BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007

BUSINESS ENVIRONMENT
Business Environment mainly refers to external forces that impact business. Such forces include political-legal ,technological ,cultural ,economic and physical.

Factors under External Environment
All the factors that provides opportunities or pose threats to an organization make up its external environment.
• • • • • • • • • • • • DEMOGRAPHIC ENVIRONMENT SOCIAL ENVIRONMENT CULTURAL ENVIRONMENT POLITICAL ENVIRONMENT ECONOMIC ENVIRONMENT FINANCIAL ENVIRONMENT TRADE ENVIRONMENT TECHNOLOGICAL ENVIRONMENT LEGAL ENVIRONMENT REGULATORY ENVIRONMENT TAX ENVIRONMENT ETHICAL ENVIRONMENT

External environment consists of 1. Micro Environment 2. Macro Environment 1. Micro Environment • Micro environment is called as the task environment and operating environment. • Micro environment forces have a direct bearing of the operation of the firm. • These factors are present in companies environment and affect on the performance of the companies. • Includes – suppliers ,marketing intermediaries .competitors,customers and public.

Micro environment are more intimately linked to company than macro.  Suppliers : o Those who supply inputs,raw material and components o Uncertainty in supply compels high inventory cost. o India maintains stocks of 3 to 4 months were as Japan maintains for few hours. o Eg : Nirma –believes of the logic that captive production plant for raw material is best for cost control.(backward integration) o Co feel outsourcing is more beneficial o Risk to depend on single supplier o Globally companies are resorting to partenering relationship marketing.

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BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007

 Customers: o Business exists because of customers o Monitoring customers sensitivity is perquisite o The choice of customer by the firm can be on a. Relative profitability b. Dependability c. Stability of demand d. Growth prospects o Today customer is global customer as exposed to global products.  Competitions: o Competition includes not only with competitors of same product but all those who compete for discretionary income of consumers. o Eg : the competiton for T V firm may not be only from other T V manufacturing but also from 2wheelers , refrigerators,cooking ranges,stereo sets etc,bank schemes. o To influence basic desire of customer o Generic competition: If the customer decides to spend discretionary income on recreation , he come across alternatives like, TV ,stereo ,2 in 1,3 in 1 P C etc. o It is competition among alternative.  Marketing Intemediary: o Firms that aid the company in promoting,selling and distributing its grads to final buyers. o Includes middlemen,agents,merchants,distribution firms,warehouses,transportation firms,marketing,financial intermediaries ,insurances etc.  Financiers o Financiers of the company o Their financial capability,policies, strategies.attitudes,ability to provide non financial assistance.  Public o Public is any group that has actual or potential interest I or impact on organizations ability to achieves its interest. o Media publics,citizens action publics,local publics etc,consumers publics o Issues against companies o Tarnishing the image by media o Environmental pollution o Chills labour,sweat labour,cruelty against animals.

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BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007

2. Macro Environment • Macro environment consists of larger societal forces that affect on companies micro environment. • Micro environment forces have a direct bearing of the operation of the firm. • These factors are present in companies environment and affect on the performance of the companies. • Includes – suppliers ,marketing intermediaries .competitors,customers and public.

Factors under Internal Environment
The internal environment comprises the resources ,synergy and distinctive competencies of a firm.These together determine its organizational capability in terms of its strengths and weaknesses existing in the different functional areas – marketing, operations,personnel,financial,technical,etc. Needless to mention that internal environment is constantly influenced by the external environment.
• • • • • • • STRATEGY STRUCTURE MARKETING CAPABILITY OPERATION CAPABILITY PERSONNEL CAPABILITY FINANCIAL CAPABILITY TECHNICAL CAPABILITY

The factor which have bearing on the strategy and decision making are Value system  Value system by founder has important bearing on o Choice of business o The mission o Objective of the organization o Business policies and practices  If value system is shared by all in firm contributes to the success.  The value system of JRD TATA and its acceptance ,voluntarily incorporated to social responsibility to consumer,employees,shareholder,society and people.  EID PARRY group was taken over by MURUGAPPA group,profitable liquor business sold off to PARRY ;did not fit into value system of the MURUGAPPA GROUP.  VALUE system and ethical standards are evaluated by many companies in selection of suppliers,distributors and collaborations  Value ,governance , and excellance of Infosys ltd o I nfosys tech ltd ,IT consulting and software services to future 1000 Co,employ more than 3000 people key growth principle of the corporate governance a. Best practices b. Financial markets c. Human capital 3

BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007

o Core values: to achieve objective in an fair environment,honesty,transperancy,courtesy towards customers,employers,vendors and society. o Activities benchmaked to Global practices o Firms quality control and project management helped in achieving total quality management accredation o Feedback from process audit helped foe reengineering the internal processes. o International accounting practices followed o Infosys published all financial reports according to US and Indian accounting practices. o Best practices captured through knowledge management systems and gives experience. o The 1st Indian registered direct listing on US market o NASDAQ trading began in Maech 1999. o Viewed it as to achieve more liquid currency through stock options (ESOP) o Attracting best employee and future acquisition o Presence on NASDAQ would give comfort and confidence to customers. o Provides innovative compensation and benefits o Pioneered the concept of employee stock qwnership plan in India. o Offer benefits of traning ,asset acquisition ,loans,housing,personnel assistance services. o Combination of stock options and bemnefits allows infosys to attract top talent to contribute to the growh. o Won 1st national corporate governance award 1999 instituted by ministry of finance and sponsered by the UTI. • Mission and Objective  Mission and objective guides o The business domain of the Co . o Priorities o Direction of development o Business philosophy o Business policy o Eg Ranbaxy thrust in foreign market and development is driven by mission “ To become a research based international paramaceutical company. o Eg : Arvind mills Mission:- “To achieve global dominance in select business to build core competencies through continuous product and technical innovation and focus on cost effectiveness”. Management structure and nature o Composition of board of directors o Extent of professionalism o Quality of the board in critical factors o Shareholding pattern could have important managerial implication 4

Relationship between members of BOD and between chief executive and the board is important.entering purchase or sale contracts. 5 .initiative of people varies in different organization o The organization culture and qverall environment is responsible.soliciting.technology.capital structure etc. • • • Environmental study confer several benefits: • Broad strategies are developed • Action plans to cope with technological changes may be evolved • Counter strategies to outsmart competitors • Keep managers on toes.distribution logistics.launching new product.financial policies .BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 • o Eg WIPRO majority of shares held by promoters o Financial institution have large share holding o The stand of nominees of financial institution can be decisive factors Internal power relationships o The amount of support the top management enjoys from  Employees of different level  Share holders  Board of directors Has impact on decision making.D of Rovers group found Japanese firm with 30000 employees and 30000 process improvers. o Western firms 2000 process improvers and 2800 workers o India? Company image and brand equity o Co image matters while raising finance.marketing intermediaries. o John towers M.forming joint venture alliance .quality production. o The involvement . Human Resources o Characters like skills quality morals commitment attitude etc. Miscellaneous Factors o Other factors contribute to the success failure of business or influence decision making are  Physical asset and facilities :-production capacity.  R & D of technological Capabilities:-to innovate and compete  Marketing resources  Financial factors:.financial position.

