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1.)WHAT IS BUSINESS ENVIRONMENT? 2.) The success of every business depends on adapting itself to the environmentwithin which it functions.

For example, when there is a change in the government polices, the business has to make the necessary changes to adapt itself to the new policies. 3.) imilarly, a change in the technology may render the existing products obsolete, as we have seen that the introduction of computer has replaced the typewriters! the colour television has made the black and white television out of fashion. "gain a change in the fashion or customers# taste may shift the demand in the market for a particular product, e.g., the demand for $eans reduced the sale of other traditional wear. %.)"ll these aspects are external factors that are beyond the control of the business. o the business units must have to adapt themselves to these changes in order to survive and succeed in business.

&.) The term 'business environment# connotes external forces, factors and institutions that are beyond the control of the business and they affect the functioning of a business enterprise. These include customers, competitors, suppliers, government, and the social, political, legal and technological factors etc. (hile some of these factors or forces may have direct influence over the business firm, others may operate indirectly. Thus, business environment may be defined as the total surroundings, which have a direct or indirect bearing on the functioning of business. )t may also be defined as the set of external factors, such as economic factors, social factors, political and legal factors, demographic factors, technical factors etc., which are uncontrollable in nature and affects the business decisions of a firm.

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SOCIAL FACTORS

ECONOMIC FACTORS

POLITICAL FACTORS

BUSINESS ENVIRONMENT

LEGAL FACTORS TECHNOLOGICAL FACTORS


DEMOGRAPHIC FACTORS

+.) POLITICAL AND LEGAL ENVIRONMENT The legal,political aspect is very important in global marketing. -)nternational law- can be defined as rules and principles that states and nations consider binding upon themselves. The business is also sub$ect to political decrees made by governments. .overnments can apply pressure not to deal with disapproved parties. These measures may take the refusal to grant an export licence, withdrawal of export guarantee cover, taxation, ownership controls.

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Political En i!on"#nt

This includes the political system, the government policies and attitude towards the business community and the unionism. "ll these aspects have a bearing on the strategies adopted by the business firms. The stability of the government also influences business and related

activities to a great extent. )t sends a signal of strength, confidence to various interest groups and investors. Further, ideology of the political party also influences the business organisation and its operations. 0ou may be aware that 1oca21ola, a cold drink widely used even now, had to wind up operations in )ndia in late seventies. "gain the trade union activities also influence the operation of business enterprises. 3ost of the labour unions in )ndia are affiliated to various political parties. trikes, lockouts and labour disputes etc. also adversely affect the business operations. 4owever, with the competitive business environment, trade unions are now showing great maturity and started contributing positively to the success of the business organisation and its operations through workers participation in management.

5.)

L#$al En i!on"#nt

This refers to set of laws, regulations, which influence the business organisations and their operations. 6very business organisation has to obey, and work within the framework of the law. The important legislations that concern the business enterprises include7 8i) 1ompanies "ct, 95&* 8ii) Foreign 6xchange 3anagement "ct, 9555 8iii) The Factories "ct, 95%/ 8iv) )ndustries 8:evelopment and ;egulation) "ct, 95&9 8v) <revention of Food "dulteration "ct, 95&% 8vi) 6ssential 1ommodities "ct, 2==2 8vii) The tandards of (eights and 3easures "ct, 95&* 8viii) 3onopolies and ;estrictive Trade <ractices "ct, 95*5 8ix) >ureau of )ndian tandards "ct, 95/* 8x) 1onsumer <rotection "ct, 95/* 8>esides, the above legislations, the following are also form part of the legal environment of business

9=.) Go #!n"#nt R#$%lation&' Ta(#&' an) *o!"al T!a)# Ba!!i#!& Starting a business in India tarting a business in )ndia takes an average of 3& days, compared to the world average of %/ days. ?btaining a business license and closing a business can be very difficult. "ll businesses must contend with extensive federal and state regulation as well as an infamously slow bureaucracy. The overall freedom to start, operate, and close a business is significantly restricted by the national regulatory environment. ;elatively unstable prices explain most of the monetary freedom score. The government subsidi@es agricultural, gas, and kerosene production and applies price controls at three levels 8factory, wholesale, and retail) on -essential- commodities, electricity, some petroleum products and certain types of coal, and pharmaceuticals.

