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BUSINESS ENVIRONMENT                                                                       6.1                            ...
BUSINESS ENVIRONMENT                                                                                6.2allowing us to pros...
BUSINESS ENVIRONMENT                                                                                 6.3                  ...
BUSINESS ENVIRONMENT                                                                               6.4   powers/decision-m...
BUSINESS ENVIRONMENT                                                                                      6.5             ...
BUSINESS ENVIRONMENT                                                                                   6.6              In...
BUSINESS ENVIRONMENT                                                                                6.7     Environmental...
BUSINESS ENVIRONMENT                                                                                6.8                 Un...
BUSINESS ENVIRONMENT                                                                       6.9Ans : Economic environment r...
BUSINESS ENVIRONMENT                                                                             6.10largely slashed/ rati...
BUSINESS ENVIRONMENT                                                                                            6.11   inc...
BUSINESS ENVIRONMENT                                                                                                  6.12...
BUSINESS ENVIRONMENT                                                                          6.134. By innovation and gro...
BUSINESS ENVIRONMENT                                                                              6.14  2. To do research ...
BUSINESS ENVIRONMENT                                                                               6.15     help it in att...
BUSINESS ENVIRONMENT                                                                             6.16sustainable global ec...
BUSINESS ENVIRONMENT                                                                               6.17general manner, but...
BUSINESS ENVIRONMENT                                                                                6.18 6. Licensed pract...
BUSINESS ENVIRONMENT                                                                            6.19                      ...
BUSINESS ENVIRONMENT                                                                           6.20 23.Enumerate the guide...
BUSINESS ENVIRONMENT                                                                                6.21                  ...
BUSINESS ENVIRONMENT                                                                                6.22get all sorts of a...
BUSINESS ENVIRONMENT                                                                             6.23  Facilitate   fair P...
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
Business environment 1 to 3 units(SVU)
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Business environment 1 to 3 units(SVU)

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a brief notes on business environment in accordance to svu curriculum .

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Business environment 1 to 3 units(SVU)

  1. 1. BUSINESS ENVIRONMENT 6.1 UNIT – I and distribution operations in the most efficient manner. Restructuring of organizational designs, marketing mix and business portfolio is necessitated in the current business due to 1.1 BUSINESS CONCEPT changes in global environment. Co-existence of public and private sector, and 1. What do you mean by business? What are increasing number of public private its characteristics? Or Outline the nature partnerships (PPP) is another distinguishing of modern business. Or what is your feature of modern business. Similarly small perception about business in 21st Century? and medium firms co-exist with large conglomerates.Ans : Characteristics of Business : The nature ofbusiness is very dynamic and it undergoes changes Intense competition among domestic firms,from time to time. Business in 21st Century is and between domestic and multi-nationalcharacterized by intense competition among firms, firms: The competition poses severalaggressive expansion, growth and diversification challenges to the firms, but creates immensestrategies, keeping pace with sophisticated opportunities as well.technology and the like. Business is characterized by increasing use of Business fundamentally involves exchange of Technology. Technology influences every goods and services for income. sphere of business activity Activities of business enterprise are recurring Information revolutionizes the way business is in nature. run. Timely availability of reliable information is the key for making right decisions. Profit motive is the main characteristic of business; however the enlightened organizations endeavour to optimize the 2. Write a note on Vision, Mission, profits rather than to maximize it. Objectives and Goals of Business. Business firms of modern era are strategically Ans: Vision: Vision is a broad explanation of why oriented to have optimum leverages of the firm exists and where it is trying to lead. Vision strengths, and minimize the impact of gives the organization a sense of purpose, and a weakness and adverse elements in the set of values to its employees. It answers the environment question “where do we go from here”. The vision Globalizaton is the order of the day, and of Infosys is “To be a globally respected business firms are increasingly becoming corporation that provides best-of-breed business global entities, posing and facing competition solutions, leveraging technology, vendors and world over. society at large”. Growth of Management education and Mission: A mission statement training contributed to professionalization of outlines the fundamental purpose of the business, alienating management from organization. A vision becomes tangible as a ownership. mission statement. It answers the question “what is our business”. The mission statement of Birla Integrated supply chain management is one of Group reads as “To deliver superior value to our the key characteristics of business, which customers, employees, shareholders and society involves integrating procurement, production at large”. Similarly the mission statement of Ford Motors is “to improve continually our products and services to meet our customers’ needs,
  2. 2. BUSINESS ENVIRONMENT 6.2allowing us to prosper as a business and to provide power commanded by business personalities likea reasonable return for our stockholders, the Mittal, Tata, Vijay Malya, Ambanis and the like isowners of our business”. very much evident from their media posturing. Objectives: Objectives are more Employee satisfaction andprecise statements, giving a clear direction and development: Caring for employee satisfactionaction plan for accomplishment of mission. and providing for their development has been oneObjectives normally cover long-range company of the objectives of enlightened business houses.aims, more specific department goals, and even Providing training and development programs,individual assignments. Thus objectives may competency enhancement and career planningpertain to a wide or narrow part of an enterprise. programs for employees top the agenda of progressive organizations. Goals: A goal may be defined asan intermediate result to be achieved in a certain Quality Products and services:time, as part of the grand plan. Specific goals are Offering quality products/ services keeps the firmusually referred to as targets. It may be noted that ahead of its competitors. So the firms desirous ofobjectives are the long-term results that an long run survival make no compromise on qualityorganization seeks to achieve, while goals are the of products and services that they offer to theshort-term benchmarks that organization strives consumers.to reach. Market Leadership: Firms do seek to carve a niche for themselves in the market place, through innovation in various areas- 3. Discuss various goals of business. product, advertising, distribution, finance and the like. Pidilite, for instance, retains its marketAns: The most common goals of business include leadership in adhesive solutions market throughthe following: its leading brands Fevicol, Feviquick etc. Profit: It is the main incentive and Challenging: Businesses endeavormotivator for running the business. Even not-for- to take on challenges from adverse elements,profit organizations endeavor to work for a while constantly posing challenges to thesurplus- i.e excess of income over expenditure, to competitors. Maneuvering the rivals gives utmostensure long-run survival and growth. Even though contentment to the firms.profit is the most important criteria for business,progressive organizations work towards the goal Joy of creation: It is the ability ofof profit optimization rather than profit the business house to provide solution to themaximization- the former often involves exploiting diverse needs of various consumer groups throughthe consumer and resorting to unethical and illegal new ideas and innovations. .means to enhance profitability, while the latterduly emphasizes on increasing profits by ethical Good Corporate Citizenship: Itmeans and genuinely working to satisfy the implies that the business unit complies with thecustomers’ needs. rules of the land, pays taxes to the government regularly, discharges its obligations to society and Growth: Every business house cares for its employees and consumers.strives to grow over the time in terms of its size,market coverage, market share, sales, profits,revenues, brand equity, customer patronage and 1.2 BUSINESS ENVIRONMENTthe like. Power: Business confersenormous power on owner and endows them with 4. Define Business Environment and Discussvast resources. Business executives make and various components (or elements) ofunmake political parties and political leaders. The Business Environment.
