W Business Environment

CONTENTS
Unit Contents Page No.
1 Introduction to Business Environment 1-16
2 Economic Environment 17-31
3 Regulatory Environment 32-49
4 Socio-Cultural Environment 50-72
5 Natural and Technological Environment: 73-85
6 Global Environment and Institutions 86-106

Business Environment
Chapter 1 – Introduction to Business
Environment
Learning Objectives:
After learning this chapter, you should be able to:
1. Know and understand Business environment
2. Explain the nature scope and goals of business
3. Discuss environmental analysis
4. Explain the benefits of environmental analysis
5. Understand environmental forecasting
6. Explain the various techniques of environmental forecasting
7. Discuss the limitations of environmental forecasting
Content
1.1 Introduction
1.2 Understanding Business environment
1.3 Nature of Business
1.4 Scope of Business
1.5 Goal of Business
1.6 Objective of Business
1.7 Understanding environmental analysis
1.8 Benefits of environmental analysis
1.9 Environmental factors and its features
1.10 Environmental Forecasting
1.11 Techniques of forecasting
1.12 Benefits of forecasting
1.13 Limitations of Environmental Forecasting
1.1: Introduction:
The economy around the world is like a swing. Fluctuations are a very important
characteristic of the global economy. Similarly, Indian economy has also seen the
blooming and recession hit periods due to various internal and external factors.
Any jolts to the major economies of US, Japan & Europe, its consequences are felt
across the globe including India.
In other words we can say that world economy is very volatile and dynamic. In
such a situation, managing the businesses during slowdown is more difficult. If the Introduction to Business
economy is dynamic, in such a situation the corporateshave to be abreast of all the Environment
1
“Only for Private Circulation”

Business Environment changes and should always be ready to implement the changes as per the situation
demand. If the firms do not adapt to this changes, they will eventually incurlosses
and will not be able to survive in such scenario.
Therefore, it is very important for the firms and business houses to understand this
business environment, both internally as well as externally and be proactive to
take any measure for their growth and survival.
1.2: Understanding Business environment:

Business environment consists of various internal as well as external factors,
which deeply affect the business and its operations. These factors include strength,
weakness, and opportunities in the external world, threat both internally as well as
externally, management employee relationship.
External factors like political, social, economical and technology have a greater
impact on the corporate houses. These external sources cannot be altered by the
businesses. They are beyond the control of corporates. The only thing business
should do is, they should closely monitor the internal factors and have a tighter
control over them. If there is harmonious relationship existing in the organization,
employees will be ready to adapt to any change whether in their existing working
condition, policies or external factors.
Therefore, it is imperative for the management to analyze these factors and
accordingly prepare itself and its employees for any change in the future. An
organization utilizes the resources from the external world like labor, capital,
energy, adhering to rules and regulation of the government, follow various trading
norms set up by the world economy. None of these factors are stable. They keep on
appreciating or depreciating with any change in the world economy.
Therefore, it is said that business environment is dynamic and volatile and to
survive and be successful in such a dynamic market, firms have to formulate new
strategies to adhere to this dynamism.
1.3: Nature of Business:

Business is an economic activity. It deals with goods and services and aims at
earning profits through a process / system laid down using available resources and
various intermediary services so as to conduct all requisite operations.
Globalization and Technological development has paved the way for economical
development of not only a single country but also the entire globe at large.
Business is a collective effort of group of people to supply goods and services to
consumers in exchange of money. The objective of business is to earn
profit.Businessesare characterized by the volume or size. In India, we have large
big houses like SAIL, TATA group, Reliance etc. to name a few. Their employee
strength runs into 1000’s and revenue into lakhs. Not all corporations are huge.
Business houses strength may start from single person and may multiply many
folds depending upon its volume, geographical presence etc.
Introduction to Business Society and business are interdependent on each other. Society needs businesses
Environment to supply with goods and services apart from generating employment, improving
2
quality of life, accelerating the development of nation. Businesses they need
society i.e.customers to whom they can sell their goods and services and make Business Environment
profits.
Another important feature of Business is Diversification. Diversification means
expansion. This is of paramount importance for any business whether it is one-
man organization or it has 1000’s of people working
.
Fig: 1.1 Types of Diversification
Diversification is of three types:

