Mg 2451 - Engineering Economics and Cost Analysis

MG 2451 - ENGINEERING ECONOMICS AND COST ANALYSIS DEPARTMENT OF CIVIL ENGINEERING UNIT III ORGANISATION Part I 1. Forms of business – 2. Proprietorship – 3. Partnership – 4. Joint stock company – 5. Cooperative Organisation – 6. State enterprise Part II 7. Mixed economy – 8. Money and banking – 9. Banking - kinds - commercial banks -central banking functions - control of credit – 10. Monetary policy – 11. Credit instrument. Part I CHAPTER -
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    MG 2451 - ENGINEERING ECONOMICS AND COST ANALYSIS DEPARTMENT OF CIVIL ENGINEERING UNIT III ORGANISATION Part I 1.   Forms of business  –   2.   Proprietorship  –   3.   Partnership  –   4.   Joint stock company  –   5.   Cooperative Organisation  –   6.   State enterprise Part II 7.   Mixed economy  –   8.   Money and banking  –   9.   Banking - kinds - commercial banks -central banking functions - control of credit  –   10.   Monetary policy  –   11.   Credit instrument.    Part I  CHAPTER - 1 ORGANISATION “  The business is coming to realise that, education is to business what fertiliser is to farming ”    Learning Objectives :  After reading this chapter you will be able to learn the following. v  1.1. Meaning of business organisation v  1.2. Principles of organisation v  1.3. Types of organisation 1.1. MEANING OF BUSINESS ORGANISATION Literally speaking, business means “ State of being busy” throughout. In economic sense, the word business means work efforts and acts of people which are connected with the production of wealth. Functionally, “ thos e human activities which involve  production or purchase of goods with the object of selling them at a  profit.” are called business.  The term business organisation is very often used in different senses. Firstly it is used to represent a business enterprise such as Tata Iron & Steel. “ Secondly business organisation is a subject of study consisting of topics concerned with organisation and management of industrial and commercial organisation. Thirdly, -1- the term „Organisation‟ is used to mean bringing together various  elements of business with the object of establishing harmonious relationship and adjustment in their functioning. OBJECTIVES The objects of business organisation are 1. Profit motive 2. Service motive 3. To get the economies of large scale production 4. To achieve in time and efforts 5. Harmonious relations with employees FUNCTIONS The important functions of business are as follows 1. Production function 2. Marketing function 3. Finance function 4. Personnel function 5. Purchase function 6. Public relations function 7. Legal function Sound organisation is essential for the success of a business. The reason is that it makes administration easy. It consists of determining the activities to be undertaken for achieving the objectives. The activities are arranged in groups. Each group of activities are entrusted to each department. The duties and functions of each individual in each department are defined. So organisation consists of department and grouping of activities, delegation of work and establishment of relationship between various persons. -2-    The word organisation has srcinated from the word „organism‟ which means any system with parts dependent upon each other. In a human body, it is the brain which controls, directs and co-ordinates the activities of different parts of the body. The human body is a combination of various limbs. If any one of the limbs stops functioning properly, then some defects will develop in the body. If the goals of an enterprise are to be achieved, the activities of the different departments must be welded together. Organisation does this co-ordination. It establishes inter-relations  between departments. DEFINITION: According to Urwick and Hunt , “ A business is an enterprise which makes, distributes or provides an article or service which other members of the community need and are able and willing to  pay for it”.  According to Lewis H.Haney, “Organisation is a harmonious adjustment of specialised parts for the accomplishment of some common purpose or purposes   Louis A. Allen has defined organisation as “ the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationship for the purpose of enabling people to work most effectively together in accomplishing objectives ” . Organisation means finding out the objectives, grouping the activities aimed at their achievement, assigning them for  performance and coordinating them, are the features of an organisation. The study of organisation is important for the following reasons. -3- a) Organisation pervade all the important phases of human life. A man is born in organisation (hospitals and clinics). He is educated in an organisation (Schools, Colleges and universities). He works in an organisation (office, factories and business).  b) Knowledge of organisation helps the manager to work effectively. c) Organisation satisfies and sometimes frustrates, if it is not well organised. 1.2 PRINCIPLES OF ORGANISATION The following principles are helpful in developing a sound and efficient organisation to achieve the objectives of the business successfully. 1. Unity of Objectives The term objective means a goal to be achieved.The organisation structure depends upon the objectives of the enterprise. Therefore the objectives of an enterprise must be clearly fixed. Every part of the organisation should be designed to facilitate the accomplishment of common objectives. 2. Division of Work The total work should be divided. This is known as departmentation. All the activities must be planned. This gives an idea of the total workload of the enterprise. Effective organisation must promote specialisation. 3. Span of Control  No executive in the organisation should be required to supervise more subordinates than he can effectively manage. An executive should be asked to supervise a reasonable number of subordinates. -4-    4. Scalar Principle Line of authority must proceed from the highest executive to the worker at the bottom level through a downward flow. This is known as „chain of command‟. The superior has a direct authority over his immediate subordinate. He is responsible for efficient  performance of the work entrusted. 5. Unity of Command Each individual should receive orders from only one boss. A  person cannot serve under two masters. He is accountable to his immediate superior. Dual subordination should be avoided. It creates disorder and confusion and leads to indiscipline. 6. Functional Definition The authority and responsibility of every individual should be clearly defined. The relationship between different jobs should be clearly specified. 7. Unity of Direction There must be one head and one plan for a group of activities directing towards the same objectives. This is necessary to ensure completion of tasks and co-ordination of activities. 8. Co-Ordination The various activities of undertaking should be co-ordinated to secure the desired results. The different departments may have to function frequently in close consultation with other departments in a departmental store. The purchase department and sales department activities must be well coordinated to increase profit. 9. Delegation of Authority Delegation means the entrustment of part of the work or some duties to the subordinates. Superior has to entrust some of -5- his duties to his immediate subordinate. The subordinates should  be granted necessary powers and rights. He becomes accountable to his superior. Delegation creates obligation on the part of the subordinate. 10. The Principle of Responsibility The superior should be held responsible for the acts of his subordinates. He cannot escape from the responsibility. He is accountable to his higher authorities. 11. Flexibility The organization should be flexible. It should be adaptable to changing circumstances. There should be scope for expansion without disrupting the basic design. 12. Efficiency Efficiency should be the watchword of the organisation. The organisation structure should enable the enterprise to function efficiently and accomplish its objective with the lowest possible cost. 13. Personal Ability As people constitute an organisation there is need for proper selection, placement and training of staff. The organisation must ensure optimum use of human resources and encourage development programmes. 14. Simplicity Another principle of organisation is that it should be simple. Too many levels of authority for example, complicate communication channels and by causing confusion and friction makes achievement of co-ordination impossible. -6-

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