  3. 3. BUSINESS ENVIRONMENT 6.3 OR company. The external or environmental factors such as the economic factors, socio-cultural write a note on Micro and Macro factors, government and legal factors, Environment of business demographic factors, geo-physical factors etc., are, therefore, generally regarded as uncontrollable OR factors. Write a note on internal and external Those external factors with have a direct environment and intimate impact on the firm (like the suppliers OR and distributors of the firm) are classified as micro environment, also known as task environment and Write a note on controllable and operating environment. There are other external uncontrollable environment of business. factors which affect an industry very generally (such as industrial policy, demographic factorsAns: Business Environment consists of all those etc.). They constitute what is called macrofactors that have a bearing on the business. environment, general environment or remote environment. Business Environment refers to allexternal and internal forces that have a bearing on The following Figure gives a bird’sthe functioning of business. Environmental eye view of the important components of businessAnalysis is must for the organizations to identify environment.firm’s strengths & weaknesses that lie in theinternal environment and to make outopportunities and threats that exist in the externalenvironment. The survival and success of abusiness firm depend on its innate strength –resources at its command – and its adaptability tothe environment and the extent to which theenvironment is favourable to the development ofthe film. The survival and success of a firm, thus,depend on two sets of factors, viz, the internalfactors – the internal environment – and externalfactors – the external environment. However, theterm business environment often refers to theexternal factors. The external environment has,broadly, two components, viz, business Impact of Internal environment on business isopportunities and threats to business. Similarly, presented below:-the organizational environment has twocomponents: strengths and weaknesses of the Mission/objectives: Well definedorganization. mission/objectives give clear direction and path to the organization. As the company, generally, hascontrol over the internal factors, they are Promoters/shareholders values are emulatedgenerally regarded as controllable factors because down the line in organizations. Values upheldit can alter or modify such factors as its personnel, by personalities like Tata helped buildingphysical facilities, organization and functional ethical and social entities that serve themeans, such as marketing mix, to suit the society the most.environment. Management Structure influences The external factors, on the other concentration or distribution ofhand, are, by and large, beyond the control of a
  4. 4. BUSINESS ENVIRONMENT 6.4 powers/decision-making authority at various globalization & liberalization. Various firms levels within the organization. across diverse sectors compete for the limited disposable income of consumers. A marketer Internal power relationships: The relationship should strive to create primary & selective between Board of directors and other key demand for his product to have an edge. members of the enterprise determine the effectiveness of decision-making and its Customers: Having a large and loyal customer implementation. base is required for sustainable growth and development of the firm. Firms having strong base of Assets and Physical facilities will have absolute control Public : Rising public awareness on various over operations, and could ensure effective issues like environment, product safety etc., implementation of strategies. and changing public expectations towards the companies influence their decision making, Company image & Brand equity helps in product policy, pricing, waste disposal, raising funds, diversifying activities operations participation in community development and etc. smoothly. other issues. Competent and committed manpower provides greater efficiency, process improvisation and better quality of products/services to the customers. Impact of Macro Environment on Business: Research and Development, and Technological capabilities determine a company’s ability to Global Environment: It includes innovate, reduce cost and achieve leadership factors such as WTO principles and agreements, position. Trading blocs, Treaties, conventions, declarations, protocols etc. among various countries/regions. ItImpact of External Environment: largely influences firm’s overseas operations, revenues and overall corporate performance. Micro Environment: It is the firm’simmediate environment, and micro-environmental Political & legal environment:factors are more intimately linked with company’s Political parties, alliances, their ideologies, theperformance. It includes the following elements: type and tenure of government and similar factors largely determine the economic agenda of the Suppliers: Having a wide network nation. Similarly various laws relating to consumerof reliable suppliers ensures procurement of protection, employee protection, environmentquality material in the right time in right protection, Taxation, foreign exchangequantities at competitive prices. transactions etc create certain obligations on the firms to do business in a responsible manner. Channel Partners: They act as vital link in taking the product from point of production to Economic Environment: Factors point of consumption, providing feedback to kike GDP/NI, Per Capita Income, Monetary & the company on customer’s expectations & Credit Policy of Government, Demand & Supply preferences, and in upholding the image of conditions, Inflation/phase of business cycle etc brands & organizations that they deal with. will have tremendous impact on business. Financiers: Reliable financiers are needed for Social & Cultural environment: It funding the projects, implementing various consists of people’s values, attitudes, beliefs programs and for smooth functioning of customs, traditions and the like that have huge operations. influence on what they want, what they accept and what they don’t. Competitors: Competitive environment has undergone sea change with the advent of
  5. 5. BUSINESS ENVIRONMENT 6.5 Technological environment: rainfall, draught availability of natural resourcesDevelopment of Information and Communication etc… have huge impact on firm’s decisions andTechnology facilitates fast cross-border spread of operations.cultures, movement of Technology and capital,which have significant implications for business. Natural Environment:Geographical conditions, climate, monsoon, 5. What is macro environment? What are its components?Ans: Macro environment of business consists of Economic, Political and legal, Social and Cultural,Technological, Natural and Global environment. The following figure explains various elements of macroenvironment and the features of each element. Global Technological Economic Political Social-Cultural Natural Environment Environment Environment Environment Environment EnvironmentIncreasing Technology Growth Role of Culture creates Manufacturing dependsopportunity as reaches people strategy legislature people on physical inputsworld has through businessbecome onemarketImproving quality Increased Economic Role of Culture and Mining and drilling productivity system executive globalization depend on natural environmentCompetition from Need to spend on Industry Role of judiciary Culture determines Agriculture depends onMNCs R&D goods and services NatureCapital and Fast changing Agriculture Constitution of Determines Trade between twotechnology technology India People’s attitude to regions depends ontransfers business and work geographical factors.Deciding which Rise and decline Infrastructure New direction Caste system Transport andmarkets to enter of products and for communication dependand how to enter organizations government’s on geographical factors. roleAdjusting the High Money and Spirit of collectivism The needs of people andmanagement expectations of capital markets and demand for variousprocess consumers individualization products largely depend on physical environmentIndia and WTO Problem of Per capita and Education, techno structure national awareness and income enlightenment System Population Family and marriage complexity
