Class -XI BUSINESS STUDIES Chapter 3 to 7 Notebook Notes

Chapter 3 (Private, Public, and Global Enterprises)

Private Sector- Businesses owned by individuals or groups of individuals.

Public Sector- Consists of organizations owned and managed by the government. Some fall
under the operation of the central while others fall under the operation of the state
government.

Forms of Organizing Public sector enterprises

1.Departmental Undertaking- This is the oldest and most traditional form of organizing
public enterprises. These enterprises are established as departments of the ministry and are
considered part or an extension of the ministry itself. They act through the officers of the
Government and its employees are Government employees. Examples of these undertakings
are railways and post and telegraph departments.

• Funds are derived from government treasury and profits are paid to the same
treasury.

• They are subject to accounting and audit controls applicable to other Government
activities;

• Employees working under these are government employees and their recruitment
takes place as per the rules.

• Directly controlled by the ministry

• Accountable to ministry

Merits:

• Facilitates parliament to exercise effective control over their operations.

• A high degree of public accountability

• Revenue earned goes to the government treasury and is a source of income for the
government.

• Ensures national security, directly under the supervision of the concerned ministry

Limitations:

• Inflexible

• Delay in the decision-making process

• Over-cautious bureaucrats don’t let businesses take risky ventures

 • Prevalent red-tapism

• High political intervention

• Insensitive to consumer needs

2.Statutory Corporation- Statutory corporations are public enterprises brought into

existence by a Special Act of the Parliament. This is a corporate body created by the
legislature with defined powers and functions and is financially independent with clear
control over a specified area or a particular type of commercial activity.

Features:

• They are set up under an Act of Parliament

• Wholly owned by the state

• It is a body corporate that can sue, be sued, enter into contracts, and can acquire
property in its name.

• Independently financed.

• A statutory corporation is not subject to the same accounting and audit procedures
applicable to government departments.

• The employees of these enterprises are not government or civil servants and are not
governed by government rules and regulations.

Merits:

• Enjoys independence and has operational flexibility.

• No financial interference from the government

• They frame their own rules, policies, and procedures

• A valuable instrument for economic development

Limitations:

• Does not enjoy much operational flexibility

• Government interference in matters concerning high budget

• Rampant corruption

• The Government has a practice of appointing advisors to the Corporation Board. This
curbs the freedom of the corporation in entering into contracts and other decisions.

3.Government Company- According to section 2(45) of the Companies Act 2013, a

government company means any company in which not less than 51 percent of the paid-up
capital is held by the central government, or by any state government or partly by Central
government and partly by one or more State governments and includes a company which is
a subsidiary of a government company.

Features:

• Created under the Companies Act 2013

• Can sue and be sued

• The company can enter into a contract and acquire properties in its own name

• Management is regulated by The Companies Act

• The employees of the company are appointed according to their own rules and
regulations as contained in the Memorandum and Articles of Association of the
company.

• These companies are exempted from the accounting and audit rules and procedures.

• The government company obtains its funds from government shareholdings and
other private shareholders.

Merits:

• Can be established by fulfilling the requirements of the Indian Companies Act. A

separate Act in the Parliament is not required.

• It has a separate legal entity, apart from the Government.

• Enjoys autonomy in all management decisions

• by providing goods and services at reasonable prices are able to control the market
and curb unhealthy business practices.

Limitations:

• The provisions of the Companies Act do not have much relevance.

• It is not answerable directly to the Parliament.

• The management and administration rests in the hands of the government.

The changing role of the public sector

• Development of infrastructure

• Regional balance

• Economies of scale

• Check over-concentration of economic power

• Import substitution
 • Government policy towards the public sector since 1991(Reduction in the number of
industries reserved for the public sector from 17 to 8, Disinvestment of shares of a
select set of public sector enterprises, Policy regarding sick units to be the same as
that for the private sector, Memorandum of Understanding)

4.Global Enterprises- Global enterprises are huge industrial organizations that extend their
industrial and marketing operations through a network of their branches in several
countries. These enterprises operate in several areas producing multiple products with their
business strategy extending over a number of countries. They do not aim at maximizing
profits from one or two products but instead spread their branches all over. They are also
referred to as Multi-national Companies(MNCs).

