Business environment BBA(CAM) 201

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: THIRDSEMESTER(CAM)
Name of the Subject:
BUSINESS ENVIRONMENT
Unit-1-4

What is business environment?
Business environment includes the ‘climate’ or set of conditions: economic, social,
political or institutional which have a direct or indirect bearing on the
functioning of business
It signifies external forces, factors and institutions that are beyond the control of
the business and they affect the functioning of a business enterprise.

Features of business environment
 Business environment is the sum total of all factors internal & external to
the business firm that greatly influence their functioning
 It covers factors and forces like customers, competitors, suppliers,
government, and the social, cultural, political, technological and legal
conditions.
 The changes in business environment are unpredictable.
 Business Environment differs from place to place, region to region and
country to country. Ex: Political conditions in India differ from those in
Pakistan. Taste and values cherished by people in India and China vary
considerably.

NATURE
• AGGREGATIVE
• INTER RELATED
• RELATIVE
• INTER-TEMPORAL
• UNCERTAIN

Importance of business environment
Business environment is complicated and active in nature and has a
far-reaching impact on the survival and growth of the business.
 FIRST MOVER ADVANTAGE
 Giving Direction for Growth
 Continuous Learning
 Image Building
 Meeting Competition
 Identifying Firm’s Strength and Weakness: Business environment
helps to identify

Types of environment
Internal environment External environment
Micro environment Macro environment

Internal environment
 Important internal factors which have a bearing on the decisions of a
business firm and whicharegenerally controllablebecausethecompany
hascontrolover thesefactors:
 Value system
 Vision, mission and objectives
 Management structure and nature
 Internal power relationship
 Human resources
 Company image
The internal environment isthe environment that hasa direct impact on the
business.

 Vision, Mission & Objective
Ranbaxy’s mission: “ tobecomearesearchbasedinternational pharmaceuticalcompany”-
has driven it to enter the foreign markets and development.
Thus the business domain of the company, priorities, direction of development, business
philosophy, business policy etc,
are guided by the vision, mission
and objectives of the company.

 Management structure & nature
Organizational structure, composition of board of directors, extent of
professionalisation of management sometime delay decision making while
some others facilitatequick decision making.
Board of directors is the highest decision makingbody and it overseas
performance of the organization and so its quality is very important.
The share holding pattern can also have important managerialimplications.

 Internal Power Relationship
The amountof support the top management enjoysfrom
differentlevels of employees, shareholders and board of
directors have important influenceon the decisions and their
implementation.
For example: relationship betweenthe
membersof the board of director and
betweenCEO.

 Human resources
The characteristics of humanresources like skill, quality, morale,
commitment,attitude etc. could contribute to thestrengthand
weakness of an organization
Ex: Some organizations find it difficultto carry out restructuring
or modernizationbecause of resistance by employees whereas
they are smoothly done in some others.

 Company Image
While raising finance,formingjoint ventures orother alliances,
soliciting marketingintermediaries,enteringpurchase or sale
contracts, launchingnew products etc. the image of the company
mattersthe most.

 External environment
Micro environment consists of the actors in the
company’s immediate environment that affect
the performance of the company. They are more
intimately linked with the company.
Macro environment consists of larger societal
forces that affect all the actors in the company’s
micro environment.

Micro environment
Suppliers
Customers
Competitors
Marketing intermediaries
Financiers
Public

 Suppliers:
An important force in the micro environment of
a company is the suppliers, i.e., those
who supply the inputs like raw materials and
components to the company. The importance of
reliable source/sources of supply to the smooth
functioning of the business is obvious.

Customers:
 The major task of a business is to create and sustain
customers. A business exists
only because of its customers. The choice of customer
segments should be made by considering a number of
factors including the relative profitability, dependability,
stability of demand, growth prospects and the extent of
competition.
The business firm should not be dependent on a single
customer

Competitors:
Competitionnot only includethe other firms that
produce same productbut alsothose firms which
compete for the income of the consumers the
competitionhere among these productsmay be saidas
desire competitionas the primary taskhere isto fulfill
the desire of the customers.