liberalization have charges competitive environment in India. o Traditions and values. o Global interdependence 6 . Global Environment • Domestic business is affected by global factors • Global environment refers to o WTO principles and agreements o International environment o Treaties o Agreements o Declaration o Protocols o Economic and business conditions o Sentiments in others countries o Developments like hike in oil prices o WTO principles and regulation have for reaching impact on Indian business  Product patent acceptance – impact on pharma industry  The import and investment .BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 Limitations of Environmental Analysis Environmental analysis often has debilitating impact on business • Fails to foresee future accurately • Does not guarantee organizational effectiveness • Too much reliance on analysis makes a manager become complacent.customs.preferences . Domestic Environment • Economic conditions o Good export market o But recession in other country can increase the impot threat and dumping • International political factors can affect business like o War o Political tensions o Uncertainties o Strained political relations o All may eliminate sanction • Development in info and common technology facilities o Cross border spread of culture o Influence attitude o Aspirations o Tastes.

INTEL have impact on INFOSYS.their market share.strength • State of growth of industries • Fixed and storage exists • Indivisibility of capacity augmentation o Efforts to increase sales to achieve capacity utilization.during economies of scale  Product standardization and switching cost • When product of different firms are standerdised-price . 7 .LUCENT.after sales service.WIPRO.HCL o Hit on share market affects  Job market  Reduction in job  Less intake by institution  2-3 % earning dip.credit are important variable of competition.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 Eg American Co CISCO.distribution .  COMPETITIVE STRUCTURE OF INDUSTRIES MICHAEL PORTERS MODEL OF STRUCTURAL ANALYSIS OF INDUSTRIES • 5 BASIC FORCES o Rivalry among existing firms  Firms in industries are mutually dependent  Common competitive actions • Price changes • Promotional measures • Customer service • Warranties • Product improvement • New product launch • Channel promotion  No’s of factors which influence rivalry • No ‘s of firms .

product attributes.removable access to material.location.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 • Absence of switching cost are important     Strategic stake • More rivalry of no of firms have high stake inachieving success Exit barriers • High compensation of labour • Emotional attachment etc Switching costs: • Cost of retaining employees • Cost of new ancillary equipment Expected retaliation • Potential entrants expection about the reaction of existing competitors.customer loyalty. Monopoly elements o Proprietary product /technology 8 • • .govt subsidies. Product differentiation o Brand image .experience and learning curve. o Threat of new entrants  Growing industry face threat of new entrant  But can have entry barriers  Competition is high if industry is more profitable  Entry barriers are as follows • Govt policy o Prior to liberalization o Reservation of industries o Product for public sector o Industrial licensing o Regulations under MRTP ACT o Import restriction o Restriction on foreign capital and technology • • Economies of scale o Keeps out small players o Restricts large players because of risk of large stake Cost disadvantage and learning and experience curve o Cost advantage by established firms o Proprietory product technology.

BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 • o Monopolization / control on raw materials .distribution channels etc. Capital requirement o High capital intensive is barrier to small firm. • COMPETITORS ANALYSIS • Necessary for formulating right strategies and determining position of the firm Basic questions of competitors analysis are o Who are competitors of the firm? o What are their current strategies? o What are their future goals and strategies? o What drives the competition? o Where is the competitor vulnerable? o How others are likely to respond to the strategies of different firms o Porters framework suggestion  Future goals  Current strategies  Assumptions  Capabilities 9 . o Threat of substitutes  Important forces power of substitute  Direct impact on the price  Low manufacturing cost / sub standard quality o Bargaining power of suppliers  Determinants are • Extent of concentration and demination in supplier industries • Importance of product to the buyer and vice versa • Extent of substitutability • Switching costs o Bargaining power of buyers  Buyers are potential competitors  May intergrate backwards –environmental awareness  Buyers compete by • Forcing down prices • Bargain for high quality and more service LIMITATION OF PORTERIAN MODEL Provides useful framework for analysis of nature of competition in the industry but have shortfalls if competition is driven by innovation.

Strategy is defined by Glueck as “Unified .comprehensive and integrated plan relating to strategic advantage of firm to challenge environment” Strategic management is defined as “ Set of decisions and action which leads to development of an objective strategy to help achieve corporate objective “ Strategic management process is explained as under Implementation Evaluation and Control Choice of strategy Determination of vision Consideration of strategic alternatives SWOT analysis Establishing Objective 10 . Value is amount buyer willing to pay for product Value chain displays total value activities and margins Primary activities o Inbound logistics o Operations o Marketing and sales o Services Support activities o Procurement o Tech development o HRM o Firm infrastructure and Management • ENVIRONMENTAL ANALYSIS AND STRATEGIC MANAGEMENT • • • • SWOT (STRENGTH WEAKNESSES OPPORTUNITIES and THREATS) plays vital role in environmental analysis and strategic management.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 VALUE CHAIN • • • • Porter: value chain important determinant of competitive advantage.

cement . 11 . Implementation • Formulation of good strategy o Corporate level strategy o SBU level strategy(operating division) o Functional level strategy Evaluation .SEZ  Establish in foreign country  Manufacturing components at home and assemble foreign  Enter into licencing / franchising etc Strategy development process.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 • Eg where the Raymond wants to be : o Gautam Hari Singhania CMD o Turnover 1374 Crores o SWOT analysis o Sold filament yarn. • • • Strategic Alternatives • Question o Why should Co go for this Business? o If same Business what way?  Manufacturing completely  Establish manufacturing in free areas EPZ .31% holding o Claims among top 3 fabric bonds of the world Well international product life cycle Japan started exporting to US o Compact fuel efficient cars o Small screen TV o Low horse power tractors P & G Vs Hindustan Lever.steel o Strengthen with buy back shares Rs 158 Crores o 27% .

 To assess the impact of environmental factors on organization business  Involves drawing up implication possible impacts. 12 • .location preference  Output of monitoring • A specific description of environmental pattern forecast • Identification of trends for further monitoring • Identification of pattern requiring further analysis. o Forecasting the direction of future environment changes  Anticipating the future for threats and opportunities and formulating strategic plan. o Monitoring specific environment trends  Entails perspective follow up and indepth analysis of relevant environmental changes or trends  More focused and systematic effort than scanning  Eg emergent lifestyle pattern may include • Changes in entertainment • Education • Consumption • Wok habit • Domicile. o Assessing current and future environment changes for organizational implication.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 ENVIRONMENTAL ANALYSIS AND FORECASTING • Strategic business decisions need o Clear identification odf relevant variables o Detailed and indepth analysis of them  Eg what impact and implication of liberalization on organization  Means – what are the threats and opportunities posed by the liberalization  So through analysis of environment is needed Stages of environmental analysis o Scanning the environment to detect warning signals  Scanning is process of analyzing environment for the identification of the factors which impact on business  Identification of emerging trends  Identifying the process or indicators of potential environment changes and issues  Drawing attention to possible changes and events well before occurrence  Scanning is exploratory and involves wide examination.

BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 APPROACHES TO ENVIRONMENTAL ANALYSIS BROADLY 2 APPROACHES OUTSIDE – IN (MACRO) APPROACH • • • • Take broad view of business environment Useful when many variable play a role Scenarios allow integration of multiple variables Scenario is description of events may occur in future and their consequences for the organization.prioritise it according to importance o Select most important issues  List organizational assumptions to these issues  Identify possible assumptions variations o Prepare preliminary description of these issues . TECHNIQUES FOR ENVIRONMENT ANALYSIS • WILLIAM GLUECK o Verbal and written info o Search and scanning o Spying o Formal forecasting. o Draw out implication of the issues for organizational perfoemance  What firm has done and what can be done for these issues ?  Identify where management has control and which management cannot control? o Develop detailed description of future with present scenarios o Discuss the scenarios with top management and refine them? o Develop contingency action plans for each scenario? INSIDE –OUT (MICRO) APPROACH • • • Takes narrow view of environment Forecast immediate future of the environment Determine the implication of it for industry and firm. 13 . STEPS TO DEVELOP SCENARIOS o Identify strategic environmental issue.social .include the key economic.political and cultural influences that affect them.

Collection of information o After determination of key variables o Connect the information o Involves identification of sources of info o Determining type of info to be collected o Selection of method of data collection o Collection Selection of forecasting technique o Depends on usefulness of forcast o Technique depends on  Consideration of nature of forecast decision  Amount of accuracy of info available  Accuracy required  Time available  Quantitative technique Vs qualitative technique.  Disregards major disaster  Aggregate when possible into gross variables eg bank loans  If value of one variable is dependant on value of other. • • TYPES OF FORECAST • Economic forecast o Important economic factors are  General economic condition  GDP growth rate  Per capita income  Distribution of income  Structural changes in GDP  Investment and output trends in sectors / industries  Prices trends  Trade and BOP trends 14 .delete variable with little impact.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 STEPS IN ENVIRONMENT FORECASTING • Identification of relevant environmental variables o Not relevant to all industries and firms o Pearce and Robinson point out to limit the variables  Include all variables that have significant impact .

age structure o Social trends are vital for business strategies o Social trends are vital for business strategies o Quantitative techniques.population size.ideologies has implications on business o Political forecast covers 15 • .median and long term forecast  International organization like World Bank .econometric method.firm has to make own forecast.UN.dolphin methods are used o Scenario building is useful.WORLD BANK.series analysis .judgement method used. o Reliable forecast give useful picture of future scenario o Eg power development would indicate  Scope of investment in power sector  Prospects of related industries like generators .  Regional organizations  Asian development bank o When reliable forecast is not available from secondary source. • SOCIAL FORECAST Important factors o Population growth / decline o Age structure of population o Ethnic composition of population o Occupation of population o Rural urban distribution of population o Migration o Factors related to family o Lifestyle. POLITICAL FORECAST o Political shift (1980-USSR and Eastern Europe) o Change in internal political power structure (China) o Political alliance and political structure.transformers .cables switchgears.IMF.trends. electric goods etc  Rural electrification will indicate demand for pump set and consumer durables o Short term economic forecast useful for demand and sales forecast and marketing strategies formulation o Quanti method .WTO.academic organization govt organization are sources.expenditure paterns o Social attitudes o A wealth of published and unpublished data of forecast and social trend is available o UN and its organs. o Data is available regarding future trends in birth / death rate.income levels. econometric methods.time series.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 o The macro economic forecasts serve base for the industry and company forecast o Sources are for short .

current trends etc o Focus on few tendencies.its evolution SYSTEM DIAGRAM METHOD o It explores policy and strategy options based on present system. o Eg newspaper firm think of entering other media CRITICAL SITE METHOD 16 • • .forecasting and assessment council (TIFAC) established in 1988 in India.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007    • o o Industrial policy Commercial policy Fiscal policy TECHNOLOGICAL FORECAST Innovation and technical development alter usiness environment Technological forecast includes  Innovation  Pace and extent of diffusion and penetration of technology Technology is one component in world competitive report Technology vision 2020 for India Technology info . Brainstorming and Delphi methods are popular o o o o TECHNIQUES FOR ENVIRONMENT FORECASTING • ECONOMETRIC TECHNIQUE o Establishing relationship between 2 or more variables  Multiple regression analysis  Time series analysis TREND EXTRAPOLATION o Time series models o Past is prologue to the future o Simple linear relationship o Non-linear relations SCENARIO DEVELOPMENT o Royal Dutch Shell’s anticipation of crash in oil prices in future o If projects emergence of future conditions and it consequences o Eg Developing alternative scenario by planning commission of India o Drawn different alternative scenarios for  Growth rates of different sectors  Poverty ratio • • METHODS OF SCENARIO BUILDING • PREMISSING METHOD o Series of premises are drawn up from which projectionof future o Scenarios is made o This consist basic assumptions about certain variables.

BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 o Based on scenario projection on the policy making structure of organization o Focus on the critical sites related to the business  Eg meeting of board of co  National convention  Meeting of policy decision making body of political party  Meeting of bodies like OPEC or WTO. • • • 17 . • NEWS PAPER HEADLINE METHOD o Scenario writer post one or more hypothetical headlines for future date o Writes possible development and chart out strategy.political changes.discuss and make forecast o Popular techniques for technological forecasting DELPHI METHOD o More systematic than brain stroming o Panels of experts opines on subject o Can be semi structure quetionaire or interview o RAND corporation formed this tech of for formation of OPEC on oil supplies and prices STATEGIC ISSUES ANALYSIS o Qualitative tech f used for assessing emerging atrtegies environment issues o Consists systematically monitoring .social . LOGICAL POSSIBILITY METHOD o Based on already developed scenario o This is supplement to the earlier • • JUDGEMENT METHOD o On opinions BRAIN STORMING o Creative method of generating ideas and forecast o Group of knowledge people are asked to generate ideas .regulatory.

KUWAIT. Diffusion of new ideas and technology g.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 ECONOMIC ENVIRONMENT INCLUDE: • STRUCTURE AND NATURE OF ECONOMY • THE STAGES OF DEVELOPMENT OF ECONOMY • ECONOMIC RESOURCES • THE LEVEL OF INCOME • DISTRIBUTION OF INCOME AND ASSETS • GLOBAL ECONOMIC LINKAGES • ECONOMIC POLICIES THE NATURE OF THE ECONOMY • Countries different regions within country show great difference • General level of economic development has lot of implication on business • Has significant bearing of nature and size demand . Employment generation c. Market friendly economic policies i. Open trade and investment policy 18 . Sectorial distribution of income b. Social development indicators d. Use of modern and sophisticated tech etc e. • Industrial economies are developed economies. Innovation f.government policies etc • Widely used method of classification of economies is on the basis of per capita income (ie average annual income of peron) • Low income and middle income economies are developing • All oil eporters are not developed economies. they are high income economies.UAE. • Some criteria for developed economy a. Low share of primary sector h.