1) Concentric-
It means adding new but related products and services.
Example: Smart phones introduced with upgraded versions at regular
intervals.
2) Horizontal –
It is exactly the opposite of Concentric. It is adding new unrelated products
and services for present customers.
Example: Sony brand, it manufactures TV, camera, mobile phone, Laptops,
MP3 playersetc.
3) Conglomerate –
It is defined as adding new unrelated products and services.
Example: TATA brand, they offer variety of products and services like
Tanishq for jewellery, Westside for garments, Titan eye for optometric
solutions, Star bazaar is super market, TCS an IT giant, TATA motors an
automobile company etc.
Another major development seen today is that all successful domestic
players are goingglobal. This is because of globalization, which has opened
up the world economy.
1.4: Scope of Business:

Scope of business is a culmination of several factors done in a synchronizing Introduction to Business
manner to achieve a planned outcome. Environment
3
Business Environment For a case, let us assume we have to purchase a smartphone. Behind our purchase,
a supplier provided raw materials, manufacturer who used the raw materials and
converts them to a usable unit called as finished product. Then comesa dealer who
makes sure that the smartphone is available at the places near you to experience
and purchase. There was a transport unit, which had helped dealer in moving the
product from warehouse to market place.
Bankers and financial units were involved since the beginning to finance
activities. We were involved in passive engagement by marketing firms to make
us aware of the smartphone, which we need today, and from where to purchase.
Not just the smartphone, but also even a pencil requires a detail list of activities to
make sure it is out there in market available for us to purchase and use.
The numerous activities involved in getting the raw material converted to a final
product; its promotion through advertisements and campaigns; and its final
purchase by consumers at locations close to consumers, defines Business.
Business, an entity as a whole needs to have certain processes carried out that
involves: Production, Trading, Banking, Insurances, Advertising, Packaging and
other related activities which completes the organization. Not just the activities
that involves the foundation a business, but a business also has to comply with
several legal and government rules and regulations.
This is to ensure that all the direct and indirect stakeholders such as employees,
customers and other related interest groups are delivered with required end
benefits.
Business is not just about ensuring to follow all the standard operating procedures
laid down but to also have an important purpose i.e. Profit. This is ensured by
supplying proper quality goods to satisfy consumer needs. This makes People the
center of curvature for any business that exists in market today. People are
synonym to Business.
Business is not just all about profits, there are other segmentations to business too
which are defined as Non – Profit organizations. Hospitals, B-Schools, NGOs and
other society oriented organizations that do not solely work for their own profit but
for the development of society. Even these have to follow strict rule of an
organization and the very basic steps to run a business in order to survive in
market.
1.5: Goal of Business:
The goals of business may be illustrated as below:
Introduction to Business
Environment
4

Fig: 1.2 : Goals of Business Business Environment
Following are the goals of business:

1) The main purpose of business is to make money and earn profits.
2) Growth is one of the most important goals of any business. A business
should grow in a period, else it will perish.
3) Big corporations have huge resources be it capital, raw material or human
resource. This empowers the businesses with social and political power,
which they can use to influencesociety.
4) Businesses cannot exist in isolation. Human asset is the most indispensible
asset for any firm. They need to look after their employees and cater to their
need of satisfaction and development if the firms want to be successful in
the longer run.
5) Firms, which promise and deliver their promise by supplying consistently
quality products and services, are sure to survive in the longer run. It
therefore implies that businesses have to be fair and just. They cannot cheat
their customers.
6) Consistent quality and better employee satisfaction results in firm being
one of the market leaders. All this coupled with innovation will help the
business to stride in this dynamic business scenario.
7) Another important purpose of business is to accept new challenges as well
as increase competition from its competitors by providing quality products
and services.
8) Businesses identify the gap and needs of customers and through innovation
try to fulfill this gap by manufacturing and delivering goods and services to
meet their expectations.
9) Business utilizes the various resources from society. Therefore,it has
obligation towards society.
1.6: Objective of Business:

Objective is something that helps in defining business and are those that a business
enterprise wants to accomplish over a specific period of time. It can vary from
earning profits for sustenance of its growth and development, provide quality
goods and services to its customers, aim for social good while its conduct of
business operations etc. Often, objectives are derived from the mission of the
business and achievement of objectives leads to achievement of the mission of the
business enterprise.
Classification of Objectives:
Though business exists to earn profits, but that alone cannot be the sole objective.
While pursuing profits, the enterprise has to take into into consideration several
stakeholders such as employees, customers, intermediaries, the community etc. Introduction to Business
Environment
5
Business Environment No business can prosper in the long run unless it takes good care of its employees
in terms of adequate salary, welfare schemes; contribution towards social good
and nation development etc. The objectives can be classified as
a) Economic Objectives
b) Social Objectives
c) Human Objectives
d) National Objectives
a) Economic Objectives
It refers to profit earnings by the business so as to sustain itself in the long
run. Earning profits help the business regularly produce goods and
services, improvise on quality of goods and services, innovate products for
the benefit of the customers, create new customers, expand business etc.
A business firm can earn profits only when it provides good quality
products and services at reasonable prices, this in turn will add lots of
customers keeping the momentum of revenues and profits going.
A business unit has to regularly innovate so as to bring about changes in
products, its operational processes, the services it offers etc. This will help
in reducing cost and attract more number of customers.
A business usually requires resources such as capital / funds, machinery,
manpower, materials to effectively run its operations. However, resources
are always limited and it’s a challenge to operate with the available
resources. Thus a business has t aim in building efficiency in effective use
of available resources.
b) Social Objectives
By this objective, a business aims to provide benefit to the society in which
it operates. While business conducts its operations of producing goods and
services and making it available to customers, the society expects
something in return from the business enterprise.
The society expects good quality of products and services by making use of
available resources from business enterprises. However, these products
and services must be made available to the society at large at the right time
and with right prices. A business enterprise should not supply inferior
products which may harm the society. Additionally, timely and regularity in
supply of products is an important objective.
Also, a business enterprise should not resort to over-charging, or hoarding
of goods. It should not resort to misleading advertisements by giving false
assurances about quality of products as they deceive the society at large. A
business must not resort to creation of artificial scarcity of goods by
hoarding it. Thus a business must always adopt fair practices for the welfare
of the society.
Environment A business unit must also work towards development and betterment of
6

society which may be done through either contributing towards health Business Environment
related services such as hospitals, setup of medical facilities; contribution
and provision of education through schools and skill development,
contribution towards recreational facilities; contribution for NGO
activities etc.
c) Human Objectives
This is aimed at betterment and growth of employees and fulfilling their
expectations. It may include providing for economic well being of
employees, providing avenues for their growth in career etc. The
employees must be paid adequate remuneration, medical facilities,
facilities for housing, retirement benefits etc.
The business unit must also ensure that the employees are motivated to
work and make the job challenging thereby providing opportunities of
career advancement and growth. By this employees will be motivated and
satisfied and take more interest in accepting challenging roles.
Adequate training opportunities must be provide by the organization so that
they make full use of their competence and abilities.
d) National Objectives
A business must contribute to development of the nation through.
Providing employment opportunities by expanding, setting up newer
business units, strengthening distribution channels etc. These opportunities
must be aimed to provide gainful employment for members of the society.
Business units must also produce goods and service in accordance to
priorities of the government.
The business firm, in conduct of its business operations must also pay taxes
regularly which are used by the government for development projects that
will benefit the citizens of the country.
The business firm must also aim to make the country self sufficient i.e. by
producing those goods and services that will reduce dependence on imports
and be able to export goods which will earn revenues, both for the country
and the business firm itself.
1.7: Understanding Environmental Analysis:

We have seen above that the working of business depends upon the factors, which
are within the organization, as well as factors, which are outside the purview of
businesses. The success of firms depends upon both these factors. A successful
firm has to continuously evaluate and measure these internal and external factors
if it wants to survive and reap the fruits of success in long run.
Environmental Analysis is scanning these internal and external factors, which will
affect thefunctioning of the business. This is the most important part of strategic Introduction to Business
management. All strategies have to be derived from the result of this analysis. Environment
7
Internal Environment External Environment
Fig: 1.3 Factors influencing Business Decision
Factors influencing Business Decision:

Internal Factors are those factors, whichcan be controlled by the firm. For eg: Its
physical capacity, employee strength, marketing strategies etc. to suit the
functioning of the business. A firm can alter and modify as per the necessity.
External factors are those factors, whichcannot be controlled by the firm. Factors
like government rules, regulation, trade laws, political, social, cultural,
demographic and technological changes will affect the business, therefore these
factors have to be continuously scanned and necessary changes should be brought
so that the business is accordant with the external factors.
Approaches to Environmental analysis:
Any business as we have seen above is always influenced by Internal and External
factors which are also known as Micro & Macro factors. Understanding and
following guidelines of these factors makes a proper and logical approach towards
any business.
i) Micro Factor (Internal Factor): This is a narrow view of our current
business and helps in making forecast for near future missions & visions.
This is achieved by doing SWOT analysis.
a) Strength: The uniqueness of an organization that favors in achieving
targeted goal.
b) Weakness: Unfavorable or weak links of an organization that slows
down success.
c) Opportunity:External factors that work in favor of an organization to
achieve goal.
d) Threat: External factors that have an adverse impact on
organization’s goal.
ii) Macro Factor (External Factor): This is a broad view of business and
helps in developing alternate scenarios for achieving success of an
organization. Organizations follow PESTLEanalysis for understanding
Macro factors:
a) Political: Political Party that is governing the local business area and
their policies defines a lot on how business carries out.
b) Economical: Personal income, inflation, interest rate, taxes,
employment rates, etc. acts as a catalyst in shaping business models.
Environment c) Socio cultural: Work zone’s societal values, culture and beliefs
8 frames company’s policies.

d) Technological: Access / Lack of technology define how a company Business Environment
works.
e) Legal: Political parties ruling in an area make certain laws which in
turns inspire organization’s Labor and human resource policies.
f) Environmental: Safeguarding and preserving natural habitat of
working geographical zone should be a prime concern of any
organization.
Stages of Environmental analysis:

There are 4 major stages of environmental analysis
I) Scanning:
It involves Environment in which company intends to set up their business
unit. It majorly deals with factors which affect business in shaping their
mission, vision, policies and operational methods.
II) Monitoring:
It involves in-depth understanding and analysis of environmental factors
and how they are affecting business over a period time. It may impact
business in reshaping certain standard operating protocols in order to have a
sustainable environment.
III) Forecasting:
It helps in anticipating change and understanding future trends. It helps an
organization in growing in positive direction and keeping its performance
consistent in always changing environment.
IV) Assessment:
It deals with damages dealt with and anticipation of future success of a
certain organizational policy or way of working. It keeps an organization on
its toes to tackle environmental factors.
1.8: Benefits of environmental analysis:

We have seen that environmental analysis is the most crucial activity for any firm.
Without it, it is difficult rather impossible to make any plans and predictions for
the growth of the firm. Based on this analysis only business can decide whether to
continue or discontinue their operations in future.
Below are the few advantages of environment alanalysis:

1. Achieving objectives
At the point when an organization fails to alter its procedure to the business Environment
condition, or does not respond to the requests of the environment by 9
Business Environment changing its technique, the organization cannot make progress in achieving
its goals.
Nevertheless, environmental analysis empowers the business endeavors to
ponder nature and define the systems as needs be, which will bring about
effective fulfillment of destinations.
2. Identifying threats
Business Environment examination and determination give
representatives time to envision openings and to plan to take discretionary
reaction to these openings. It additionally causes procedures to build up an
early cautioning framework to forestall dangers or to create techniques,
which can turn a risk to the company's leeway.
3. Happenings in the market place
Each firm ought to be in steady touch with the market and ought to know
about what is going on in the market. In the event that the organization
neglects to modify or respond to the requests of the environment, by
changing their procedures, it cannot accomplish corporate goals.
4. DangersIn-built in any opportunity
Business Environmental conclusion helps the specialists in two ways. 1. He
can learn the conceivable dangers to the business. This will empower him
to take appropriate preventive measures. 2. He can distinguish the openings
and roads in which the firm can work effectively and accomplish the
organizational goals.
5. Forecasting future
Changes in the environment are regularly continuous and unexpected.
Additionally, such changes cannot be anticipated correctly well ahead of
time. Again, the business visionary can envision just a couple of such
changes and not all. On the off chance that the estimates and desires are
exact and precise, the choices are probably going to be better. Henceforth
business condition examination gauges the future prospects of the business
concern.
6. Dangers and prospects
A few elements of the environment exhibit dangers to the organization's
available procedure and the achievement of the goals. While a few
elements, then again, exhibit more prominent open doors for an
extraordinary achievement of the goals. An intensive examination of the
environmental elements should empower the analyst to identify the in-built
hazard included and furthermore empower him to utilize the opportunities
for the firm’s advantage.
In each danger, there is an opportunity and in each open door, there is a risk.
By appropriately examining the environment and reckoning the
progressions liable to happen in environment, the corporations can assess
the future and modify his designs likewise.
Introduction to Business Obviously, not all the future happenings can be foreseen but rather some
Environment can and are, the degree to which the desires are precise, administrative
10
choices are probably going to be better.
1.9: Environmental Factors and its features are listed in table: Business Environment
Global Technological Economic Political Social-Cultural Natural