Marketing Intermediaries
The marketing intermediariesincludemiddlemen such
as agents andmerchants that help the company find
customers or closesales withthem. The marketing
intermediariesare vital links between the company
and the finalconsumers .

Financiers:
The financiers are also important factors of internal
environment. Along with financing
capabilities of the company their policies and
strategies, attitudes towards risk , ability to
provide non-financial assistance etc. are very
important.

Public :
 A publicis any group thathas an actualor potentialinterest
in or impact on an organization’s ability to achieve its
interests.Ex-media, citizens, local public etc.
NGOs have been protesting againstchild labour, cruelty
against animals, environmentalproblems, deindustrialization
resulting from imports etc.

Input
suppliers
Workers &
their unions
Public
Competitors
Marketing
intermediaries
Customers
BUSINESS

Macro environment
• Economic environment
• Political environment
• Technological environment
• Social environment
• Global environment

Economic environment
• Economic environmentrefers to the aggregateof the natureof
economic system of thecountry, business cycles, thesocio-
economic infrastructureetc.
The successful businessmanvisualizes theexternalfactors affecting
the business, anticipatingprospective marketsituationsand
makes suitableto getthe maximumwithminimizecost.

Economic environment
Economic conditions like GDP, per capita income,
markets for goods and services, growth of foreign
trade etc.
Economic policies like
1. Fiscal and monetary
2. EXIM
3. Industrial policy
• Economic system like capitalist, socialist and
mixed

Non economic environment
• Social environment includes social factors like
customs, traditions, values and beliefs,
poverty, literacy rate , life expectancy rate etc.
• Political environment includes the political
system, the government policies and attitude
towards the business community and
unionism.ex: coke

• Legal environment refers to set of laws, regulations
which influence the business organizations and their
operations.Every business organization has to obey and
work within the framework of the law.
• The important legislations which concern business are:
• Companies Act 1956
• FEMA 1999
• THJe factories act 1948
• Industrail dispute 1972
• MRTP 1969
• THE Consumer Protection Act 1986

• Technologyical environment include the
methods , techniques and approaches for
production of goods and services and its
distribution.
• Ex: USA Electrical appliances 110 volts but in
India 220 volts.
• 2g , 3g ,4g
• It offers both oportunity and threats.

Political environment
It includes factors such as characteristics and policies of the
political parties, natureof Constitution andgovernment system
relating to business policies and regulations.
Importanteconomic policies such as industrial policy, policy
towards foreign capital and technology, fiscal policy and foreign
trade policy are often political decisions.

Technological environment
• The business in a country is greatly influenced by the technological
development.
• The technology adopted by the industries determines the type and
quality of goods and
services to be produced and the type and quality of plant and
equipment to be used.
Technological environment influences the business in terms of
investment in technology,consistent application of technology and
the effects of technology on markets.

Social Environment
• The social dimension or environment of a nation
determines the value system of the society which, in turn
affects the functioning of the business.
• Sociological factors such as costs structure, customs and
conventions, mobility of labour etc. have farreaching
impact on the business. These factors determine the work
culture and mobility of labour, work groups etc.

Global environment
• The global environment refers to those factors which are
relevant to business such as:
• WTO principles and agreements
• International conventions
• Treaties, agreements, declarations, protocols, economic
• Sentiments in other countries, hike in crude oil prices etc.

MEANING OF ENVIRONMENTAL
ANALYSIS
• Environmental analysis is the process through which an organisation monitors
and comprehends various environmental forces so as to determine the
oppourtunities and threats that lie ahead.
• This process is also known as ENVIRONMENTAL SCANNING OR
ENVIRONMENTAL ANALYSIS.
• It has two broad aspects: environmental diagnosis or identifying opportunities
and threats.
• Environmental search or monitoring the environment.
1. Environmental search leads to the identification of various forces that may
influence the enterprise.
2. Environmental diagnosis judges these forces for their positive and negative
impact.

