BBA Notes Business Organisation Business Growth Study Material
BBA Notes Business Organisation Business Growth Study Material :- In This Article You Can Find Meaning Retail trade Wholesaler Business Organisation Notes
Meaning of Business Growth
Generally, the term ‘Business growth’ is used to refer to various things such as increase in the total sales volume per annum, an increase in the production capacity, increase in employment, an increase in production volume, an increase in the use of raw material and power. These factors indicate growth but do not provide a specific meaning of growth. Simply stated, business growth means in the size or scale of operations a firm usually accompanied by increase in its resources and output.
Need of Growth BBA Notes Business Organisation
- Survival : In a competitive market no single enterprise can have monopoly. The competition can be direct or indirect. Direct competition comes from other firms manufacturing the same product. For example, there are many brands of shampoos available in the market. To survive the competition the manufacturer of each brand of shampoo has to continuously bring new varions of basic product to maintain an edge over his competitors. Indirect competition may come from availability of cheaper subsitutes. For example, the khadi industry faced a problem when polyester emerged. Severe competition forces a firm to grow and gain competitives strength. Any business firm that fails to grow can’t survive for long. A growing conern will be an innovator and can easily face the risk of competition. Thus growth is means of survival in a competitive and challenging environment.
- Economies of Scale : Growth of a firm may provide several economies in production, purchasing, marketing, finance, management etc. A growing firm enjoys the addvatages of bulk purchase of materials, increased bargaining power, spreading of overheads, expert management etc. this leads to low cost of production and higher margin of profit. This also ensures full utilization of plant capacity.
- Owners Mandate : The owners of a company get the ultimate benefit of growth in the form of higher profits. They may direct the management to reinvest a substantial protion of the earnings in the business rather than paying them out. Capable management may on its own like to the carefully calculated risk and expand the size of the company.
- Expansion of the Market : Increase in demand for goods and services leads business firms to increase the supply also, Population explosion and transportation led to increase in the size of markets which in turn resulted in mass production. Busienss firms grow to meet the increasing demand.
Expanding markets provide opportunity for business growth.
- Latest Technology : Some business firms invest in researh and development activites to create new products and new techiques, while others try to acquire latest technology from the market. Rationalization results in more efficient use of resources and a firm may grow to obtain them.
- Prestige and Power : The more the size of the business firm increase the more is the prestige and power of the firm. Businessmen satisfy their urge for power by increasing the size of their business firm.
- Government Policy : In a planned economy like India, business firms operate under a large number of rules and restrication. A big firm is in a better position to carry out the various legal formalities required to obtain licenses and quotas. Busienss firms may plan for growth to make usae of the incentives provided by the government. The government provides certain subsidies and tax concessions to the new industrial units in the backward areas and those producing goods for expot only.
- Self-sufficiency : Some firms grow to become self sufficent in terms of marketing of raw material or marketing of products. Growth in either or both of these forms reduces the dependency of the firm over other firms.
Method of OperationBBA Notes
On the basis of the method of operations, wholesalers may be divided into two categories :
(i) Service wholesalers those who perform a variety of function like advertising, grading. Branding, packingg, etc. on behalf of manufacturers and retailers.
(ii) Limited function wholesaler those who undertake to carry out a few limited functions, like packing or grading.
Territory Covered BBA Study Material
On the basis of geographical coverage of dealings, wholesalers may be grouped into three types :
- Local wholesaler those who restrict their operation to a particular city or town and supply products to retailers in that area.
- District wholesaler those who have dealings with retailers located in a district.
- Regional or national wholesaler those who specialise in products having a national market and are nationally advertised. They have dealings with retailers located in a region or a country.
Advantavges of Growth
- For obtaining the economies of scale.
- For exploitation of business opportunites.
- For facing competition in the market by diversifying ithe product line.
- For providing protection against adverse business conditions, e.g., Depression.
- For gaining economic and creating resources for further reinvestment into business.
- For making optimum utilization of resources.
