindrance of
(a) Persons
(b) Time
(c) risk
(d) Finance
8. Trade between two countries is known as
Import
Time
Foreign trade
Export
9. To bring goods from another country to one's own country is known as :
Import
Time
Foreign trade
Export
10. Buying and selling of goods so as to make profit is known as
(a) Trade
(b) Commerce
(c) None of the above
11.Problem in commerce is/are
A. Hindrance of person
B. Hindrance of place
C. Hindrance of time
D. All of the above
12. Trade includes
A. Buying
B. Selling
C. Exchange of goods
D. All of the above
13. Entreport trade is
A. Country sale to other country
B. Brought into from a country
C. Sale of goods by a country to foreign country for further sale
D. All of the above
14. The retailer pharmaceutical trade is,
A. Chemist
B. Druggist
C: Pharmacist
D All of the above-
15. Trade is nucleus of
A. Business
B. Economics
C. Commerce
16. Warehousing removes the hindrance of
A. Place
B. Time
C. Risk
D.Spoilage
17.Packaging removes the hindrance of
A. Place
B. Time
C. Risk
D. Spoilage
18. Activities around the trade
A. Insurance
B. Packaging
C. Transport
D. Al of the above
19. Which is not function of management?
A. Planning
B. Staffing
C. Packaging
D. Directing
20. For small scale industry involved , the total capital
A. Ten lacs
B. Ten thousand
C. Twenty lacs
D. Fifteen lacs
21.Pharmaceutical industry is covered under
A Manufacturing industries
B. Thermal industries
C. Energy industries
D. All of the above
Answers
1.Industry and commerce
2.Economic activity
3.(a) Industry and commerce
4.Place
5.finance
6.Time
7.risk
8.Foreign trade
9.Import
10.Trade
11.All of the above
12. All of the above
13.Sale of goods by a country to foreign country for further sale
14. All of the above
15.Commerce
16. Time
17. Spoilage
18. . All of the above
19.Packaging
20. Ten lacs
21.Manufacturing industries
Chapter-2 Forms of Business Organisations
Chapter-3 Channels of Distribution
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