Tag: University of Mumbai BMS Notes

Goods and services are often pronounced in the same breath. These are offered by the companies to the customers to provide utility and satisfy their wants. At present, the success of the business lies in the combination of best quality of goods and customer oriented services. ‘Goods’ are the physical objects while ‘Services’ is an activity of performing work for others.

Goods implies the tangible commodity or product, which can be delivered to the customer. It involves the transfer of ownership and possession from seller to the buyer. On the other hand, services alludes to the intangible activities which are separately identifiable and provides satisfaction of wants.

One of the main difference between goods and services is that the former is produced and the latter is performed.

Goods

Goods refer to the tangible consumable products, articles, commodities that are offered by the companies to the customers in exchange for money. They are the items that have physical characteristics, i.e. shape, appearance, size, weight, etc. It is capable of satisfying human wants by providing them utility. Some items are made for one-time use by the consumer while some can repeatedly be used.

Goods are the products which are traded on the market. There is a time gap in the production, distribution, and consumption of goods. When the buyer purchases goods and pays the price, the ownership is passed from seller to buyer.

Products are manufactured in batches, which produces identical units. In this way, a particular product offered by the company will have the same specifications and characteristics all over the market.

Example: Books, pen, bottles, bags, etc.

Services

Services are the intangible economic product that is provided by a person on the other person’s demand. It is an activity carried out for someone else.

They can only be delivered at a particular moment, and hence they are perishable in nature. They lack physical identity. Services cannot be distinguished from the service provider. The point of sale is the basis for consumption of services. Services cannot be owned but can only be utilized. You can understand this by an example: If you buy a ticket for watching a movie at the multiplex, it doesn’t mean that you purchased the multiplex, but you have paid the price of availing services.

Service receiver should fully participate when the service is provided. Evaluation of services is a relatively tough task because different service providers offer the same services but charges a different amount. It may be due to the method they provide services is different or the parameters they consider in valuing their services vary.

Example: Postal services, banking, insurance, transport, communication, etc.

Differences between Goods and Services

The basic differences between goods and services are mentioned below:

1. Goods are the material items that the customers are ready to purchase for a price. Services are the amenities, benefits or facilities provided by the other persons.
2. Goods are tangible items i.e. they can be seen or touched whereas services are intangible items.
3. When the buyer purchases the goods by paying the consideration, the ownership of goods moves from the seller to the buyer. Conversely, the ownership of services is non-transferable.
4. The evaluation of services is difficult because every service provider has a different approach of carrying out services, so it is hard to judge whose services are better than the other as compared to goods.
5. Goods can be returned to or exchanged with the seller, but it is not possible to return or exchange services, once they are provided.
6. Goods can be distinguished from the seller. On the other hand, services and service provider are inseparable.
7. A particular product will remain same regarding physical characteristics and specifications, but services can never remain same.
8. Goods can be stored for future use, but services are time bound, i.e. if not availed in the given time, then it cannot be stored.
9. First of all the goods are produced, then they are traded and finally consumed, whereas services are produced and consumed at the same time.

Generally, companies keep a stock of goods with itself to fulfill an urgent requirement of goods. It also keeps track of the quantity of goods at the beginning and the end. In contrast to services are delivered as per the request of the customer itself. In short, the production of services depends on the customer’s demand. Both are subject to tax like Value Added Tax (VAT) is levied on goods while service tax on services provided.

Sometimes products offered by the companies in such a way that it‘s hard to segregate goods and services like in the case of a restaurant, you pay for the food you eat as well as for the add-on services of the waiters, chef, watchman and so on.

Defect in Goods

Section 2(1)(f) of the Consumer Protection Act, 1986 defines defect in goods. The defect is defined as any imperfection, fault, a shortcoming in certain parameters of the good which are as follows:

• Quality
• Quantity
• Purity
• Potency
• Standard

The above has a level that needs to be maintained by or under any law in force at that time.

Hence, if any good is not up to the mark or is faulty, that is, does not meet the mark of the laws applicable in the particular period, it is defective.

illustrations of Defective Good

• A consumer purchases a washing machine. It has a wiring problem which results in the destruction of all the clothes put in the machine.
• A consumer purchases a cosmetic product that causes irritation to the skin.
• A consumer purchases a handbag. After purchase, he sees a slit at the bottom of the bag.
• A consumer purchases milk that has been adulterated by mixing with water.
• A consumer purchase socks made of a fabric that causes skin infection.

A defect of Good seen in numerous cases due to its wide ambit. Defects can be present in goods irrespective of their size, shape, colour, dimension, state of matter and so on. The defect in service often causes inconvenience, injury and in aggravated cases, death. Producers of goods must be immensely careful of the goods that are being manufactured by them.

Safety is a major concern which is sought after by all consumers across the globe. A small defect in good can cause a great impact on the consumer who can face a damage. This damage includes physical, mental and economic loss.

Cases of the defect in goods are too many to count and have rapidly increased with the introduction of online shopping. The Consumer Protection Act tries to limit these grievances of the consumers by penalizing the producers of such goods. It is the much-required means of providing justice to those consumers who have been at a loss or inconvenience.