- For securing subsidies, tax concessions and other incentives offered by the government.
Limitations of Growth
Business firms cannot grow indefinitely. Growth has its own limitation which are :
- Finance : Growth, especially external growth, requires additional capital investment which is sometime difficult for a small firm to arrange.
- Market : Growth can be achieved to the extent that the size of market permits. If a firm grows faster than increase in the size of the market, it is likely to face failure.
- Human Relations Problems : In a big firm, management loses personal touch with employees and customers. Motivation and morale tend to be low resulting in inefficiency.
- Management : Growth increases the functions and complexities of operations. As the number of functions and departments increase, coordination and control become very difficult. If the organization and management structure is not capable of accommodating them, growth may be harmful.
- Lack of Knowledge : Under conglomerate growth a firm enters new industries and new markets about which the managers know little. Managers find it difficult to find and develop managers who can quickly handle new units and improve their earning potential against heavy odds. Many growing firms could not succeed because their managers felt they they could manage anything anywhere.
- Social Problems : From social point of view also big firms may be undesirable as they may lead to concentration of economic power and creation of monopolies which may exploit consumers. In their desire for growth firms indulge in combative adverting. The quickening growth creates a cultural gap which society finds it difficult to cope with technological change.
Types of Factory Buildings BBA Stady Material
Planning and construction of factory building is a very important task. The building should be designed and built to protect the property and workers. It should provide for efficient operation of the plant so that the costs of operations are minimized. The factory building should provide pleasant and comfortable working environment.
There are two main types of factory buildings, namely single storey, and multistory buildings.
Single Storey or Horizontal Buildings
A single storey building normally consists of the ground floor only. However in some cases, basement or mezzanine floor may be constructed for storing raw materials and finished goods. If necessary, machines and equipment may also be arranged in the basement.
Advantages of Single Storey Building BBA Notes
- Low construction cost : The cost of construction per square foot is comparatively low as the foundations of the building require less expenditure. Less time is required in construction.
- Ease in materials handling : it is easier and cheaper to handle raw materials, spare parts and work-in-progress because all machines and equipments are arranged on one floor. Back tracking and delays in materials handling are avoided. In the absence of too many columns of iron and steel obstacles are reduced resulting in smoother operations.
- Natural lighting : There can be better natural lighting throughout the factory. Suitable roof, big side windows, etc. can be used for allowing sufficient day light during working hours. Natural lighting provides balanced natural colour and reduces the costs of artificial illuminations.
- Efficient supervision : Supervision and control of the manufacturing process is easier and economical because all the equipments and workers are located on the some floor. A transparent glass cubicle can be placed at the centre or at a strategic position from which the supervisions can continuously watch the operations. The supervisors can also walk through the space between the machines and cover all the production stations quickly.
- Possibility of expansion : A single storey building is normally constructed on a large area of land. Therefore, it is easier to expend operations of the factory. More rooms can be added to provide extra space in factory whenever necessary.
- Reduced fire hazards : Fire hazards due to electricity and chemicals can be minimized through frequent inspection of junction boxes and power convertors. This is because prevention measures are easily accessible.
- Conservation of floor space : Space is not wasted on elevators shafts stairways, etc. Greater floor load bearing capacity for heavy equipment is ensured. Ceilings can be high to accommodate movement of machinery of great height and material handling equipments like overhead conveyors.
- Flexibility of layout : there is greater flexibility in the arrangement of production facilities. As all the machinery and equipment are situated on one floor, suitable rearrangements can be made to suit changes in the manufacturing process.
Multistorey of Vertical Building BBA Study Material
Multistorey buildings consist of several floors and have, therefore, a vertical structure. Machinery and equipment are arranged on different floors according to the manufacturing plan. As greater space is available in offices can also process of manufacturing. The design of a factory directly or indirectly influences the operational costs of the plant. Costs of operations can be minimized if the factory is designed according to a scientific and systematic approach. Some of the benefits of a goods factory design are given below :
- Storage and Movement of Materials : A well designed factory provides adequate storage space for raw materials. The enterprise can store sufficient materials so that the production process is not disrupted. It need not depend upon outside warehousing facilities. Moreover a goods factory design the movement of material inside the factory without any difficulty. Material handing costs can be mininised if the material are carried over short distances.