  6. 6. BUSINESS ENVIRONMENT 6.6 Increased New Economic Authority regulation and policy stiff opposition Demand for Scientific spirit capital Social change Ethics in business Social responsibility Corporate governance 6. Explain the importance of environment analysis. (OR) “Firms which systematically analyze and diagnose environment are more effective than those which don’t”. Elucidate. Also discuss the limitations of environmental analysis.Ans: Environmental analysis has several benefits like those mentioned below.  The very idea of environmental analysis makes one aware of the environment-organization linkage.  A corollary of the above is that (environmental analysis helps) an organization to identify the present and future threats and opportunities.  Environmental analysis will provide a necessary and very useful picture of the important factors which influence the business.  Environmental analysis helps to understand the transformation of the industry environment.  Technological forecasting will indicate some of the future opportunities and challenges.  A very important benefit of environmental analysis is its contribution to identification of risks.  Environmental analysis is a prerequisite for formulation of right strategies – corporate, business and functional.  Environmental monitoring helps suitable modifications of the strategies as and when required.  Environmental analysis keeps the managers informed, alert, and often dynamic  It encourages favourable attitude towards change and forward thinking.  It minimizes the effects of adverse conditions and changes.Limitations of Environmental Analysis:
  7. 7. BUSINESS ENVIRONMENT 6.7  Environmental forecasting has several limitations. Some of the limitations arise from the forecasting techniques used. Further there are also chances of certain errors affecting the reliability of the forecasts.  Environmental analysis does not foretell the future, nor does it eliminate uncertainty for any organization.  Environment analysis is only a tool for strategy development and testing, and not a sufficient guarantor of organizational effectiveness.  Excessive reliance on scanned data may lead to erroneous decisions  Decision making is often constrained by overload of information In spite of several limitations, organizations do engage in scanning and analyzing theenvironment to cope with dynamics of business environment. 7. Explain the process (or steps) of environmental analysis.Ans: The Process of Environmental Analysis: Environmental analysis is a challenging, time consumingand expensive affair. The analysis consists of four sequential steps: (i) scanning, (ii) monitoring, (iii)forecasting, and (iv) assessment. Scanning - Being the first step in the process of environmental analysis, scanninginvolves general surveillance of all environmental factors and their interactions in order to (a) identifyearly signals of possible environmental change, and (b) detect environmental change already under way. The potentially relevant data for scanning are unlimited but are scattered, vague, andimprecise. The fundamental challenge for analysis in scanning is, therefore, to make sense out of vague,ambiguous, and unconnected data. Monitoring: Monitoring involves tracking the environmental trends, sequences ofevents, or streams of activities. It frequently involves following signals or indicators unearthed duringenvironmental scanning. The purpose of monitoring is to assemble sufficient data to discern whethercertain trends and patterns are emerging. Thus, as monitoring progresses, the data turn more precise.Three outcomes emerge out of monitoring: (a) a specific description of environmental trends andpatterns to be forecast; (b) the identification of trends for further monitoring, and (c) the identificationof areas for further scanning. These outputs (particularly the first) become inputs for forecasting. Theywill also cause for further scanning and monitoring. Forecasting: Scanning and monitoring provide a picture of what has already taken placeand what is happening. Strategic decision-making, however, requires a future orientation. Naturally,forecasting is an essential element in environmental analysis. Forecasting is concerned with developing plausible projections of the direction, scope,and intensity of environmental change. It tries layout the evolutionary path of anticipated change. Forexample, how long will it take the new technology to reach the market place? Are current life-styletrends likely to continue? These kinds of questions provide the grist for forecasting efforts.
  8. 8. BUSINESS ENVIRONMENT 6.8 Unlike scanning and monitoring, forecasting is well focused and is much more deductiveand complex activity. This is so because the focus, scope and goals of forecasting are more specific thanthe earlier two stages of environmental analysis. Assessment :- Scanning, monitoring and forecasting are not ends in themselves. Unlesstheir outputs are assessed to determine implications for the organizations current and potentialstrategies, scanning, monitoring and forecasting simply provide nice-to-know information. Assessmentinvolves identifying and evaluating how and why current and projected environmental changes affect orwill affect strategic management of the organization. In assessment, the frame of reference moves from understanding the environment - thefocus of scanning, monitoring and forecasting - to identifying what the understanding means for theorganisation. Assessment, therefore, tries to answer questions such as what are the key issues presentedby the environment, and what are the implications of such issues for the organisation.Linkages among Stages:- Though conceptually scanning, monitoring, forecasting and assessment are separate activities,they are inextricably intertwined. For example, upon unearthing an emerging trend through scanning, one might quickly jump to -potential implications for the organisation (assessment) by implicitly forecasting the future path of thetrend. If warranted by the potential impact, one may then continue scanning and monitoring. Derivingimplications (assessment) often prompts the organisation to the need to conduct further scanning, moni-toring and forecasting. Thus, environmental analysis is not as simple and as linear as moving fromscanning to monitoring to forecasting to assessment, and should be carried out diligently. 1.3 ECONOMIC ENVIRONMENT 8. What do you mean by Economic Environment? What are the different factors of economic environment that effect business (OR) Evaluate Economic Environment in India (OR) What are the Components of Economic Environment?