Cases of Defect

Laxmi Engineering Works vs P.S.G. Industrial Institute, Abhay Kumar Panda v. Bajaj Auto Limited and various other cases that resulted in major debates were initially filed as cases for the defect in good. The former saw a defect in a machine while the latter saw a defect in a vehicle purchased. Other prominent cases include Kevin Enterprise vs Joint Cit, and cases at the Supreme Court, Union Of India (Uoi) vs Ratilal Jadavji and Union Of India vs Behari Lal And Co.

These cases show the repercussions of defective goods. While the first two cases resulted in a whole new deliberation upon the definition of the consumer, the later cases were all under the ambit of defective goods. However, all these case complaints find its root in the good received being defective, hence highlighting its meaning and importance.

Online Shopping and Defect in Goods

Online shopping is a recent development in the market. It has introduced a new and modern style of interaction between consumers and sellers by benefitting both consumers and sellers. The consumers find online shopping extremely convenient while the sellers now have a wider access for sale of their products. However, this development in the global sphere also has its repercussions. It has brought in a large number of complaint of defective goods.

In many cases, the good purchased online looks nothing like what was portrayed of the product. Goods have arrived broken, faulty in design, torn, adulterated, impure and so forth. This is a great hurdle in Consumer Protection and is a problem that remains unsolved today.

Online shopping has turned disastrous to the consumer in cases like Anil Kumar v. M/s Naaptol Online Shopping Pvt. Ltd. and M/s Gati Limited, Vinodkumar, Ernakulam Vs. Shoed Merchant, Mumbai & Ebay India and the Chitra Vittal case.

Sellers must take care while sending their goods for transit. The goods should be handled with care during the transportation process. The sellers should not attempt to cheat the consumers by intentionally handing over defective goods to them.

Deficiency of Service

Deficiency of Service sprawls across various fields like medicine, construction, transport and so on. Deficiency in service often causes inconvenience, injury and in aggravated cases, death. Services are to be provided by immensely equipped individuals with utmost proficiency. If services are not provided with care, severe damage can be caused to the receiver. This damage includes physical, mental and economic loss.

Cases of deficiency of service are rampant in India due to inefficiency and negligence. The Consumer Protection Act is a way to penalise curb this lax behaviour and curb negligent activities in future. It is the much-required means of providing justice to those consumers who have been at a loss or inconvenience.

The field of medicine has seen the most complaints, ranging from Ayesha Begum v. All India Institute of Medical Sciences to the famous Indian Medical Association v. V.P. Shantha. The former dealt with a wrong diagnosis leading to economic loss and physical weakness, while the latter argued upon the distinction of the contract of service and contract for service. Other cases in this field include Gulam Abdul Hussain v. Katta Pullaiah Choudhary and Consumer Unity and Trust Society Vs. State of Rajasthan.

The field of construction to has seen cases of deficiency of service, as noted in the case, Lucknow Development Authority v. M.K. Gupta. The field of tailoring involves A.C. Monday v. Cross Well Tailor And Anr.

These cases are the various instances where the Indian law rightly intervened and redressed the consumers. It poses as a strong deterrent to all those service providers who indulge in fraudulent or negligent means of operation.

Contract of Service of Contract for Service

As clearly mentioned in the definition of service, a contract of service is excluded from service. But what does this term actually mean? The concepts are as follows:

A Contract of Service involves an employer and an employee, similar to a master-servant relationship. All the actions of the employee are monitored, controlled and regulated by the employer. The employee acts on the directions of the employer, hence he is told what task to do and precisely how to do it.Hence, the employee is not personally liable for the acts done by him. The employee can be hired and fired at any time, on the discretion of the employer. The acts of an employee arising out of a contract of service is not a service and hence cannot be deficient.

Company law (also known as business law or enterprise law or sometimes corporate law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corporations, or to the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation.

While the minute nature of corporate governance as personified by share ownership, capital market, and business culture rules differ, similar legal characteristics – and legal problems – exist across many jurisdictions. Corporate law regulates how corporations, investors, shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community, and the environment interact with one another.[ Whilst the term company or business law is colloquially used interchangeably with corporate law, business law often refers to wider concepts of commercial law, that is, the law relating to commercial or business related activities. In some cases, this may include matters relating to corporate governance or financial law. When used as a substitute for corporate law, business law means the law relating to the business corporation (or business enterprises), i.e. capital raising (through equity or debt), company formation, registration, etc.

Characteristics of Company

The following are the defining characteristics of a company:-

1. Separate Legal Entity

On incorporation under law, a company becomes a separate legal entity as compared to its members. The company is different and distinct from its members in law. It has its own name and its own seal, its assets and liabilities are separate and distinct from those of its members. It is capable of owning property, incurring debt, borrowing money, having a bank account, employing people, entering into contracts and suing and being sued separately.

2. Limited Liability

The liability of the members of the company is limited to contribution to the assets of the company upto the face value of shares held by him. A member is liable to pay only the uncalled money due on shares held by him when called upon to pay and nothing more, even if liabilities of the company far exceeds its assets. On the other hand, partners of a partnership firm have unlimited liability i.e. if the assets of the firm are not adequate to pay the liabilities of the firm, the creditors can force the partners to make good the deficit from their personal assets. This cannot be done in case of a company once the members have paid all their dues towards the shares held by them in the company.

