Class Notes of Business Organisation -BBA 101 (N)

Meaning of Business Unit-

In accordance to the size of their business unit, the word Unit is used in there are following
three ways
1. Plant- Any place where goods are manufactured or distributed or services are
rendered is called plant or an establishment.
2. Firm- The word firm is used in a broader sense. It concern which owns and
manages the plants and in addition arranges for mareting of the goods
manufactured. A firm may own only one plant or several plants manufacturing one or
more products. The collection of all these plants under one umbrella maes a firm.
3. Industry- The word Industry refers the collection of firms which either use the same
raw material or manufacture the same product, even if they use different raw
materials, such as te!tile mills.
Objectives of Business Unit"
1. #repare a plan for setting up a small business unit.
2. Identify various factors that affect the decision regarding location.
. Identify the various sources of raising fi!ed capital and woring capital.
!. #repare a pro$ect for loan to be submitted to an agency which grants loans.
". %eep in view the legal and other formalities re&uired to be compiled with to
establish a business unit.
#. Identify various measures of &uality control.
Factors $%ic% determine t%e si&e of a Business Unit"
1. 'emand for to Product (roduced
2. Financial re)uirement
. *overnment regulation
!. +%e ability and efficiency of ,ntre(reneur
". +rans(ortation cost
#. -is.
/. Production 0ystem
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Class Notes of Business Organisation -BBA 101 (N)
0et u( a (lan of action-
1. 0election of t%e line of business- At first decision is to be taen about the line of
business. The main consideration will be its profitability, ris involved and the amount
of capital re&uired.
2. 1%oice of form of organisation- A small business may be organized as a sole
proprietorship firm. Advantages and disadvantage of both the forms will have to be
considered and decision is to be taen.
. Financial (lanning- A business cannot be started and run without sufficient amount
of capital. 'apital is re&uired to buy fi!ed assets lie land, building, machine and
e&uipment. 'apital is also re&uired to buy raw material and meet day to day
e!penses of the business.
!. Mar.eting of t%e (roduct- The managerial decision to enter the maret with a
product or service is based on the fact (finding approach. )e need mareting
research in two branches. *. #roduct research, +. 'onsumer research.
". 2ocation of t%e Business- )here to establish a business is also to be decided in
advance. A business established at a particular location cannot be shifted to other
location easily. ,ecision regarding location of the business unit consists of decision
regarding the choice of the locality and selection of site.
#. Plant 3 ,)ui(ment- -anufacturing process governs the character of a plant, its
building, machinery and e&uipment. It is preferable to purchase new machine and
e&uipment. )e must tae advice of e!pert in procuring new machinery.
/. Plant layout- After selecting the machinery . e&uipments re&uired, it is necessary to
decide about their installation in a proper manner. This is called plant layout. A good
layout maes operation efficient and economical.
4. Man (o$er 3 -a$ material- The number . type of employees to be enrolled have
to estimated and decided in advance. ,ecision is also to be taen regarding source
of procurement, development and training of the employees.
5. Production (rocess- The whole production process is to be visualized and the
various activities of the business operation are to be decided in advance.
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Class Notes of Business Organisation -BBA 101 (N)
Promotion of a Business 6ctivity-
#romotion may be undertaen for the purpose of setting up a 78e$ business9 for
e!pansion of an e!isting business or for combining two or more business firms.
6ccording :.;.B%usan< Promotion refers to t%e act and (rocess of establis%ing a
ne$ business enter(rise.
0te(s of (romotion-
1. 'iscovery of business idea- The first step is to conception of idea. A person
visualized that there are opportunities for a particular type of business and it can be
profitably run.
2. 'etailed Investigation and verification- It involved study of maret demand,
availability and cost of raw material machinery and other factors of production,
degree of potential completion, probable selling price and profits etc.
. 6n assembling t%e re)uirement- It is practical and profitable, the promoter
proceeds to assemble the re&uirements. The promoter selects the factory site,
decides about the plant and machinery and contact supplier or raw materials etc.
!. Financing (ro(osition- At this step, financial plans are prepared with respect to
capitalization. 'apital structure, time and method of capital issue etc.
Function of Promoter
1. To conceive the idea of forming a company.
2. To conduct the necessary negotiation in connection to such an idea.
. To decide upon /a0 the name /b0 ob$ects /c0 location or registered office /d0 the
amount and form of capital of the company.
!. To enter into underwriting contracts, if any, on behalf of the company.
". To arrange for preliminary e!penses of the company.
#. To pay the preliminary e!penses of the company.
Plant (The #hysical means of production such as buildings, machineries, dies tools, $igs
fi!tures, service machineries and1or worshop e&uipments erected and e&uipped at a given
location for the purpose of converting the raw materials to finished goods using men,
machineries and materials is called plant.
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Class Notes of Business Organisation -BBA 101 (N)
2ocation- 2ocation may be defined as a particular area1site1place selected for setting up of
a manufacturing1production unit or plant.