- Service Facilities : Factory design has a direct bearing on the costs of heating. Power light and other services. A good design allows for proper insulation of the roofs and walls. Insulation prevents heat losses thereby reducing the costs of maintenance. The costs of distributing electricity for lighting and other purposes can be reduced through a well designed factory building.
- Supervision : A well designed factory ensures maximum visitsory of operations to the supervisors. This means the same number of workers can be lesed with fewer supervision. Fewer supervisors will help to reduce the possibility of grievance. Workers are likely to be more contented when they have to report to one or two supervisors only. The factory can be so designed as to enable the supervisors to perform their duties with the minimum of movement this well help to minimize the cost of supervision.
- Employee Morale : A well-designed factory provides a pleasant work environment thereby boosting the morale of workers. When the factory provides appropriate facilities like rest room, canteens, toilets, first aid, etc. workers feel comfortable and have a sense of pride.
- Productivity : A good factory design helps to increase productivity by providing adequate facilities of lighting ventilation, heating, etc. proper lighting avoids eye strain and fatigue. Ventilation helps to maintain heating and comfort of employees by providing free movement of fresh air. Well-arranged machinery and equipment reduces excessive movement of workers. Adequate provision for safety against fire and accidents also lead to higher quality of work lesser wastage.
Factors considered for the plant Location
- Supply of raw materials.
- Nearness to market.
- Transport facility.
- Power supply.
- Supply of capital.
- Supply of labour.
- Nature factor.
- Political factor.
- Personal factor.
- Historical and religious.
- Initial start and goodwill.
Primary Factors BBA Business Organisation Notes
Following factors be considered while selecting a plant location :
- Supply of raw materials : it is necessary to consider the adequate supply of raw material and the nature of raw material. The cost of raw material is an important element of the total costs of production if the supply of raw material is not regular. It may lead to frequent stoppage and breakdown in the production.
- Nearness to market : Every producer wants to sale his product in the market. Nearness to market is important from the point of view of this control over the market. Nearness adjusting supply according to changes in demand and gaining control over the market nearness to reduce cost of transporting finished goods to the market and taking advantages of favourable price and demand in the market.
- Transport facility : Speedy transport facilities are needed for regular supply of raw material at low costs and for transporting finished product on time to the market.
- Supply of labour : supply of labour at low rate is important because labour is the important element in the cost of production so it has great importance in selecting a plant location. Machines cannot produce anything without skilled labour.
- Power supply : Power is necessary for the process of production and expansion. Therefore a capital market must be developed in industrial centre large scale production and big industries require large amount of equity capital and deventure capital for a long period so, it is necessary for that development of bank and financial institute are developed.
- Supply of capital : Industries requires capital for initial promotion and expansion. Therefore a capital market must be developed in industrial centres large scale production and big industries require large amount of equity capital and deventure capital for large period so, it is necessary for that development of bank financial institute are developed.
Secondary Factory BBA Notes
An enterprising spirit innovation technically know how an industrious nature of population consider all these factors taken together and a favourable government policy create a favourable atmosphere for the purpose of the establishment of industries. Heavy industries in india are the result of personal factors like enterprise, industrial nature of one main creating an industrial gap. Following secondary factors to be considered while selecting a plant location :
- Nature factor : Land, water, climate sources of raw materials and agricultural climate are some nature factors which are important for some industries like cotton texile, sugar and jute. These industries depend on a good climate and sources of natural raw material.
- Political factor : The government policy of licensing and encouraging the development of industries in undeveloped regions determines the location of industries.
The government policy of subsidiary small industries in village areas will determine their location and dispersal in village. The government policy of not allowing licenses to big cities will cause the dispersed of industries to underdevelop areas.