  9. 9. BUSINESS ENVIRONMENT 6.9Ans : Economic environment refers to all those economic factors which have a bearing on business.Business depends on economic environment for procurement of inputs & sale of its output. The major factors of economic environment effecting business are discussed as below: Growth Strategy of the nation Economic Systems Economic Planning Major sectors of the economy, such as Agriculture, Industry and Infrastructure Economic Reforms Human Capital income & GDP Distribution of Income & Assets Global linkages Growth Strategy: The growth strategy followed in India until 90’s was Soviet Model, withlittle/marginal participation by private sector. This strategy contributed to overall growth of theeconomy, but was subjected to severe criticism for its poor focus on agriculture, neglect of export andtrade opportunities and excessive protectionism. There has been a major turnaround in the growthstrategy in the post-liberalization era. Economic Systems: Major economic systems adopted in various countries include.Capitalist Model, in which the private enterprises have major control over resources; Socialism, in whichthe tools of production are organized, owned and managed by government; and Communism which goesfurther to abolish all private property and property rights to income. Though India adopted MixedEconomic System to facilitate existence of public and private sectors, the role of private sector was verylimited. The scenario had drastically changed in 90’s with the phenomenon of Liberalization, Privatization& Globalization. Economic Planning: India has been planned economy with the central and stategovernments playing a lead role in determining priorities and allocation of funds & resources acrossvarious sectors and regions. However the objectives of economic planning such as rising production &income, full employment, equitable distribution of income and wealth, and equality & justice could notbe achieved to the right extent due to lapses in policies and their implementation. Production, Agriculture & Infrastructure: These are the vital components of thestructure of the economy. Great emphasis was laid on development of Industry; with due priority toagricultural sector. However the scenario has been rapidly changing in the last two decades, as theservice sector growing phenomenally and contributes 51.6% of GDP, while Agriculture and Industrycontributes 22.7% and 25.7% respectively. Economic Reforms: Economic Reforms helped dismantling license, permit, quota Raj,which was taken over by the phenomenon of liberalization, privatization & globalization. Controls are
  10. 10. BUSINESS ENVIRONMENT 6.10largely slashed/ rationalized, restrictions on FDI & MNCs are removed/relaxed, prices are deregulated(still few price controls exist). Protectionism given way for market oriented policies. Various economicpolicies that have profound influence on business include: Industrial policy, Foreign Investment policy,Foreign Exchange Policy, EXIM Policy and Monetary and Fiscal Policy. Human Capital: Of late, required attention is being paid to development of skilled andcompetent manpower in India. The nation’s excessive population, once viewed to be a burden on theeconomy, is being shaped into vital resource, which makes India a most attractive manufacturing andoutsourcing destination for MNCs. However the problem of unemployment is still in dangerousproportion, especially in the unorganized sector/among unskilled laborers. Programs like MahatmaGandhi National Rural Employment Guarantee Scheme go in the right direction, if properly implemented. Income & GDP: They are the most vital indicators of a nation’s economic progress.India’s position on these parameters has been improving over the time in money terms. The situation iseven better in terms of purchasing power Parity. India ranks 10th in terms of Gross National Income inthe world, but stands 4th in terms of purchasing power Parity. The rate of economic Growth in India innew millennium has been highly impressive and the future looks to be very promising. Distribution of Income & Assets: The rising employment, Income, FDI and the like donot compensate for widening inequalities between rich and poor in the society. The number ofMillionaires & Billionaires is growing but the fact that the farmers, weavers and other vulnerable &disadvantaged sections committing suicides can not be ignored. The growing inequalities between rich &poor nations has been alarming, as 20% of world population in developed countries control 80% ofincome/resources while 80% people fight for remaining meager income. Global Linkages: It includes elements such as magnitude and nature of cross-bordertrade and investments, and membership of WTO, IMF, World Bank, Trading Blocs, etc. India has been theactive member in various international bodies. Its cross-border flows are rising, but India’s contributionin Global Trade is dismally low at about 1%. To conclude, the economic environment in India is turning out to be positive andpromising as Indian firms are increasingly exploiting global opportunities, and MNCs are beingincreasingly inclined to do business in India. 10. How is economic environment important Business depends on economic environment for business? for pooling various resources.Ans: Economic environment refers to all those Crucial business decisions viz. what toeconomic factors which have a bearing on produce, how to, how much, when, where etc.business. Business depends on economic are largely influenced by the factors inenvironment for procurement of inputs & sale of economic environment.its output. Economic Environment reflects government’s The impact of economic policy towards various sectors of the economyenvironment on business may be understood from viz., Manufacturing, Agriculture & Services.the following facts. The quantum of credit available for various sectors, interest rates, subsidies,
  11. 11. BUSINESS ENVIRONMENT 6.11 incentives/controls, price regulations, taxation 11. Do you think the present economic structure and other such vital factors. environment in India is favourable to business? It determines the extent of protection or competition faced by the organization. Ans : Yes. The present economic environment in India is largely favourable with favourable macro It influences firm’s decisions with respect to economic indicators – impressive growth rate in pricing, promotion, business growth, GDP @ 7% +, which is commendable during the expansion and diversification. spell of recession world over. Thanks to the strong It influences overall investment climate in the fundamentals of the domestic economy, series of stimulus packages ushered in by the government country and flow of FDI into the country. and partial recovery of the global economy, Indian The following table shows various economy is going strong. The sales of variousvariables of Economic environment and their manufacturing units such as Automobile, PCs,relevance to business. consumer electronics, industrial goods, etc have been rising, while exports register an impressive Variable Relevance to Business growth during latter half of F.Y 2009-10. Income & Purchasing power of people & demand The recovery of IT sector is very employment for goods & services. much evident from the companies’ expansion GDP trends Overall investment climate in the plans, new recruitments and further investments. country. The opportunities in sectors like Telecom, Retail, Automobile Consumer Electronics, FMCG, Pharma, Distribution of Prevailing inequalities in income & Insurance & Financial services, real estates and the income wealth distribution. like are plenty. Price Trends _____/output discuss inventory ____ India is 4th largest economy in the profitability, ____ investment etc. world in terms of purchasing power parity and 2nd Tradeand Degree of flexibility on exports and rapidly growing economy after China, and is BOP Trends imports, incentives/controls. competing strongly with China in attracting FDI. Industrial Role & Scope for private investment. However there are still several policy. controls on flow of FDI in various sectors, while rapidly changing political environment in some Monetary cost and availability of credit, its impact states including that of Andhra Pradesh that could policy. on demand adversely affect the economic climate. Global Fosters open competition, removal of linkages. trade barriers, protectionism To conclude, the economic abandoned. environment in India is by and large favourable, however prudence demands caution and Economic Priority areas/sectors of investment. meticulous scrutiny of problems and prospects of planning. every business decision. Global Influences outsourcing Foreign economic investment, etc. Trends. 12. Give a comparative account on pre-reform To conclude, analysis of economic and post-reform economic environment inenvironment enables the organization to leverage India.the favorable factors, and take steps to minimizethe impact of adverse factors in the environment. Ans : Indian Economic Reforms and Environmental Change