Features:

• They possess huge financial resources and the ability to raise funds from different
sources.

• Foreign collaboration for the sale of technology, production of goods, and use of
brand names for the final products

• These enterprises possess technological superiority in their methods of production.

• They have highly sophisticated research and development departments engaged in

the task of developing new products and superior designs of existing products.

• They use aggressive marketing strategies in order to increase their sales in a short
period.

• Their operations and activities extend beyond the physical boundaries of their own
countries.

• Headquarters are based in their own countries and the control is centralized.
 Chapter 4 (Business Services)

What is a Service?

Services are intangible economic activities performed to achieve certain needs and do not
necessarily have to be associated with the selling of a product. Example: receiving advice
from doctors.

Nature of Services

• Services are intangible, they can’t be touched.

• Services are inconsistent since they are intangible, they have to be exclusively
performed for people as per their needs.

• It is inseparable from production and consumption because it takes place

unknowingly.

• Since they are intangible they can’t be stored for long enough and thus possess less
inventory.

• High involvement of the customer.

• Differences between goods and services

Goods Services
It is a physical object It is an activity or a process
It is homogeneous It is heterogeneous
Tangible Intangible
Consistent, fulfill similar needs of customers. Eg: Inconsistent, deals with exclusive demands of
mobile phones customers. Eg: Mobile services
Separate production and consumption Simultaneous production and consumption
Can be kept in stock Cannot be kept in stock
Involvement of customers takes place if delivery hasn’t Involvement of customers takes place during the
happened delivery process
Types of Services

• Business Services- Services used by businesses for the conduct of their activities are
business services. For example, banking, insurance, transportation, warehousing, and
communication services.

• Social Services- Services offered in pursuit of social goals are called social services.
For example, health care and education services are provided by certain Non-
government Organisations (NGOs) and government agencies.
 • Personal Services- These services are different in the nature of the experience of
their customers.For example, tourism, recreational services, restaurants

What is Banking?

Banking means accepting, for the purpose of lending and investment of deposits of money
from the public, repayable on demand or otherwise and withdrawable by cheques, draft,
order, or otherwise. A bank accepts money on deposits, is repayable on demand, and also
earns a margin of profit by lending money.

Types of Banks

Banks can be classified into four types:

• Commercial Banks- They are institutions that deal in money. For them, banking
means accepting deposits from people and lending on investment. They are
governed by the Indian Banking Regulation Act, of 1949. There are two types of
commercial banks: public sector and private sector.

• Cooperative Banks- They are governed by the provisions of the State Cooperative
Societies Act and are meant essentially for providing cheap credit to their members.

• Specialised Banks- These banks provide financial aid to industries, heavy turnkey
projects, and foreign trade. Banks such as foreign exchange banks, industrial banks,
development banks, and export-import banks cater to the specific needs of these
unique activities.

• Central Bank- The Central bank of any country supervises, controls, and regulates the
activities of all the commercial banks of that country. RBI is the central bank in India.

Functions of Commercial Banks

• Acceptance of deposits

• Lending of funds

• Cheque facility

• Remittance of funds

• Allied services

What is e-banking?

Performing any virtual banking functions and availing any of the bank’s services by
connecting to the bank’s website via an internet browser is called e-banking.

Benefits of e-banking:

• Facilitates digital payments and promotes transparency in financial statements.

 • Provides service at any time of the day and is available for 365 days.

• Easy transactions via traveling

• Maintains financial discipline since every transaction goes into a transparent record.

• Greater customer satisfaction

What is insurance?

Insurance is thus a device by which the loss likely to be caused by an uncertain event is
spread over a number of persons who are exposed to it and who prepare to insure
themselves against such an event.