- Personal factor : in business history it was found that personal considerations have decidedly affected the location of certain industrial units. There is no rational for such considerations however, when there is a possibility of multiple locations, this factor plays a decisive role in location consideration.
- Historical and religious factor : Some industrial cities are of historical importance. Some of them are capital cities having religious importance ex-Benaras, Prayag, Nasik etc. industries grow those religious centres because these are place of historical importance.
- Initial start and goodwill : Some industrial get located at a place because some industrialists start the industry at that place at an early stage, e.g., Jamsdpur, (Tatas) was developed into an industrial city, the iron and steel industry received its initial start there.
Plant Layout BBA Notes Business Organisation
A plant layout is an arrangement of facilities and service in the plant. It outlines relationship between production centers and departments.
Plant layout can be defined as an optimum arrangement of industrial facilities, including personnel, equipments, storage space, material handling equipments, and all other supporting services. In an existing or proposed plants. Plants layout can also be defined as “A technique of locating machines, processes and plant services within the factory in order to secure the greatest possible output of high quality at the lowest possible total cost of production.”
Plant layout provides a broad framework within which production and many administrative activities have to take place. All facilities like equipment, raw-materials, machinery, tools, fixtures, finished goods, in process inventories, workers, material handling equipments etc. are given a proper place in the plant layout. Therefore, the plant layout has an important bearing on utilization of facilities on manufacturing methods, on control mechanisms and on production costs.
Objectives of a Goods Plant Layout BBA Study Material
An appropriate or good plant layout is one which enables the right equipment coupled with right method, in right place to permit processing of a product unit in the most effective manner. A good layout ensures orderly and efficient arrangement of work facilities and personnel. Good plant layout helps to improve industrial productivity. It is a constant and continuous problem.
Good layout is bassed on the principle of flow— smooth flow of operations, flow of material and people, so that manufacturing length and time can be shortened and inventory of material in process can be reduced. Similarly, it must be flexible and should anticipate future needs.
“A good layout is one which allows materials rapidly and directly for processing. This reduces transport handling, clerical and other costs down per unit, space requirements are minimized and it reduces idle machine and idle man time.”
- Integrate the production centers : A goods layout integrates the production centers (men, material and machines) into a logical , balance and effective production unit.
- It permits the arrangement of the equipment to provide greater utilization.
- A good layout will minimize the production delays and reduce congestion, by allowing smooth and continuous flow of raw-material and work-in-process.
- It helps to increase the output by shortening the manufacturing time.
- Reduce Material Handling : The equipments may be arranged in such a manner to minimize material handling and transportation.
- Effective Utilization of available space : The layout determines the location of departments and production centers, their proximity to each other and to various services, and hence the efficient utilization of the available space. Moreover, a good layout utilizes space, both vertical and horizontal in the best possible manner.
- Worker Convenience and Job Satisfaction : It is obvious that everbody wants to work in a pleasant and clean environment. Reducing excessive noise and safety are the factors that should be considered while planning a layout. Further, attention to such items as convenient working temperature, ventilation, light removal of moisture and dirt and safety is also important in promoting worker’s job satisfaction.
- Flexibility : A good layout should be adaptable to possible changes in the plant’s production programmes; either changes in product design or changes in the required output, since these changes may necessitate rearrangement of equipment or expansion or the plant’s facilities.
- Removal of Boottlenecks : A good plant layout allows smooth flow of operations, flow of materials and eliminates bottlenecks thought balancing of plant capacities.
- Quick Disposal of Work : Good layout allows quick disposal of work and minimum waste of time in production.
- Avoids Industrial Accidents : By Providing adequate space for the movement of men, material etc. and by proper arrangement for storages, good environment helps to minimize accidents.
- Eliminaties physical efforts required of operative workers.
- Maintenance of decency and orderliness inside the plant area.