3. Perpetual Succession

A company does not die or cease to exist unless it is specifically wound up or the task for which it was formed has been completed. Membership of a company may keep on changing from time to time but that does not affect life of the company. Death or insolvency of member does not affect the existence of the company.

4. Separate Property

A company is a distinct legal entity. The company’s property is its own. A member cannot claim to be owner of the company’s property during the existence of the company.

5. Transferability of Shares

Shares in a company are freely transferable, subject to certain conditions, such that no share-holder is permanently or necessarily wedded to a company. When a member transfers his shares to another person, the transferee steps into the shoes of the transferor and acquires all the rights of the transferor in respect of those shares.

6. Common Seal

A company is a artificial person and does not have a physical presence. Therefore, it acts through its Board of Directors for carrying out its activities and entering into various agreements. Such contracts must be under the seal of the company. The common seal is the official signature of the company. The name of the company must be engraved on the common seal. Any document not bearing the seal of the company may not be accepted as authentic and may not have any legal force.

7. Capacity to sue and being sued

A company can sue or be sued in its own name as distinct from its members.

8. Separate Management

A company is administered and managed by its managerial personnel i.e. the Board of Directors. The shareholders are simply the holders of the shares in the company and need not be necessarily the managers of the company.

9. One Share-One Vote

The principle of voting in a company is one share-one vote. I.e. if a person has 10 shares, he has 10 votes in the company. This is in direct contrast to the voting principle of a co-operative society where the “One Member – One Vote” principle applies i.e. irrespective of the number of shares held, one member has only one vote.

Distinction between Company and Partnership

A Partnership firm is sum total of persons who have come together to share the profits of the business carried on by them or any of them. It does not have a separate legal entity. A Company is association of persons who have come together for a specific purpose. The company has a separate legal entity as soon as it is incorporated under law. Liability of the partners is unlimited. However, the liability of shareholders of a limited company is limited to the extent of unpaid share or to the tune of the unpaid amount guaranteed by the shareholder. Property of the firm belongs to the partners and they are collectively entitled to it. In case of a company, the property belongs to the company and not to its members. A partner cannot transfer his shares in the partnership firm without the consent of all other partners. In case of a company, shares may be transferred without the permission of the other members, in absence of provision to contrary in articles of association of the company. In case of partnership, the number of members must not exceed 20 in case of banking business and 10 in other businesses. A Public company may have as many members as it desires subject to a minimum of 7 members. A Private company cannot have more than 50 members. There must be at least 2 members in order to form a partnership firm. The minimum number of members necessary for a public limited company is seven and two for a private limited company. In case of a partnership, 100 % consensus is required for any decision. In case of a company, decision of the majority prevails. On the death of any partner, the partnership is dissolved unless there is provision to the contrary. On the death of the shareholder the company’ existence does not get terminated.

Trademark infringement

Section 29 of the Trademark Act, 1999 provides remedy in cases of trademark infringement. The statutory provision also enlists the circumstances under which a mark is infringed:

1. Infringement of a mark occurs when a person not being registered proprietor uses a mark which is identical or deceptively similar to a registered mark in relation to goods or services in respect of which the trademark is registered.
2. When a person not being a registered proprietor uses a registered trademark which because of its identity with registered trademark and similarity with goods or services is likely to cause confusion in public.
3. When a person not being registered proprietor of a mark uses mark which is identical or similar to the registered trademark in relation to similar goods or services and the registered mark has a reputation in India.
4. A registered trademark is infringed by a person if he uses such registered trademark as part of his trade name of his business concern dealing in goods or services in respect of which the trade mark is registered.
5. A registered trademark is infringed by any advertising of that trademark if such advertising takes unfair advantage and is detrimental to its distinctive character.

Cases on Trademark Infringement

When mark adopted by Defendant is identical to Plaintiff’s registered trademark

If on comparison of the trademarks of the two parties in case the trademark adopted by the Defendant is identical to that of the Plaintiff, the Plaintiff may not be required to prove anything further. Section 29 of the Trademark Act, 1999 statutorily mandates so as well. However, when the two marks are not identical, then the plaintiff would be required to establish that the mark used by the defendant so nearly resembles the plaintiff’s registered trademark as is likely to deceive or cause confusion in the minds of the consumer public.

Onus to prove infringement on Plaintiff

The Supreme Court in the case of Kaviraj Pandit Durga Dutt case held that in an action for infringement the onus would be on the Plaintiff to establish that the trade mark used by the defendant in the course of trade in the goods in respect of which his mark is registered, is deceptively similar.

How can the Plaintiff establish that the Defendant’s mark is identical or resembles the Plaintiff’s mark?

This issue was elaborately discussed by the Delhi High Court in the case of Atlas Cycle Industries Ltd. v. Hind Cycles Limited, wherein the Court stated that in a case of trademark infringement, the plaintiff may establish that its trademark is identical with or so nearly resembles the plaintiff’s work either visually or phonetically or otherwise, that it is likely to deceive or cause confusion in relation to the case in respect of which the plaintiff got his mark registered.

Thus, if the essential features of the trade mark of the plaintiff have been adopted by the defendant, the fact that there are some additional features in the defendant’s mark which show marked differences is immaterial in an action for infringement.

