Business studies
Chapter 1 Meaning
Business is an economic activity which is performed by
human, trader or an organization for economic gain. The word ‘business’ is
derived from word ‘busy’ which means the state of being busy. In general
concept, all the human activities which is legally done for the economic gain
or for profit motive is business. In specific concept, business includes all
those activities which are performed for production, exchange and distribution of
goods and services regularly done for the satisfaction of human wants and
needs, with the view of earning profit or an income.
The production of goods and services for self consumption is
not a business. Business is the process where regular and continuous
production, purchases and sales of goods and services are done to fulfill the
customers’ wants.
In conclusion, business involves all the legal economic
activities like production and exchange of goods and services to fulfill the
changing demands of customers.
Characteristics/features of business:
1.
Economic activity
Business involves only economic activities which are related
to the production, distribution and exchange of goods and services for the
satisfaction of human wants. These activities are undertaken with economic
motive.
2.
Production, distribution and selling
The production, distribution and selling processes are
related to the business. It is the major part of business. The producer
produces a product; through agent, wholesaler and retailer the product is sold
to the customer. It is the process which is known as business.
3.
Profit motive
The primary objective of business is to earn profit to
create wealth. Profit is an essential part for survival of business as well as
growth and expansion of business. The activity done without profit is not
called business.
4.
Regular dealing
Business is a continuous process which is not one time job.
It's all activities should be repeated. Single transaction is not included in
the business. Business should have regular dealing among their customers.
5.
Satisfaction of customers
The business should try to satisfy the customers so that
they demand for the product again and again. Business organization has to
supply right quality of goods at right time and place in affordable price.
Satisfaction of customers is necessary for the smooth run of a business.
6.
Risk and uncertainty
All the business organization has to face some risks and
uncertainty. It may be created from change in technology, shortage of raw
materials, change in political issue change in customer taste and fashion, etc
may stop our business.
Future is uncertain and full of risk. Business organization
faces risk and uncertainty from starting point to ending or closing down of the
business.
7.
Creation of utility
Business creates different types of utility of goods and
services for the satisfaction of the customers’ wants and needs. Business
creates mainly three kinds of utility i.e. form, place and time by production,
distribution and exchange function.
Ø
Time utility:
The general principle is that goods should be made
available when the demand exists for it or when people demand it. Too early or
lately distribution of goods has no value because people do not buy it.
Marketing creates time utility by distributing goods in right time.
Ø
Place utility:
Marketing helps to distribute or supply of goods in those
market places where demand exists for intended goods or where majority of
customer wants to buy goods. Therefore through physical distribution of goods
from one place to another, marketing creates place utility.
Ø Form
utility:
Scope/Area of business:
Business covers large area, broadly business can be
classified into two categories i.e. industry and commerce which are explained
as follows:
A.
Industry
Industry involves production of goods and services through
the utilization of various resources like Men, Material, Money and Machine
(4M). Some industry are involved for production of industrial product whereas
other for production of consumers’ goods.
On the basis of nature of product, industry can be
sub-classified into four groups and are explained as follow:
I.
Extractive industry
The industry which mainly concerned with extraction of
product from the natural resources is formed as Extractive industry. For e.g.
Crude oil
II.
Genetic industry
Genetic means heredity. The industry which mainly concerned
with the production of goods from plants animals is formed as genetic industry.
For e.g. cattle farming, poultry form, hatchery, etc.
III.
Construction industry
The industry that is mainly concerned with construction
activities like road, bridge, dam etc. is formed as Construction industry. It
mainly uses the product of Manufacturing industry as a raw materials.
IV.
Manufacturing industry
The industry that creates form utility of goods and services
by collecting raw materials from extractive and genetic for the production
process to make the final products is manufacturing industry. On the basis of the nature of product, it can
be classified into four types.
a) Analytical
industry
The industry which uses a single raw material to male two or
more products is Analytical industry. This industry uses the product of
extractive industry as the raw material. For e.g. Crude oil is use to produce
petrol, kerosene, Mobil, etc
b) Processing
industry
The industry which uses the final product of extractive and
genetic industry as a raw material to make the final product by crossing many
steps or process is called processing
industry. For e.g. sugar
c) Synthetical
industry
The industry which produces a single product as a final
product by using two or more raw materials is known as Synthetical industry.