PROCESS OF ENVIRONMENTAL ANALYSIS
1. ENVIRONMENTAL SCANNING
• SCANNING MEANS THE PROCESS of analysing the environment for identifying
the factors which may influence the business.
• Its main purpose is to identify the emerging trends or early warning signals.
• There are so many environmental factors that influence the business but all
these factors may not be relevant for the enterprise.
• Therefore, critical and high priority factors must be identified.
• Example of factors are:
• Managerial philosphy
• Age,size,power
• Graphical dimmensions
• Type of the business organisation

ENVIRONMENTAL MONITORING
• Monitoring is a follow up and deeper analysis of relevant environmental forces
identified through scanning.
• Once the relevant factors are identified, adequate data about these factors are
gathered so as to ascertain emerging pattern and trends.
• Several techniques used to collect the relevant factors about environmental factors
are:
• Company records
• Publications
• Verbal talks with the employees, customers, dealers, suppliers and competitiors.

Environmental forecasting
• Forecasting is the process of estimating the relevant future events based
on present and past behaviour.
• It is necessary to anticipate future events before any strategic plans are
formulated.
• Therefore, forecasting is done for all the elements of external environment
including political, social, economic and technological etc.
• Techniques used for forcasting are:
• Depli method
• Time Series analysis
• Econometric analysis

DIAGNOSIS(ASSESSMENT)
• Environmental factors are assessed in terms of their impact on the
organization.
• Some factors in the environment may entail an opportunity while
others may pose a threat to the organization. The degree of impact may
vary from one factor to another.
• Techniques used for environmental analysis:
1. SWOT ANALYSIS
2. ETOP ANALYSIS

IMPORTANCE OF ENVIRONMENTAL
ANALYSIS
• Environmental analysis makes manager aware of the linkage between an
organisation and its environment and keeps them alert and informed.
• It helps the company to identify the threats and opportunities before it.
• Through environmental analysis an organization can gain understanding of
how the industrys environment is being transformed.
• With the help pf environmental analysis the organisation can know the
causes of disequilibrium.
• It is essential for the formulation of right strategies and for modification of
existing strategies as and when necessary.

LIMITATIONS OF ENVIRONMENTAL
ANALYSIS
• BASED ON ASSUMPTIONS
• NOT ABSOLUTE TRUTH
• TIME CONSUMING AND EXPENSIVE

TECHNIQUES OF ENVIRONMENTAL
ANALYSIS
• SWOT ANALYSIS
• ETOP

APPROACHES TO ENVIRONMENTAL
ANALYSIS
• SYSTEMATIC APPROACH: Information is collected
systematically and regularly.
• ADHOC APPROACH: Under this special survey and studies
understand trends in environment from time to time.
• PROCESSED FORM APPROACH: The organization uses
information in a processed form available from various
sources inside and outside the organization.

ENVIRONMENTAL ANALYSIS AND
STRATEGIC MANAGEMENT
• Strategic management involves formulation, implementation,
review and control of strategies for achieving company’s
objectives and mission.
• Strategies cannot be formulated without the thorough
knowledge of the company’s internal and external
environment.
• Therefore, environmental analysis plays an important role in
the process of strategic management and consists of following
five steps:

Strategies For Managing Diversity
 Training and education programs
 Organizational policies
 Outreach programs
 Career development programs

Semester: Third Semester(CAM)
BUSINESS ENVIRONMENT
Unit-2(ECONOMIC
ENVIRONMENT)

 Foreign exchange is the system or
process of converting one national
currency into another, and of
transferring money from one country
to another

FOREIGN CURRENCY
• Foreign currency means any currency other than Indian
currency.
FOREIGN SECURITY
• Foreign security means any security, in the form of
shares, stocks, bonds, debentures or any other
instrumental denominated or expressed in foreign
currency and includes securities expressed in foreign
currency but where redemption or any form of return such
as interest or dividends is payable in Indian currency.

OBJECTIVE’S
• prevent the outflow of Indian currency
• To regulate dealings in foreign exchange and
securities
• To regulate the transaction indirectly affecting
foreign exchange
• To regulate import and export of currency and
bullion

• To regulate employment of foreign nationals
• To regulate foreign companies
• To regulate acquisition, holding etc of immovable
property in India by non-residents
To regulate certain payments .
To regulate dealings in foreign exchange and
securities.
To regulate the transactions indirectly affecting
foreign exchange.
.