Functions of Insurance

• Providing certainty

• Protection

• Risk sharing

• Assist in capital formation

Principles of insurance

• Utmost good faith

• Insurable interest

• Indemnity

• Proximate cause

• Subrogation

• Contribution

• Mitigation

Types of Insurance

• Life insurance- A life insurance policy was introduced as a protection against the
uncertainty of life. The insurance company undertakes to insure the life of a person
in exchange for a sum of money called the premium.

• Fire insurance- Fire insurance is a contract whereby the insurer, in consideration of

the premium paid, undertakes to make good any loss or damage caused by fire
during a specified period up to the amount specified in the policy. Fire insurance can
be claimed only when: there is an actual loss and the fire incident was accidental and
non-intentional.
 • Marine insurance-A marine insurance contract is an agreement whereby the insurer
undertakes to indemnify the insured in the manner and to the extent thereby agreed
against marine losses. Marine insurance provides protection against loss by marine
perils or perils of the sea.

Types of life insurance policies

• Whole-life policy- In this kind of policy, the amount payable to the insured will not
be paid before the death of the assured.

• Endowment Life Assurance Policy- The insurer (Insurance Company) undertakes to

pay a specified sum when the insured attains a particular age or on his death
whichever is earlier.

• Joint Life Policy- This policy is taken up by two or more persons. The premium is paid
jointly or by either of them in installments or lump sum.

• Annuity Policy- Under this policy, the assured sum or policy money is payable after
the assured attains a certain age in monthly, quarterly, half-yearly, or annual
installments.

• Children’s Endowment Policy-This policy is taken by a person for his/her children to

meet the expenses of their education or marriage.

Types of Marine Insurance Policies

• Ship or hull insurance- This insurance policy is for indemnifying the insured for losses
caused by damage to the ship.

• Cargo insurance-The cargo while being transported by ship is subject to many risks.
Thus, an insurance policy can be issued to cover such risks to cargo.

• Freight insurance- Freight insurance is for reimbursing the loss of freight to the
shipping company i.e., the insured.

Chapter 5 (Emerging Modes of Business)

What is E-business?

E-business can be defined as the conduct of industry, trade, and commerce using the
computer network

Scope of E-business

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 • B2B Commerce- When both the parties involved are business firms, it is called B2B
Commerce, Business to Business Commerce. A business needs help from other
businesses in gathering of raw materials, transportation, product gathering, etc.
Through computer/internet, orders can be placed, delivery can be tracked, and
payments can be made easily.

• B2C Commerce- Transactions taking place between businesses at one end and their
customers on the other are called B2C Commerce. E-business has enhanced B2C
Commerce to all possible extent. Be it 24/7 delivery of products, exhaustive and
customized marketing, or availability of products in massive numbers, businesses
have adapted to every single resort of marketing, through E-business.

• Intra-B Commerce- It deals with electronic transactions within an organization. Just

as the intercom facilitated voice communication within the office, the intranet
facilitates multimedia and even 3-D graphic communication among organizational
units for well-informed decisions, permitting better coordination, faster decisions,
and speedier workflows.

• C2C Commerce- This deals with the origination of business from customers and the
destination is also customers, thus it is named as C2C commerce. Examples: selling
used books or clothes either on a cash or barter basis.

• Benefits of E-business

• Ease of formation and lower investment requirements

• Convenience

• Speed

• Global reach/access

• The movement toward a paperless society

Limitations of E-business

• Low personal touch

• Incongruence between order taking/giving and order fulfillment speed

• Need for technology capability and competence of parties to e-business

• Increased risk due to anonymity and non-traceability of parties

• People resistance

• Ethical fall outs

Difference between Traditional Business and E-business

 Traditional Business
E-business

Easy Formation
Difficult to start

Does not require physical presence to start

Requires physical presence
it

Cost of setting up is low since no physical

Cost of setting up high facilities are required

Operating cost is low

Operating cost is high

Indirect contact with suppliers and

customers Direct contact with suppliers and customers

Follows a hierarchy from top-level

management to low level Does not follow a hierarchy

Shape of organizational structure is Shape of organizational structure is

Vertical/tall, due to the hierarchy or chain Horizontal/flat due to the directness of
of command command and communication.