Standard of living c. Composition of output d. e.Maldives. Large portion of population lives in abject poverty c.Uganda. Eg countries where income and investment are steady increasing the prospects of business are bright.Singapore.Myanmar.Nepal. Natural disasters e. High per capita income c. Characterized by high birth and population growth d. Desertification d. Democratic rights k. These economies are in “Transition Economies”.Butan.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 j. • • • 19 . Eg Bangladesh. Shows the inequality in distribution of income b.Mali. Former communist and socialist economies f. Eg Hong Kong . New industrialized economy a. USSR / CIS and East European countries Income is not only criterion for economic growth and development Increase in income is indication growth But development has qualitative dimensions a.Sudan.Zambia. Low GNP per capita b.South Korea. Prevalence of rudimentary and traditional methods and obsolete technology • • • Least developed economy a.Taiwan. High death rate than developed countries e. Competition and consumer choice • • • Low income is indication of deprivation of people Prevents access to basis necessities and morden amenities Developing economy a. Overall economic welfare f. Distribution of income b. Zimbabwe. Show high growth rate overlog series b. Impressive export d. Developing with rapid industrialisation a. Character of working condition e. Land locked remote insularity c.

DEFINE the scope and role of different sectors like private.SECONDARY AND TERTIARY SECTORS LARGE .small. TINY.public.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 STRUCTURE OF THE ECONOMY PRIMARY .medium.SECTORS INTEGRATION IS IMPORTANT WITH WORLD • • • • • • • • • • • • Some economies still based on primary sector But service sector contributes 60% of the world GDP Service sector of India grew at 6.9% and GDP growth was 46% in 2000 The growth in the trade of service increased tremendously ECONOMIC POLICIES HAVE GREAT IMPACT ON Industrial policy Trade policy Foreign exchange policy Monetary policy Fiscal policy Foreign investment Technology policy INDUSTRIAL POLICY a.MEDIUM.liberalization ushered in 1991 20 . It may influence the location of industry  Choice of technology  Scale of operation  Product mix etc o India .SMALL.tiny b.joint and co operative or large .

1991 has wide open j. The scope of large private sector was limited b. Thus was exist and entry of many old and new players. As part of economic liberalization .BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 • Pre liberalization a. But liberalization of import may create difficulties to them f. Restrictive impot policy c. Govt policies thus limited the scope of private business h. c. Pattern of expenditure affects the development c. d.foreign capital and technology were under restriction in developing and socialist/ communist countries b. Policy of protecting home firms d. Abolition of exchange control allows cross border movement of capital. Permits global sourcing of capital and technology f. 21 • • • . Exchange rate policy and policy on respect of cross border movement of capital b. Trade policy often integrated with industrial policy g. Restriction on foreign capital affect growth plan of firm . Increased competition n. Significantly affects the formation of the firm b.co operative. In private sector entry and growth was regulated by licencing and MRTP g. When industry suffers recession. Govt policy was constraint and registered growth i. In tax policy.establishing joint ventures c. Huge investment in infrastructure and vital sector can change environment eg: China. The development of 17 most important industries was reserved for state. Increases quality / quantity domestic supply and services FISCAL POLICY a. FOREIGN EXCHANGE AND TECHNOLOGIACAL POLICY a. Changed the business environment l.India has liberalized h. Production of large no of items was reserved for manufacturing of SSI f. Liberal foreign investment and technology can increase domestic competition e. Till 1980. But few industries for the private sectors k. Remaining industries. Companies face growing international competition in the domestic truf  FOREIGN EXCHANGE POLICY a. May help the impot competing firm e.reduction of taxes like excise duties. Expanded business opportunities m. sales tax may help improve demand.govt can use tax incentive or disincentives to encourage activities a. TRADE POLICY a. For another 12 major industries state had to play major role d. Govt strategy of public expenditure and revenue have impact on business. b.WTO compliance .joint sector and SSI were getting preferential treatment over large entrepreneurs e.

Investments c. depending on the conditions of economy and general economic policy of Govt RBI may adopt an expansionary or contractionary or neutral monetary policy c. Consumer spendings b. Savings b. d.result increase in demand .BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 b. Govt or State may offer different fiscal incentive to two industries. High level of output 2. Reduction of rate of direct tax . Employment and rising demand and prices Economies of oil exporting countries depends on extent of crude oil prices Economic condition related to major crops o Eg :1997-2000 fall in coconut prices o Loss of 10000 crores o Rubber farmers • • • • • • Steel prices south east asian crisis 100% surge by Indian companies in US and Europe. The Central bank . U S economy account for ¼ of global economy Thus trends in US affects the growth trend of global economy The balance of payment position of the country influence the economic policies and business environment. a/c surplus encourage the Govt to liberalise the import and capital movement. ECONOMIC CONDITIONS • • • • Economies pass through boom and recession Boom is 1.by its policy towards cost and availability of credit can influence a.personal income tax and corporate tax may increase disposable income. monetary policy also effects the exchange rate of the currency. eg :1% point reduction Ithe cash reserve ratio or statutory reserve ratio will signify increase in the ratio will have opposite effect d. India export performance is affected by 2 kinds of factors o EXTERNAL FACTORS  The rate of growth of the economies of the importing countries  The rate of growth of the world trade  The rate change in the price level in the importing country o INTERNAL FACTORS  The rate of growth of the Indian economy  The rate of change in the domestic price level Major factors real exchange rate of exports (RERX) • 22 . • MONETARY POLICY a.

Industrial policy b. Monetary policy d.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 FACTORS OF ECONOMIC ENVIRONMENT • STRUCTURE AND NATURE OF ECONOMY a. Sectoral comppsition of output c. Trade policy c. Distribution of income c. Foreign exchanges reserve position i. Demand and supply trends f. Prices trends g. Sectoral growth trends e. Income levels b. Magnitude and nature of cross border: trade flows : financial flows 23 • • • . Global economic trends ECONOMIC POLICIES a. Trade and BOP trends h. GDP trends d. Foreign investment and technology policy GLOBAL LINKAGES a. Foreign policy f. Level of development of the economy b. Fiscal policy e. Intersectoral linkages ECONOMIC CONDITIONS a.

WORLD BANK. Membership of WTO .IMF .telecom. aviation.TRADE BLOCS ETC.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 b. India faced oil crisis o Foreign exchange reserve down to Rs 2400 crores equivalent to 3 weeks imports Actions by GOVT o Govt pledged a part of gold reserve to meet foreign liabilities o Govt arranged loan from IMF in short term o Long term initiated for reaching reform programme include  Changes in trade policy economic policy  Structural reforms  Restoration of fiscal balance to contain inflation The economic reforms changes undertaken as follows o Abolition of licensing o Abolition of FERA and leberalising MRTP o High% of foreign holding o Privatization of oil sector .mining.banking. o Move autonomy to public sector 24 • • . CHANGING BUSINESS ENVIRONMENT OF INDIA • • • JULY 1991 GOI changed policy of macro economic crisis Serious economic imbalance before the period Imbalance due to o Constant rise in fiscal deficit o Higher export growth o Constant balance of payment crisis o Deficit in current account o 1991 US – IRAQ war .

