Showing posts with label Business. Show all posts
Showing posts with label Business. Show all posts

Problems Faced By Women Entrepreneurs

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Women entrepreneurs have to face the following Problems:

1. Lack Of Adequate Capital

Generally, women entrepreneurs use their savings and personal property to start a new venture. Due to their poor access to external financial resources, they face the problem in raising capital.

2. Poor Business Relations

In male-dominated groups, it is very hard for the women entrepreneurs to to develop business relations. Therefore, they find limited business opportunities. 

3. Lack Of Skill

Generally, women possess administrative skills and lack manufacturing and technical skills. Therefore, their skills and experience limits them to service-related ventures only.

4. Family Pressure

Women entrepreneurs suffer from family pressure. They have to devote their time for household works and for children. This limits them to use time for new venture.


5. Low Mobility

Women tend to be less mobile than men by nature. Due to low mobility, they may lose various business opportunities.

6. Other Difficulties

Women entrepreneurs have to face various other problems such as legal constraints, lack of infrastructure, shortage of raw materials, stiff competition. etc.

Functions Of Women Entrepreneurs

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Following Functions Are Performed By Women Entrepreneurs

1. Creating New Venture
Women entrepreneurs identify the opportunities, evaluate them and select the best opportunity. They convert the opportunity into new venture. Women entrepreneurs are imaginative in nature and they can develop ideas about the new venture.

2. Risk Bearing
Every business includes some portion of risk. But women entrepreneurs have risk taking capacity. They calculate different types of risks such as financial risk, social risk, psychological risk etc. They handle risks by gathering information.

3. Innovation
This is another major function of women entrepreneurs. They convert their ideas into innovations to meet market demands by the help of research and development facilities. 

4. Management
Women entrepreneurs believe in hard work. They directly engage in the management. They take part in planning, coordinating and controlling. They motivate and provide leadership to the employees.

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Problems Faced By Women Entrepreneurs
Difference Between Entrepreneur And Intrapreneur
Functions Of An Entrepreneur
Characteristics Of Entrepreneurship
Concept And Meaning Of Entrepreneurship


Difference Between Entrepreneur And Intrapreneur

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The differences between entrepreneur and intrapreneur are as follows:

1. Dependency
Entrepreneur: He is fully independent. He does not work for others and his own boss. 
Intrapreneur: He depends on corporate owner. He works for corporation under defined rules and regulations.

2. Capital/ Investment
Entrepreneur: He manages required capital himself. He raises fund for new business.
Intrapreneur: He does not need to manage required fund because corporation raises capital for the business.

3. Risk Bearing
Entrepreneur: He bears 100%  business risk. He risks own money.
Intrapreneur: He does not bear full risk of the business, He risks others money.

4. Primary Motive
Entrepreneur: Primary motive of entrepreneur is to be independent, self-satisfaction and earn monetary reward.
Intrapreneur: He has the motive of advancement and promotion with fixed salary.

5. Time Bound
Entrepreneur: He does not follow strict timetable. It may take several years for the growth of the business.
Intrapreneur: He is bounded by the corporate timetable.

6. Mind-set
Entrepreneur: He is guided by the principle of ' Problems provide opportunities'.
Intrapreneur: He thinks that the problems are threats for him and his corporation

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E-commerce Features

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 E-commerce has the following features:

1. Individual Communication
Communication is individualized and interaction is with carefully selected individual customer. E-name is used for this purpose.

2. Data Depository 
Internet is a central depository of huge amounts of data. It can be accessed all over the world through search engines. Websites contain information and they can be downloaded as needed.

3. E-mail and Electronic Platforms
E-mail and computer faxing is used for speedy transfer of messages to conduct business. Electronic platforms can be :

- EDI : Electronic data interchange for placing orders to suppliers. It is business to business exchange of data.

- ATM : Automatic teller machine to facilitate receiving digital cash. Smart cards are used to make payments.

- Computers : They receive orders from customers.