  12. 12. BUSINESS ENVIRONMENT 6.12 Pre-1991 Post-1991 Consequent/implication import policy. liberalized. competition. Global situation situation competition emerges in the of the change Indian market. Indian firms will have to improve theirPrivate sector All but a few Enormous scope for private competitiveness andexcluded from industries are investment. Considerable become more innovative tomany important open to the freedom to decide the face the global competition.industries. In a private sector. portfolio strategy.number of other Competition increasesimportant substantially and publicindustries sector loses itspublic sector monopoly/dominanthad priority to positions. 1.4 RESPONSIBILITY OF BUSINESSestablish newundertakings.Entry, All but a few Reinforces the above 13. Define Social Responsibility of Business.involving industries are factors. Discuss the responsibility of businessinvestment free from towards various sections (or interestabove specified licensing. groups or stakeholders) of societyexemptionlimit, are Ans: Social Responsibility, also refereed to asrestricted by corporate social responsibility, is understood aslicensing. the obligation of decision makers to take actions, which protect and improve the welfare of societyEntry of large No MRTP Reinforces the abovefirms was Act factors. as a whole along with their own interests. There issubject to restrictions on no unanimity of opinion as to what constitutesMRTP Act entry. social responsibility of business. The importantrestrictions, generally accepted responsibilities of the businessbesides to different sections of the society are describedlicensing. below.Licensing and All but a few Companies can grow Responsibility to Shareholders:MRTP Act industries are organically and by The responsibility of a company to itsrestrictions on free from acquisitions. Firms will shareholders, who are the owners, is indeed agrowth of licensing grow in size and several primary one. The fact that the shareholders haveexisting restrictions on industries will witness taken a great risk in making investment in theundertakings. growth. No consolidation of firms. A business should be adequately recognized. MRTP Act small number of firms restrictions on would eventually dominate 1. To protect the interests of the shareholders growth. the industry in several and employees, the primary business of a cases. business is to stay in business.Limited scope Foreign Entry of many foreign firms 2. To safeguard the capital of the shareholdersfor foreign capital and by Greenfield projects and and to provide a reasonable dividend, thecapital and technology acquisitions. Opportunity company has to strengthen and consolidate itstechnology. policies have for Indian firms for position and improve its business and build up been acquiring technology and its financial independence. substantially establishing joint ventures. liberalized. Substantial increase in 3. To provide clean and transparent competition. administration of the enterprise and makingHighly Imports User industries can benefit necessary disclosures from time to time.restrictive substantially by global sourcing. Import competing firms face stiff
  13. 13. BUSINESS ENVIRONMENT 6.134. By innovation and growth the company should 7. Proper recognition, appreciation and consolidate and improve its position and help encouragement of special skills and strengthen the share prices. At the same time, capabilities of the workers; it should avoid indulging in tampering of share prices and mislead the investors. 8. The installation of an efficient grievance handling system;5. The shareholders are interested not only in the protection of their investment and the return 9. An opportunity for participating in on it but also in the image of the company. It managerial decisions to the extent shall, therefore, be the endeavour of the desirable. company to ensure that its public image is The Committee that conducted such that the shareholders can feel proud of the social audit of Tata Iron and Steel Company their company. (TISCO) observes that “not only should the It may be mentioned here that the company carry out its various obligations to theshareholders also have certain responsibilities employees as well as the larger community as awhich they have to discharge to protect their own matter of principle, but his has also led to a higherinterests. They shall not only offer whole-hearted degree of efficiency in TISCO works and ansupport and co-operation in the positive efforts of unparalleled performance in industrial peace andthe company but shall also guide and control considerable team spirit and discipline which haveproperly its policies and activities. At the same all resulted in high productivity and utilization oftime, they shall appreciate the responsibility of the capacity”. Thus, by discharging its responsibilitiesbusiness to other sections of society – to the to the employees, the business advances its ownworkers, consumers and the community. interests. Responsibility to Employees: The It may, however, be pointed outsuccess of an organization depends to a very large that the expenditure on labour welfare, etc.,extent on the morale of the employees and their should have relevance to the financial position ofwhole-hearted co-operation. Employee morale the company and the economic conditions of thedepends to a large extent on the discharge of the nation. This aspect has to be particularly takencompany’s responsibilities to them and the note of by public sector enterprises. Suchemployer-employee relationship. The expenditure shall not exceed the socially andresponsibility of the organization to the workers economically warranted limits and shall not causeincludes: undue burden on the consumers or the general public. It shall not result in the formation of islands 1. The payment of fair wages; of affluence or comfort in the midst of poverty and suffering at the expense of society. 2. The provision of the best possible working conditions; Responsibility to Consumers: According to Peter Drucker, “there is only one 3. The establishment of fair work standards valid definition of business purpose; to create a and norms; customer”. It has been widely recognized that customer satisfaction shall be the key to satisfying 4. The provision of labour welfare facilities to the organizational goals. Important responsibilities the extent possible and desirable; of the business to the customers are: 5. Arrangements for proper training and 1. To improve the efficiency of the functioning education of the workers; of the business so as to (a) increase 6. Reasonable chances and proper system for productivity and reduce prices, (b) improve accomplishment and promotion; quality and (c) smoothen the distribution system to make goods easily available.
  14. 14. BUSINESS ENVIRONMENT 6.14 2. To do research and development, to 4. Taking steps to conserve scarce resources improve quality and introduce better and and developing alternatives, wherever new products. possible. 3. To take appropriate steps to remove the 5. Improving the efficiency of the business imperfections in the distribution system, operation. including black-marketing or profiteering by middlemen or anti-social elements. 6. Contributing to research and development. 4. To supply goods at reasonable prices even 7. Development of backward areas. when there is a seller’s market. 8. Promotion of ancillary and small-scale 5. To provide the required after-sales services. industries. 6. To ensure that the product supplied has no 9. Making possible contribution to furthering adverse effect on the consumer. social causes like the promotion of education and population control. 7. To provide sufficient information about the products, including their adverse effects, 10. Contributing to the national effort to build risks, and care to be taken while using the up a better society. products. 8. To avoid misleading the customers by improper advertisements or otherwise. 14. What are the arguments for and against social responsibility of business? 9. To provide an opportunity for being heard and to redress genuine grievances. Ans: Arguments for and Against Social Involvement: The important arguments for and 10. To understand customer needs and to take against the social involvement of business are necessary measures to satisfy these needs. given below.Responsibility to government: They include: Arguments for Social Involvement Business: 1. Payment of taxes from time to time 1. Business which survives using the resources 2. Compliance to various laws, rules and of the society has a responsibility to the regulations society. 3. Provide vital information to facilitate policy decision making 2. Business which is an integral part of the 4. Participate in effective implementation of social system has to care for the varied various schemes, programs etc. needs of the society. Responsibility to the Community: 3. Social involvement of business would fosterA business has a lot of responsibility to the a harmonious and healthy relationshipcommunity around its location and to the society between the society and business to theat large. These responsibilities include: mutual benefit of both. 1. Taking appropriate steps to prevent 4. Social responsibilities like recycling of waste environmental pollution and to preserve the may have favourable financial effects. ecological balance. 5. Social involvement may discourage 2. Rehabilitating the population displaced by additional government regulation and the operation of the business, if any. intervention. 3. Assisting in the overall development of the 6. Social involvement may create a better locality. public image for the company which may
