Business Letter - Meaning, Purpose and Components - MBA Knowledge Base (2022)

A letter is price of conversation by post. It is the most important means of written communication. Every organization has to maintain contacts with its customers, suppliers, Government Department and so on. The organization has also to exchange information with various parties. Placing orders, soliciting enquires, executing orders etc. require communication. For such type of communication the media used by the organization is a letter. This letter is known as business letter.

  • In the words ofH. A. Murphyand others, “The medium used most often for written messages to persons outside your organization is the business letter.”
  • W. J. Westonsaid, “Business letter is the process of accomplishing business transaction in written form.”

The Purposes of a Business Letter

Business people have to communicate with the suppliers, debtors, creditors, customers and with other concerned parties to exchange information. Business letters are basically used to communicate with the above parties.

According toRicks and Gow, “The primary purposes of business letters are to inform, instruct, request, inquire, remit, order, advice, correct and to question.”

The main purposes of Business Letter are;

  • Convey Information: The basic purpose of any business letter is to convey information regarding business activities. Information can be transmitted through business letter to customers, suppliers, debtors, government authorities, financial institutions, bank and insurance companies and to any other parties related with the business.
  • Conclude Transaction: This is one of the specific purposes of business letter. To conclude in completed transactions business letters are frequently used.
  • Creation of Demand: Business letters especially circular letters used to create demand for new products. Circular letters can communicate many people in the same time.
  • Creation of Goodwill: In this electronic era messages can be sent within few seconds through electronic media but a well decorated business letter has its own importance in creation positive image of the company.
  • Expansion of Business: Through goodwill messages and through circular letters existing market can be expanded.
  • Establishment of Relationship: Another important purpose of business letter is, it helps to establish mutual relationship with the customers, suppliers and with the other interested parties.
  • Evidence: Business letters are also used to maintain documentary evidence. Letters can be preserved for future reference.
  • To Inquire: A business concern not only sends messages but also receive information from the outside. To run the business any firm need different types of information from outside. Through business letters firms can inquire regarding necessary matters.
  • Placing Order: It is a very common purpose for using business letter. Both trading and manufacturing concerns need to place orders for finished goods or raw-materials to run the business.
  • Problem Solving: In the course of business, disputes and misunderstanding may arise. Business letters play vital role in solving such misunderstandings.

Essentials for a Good Business Letter

Business letters are an important part of any business or profession. They are written to different persons with different motives. Letter writing is basically an art. The writer can cultivate a good style of writing various business letters by a constant and regular practice. Below are mentioned some of the important features which should be closely followed by a letter writer:

  • Clarity: A letter must have clarity. The purpose of communication should be made clear. Whether it is to inform, invite, reiterate, emphasize, remind, announce, seek participation or clarity and correct the earlier message, the purpose should clearly be stated. Lack of clarity affects the intended purpose of the letter.
  • Impact: The letter should create the necessary impact. Behind every letter there is an objective and the letter should have a clear purpose. The purpose of writing a letter is not just to reach out to the customer. Every letter has an intended impact which must be felt.
  • To create the desired impact: It is often necessary to lay emphasis. Emphasis can be laid in many ways. It can be done by proper positioning—placing them in an important position. It can be done by repetition.
  • Relevant Information: The letter should provide the relevant details forming part of the message. Facts, figures, illustrations and other such information, which are accurate and reliable, as well as relevant to the context of the communication, should be incorporated in the letter.
  • Brevity: Any good communication—oral or written—should necessarily incorporate this essential feature. Brevity is a very important attribute for any business letter. For everyone connected with business, time is of essence.
  • Concise: The time that one can allot for reading business letters is certainly limited. The receiver does not have unlimited time to spare towards reading and re-reading the letter and drawing out the message in its entirety.
  • Simplicity: Simplicity is the hallmark of any good communication. Simplicity refers to the ease of understanding. Simple writing is the opposite of complex and involved writing. The art of simple writing is mastered through conscious effort and practice. A letter written in a simple, easy, informal style using easily understood words catches the attention, and makes an impact.
  • Timeliness: Business letters, to be effective, should have proper timing. Letters should be written and dispatched on time. Some messages have a sense of urgency. They call for action, which is ‘immediate’ or ‘urgent’, or within a given time frame. Letters which carry such messages should reflect the associated urgency.
  • Language: Language is an extremely important facet of business communication. First and foremost, it is necessary to ensure that the language used is appropriate, i.e., the language with which the reader is at ease. Apart from English and Hindi, various regional languages are in common use in businesses in different parts of the country. Public sector organizations such as banks follow the three-language formula.
  • Appeal: A good letter should appeal to the reader’s sensibilities. It should go beyond the message it conveys and make a good impression. It should have elegance, which means taste, beauty and decency.
  • Style: Style refers to the manner of writing. It constitutes the collective characteristics of the writing or impression or way of presenting things. Each person has an individual style. The writing style, to create an impact, again needs conscious effort, on an ongoing basis.
  • Positive Approach: A good business letter, in the ultimate analysis, is that which has a positive approach. It creates a friendly atmosphere. It avoids negative feelings. One must be in a proper frame of mind to write a really good letter.

