Management Science II
Dr.T.J.Kamalanabhan
MODULE 7
Business Organizations
Business can be undertaken in various forms
•
In many instances, ways of doing business are governed by law.
•
In others, they are determined by the preferences of the entrepreneurs
involved, such as nature of business, tax and personal considerations.
Purpose Of Organizations
•
People need to work together to accomplish goals
•
Goals are too large, too complex, too expensive to be achieved without
cooperation
•
By working together, people can produce more & better goods and services
Indian Institute of Technology Madras
Management Science II
Types Of Organization
•
Retail outlet
•
Manufacturing
•
Service
•
Government
•
NGO
Retail Organizations
•
Food world
•
Subhiksha
•
McDonald
•
Lifestyle
Manufacturing Organizations
•
Tata Engineering
•
Larsen & Tubro
•
Bajaj Auto
Indian Institute of Technology Madras
Dr.T.J.Kamalanabhan
Management Science II
•
Ashok Leyland
•
Ballarpur Industries
Service Organizations
•
Infosys
•
HDFC
•
ICICI
•
Appolo Hospitals Ltd.
•
The Indian Hotels Company Ltd.
Government Organizations
•
National Thermal Power Corporation
•
ONGC
•
MTNL
•
Indian Railways
•
Administrative Staff College of India
Non-Government Organizations
Indian Institute of Technology Madras
Dr.T.J.Kamalanabhan
Management Science II
•
Indian Wind Turbine Manufacturers Association
•
CRY
•
The Banyan
•
Udavum Karangal
•
Helpage India
Dr.T.J.Kamalanabhan
Factors Considered In Forming A Business Organization
•
Legal restrictions
•
Kind of business operation
•
Need for capital Tax advantages or disadvantages
•
Liabilities assumed
•
Decision-making
•
Intended division of earnings
•
Number of people associated with the venture and their specific roles
•
Perpetuation of the business
Factors In The Creation Of A Business Organization
•
Costs associated with starting the form of business organization
•
Possibility of transferring the interest in the business organization
•
Management control
•
Initial capital requirements
Indian Institute of Technology Madras
Management Science II
•
Ability of the form of organization to attract additional capital
Types – Legal Classification
•
Entrepreneurship / Sole Proprietorship
•
Partnership
•
Co-operatives / Associations
•
Agencies
•
Trust
•
Corporate bodies
Sole Proprietorship
•
Business entity owned and operated by one person.
•
This is usually the least costly way of starting a business.
Indian Institute of Technology Madras
Dr.T.J.Kamalanabhan
Management Science II
Sole Proprietorship
Advantages
•
Easiest to get started
•
Greatest freedom of action
•
Maximum authority
•
Income tax advantages in very small firms
•
Problems with isolation
Disadvantages
•
Unlimited liability
•
Death or illness endangers business
•
Growth limited to personal energies
•
Personal affairs easily mixed or confused
•
Social security advantage to owner with business
Indian Institute of Technology Madras
Dr.T.J.Kamalanabhan
Management Science II
Dr.T.J.Kamalanabhan
Partnership
•
A partnership is an association between two or more persons who have
agreed to operate a business.
•
Partnership is where two or more parties cooperate and work together
•
A partnership brings together and uses partners' resources more
economically, efficiently and effectively.
•
Partnerships are a means of achieving outputs and outcomes that are
important in relation to the needs of the local community
•
Partners develop a commitment to an agenda for joint or co-ordinate action
•
The partnership process involves planning each partner's contribution, what
is expected of them and how they will benefit.
•
The partnership involves the formation of effective leadership of the joint or
co-ordinate action being taken.
Contents Of Partnership Deed
•
Type of business
•
Amount invested by each partner
•
Division of profit and loss
•
Compensation for each partner
•
Distribution of assets on dissolution
•
Duration of partnership
Contents Of A Partnership Deed
Indian Institute of Technology Madras
Management Science II
•
Restrictions of authority – expenditures
•
Provisions for withdrawals or admission of additional partners
•
Dispute settlement clause
•
Provisions for dissolving
•
Settlement in case of death or incapacitation of any partner
Partnership
Advantages
•
Two heads are better than one
•
Additional sources of capital
•
Better credit rating than corporation of similar size
•
Ease of formation
Disadvantages
•
Death, withdrawal, or bankruptcy of one partner
•
Difficult to get rid of bad partner
•
Hazy line of authority.