4. On-line Selling
E-commerce uses on-line selling. It has revolutionized selling through E-tailing, specially for:
- Airlines tickets and hotel bookings.
- Shares and financial services
- Cars and other vehicles 
- Computer hardware and software
- Books and music
- Consumer electronics
- Fashion goods

5. Relationship Marketing
E-commerce builds long-term mutually satisfying relations. This leads to life time loyal customers. The relations are based on superior customer value and satisfaction. Long term profits are made by lifetime customer loyalty.

Characteristics Of Entrepreneurship

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Entrepreneurship has the following characteristics:

1. Creating New Venture
Entrepreneurship is concerned with creation of new venture with new ideas. Such ventures starts as a small business to satisfy the unfulfilled needs in the market. These new ventures produce something new of value, create new market and new customers.

2. Hard Work And Commitment
Entrepreneurship requires hard work and commitment through devotion of time and efforts. Hard work with enthusiasm is needed to make new ideas, developing plan, determination of required resources. Entrepreneurs have deep sense of personal responsibility and high level of energy.

3. Risk Assumption
Entrepreneurship involves assumption of risks which implies possibility of loss. Probability estimates of the outcome of risk situations are made to calculate risk. Generally, new ventures tend to have high risk and high failure rate. Financial risk, career risk, social risk and psychic risk are involved in entrepreneurship.

4. Reaping Of Rewards
Entrepreneurship results in reaping of rewards. Rewards can be monetary benefits in terms of profit or non-monetary benefits in terms of personal satisfaction, self development, fame, reputation and independence in work. Monetary rewards serve as symbol of achievement and non-monetary rewards provide opportunities to make contribution toward social well-being and get social recognition.

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Concept And Meaning Of Entrepreneurship

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The process of discovering new venture with creativity and innovation is called entrepreneurship. Entrepreneurship requires assumption of risk and reaping of awards. It brings resources together and provides option for self-employment to an individual. Entrepreneurship also creates employment opportunity for others.

Entrepreneurship is a mind set of creativity and risk taking. It is a process of identifying opportunities and bringing together factors of production to exploit these opportunities.Entrepreneurship results in creation of new venture by planning, organizing, operating and assuming the risk. It always aims for innovation, profitability and growth.

The entrepreneurial spirit has appeared as the engine of economic development. Entrepreneurship has resulted in millions of new ventures in the world. Entrepreneurship has appeared as the driving force for industrial and economic development. Therefore, the interest in the concept of entrepreneurship is growing in today's world.

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Concept And Meaning Of Investment

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Investment

Generally, income and expenditure of an individual never equals.If current income exceeds current desires, people intend to save their surplus. With this surplus they plan to use the saving in another way. In this connections, individuals may have various alternatives. They can deposit the money in bank or purchase government or corporate bonds or invest in stocks or contribute the fund to a provident fund or purchase the real assets like land, building, plants etc. In this way what people think about the use of saving that is known as investment.

Investment refers to the sacrifice of present financial resources with the view to get additional benefit in future. Therefore, investment can be defined as a alternative or best use of the saving. Purchase of real or financial assets is considered as the investment. Such use takes place at present and almost certain. However, returns are generated in future and that are generally uncertain. Therefore, every investment involves some degree of risk which occurs due to several reasons.

Therefore, we conclude that, invest is a sacrifice of current fund or money or other resources for future benefits. It is the employment of saving or funds with the view of achieving additional income . It involves the commitment of resources that have been saved  from current consumption, in the hope that some benefit will produce in future. It involves long term commitment and waiting for a reward. The sacrifice takes place in the present and reward comes later and uncertain.

Concept Of The Law Of Diminishing Marginal Utility And Its Assumptions

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Concept Of The Law Of Diminishing Marginal Utility
This law was first developed by a German economist Hermann Heinrich Gossen. This law is also known as the first law of Gosse. The law of diminishing marginal utility states that the marginal utility derived from the consumption of every additional unit goes on diminishing, other thing remaining the same.

The law of diminishing marginal utility is based on two important facts :
1. Though human wants are unlimited, each single want is satiable.
2. Commodities are not perfect substitute for each other.