Trademar Passing-off

Section 27 of the Act  recognizes common law rights of the trademark owner to take action against any person for passing of goods as the goods of another person or as services provided by another person or remedies thereof. The remedy made available under Section 27 of the Act protects the rights of the proprietor of an unregistered trademark to register complaint against another person for passing off his goods as goods the goods of proprietor. An unregistered proprietor of trademark can also oppose an application for registration on grounds as enumerated under Section 11 of the Act.

In an action of passing off, the Plaintiff has to establish prior use to secure an injunction and that the registration of the mark or similar mark in point of time, is irrelevant.

Lord Oliver in the case of Reckitt & Colman Products Ltd. v. Borden Inc. enumerated three elements for a successful passing off action:

• Goodwill owned by a trader
• Misrepresentation
• Damage to goodwill

Thus, the passing action is essentially an action in deceit where the common law rule is that no person is entitled to carry on his or her business on pretext that the said business is of that of another.

Tests in the case of passing off– The Supreme Court in the case of Cadila Healthcare Ltd. v. Cadila Pharmaceutical Ltd., laid down the test of passing off and observed that a passing off action depends upon the principle that nobody has a right to represent his goods as the goods of some body. In other words a man is not to sell his goods or services under the pretence that they are those of another person. As per Lord Diplock in Erwen Warnink BV v. J.Townend & Sons[, the modern tort of passing off has five elements, namely

• A misrepresentation
• Made by a trader in the course of trade
• To prospective customers of his or ultimate consumers of goods or services supplied by him
• Which is calculated to injure the business or goodwill of another trade (in the sense that this is a reasonably foreseeable consequence), and
• Which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so.

Further in the case of Corn Products Refining Co. v. Shangrila Food Products Ltd., it was observed that the principle of similarity could not to be very rigidly applied and that if it could be prima facie shown that there was a dishonest intention on the part of the defendant in passing off goods, an injunction should ordinarily follow and the mere delay in bringing the matter to Court was not a ground to defeat the case of the plaintiff.

Is fraud an essential element of passing-off?

According to Kerly Law of Trademarks– Passing off cases are often cases of deliberate and intentional misrepresentation, but it is well-settled that fraud is not a necessary element of the right of action, and the absence of an intention to deceive is not a defence though proof of fraudulent intention may materially assist a plaintiff in establishing probability of deception. The burden to prove passing off is on the Plaintiff or goods, besides the essential features which are sufficient to distinguish the same from that of the plaintiff. Thus, while in an action for infringement of a registered trade mark the plaintiff has to establish either an use of his registered trade mark as such or of an identical mark or of a deceptively similar mark by the defendant, he has to establish in an action for passing off that the defendant’s mark or goods are such that the defendant can pass off his goods as those of the plaintiff.

Difference between Trademark Infringement and Passing Off

The difference between a passing off action and an action for trademark infringement was expounded by the Delhi High Court in the case of Cadbury India Limited and Ors. v. Neeraj Food Products as under:

• An action for passing off is a common law remedy whereas an action for trademark infringement is a statutory remedy.
• Passing off action in essence is an action of deceit that is, a passing off by a person of his own goods as those of another whereas in case of infringement, the Plaintiff on account of being registered proprietor of the disputed trademark, claims to have an exclusive right to use the mark in relation to those goods.
• The use by the defendant of the trademark of the plaintiff may be prerequisite in the case of an action for infringement while it is not an essential feature of an action for passing off.
• If the essential features of the trademark of the plaintiff have been adopted by the defendant, the fact that the getup, packing and other writing or marks on the goods or on the packets in which the defendant offers his goods for sale show marked differences or indicate clearly a trade origin different from that of a registered proprietor of the mark, would be immaterial for the case of infringement of the trademark. The liability of the defendant for such infringement may be absolute. In the case of passing off, the defendant may escape liability if he can show that the added material is sufficient to distinguish his goods from those of the plaintiff.

The distinction between passing off and infringement was examined by Judge Clauson in the case of Listen Ltd. V. Harley, wherein he opined that if you are restraining the infringement of a registered mark, you can restrain the man from using the mark; but, restrain him from selling the articles under the label containing that word without clearly distinguishing his goods from the goods of the Plaintiff is quite a different thing.

The Supreme Court in a recent case of S. Syed Mohideen v. P. Sulochana Bai, stated that passing off right is a broader remedy than that of infringement. This is due to the reason that the passing off doctrine operates on the general principle that no person is entitled to represent his or her business as business of other person. The said action in deceit is maintainable for diverse reasons other than that of registered rights which are allocated rights under the Act.

Many business laws in India precede the country’s independence in 1947. For example, the Indian Contract Act of 1872 is still in force, although specific contracts such as partnerships and the sale of goods are now covered by newer laws. The Partnership Act of 1932 covers partnership firms in India. Business laws regulating chartered accountants and cost accountants were passed in 1949 and 1959, respectively. The Banking Regulation Act of 1949 continues to regulate private banking companies and manage banks in India. In 2012, it was amended by the Banking Law (Amendments) Act. Under these amendments, the Reserve Bank of India (RBI) was given power to restrict voting rights and shares acquisition in a bank. The RBI established the Depositor Education and Awareness Fund. Banks are now able to issue both equity and preference shares under RBI guidelines.