For e.g. colour, cement
d) Assembling
industry
Assembling industry uses the final product of extractive and
genetic industry as a raw material to make a final product by assembling the
raw materials. For e.g. TV, Bike, Car
B.
Commerce
Commerce plays an important role as a mediator between
producer and consumer. Commerce means supply, exchange, and transfer of goods
from producer to consumer or from production point to consumption point. It is
also known as trading activities. On the basis of the nature of commercial
activities, it can be classified into two group i.e. trade and aid to trade.
I.
Trade
Trade includes all the activities of selling, exchanging,
buying and distributing of goods and services. Trade only involve in buying,
selling and exchanging, it does not produce goods. On the basis of activities
of their trade, it can be sub-classified into two categories.
a) Home
trade
The activities of buying, selling, exchanging and
distributing of goods and services are limited only in the boundary of a
country is home trade. Generally in the home trade, national currency and
national means of transportations are used. On the basis of quantities of
buying and selling, home trade can be also classified into two groups.
I.
Wholesale trade
The trade which purchases maximum quantity of goods and
services with producer and sale large amount or quantity to the retailer is
known as wholesale trade. The person who involves in the wholesale trade is
wholesaler.
II.
Retail trade
The trade which purchases large quantity of goods and
services with wholesaler and sale small amount or quantity to the customers
according to their capacity is known as retail trade. The person who involves
in the retail trade is retailer.
b) Foreign
trade
The trade or selling, buying and exchanging of goods are
extended from one country to another is called foreign trade. International
currency and international means of transportation are used in foreign trade.
On the basis of exchange and distribution of the goods, it
can be classified into three groups:
i.
Export
The goods which is produced in one country and distributed
or sold to another country is called export.
ii.
Import
The goods which is produced in one country and buy from that
country is called import.
iii.
Entry port/Re-export
The goods which is purchased or import from another country
and export to third country is Entry port/Re-export. At least three countries
should be involved in this process.
II.
Aid to trade
Aid to trade helps the business for smooth flow of trade.
They remove hindrances to trade. They provide services.
a) Transportation
We know that, transportation creates place utility by
transferring goods from one place to another. Goods are produced in one place
with the help of transportation they are distributed all over the world by the
air, road and ship ways.
b) Communication
Communication means to inform about the new and existing
product. Without communication the new launched goods cannot be sold to the customer.
c) Banking
and financing
Banking and financing services are generally provided by the
finance company. It gives loan and services of depositing. The finance company
provides different types of services which helps businessmen in trade.
d) Insurance
Life of business is always surrounded by risk and
uncertainty. Insurance is necessary for business organization to minimize the
risk and uncertainty which is provided by the insurance company. They cannot stop
losses from the natural calamities and disaster but they provide financial
support to the business so that business can be re-build and easily performed.
e) Warehousing
Warehouse is a place where goods are stored until they are
sold. Warehouse creates time utility. Warehousing is also an aid to trade which
helps in trade.
f)
Promotion
Promotion means to inform about the new and existing product
to the customers. Promotion can be done through different media like print
media, visual, audio, audio-visual, etc.
Function of business
All the business organizations are generally started with
certain objectives to fulfill their own objectives they perform different
functions. The major function of business is to produce goods and services by
using raw material. The basic functions of business are explained as follows:
a.
Production function
Production means converting raw material to final or usable
product. It creates various utility to satisfy the customers. Production
function of business involves various activities mainly concerned with product,
procurement or raw materials, storage of raw materials, quality control, proper
layout of plant and equipment.
b.
Distribution (marketing) function
Distribution function of the business mainly concerned with
the distribution of goods to the market or its targeted customers. It includes
exchange of goods and services. Its main objective is to exchange the produced
goods from the place of production to the place of consumption. Marketing
function involves buying, selling, storing transportation, marketing
information, etc.
c.
Finance function
Finance is the blood of each and every organization. The
finance function of business mainly concerned with the collection and
mobilization of capital. With the help of finance, the capital can be got from
various sources like bank, people, etc.
d.
Organizing (managerial) function
Simply, organizing means managing of all factors of
productions. Business identifies all the activities and makes the proper
organization structure for efficient management.
e.