•
Personally liable for business debts
Indian Institute of Technology Madras
Dr.T.J.Kamalanabhan
Management Science II
•
Dr.T.J.Kamalanabhan
Divided authority.
Co-Operatives
Cooperative enterprises provide the organizational means whereby a significant
proportion of humanity is able to take into its own hands the tasks of creating
productive employment, overcoming poverty and achieving social integration.
They constitute a model for a people- centred and sustainable form of societal
organization, based on equity, justice and solidarity.
Co-Operatives In India
Indian Institute of Technology Madras
Management Science II
•
Co-operative Initiative Panel
•
Transport Co-Operative Society
•
SARADA
•
Amul
•
Cooperative Banks
•
Sugarcane Growers Cooperative Society
Dr.T.J.Kamalanabhan
Agencies
Under the Indian Contract Act, 1872, agency is a relationship founded upon a
contract, either express or implied, by which one of the parties confers on the
other the management of some business to be transacted in his name or on his
account and by which the other assumes to do business and renders an account
of it. A typical agreement would include clauses under the following broad heads:
Contents Of Agency Agreement
1. Appointment
2. Trademark and copyright license and acceptance
3. Term of the agreement
Indian Institute of Technology Madras
Management Science II
4. The principal's representation of the agent to its customers
5. Commissions
6. Indemnification
Contents Of Agency Agreement
•
•
•
•
•
•
•
•
•
•
•
Quality control
Relationship of the parties
Excusable delays
Assignment
Third parties
Modifications
No waiver
Governing law
Notices
Arbitration agreement
Agency termination
Corporation
Indian Institute of Technology Madras
Dr.T.J.Kamalanabhan
Management Science II
•
•
Dr.T.J.Kamalanabhan
A voluntary organization of persons, either actual individuals or legal
entities, legally bound together to form a business enterprise.
A corporate body is an artificial being, invisible, intangible and, existing only
in contemplation of the law. In other words, a corporation is a distinct legal
entity, separate from the individual who owns it.
Corporation
Advantages
•
•
Limited liability for stockholders (While true for big business, may not be true
for small business)
Continuity
Transfer of shares
•
Easier to raise capital
•
Possible to separate business functions into different corporations
•
Transfer of shares
•
Disadvantages
•
Gives owner a false sense of security
•
Heavier taxes
•
Power limited by charter
•
Less freedom of activity
•
Legal formalities
•
Expensive to start
•
Increased accounting
Corporate Forms Of Organizations
Indian Institute of Technology Madras
Management Science II
PRIVATE
Dr.T.J.Kamalanabhan
GOVERNMENT
PUBLIC
Types Of Corporate Organizations
The principal forms of business enterprises in India are as follows
Limited by shares
Private
Company
Limited by guarantee
Unlimited
Limited by shares
Public Company
Limited by guarantee
Unlimited
Holding/
Subsidiary
Companies
Subsidiary 1
Subsidiary 2
Subsidiary 3
Private Corporate Organizations
Indian Institute of Technology Madras
Management Science II
Dr.T.J.Kamalanabhan
•
Roop polymers Ltd.
•
Sundaram Finance Ltd.
•
ANL Parcel
Public Corporate Organizations
•
Reliance Industries
•
Hindustan Lever
•
ITC
•
ACC
•
SPIC
•
Philips India
Government Organizations
•
•
•
•
Indian Railways
Air India
Indian Airlines
Road Transport Corporations
Structure
•
•
•
The organizational structure defines the formal communication
relationship in the organization
The organizational structure links various activities of the business
through job profiles
The organizational structure is represented through the organizational
chart
Organization Structure
Indian Institute of Technology Madras
Management Science II
Dr.T.J.Kamalanabhan
COMMUNICATION LINK
BUSINESS ACTIVITY LINK
Simple Organizational Structure
Indian Institute of Technology Madras
Management Science II
Dr.T.J.Kamalanabhan
CEO/ PRESIDENT
PRODUCTION
ADMINISTRATION
FINANCE
DEBT1 DEBT2
PURCHASE
DEBT3
ZONE1 ZONE2 ZONE3
C.O.O
RESOURCES
BUSINESS
DEVELOPMENT
TECHNOLOGY SERVICES
ASSISTANT GENERAL MANAGER(Tech)
CLIENT
SERVER
MANAGER
(RESOURCE)
COLLABORATIVE
COMPUTING
PROJ.MANAGER
CONSULTANTS
BUSINESS
ANALYST
INTERNET
MANAGER(B.D)
PROJ MANAGER PROJ MANAGER
CONSULTANTS
BUSINESS
ANALYST
CONSULTANTS
BUSINESS
ANALYST
HR
EXECUTIVE
FACILITY OFFICE
EXECUTIVE COORDINATOR
Indian Institute of Technology Madras
SOFTWARE
ENGINEERS
SOFTWARE
ENGINEERS
SOFTWARE
ENGINEERS
ASST.