While India is often criticized for complex regulations, it is important to keep in mind that that in some cases, these laws are simpler than those of the U.S. Furthermore, most regulations are consistent across the country, and attorneys in India can practice in any state. Filing lawsuits is seldom productive in most commercial disputes since court cases can drag on for decades and collection can take even longer. For large deals, binding third-country arbitration can be the best way to resolve disputes.

Following India’s economic development in the 21st century, the Ministry of Corporate Affairs passed the Competition Act of 2002 and the Limited Liability Act in 2008. These promote sustainable competition in markets, prohibit anti-competitive business practices, and protect consumer interests while ensuring free trade.

The Parliament of India passes and amends regulations for both businesses and investors. In addition to provisions from the Companies Act of 1956, the Companies Act of 2013 features provisions regarding mergers and acquisitions, board room decision-making, related party transactions, corporate social responsibility, and shareholding. The act was further amended through the Companies Act of 2015 which eliminated the procedural common seal, declarations for commencement of businesses, and minimum paid-up capital requirements. The amendment also relaxed governing-related party transactions while limiting access to strategic corporate resolutions in India.

As a member of the International Labor Organization, India offers protections for employees. These include the Payment of Wages Act of 1936, the Industrial Employment Act of 1946, the Industrial Disputes Act of 1947, the Payment of Bonus Act of 1965, and the 1972 Payment of Gratuity Act. Protections include annual bonuses of 8.33% and separation fees of about 15 days per year of employment. Other labor laws such as the Building and Other Construction Workers Acts of 1996 and the Workmen’s Compensation Act of 1923 (amended in 2000) are in effect. Passed in 1926, the Trade Unions Act deals with the registration, rights, liabilities, and responsibilities of trade unions. The Industrial Disputes Act of 1946 regulates trade unions and matters between industrial employers and employees.

Business laws in India include consumer protection. The Consumer Protection Act, 1986 mandates Consumer Dispute Redressal Forums at local and national levels. Older laws, such as the Standards of Weights & Measures Act of 1956, ensure fair competition in the market and free flow of correct information from providers of goods and services to consumers.

Due to the growth of trade, the Indian government passed the Foreign Trade (Development and Regulation) Act of 1992 to facilitate imports and augment exports. The latest EXIM Policy, known as the Foreign Trade Policy, was issued for April 2015 to March 2020. The Service Exports from India Scheme (SEIS) replaced the Served from India Scheme. The SEIS extends the duty-exempted scrip to Indian service providers and provides notified services in a specified mode outside the country. Under the Export Promotion Capital Goods Scheme, the export obligation requires six times the duty saved on imported capital goods; in the case of local sourcing of capital goods, the export obligation is reduced by 25%. Beyond goods and services, the Foreign Exchange Management Act of 1999 regulates foreign exchange transactions including investments abroad.

As a founding member of the World Trade Organization in 1995, India has updated business laws regarding copyrights, patents, and trademarks to meet the Agreement on Trade Related Aspects of Intellectual Property Rights. Indian companies and the federal government honor global IP rights. However, because music copyrights are different in India, both Indian and Western IP owners in the entertainment industry have suffered due to digital piracy. Even so, there are few IP-related disputes outside of several celebrated pharmaceutical industry cases. In 2013, India’s Supreme Court denied Novartis an extension to update its cancer drug Glivec due to “evergreening” charges.

E-commerce and online expansion of companies prompted India to create regulations to cover cyber law and security compliances, such as the techno legal regulatory provisions in the Companies Act of 2013. The Information Technology Act of 2000 is the primary law for e-commerce regulation in India. In 2008, the IT Act was amended to provide explicit legal recognition of electronic transactions.

Importance of Communication in Corporate World in Recent Time

In 21st Centuries, business has become highly complex and competitive. To survive one needs the services of specialists are required in every single field. Communication takes place within the organization as well as between the business and outside world. Today professionals have to compete globally and hence they have to be extra cautious while communicating.

In a global world, we have to communicate globally to negotiate, to deal and to reach out the targeted audience. The ability to communicate effectively with others also and along with a variety of different types of personalities are two of the most desirable qualities in job candidates.

Good communicators have complete control of oral and written communication. Today business communication skills are important for executives as businesses in a professional environment require a rapid inflow, and environment need fast inflow and outflow of communication.

Importance of communication in the corporate world is depicted in the following image.

1. Helps to increase the sale

To increase the sales, a company requires a salesman who is a good communicator, who can sell products, convey company’s ethos and also outlines the values of company to people who will not only buy the products but will become company loyalist. Thus, communication helps to increase sales.

2. Helps in retaining the client

A company executive must have necessary skills to deal with the customers. This helps in retaining the clients as customers are business lifelines and their concern is very important for the organization to succeed.

3. Helps to implement strategies

With the help of effective communication organizations can implement strategies. This builds employment commitment toward the organization, and they feel the sense of sharing of responsibility and capabilities.

4. Helps in corporate branding

Communication has always been the core of the corporate world. Communication between people and company is the core element of a good corporate reputation. Many companies invest millions in strategies, which aim to reinvest their profile in important ways.

5. Helps to develop global competence

Communication helps to develop an understanding of other regions, lifestyles and culture of all around the world. This helps in overcoming the cross-cultural barriers during the conduct of business.

