Nature & Scope of Business Organizations

(This is a very basic topic, do not go in much details)

Meaning of Business Organization

Business organization is composed of two words, business and organization. In order to understand the nature of business organization, it is necessary that the meaning of these two words is made clear to the readers.

(1) Business

Business is a human economic activity. It involves continuous and regular production and distribution of goods and services with a view to earn profit. Money flowing in and earning of profit through the satisfaction of the customers are the two measuring rods of the success of a business.

(2) Organization

The meaning of the word organization is generally divided into two parts (i) material organization and (ii) human organization.

(i) Material Organization

The material organization is the determining and providing of necessary raw materials, tools, capital, personnel etc in an enterprise fonts smooth functioning.

(ii) Human Organization

It is the appointment of qualified staff, dividing the duties and re of the personnel employed. Then grouping these duties in the form of posts and delegating authority to each post so that work is carried out as planned.

Business Organization

Thus is a process or an art of establishing effective cooperation between the factors of production (land, material, capital equipment. personnel) for producing or acquiring wealth with a view to earn profit in an enterprise. Scope of business organization. Business organization thus is a process or an art of establishing effective cooperation between the factors of production (land, material, capital equipment. personnel) for producing or acquiring wealth with a view to earn profit in an enterprise.

Scope of Business Organization

The scope of business organization has considerably expanded after the Industrial Revolution. The process of production is now quite complicated. An organization is needed to determine what each person will do and how much authority each will have. The role of business organization in various forms of business ownership is discussed in brief.

(1) In Sole Proprietorship


Form of business, the organization structure is very simply. The entrepreneur generally introduces his own capital. He alone is the sole organizer, financier, decision taker, operator, and controller and above all responsible for air the success and failures of business, there is generally rule sub-division of main work into small groups.

(2) In a Partnership Form of Business

ownership, each partner provides capital, labour and management according to an agreement the partners determine among themselves the extent to which each partner shall take part in the management. The pattern of division of activities, determination of responsibilities. Delegation of authority etc depends upon the nature and size of business. As the partnership business is generally run on small scale, the business organization structure is relatively simple, temporary and informal.

(3) In a Company Form of Business

There is a formal pattern of organization. The work of organization begins even before its incorporation by the promoters. This work of organization continues after incorporation. An organization chart of responsibilities is prepared. The duties and responsibilities of the personnel employed are defined, procedures are aid down. Methods are evolved discussed and put before the personnel’ in clear terms. The scope of business organization in corporate business is quite wide and complicated.