Chapter 5.

BUSINESS AND PROFITS

(CONCEPTS)

1) OPTIMUM PROFITS:

This is the right amount of profit a business can achieve. In business, this figure takes account of marketing strategy, market position and other methods of increasing returns above the competitive rate.

2) ECONOMIC RENTS :

Accounting profits should include economic profits, which are also called economic rents. For instance, a monopoly can have very high economic profits, and those profits might include a rent on some natural resources that firm owns, where that resource cannot be easily duplicated by other firms.

3) VALUE CREATION :

A value is a belief in action. It is a choice about what is good, bad, important or unimportant. Value shape behavior until a value is acted upon it remains an aspiration. Values are hard to detect; yet they underpin organizations like the foundation of a house. If the foundation is weak, then the house falls down. Value creation is a constant and difficult struggle since we cant predict the future and many of the most important drivers of values are not measurable. Therefore, it may be appropriate to focus on only a few key drivers of value since organizational resources are limited.

- By Peter J. Clark.

4. STAKEHOLDERS:

The stakeholders of any organization are all those who part in some way in the activities of the organization. Stakeholders include host of entities as shown in the diagram:

STAKEHOLDERS

INTERNAL STAKEHOLDERS

EXTERNAL STAKEHOLDERS CONSUMERS

SHAREHOLDERS EMPLOYEES MANAGEMENT

SUPPLIERS CREDITORS COMPETITORS COMMUNITY

CLASSIFICATION OF STAKEHOLDERS

Any group of people who have a stake in the business.

 Those who are vital to the survival and success of the organization.

Any group that is affected by the activities of the organization.

5. PROFITS NOT AN UNETHICAL WORD:

It is considered from all angles, it is unethical, not to make profit. It is unethical for a company to make losses. Because, a company which cannot make profits and make losses , misutilities, scarce national resources, cannot pay back creditors, does not make health for its shareholders, make huge liabilities, upsets the economy, promotes inefficiency and most importantly, cannot, at any cost discharge its social responsibility, meet its welfare commitments and jeopardizes the future of its employee. Profits being contradictory to ethics, business ethics dictates that the first responsibility of business is to remain profitable and generate revenue for the shareholders and the society.
6. TRIPLE BOTTOM LINE:

The triple bottom line is abbreviated as TBL or 3BL. It is also known as people, planet, profit or the three pillars. Triple bottom line accounting means expanding the traditional reporting frame work to take into account ecological and social performance in addition to financial performance.

Chapter No. 6 MANAGERS AND ENTREPRENEUR

(Concepts)
1. MANAGERS :

A person who identifies and achieves organizational objectives through the deployment of appropriate resource. Manager can have responsibilities in one or more of five key areas: managing activities, managing resources, managing information, managing people and managing him- or herself at the same time as working within the context of the organizational, political and economic business environments. A manager is the people responsible for planning and directing the work of a group of individuals, monitoring their work and taking corrective action when necessary. For many people, this is their first step into a management career.

2. ENTREPRENEUR :

An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes signification accountability for the inherent risk and the outcome. Entrepreneur is one who undertakes an enterprise, especially a contractor, acting as an intermediatory between capital and labour.

3. PERSONAL ETHICS :

Personal ethics depends highly on personal belief and loyalties and result in behaviour in a persons life in his relationship, family and friends. We bind ourselves but our personal ethics as they define who we are, and give us the pride and confidence in our lives. Personal can also change depending on major events in our lives.

4. PROFESSIONAL ETHICS :

Professional ethics depends highly on the requirements of the profession, looking out for the interests of the organizational as well as the customers. We are often bound legally by our professional ethics, such as confidentiality and due diligence. Professional ethics are usually written and singed, and rarely change over time.

5. SPECIAL OBLIGATIONS OF MANAGERS :

It is impossible to formulate a code of professional ethics managers without some reasonably clear idea of the mission of the profession. The legal profession, for example can spin its convoluted conflicts of interest rules only because it knows what it is trying to achieve fair representation for all parties. Medical ethics are beset with some thorny issues, such as when termination of pregnancy is appropriate, but there is a large area of agreement on what the point of the whole affair is. No one should attempt to spell out the professional obligations of business managers without a similar understanding of their raison detre. A brief intimation of it was given above, and it might be elaborated under three headings To generate wealth To provide meaningful and gainful employment

To contribute to social order and stability

6. WEALTH CREATION :

To say that a business manager is obligated to generate wealth is by no stretch tautologies, if the generation of wealth is distinguished from its mere transfer. To make a profit is to transfer wealth to oneself. It is future question whether wealth is generated. If for example one makes a handsome profit on real estate speculation one can ask what is contributed to the commonweal by the transfer money and land titles. If the land is held and released in such a way as to provide its rational development then estate deals can create wealth. On the other hand, irresponsible speculation can impede the proper development or preservation of land.

7. EMPLOYMENT :

Most people in industrialized countries spend the bulk of their adult years and deplete a major fraction of their energy working outside the home. Their employment not only supplies their livelihood but structured their lives with meaningful activity. Because the existence and quality of employment is largely in the hands of managers, managerial decision have a profound effect on the lives of others.

8. SOCIAL ORDER AND STABILITY:

Business is the primary player in a system of mind-boggling complexity. This is the system that makes things work that transports one to work, that puts food on grocery shelves, which provides electricity to household outlets, which polices the streets and resolves disputes, and so on with millions of product and services. Anyone who believes this system runs itself should spend some time in a part of the world in which things do not work. The system works only because private and public-sector managers on the whole have a strong sense of responsibility. They take to the burden of making sure that other work together and do their job in a responsible manner. To be sure they do it primarily because their firm or agencies would collapse otherwise. But it is evident in the experience of societies that do not work so well that firms and government agencies can endure despite poor performance. When things do work, it is because mangers collectively adhere to professional standards even when immediate incentives to do so may be less than compelling.