6. Helps in crisis management

To handle the economic crisis is the worst. Each person associated with the company needs information and reassurance with proper communication, thus employees can become the strength of the organization. The stockholders should be communicated properly so they do not indulge in panic and sell off their shares.

THE IMPORTANCE OF GLOBAL COMMUNICATIONS IN THE WORLD TODAY

In a globalized world, effective communication is a necessity. When friends, relatives, and colleagues need to reach all corners of the world, it is easy to see the importance of global communications in the world today. Whether you need to connect from Barcelona to Buenos Aires or Boston to Beijing, instant contact has become the norm and expectation. But how did we get here? Just 10 years ago, we were being introduced to new programs called YouTube, Skype, and Facebook. Now these are household names that are used on a daily basis at home and in the office. But in a business environment, there is more to communications than just opening up Skype and connecting to the other side of the planet. Learning the importance of global communications and implementing effective communications policies are key to helping a global organization thrive in this new world.

Global communications is not only the interaction between two employees within your organization. The first step in achieving effective communications is to know your audience. Your entire company profile and history is available to the whole world at the click of a button, making you a sitting duck if you’re not prepared. If you’re not, your company could wind up as the next viral sensation. Communicating with your customers, your suppliers, your stockholders, and many other stakeholders all factor into the global equation. Proper handling of a customer complaint can be just as important whether it is sent to company headquarters or at a local store – one insensitive comment could wind up being viewed by millions on Twitter. Company owners have to be kept informed about the status of the business and employees have to be able to be in constant contact in order to reach deadlines. Even governments need to be involved in your communications strategy, and having a good one can save you a big headache.

Affecting the true meaning of global communications would be the intercultural factor. Now that we expect to do business on multiple continents, understanding the language and cultural difference between two people can bridge gaps and make business transactions much smoother. Even within Europe, making sure your organization understands the business customs of Spain versus Germany will help grow your business. And in a globalized world, it is absolutely vital.

When analyzing the changes in global communications, technology is, by far, the biggest factor. There have been many changes in technology and something new seems to develop every single day. But just because communication has gotten faster and easier doesn’t mean that it’s always a good idea to implement. Video conferencing is a great way to have face-to-face communication while separated by thousands of kilometers. Without the need for travelling, video conferencing can instantly and vastly improve your internal and external communications over what can be done with a phone call. But installing a video conferencing network can be very costly. Is clear and visual communication a necessity worth such an investment or is it just a nice-to-have? How do you go about making a decision like this?

These are just a few of the many issues that affect global communications on a daily basis. And with an ever-growing globalized world, the importance of global communications becomes more evident every year. Studying a Master’s in Communication can help prepare you to understand how to tackle the various issues and make decisions on your communications strategy. With thorough studying of the core concepts and specific examples, you will be able to cope with the ever-changing world and be ready to guide your organization to new heights in a global world.

Business communications consisted of formal business letters and a conversation in the boss’s office. Today’s technological advances have moved communications into a new realm, where messages are delivered almost instantly, tasks are assigned and managed by computer programs and people are even removed from the communications equation. And while most advances have improved workflow and efficiency, some concerns about the quality of business relationships have surfaced.

Continued Evolution of Email

Perhaps one of the most obvious developments in business communications has been that of direct correspondence through email. Although it’s existed for almost 50 years, email has experienced continual change. It’s gone from being simply a method of sending a message to becoming a means of workflow management. Within an email system users can:

• Flag priority messages and set tasks for follow-up
• Program alerts for when messages from VIP senders arrive
• Send automated responses when out of the office and unable to personally respond

Project Management Systems and Scheduling

Another use of technology in business is the implementation of project management systems for collaboration between employees. Workers no longer need to be in the same building or sit in a lengthy meeting to share their ideas. Whether they’re at the corporate headquarters or working from home, individuals can create task lists, assign work, upload content, set appointments and track progress all in one online application.

Automated Voice Systems Provide Service

Automated voice response systems are another way to provide customer service while allowing employees to stay focused on other tasks. Instead of a “live person,” the automated system handles the call and either directs the customer to the appropriate individual or retrieves data and communicates the basic information requested by the caller. Similarly computer “bots” handle online requests for information through live chats. Customers feel like they are being served by a live representative, but often the site is served by a computer programmed with basic responses to routine questions.

Artificial Intelligence Engages in Marketing

Artificial Intelligence (AI) systems are being used to predict and influence future sales based on consumer preferences. Knowledge of customer preferences in real time can assist marketing departments in determining where to spend their money by tracking trends more closely and adapting promotional and sales efforts. The streaming entertainment industry, for example, suggests additional programming based on shows already being watched. “Because you watched this … you might enjoy this.”

Easy Collaboration with Remote Workers

The gig or freelance industry has also grown dramatically because of technological advancements that allow talented workers to be hired and perform remotely for an organization. Needs can be posted online and workers hired, sometimes within hours. Freelancers can collaborate with managers and employees through project management platforms, without any one-on-one interaction. The cost savings by using contractors adds up as companies save time and effort by not hiring and managing long-term employees.

The Downside of Technology in Communications

Despite the savings to companies, there are some negative effects to this surge in technological integration into business communications. Some studies have shown a decrease in productivity over the long term due to an “always connected” lifestyle fueled by easy access to information. Many employees may never actually take a break from the work routine because they are always checking email or status updates on a project through a mobile app, resulting in high levels of stress and increased illness. Additionally, many workers are lacking in proper sleep, less connected with people outside the office and lacking the ability to relate to each other in face-to-face interactions.

