Business Organization: Scope and Importance of Business Organization


Business means any activity being carried on for the purpose of earning profit. It involves the regular production of goods and services for the purpose of earning profit.


The word organization may be divided into two parts:

 (a) Material organization

It means providing of raw materials, tools, capital etc., to business for its operation

(b) Human organization

It means the appointment of staff and division of duties among them

Business organization

Business organization is an act of grouping activities into effective co-operation to obtain the objective of the business

In the words of Haney, “It is more or less independent complex of land, labour and capital, organized and directed for productive purposes but entrepreneurial ability”

Scope of business organization

  1. Sole proprietorship

Sole proprietorship is the oldest form of business organization which is owned and controlled by one person. In this business, one man invests his capital himself. He is all in all in doing his business. He enjoys the whole of the profit.

  1. Partnership

Partnership means a lawful business owned by two or more persons. The business profit is shared by them in agreed ratio. The liability of each partner is unlimited. Small and medium size business activities are performed under this organization.

  1. Joint stock company

A joint stock company is a voluntary association of persons created by law. It has a separate legal entity apart from its members. It can sue and be sued in its name In the joint stock company, the work of organization begins before its incorporation by promoters and it continues after incorporation.

  1. Co-operative societies

Cooperative societies are formed for the help of poor people. It is formed by the economically weak persons of the society. In this form of organization, all members enjoy equal rights of ownership.

  1. Combination

Business combinations are formed when several business concerns undertaking units are combined to carry on business together for achieving the economic benefits. The combination among the firms may be temporary or permanent.

Importance of business organization

  1. Product growth

Business organization is very useful for the product growth. It increases the efficiency of labor.

  1. Reduces the cost

Business organization is useful in reducing the cost of production as it helps in the efficient use of factors of production.

  1. Distribution

Another benefit of business organization is that it solves the problems of marketing and distribution like buying, selling, transporting, storage and grading etc.

  1. Quick decision

The business organization makes it easy to take quick decisions.

  1. Skilled salesman

It is also the benefit of business organization that it provides the skilled salesman for satisfying the various needs of the customers.

  1. Transportation

Its another benefit is that it guides the businessman that what type of transport he should utilize to increase the sales volume of the product.

  1. Minimum wastage

It reduces the wastage of raw material and other expenditures. In this way the rate of profit is increased.

  1. Finance management

It also guides the businessman that how he should meet his financial needs which is very beneficial for making progress in business.

  1. Secretariat functions

It also guides the businessman about the best way of performing the secretarial functions.

  1. Fixing of responsibilities

It also fixes the responsibilities of each individual It introduces the scheme of internal check In this way chances of errors and frauds are reduced.

  1. Feed back

An organization makes it possible to take decisions about production after getting the feed back from markets.

  1. Recognition of problems

Business organization makes it easy to recognize the problems in business and their solutions.

  1. Minimum cost

It helps in attaining the goals and objectives minimum cost in the business.

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