8eed for 2ocation 'ecisions-
-areting 3trategy
'ost of ,oing 4usiness
5rowth
8ature of 2ocation 'ecisions =
3trategic Importance of location decisions
o 2ong term commitment1costs
o Impact on investments, revenues, and operations
o 3upply chains
6b$ectives of location decisions
o #rofit potential
o 7o single location may be better than others
o Identify several locations from which to choose
2ocation 6ptions
o 8!pand e!isting facilities
o Add new facilities
o -ove
2ocation 'ecision Factors =
9egional :actors (
o 2ocation of raw materials
o 2ocation of marets
o 2abor factors
o 'limate and ta!es
'ommunity 'onsiderations (
o ;uality of life
o 3ervices
o Attitudes
o Ta!es
o 8nvironmental regulations
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Class Notes of Business Organisation -BBA 101 (N)
o Utilities
o ,eveloper support
3ite 9elated :actors (
o 2and
o Transportation
o 8nvironmental
o 2egal
-ultiple #lant 3trategies"
o #roduct plant strategy
o -aret area plant strategy
o #rocess plant strategy
Plant 2ayout ( #lant layout is the physical arrangement of industrial facilities. It involves the
allocation of space . the arrangement of e&uipment in such a manner that overall operating
costs are minimized.
In t%e $ords of >ames 2undy, <2ayout identically involves the allocation of space and the
arrangement of e&uipment in such a manner that overall operating costs are minimized,=
?%y 2ayout (roblems e@istA
*. 8nlargement or contraction of e!isting departments> This may be re&uired due to
increase1decrease in demand, advancement in technology etc.
+. -ovement of department due to change in the design of product.
?. Addition of some new department e.g. computerization.
@. 9eplacement or addition of some new facility1machinery e.g. 2ift system, material
handling innovations etc.
Factors affecting (lant layout-
1. 7ature of product" e.g. some products need air"conditioned plants.
2. 3ize of output"
o :or bul"product1line layout
o :or small"functional layout
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AXIS INSTITUTE OF HIHE! E"UCATION # $ Sing%
Class Notes of Business Organisation -BBA 101 (N)
. 7ature of manufacturing system"
o :or intermittent"functional layout
o :or continuous"product1line layout
!. 2ocalization of plant" e.g. there will be different transportation arrangement if site is
located near railway line.
". -achines or e&uipment" e.g. heavy machines need stationary layout
#. 'limatic conditions, need of light, temperature also affect design of layout.
0tage of (lant 2ayout
*. #roduct demand.
+. #roduction re&uirements.
?. 'omponents and parts analysis.
@. )or methods and measurements.
A. -achine re&uirements.
B. Canding and movement re&uirements.
D. 3pace re&uirements.
Objectives of 2ayout
*. #roper and efficient utilization of available floor space.
+. To ensure that wor proceeds from one point to another point inside the plant without
any delay i.e. to avoid congestion and bottlenecs.
?. #rovision of better supervision and control of operations.
@. 'areful planning to avoid fre&uent changes in layout which may result in undue
increase in cost of production.
A. To provide ade&uate safety to the worers from accidents.
B. To meet the &uality and capacity re&uirement in the most economical manner.
D. #rovision of medical facilities and cafeteria at suitable and convenient places.
E. To provide efficient material handling system.
F. To suggest improvements in production process and wor methods.
6dvantages of good layout-
*. To the )orer
+. In -anufacturing 'osts>
?. In #roduction 'ontrol and 3upervision>
+y(es of 2ayout-
Product layout- 2ayout that uses standardized processing operations to achieve smooth,
rapid, high"volume flow
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Class Notes of Business Organisation -BBA 101 (N)
Cere machines are arranged acc. To the needs of product . in the same se&uence as the
operations are necessary for manufacture. 8.g. bac office of services such as bans and
insurance companies
6dvantages of Product 2ayout-
*. Cigh rate of output
+. 2ow unit cost
?. 2abour specialization
@. 2ow material handling cost
A. Cigh utilization of labour and e&uipment
B. 8stablished routing and scheduling
D. 3hort processing time
'isadvantages of Product 2ayout-
*. 'reates dull, repetitive $obs
+. #oorly silled worers may not maintain e&uipment or &uality of output
?. :airly infle!ible to changes in volume
@. Cighly susceptible to shutdowns
A. 7eeds preventive maintenance
B. 9e&uire large capital investment
Process layout-
2ayout that can handle varied processing re&uirements
Cere all machines performing similar type of operations are grouped together
at one location in the process layout. Thus here facilities are grouped together
acc. To their functions. 8.g. all drilling machines are located at one place
nown as drilling section.
6dvantages of Process 2ayouts-
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Class Notes of Business Organisation -BBA 101 (N)
1. 'an handle a variety of processing re&uirements
2. -achines breadown doesnt result in shutdown.
. 8&uipment used is less costly
!. )ide fle!ibility in production facilities.
". 8ach production unit of system wors independently.
#. Cigh utilization of facilities
/. Gariety maes the $ob interesting.
'isadvantages of Process 2ayouts-
*. In"process inventory costs can be high
+. 'hallenging routing and scheduling
?. 8&uipment utilization rates are low
@. -aterial handling is slow and inefficient . is more.
A. -ore space is re&uired
B. 2onger processing time
D. 4ac tracing may occur.
0tationary layout- 2ayout in which the product or pro$ect remains stationary, and worers,
materials, and e&uipment are moved as needed. 8.g. construction of ,A-3.
The product, because of its size and1or weight, remains in one location and processes are
brought to it.
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