Communication is the lifeblood of an organization. It is the vehicle that ensures proper performance of organizational functions and achievement of organizational goals. As a separate field of study, business communication has the following objectives:

1. To exchange information

The main objective of business communication is to exchange information with internal and external parties. Internal communication occurs within the organization through orders, instructions, suggestions, opinions etc.

2. To develop plans

Plan is the blueprint of future courses of actions. The plan must be formulated for attaining organizational goals. In order to develop a plan, management requires information. In this regard, the objective of communication is to supply required information to the concerned managers.

3. To implement the plan

Once a plan is prepared, it is to be implemented. Implementation of a plan requires timely communication with the concerned parties. Thus, communication aims at transmitting a plan throughout the organization for its successful implementation.

4. To facilitate policy formulation

Policies are guidelines for performing organizational activities. Policies are also termed as standing decisions to recurring problems. Every organization needs to develop a set of policies to guide its operation. Preparing policies also require information from various sources. Therefore, the objective of communication is to collect necessary information for policy formulation.

5. To achieve organizational goal

Collective efforts of both managers and workers are essential for achieving organizational goals. Communication coordinates and synchronizes the efforts of employees at various levels to achieve the stated goals of the organization.

6. To organize resources

Various kinds of resources are available in an organization such as human resources, material resources, financial resources and so on. In organizing these resources in an effective and efficient way is a key challenge to the managers. Communication is the vehicle to overcome this challenge.

7. To coordinate

Coordination is a basic management function. It involves linking the various functional departments of large organizations. Without proper and timely coordination, an achievement of organizational goals is impossible. Therefore, the objective of communication is to coordinate the functions of various departments for the easy attainment of organizational goals.

8. To direct the subordinates

The job of a manager is to get the things done by others. In order to get the things done, management needs to lead, direct and control the employees. The performance of these managerial functions depends on effective communication with subordinates.

9. To motivate employees

A pre-requisite of employee motivation is the satisfaction of their financial and non-financial needs. Financial needs are fulfilled thorough monetary returns. However, in order to satisfy non-financial needs, management must communicate with employees on a regular basis both formally and informally.

10. To create consciousness

Employees of an organization must be conscious regarding their duties and responsibilities. Communication supplies necessary information and makes them conscious about their duties and responsibilities.

11. To increase efficiency

In order to increase employee efficiency, they should be provided with necessary information and guidelines. Communication supplies such information and guidelines for them.

12. To bring dynamism

Organizations should be dynamic to cope with the internal and external changes. Bringing dynamism requires finding new and better ways of doing things. For this purpose, communication helps to seek new ideas and suggestions from the internal and external parties.

13. To improve labor-management is relationships

Harmonious relationship between workers and management is a prerequisite for organizational success. In this regard, the objective of communication is to ensure the free and fair flow of information and to create good understanding between them.

14. To increase job satisfaction

Communication enhances job satisfaction level of employees. It creates a friendly environment where employees can express themselves. As a result, they become more satisfied with their job.

15. To convey employee reaction

Communication conveys employees’ reactions, opinions, suggestions, and complaints to their superiors about the plans, policies, programs and strategies of the company.

16. To orient employee

Communication orients the new employees with the company’s policies, rules, regulations, procedures etc.

In an organization, information flows forward, backwards and sideways. This information flow is referred to as communication. Communication channels refer to the way this information flows within the organization and with other organizations.

In this web known as communication, a manager becomes a link. Decisions and directions flow upwards or downwards or sideways depending on the position of the manager in the communication web.

For example, reports from lower level manager will flow upwards. A good manager has to inspire, steer and organize his employees efficiently, and for all this, the tools in his possession are spoken and written words.

For the flow of information and for a manager to handle his employees, it is important for an effectual communication channel to be in place.

The Working of a Communication Channel

Through a modem of communication, be it face-to-face conversations or an inter-department memo, information is transmitted from a manager to a subordinate or vice versa.

An important element of the communication process is the feedback mechanism between the management and employees.

In this mechanism, employees inform managers that they have understood the task at hand while managers provide employees with comments and directions on employee’s work.

Importance of a Communication Channel

A breakdown in the communication channel leads to an inefficient flow of information. Employees are unaware of what the company expects of them. They are uninformed of what is going on in the company.

This will cause them to become suspicious of motives and any changes in the company. Also without effective communication, employees become department minded rather than company minded, and this affects their decision making and productivity in the workplace.

Eventually, this harms the overall organizational objectives as well. Hence, in order for an organization to be run effectively, a good manager should be able to communicate to his/her employees what is expected of them, make sure they are fully aware of company policies and any upcoming changes.

Therefore, an effective communication channel should be implemented by managers to optimize worker productivity to ensure the smooth running of the organization.

Types of Communication Channels

The number of communication channels available to a manager has increased over the last 20 odd years. Video conferencing, mobile technology, electronic bulletin boards and fax machines are some of the new possibilities.

As organizations grow in size, managers cannot rely on face-to-face communication alone to get their message across.