Research and development function
At the modern competitive society, research and development
is essential for the development of business, introduction of new product,
development of new technology, growth and development of the organization and
existence of organization. This function develops the goods as per the needs of
the customers, their taste and preference, paying capacity, etc.
f.
Creation of employment/Employment generation
All the business organization either small, medium or large
needs the human or manpower to produce product and to utilize other resources
like machine, material, money, etc. the business create the opportunity of
employment to the people which helps reducing the unemployment problem.
g.
Promotion function
Promotion function is another important function of the
business organization which is done by all the business organization to
increase the sales quantity and provides information to the customers about
their product.
Objectives of business
A.
Economic objectives
Each and every business organization has its own objectives
and goals.
i.
Earning profits
The main objective of business is to earn profit. Business
needs profits not only for the survival of business organization but also for
innovation, growth and expansion. Without profit business organization cannot
continuously run.
ii.
Creation of market and consumers
Producer produces goods and services to sell them for
consumption, the expansion of the volume of business on the basis of needs. All
the organization have to create new market, new site according to customer.
iii.
Innovation
Innovation means creation of anything from research and
development for the first time. The business must consider the taste,
capability of paying, changing habits and fashion at the introduction of new
product.
B.
Social objectives
The main objective of business organization is economic
objectives beside economic objectives it has to pay attention for the social
responsibility too.
i.
Supply of quality goods and services
Each and every business organization has to supply quality
goods and services as per the demand of customers or as per the government
rules and regulation. It must maintain the minimum standard.
ii.
Supply of goods and services in time and
affordable rate (price)
Generally, business is done by the people to the people for
the people so business should supply not only quality goods and services but
also at low and affordable cost in right time. Business should not practice and
encourage black marketing.
iii.
Creation of employment
Business is the great sources of employment. Small, medium
and large, all business organization needs human resource to run their
operation. For to perform the operation, business organization hire employees
this will helps in reducing unemployment problem.
iv.
Utilization of natural resources
C.
Human objectives
i.
Satisfaction of investors
ii.
Welfare of employees/Satisfaction of staffs or
employees
iii.
Satisfaction to the government/customers
Importance of business
1) Utilization
of natural resources
2) Creation
of employment opportunity
3) Economic
development
4) Earning
of foreign currency
5) Enhancement
of international relation
6) Increase
of government revenue
7) Self
dependence of a country
Social responsibility of a business
A. Responsibility
towards shareholder
B. Responsibility
towards consumer
C. Responsibility
towards employees
D. Responsibility
towards community
E. Responsibility
towards government
Chapter 2 Evolution and foundation of business
Consideration before starting a business
1. Selection
of a business
2. Detailed
investigation
3. Forms
of business organization
4. Provision
of capital
5. Location
of a business
6. Selection
of worker and staffs
7. Selection
of equipment and materials
8. Government
policy
Requisites of business success
1. Personality
of businessman
2. Adequate
capital
3. Qualified
and dedicated employees
4. Satisfied
consumers
5. Research
and development
6. Morality
of business
7. Efficient
management
8. Well-defined
objectives
9. Proper
plan and policy
Business environment and its components:
Business environment means all the factors which directly
and indirectly affect the business organization activities.
A.
Internal environment
Internal environment of business organization refers to all
the internal factors that affect the activities of business organization.
Internal environment is controllable or changeable which can be modified
according to need or requirement of organization.
i.
Owners/investors
Owners are the main source of capital. If they became
satisfied business organization can be continuously run for long period.
ii.
Board of directors (BOD)
iii.
Organizational resources
iv.
Organizational structure Organizational culture
B.
External environment
a.
Specific environment
i.
Customers
ii.
Suppliers
iii.
Competitors
iv.
Government
v.
Pressure group
b.
General environment
i.
Political and legal environment
ii.
Economic environment
iii.
Socio-cultural environment
iv.
Technological environment
Chapter 3 Sole trading concern (STC)
Sole trading concern (STC) is the oldest, simplest and most
commonly used type of business organization which is handled by only a single
person. In Sole trading concern (STC) a single person is owner, manager,
controller, decision maker, motivator, supervisor and leader too.
According to Peterson and plowman, “A sole proprietorship is
a business unit whose ownership and management are vested in one person. This
individual assumes all risk and failure of the enterprise and receives all
profits from its successful operation.”
