Business could be described as a purposeful commercial or merchantile activity engaged in by an individual or group of people as a means of livelihood. People’s involvement in trade, and commercial or industrial enterprises or any economic dealing could easily be refered to as business. Business designates the activities of those engaged in the purchase or sale of commodities or any related financial transactions.
Business can also be described as an institution in the society which tries to allocate resources in an effective way. The major aim of business is to produce goods and services that would satisfy customers and clients. It is an input-output process resulting in profit or loss. Business can also be described as the sum total of organised efforts by which individuals and organisations that are engaged in commerce and industry provide the goods and services needed to maintain and improve the standard of living quality to which members of the society desire. In summary, business is any legal activity people engage in to earn a living or to make a profit.
What is Organisation?
Organisation can be described as the process of identifying and scheduling the work to be undertaken by individuals. The process involves defining work, delegating responsibility and authority and establishing work relationships that would enable roup work towards goal achievement. Organisation of the workplace is the plan by which individual efforts is pooled together through the division of labour, responsibilities and authority. All works or business organisations have two major objecti ves:-
(1) To provide goods or services,
(2) To derive benefits, in whatever form it desires from the goods produced or services rendered.
To this extent therefore, every business organisation must strife to satisfy human needs and wants if they are to survive.
The Organisational Chart
In our discussion above, it was observed that the organisation pools individual efforts through division of labour to achieve a common goal. For administrative convenience, the workplace relationship can be schematically depicted. This will show how the organisations workload is divided and the assignment of specific individuals or departments. The diagram also informs us of the functions, department, or positions in the organisations and the relationship between them. A typical
organisational chart in a government owned broadcast stations could be as sketched below:
The advantages are
(i) The structure of the organisation will be seen at a glance;
(ii) Information on where to find a staff is known at a glance;
(iii) Managers can identify organisational defects at a glance,
(iv) It affords easy co-ordination of inter and intra departmental activities.
The disadvantages include:
(1) The chart does not tell us who has greater responsibility at each managerial level;
(ii) It only tells us of the formal relationships leaving out the informal relationships which is equally vital for organisational survival;
(iii) It could give each department a sense of separate identity.
Kinds of Business Organisations
The business organisation is a type of organisation that includes such functional areas as purchasing, production, sales and finance. The common forms of business organisation available to an investor are:-
(a) The Sole Proprietor.
(c) Limited Liability Companies.
(d) Co-operative Society.
The various kinds of business formations will be briefly discussed.
This is simply called the one man business It is the oldest form of business available to the investor. Its existence dates back to the early days of buying and selling when exchange of goods and services commenced.
The sole proprietor has the following advantages:
(i) The owner provides the capital to his best possible standard.
(ii) It is easy to start this type of business.
(ii) The owner keeps all the profits.
(iv) Decisions are promptly taken.
(v) There is great trade secret.
(vi) The sole proprietor could decide to change business or diversify at Will.
(vii) He could attract easy credit facility.
There are also attendant disadvantages to this type of business. These include.
(1) It may not be able to employ the services of skilled managers.
(ii) The Liability of the owner is not limited.
(ii) The growth is usually doubtful.
(iv) Business could die with owner.
This form of business is jointly owned by two or more people on an agreement. Such agreement could be oral or documented When there is documented and signed agreement, such is refered to as “articles of partnerslhip”. Such agreement regulates the involvement and commitment of each of the partners.
A partnership agreement must stipulate the following facts:-
(i) Name of the business.
(ii) Location of business.
(iii) Duration of agreement.
(iv) Stipulation of the accounting system in any financial year
(v) Provision for salary and withdrawals by partners.
(vi) Profit and Loss sharing.
(vii) Names of the partners and individual commitment.
There are two major types of partnership. They are:-
(i) General or Unlimited partners.
(ii) Limited partners.
The Unlimited partner has no limit to his commitment to the organisation. He commits everything he has in case of business failure.
Limited partners are the type of partnership in which one or several partners have limited liability. However, one of the partners must have unlimited liability. This type of partners cannot be active or appear in the day-to-day management of the business.
Other types of partnership will just be mentioned in passing. They are:
Dormant or sleeping partners.
Limited or special partners.
General or active partners.
Their features are best described by their names.
The Companies and Allied Matters Decree of 1990 is the Law that requires the registration of partnerships. A minimum of two and maximum of twenty people could form a partnership.
The Advantages of partnership are –
(i) High credit facility.
(ii) Ability to employ skilled labour.
(iii) Collective decision and responsibility
(v) Pool of capital.
(v) Easy entry
The disadvantages are:-
(i) Investment is frozen, thus it cannot be withdrawn.
(ii) Liability of partners is unlimited
(iii) Disagreement could cause business collapse.
(iv) Limitation on size.
(c) Limited Liability Company
These are Incorporated businesses. They are owned by a number of investors who are share holders in the business. They are artificial being who can sue and be sued.
The limited liability company could be classified into two as clarified by the Companies and Allied Matters Decree of 1990. They are:-
(1) The Private Limited Liability Company. It has a minimum of two (2) and a maximum of fifty (50) members. It cannot sell or buy shares.
(ii) A Public Limited Liability Company has a minimum of seven (7) persons and a maximum membership of infinity. It can invite the public to buy shares from it.
Advantages of Limited Liability Company are:-
(i) Shareholders Liability is limited
(ii) The Legal entity of the company.
(iii) Its large size.
(iv) Possibility of expansion.