A challenge the managers face today is to determine what type of communication channel should they opt for in order to carryout effective communication.

In order to make a manager’s task easier, the types of communication channels are grouped into three main groups: formal, informal and unofficial.

1. Formal Communication Channels

A formal communication channel transmits information such as the goals, policies and procedures of an organization. Messages in this type of communication channel follow a chain of command. This means information flows from a manager to his subordinates and they in turn pass on the information to the next level of staff.

An example of a formal communication channel is a company’s newsletter, which gives employees as well as the clients a clear idea of a company’s goals and vision. It also includes the transfer of information with regard to memoranda, reports, directions, and scheduled meetings in the chain of command.

A business plan, customer satisfaction survey, annual reports, employer’s manual, review meetings are all formal communication channels.

2. Informal Communication Channels

Within a formal working environment, there always exists an informal communication network. The strict hierarchical web of communication cannot function efficiently on its own and hence there exists a communication channel outside of this web. While this type of communication channel may disrupt the chain of command, a good manager needs to find the fine balance between the formal and informal communication channel.

An example of an informal communication channel is lunchtime at the organization’s cafeteria/canteen. Here, in a relaxed atmosphere, discussions among employees are encouraged. Also managers walking around, adopting a hands-on approach to handling employee queries is an example of an informal communication channel.

Quality circles, team work, different training programs are outside of the chain of command and so, fall under the category of informal communication channels.

3. Unofficial Communication Channels

Good managers will recognize the fact that sometimes communication that takes place within an organization is interpersonal. While minutes of a meeting may be a topic of discussion among employees, sports, politics and TV shows also share the floor.

The unofficial communication channel in an organization is the organization’s ‘grapevine.’ It is through the grapevine that rumors circulate. Also those engaging in ‘grapevine’ discussions often form groups, which translate into friendships outside of the organization. While the grapevine may have positive implications, more often than not information circulating in the grapevine is exaggerated and may cause unnecessary alarm to employees. A good manager should be privy to information circulating in this unofficial communication channel and should take positive measures to prevent the flow of false information.

An example of an unofficial communication channel is social gatherings among employees.

In any organization, three types of communication channels exist: formal, informal and unofficial.

While the ideal communication web is a formal structure in which informal communication can take place, unofficial communication channels also exist in an organization.

Through these various channels, it is important for a manager to get his/her ideas across and then listen, absorb, glean and further communicate to employees.

Vertical communication is the communication where information or messages flows between or among the subordinates and superiors of the organizational. Some important definitions of downward communications are given below:

According to Stoner and his associates, “Vertical communication consists of communication up and down the organization’s chain of command.”

According to Bovee and his associates, “Vertical communication is a flow of information up and down the organization’s hierarchy.”

According to Ricky W. Griffin, “Vertical communication is the communication that flows both up and down the organization, along formal reporting lines.”

The graphical presentation of vertical communications is as follows:

So, vertical communication is the communication where information or messages flows within the top level of the organizational structure and bottom level of the organizational structure.

Advantages of vertical communication

Without communicating with superior and subordinate, no organization runs a single day. Communication without upper level and the lower level employee is very much essential for organization. Some advantages of vertical communication system are as follows:

(i) Conveying message of subordinate

Through upward direction of vertical communication system, the upper-level management covey their suggestions, complains and recommendations to the subordinates.

(ii) Maintains good labor-management relations

There is a systematic flow of information under his communication system, so a good relationship can be developed between superiors and subordinates.

(iii) Maintains organizational discipline

There is a chain of command in vertical communication system. So, a sense of discipline may be developed among the employees.

(iv) Explaining policies and plan

Through vertical communication system, upper level management can send the policies and procedures to the subordinates.

(v) Effective decision making

Superiors needed various information to take decision making in the organization. With the help of vertical communications, superiors collect information form subordinate.

(vi) Help in decentralizations

Duties and responsibilities can be delegated among departments thorough vertical communication.

(vii) Avoid by-passing

Under this communication system superior and subordinates exchange message directly. So there is no chance to by-passing.

(viii) Maintains chain of command

proper chain of commands is easily maintained through vertical communication system.

(ix) Assigning jobs and evaluating performance

Vertical communication facilitates job assignment and job evaluation of the employees.

(x) Increase efficiency

Necessary instructions are sent to subordinates and they perform their duties and responsibilities accordingly that is help to increase efficiency both superior and subordinate.

Disadvantages of vertical communication

In spite of having many advantages vertical communication, there are some disadvantages which are given below:-

(i) Delay process

Vertical communication system is a delay process. It maintains long chain of command in large organization to exchange information.

(ii) Disturbing discipline

In this communication, if the boss’s role of direction is seen by doubtful eyes by the subordinates, the chain of command and discipline may be broken.

(iii) Efficiency reduces

Downward direction of vertical communication is commanding in nature. So, there is no opportunity of the workers to become efficient.

Loss or Distortion of information: Information may be fabricated by the employees to maintain lengthy channel. So, through his communication information may lose its originality.

Reduces relationships: By this communication system relationship between superior and sub-ordinate may be reduced due to inability and inefficiency.

Slowness system: Vertical communication is the slowest communication method because it requires passing through the various levels of an organization. For this, it may become ineffective.

Negligence of superiors: In this communication superiors can neglect to send message to their subordinates.