Stages of online transactions

Stages for online transactions are categorized into three parts:

• Pre-Purchase/Sale stage- includes advertising and information seeking

• Purchase stage- comprises steps such as price negotiation, the closing of purchase/
sales deal, and payment

• Delivery stage- Except for this stage, all other stages involve the flow of information.
Process of online trading from a customer’s standpoint

• Registration- In order to purchase or view items through an online vendor, you have
to register through your email or number and enter a few details. You are also asked
to create a password for your profile.

• Placing an order- Users can go through the available items and them to their cart,
once they are done choosing, they can checkout and place their order.

• Payment Mechanism- Payment for online shopping can be done in multiple ways:

• Cash-on-delivery, pay after getting your product

• Cheque- A delivery partner can take the cheque from your doorstep
• Net-banking transfer- Banks allow users to make online payments through NEFT,
RTGS
• Credit/debit cards- Users can use their credit or debit cards to make digital
payments. This is done by entering your card details on the payment portal of the
app.
• Digital cash- It is electronic cash that does not have any physical properties. It is
issued by banks dealing in e-cash.

Chapter 6 (Social Responsibilities of Business and Business Ethics)

What is Social Responsibility of business?

Social responsibility of a business is its obligation to take those decisions and perform those
actions which are desirable in terms of the objectives and values of society. It motivates
businesses to adhere to environment-friendly business standards and do something for
society.

Arguments for Social Responsibility of Business

• Justification for existence and growth

• Long-term interest of the firm

• Avoidance of government regulation

• Maintenance of society
 • Availability of resources with business

• Converting problems into opportunities

• Better environment for doing business

• Holding businesses responsible for social problems

Arguments against Social Responsibility of Business

• Violation of profit maximisation objective

• Burden on consumers

• Lack of social skills

• Lack of broad public support

Reality of Social Responsibility of Business

• Threat of public regulation

• Pressure of labour movement

• Impact of consumer consciousness

• Development of social standards for business

• Development of business education

• Relationship between social interest and business interest

• Development of professional, managerial class

Kinds of Social Responsibility

• Economic responsibility- Business is an economic activity. Its foremost job is to

produce goods and services and sell them to the consumers as per their needs, to
gain profit.

• Legal responsibility- Every business has to function within the laws of the land. These
laws are made for the benefit of the people of the country and thus business
enterprises should be legally and socially responsible.

• Ethical responsibility- This deals with the behavior of the firm that is expected by
society and not codified by law.

• Discretionary responsibility- It is voluntarily taken by business organizations. For

example, providing charitable contributions to educational institutions or helping the
affected people during floods or earthquakes.

Social Responsibility Towards Different Interest Groups

 • Responsibility towards the shareholders or owners- has the responsibility to provide
a fair return to the shareholders or owners on their capital investment and to ensure
the safety of such investment.

• Responsibility towards the workers-It should try to create the right kind of working
conditions so that it can win the cooperation of workers

• Responsibility towards the consumers- Supply of the right quality and quantity of
goods and services to consumers at reasonable prices constitutes the responsibility
of an enterprise toward its customers.

• Responsibility towards the government and community- An enterprise must respect

the laws of the country and pay taxes regularly and honestly must protect the natural
environment.

Causes of pollution

Businesses must protect the natural environment. They should take responsibility for harm
that they are causing to nature in the form of gases, toxic chemicals, etc. Businesses must
plan activities to control pollution, work towards reducing carbon footprints, and adapt to
new technology to attain the goal of controlling climate change.

• Air pollution

• Water pollution

• Land pollution

• Noise pollution

Need for pollution control

• Reduction of health hazards

• Reduced risk of liability

• Cost savings

• Improved public image

• Other social benefits

Role of business in environment protection

• A commitment by the top management of the company to create, maintain and

develop a work culture for environmental protection and pollution prevention.

• Ensuring that commitment to environmental protection is implemented by all

divisions and employees.
 • Developing policies regarding the purchase of good quality raw materials, employing
superior technology, using scientific techniques of disposal and treatment of wastes,
and developing employee skills for the purpose of pollution control.