(v) Transferability of Ownership.
(vi) Efficient Management.
(vii) Unlimited existence.
Disadvantages of limited liability company include:-
(i) Both owners and company are separately taxed.
(ii) Government restriction
(iii) Lack of personal commitment.
(iv) Lack of secrecy.
(d) Co-Operative Societies
They are similar to limited liability companies. Their main features are:-
(i) They seek the welfare of their members.
(ii) Membership is open to responsible members on payment of prescribed entry fees.
(iii) Decisions are taken on one man one vote basis.
(iv) Share could be repaid on demand.
(v) Dividends are paid to shareholders on volume of patronage
There are three major types of Cooperative Societies These are:
(i) Consumer cooperatives
(ii) Producers cooperatives
(iii) Credit and Thrift
However, a recent dimension of cooperative society open to the cooperator is the Multi-purpose societies, of all these societies, the Credit and Thrift Society is the commonest and most established. We shall examine the advantages and disadvantages of this society.
Advantages of Credit and Thrift Society include:
(i) Membership is open to all on approval by other members and payment of prescribed fee.
(ii) The members are loyal because they have sense of belonging and joint ownership
(iii) It is one man one vote irrespective of the number of shares held
(iv) Dividends paid to cooperate are not subjected to taxation.
The disadvantages are:-
(1) Poor management, corruption and favouritism on the side of officials
(ii) Dividend is usually low because of low investment.
(iii) Lack of profit making incentives.
Management of the Business
The success of any business depends in large measure on how effectively and efficiently it is managed. A successful business management may be described as the profitable use as the factors of production that is necessary to conduct a business, e.g. money, materials, machines and other equipment. The personnel aspect should be given an important consideration. To utilize the factors of production effectively, the activities of the enterprise must be carefully planned, organised, directed and controlled
Basic management Functions
The basic functions carried out in the process of managing the business are: –
(b) Organising and staffing.
(C) Directing and
We shall consider each of these
(a) Planning: Involves the manager in making decisions. Decision making calls for the ability to select from possible alternative actions. It involves policy formulation. Planning means preparation of the schedule that anticipates various actions at varied stages of the business, Feasibility study is part of the planning process. This is an examination of all factors surrounding the making, production and financial aspects of a business concem. Oftentimes feasibility studies are associated with new business ventures. The major features of feusibility sludy will include
(i) The product or service the business intends to go into
(ii) The market size of the product or service the business would have
(iii) The quality and quantity of staff to be involved in the business
(iv) The production process and plan showing how the product will be made, including sales, purchases, expenses to be incurred, etc
(v) The marketing plan explaining the anticipated sales
(vi) Estimated Capital expenditure e.g. the fix and working capitals,
(vii) Cash Budget estimating the anticipated revenue and expenses within a financial year
(viii) A projected balance sheet
(ix) Profitability or non-profitability analysis and evaluation of the business.
Policies formulation is also an essential element in planning. They are standing guides to actions, They direct the business and control its activities to keep them in line with established objectives for policies to be effective, they must be definite and stable, yet they must be flexible to be adjustable to meet fundamental changes.
Innovations are also part of the long plans Managers should occasionally stop to take long view of their operations doing this will make the busines dynamic and current.
(b) Organising and Staffing: This is another management function that involves classifying and dividing the work or activities of the business into manageable bits. The planning like the organising function must be carried out on constant basis to make the business up-to-date. Staffing is a fundamental aspect of business organisation. It involves finding the right person for the right job. The manager must establish positions and decide which duties and responsibilities belong to each. Finding and keeping good employees iS not a matter of luck but rather the result of aggressive recruftment, careful selection, proper training and motivation and thoughtful management.
A good business Manager in considering his staffing function will give priority of place to:-
A perfect job analysis.
Recruitment and selection of good staff.
Proper placement of staff.
Necessary and adequate training.
Satisfactory transfers, due and beneficiary promotions
Acceptable remuneration system and
Efforts at morale building and motivation.
Still part of the organising function of management is Delegation of Authority. Proper delegation of authority must be outlined. Decisions must be made as to the extent to which managers will delegate authority of various sorts to others and what authority they will withhold to themselves. An axiom of good organisation is that responsibility must always be equal to authority. A worker should not be held responsible for a job unless he has the authority to do it, and no one should be given authority in a business unless he or she is held responsible for the results.
(c) Directing: This is the function of supervising and coordinating the activities of subordinates. Co-ordination is very essential because all members of the organisation perform different inter-related functions which affect each other in some ways. Failure to co-ordinate these different but interested function will bring confusion in the organisation according to Samuel Tilden, we are apt to forget that we are only one of a team, that in unity there is strength, and that we are strong only as long as each unit in our organisation function with precision.
Supervision is synonymous with leadership. It is accomplished by means of communication of ideas and instructions to subordinates.
Supervisors deal with materials, machines and the workers. Of all the supervised, it is the human being the most unpredictable, that is difficult to supervise Personal factors make individual worker different from the others and therefore their reactions to supervisors on instructions will differ. The supervisor must therefore try to understudy each subordinate
(d) Controlling: This is the measuring and correcting the actions of subordinates to ensure that plans for the business are achieved. Controlling involves.-
(i) Setting standards or objectives for accomplishment,
(ii) Maintaining current operating records for comparison with approved standards.
(iii) Acting promptly when operation deviate too much from established goals.
For control to be effective, there must be proper feedback on the activities of the subordinate and an investigation of why there is need for correction.