In conclusion, Sole trading concern (STC) is that form of
business which is start and operates by only one person who is responsible for
all liabilities, losses and profits.
Characteristics
a.
Individual ownership
In Sole trading concern (STC), a single person invests all
the required capital from his private property or by taking loan from financial
organization. Sole trading concern (STC) means a sole man ownership that single
person is owner, manager, controller, decision maker, motivator, supervisor and
leader too.
b.
Unlimited liability
The liability of sole owner is unlimited. If business
organization bears losses and to pay dues, the sole owner must pay dues by
using his/her own property.
c. Sole
management and control
d. No
sharing of profit and loss
e. Risk
bearing
f. Secrecy
g. No
separate legal entity/status
h. Limited
operation
i.
No more legal formalities
Advantages/merits of sole trading concern
1. Easy
to establish
2. Easy
to dissolve
3. Prompt
decision
4. Secrecy
5. Flexibility
6. Loan
facility
7. Economy
8. No
sharing of profit
Disadvantages/demerits of sole trading concern
1. Limited
capital
2. Limited
managerial skill
3. Unlimited
liability
4. Uncertain
duration of life
5. Loss
in absence
6. Possibility
of wrong decisions
7. Limited
scope of expansion
Procedures of registration of sole trading concern
a. To
submit application form
b. To
deposit fee
c. To
receive a certificate of registration
Fine and penalty
Procedures of renewal
Chapter 4 Partnership firm
Features/characteristics of partnership firm
a. Ownership
of two and more than two
b. Sharing
of profit and loss
c. Unlimited
liability
d. Based
on agreement
e. Restriction
of transfer of shares
f. Management
and control
g. No
legal status
Merits and demerits of partnership:
A. Merits:
1.
Easy in formation and dissolution
2.
More resources
3.
Flexibility
4.
Union of business ability and skill
5.
Appropriate decision
6.
Protection of minority
7.
Secrecy
B. Demerits
1.
Unlimited liability
2.
Possibility of conflict
3.
Restriction on transfer of share
4.
Delay in decision making
5.
Uncertain lifeless public confidence
6.
Inappropriate for large scale industries
Types of partnership firm
1)
Partnership at will
2)
Particular partnership
3)
Limited partnership
4)
General partnership
Types of partner
a)
Active partner
b)
Sleeping partner
c)
Limited partner
d)
Nominal partner
e)
Minor partner
f)
Partner in profit only
g)
Secret partner
h)
Quasi partner
i)
Incoming partner
j)
Outgoing partner
Rights and duties of partners
Rights
i.
Right to participate in management
ii.
Right to share profit
iii.
Right to inspect and take the copy of books of
account
iv.
Right to get interest on additional capital
v.
Right to quit from the firm
vi.
Right to express opinion
vii.
Right to ownership
viii.
Right to dissolve the firm
ix.
Right to proper use of firm’s property
Duties
i.
To act faithfully and honestly
ii.
To share losses
iii.
Not to transfer shares
iv.
To work within authority
v.
Not to run competitive business
vi.
To compensate
vii.
Not to demand remuneration
viii.
Not to use firms property
ix.
To maintain up to date accounts
Partnership deed and its contents
Difference between sole trading concern and partnership firm
Basis of difference
|
Sole trading concern
|
Partnership firm
|
1)
Number of members
|
Sole trading concern has one member or owner.
|
In Partnership firm minimum 2 to maximum 20 can remain as partner.
|
2)
Agreement
|
It does not require agreement.
|
It requires an agreement among the partners.
|
3)
Capital
|
In sole trading concern single owner invest all required capital for
business operation.
|
In partnership firm, all partners invest all required capital for
business operation.
|
4)
Secrecy
|
A sole owner keeps all transaction of business with him/her.
|
The partners share transaction among them but All partners keeps
their business transaction within them.
|
5)
Management and control
|
Owner is responsible for all management and control
|
All the partners have equal right to participate in management and
control.
|
6)
Sharing of profit and loss
|
All profits and losses occurred in the business organization is bear
by sole owner.
|
All profits and losses occurred in the business organization is
shared among the partners either according to mutual agreement or according
to capital invested proportion.
|
7)
Registration with and act
|
Sole trading concern is registered either in department of commerce
or in department of industry under Private firm registration act 2014 B.S
|
Partnership firm is registered either in department of commerce or in
department of industry under partnership act 2020 B.S
|
8)
Decision
|
There is prompt decision in sole trading concern but possibility of
wrong decision is high.
|
There is delay in decision making in partnership firm but possibility
of wrong decision is low or minimum.
|
9)
|
||
10)
Close-down
|
It can be closed in death, insanity, will and interest of partners
and by other conditions
|
Chapter 5 Joint stock Company
To avoid the drawback of sole
Characteristics of Joint Stock Company
1.