PROVISIONS
• Regulation of dealing in foreign exchange.
• Restrictions on payments.
• Restrictions regarding assets held by non
residents and import & export of certain
currency & bullion .
• Duty on persons entitled to receive foreign
exchange and payment for exported goods.

FERA TO FEMA
• The main objective of FERA framed against the background
of severe foreign exchange problem and controlled
economic regime , was conservation and proper utilisation
of the foreign exchange resources of the country.
• FERA created flourishing black market in foreign exchange.
It brought into the economic lexicon the word “HAWALA”.
• There was a demand for a substantial modification of FERA
in the light of ongoing Economic liberalization and
improving foreign exchange reserves position. Accordingly,
a new act ,FEMA( Foreign Exchange Management Act )
1999 replaced the FERA.

Need for FEMA
The demand for new legislation was basically on
two main counts
1. The FERA was introduced in 1974 when India’s foreign
exchange reserves position was not satisfactory. It required
stringent controls to conserve foreign exchange and to utilize
in the best interest of the country. Very strict restrictions have
outlived their utility in the current changed scenario.
2. there was a need to remove the draconian provisions of FERA
and have a forward-looking legislation covering foreign
exchange matters.

Milder FEMA replaces FERA
• The older version had very strict laws (for example, a person
was assumed guilty unless proven otherwise.) All the
unnecessary restrictions were removed. The rules regarding
foreign investments were simplified to encourage more
foreign investment in India and consequently ensure better
foreign cash flow. However, FERA was not in accordance with
the pro-liberalization policies of the Indian Government.
Finally, in 1999 the FEMA was passed which replaced the
FERA, though certain provisions of FERA 1973 still exist under
FEMA 1999.
• FEMA came into effect from 1st June, 2000. Some structural
changes were made. The FEMA combines and improves the
laws relating to foreign exchange It makes the procedure for
foreign investment easy and consequently encourages foreign
exchange in India.

Similarities between FERA and FEMA
• The RBI and central government would
continue to be the regulatory bodies.
• Presumption of extra territorial jurisdiction as
envisaged in section (1) of FERA has been
retained.
• The Directorate of Enforcement continues to
be the agency for enforcement of the
provisions of the law such as conducting
search and seizure.

MEANING OF FISCAL POLICY
Fiscal policy refers to the entire budgetary policy of the government.
The fiscal Policy is concerned with the raising of government
revenue and incurring of government expenditure. To generate
revenue and to incur expenditure, the government frames a policy
called budgetary policy or fiscal policy. So, the fiscal policy is
concerned with government expenditure and government revenue.
According to smith,” fiscal policy refers to a policy under which the
government uses its expenditure and revenue programme during a
year to produce favorable distribution effect and avoiding
undesirable effect on national income, production and
employment.”

OBJECTIVES
• To mobilize resources for economic growth for the public sector.
• To promote efficient allocation of financial resources.
• To ensure equitable distribution of income and wealth so that the
fruits of the economic development are fairly distributed among
the public.
• To restrain inflationary pressure in the economy in order to ensure
economic stability and to prevent business cycles.
• To promote export and encourage import substitution.
• To reduce income inequalities among different sections of the
society.
• To achieve balanced regional development.
• To increase employment in the country through effective fiscal
measure.
• To ensure optimum utilization of the country’s economic resources.

MEANING OF MONETARY POLICY
• Monetary policy is the process by which monetary authority
of a country, generally a central bank controls the supply of
money in the economy by exercising its control over interest
rates in order to maintain price stability and achieve high
economic growth In India, the central monetary authority is
the Reserve Bank of India (RBI). is so designed as to maintain
the price stability in the economy.. It is announced twice a
year.
• Slack season policy-April- September
• Busy Season Policy-October- March

TYPES
• Monetary policy is referred to as either being
an expansionary policy, or a contractionary
policy
• Expansionary policy increases the total supply of
money in the economy rapidly.Expansionary
policy is used to combat unemployment in
a recession by lowering interest rates
• Contractionary policy decreases the total money
supply, or increases it slowly. Contractionary
policy involves raising interest rates to
combat inflation.