Therefore, as a consumer consumes more and more units of a commodity, intensity of his/her want for the commodity goes on falling and reaches a point where a consumer do not want any more units of the commodity. That is, when saturation point is reached marginal utility of a commodity becomes zero. Thus, as the amount of consumption of a commodity increases, marginal utility decreases. The second fact is that the different commodities are not perfect substitutes for each other. Hence, when an individual consumes more and more units of a commodity, the intensity of his particular want for the commodity diminishes.

Assumptions Of The Law Of Diminishing Marginal Utility

- Consumer should be rational.
- Utility can be measured in the cardinal number.
- Marginal utility of money remains constant.
- All the units of consumption are homogeneous.
- There is continuous consumption of the commodity i.e, there is no time gap between the successive units of consumption.
- The units of consumptions are suitable in size.
- There is no change in tastes, nature, fashion and habits of the consumer.

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Concept Of Marginal Utility And Total Utility And Their Relationship

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 Concept Of Marginal Utility
Marginal utility is the change in total utility by the consumption of an additional unit of a commodity. In other words, marginal utility is the addition to the total utility derived from the consumption of one additional unit. It is also called additional utility. Marginal utility can be explained with the help of an example. When a consumer consumes one orange, he gets total utility equal to 8 utils. By consuming second orange, total utility becomes 14 utils i.e 8+6. Therefore the marginal utility of the second orange is 6 utils i.e. 14-8.

 Concept Of Total Utility
The total satisfaction received from the consumption of given quantities of a commodity by a consumer within a given time period is called total utility. In other words, total utility is the sum of all marginal utilities obtained from the consumption of different units of  a commodity. For example, suppose a consumer consumes first unit of an orange and gets 8 utils utility. As he consumes second unit of orange his total utility increases to 14 utils i.e 8+6 if he gets 6 utils utility from second orange.In the same way total utility increases to 18 utils (8+6+4) as he consumes third orange and gets 4 utils from it.

Relationship Between Total Utility And Marginal Utility

1. Total utility is the sum total of marginal utility whereas marginal utility is the change in total utility.

2. Total utility generally remains positive while marginal utility may be positive, zero or even negative.

3. When marginal utility is positive, total utility rises.

4. When marginal utility is zero, total utility is the maximum.

5. When marginal utility is negative, total utility falls.

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Determinants Of Elasticity Of Demand

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The elasticity of demand of any commodity is determined by a number of factors which are explained below:

1. Nature of commodity
The elasticity of demand for any commodity depends upon the nature of the commodity i.e. whether it is a necessity, comfort, or luxury. The demand for necessary of life generally less elastic. The demand for comfort products have neither very elastic nor very inelastic because with the rise or fall in their prices, the demand for them decrease or increase moderately. On the other hand, demand for luxurious product is more elastic because with a small change in their prices, there is a large change in their demand. But the demand for prestige goods is inelastic because they possess unique utility for the buyers who are prepared to buy them at all costs.

2. Substitutes
Commodities having substitutes have more elastic demand because with the change in the price of one commodity, the demand for its substitute is immediately affected. For example, if the price of coffee rises, the demand for coffee decreases and the demand for tea increases and vice-versa.

3.Goods having several uses
If the commodity has several uses, it has an elastic demand. For example, electricity has multiple uses. It is used for lighting, heating, cooking etc. If the tariffs of electricity increases, its uses will be restricted to important uses. On the other hand, it will be withdrawn for less important uses.

4. Joint demand
There are certain commodities which are jointly demanded such as car and petrol, pen and ink, bread and jam etc. The elasticity of demand of second commodity depends upon the elasticity of demand of the major commodity. If the demand for car is less elastic, the demand for petrol will be also less elastic. On the other hand, if the demand for bread is elastic, the demand for jam will also be elastic.

5. Postpone of the consumption
Those commodities whose consumption can be postponed will be elastic. For example, demand for constructing a house can be postponed. As a result, demand for bricks, cement, sand etc will be elastic. On the other hand, goods whose demand cannot be postponed, their demand will be inelastic.