Importance of Layout BBA Notes
The importance of a layout would be better appreciated of we understand the influence of an efficient layout on the manufacturing function : it makes it smooth and efficient. Operating efficiencies, such as economies in the cost of handling materials, minimization of production delays and avoidance of bottlenecks; all these depends on a proper layout.
An ideally laid out plant reduces manufacturing const through reduced material handling. Reduced personnel and equipment requirement and reduced in process inventory.
- Economics of Handling : Nearly 30 per cent to 40 per cent of the manufacturing costs is accounted for by materials hadndling. Every efforts should, therefore,, be made to cut down this eliminated. A cynic may say that the cheapest way to gandle materials is not to handle them at all. But, in a factory, materials have to be handled and therefore, the answer to the questions how best avoid handling depends on layout.
- Effective Use of Available Area : Every unit of the plant area is valuable specially in urban areas. Effort should therefore, be made to make use of the available area by planning the order that they may perform multiple function; development of up-to-date work areas and operator job assignment for a full utilization of the labour force.
- Minimization of Production Delays : Repeat orders and new customers will be the result of prompt execution of orders. Every management should try to keep to the delivery schedules. Often, the deadline dates for delivery of production orders are a bug-a-boo to the management. Plant layout is a significant factor in the timely execution of orders. An idea layout eliminates such causes of delays as shortage of space, long-distance movements of materials, spoiled work and contributes to the speedy execution of orders.
- Improved Quality Control : Timely execution of orders will be meaningful when the quality of the output is not below expectations. To ensure quality, inspection should be conducted at different stages of manufacture. An ideal layout is provided for inspection to ensure better quality control.
- Minimum Equipment Investment : Investment on equipment can be minimized by planned machine balance and location, minimum handling distances, by the installation of general purpose machines and by planned machine loading. A good plant layout provides all these advantages.
- Avoidance of Bottlenecks : Bottlenecks refer to any place in a production process where materials lend to pile up or produced at rates of speed less rapid than the previous or subsequent operations. Bottlenecks are caused by inadequate machines capacity, inadequate storage space or low speed on the part or operators. The results of bottlenecks are delays in production schedules, congestion, accidents and wastage of floow area. All these may be overcome with an efficient layout.
- Better Production Control : Production Control is concerned with the production of a product of the right type at the right time and at reasonable cost. A good plant layout is requisite of good production control and provides the plant control officers with a systematic basis upon which to build organization and procedures.
- Better Supervision : A Good plant layout ensures better supervision in two Ways :
- Determining the number of workers to be handled by a supervisor and
- Enabling the supervisor to get a full view of the entire plant at one glance.
A good plant layout is therefore, the first step in good supervision.
- Improved Utilization of Labour : Labour is paid for every hour it spends in the factory. The efficiency of a management lies in utilizing the time for productive purpose. A good plant layout is one of the factors in effective utilization of labour. It makes possible individual operations, the process and flow of materials handling in such a way that the time of each worker is effectively spend on productive operations.
Characteristics of a Good Layout
- Smooth flow of production (i.e., raw materials and workers).
- Maximum utilization of available space.
- Minimum material handling.
- Smooth movement of men, materials and machinery from place to place.
- Good working conditions—lighting ventilation, temperature, humidity etc. are as per requirement.
- Flexibility for change of layout, expansion, change in product design and process.
- Proper location of storage areas.
- Facilitates supervision and control.
- Effective coordination and integration among men, materials and machinery to maximize utilization and output.
- Provision of safety and reduction of accidents.
Symptoms of Bad Layout
- Congestion of materials, semi-finished goods, finished goods and even of workers.
- Excessive work-in-progress inventory.
- Poor utilization of available space.
- Excessive material handling distance, time and costs.
- Excessive maintenance time and costs.
- Long production cycle time.
- Delay in meeting the delivery schedules.
- Difficulty in supervision and control.
- Excessive damage to materials and products during transportation and storage.
- Low productivity due to excessive handling costs, storage costs, long cycle time and more idling of men and machines.