Environment Environment Environment Environment Environment Environment
• Expanding • Increased • Growth • Role of Law • Culture makes • Manufacturing

door as efficiency technique making body individuals relies upon
world markets physical sources
are unrestricted • Need to • Economic • Role of • Culture decides
spend on planning & Legal products and • Mining and
• Improving Research and framework constitution ventures boring depend
quality development of India on natural deposits
• Money and • Caste
• Competition • Fast evolving capital markets • New framework • Agriculture
from innovation Bearing for relies upon
multinationals • Per capita and Government’s • Spirit of nature
• Rise and fall national income part towards community
• Capital and of Firms and business also, • Trade between
innovation products • Population individualization two areas relies
exchanges upon geographical
• High desires • New financial • Education, components.
• Deciding of purchasers approach Family and
which marriage • Transport and
markets to • Problem of correspondence
enter and how techno • Scientific soul rely upon
to enter structure topographical
• Ethics in factors
• Adjusting the • System business
administration unpredictabilit
process y • Social
obligation
• India and • Increased
WTO control • Corporate
also, firm administration
restriction
• Social change
Table No. 1 Features of Environmental factors

It is evident from above that the success of any firm depends upon the thorough
understanding of internal as well as external factors.
Let us take the example of IT Indian giant TCS. TCS is not only a domestic player
but it has expanded its wings across the globe. It would have not been able to gain
this market leadership if it would have not identified the opportunity in the
external market. 90% of TCS comes from overseas assignments.
Thus, it is proved that every firm big or small has to continuously watch its internal
and external forces so that it can act at the right time by converting every
opportunity into profit and eliminating every threat by devising and modifying its
current operations.
1.10: Environmental Forecasting:

Filtering and checking give a photo of what has officially occurred and what is
occurring. Key basic leadership, in any case, requires a future introduction.
Normally, estimating is a fundamental component in environmental analysis.
It tries to draw a format for the transformative way of expected change. For case, Introduction to Business
Environment
to what extent will it take the innovation to achieve the market place? Are present 11
Business Environment ways of life patterns prone to proceed? These sorts of inquiries give the grist to
gauging endeavors. Forecasting is a complex activity because the purpose and
objectives have to be precise if we want the desired outcome from the forecasting.
1.11: Forecasting Techniques:

Estimates can be made through various methods. No strategy can all around apply
in comparable business circumstances. These systems, independently or in blend,
are utilized relying on the business circumstances when they must be utilized.
There are two types of forecasting Techniques:
1) Qualitative Technique:
It applies when information is not accessible or almost no information is
accessible. Supervisors utilize judgment, instinct, learning and expertise to
make powerful figures. Few qualitative techniques are jury of executive
opinion method, sales force composite method and users’ expectation
method.
2) Quantitative Technique:
It applies scientific models to at various times data to foresee future results.
These strategies are utilized to approach hard or quantifiable information.
Few quantitative techniques are time series analysis, regression models
and econometric models.
Both of these techniques are used for external as well as internal environment
analysis.
Fig 1.4 Forecasting techniques
1.12 Benefits of Forecasting:

1) Concerned about future:
It empowers supervisors to envision and markdown future to the present. It,
Introduction to Business along these lines, enhances the type of planning. Planning is done to
Environment
12

improve the situation in the future under certain known conditions and Business Environment
determining helps in knowing these conditions.
For instance, if the Laptop manufacturers feel that they need to
manufacture Tabs, which is a combined product of smart phones and
laptopsto work like a computer system/laptop yet very handy they should
make a move to either change their item blend or begin producing Tabs.
Forecasting, in this manner, helps in using assets in the best and most
beneficial business territories.
In the quick dynamic business world, organizations may think that it is hard
to survive if they do not identify or forecast the consumer and their
competitor’s moves.
2. Pointing out of grave areas:

Gauging helps in recognizing parts that need administrative consideration.
It spares the organization from causing misfortunes because of terrible
arranging or badly characterized targets.
By recognizing the grave areas and determining the requirement of various
assets like cash, men, material and so forth.Firms can detail better goals and
objectives for the organization.
3. Minimizes risk:
In spite of the fact that gaugingcannot dispose of hazard, it minimizes the
risk of making losses because of faulty planning and not properly defined
objectives and goals. It helps the firm to adapt itself in the uncertain
business environment.
If the firm is aware about the changes in consumers taste and preferences, it
will accordingly plan and modify its operations to meet the requirement
thus proving beneficial to the firm.Thus forecasting will not prevent the
future changes, it will only help the organization to prepare itself to face
these changes.
4. Coordination:
Forecasting includes involvement of hierarchical individuals from all
offices at all levels. It helps in planning departmental plans of the
association at all levels. Individuals in all divisions at all levels are
effectively engaged with organizing business activities with likely future
changes anticipated because of forecasting.
5. Successful administration:
By recognizing the important areas of working, supervisors can define
sound destinations and approaches for their associations. This leads to an
overall enhancement in organizational efficiency and effectiveness in Introduction to Business
achieving organizational goals and objectives. Environment
13
Business Environment 6. Advancement of officials:
Forecasting builds up the psychological, applied and logical capacities of
mangers to get things done in arranged, deliberate and logical way. This
creates management executives.
1.13 Limitations of Environmental Forecasting:

Environmental forecasting comes with lots of benefits and is accompanied with
below mentioned limitations as well:
1. Absence of Forewarning of Unforeseen Events:
Environmental examination does not foresee what has to come. Business
ventures occasionally confront events, which are unforeseen amid
examination. Ecological investigation, nonetheless, should go for limiting
the recurrence and degree of bewilderments that may hamper a business
association.
2. No Assurance as to Organization Effectiveness:

Environmental examination does not guarantee authoritative capability. It
acts just as contributions to system improvement and testing. Many times,
supervisors put indiscriminating confidence in the information without
considering the information's undeniable nature or precision. If so, it might
provide unreliable result.
3. Not completely Dependable:

Typically, individuals put unreasonablefaith on the data gathered through
Environmental examining. In any case, practically speaking, it is not so. At
the point when there is over-burdening of data, one is probably going to get
puzzled.
4. Absenteeism of Strategic Approach:

Accomplishment of any company lies in experience and key risk taking.
Natural investigation regularly makes an individual excessively mindful in
his methodology and he is probably going to be distant from the
circumstances. Therefore, this investigation has to be carefully done.
Questions:
Part I
1) Identify any business group of your choice and based on your
understanding backed by company’s business data; prepare a chart for their
SWOT analysis.
Environment
14