6. Income of the consumer
The elasticity of demand also depends on income of the consumer. If the income of consumers is high, the elasticity of demand is less elastic. It is because change in the price will not affect the quantity demanded by a greater proportion. But in low income groups, the elasticity of demand is elastic. Because a rise or fall in the price of commodities will reduce or increase the demand. But this does not apply in the case of necessities.

7. Proportion of income spent
Goods on which a consumer spends a very small proportion of his income, e.g. salt, newspaper, tooth paste etc. the demand will nor be much affected by a change in the price. Hence, it will be inelastic. On the other hand, goods on which the consumer spends a large proportion of his income e.g clothes, food etc. their demand will be elastic.

8. Price level
The price level also influences the elasticity of demand for commodities. When price level is too high or too low, the demand will be comparatively inelastic.

9. Habits
People who are habituated to the consumption of a particular commodity like coffee, tea, cigarette of a particular brand, the demand for it will be inelastic.

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Concept Of Cardinal Utility Analysis And Its Assumptions

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Concept Of Cardinal Utility Analysis
Cardinal utility analysis is based on the cardinal measurement of utility which assumes that utility is measurable and additive. This theory was developed by neo-classical economists like Marshall, Pigou, Robertson etc. It is expressed as a quantity measured in hypothetical units which called utils. If a consumer imagines that one mango has 8 utils and an apple 4 utils, it implies that the utility of mango is twice than of an apple.

Assumptions Of Cardinal Utility Analysis

1. Rationality
The consumer is assumed to the rational. He tries to maximize his total utility under the income constraint.

2. Cardinal Utility
The utility of each commodity is measurable. Utility is cardinal concept. The most convenient measure is money. Thus utility can be measured quantitatively in monetary units or cardinal units.

3. Constant Marginal Utility Of Money
The utility derived from commodities are measured in terms of money. So, money is a unit of measurement in cardinal approach. Hence, marginal utility of money should be constant.

4. Diminishing Marginal Utility
If the stock of commodities increases with the consumer, each additional stock or unit of the commodity gives him less and less satisfaction. It means utility increases at a decreasing rate.

5. Independent Utilities
It means utility obtained from commodity X is not dependent on utility obtained from commodity Y. It does not affected by the consumption of other commodities.

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Concept Of Cross Elasticity Of Demand And Its Types

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Concept Of Cross Elasticity Of Demand

Cross elasticity of demand is the relation between the percentage change in demand for a commodity to the percentage change in the price of related commodity. The cross elasticity of demand between good A and B is :



Cross elasticity (exy) = % change in quantity demanded for A good / % change to price of B good.

Types Of Cross Elasticity Of Demand
Theoretically, there are two types of cross elasticity of demand:

1. Positive Cross Elasticity Of Demand (exy>0)
In the case of substitute goods, the cross elasticity of demand is positive. If the price of tea rises, it will lead to increase in the demand for coffee. Similarly, a fall in price of tea will cause a decrease in the demand for coffee.

2. Negative Cross Elasticity Of Demand (exy<0 comment-0--="">
In the case of complementary goods, cross elasticity of demand is negative. If the price of car rises, it will lead to decrease in the demand for petrol. Similarly, the fall in the price of car will bring the increase in the demand for petrol. Since, the price and demand change in opposite direction, the cross elasticity of demand is negative.

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Concept Of Income Elasticity Of Demand and Its Types

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Concept Of Income Elasticity Of Demand
The income elasticity of demand shows the responsiveness of quantity demanded of a certain commodity to the change in income of the consumer. The income elasticity of demand is also defined as ' the ratio of the percentage change in the demand for a commodity to the percentage change in income'. Income elasticity of demand can be expressed as follows:

Income elasticity (ey) = Percentage change in quantity demanded / Percentage change in income

For example, consumer's income rises from $ 100 to $ 102, his demand for good X increases from 25 units per week to 30 units per week then his income elasticity of demand X is:

ey = 5/25 x 100/2 = 10

It means that 1 percent increase in income results 10 percent increase in demand and vice versa.