An artificial person
2.
Limited liability
3.
Separate legal entity
4.
Perpectual existence
5.
Separation of ownership and management
6.
Transfer of shares
7.
Common seal
8.
Number of members
9.
Lack of secrecy
Advantages and disadvantages of Joint Stock Company
Advantages:
1) Limited
liability
2) Transfer
of shares
3) Perpetual
life
4) Huge
capital
5) Sound
and better management
6) Public
confidence
7) Easy
to obtain loan
8) Diffusion
of risk
Disadvantages:
1) Difficult
in formation
2) Delay
in decision
3) Lack
of secrecy
4) Exploitation
of general shareholders
5) Conflicts
of interested groups
6) Separation
of ownership and management
7) Groupism
of authority
8) Difficult
for management
Difference between partnership firm and Joint Stock Company
Basis of difference
|
Partnership firm
|
Joint stock Company
|
1)
Number of members
|
In Partnership firm minimum 2 to maximum 20 can remain as partner.
|
In Public Joint stock Company minimum 7 to unlimited can be member
similarly in private Joint stock Company minimum 1 to maximum 50 can be
member.
|
2)
Liability
|
All the partners have unlimited liability.
|
All the shareholders have limited liability up to their share.
|
3)
Act
|
All partnership firms are established under Partnership act 2020 B.S.
|
All Joint stock Companies are established under Company act 2020 B.S.
|
4)
Transfer of shares
|
There is restriction in transfer of shares in partnership firm.
|
There is no restriction in transfer of shares in public joint stock
company but some restriction in private company
|
5)
Management
|
All the partners have equal right to participate in management.
|
There is separation between ownership and management so shareholders
have no right to participate in management but they can elect board of
directors in management by voting.
|
6)
Perpectual life
|
The partnership firm does not have perpectual life; life of firm
depends upon the life of partners. If any partner died, became insolvent, mad
or imprisoned the firm will be closed down.
|
Joint stock company has perpectual life. “Members may come and
members may go but the company goes on forever.”
|
7)
Registration with
|
It should be registered either in department of commerce or in
department of industry.
|
It should be registered in company registrar office.
|
8)
Audit
|
Auditing is not compulsory for the partnership firm.
|
Auditing is compulsory must be done in every fiscal year.
|
9)
Secrecy
|
Secrecy can be maintained partnership firm among the partners.
|
Secrecy cannot be maintained in joint stock company. It compulsorily
discloses all its financial transaction to public through print media,
newspaper.
|
10)
Close-down
|
It can be closed in death, insanity, will and interest of partners
and by other conditions
|
It can be closed as per the provision of act or law only.
|
Types of Joint Stock Company
1. On
the basis of incorporation
i.
Chartered company
ii.
Statutory company
iii.
Registered company
2. On
the basis of number of members
i.
Public limited company
ii.
Private limited company
Difference between private and public limited company
Basis of difference
|
Private limited company
|
Public limited company
|
i.
|
||
ii.
|
||
iii.
|
||
iv.
|
||
v.
|
||
vi.
|
||
vii.
|
||
viii.
|
||
ix.
|
||
x.
|
3. On
the basis of holding
i.
Independent company
ii.
Subsidiary company
iii.
Holding company
4. On
the basis of in land
i.
In land or national company
ii.
International or multinational company
5. On
the basis of ownership
i.
Government Company
ii.
Non-government Company
Chapter 6 Co-operative organization
Characteristics of co-operative organization
a.
Voluntary association
b.
Equity
c.
Democratic management
d.
Service-motive
e.
Separate legal entity or status
f.
Limited liability
g.
Cash trading
h.