OBJECTIVES
• Price Stability
• Controlled Expansion Of Bank Credit
• Restriction of Inventories
• Promotion of Exports and Food Procurement
Operations
• Desired Distribution of Credit
• Equitable Distribution of Credit

Quantitative Instruments
• Quantitative Instruments ARE THOSE
INSTRUMENTS which affect overall money
supply in the economy – do not direct or restrict
the flow of credit to some specific sectors of the
economy.
• Bank Rate
• Open Market Operations
• Cash Reserve Ratio (CRR) Margin requirements
• Statutory Liquidity Ratio (SLR)
• Repo rate and reverse repo rate

BANK RATE
• Bank rate is the minimum rate at which the central bank provides
loans to the commercial banks. It is also called the discount rate.
• Dear money policy: Increase in bank rate means increase in the
rate of interest charged by the central bank on the loans and
advances to the commercial banks which in turn compels
commercial bank to raise the rate of interest charged by them to
their customers i .e CONTRACTION OF CREDIT
Bank rate inc interest rate inc borrowing will be less
profitable results contraction of credit.
Near money policy: : Decrease in bank rate means decrease in the
rate of interest charged by the central bank on the loans and
advances to the commercial banks which in turn compels
commercial bank to decrease the rate of interest charged by them
to their customers which results in Expansion OF CREDIT
Bank rate dec interest rate low borrowing will be more
profitable results expansion of credit.

Open market operations
• It refers to the purchase or sale by the central bank of
any securities in which it deals, such as the government
securities, banker’s acceptances or foreign exchange.
• When central bank offers securities for sale, it intends
to contract money supply and credit.
• When the central bank pursuing the expansionary
monetary policy will buy securities in the market, so
that supply and credit capacity will be increased.

Statutory liquid ratio:
• Bank has to keep portion of total deposits with
itself in liquid assets with the RBI in the form
of liquid assets like cash , gold .
• HIGH SLR – less credit availability –will
reduce the money supply.
• Low SLR– more credit availability will
increase the money supply.

CASH RESERVE RATIO
• It refers to the minimum percentage of a
bank’s total deposits required to be kept with
the Central Bank in the form of cash reserves.
• HIGH CRR – less credit availability –will
reduce the money supply.
• Low CRR – more credit availability will
increase the money supply.

Repo rate
• Repo rate is the rate at which RBI lends to
commercial banks generally against
government securities. Reduction in Repo rate
helps the commercial banks to get money at a
cheaper rate and increase in Repo rate
discourages the commercial banks to get
money as the rate increases and becomes
expensive

Reverse Repo rate
• Reverse Repo rate is the rate at which RBI
borrows money from the commercial banks.
The increase in the Repo rate will increase the
cost of borrowing and lending of the banks
which will discourage the public to borrow
money and will encourage them to deposit. As
the rates are high the availability of credit and
demand decreases resulting to decrease in
inflation.

QualitativeInstruments
- which focus on the alternative uses of credit in the economy –
direct or restrict the flow of credit to some specific sectors of the
economy. The qualitative measures do not regulate the total
amount of credit created by the commercial banks. These measures
make distinction between good credit and bad credit and regulate
only such credit, which creates economic instability. Therefore,
qualitative measures are known as the selective measures of credit
control.
• Qualitative credit control measures include:
• (i) Prescription of margin requirements
• (ii) Consumer credit regulation
• (iii) Moral suasion
• (iv) Direct action

Prescription of margins requirements:
• Generally, commercial banks give loan against ‘stocks or ‘securities’. While
giving loans against stocks or securities they keep margin. Margin is the
difference between the market value of a security and its maximum loan
value. Let us assume, a commercial bank grants a loan of Rs. 8000 against
a security worth Rs. 10,000. Here, margin is Rs. 2000 or 20%.
• If central bank feels that prices of some goods are
rising due to the speculative activities of businessmen
and traders of such goods, it wants to discourage the
flow of credit to such speculative activities. Therefore,
it increases the margin requirement in case of
borrowing for speculative business and thereby
discourages borrowing. This leads to reduction is
money supply for undertaking speculative activities
and thus inflationary situation is arrested.