The income elasticity may be positive or negative or zero depending upon the nature of a commodity. As a rise in income leads to an increase in demand, the income elasticity is positive. A commodity which has positive income elasticity is a normal good. On the other hand, when a rise in income leads to a decrease in demand for a commodity, its income elasticity is negative. Such a commodity is called inferior good. If the quantity of a commodity purchased remains unchanged, even at the change in income, the income elasticity of demand is zero.

Types Of Income Elasticity Of Demand
There are five types of income elasticity of demand as follows:

1. Income elasticity greater than unity (ey>1)
The income elasticity of demand is greater than the unity when the demand for a commodity increases more than percentage rise in income.

2. Income elasticity less than unity(ey< 1)
Income elasticity of demand is less than the unity when the demand for a commodity increases less than proportionate to the rise in income.

3.Income elasticity equal to unity (ey=1)
Income elasticity is unity when the demand for a commodity increases in the same proportion as the rise in income.

4. Zero income elasticity (ey=0)
If the rise in income, the quantity demanded remains unchanged, the income elasticity is called zero income elasticity.

5. Negative income elasticity (ey <0>
In the case of inferior goods, the income elasticity of demand is negative. The consumer will reduce his purchase of it when income rises and vice versa.

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Concept And Types Of Price Elasticity Of Demand

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Concept Of Price Elasticity Of Demand
The price elasticity of demand measures the degree of responsiveness of quantity demanded for a certain commodity to the change in its price. In other words, the price elasticity of demand is defined as the 'ratio of percentage change in the quantity demanded to the percentage change in price . It can be expressed as follows:

Price elasticity of demand (ep) = Percentage change in quantity of demand / Percentage change in price

Where, ep = Coefficient of price elasticity of demand.

The price elasticity of demand is always negative due to the inverse relationship between the price and quantity demanded. But for the sake of simplicity in understanding the magnitude of response of quantity demanded to the change in the price we ignore the negative sign and take into account only the numerical value of the price elasticity of demand.

Types Of Price Elasticity Of Demand
There are five types of price elasticity of demand. They are as follows:

1. Perfectly Elastic Demand
Demand is said to be perfectly elastic if negligible change in price would lead to infinite change in the quantity demanded. Visibly, no change in price causes in infinite change in demand.

2. Perfectly Inelastic Demand
When the demand for a commodity does not change despite change in price, the demand is said to be perfectly inelastic.

3. Unitary Elastic Demand
When the percentage change in the quantity demanded is equal to the percentage change in price, the demand for a commodity is said to be unitary elastic demand. For example, 10% change in price causes 10% change in demand.

4. Relatively Elastic Demand
When the percentage change in the quantity demanded for a commodity is more than percentage change in price, it is called relatively elastic demand. For example, if 10% change in price results, 20% change in quantity demanded.

5. Relatively Inelastic Demand
When the percentage change in the quantity demanded of a commodity is less than percentage change in the price, it is called relatively inelastic demand. For example, when 20% change in price causes 10% change in demand.

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Concept And Meaning Of Unit Banking

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Unit banking has one office. Generally, limited banking services are offered to customers by unit banking organization. Although unit banking organization has one banking office, it can spread cash counters in market place such as walk-in windows, automated teller machines, retail store point-of-sale terminals that are linked to the bank's computer system.

Unit banking is the oldest kind of banking organization most common in the world banking today. One reason for the comparatively large number of unit banks is the rapid formation of new banks. It can be established easily even in an age of electronic banking and mega mergers among industry leaders. Many customers still seem to prefer small banks, which get to know their customers well and often provide personalized services.

Most new banks start out as unit organization, because their capital, management and staffs are severely limited until the bank can grow and attract additional resources and professional staff. Later, they try to convert them into branch banking organization. However, economic and legal barriers to banks expanding geographically into new territory still exist in some places. Yet, most banks desire to create multiple service facilities-branch offices, electronic networks, and other service outlets. In competitive banking market, it is essential to open new markets and diversify geographically in order to lower risk and cost of banking services. If the surrounding economy weakens and people move away to other market areas, it becomes very risky in relying on a single office location, from which to receive customers and income.