Distribution of profits
Difference between co-operative organization and Joint Stock Company
Basis of difference
|
Co-operative organization
|
Joint stock Company
|
1)
Number of members
|
Minimum 25 to maximum unlimited
|
In Public Joint stock Company minimum 7 to unlimited can be member
similarly in private Joint stock Company minimum 1 to maximum 50 can be
member.
|
2)
Voting right
|
‘One man one vote’ system is adopted at the time of election.
|
‘One share one vote’ system is adopted at the time of election.
|
3)
Act
|
All the co-operative organizations are established under Co-operative
act 2048 B.S.
|
All Joint stock Companies are established under Company act 2020 B.S.
|
4)
Issue of shares
|
CO-operative organization cannot issue shares and debenture directly.
|
Joint stock company can issue of shares and debentures directly to
public.
|
5)
|
||
6)
|
||
7)
|
||
8)
|
||
9)
|
||
10)
|
National Cooperative Development Board (NCDB)
introduction
National Cooperative Development Board (NCDB) was established by NCDB act of 2049 BS in 21st Katrik 2049 BS. It has its own separate legal entity or status, own legal existence. The main objectives of establishment of NCDB is to oversees the activities of all cooperative organizations to provide financial and technical support. Without development of cooperative, government cannot develop their social and economic status. With financial and technical support of cooperative, people's economic and social status slowly increase.
The main objectives is to mobilize local resources through cooperative organization. This board provide so many facilities for the expansion of cooperative organization which are established under cooperative act 2048 BS.
It is the mother organization of cooperative organization because it support in growth and expansion of all cooperative organization. It doesn't have any branch, it is only one in a nation.
Formation
NCDB is formed under the chairmanship of minister of Agriculture and Cooperative. In this board, 25 persons are required to formulate, they are called executive committee. They are:
Government of Nepal
Governor of Nepal Rastriya Bank
Secretaries of various ministries
Representative of National planning commission
Registrar of cooperative department and other members associated with cooperative organization.
Functions
The functions of NCDB are as follows:
Formulation of plan and policies
NCDB formulate necessary plan and policies for promotion and development of cooperative society in Nepal. It recommends such policies for implementation to government.
Support to Nepal government
NCDB provide support to Nepal government to formulate plan and policies in education, health, irrigation for the development of cooperative movement.
Conduct necessary study and research
NCDB conducts necessary study and research for the development of cooperative society. It also conducts necessary study and research about cooperative movement, development, changes, status, etc.
Provide financial and technical assistance
If necessary, NCDB provides financial and technical support to the small cooperative for the development of cooperative organization. It provides loan facility to the cooperative society. It also conducts training, workshop and seminar to cooperative society.
Invest in cooperative organization
For the development of cooperative organization, if necessary it also purchase shares, participate in management activities in cooperative organization.
Provide Guarantee for securities
Sometime, NCDB's financial support may not be sufficient for the development of cooperative, cooperative organization should take loan from any financial institution at that time. NCDB provide guarantee for securities to financial institution.
Make agreements
NCDB make agreements with national and international organization for joint ventures for industrial development in cooperative sector.
Maintain coordination
NCDB coordinate between cooperative organization to government, nongovernment and foreign organization for the development of cooperative organizations.
Chapter 7 Public enterprises
Features of public enterprises
1.
Government ownership
2.
Government management and control
3.
Service motive
4.
Financing by government
5.
Separate legal entity
6.
Autonomy
7.
Public responsibility and accountability
8.
Perpectual existence
Importance of public enterprises
1)
Provide facilities
2)
Economic development
3)
Provide employment opportunity
4)
Supply of essential commodities
5)
National defense
6)
Establish basic industries
7)
Balanced development
Types of public enterprises
a) Department
undertaking
i.
Formation
ii.
No separate legal entity
iii.
Management and control
iv.
Government fund
v.
Government employees
vi.
Government rules and regulation
b) Public
corporation
i.
Formation
ii.
Separate legal entity
iii.
Government ownership
iv.
Management and control
v.
Appointment of employees
vi.
Service motive
vii.
Public accountability
c) Management
and control Government companies
i.
Formation
ii.
Ownership
iii.
Management and control
iv.
Public responsibility and accountability
v.
Separate legal entity
vi.
Free from government accounting
vii.