• On other contrary, central bank can encourage
borrowing from the commercial banks by
reducing the margin requirement. When there
is a grater flow of credit to different business
activities, investment is increased. Income of
the people rises. Demand for goods expands
and deflationary situation is controlled.
• Thus, margin requirement is a significant tool
in the hands of central bank to counter-act
inflation and deflation.

Consumer credit regulation:
• Now-a-days, most of the consumer durables like T.V., Refrigerator,
Motorcar, etc. are available on installment basis financed through
bank credit. Such credit made available by commercial banks for the
purchase of consumer durables is known as consumer credit.
• If there is excess demand for certain consumer durables leading to
their high prices, central bank can reduce consumer credit by (a)
increasing down payment, and (b) reducing the number of
installments of repayment of such credit.
• On the other hand, if there is deficient demand for certain specific
commodities causing deflationary situation, central bank can
increase consumer credit by (a) reducing down payment and (b)
increasing the number of installments of repayment of such credit.

MORAL SUASION
• Moral suasion means persuasion and request.
To arrest inflationary situation central bank
pursuades and request the commercial banks
to refrain from giving loans for speculative and
non-essential purposes. On the other hand, to
counteract deflation central bank pursuades
the commercial banks to extend credit for
different purposes.

DIRECT ACTION
• This method is adopted when a commercial
bank does not co-operate the central bank in
achieving its desirable objectives. Direct action
may take any of the following forms:
• Central banks may charge a penal rate of
interest over and above the bank rate upon
the defaulting banks;

• Economic policy-makers are said to have two kinds of
tools to influence a country's economy: fiscal and
monetary.
• Fiscal policy relates to government spending and
revenue collection. For example, when demand is low
in the economy, the government can step in and
increase its spending to stimulate demand. Or it can
lower taxes to increase disposable income for people
as well as corporations.
• Monetary policy relates to the supply of money, which
is controlled by factors such as interest
rates and reserve requirements (CRR) for banks. For
example, to control high inflation, central bank can
raise interest rates thereby reducing money supply.

• Economic policies of a country are directed towards four objectives-
price stability, economic growth, full employment and equilibrium
in the balance of payments. Monetary policy and fiscal policy also
aim at these goals. Fiscal policy operates as a tool of economic
stabilization through income and expenditure of the government.
On the other hand, monetary policy through changes in the supply
of money which influence the level of aggregate demand.
• Fiscal policy and monetary policy are closely interrelated and should
be pursued in coordination with each other .fiscal policy brings
about changes in money supply through budgetary deficit.an
excessive fiscal deficit requires control of inflation through
monetary policy.on the other hand, a fiscal policy of very low deficit
enables a liberal monetary policy.
•

DIFFERENCE BETWEEN FISCAL POLICY
AND MONETARY POLICY

BASIS Fiscal Policy Monetary Policy
Definition: Fiscal policy is the use of
government expenditure and
revenue collection to
influence the economy.
Monetary policy is the
process by which the
monetary authority of a
country controls the supply
of money,.
Principle: Manipulating the level
of aggregate demand in the
economy to achieve
economic objectives of
price stability, full
employment, and economic
growth.
Manipulating the supply of
money to influence
outcomes like economic
growth, inflation, exchange
rates with other currencies
and unemployment.
Policy-maker: Government Central Bank (RBI)
Policy Tools: Taxes, government
expenditure, public debt,
deficit financing
Quantitative
instruments:Interest rates;
CRR,SLR,open market
operations,repo rate
Qualitative : marginal
requirements,moral suasion,
consumer credir regulationn

Semester: THIRD Semester(CAM)
Business Environment
Unit-3
Socio-Culture & Political
Environment

Culture
Culture is the coherent, learned, shared view of a
group of people about life’s concerns that ranks what
is important, furnishes attitudes about what things
are appropriate, and dictates behavior.
Culture is therefore:
• A shared system of meanings.
• Relative.
• Learned.
• About Groups.

Impact Of Culture On
Business Relations
• Impact on Relationships with Overseas Clients.
• Impact on Relationships with Customers.
• Impact on Relationships with Employees.
• Impact on Relationships with Partners.