IDRA New sea port policies export import policies More financial sector reforms THE ANALYSIS OF TYPES OF CHANGES BROUGHT IN THE ECONOMIC MANAGEMENT PRE REFORM STAGE CLOSED ECONOMY PUBLIC SECTOR IN COMMANDING HEIGHT IMPORT SUSTITUTION LICENSE DOMINATED STATE INTERVENTION ADMINISTERED PRICE DEFICIT HAS NO PERIL NATURAL MONOPOLY ECONOMIC REFORM STAGE OPEN ECONOMY MARKET DETERMINED GROWTH EXPORT SUBSTITUTION DELICENCED . import duties Taxing services Dechannelisation of imports No export subsidies Offering global patent protection Converstibility of rupee in stages Opportunity to Indian Co ‘s becoming global Financial sector with interest deregulation and capital market reforms Subsidy interest More liberalization on F II norms Privatization of various infrastructure Setting up of various regulatory bodies TRAI.DEREGULATED SELECTIVE INTERVENTION MARKET DETERMINED PRICE CONTAIN DEFICIT COMPETITIVE ENVIRONMENT 25 .BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 o o o o o o o o o o o o o o Lowering corporate taxes .excise duties.SEBI.

locating and positioning or organizing market. INDIAN SCENARIO • Indian corporate sector needs proactive approach • Should set up manufacturing unit abroad.proper ethics • Need quality and cost improvement • Should adopt Mckinseys 7 s framework o Aditya Birla Group 1st established manufacturing abroad 26 .superseding the national economy and enmerging single economy Globalization implies expansion of business internationally removal of domestic market and foreign market.American or Indian.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 RESTRICTION ON FDI AND MNC’S HIGH TAX REGIME CREDIT MARKET. • For this factors of production to be sourced • Finance and technology to be outsourced • Production planning should be on global market consideration • Organizational ethos.physical production facilities with an eye on global business.do not disclose info • Outlook is conservative • Lack innovative ideas.sales office. GLOBALISATION AND ITS IMPACT ON INDIAN BUSINESS Globalization • International interaction • Any international trade or exchange with massive dimension • Removes dichotomy between domestic and international market • Greater interaction.more robust.staff • Some firms are dishonest.whatever be the regional consideration.STATE CONTROLLED • • • • • • • FDI AND MNC’S WELCOMED LOWER AND TAX REFORMS DEREGULATED CREDIT NORMS Govt abolished the practice of multiplicity of agencies network Co act has been changed to create room for merger and amalgamation Banks and PSU’s have been more freedom Attempts to create vibrant capital market Easy access to ADR / GDR market Set up of various regulatory bodies to control unfair competition in trade and pricing Private agencies invited for infrastructure building.atlantic and pacific economies have achieved full integration in terms of o Capital movement o Trade movement o Migration level • Customer in globalization process are equidistant no customer as Japanese .management culture should follow global vision.measurable development. international norms etc • European union .

GOOD CORPORATE GOVERNANCE ASSURES • Flourish the corporate • More employment • Wealth and satisfaction • Improved std of living HOW CORPORATE GOVERNANCE INTERACTS VARIOUS PARAMETERS STRUCTURE OF FINANCIERS EQUITY HOLDERS: 1. market for shares 2 .BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 o Tata Tetley merger greater access to European makets o Joint ventures by Dr Reddy’s La. profit 2 . takeover mechanism OBJECTIVES Share holders’ profit maximization 1 .Ranbaxy o Investment in foreign market should be allowed after capital market is matured CORPORATE GOVERNANCE The ways in which suppliers of finance to corporation exercise control and ensure accountability of company so as to assure themselves best possible return on investment. growth 3 . stability LEGAL AND REGULATORY FRAMEWORK Ddisclosure rules Auditing rules Debt covenants Bankruptcy rules 27 .IDENTITY OF SHAREHOLDERS DEBT HOLDERS : CHANNELS OF CONTROL Board of Directors managerial incentives commitment and trust Disciplines 1 .LARGE SHAREHOLDERS 2.

ICWAI • Annual account of the Co should be certified by CEO or CFO • Amendments in Co act to order compliance with audits and provide powers to attach bank account • Beefing up staff and infrastructure in D . • Non executive board directors should be atleast 30% • Key info should be reported about o Quaterly results of Co o Performance.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 1.turnover 50 Crs goto to independent Directors • Nominees of financial institution cannot be counted as independent directors • Setting up of quality review boards for ICAI.socio economic .inrenal audit reports etc • Kumar Mangalam Birla report under aegis of SEBI • 2002 finance minister –Jaswant Singh formed Naresh Chandra committee on audit and governance MAJOR RECOMMENDATION • 50% Seats on BOD of Co with paid up capital 10 Crs and above .Co affairs • Prohibiting audit firms to provide non audit services 28 .performanceallocation of resources and designing code of conduct India 1st organized step was taken by CII a committee was formed under Rahul Bajaj RECOMMENDATION • Any listed company with 100 Crs turnover should be professionally competent.strategic direction .IDENTITY OF DEBT HOLDERS According to Jayanti and Subrata Sarkar • CG is concerned with o Overseeing .ICSI.cultural contact externalities faced by institution Has to be identified with • Traditional and cultural heritage CORPORATE GOVERNANCE got formal shape after MAY 1991 • Great Britian committee setup under chairmanship of Sir Ardian Cadbury • Recommendation were about BOD • Chairman and chief executive should not be same person • Relation between BOD and executives should be professional • Info about audit fee to be made open • Regular retention of auditors • Non executive directors should act independently on strategies.LARGE DEBT HOLDERS 2.independent.

price environment o The public sectors changed THE NEW ECONOMIC POLICIES REFORMS CLASSIFIED INTO 2 • Liberalisation measures • Macro economic reforms and structural adjustments THE ECONOMIC POLICIES • LIBERALISATION MEASURES o NEW INDUSTRIAL POLICY  Liberalisation of industrial licensing  FERA liberalization  MRTP liberalization  Curtailment of public sector o NEW TRADE POLICY  Lowering of import tariffs  Abolition of import license  A more open exim regime  Convertibility of rupee  Encouragement to export  Arrangement to foreign investment  Integrating India economy with the global economy • MICROECONOMIC REFORMS AND STREET ADJUSTMENTS o MACRO ECONOMIC REFORMS AND STREET ADJUSTMENTS  Fiscal and monetary reforms  Banking sector reforms  Capital market reforms 29 .BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 INDIA UNDER ECONOMIC REFORMS INDIA economic reforms:OPENING OF THE ECONOMY • Started in 1991 /economic reforms/liberalization • Policies relating to industrial licensing.foreign investment undergone changes eg: BANKING SECTOR.CAPITAL MARKETS • Structural adjustments o Subsidies.trade.

BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 o STUCTURAL ADJUSTMENT  Phasing out subsidies  Dismantling of process controls  Introduction of market driven price environment  Public sector restructuring and disinvestment  Exit policy LIBERALISATION MEASURES INDUSTRIAL POLICY LIBERALISATION SUBSTANTIATE CHANGES INTRODUCED • Foreign investment • Technology import • FERA AND MRTP relaxed • Role of public sector curtailed THE NEW INDUSTRIAL POLICY LIBERALISATION OF INDUSTRIAL LICENSING • DE-LICENSING • DE-CONTROL • DE-REGULATION • BROAD BANDING • ABOLITION OF REGISTRATION INDUSTRIES needs license at present  Alcohol  Cigarettes  Industrial explosives  Hazardous chemicals  Defence  Atomic energy Industrial registration scheme abolished. FERA LIBERALISATION 30 .

atomic energy.preservation of money laundering bill (h)MRTP liberalization • No MRTP clearance required for investment applications • No approval for new undertaking /expansion /takeover. SICA-sick industrial company act extended to public sector TRADE POLICY LIBERALISATION / NTP • • • • • Free trade and more open exim regime Import liberalized and de-channelised Licenses abolished.MERGERS • SEVERAL INDUSTRIES RESERVED FOR PSU OPEN TO PRIVATE • ONLY 8 CRORE INDUSTRIES REMAIN RESERVED • PURVIEW OF BIFR EXTENDED TO THE PUBLIC SECTOR FERA LIBERALISATION / FERA ENCOURAGEMENT (a) Automatic clearance for foreign equity upto 51% 100% equity holding allowed in select project Electronic hardware technology park attract FDI (b) Expansion of automatic clearance route 48 industries become eligible for 51% equity Foreign equity FDI for drugs and pharma raised to 74% (c) Automatic clearance for capital goods and tech imports and royalty payments Govt withdrew restrictions on divedend repatriation by foreign investors (d)removal of restriction on functioning of Indian co boards Eg overseas investments liberalized Investment through ADR/GDR without govt approval Indian co may invest abroad upto 50 millions annually (f)ECB liberalized: liberalization commercial borrowings for corporates (g)FEMA replace FERA:at the end of 1999:FEMA bill.railways.tariffs lowered Phasing out or relying on exchange of exchange roles Tariffs and exchange rate will e instruments of control 31 .mining and coal.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 • • • LIBERALISATION OF FOREIGN INVESTMENT IMPORT MRTP LIBERALISATION • ABOLITION OF THRESHOLD • ASSETS LIMIT • NO MRTP CLEARANCE CURTAILMENT OF PSU’S • NEED FOR EXPANSION. (i)Curtailment of PSU and enlargement of private PSU –arms and ammunition.

BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 • • • Exports encouraged o Incentives for exports o Abolition of export duties o Cheaper export credit and cuts in import duties o Duty draw back scheme Rupee made convertible: full convertibility on trade account 1993-94 EPCGS /EOU/EPI/FTZ : export promotion capital goods scheme MACRO ECONOMIC REFORMS AND STRUCTURAL ADJUSTMENTS MACRO ECONOMIC REFORMS CAPITAL FISCAL BANKING MARKET REFORMS REFORMS REFORMS  STRUCTURAL ADJUSTMENTS MARKET DRIVEN PUBLIC SECTOR EXIT PRICE RESTRUCTURING POLICY      Reduction of fiscal deficit Reforms of tax system Interest rate reforms Inflation control      banks to operate as commercial institution phasing out priority sector lending deregulation of deposit interest rates operational freedom in lending rates adherence to norms on capital adequacy      abolition of CCI and introduction of free pricing strengthening of SEBI opening up of Indian capital market to FII allowing privte sector into mutual funds allowing Indian     phasing out of subsidies dismantling of price controls axe on fertilizer subsidies abolition of sugar subsidies axe on petrol prod subsidies partial decontrol       no new PSU no ex pension of PSU with govt equity budgetary support for PSU to be phased out preference to PSU ingovt tenders abolished disinvestment of govt equity in PSU Sick PSUs to be reffered to BIFR  Support to VRS 32 .

recognition and provision for bad debt  disinvestment in public safir banks permission for new private sector banks  NBFCS to align with global finance Co allowing Indian firms to raise capital abroad   and parallel markets of kerosene and LPG abolition of export subsidy steel price decontrol ENVIRONMENT PROTECTION AND ENVIRONMENT LAW     1972 – United Nation Conference on Human Environment At stockhold UN.impose responsibility on citizens  Article 253 states.Secretary General –declared that “ inhibitants of the world have perhaps ten years left to improve human environment.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 . Bhopal Gas Tragedy gave impetus to this issue through (air (P an CP)act and water CP and CPD Act were existed Environment protection enacted as response to gas tragedy.parliament has power to make law for whole or any part of India OTHER ACTS 33 . 1992-THE EARTH SUMMIT – THE RIO DECLARATION  Problems of ozone depletion  Global warming  Water pollution ENVIRONMENT GOVERNANCE IN INDIA – SINCE 1972 nd  The 42 amendment 1976 article 48A was added to directive principles of the state policy  To protect and improve environment and forecasts  Article S I S (8) – fundamental duties.

Review of Acts b. Tiwari committee – 1980 by government a.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007         The Indian forecast act 1927 The factories act 1948 The atomic energy act 1962 The insecticides act 1968 Wildlife (protection)act 1972 The water (P and CP) act 1974 The water (P and CP) cess act 1977 The forest conservation act 1980 FOR ADEQUATE ENVIRONMENT PROTECTION WE SHOULD HAVE 1) ENVIRONMENT PROTECTION AGENCY  Social control over environment pollution  2C all areas of pollution each area separate department.ecosystem etc. Central forestry board c.51A – FUNDAMENTAL DUTY.projects. Central pollution board and state pollution board b. New legislation c. National museum of natural history ISO 14000 AND ENVIRONMENT MANAGEMENT SYSTEM INTERNATIONAL STANDARDS ON ENVIRONMENT MANAGEMENT COVERS 34 .  Agency lay down uniform national standards  Every industry should prepare environment impact statement 2) 3) 4) EFFECT SANCTION BY LAW TO ENFORCE AGENCY PEOPLE PARTICIPATION AS WATCH DOG  The environment protection act permits individual to file criminal action in court of law.A forum where activist and polluters come together and enforcement can be brought by NATIONAL EFFORTS AT ENVIRONMENT PROTECTION 1) 2) 3) 4) 42ND AMENDMENT : ARTICLE 48A-CONSTITUTIONAL OBLIGATION.  National environment engineering institutute (NEERI)  National institute of occupational health (NIOH) ENVIRONMENT COURT :. Conservation of eco-systems 1980 – formation of institution and board a. Suggested :nodal agency formation ii. National committee on environment planning and co ordination NCEPC – after Stockholm conference on planning. Forest survey of India. Introduction of environmentin concurrent list i. National wasteland development board e.wildlife institute of India d. Carrying environment appraisal for projects iii.