Components of a Business Letter

The components of a letter constitute the different parts of a letter. The following parts usually constitute the structure of a business letter.

  1. Heading: The heading which is also known as „head address‟ or “letter head” contains information relating to the name of the organization and its address. It is usually given at the top centre or top right side of the paper. Following information’s are provided in the heading. The firm’s name, address, trade mark, telephone number, telexes number, Ethics-mail address etc.
  2. Reference Number: The number which the receiver refers in all future correspondence is called reference number. It is usually printed below the date line or on the same line where the date is written to the right margin. The purpose of reference number is to enable replies to be linked with the previous correspondence and to send replies to these letters to the proper official or department.
  3. Date: The date consists of day, month and year. The date finds its place either at the starting of left margin or at the closing of the right margin as the style adopted. Date enables quick references in future and helps in prompt action and orderly filing.
  4. Inside address: The inside address contains the name and address of the organization or the individual to whom the letter is written. It is written below the reference time starting from the left margin. The inside address makes a record on the copy which helps in identification for filling purpose.
  5. Attention line: Attention line is placed below the attention time and above the salutations and is underlined. It indicates the name of those for whom the letter is meant.
  6. Salutation: Salutation means to greet the addressee. It is the complementary greeting with which the writer begins his letter. it is written below the inside address or attention line leaving some space. It starts from the left side margin. It may or may not end with comma depending upon the style of the letter.
  7. Subject line: Subject line tells what the correspondence is about. It is placed just below the salutation line. It usually begins at the left margin and may also begin from the center. It may contain apart from the subject any specific identification material i.e. date of previous letter, invoice number etc.
  8. Body of the letter: It is that part of the letter which contains the message to be converged. It is the most important part of the letter and usually consists of three to four paragraphs.
    1. The first (or the opening paragraph) begins the letter and builds up a relationship with the reader.
    2. The second paragraph contains the proper subject matter. It is the main paragraph of the letter.
    3. The third paragraph is an extension of the second paragraph.
    4. The fourth (or the closing paragraph) brings the letter to an end. It must be natural and logical must be final and complete.
    5. Closing with an important statement, a question, an offer or a request leaves the door open for further communication.
  9. Formal Close: It is also known as subscription. It is merely a polite way of ending a letter. It is written below the last paragraph of the body of the letter, either at the left side or at the right side, depending on the style of letter. The subscription should be corresponding to the salutation.
  10. Signature block/slot: Signature is the assent of the writer to the subject matter of the letter and is a practical necessity. It is usually hand written and contains the writers name, status, department, firm etc. Signature is put just below the complementary close.
  11. Enclosures: Sometimes some documents like price list catalogue etc are attached with the letter. Enclosure mentions the documents which are enclosed or attached with the letter. The enclosures usually find their place at the bottom left margin.
  12. Postscript: It is commonly known as is something written after the letter is closed. It is usually done when the writer forgets to put in some information or message in the main part. It should be very precise and to the point.
  13. ‘CC’ or Carbon Copy notation: When copies of the letter are meant to be sent to more than one person it is mentioned under “CC” or carbon copy notation.
  14. Reference initial: When typed initials are put it refers to reference initials. These are useful for office checking. They are typed adjacent to the left margin.

Differences between Business Letter and other Letters

  • Nature: Business letter or commercial letter it is impersonal and universal in nature. But other letters may be fully or partly personal in nature.
  • Purpose: Business letter is exchanging various business related issues and information. But other letters are mainly exchanging personal or family related affairs and information.
  • Scope: Business letter scope is wide and contains various types of business information. But Scope of other letters is limited and contains only personal information.
  • Structure: Business letter follow officially recognized structure. But other letters may or may not follow any recognized structure.
  • Formality: Business letter it maintains formal rules and procedure. But other letters may be informal.
  • Size: Business letter generally it is concise in size and avoids irrelevant matter. But other letters may be concise or large in size.
  • Types: Business letter it can be categorized differently. But other letters generally cannot be categorized.
  • Language: Business letter language should be easy and simple. But other letter’s language may easy, poetic, emotional etc.
  • Copy: Business letter copy of business letter is preserved. But Copy of other letters may or may not be preserved.
  • Method: Business letter it uses direct and persuasive method. But other letters may use only direct method.

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