Cultural Globalization
• Cultural globalization refers to the transmission of ideas,
meanings, and values around the world.
• This process is marked by the common consumption
of cultures that have been diffused by the Internet, popular
culture media, and international travel.
• The circulation of cultures enables individuals to partake in
extended social relations that cross national and regional
borders.
• It involves the formation of shared norms and knowledge with
which people associate their individual and collective cultural
identities. It brings increasing interconnectedness among
different populations and cultures.

Social Responsibility Of Businesses
Social responsibility of business refers to the
obligation of business enterprises to adopt
policies and plans of actions that are desirable
in terms of the expectation, values and
interest of the society. It ensures that the
interests of different groups of the public are
not adversely affected by the decisions and
policies of the business.

Social Responsibilities Toward
Different Groups
• Responsibility towards the shareholders or
owners.
• Responsibility towards the Employees.
• Responsibility towards the Consumers.
• Responsibility towards the Government.
• Responsibility towards the Community.

Social Audit
A social audit is a formal review of a company's
endeavors in social responsibility. A social audit looks
at factors such as a company's record of charitable
giving, volunteer activity, energy use, transparency,
work environment, and worker pay and benefits, to
evaluate what kind of social and environmental
impact a company is having in the locations where it
operates.

Business Ethics
The word ‘Ethics’ originated from the Greek word ‘ethos’ meaning:
• Character,
• Conduct, and
• activities of the people based on moral principles.
It is concerned with what is right and what is wrong in human behavior on
the basis of standard behavior or conduct accepted by the society.
Honesty, truthfulness, compassion, sympathy, feeling of brotherhood etc.
are considered ethical.
Ethics from business point of view or business ethics are the moral
principles, which guide the behavior of businessmen or business activities
in relation to the society. It provides certain code of conduct to carry on
the business in a morally justified manner.

Corporate Governance
• Corporate governance is the mechanisms, processes and
relations by which corporations are controlled and directed.
• Governance structures and principles identify the distribution
of rights and responsibilities among different participants in
the corporation (such as the board of directors, managers,
shareholders, creditors, auditors, regulators, and
other stakeholders) and includes the rules and procedures for
making decisions in corporate affairs.
• Governance mechanisms include monitoring the actions,
policies, practices, and decisions of corporations, their agents,
and affected stakeholders.

Political Environment
This includes the political system, the government policies and attitude towards
the business community and the unionism. All these aspects have a bearing on the
strategies adopted by the business firms.
Political factors which have impact on business.
• The stability of the government also influences business and related activities to a
great extent. It sends a signal of strength, confidence to various interest groups
and investors.
• Ideology of the political party also influences the business organisation and its
operations.
• The trade union activities also influence the operation of business enterprises amd
most of the labour unions in India are affiliated to various political parties. Strikes,
lockouts and labour disputes etc. also adversely affect the business operations.

Legal Environment
This refers to set of laws, regulations, which
influence the business organisations and their
operations. Every business organisation has to obey,
and work within the framework of the law.
Legal factors in a business environment include:
government regulations, contracts and agreements
with business partners and employee labor laws.

The important legislations that concern the business enterprises include:
(i) Companies Act, 1956
(ii) Foreign Exchange Management Act, 1999
(iii) The Factories Act, 1948
(iv) Industrial Disputes Act, 1972
(v) Payment of Gratuity Act, 1972
(vi) Industries (Development and Regulation) Act, 1951
(vii) Prevention of Food Adulteration Act, 1954
(viii) Essential Commodities Act, 2002
(ix) The Standards of Weights and Measures Act, 1956
(x) Monopolies and Restrictive Trade Practices Act, 1969
(xi) Trade Marks Act, 1999
(xii) Bureau of Indian Standards Act, 1986
(xiii) Consumer Protection Act, 1986
(xiv) Environment Protection Act
(xv) Competition Act, 2002

Besides, the above legislations, the following are also form part of
the legal environment of Business:
(i) Provisions of the Constitution: The provisions of the Articles of
the Indian Constitution, particularly directive principles, rights
and duties of citizens, legislative powers of the central and
state government also influence the operation of business
enterprises.
(ii) Judicial Decisions: The judiciary has to ensure that the
legislature and the government function in the interest of the
public and act within the boundaries of the constitution. The
various judgments given by the court in different matters
relating to trade and industry also influence the business
activities.