99.) NON TARIFF BARRIERS Aon2tariff barriers include excessive bureaucracy, restrictive licensing reBuirements, export subsidies, import taxes, onerous standards and certifications on many goods, discriminatory sanitary and phytosanitary measures, and a negative import list that bans or restricts many goods.

1onseBuently, an additional 2= percent is deducted from )ndiaCs trade freedom score to account for these extensive non2tariff barriers. )ndiaCs tax rates are moderate. >oth the top income tax rate and the top corporate tax rate are 33 percent 8a top rate of 3= percent plus a 9= percent surcharge). ?ther taxes include a dividend tax, a property tax, and a tax on insurance contracts. )n the most recent year, overall tax revenue as a percentage of .:< was 9=.2 percent.

92.) FOREIGN INVESTMENT )ndia controls foreign investment with limits on eBuity and voting rights and mandatory government approvals. 4ighly complex rules and laws limit F:) and, in some sectors, even prohibit it. ;ules established in 2==& maintain restrictions on most existing $oint ventures but allow new ones to negotiate their own terms on a commercial basis. 1entral bank approval is reBuired for residents to open foreign currency accounts, either domestically or abroad, which are sub$ect to significant restrictions. Aon2 residents may hold conditional foreign exchange and domestic currency accounts. 1apital transactions and some credit operations are sub$ect to certain restrictions and reBuirements.

93.) )ndiaCs financial system, the largest in outh "sia, is characteri@ed by heavy government involvement. )ndiaCs 2+ state2owned banks control about += percent of banking loans and deposits. )n addition, the government owns nearly all of approximately *== rural and cooperative banks! many national, state, and local development banks! financial institutions! and even venture capital funds. >anks are reBuired to extend a specified percent of their loans to -priority- borrowers. Foreign investors face restrictions on ownership of )ndian banks and insurance companies. (hile the insurance sector has been partially liberali@ed, the five state2owned insurers dominate the market. 1apital markets are widespread, but foreign participation faces some restrictions.

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Mana$in$ Political Ri&+

"voidance D either the avoidance or withdrawal of investment in a particular country "daptation D ad$ust to the political environment :ependency D keeping the host nation dependent on the parent corporation 4edging D minimi@ing the losses associated with political risk events 9&.) UNDERSTANDING THE LEGAL ENVIRONMENT O* BUSINESS (e may list these legislation which define the legal environment of business in )ndia 7 1ompany laws Eaws relating to capital market 3;T< 83onopolies and ;estrictive Trade <ractice "ct) F6;" 8Foreign 6xchange ;egulation "ct)

):;" 8)ndustrial :evelopment and ;egulation "ct)

9*.) Ho, Can T-# Political En i!on"#nt A..#ct In B%&in#&&? <olitical environment can affect a business either positively or negatively depending on the prevailing situation in a country. )t mainly forms the external factors which are part of the macro2 environment and whose control is beyond the ability of human beings. These factors touch on the way politics are conducted in a country, which directly reflects on what is happening within the government. This means that a democratic country will accord freedom to its people to vote in a government that has their interests at heart thus business will thrive owing to the good policies implemented.

9+.) The >usiness deals totally depend only on <olitical 6nvironment let me tell you how 9) The politici@ation only are the personals who decides with which country the trade will take place and under which conditions. 2) The rules F regulation for trade are passed by politici@ation 3) )f the political relation are not good with neighboring country or any country with whom you want to do trade you will not be allowed to do by means of rules F regulations which have been made be the politici@ation

BIBLIOGRAPH/ In)ian B%&in#&& En i!on"#nt0S#con) E)ition) 12 R. S!ini a&an St!at#$ic Mana$#"#nt 12 R. S!ini a&an B%&in#&& Polic2 an) St!at#$ic Mana$#"#nt 12 G%3ta Golla+ota' Vi3in G%3ta an) R. S!ini a&an Goo$l# /a-oo

PREPARED B/45 A&-,in S-#tt2 An%!%3 Rao A"it B-%3tani R%c-it 6ain Ni-al H#11a! S-a! al B-o%n&%l#

INDIAN POLITICAL AND LEGAL BUSINESS ENVIRONMENT

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