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Services Offered By Modern Commercial Banks

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Generally, modern commercial banks offer following services to customers or public:

1. Accepting Deposit
Accepting deposit from savers or account holders is the primary function of bank. Banks accept deposit from those who can save money, but cannot utilize in profitable sectors. People prefer to deposit their savings in a bank because by doing so, they earn interest.

2. Advancing Of Loans
Banks are profit oriented business organizations. So they have to advance loan to public and generate interest from them as profit. After keeping certain cash reserves, banks provide short-term, medium-term and long-term loans to needy borrowers. 

3. Discounting Of Bill Of Exchange
Bill of exchange is a negotiable instrument, which is accepted by the debtor, drawn upon him/her by the creditor and agrees to pay the amount mentioned on maturity. Discounting bill of exchange is another function of modern commercial bank. Under this, banks purchase bill of exchange from holder in discount after making some marginal deduction in the form of commission. The banks pay the deducted value to the holders when traders discount it into bank.

                       Also read: Concept And Meaning Of Bank

4. Cheque Payment
Banks provide cheque pads to the account holders. Account holders can draw cheque upon bank to pay money. Banks pay for cheques of customers after formal verification and official procedures. .

5. Remittance
Remittance is a system, through which cash fund is transferred from one place to another. Banks provide the facilities of remittance to the customers and earn some service charge.

6. Collection And Payment Of Credit Instruments
In modern business, different types of credit instruments such as bill of exchange, promissory notes, cheques etc. are used. Banks deal with such instruments. Modern banks collect and pay different types of credit instruments as the representative of the customers.

                      Also read: Meaning Of Unit Banking

7. Foreign Currency Exchange
Banks deal with foreign currencies. As the requirement of customers, banks exchange foreign currencies with local currencies, which is essential to settle down the dues in the international trade.

8. Consultancy
Modern commercial banks are large organizations. They can expand their function to consultancy business. In this function, banks hire financial, legal and market experts, who provide advices to customers in regarding investment, industry, trade, income, tax etc.

9. Bank Guarantee
Customers are provided the facility of bank guarantee by modern commercial banks. When customers have to deposit certain fund in governmental offices or courts for specific purpose, bank can present itself as the guarantee for the customer, instead of depositing fund by customers.

Concept And Meaning Of Bank

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A bank is financial institution, which deals with money and credit. Bank accepts deposits from the public and mobilizes the fund to productive sectors. Bank also provides remittance facility to transfer money from one place to another. Generally, bank accepts deposits from business institutions and individuals , which is mobilized into productive sectors mainly business and consumer lending. So bank is also called a dealer of money. At present context, a bank may engaged in different types of functions such as remittance, exchange currency, joint venture, underwriting, bank guarantee, discounting bills etc. The modern bank refers to an institution having the following characteristics:

* Bank deals with money: it accepts deposits and advances loans.
* Bank also deals with credit: it has the ability to create credit by expanding its liabilities.
* Bank is commercial institution: it aims at earning profit.

Banks are the principal source of credit for millions of individuals and families and for many units of government. They are among the most important financial institutions in the economy. Moreover, for small local businesses to large dealers, banks are often the major source of credit to stock the shelves with merchandise. Banks grand more installment loans to consumer than any other financial institutions.
Banks are among the leading buyers of bonds and notes issued by government to finance public facilities, ranging from hospitals and football stadiums to airports and highways. Moreover, bank reserves are the principal channel for government economic policy to stabilize the economy.
Banks are the important sources of short-term working capital for businesses. They have become increasingly active in recent years in making long-term business loans for new plants and equipment. When businesses and consumers must make payments for purchase of goods and services, more often they use bank provided cheques, debit or credit cards, or electronic accounts connected to a computer network.
Bank is a intermediary which accepts deposits and grants loans. It offers widest menu of services of any financial institution. In fact, a modern bank performs such a variety of functions that it is difficult to give a precise and general definition of a bank.