Rational & Extent of State Intervention
1. Minimal Functions:-
• Providing pure public goods.
• Defense.
• Law and order.
• Property rights.
• Public health.
• Protecting the poor.
• Disaster relief.

Rational & Extent of State Intervention
(Contd.)
2. Intermediate Functions:-
• Addressing externalities.
• Basic education.
• Environmental protection.
• Consumer protection.
• Insurance (health, life, pensions)
• Unemployment.
3. Activist Functions:-
• Coordinating private activities.
• Cluster initiatives.
• Assets redistribution.

THANK YOU

Semester: Third Semester(cam)
Name of the Subject : Business
Environment
Unit-4
Natural & Technological
Environment

Natural Environment
The natural environment includes
geographical and ecological factors that
influence the business operations. These
factors include the availability of:-
• natural resources,
• weather and climatic condition,
• location aspect,
• topographical factors, etc.

Impact of Natural Environment
• Business is greatly influenced by the nature of
natural environment. For example, sugar
factories are set up only at those places where
sugarcane can be grown.
• It is always considered better to establish
manufacturing unit near the sources of input.
• Government’s policies to maintain ecological
balance, conservation of natural resources etc.
put additional responsibility on the business
sector.

Technological Environment
• Technological environment include the methods,
techniques and approaches adopted for production
of goods and services and its distribution. The
varying technological environments of different
countries affect the designing of products.
• In the modern competitive age, the pace of
technological changes is very fast. Hence, in order to
survive and grow in the market, a business has to
adopt the technological changes from time to time.

Innovation
Innovation can be defined simply as a "new
idea, device or method". However, innovation
is often also viewed as the application of
better solutions that meet new requirements,
unarticulated needs, or existing market needs.

Innovation
Innovation takes place through the provision
of more effective products, processes,
services, technologies, or business models
that are made available to markets,
government and society.

Technology Leadership
• Three components:
– Assessment
– Forecasting
– Management
– Transfer
• A technological leader fosters technological innovation, and
understands the technology life cycle.
• Such a leader initiates and steers commercialization of
technological advances, links business and technology
strategies, manages technology R&D and understands
technological revolutions.

Technology Management Components
• Technology Management
– Developing and using appropriate technologies
– To lead the technology, employ it in the best way,
and to profit from technology use.
• Technology Transfer
– Helping others learn the benefits and uses of
appropriate technologies
– Making technologies available to others

Status of Technological Environment
or Technology in India
After Independence, India had basic
problems like poverty , unemployment and
development of India . Indian Govt. has taken
many following steps for technological
development :- .
.

1. Establishment of technological and research institute
Indian govt. has established 500 technological institutes
for providing education to Indian students. It has also
established 1080 research institutes. In these institutes
major names like space research centre, medical research
centre and agricultural research centre have developed
India technically.
2. Positive Technical policy
India has strong and positive technical policy for
technological development. This policy opens door to
import technology from foreign countries for increasing
agricultural and industrial developments.

3. High Growth Rate of Information Technology in
India
In India, IT sector is developing with 35% growth
rate, India is second country after China who is using
internet at large scale for e-commerce , e-education
and e-accounting.
4. Incentive for promoting Technology in India
Indian Govt. has given 100% income tax exemption
for expenses incurred in research of technology in
India. State financial corporation is uplifting domestic
technology by supporting finance to domestic
Industries.

Demographic Environment
• The importance of demographic factors to business is clear
from the facts that “Management is men” & “Market is
people.”
• Management in Men, Material, Machinery and Money.
• Market is people in the sense that the demand depends on
the people and their characteristics – the number, income
levels, tastes and preferences, beliefs, attitudes and
sentiments.

Demographic Environment(Contd.)
• Demographic factors such as size of population, growth
rate, age composition, ethnic, density of population,
rural – urban distribution, nature of family have very
significant implication for business
• Important demographic bases of market segmentation
include the following:
1.Age structure
2.Gender
3.Income distribution

4.Family size
5.Occupation
6.Education
7.Social class
8.Religion
9.Race
10.Nationality

Business environment BBA(CAM) 201

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