  15. 15. BUSINESS ENVIRONMENT 6.15 help it in attracting customers, efficient  Reducing resource use, waste and personnel and investors. emissions doesnt just help the environment - it saves you money too.Arguments against Social Involvement of  A good reputation makes it easier toBusiness: recruit and retain competent employees, 1. Business should confine to its own business. which means employees may stay longer, There are government and social reducing the costs and disruption of organizations to carry out social activities. recruitment and retraining. Employees are better motivated and more 2. Involvement in social activities could productive. adversely affect the economic health of a  CSR helps ensure effective compliance business enterprise. It may be noted that with regulatory requirements. the expenditures on social welfare has been  Activities such as involvement with the imposing severe burden on TISCO. local community are ideal opportunities to generate positive press coverage. 3. If the cost of the social involvement of the  Good relationships with local authorities business is ultimately passed on to the make doing business easier. consumers, there is no point in exalting the  Understanding the wider impact of social involvement of business. Sometimes business can help develop new products there could even be a net loss to the society because of the high cost of the corporate and services. sector undertaking such activities.  CSR can make business more competitive and reduces the risk of 4. Many companies involve themselves in sudden damage to reputation (and sales). social activities because of the tax  Investors patronage exemptions on the income spent on special In spite of several benefits, social purposes. implementation of CSR programmes poses several challenges to the firms. The main challenges 5. If the social involvement of a business include: enterprise causes an increase in the price of its product, it could affect its  Lack of community participation in CSR competitiveness both in the domestic and activities: international markets.  Need to build local capacities  Issues of transparency 6. Social involvement of business could lead to  Non-availability of well organised non- an increase in the domination or influence governmental organisations: of business over the society.  Narrow perception towards CSR initiatives:  Non-availability of clear CSR guidelines: 17. What are benefits and challenges involved  Lack of consensus on implementing CSR in CSR? issues  Lack of resources, skill, competentAns: Being good in CSR provides bundle of manpower and the like.benefits to the organization. The major benefitsthat organizations gain include:  Building a reputation as a responsible 18. What are the key drivers of social business unit, improved consumer responsibility? perception towards the enterprise  Sales of environmentally friendly Ans: The key drivers for CSR include the following: products continue to grow - and these Enlightened self-interest:- creating a products often sell at a premium price- synergy of ethics, a cohesive society and a means more profits to the firms
  16. 16. BUSINESS ENVIRONMENT 6.16sustainable global economy where markets, labour Competitive labour markets: Employees areand communities are able to function well increasingly looking beyond paychecks andtogether. benefits, and seeking out employers whose philosophies and operating practices match their Social investment: - contributing to own principles. In order to hire and retain skilledphysical infrastructure and social capital is employees, companies are being forced toincreasingly seen as a necessary part of doing improve working conditions.business. Supplier relations: As stakeholders are Transparency and trust: - business has low becoming increasingly interested in businessratings of trust in public perception. There is affairs, many companies are taking steps to ensureincreasing expectation that companies will be that their partners conduct themselves in a sociallymore open, more accountable and be prepared to responsible manner. Some are introducing codesreport publicly on their performance in social and of conduct for their suppliers, to ensure that otherenvironmental arenas companies policies or practices do not tarnish their reputation. Increased public expectations of business:- globally companies are expected to do more thanmerely provide jobs and contribute to theeconomy through taxes and employment. The shrinking role of government: In the 19. Critically evaluate the CSR performance ofpast, governments have relied on legislation and Corporates in India and abroad.regulation to deliver social and environmentalobjectives in the business sector. Shrinking Ans : The Indian Situation : The Indian businessgovernment resources, coupled with a relaxation sector presents a mixed picture as far as socialof regulations, has led to the exploration of responsibility is concerned. J.R.D. Tata, who wasvoluntary and non-regulatory initiatives instead. instrumental in conducting the first social audit in India and perhaps in the world, was of the opinion Demands for greater disclosure: There is a that while on the side of production, of growth, ofgrowing demand for corporate disclosure from efficiency, Indian industry, on the whole, didstakeholders, including customers, suppliers, remarkably well, usually against odds and in spiteemployees, communities, investors, and activist of crippling infrastructural shortages. On theorganizations. distributional side, however, its record was often poor and, in some respects, dismal, judged by the Increased customer interest: There is size of the black-market, the volume of blackevidence that the ethical conduct of companies money and the general corruption that pervadedexerts a growing influence on the purchasing our economic life.decisions of customers. In a recent survey byEnvironics International, more than one in five The Sachar Committee suggestedconsumers reported having either rewarded or that companies in the public sector, which werepunished companies based on their perceived very much a part of the total corporate sector andsocial performance. accounted for about 70 per cent of the total investment in the corporate sector, must reckon Growing investor pressure: Investors are with the social cost and social benefits arising outchanging the way they assess companies of any given investment. The business firms shouldperformance, and are making decisions based on be made accountable at least to the extent ofcriteria that include ethical concerns. A survey by informing the public about the extent and mannerEnvironics International revealed that more than a in which it has or has not been able to dischargequarter of share-owning Americans took into its social obligations in the course of its ownaccount ethical considerations when buying and economic operations. It has also been repeatedlyselling stocks. emphasized that the report on social responsibility of the company should not be in a vague or
  17. 17. BUSINESS ENVIRONMENT 6.17general manner, but should have an element of participation exceeding 50%. One event wasparticularization and certainty. Gladiathon, a fundraiser in support of the Presidents Challenge 2003. Leading byHere is a glance of CSR initiative of prominent example was the Managing Director frombusiness houses in India. HP Asia Pacific, who wore a gladiator costume and competed with other IT  Tata Group: Involved in development of industry leaders in the battle for charity. HP Sciences & Technology, healthcare, Centre was the largest corporate donor of this for Human Resource development, event, raising a total of $121,000. promoting Art & literature, rural development and the like.  Microsoft: Microsoft works closely with international organizations such as the  Birla Group: Involved in Technical World Food Programme, Save the Children, education, agricultural research, medicine, and Mercy Corps to provide technology- art & culture, Temple building, renovation & based development assistance through the archeology, scientific research, education HEART (Humanitarian Empowerment and etc. Response through Technology) program. It now contemplates to work closely with India, especially in the states of UP and  Godrej: Involved in education, health & Bihar to protect children. medicine, sports, environment protection, family planning art, wildlife, etc. Apart from above organizations, other organizations – both Indian & foreign are  Hindustan Unilever: Involved in community increasingly engaged, and getting more responsive development, rural education and to the dire needs of the society at large. entrepreneurship, upliftment of rural women, protection of girl children etc.  Bajaj : Community development, higher education, upliftment of widows/orphans 1.5 PROFESSIONALIZATION IN INDIA scholarships, spiritual, and cultural development, literacy etc.  Infosys: Community development calamity 20. What do you mean by profession? What relief, development of ICT in rural areas, are its characteristics? spreading awareness of health, hygiene and literacy in slums etc. Ans: "A profession is a vocation founded uponGlobal Scenario: specialized educational training, the purpose of which is to supply disinterested counsel and  IBM : IBM - Japan’s ‘e-elder’ initiative is a service to others, for a direct and definite national program using training materials compensation, wholly apart from expectation and other support from IBM Japan which of other business gain". will hire and train seniors as instructors for Characteristics of profession: other seniors in an effort to help elder 1. Skill based on theoretical knowledge: citizens (expected to make up one-fifth of Japan’s population by 2008) more fully 2. Professional association participate in a Web-based society. 3. Extensive period of education:  HP: In Singapore, HP staff raised nearly 4. Testing of competence $295,000 for charity in 2003 and received a SHARE Gold Award from the Community 5. Institutional training Chest of Singapore for employee