Consumer durable . Textile e. Power f.oil and gas .driven by industrial investment Always demand for equipments in following sectors a. Petrochem To sustain growth of 7.8% we need investment of 10% o GDP or $50bn per year India strong base of engineering and capital goods base Both sectors serve wide cross section of industry a.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007      Environment management systems Environment auditing Environment labeling Environment performance evaluation Life cycle assessment ISO 14000 SINGLE SHOULD MANAGEMENT SYSTEM ALLOWS  Effective management of environment responsibilities o Liabilities o Costs o Documents to government o Promote concern for society. Cement b. Non electrical:.divided into a.nuclear etc.chemical .depends on investment in power industry b.power. Steel d. TECHNOLOGICAL ENVIRONMENT 1) 2) 3) 4) 5) 6) ENGINEERING INDUSTRY – largest segment of Indian industry .fertilizers.petrochem.defense equipment. Deregulation in power derive higher growth eg ABB and BHEL derive 60% to 69% revenue from suppliers 35 .mining. Electrical :. Chemical c.

SEZ. Doctors confronted with AIDS So technology for some is WONDER. Discovered new materials and substitute to the existing one vi. open heart surgery.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 7) 8) Govt increased focus on infrastructure helped L&T like 35% sales from infrastructure like engineering design and construction. Scientist put a billion dollar technology into space b. • Eg automobile . Technology has developed beyond anbody’s comprehension b. Probe deep into seas and space research viii.e construction of hospital . Enabled man to conquer i. Produced world’s 1st test tube triplets c.birth control pills proved wonders INTERFERENCE BETWEEN TECHNOLOGY AND BUSINESS TECH REACHES PEOPLE THROUGH BUSINESS INCREASED PRODUCTIVITY SPEND ON R&D CHANGING TECHNOLOGY RISE AND DECLINE OF PRODUCT EXPECTATION OF CONSUMERS BUSINESS SOCIAL CHANGE JOBS BECOME MORE INTELLECTUAL TECHNO STUCTURE PROFESSIONAL MANAGERS REGULATION AMD OPPOSITION SYSTEM COMPLEXITY DEMAND FOR CAPITAL THE SEMANTICS – SCIENCE AND TECHNOLOGY 36 .BLESSINGS.express ways. Provide lot of leisure and infinitum 2) 1983-termed as year of scientific success a. Breakthrough of genetic engineering to cure dwarfism f. Japan marketed artificial blood system e. Generate .nerve gas. Save lives iv. Distance ii.IT parks.T V have mixed reaction • Hydrogen bomb . Control birth rate iii.HORRORS.preserve and distribute energy v.submarine .bridges etc Recent budget govt had outlined Rs 100 bn for investing J K GALBRITH DEFINES TECHNOLOGY 1) Systematic application of scientific or other organized knowledge to practical tasks a. Substitute mental work to computers vii. U S physicist stripped of electrons from uranium atom and exposed bare nucleus g. i.ports. Obtained evidence of another solar system d.gun proved horror • Pencillium .

• Society depends on business for goods and services • 50% growth of developed nations is because of technical .BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 SCIENCE – refers to systematic body of knowledge and when this knowledge is put into practice. Awareness in science develops new technology DIFFERENCES IN SCIENCE AND TECHNOLOGY FEATURES 1) IN PERSUIT OF 2) PEOPLE INVOLVED 3) AGENCIES INVOLVED 4) FUNDING 5) MOTIVATION 6) DOMAIN 7) IMPACT 8) TIME SPAN SCIENCE KNOWLEDGE SCIENTIST RESEARCH INSTITUTION AND UNIVERSITIES MOSTLY GOVERNMENT TO SATISFY CURIOSITY PUBLIC DISCONTINUOUS UNCERTAIN TECHNOLOGY SOCIO-ECONOMIC GAINS ENGINEERS ESTABLISMENTS INDUSTRIES TO BRING OUT NEED SATISFYING PRODUCT PRIVATE /SECRET CONTINUOUS EVOLUTIONARY TECHNOLOGY REACHES PEOPLE THROUGH BUSINESS : • Business is institution through which man expects new discoveries to convert it into goods and services.progress achievements • Increase productivity • It head to spend on R & D • Phillips spends 6. TV are dependent to work productivity.7% of sales • ONGC .5% OF NET TURNOVER • IOC 0.1% OF NET TURNOVER • AERONAUTICS 3.5% OF NET TURNOVER TECHNOLOGY IS CHANGING : DECLING GROWTH IN BASE BUSINESS WHAT DEVELOPMENT IN NEW TECHNOLOGY VITALITY OF VENTURE MARKETS DEVELOPMENT OF INTERNATIONAL COMPETITION INCREASING EMPHASIS ON TECHNOLOGICAL INVESTMENT BY COMPANIES WHERE HOW 37 . • All activities like printing . • Managers of organization pool necessary resources.it becomes technology.5% OF NET TURNOVER • BHEL 4.9% of total turnover on R & D – 15 Cr • Siemens -9% of worlds sales • Bayers – 6% of domestic sales • Bosch group 6. education .but business for institution.housing .mock models in laboratories.work on new discoveries to convert into products • The new discoveries are ideas in mind sketches on papers .

setting up of hydroelectric plant • • • STATUS OF TECHNOLOGY IN INDIA Govt of India set-up R & D establishments • Space research centres • Medical research centers • Agricultural research centers • Oil exploration research centers • 4700 intermediate / junior colleges • 144 universities • 44 deemed universities • 500 or more science and technical institution • 1080 inhouse R&D labs • Dept of science and technology.privacy and human race Opposition for – high rise building . POLITICAL AND GOVERNMENT ENVIRONMENT Politics often determines economic and business policies Demock observe – 2 most important institution (1) Business (2) Politics POLITICAL ENVIRONMENT INCLUDES FACTORS 1) Characteristics of political parties 2) Policies of political parties 3) Nature of constitution and govt system 4) Govt environment encompassing economic.national politics over rule economic rationality.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 • • • High expectation of consumers Job trends to become more intellectual Increased regulation and stiff opposition o By product technical advance attracts imposition by govt and stiff opposition of public.business policies and regulations Peter Druker – “Even within transational economic units.plants ejects harmful effluents. FMRAI – FEDERATION OF MEDICAL REPRESENTATIVE OF INDIA. FUNCTIONS OF STATE: 38 .” Major economic policies are political decisions Economic policy of ruling party is important eg politicians lobby over fixed vs mobile services. o Gained result of banning the sale of harmful drugs and sales promotion of advertisement of infant formula through mass media. Technical advancement invites opposition as it is threat to society. o Govt is empowered to investigate and ban the products (harmful) which hurt the sentiments of society.