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Disadvantages Of Decentralization

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Decentralization has the following drawbacks or disadvantages:

1. Decentralization Increases Expenditure
Decentralization needs qualified, competent and skilled managers at the middle and lower levels. They are to be paid remuneration on the basis of their qualification and experience. Besides, there is the possibility of duplication of effort, which unnecessarily may increase cost of production.

2. Decentralization Creates Conflict
In decentralization, the top level management puts more pressure on departmental managers to increase output and revenue. In such a situation, every department lays more emphasis on their own departmental goals instead of corporate goals. This may give rise to inter-departmental conflict and too much fragmentation creates problems in coordination and control.

3. Decentralization Is Unsuitable For Emergency Situation
In decentralization, lower and middle level managers are assigned authority only for routine decisions. Whenever they face complex and non-programmed problems they cannot take a decision due to limited authority.

4. Decentralization Maximizes Risk
In decentralization, decision making authority is delegated to the subordinate level. If subordinate level managers are unskilled and incapable, they may take wrong decision, which may increase the risks and result in losses.

5. Decentralization Is Unsuitable For Specialized Services
The concept of decentralization is not applicable in some types of services. It is not suitable for specialized nature of services like accounting, human resource, engineering, surgery etc.

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Disadvantages Of Centralization

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The following are the main drawbacks or disadvantages of centralization:

1. Centralization Is Unsuitable For Large Organization
Centralization is impractical in large business organization having various branches in different locations. It is difficult to communicate managerial decisions to different operating levels in the management hierarchy. Top level managers cannot effectively supervise and control all the activities of the organization.

2. Manager Is Overburdened
In centralization, top managers are over burdened with authority and responsibility while managing each and every activity of the organization. He/she cannot devote sufficient time in other major issues. It tends to decrease working efficiency of the organization.

3. Possibility Of Power Misuse
Centralization of authority at the top level may result in under-utilization of power. Top level managers may exercise their powers on the basis of their personal judgement. This may lead to misuse of authority if the managers lack proper skills and ability.

4. Low Morale Motivation
In centralization. middle and lower level managers feel uncomfortable while performing the assigned task. They do not have the required authority to deal with problems effectively. They do not get any opportunity to show and develop their personality. The lack of motivation tends to affect the morale of subordinates.

5. Lack Of Environmental Adaptation
Business environment is dynamic and therefore, it changes according to time. In business, it is essential to take quick decisions to resolve problems of concerned departments or branches. Centralization is not applicable in dynamic environment as flexibility will not come promptly from the top level.

6. Inappropriate For Routine Decisions
In centralization, top level managers devote maximum time in taking routine decisions. Therefore, they cannot devote more time in non-programmed decisions. This will have a negative impact on the long term performance of the organization.

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Advantages Of Centralization

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The following are the main benefits or advantages of centralization:

1. Centralization Facilitates Unified Decision
Top level managers take all decisions in centralization. It is not necessary to consult and take consent of subordinates while taking a decision. The subordinates perform activities on the basis of instructions which facilitates maintenance of uniformity and consistency in performance.

2. Centralization Simplifies Structure
In centralized organization, the structure tends to be simple and clear. It involves two levels- managerial and operating levels. Managerial level is responsible for decision making whereas operating level is responsible for execution.

3. Centralization Facilitates Quicker Decision
Centralization facilitates quicker decision as one manager takes all the decisions. Managers can take suggestions and guidance from experts and professionals, but the final decision is taken by him. Quick decision is essential for business success in competitive environment.

4. Economy In Operation
In centralization. many levels and positions of management are reduced. It minimizes overhead cost of the organization. It also helps in effective utilization of skilled, qualified and experienced members.

5. Centralization integrates Operation
Centralization helps to integrate and unify all the operations of the organization. The top level manager maintains close supervision of the subordinates and their functions. On the basis of requirement, a manager takes quick decision to maintain control over the activities of the employees.

6. Centralization Is Suitable For Small Firms
Centralization is highly appropriate for small business organization performing business in a competitive environment. In such organizations, managers can personally look after overall activities of the organization.

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