Recruitment of employees
Chapter 8 Multinational company
Features
Chapter 9 Motivation
Motivation is the psychological factors; it is directly
concerned with the human behaviour. Motivation is the act of stimulating and
encouraging others to contribute their extra efforts while performing the job.
It can be also defined as an inner-force that energizes the person to perform
the job with the effective manner.
To run the organization smoothly it needs different types of
resources human, physical (machinery), financial, information, etc. Motivation
is related to the behaviour of human resource proper motivation contributes
better utilization of other resources. Without the motivation of employees
proper planning, strategy and sufficient resources become useless. It helps to
utilize the skills, ideas, knowledge while performing the job. Motivation is
the act of inspiring and stimulating of employees towards for the assigned job.
According to Robbins and Decenzo, “Motivation is an
individuals’ willingness to exert effort to achieve the organization’s goal
co-ordinate by this effort ability to satisfy individuals’ needs.”
Motivation is the act of energizing people or employees to
put more effort. It is willingness to contribute the maximum effort while
performing the job. Without employees’ motivation, there is no possibility of
optimum utilization of resources.
1)
Psychological concept
2)
Complex and unpredictable
3)
Concerned with individual
4)
Continuous process
5)
Pervasive
6)
Goal oriented
A. Maslow’s
need hierarchy theory:
Abraham Maslow, an eminent American psychologist, saw human
needs in the form of hierarchy ascending from lowest to highest.
Some assumptions of Maslow’s need hierarchy theory are as
follows.
Assumptions:
i.
Human needs and motives are complex.
ii.
Needs form hierarchy.
iii.
Unsatisfied needs are the reasons of motivation.
iv.
People seek growth and development.
This can be shown with the help of following figure.
1.
Physiological needs:
According to Maslow, physiological needs are basic needs
which are essential to survive. It includes food, shelter, clothes, etc. In an
organization to fulfill the physiological needs of employees, they should
provide salary, maintaining good working environment providing other basic
needs should be done for to motivate them.
2.
Security needs:
Security needs is the second step of human needs, they may
arise after the fulfillment of basic needs/physiological needs which includes
free from accident, survive from danger, etc. In the organization point of
view, management should provide the feeling of job security or permanent job,
insurance, providing other safety measures so that employees feel safe while
performing the job.
3.
Social needs:
According to Maslow, it is the third step of human needs.
Human beings are social animals who always want to live in society and want to
consume social elements. After the fulfillment of physiological and safety
needs human beings desire social needs like family, friends, society, etc. To
fulfill such types of needs of employees, management should provide the feeling
of team work, friendship, mutual co-operation and relation to each other.
4.
Ego/Esteem needs:
After the fulfillment of social needs, human beings desire
ego or esteem needs, it means respects by others or self-respect. To provide
ego or esteem needs management should provide the chances of promotion, merit
certificate etc.
5. Self
actualization:
According to Maslow needs hierarchy theory, Self
actualization needs are the highest level of needs. These needs are
soul-searching and inner-oriented. After the fulfillment of such needs, there
is no more desire of human being. To fulfill the self actualization needs of
employees, management should provide the freedom in work, decision making, challenging
jobs, etc.
Types of motivation:
A. Positive
and Negative motivation:
Positive motivation:
Positive motivation is also known as ‘carrot approach’.
Positive motivation offers some rewards to the employees in terms of money or
non-monetary or both. Monetary incentives include increment in salary, cash
rewards, bonus payment, share of profit, pension, etc. other facility.
Similarly, non-monetary incentives include promotion, delegation of authority,
participation in decision making, assignment of creative works, providing
better working environment, providing merits, etc. Positive motivation brings
integrity among the employees and develops the sense of belongingness and
feeling of family member among the co-workers. It helps to increase working
efficiency and gain organizational objectives.
Negative motivation:
Negative motivation is also known as ‘stick approach’. To
make employees motivated some punishment can be given. Such punishment can be
monetary and non-monetary. Monetary punishment includes fine, penalties,
reduction of remuneration, bonus, allowances and reduction of other financial
incentives. Non-monetary punishment includes demotion, threat of dismissal,
transfer to remote areas, minimization of responsibilities, etc. Negative motivation is rarely done because it
may tend to failure of management however it also cannot be avoided.