defense). 1. Executive continuance depends on support of legislature b. GOVT : process of governing . STATE AND GOVERNMENT SOME CONCERNS STATE : Set of institutions possesses means of legitimate coercion over defined territory population . Legislature – role is to make law 2. Federal state : local legislature are guaranteed measure of autonomous decision making authority. Ultimately decision making lies with one person the president 2nd CLASSIFICATION ON DISTRIBUTION OF POWER BETWEEN LEVELS OF GOVERNMENT 1) 2) 3) Unitary state : authority to make law is vested in the supreme legislature whose jurisdiction covers whole country. Prime minister powerful member d.to exercise power condition of ordered rule. Member of executive are members of legislature c. Judiciary – responsible for interpreting and applying the law 1. Manner .method or system of governing in the society. Confederation – groupof sovereign states each state remain sovereign POST WORLD WAR SCENARIO • Importance of public policies • Macro economic policy • Oil shocks • GDP Expenditure • Communism FUNCTION OF STATE Addressing market failure Minimal Providing pure public goods Improving equity Protecting the poor 39 . Executive position is independent of legislature b. Executive – implementin the law 3.monopolies rule making through organized government.but with the sufferance of the national legislature.“Government that governs is the best. PARLIAMENTORY SYSTEM a. Member of executive not normally members of legislature c. Important decision are taken collectively 2. Local legislature may exist.” Countries transmitting from mark to market Adam Smith wealth of nations-says “Economic growth and welfare are best achieved by the free market mechanism and state should confined to core functions( law and order.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 VIEW :. People who fill the position of authority in the state . PRESIDENTIAL SYSTEM a.society. Government consists of 3 sets of power with assigned role.

finance market. Power . Promotional activities f.institutions for training ii. GOVERNMENT PLAY AND IMPORTANT ROLE OF • Regulation • Promotion • Entrepreneurship • Planning 1) REGULATORY ROLE a. Control through fiscal monetary incentives 2) PROMTIONAL ROLE a.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 functions Intermediate Function Overcoming imperfect information Basic education Utility Insurance Environmental Regulation Financial protection Antitust regulation policy Consumer protection Activist Co ordinating private activity. Celings on prfit margins.interlocking of directors.redistribution ECONOMC ROLE OF GOVERNMENT • In any economy susbstantial share of any product goes to satisfy public wants • Market mechanism cannot alone perform all economic function • Public policy is needed to guide.appointment of sole selling agents h.divedend etc g. Infrastructure facilities i. Various incentives through policies 3) Entrepreneursial role 40 .correct and supplement it • So it is realized that public sector is a significant degree. Covers broad spectrum from entry into business to final results b.a technical rather than ideological issues.transport .fostering function markets. Regulation of product mix e.cluster initiatives (ADOPTED FROM WORLD BANK) Defence Law and order Property rights Macro economic management Public health Addressing Regulating externalities monopoly Antipoverty Programme Disaster relief Providing social insurance Redistributive pension Family allowance Unemployment insurance Redistribution asset. Restriction on intra corporate investment. Reservation of industries to sectors c. Licensing system d.

Establishing and operating business interprises b. Laws relating to consumer interest b.socialist. Statutory controls.equality. 5 year planning INDIAN ECONOMIC REFORMS REGIME 1) NATIONAL DEMOCRATIC ALLIANCE (NDA) a. Capital intensive projects. Right to equality b. Constitutional remedies FUNCTIONA AND POWERS OF PARLIAMENT • As other parliamentary democracies.fraternity. To freedom of religion e. Chandra Babu Naidu CO/ AP.democratic republic to secure all its citizens – justice. State as planner b. Cigarette smoking d. Restraining children in commercial ads c.The people of India have solemnly resolved to constitute India into a Sovereign. Amendment in labour laws c.self styled opposition d. THE CONSTITUTIONAL ENVIRONMENT • The socio economic and political objects of Indian republic • Basic guiding principles of state functioning are clearly laid down • Impermeable to the constitution • Fundamental rights • Directive principles of state policies • The responsibility is bestowed on state by constitution PREAMBLE. Freedom c. Measure in electricity bill b. Public sector development i.capital goods. THE FUNDAMENTAL RIGHTS a.like steel .petrochem. liberty.fertilizers 4) PLANNING ROLE a.secular.parliament of India has the caedinal functions of o Legislation o Overseeing administration o Passing of budget o Ventilation of public grievances o Development of plans 41 .BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 a. Mamta banarjee. vision and ideology 2) GOVERNMENT AND LEGAL ENVIRONMENT a. Cultural and education f. Against exploitation d.

42 .but counts cannot avoid taking cognizance of it.distinct and sovereign in its own allocated sphere.executive and judiciary.tech organ should be separate.chief election commissioner.comptroller and auditor general according to laid down procedure Incase of money bill.1976 for • To abide by constitution • To define the country and render national services • To promote harmony and spirit of brotherhood THE DIRECTIVE PRINCIPLE • Unique feature of Indian’s constitution • They are in nature of directions to the legislature and expenditure • These directions are not justiceable. • They are imperative basis of state policy and constitution directs the state to apply it SIGNIFICANT DIRECTIVE PRINCPLES • The state shall strive to promote the welfare of people • State shall minimize In equalities in income. legal aid Article 40 village panchayat Right to work sickning and disablement act 41 Maternity relief 42 SEPARATION OF POWERS IDEA that – that government functions must be bated on a tripartite division of legislature.facilitate opputunities • State shall direct policy towards securing o Rights of people o Equal opportunity to material resources o Operation of economic system o Equal pay for all o Health and strength of workers • • • • Article 39 legal system to promote justce and equal opportunity.will of lok sabha prevails The parliamentary committees for both houses The appointment .term of office .function and procedure of conducting business as per norms Parliamentary committee 2 kinds o Standing committees :Elected or appointed every year or periodically  Committee on estimates  Public accounts  Public undertaking  Keep vigil on government expenditure and performance o Ad hoc committee : appointed when need arises FUNDAMENTAL DUTIES 42ND amendment of the constitution.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 o Internal relations o National policies • • • • • • Power distributed in between union and states Parliament is vested with powers to impeach the president and remove judges.

63 • SEBI 43 .62.TRAI) STATE GOVT POLICIES GUIDELINES CODES LAWS DEVELOP/PROMOTIONAL ORGANISATIONS(EG DEVELOPMENTAL BANK EXPORT DEVELOPMENT AUTHORITIES) GOVT EXPANDS CONTROL ON VARIOUS SEGMENTS OF ECONOMY • • • • • • • • • • THE industries (development and regulation)act The companies act Capital issues control act Securities (contract regulation act) Monopolies and restriction trade act Essential commodities act Prevention of black marketing and maintaining of supplies of essential commodities act Foreign xchange regulation act –FEMA 2000 Imports and export act Provides govt OTHER ACTS (INDUSTRIAL AND LABOUR LAWS) TO REGULATE • Employer employee relations • Working conditions • Wages • Bonus • Labour welfare • Social security etc COMMERCIAL BANKING SECTOR ACT TO CONTROL EFFECTIVELY BY RBI • BANKING CO ACT 1949 • AMENDMENTS 1956.BUSINESS ENVIRONMENT BY PROF ANIL PANDE MFM2SEM1-2007 DIVISION OF POWERS ITEMS FOR LEGISLATION AMONG THREE LISTS 1) UNION LIST 2) STATE LIST 3) CONCURRENT LIST THE CONSTITUTIONAL ENVIRONMENT CONSTITUTION JUDICIARY EXECUTIVE LEGISLATURE CENTRAL LIST CONCURRENT LIST CENTRAL GOVT BUDGET DIRECT INVOLMENT IN BUSINESS STATE LIST LOCAL GOVT REGULATORY ORGANISATIONS (EG SEBI.

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