MANAGER
(B.C)
Management Science II
Complex Structure Of Organizations
Indian Institute of Technology Madras
Dr.T.J.Kamalanabhan
Management Science II
Dr.T.J.Kamalanabhan
BUREAU
EXECUTIVE
COMMITTEE
ADVISORY
COMMITTEES
STANDARDS
CERTIFICATION
LABORATORY
PLANNING & DEVELOPMENT
LEGAL
CONSUMER POLICY
DIRECTOR
GENERAL
DIRECTOR
GENERAL
ADGM
Indian Institute of Technology Madras
ADGT
DDGA
DDGF
CVO
Management Science II
Dr.T.J.Kamalanabhan
ADGM
DDG
CENTRAL
−CMD-I −MDD-I
−CMD- −MDD-II
II
−MDD-III
−CMD- −BHOPAL
III
GHAZIABA
−QSD −
D
Indian Institute of Technology Madras
DDG
NORTHER
N
DDG
SOUTHE
RN
DDG
EASTE
RN
DDG
WESTERN
−NDC-I
−MDCH-I −MDM-I
−NDC-II
−MDCH-II −MDM-II
−NDC-III
−MDCH-III −SROLAB
−NROLAB −BANGALORE −EROLAB
−FARIDABA−COIMBATORE −BHUBANESHWA
D
−HYDERABAD R
−GUWAHATI
−KANPUR −
−
Management Science II
Dr.T.J.Kamalanabhan
ADGT
DOGT-I
−P&C
−HRD
−IRD
−BS
Indian Institute of Technology Madras
−CED
−ETD
−MTD
−BPD
−LTD
−WRD
−TED
−FAD
−PCD
−TXD
−MHD
−CHD
−MSD
DOGT-II
−TISC
−SPD
−CAD
−BMP
−TI
−CC
−FL
DOGL
−CLCHEM
−CLELECT
−CLMECH
−CLQA
−LABP &PUR
Management Science II
Dr.T.J.Kamalanabhan
ADGM
DODG
−ESIT
−GAD &
SECURITY
−HINDI
−PID
−PUB
−PR
−LIBRARY
−SALES &
DISTT
Indian Institute of Technology Madras
DOGF
−FINANCE
−ACCOUNTS
CVO
−VIGILANCE
Management Science II
Dr.T.J.Kamalanabhan
Organization Structure Of Government Ministry
Foreign Entry Into India
A Foreign business organization has its corporate head office located outside the
boundaries of India.
All foreign investment and collaboration ventures in India need government
approval.
Indian Institute of Technology Madras
Management Science II
Dr.T.J.Kamalanabhan
Restrictions In Foreign Entry Into India
Ownership & Management
The major interest in ownership and
management of companies falling in the industry list reserved for the public sector
should be in Indian hands. However, the government of India, in exercise of its
discretion, may not object to foreign capital having control of a concern in such
areas for a limited period in the national interest.
Restrictions An Foreign Entry Into India
Investment Ceiling
Normally, foreign equity capital participation is
limited to 51% of the total paid up capital. However, a higher foreign contribution
towards equity can be considered in the priority industries by the Foreign
Investment Promotion Board or the Secretariat for Industrial Approvals on a caseby-case basis.
Restrictions In Foreign Entry Into India
Royalty:
The rate of royalty is normally limited to 5% on
internal sales and 8% on export sales for a period of 5 years depending on the
nature of the technology, etc., but a higher rate of royalty for a longer period may
be considered in exceptional cases where technology is sophisticated or is exportoriented.
Indian Institute of Technology Madras
Management Science II
Indian Institute of Technology Madras
Dr.T.J.Kamalanabhan