• Abiding by the laws of government for environmental protection.

• Participating in environmental conservation programs organized by the government.

• Arrange educational workshops and training to share technical information and

experience with suppliers, dealers, and customers to get them actively involved in
pollution control programs.

What is business ethics?

Ethics is concerned with what is right and what is wrong in human behavior judged on the
basis of a standard form of conduct/behavior of individuals, as approved by society in a
particular field of activity. Thus, business ethics are the morals and values that businesses
have to adapt to thrive in society.

Chapter 7 (Formation of a Company)

Formation of a Company- It is a tedious task that involves legal work, formalities, and
procedures. To ease it, we have divided it into three categories:

• Promotion

• Incorporation and

• Subscription of capital

(i) Promotion of a company- It is the first step in the formation of a company. This stage
involves forming a business idea and then translating it into a full-fledged business. It is the
most crucial stage since the future of your business depends on this stage completely.

Promoter- Any person or group of people focused on converting a business idea into a
business is called a promoter. A promoter is said to be the one who undertakes to form a
company with reference to a given project and to set it going and who takes the necessary
steps to accomplish that purpose.

Functions of a promoter

• Identification of business opportunity- A promoter is responsible for choosing the

most potential business idea, among all the available options

• Feasibility studies- Then a promoter checks for the feasibility of the idea. He/she is
responsible for understanding will the business idea be workable on the following
grounds: Technical feasibility, Financial feasibility, Economic feasibility
 • Name approval- Then, the next job is to get the name approved for the business.

• Fixing up Signatories to the Memorandum of Association- Promoters have to decide

about the members who will be signing the Memorandum of Association of the
proposed company.

• Appointment of professionals- Certain professionals such as mercantile bankers,

auditors, etc., are appointed by the promoters to assist them in the preparation of
necessary documents which are required to be with the Registrar of Companies.

• Preparation of necessary documents- The promoter takes up steps to prepare

certain legal documents, which have to be submitted under the law, to the Registrar
of the Companies for getting the company registered.

Documents to be submitted to the registrar's office

• Memorandum of Association- The name clause, Registered office clause, Objects

clause, Liability clause, Capital clause

• Articles of Association

• Consent of Proposed Directors

• Agreement

• Statutory Declaration

• Receipt of Payment of Fee

(ii) Incorporation- After the above formalities have been completed, an application has to be
submitted for incorporation of the business. The application is to be filed with the Registrar
of Companies of the state within which they plan to establish the registered office of the
company. The aforementioned documents are required for incorporating a firm.

Effect of Certificate of Incorporation

A company is legally born on the date printed on the Certificate of Incorporation. It becomes
entitled to enter into valid contracts. The Certificate of Incorporation is conclusive evidence
of the regularity of the incorporation of a company.

DIN- It stands for Director Identification Number. Every Individual intending to be appointed
as director of a company shall make an application for allotment of a Director Identification
Number (DIN) to the Central Government in the prescribed form along with fees.

(iii) Capital Subscription- In order for a public company to raise required funds from the
public by issue of debentures, it has to issue a prospectus which is an invitation to the public
to subscribe to the capital of the company and undergo various other formalities.

Steps for capital subscription:

 • SEBI Approval

• Filing of Prospectus

• Appointment of Bankers, Brokers, Underwriters

• Minimum Subscription

• Application to Stock Exchange

• Allotment of Shares

Difference between Memorandrum of Association and Articles of Association

Memorandrum of Association
Articles of Association

It defines the objects for which the They indicate how the objectives of the
company is formed. company are to be achieved

This is a subsidiary document and is

This is the main document of the company
subordinate to both the Memorandum of
and is subordinate to the Companies Act.
Association and the Companies Act.

It defines the relationship of the company Articles define the relationship between
with outsiders. the members and the company.

Every company has to file a Memorandum It is not compulsory for a public Ltd.
of Association company to file Articles of Association.

Acts beyond the Memorandum of Acts that are beyond the Articles can be
Association are invalid ratified by the member.

BST NOTEBOOK DATE FOR CORRECTION IS ON 20/08/2025