  18. 18. BUSINESS ENVIRONMENT 6.18 6. Licensed practitioners: Professions seek to knowledge and skill. In this connection, Peter establish a register or membership so that Drucker observes: “Management is independent only those individuals so licensed are of ownership, rank, or power. It is objective recognized as bona fide. function and ought to be grounded in the responsibility for performance. Professional- 7. Work autonomy: management is a function, a discipline, a task to be done; and managers are the professionals who 8. Code of professional conduct or ethics: practice of this discipline, carry out the functions, 9. Self-regulation: Professional bodies tend to and discharge these tasks, it is not longer relevant insist that they should be self-regulating and whether the manager is also an owner; if he is it is independent from government. Professions incidental to his main function, which is to be a tend to be policed and regulated by senior, manager.” respected practitioners and the most highly From what have been stated qualified members of the profession. above, it is clear that professional of business10. Control of remuneration and advertising: management means that the business should be Where levels of remuneration are managed by men: determined by government, professional Who have formally acquired the specialized bodies are active in negotiating (usually knowledge and skill for management advantageous) remuneration packages for their members.] Who have authority and freedom to take the11. High status and rewards: right decision12. Legitimacy: Professions have clear legal Who have no ideological bias in the discharge authority over some activities (e.g. certifying of the functions; and the insane) but are also seen as adding Whose decisions and actions are guided by legitimacy to a wide range of related certain ethical consideration activities. Though progress has been made in13. Inaccessible body of knowledge: In some the direction of professionalisation of professions, the body of knowledge is management in India, there is still a long way to relatively inaccessible to the uninitiated. For go, particularly in many enterprises which are example, Medicine, law, architecture and the owned and managed by families. like. Professionalisation does not, of course, mean that the owners shall not be the managers; but it certainly means that the managers should have 19. Critically evaluate the statement “There is proper management education and qualifications. no scope for professionalism in family In business circles, there has been a growing owned businesses” in the Indian context. awareness of the need for professionalizing management; and, as a result, many “familyAns : The growth of management education and concerns’ have taken steps towards professionaltraining has contributed to the growing management of their enterprises.professionalization, which in turn, has contributedto the growing social orientations of business. Professionalization makes business more efficient, dynamic and socially responsible. The Professionalization imparts a growth of management education in the country,certain social responsibility and dignity to and the facilities abroad to obtain managementmanagement. A professional is one who possesses education have contributed to professionalizationsystematic knowledge and skill to perform certain in the business field.responsible function with authority and who isbound by certain ethics in the use of his
  19. 19. BUSINESS ENVIRONMENT 6.19  Ethics corresponds to basic human needs. It is a human trait that man desires to be ethical; 1.6 ETHICS not only in his private life but also in his business affairs where, being a manager, he knows his decisions may affect the lives of thousands of employees. 20. Define a) Ethics and b) Business Ethics.  Values create credibility with the public. AAns : Ethics refers to the code of conduct that company perceived by the public to beguides an individual in dealing with others. It deals ethically and socially responsive will bewith personal conduct and mortal duty and honored and respected even by those whoconcerns human relations with respect to right have no intimate knowledge of its actualand wrong. It governs the behavior of individuals working.and standards governing the interrelationshipbetween individuals.  Values give management credibility with employees The term business ethics refers tothe system of moral principles and rules of  Values help better decision making.conduct applied to business. Business ethicsmeans that the business should be conducted  Ethics and profit go together. A companyaccording to certain self-recognized moral which is inspired by ethical conduct is alsostandards. Business, being a social organ, shall not profitable one.conduct itself in a way detrimental to the interestsof society and the business sector itself.  Law cannot protect society, ethics can Strategies for improving ethical decision making: 1. Apply intuition to make dispassionate 21. What do you mean by ethical dilemmas? assessment.Ans : Ethical dilemma is a complex situation that 2. Empathy ie looking at issue from other’swill often involve an apparent mental conflict point of view while making decision.between moral imperatives, in which to obey onewould result in transgressing another. This is also 3. Write down pros and cons in the form of acalled an ethical paradox. The ethical content of balance sheet. The balance sheet approachthe policies of top managers in the organization helps decision making by presentingcan have enormous impact throughout the information in an organized way.company. Organizations often confront withdecision making that help them save costs or rise 4. Sort out ethical priorities before problemsprofits/revenues, which may not strictly conform arise. Prioritization shall help considerto ethical standards. Eg: Bribing the bureaucrats alternatives when one is not under stress.for getting clearances, advertising a product asnew/improved when it is not actually the one, 5. One should commit oneself publicly ondiscriminatory pricing and the like. ethical issues. He should identity potential areas of ethical conflict and make clear his opposition to padding expense accounts, stealing supplies from the company, price 22. Outline the importance of ethics in fixing or damaging ecology. business. Suggest strategies for improving ethical conduct of business. 6. One should set a good personal example for employees.Ans: Ethics is important to business for severalreasons as stated below:
  20. 20. BUSINESS ENVIRONMENT 6.20 23.Enumerate the guidelines for managing 8. The best way of promoting high standards of ethics at workplace. business practices is through self-regulation. The Code has been designed as an instrumentAns : Strategies for Managing Ethics in the of self-regulation to serve as a voluntaryWorkplace : The following guidelines ensure the guideline towards better quality of life andethics management programme is operated in a higher standards of business practice.meaningful fashion: 9. Ethics Committees: Setting up ethics 1. Recognize that managing ethics is a process. committees and Ethics Hot lines go a long Ethics is a matter of values and associated way in upholding ethics in business. behaviours. The best way to handle ethical dilemma is to avoid their occurrence in the first place. 2. Make ethics decisions in groups, and make decisions public, as appropriate. This usually produces better quality decisions by including diverse interests and perspectives, and increases the credibility of the decision process and outcome by reducing suspicion of unfair bias. 2. Integrate ethics management with other management practices. 3. Use cross-functional teams when developing and implementing the ethics management programme. 4. Value forgiveness. An ethics management programme may at first actually increase the number of ethical issues to be dealt with because people are more sensitive to their occurrence. Help people recognize and address their mistakes and then support them to continue to try operating ethically. 5. Goods and services must conform to the commitment promised to customers. Business must be realistic and truthful in stating claims. 6. Customers must be given best possible service and treated with respect and fairness. 7. Business must understand and respect the needs, concerns and welfare of the community and society. It should use knowledge and experience for upgrading the quality of life. All business endeavours must combine the qualities of private excellence for public good.
  21. 21. BUSINESS ENVIRONMENT 6.21 regulations. These factors may vary very significantly across different countries, different provinces in a country and also over the time. The vital institutions under political system include legislature, executive and UNIT – II judiciary, each bestowed with well defined role and authority. They have profound influence on business. The businessman of today cannot limit himself to the problems internal to his business unit but has to intelligently keep himself constantly abreast of the national problems. Such an understanding will help him in the long run while dealing with his own managerial and business problems being 2.1 POLITICAL ENVIRONMENT influenced by the political environment. Public opinion is a very important aspect of modern life. In a 24. Write a note on preamble? democracy, any act must be supported by public opinion to be upheld and sustained.Ans : The Preamble is an introduction to the Even so the business activity must get theConstitution and contains its basic philosophy. The support of public opinion. Political leaders arePreamble to the Indian Constitution states that the representatives of the public and the spokesmen of its opinion. Therefore, business “We the people of India having and politics are closely related. Without a clearsolemnly resolved to constitute ourselves into a understanding of dynamics of politics and theSovereign, Socialist, Secular, Democratic Republic support and encouragement from theand to secure to all citizens: politicians, business cannot prosper. The “Justice- social, economic and business strategy adopted by the businessmanpolitical; Liberty of thought, expression, belief, is to be framed keeping in mind what is thefaith and worship; Equality of status and present political situation, what are going to beopportunity; and to promote among them all the steps taken by political forces in thefraternity assuring the dignity of the individual and country and abroad and what will be thethe unity and integrity of the Nation. repercussions of different political developments on the life of business. If the The preamble of Indian general atmosphere in the political circle isconstitution provides a roadmap for governance, against business-specially the private sector,functioning of business and ensures equality and the businessman has to deal with it by makingdignity for human life. necessary modifications in his attitude, policies and practices. If he does not care for the political environment he may be meeting with 25. What is political environment? Outline the the failure as the political forces may finish the impact of political environment on chances of his success by creating business insurmountable obstacles in his way. The case of Maruti LimitedAns: The political environment includes which was set up for the manufacture of mini-factors such as characteristics and policies of cars in good example of how the change ofthe political parties, the nature of the political forces affects favorably or adverselyconstitution and government system and the the business venture. During the emergency,government environment, encompassing the when the country was governed by theeconomic and business policies and Congress (I), Mr. Sanjay Gandhi was able to
  22. 22. BUSINESS ENVIRONMENT 6.22get all sorts of assistance from the Government Countries are getting integrated into globalincluding huge finance because of his close villages. Directive principles are not legallyrelations with the then Prime Minister Mrs. enforceable in the courts, and the state can notIndira Gandhi. With the change in be held responsible for not formulating publicGovernment, i.e., when the Janata party came policies in conformity with directiveinto power, the same concern had to see its principles. Inclusion of two confusing words indooms day as so many charges of corruption the preamble- socialistic and secular- lead toand bungling were laid against Maruti Limited deterioration of relationship between variousand its Directors because of which the business religious communities.came to a close and the legal battle is stillgoing on. The political climate determines theprospects and problems of any concern.Reliance Retail business in Uttar Pradesh faced 2.2 LEGAL ENVIRONMENTmany hurdles and suffered huge losses sinceMayavathi Government came to power.Similarly investment in Telangana Region had 27. Write a note on impact of a) Legislature, b)drastically slowed down if not turned negative- Executive or government and c) Judiciarythat may largely be ascribed to political on businessfactors. Ans : Impact of legislature on business : Various laws like consumer protection Act, Environment protections Act, MRTP Act or Competition Act, 26. “Constitution in India had put several Companies Act, various Acts governing employee roadblocks in the process of industrial welfare /security viz. factories Act, PF Act, ESI Act, development” Discuss. Gratuity Act, workmen compensation Act etc., create several obligations on the part ofAns: For over five decades, the constitution organizations. Contravention of the provisions ofhas been guiding the destiny of our country. It any law/act calls for severe penalties to the firm.is said that the constitution has put severalroadblocks which checked the pace of Impact of Executive orcountry’s economic progress- roadblocks Government on business: Executive is the lawmanifested through communal clashes, moral implementation agency. Keeping in tune withdisintegration, growing regional and parochial federal setup, the powers are divided between thetendencies, corrupt bureaucracy, umpteen central and State Government. The role of theregulatory agencies and their implementing govt. is vital as it facilitates smooth conduct ofagencies, and topping all, the helplessness of business.the government in curbing the menace of theundesirable elements. Partly the problem lies The mutual impact of govt. and businesswith the background against which the towards each other is show below :constitution was drafted and adopted. It is high Govt. to Business Business to Govt.time that we have a re-look at the constitution.It is not helping the country to attain the goals Variable Relevance to Businessthat it was meant to achieve. The dream ofprosperous and free society did not come true. Maintaining Law Payment of Taxes.Socialism which the constitution seeks to and order.achieve has become irrelevant. From 1991 onwards, there has Licensing. Providing information forbeen a restructuring of the economy from the making policy decisions.command to a market oriented one. The Money & credit. Taking up & completelychanges in the economic system need to be contracts/project.incorporated in the political system also.
  23. 23. BUSINESS ENVIRONMENT 6.23 Facilitate fair Participation in voluntary promoter of business. The functions and roles of competition. programs. government may be summarized as below: Facilitate growth Service to Govts. bodies. Functions of Economic Roles of & development Government Government of business. Basic Functions Regulatory Role Providing Implementation of rules, Infrastructure policies, programs These include the pure Regulation may cover a wide envisaged by the govt. public goods such as the spectrum extending from entry provision of property in to a business through the Exchange of rights, macro-economic conduct of the business to final information. stability, control of results of the business, and infectious diseases, safe also the exit. Regulation is very Protecting the water, roads, and important for the proper interests of small protection of the functioning of a market industries. destitute. economy. Facilitate transfer Intermediate Functions Entrepreneurial Role & adoption of technology. These, include matters Direct participate of such as management of government in business was Govt. also influences business by fixing externalities (e.g.: very common particularly intariffs and quotas. With the advent of pollution), regulation of the socialist and developingliberalisaton, privatization and globalization, the monopolies, and the countries. Reasons includedrole of government changed from regulator to a provision of social ideological and dearth offacilitator. However the role of government insurance (pensions, private entrepreneurship andcontinues to be relevant as licensing continues, unemployment capital. Privatization, however,though the list of industries subject to licensing is benefits). has become widespread sincereduced, subsidies and tariffs continue though on the med 1980s.a reduced scale. Impact of Judiciary on business:The role of the judiciary is to ensure that the Activist Functions Planning Roleexecutive authority conforms to the general rules These involve measures The national necessity forlaid down by the legislature. It also settles the to stabilize and promote proper utilization of scarcerelationship between private citizens on the one markets and to resources and prioritization ofhand, and between citizens and the government redistribute development objectives andon the other. The power of the judiciary to settle assets/income. ideological reasons have madelegal disputes affects business considerably. this an important role ofJudiciary has the power to penalize the erring governments in the developingorganizations /employers, duly protecting their and socialist countries.rights. Promotional Role This is also more important in 28. Discuss various roles and functions of developing countries than in government with respect to business. the developed because speedy The functions of government with respect to development of the industrybusiness include basic, intermediate and activist and commerce and thefunctions, while the government also plays the economy requires therole of regulator, entrepreneur, planner and development of the infrastructure, including

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