Part II Business Environment
Suggested readings:
1) Business environment by A C Fernando, Pearson Education India
2) Business Environment by Saleem Shaikh, Publisher: Pearson Education
3) Business Environment by Justin Paul, Publisher: The McGraw Hill
Companies
4) Business Environment: Text and Cases by Francis Cherunilam, Publisher:
Himalayan Publishing House
5) Business Environment by K. Chidambaram and V. Alagappan, Publisher:
Vikas Publishing House Pvt. Ltd.
6) Dr. V Basil Hans (March 2018), Associate Professor Of Economics, St
Aloysius Evening College, Mangalore, Karnataka, “Business environment
– Conceptual framework and policies”,
Part III
Summary
Ø Business environment is a crucial part of any business entity. It acts as a
major deciding factor on how the business is going to be conducted in a
decided geographical location. Macro and Micro are two kinds of factors
that are broadly classified under business environment paradigm.
Ø Nature of business is what kind of business model a company follows. It is
broadly segmented in Horizontal, Concentric and conglomerate. Each
model comes with its unique feature on how to increase or manage the
business.
Ø Scope of every business is to make profits and how to make these profits in
an ethical manner is defined in Goals. There are certain defined goals of
business: Profit, Quality product, Power, Market leadership, Challenging,
employee development, growth and serving to Society.
Ø Objective of business is what gives it a direction to grow. These objectives
can be economical, Social, Human and National.
Ø Environmental analysis is and has always been very crucial first step to a
business. To study business environment, we need to have an
understanding of Macro and Micro factors.
Ø Understanding these factors helps an organization in accessing,
monitoring, altering, forecasting and verifying the goals that they have set
for their growth.
Ø Micro factors include understanding of SWOT i.e. Strength, Weakness,
Opportunity and Threat. Whereas, Macro factors include understanding
PESTLE i.e. Political, Economic, Society, Technological, Legal and
Environmental.
Environment
15
Business Environment Ø Understanding environmental factors gives us an ability to do business
forecasting that helps us in achieving and deciding what and how goals are
to be achieved. These forecasting could be Qualitative or Quantitative.
Ø Forecasting has its Limitations and Benefits. Benefits include; focused
approach for Future, Minimizing risk, handling issues proactively, smooth
operations and developed workforce. Limitations are majorly lack of
experience of unforeseen events, unprepared for any sudden
ineffectiveness of work force; cannot depend fully and NO strategic
approach is involved, just facts based on data.
Part IV
Study Tips:
1) Students should understand the theoretical concept.
2) They should relate the theory to current economic environment by visiting
few firms
Part V
Self-assessment:
1) Define Business environment.
2) “Profit making is the only goal of any business”. Do you agree? Justify your
answer.
3) What is environmental analysis?
4) Enumerate the benefits of environmental analysis.
5) Explain Vision, Mission and objective. Are they same or different? Explain
with example.
6) List down the techniques of forecasting
Environment
16

Chapter 2 – Economic Environment
1. Know and understand economic environment
2. Explain the nature and structure of economy
3. Discuss the economic system
4. Explain Economic policy and its types.
5. Explain GDP and National Income.
6. State Composition and growth trends.
Contents
2.1Economic Environment
2.2 Macro Factors
2.3 Micro Factors
2.4 Nature of Economy
2.5 Economic System
2.6 Structure of Economy
2.7 Types of Economic structure
2.8 Economic Policy
2.9 Aim of Economic Policy
2.10Types of Economic Policy
2.11 GDP
2.12 Types of GDP
2.13National Income
2.14 Growth Rate
2.15 Growth trends and Composition
2.17 Classification of Industries
2.18 Role of Industry in Economic development
2.19Conclusion
Economic Environment
17
Business Environment 2.1 Economic Environment:
Economic environment can be defined as the total of the following factors in the
external environment like job opportunities, interest rates,wealth etc., whichaffect
the purchasing power of the customer and businesses, thereby affecting the
working of a company. Firms cannot control these factors. These factors can be
large (macro) or small (micro) factors.
2.2 Following are the Macro factors:
Fig 2.1: Macro Factors
Ø Job opportunities/joblessness
Ø Pay
Ø Inflation
Ø Financing costs
Ø Tax rates
Ø Cash conversion scale
Ø Saving rate
Ø Buying behavior
Ø Recession
18

2.3 Micro factors include the following: Business Environment
Fig 2.2: Components of Macro Factors
While organizations regularly cannot control their economic condition, they can
definitely assess and evaluate these external factors and accordingly develop
strategies to grow and sustain in these markets, which are very dynamic.
2.4 Nature of economy:

The businesses utilize the resources from the environment. These resources are
limited. Therefore, it is very important to ensure proper allocation of these
resources and its optimum utilization.
Each business needs to take its choices in regards to its tasks and exercises inside
the structure of its country’ seconomic framework to make ideal use of its
accessible assets. Therefore, economic activities cannot be broken down
legitimately without reference to the economic framework inside which they are
being completed.
Every business enterprise has to take calculative decision keeping in mind the
economic condition of its nation, which has a direct impact on the economic
condition of the enterprise as a whole.
The economic environment of the nation at large is one of the most crucial
parameters, which has a great impact on the health of the organization. In fact,
without a stable economic environment it will be difficult for businesses to
flourish and grow.
2.5 Economic System:

Economic system is a social living being through which individuals make their
living. It is constituted of people, family units, farms, firms, production lines,
banks and government, which act and interface to deliver and expend goods and
services.The economic system can be categorized into three types namely:
19
Fig 2.3: Types of Economic Systems
1) Capitalist economy :
In this framework, the essential parts of the government are:
(I) to promote a healthy free market competition
(II) to eliminate every superfluous restriction on the free trade and
operation of competitive market, and
(III) To provide a level playing field and rules that would encourage free
competition and every trading firm can leverage from this.
It might be summarizedthat the government’s part in capitalist society should be

restricted to:
(a) Rebuilding and advancement of vital conditions for proficient
working of free market system
(b) To enter those territories of creation and distribution in which private
business enterprise is missing or is wasteful.Examples of Capitalist
economy are USA, Canada, Mexico, Germany, Sweden, etc.
2) Socialist economy :
In comparison to capitalist economy, the role of government here is more
comprehensive. While in the previous, the government is expected to assume a
constrained part in the economic domain.
In the socialist framework, not just there is an entire laxity with regards to free
trade and market competition in addition these frameworks are also canceled by
law. The private responsibility for production is supplanted by the State
ownership.
Every single financial movement is centrally managed controlled and planned by
the State. All choices with respect to allocation of resources, distribution, work,
estimating and so on.Are concentrated in the hands of government or the Central
planning Authority.Examples of Socialist economy: Denmark, Finland, Norway,
New Zealand, etc.
20

3) Mixed economy : Business Environment
Mixed economy is a combination of Capitalist and Socialist economy. In this

framework, a noteworthy part of the economy, the private sector, is permitted to
work on the concept of free trade or free market instrument inside a wide political
and economic al approach structure.
The public sector is monitored and controlled on the grounds of socialist
approach. The government forestalls by a law the entry of private capital into the
ventures held for public sector.
Another method for making or growing public sector enterprises is
nationalization of existing enterprises. The advancement, control and
administration of public enterpriseare the sole duty of the State.
Aside from controlling and dealing with public sector, the governmentcontrols
and directs the private sector through its various rules, regulationand various
economic policies.
In few cases, direct control is also imposed if the need arises.
Examples of Mixed economy are Australia, Iceland, United Kingdom, Japan, and
Italy including India. It is one of the prevailing economies in the world.
2.6 Structure of Economy:

Economic structure is a term that portrays the changing equalization of yield,
exchange, earnings and work drawn from various financial segments like going
from essential (cultivating, fishing, mining and so forth) to ancillary (assembling
and development ventures) to tertiary and quaternary areas (tourism, banking,
programming enterprises).
Changes in economic structure are a characteristic element of economic life yet
they acquire challenges in terms of rearrangingthe factors of production. For
instance, changes in production and jobs in one area can prompt issues of basic
joblessness.
2.7 The economic structure can be divided into three categories:
Fig 2.4: Types of Economic Structure Economic Environment

21
Business Environment These structures are further divided into sub categories.
PRIMARY SECTOR:
Fig 2.5: Types of Primary sector

Primary sector is dependent on the natural resources of environment. They are
specifically subject to condition as these elude to usage of earth's assets, for
example, land, water, vegetation, building materials and minerals.
It, in this manner incorporates, chasing and assembling, angling, ranger service,
horticulture, mining and quarrying.
Individuals occupied with these activities are called red-collar laborers because of
the outside nature of their work.
SECONDARY SECTOR
Fig 2.6: Types of Secondary sector

Secondary sector increases the value of natural assets by changing crude materials
into significant usable goods. Secondary sector, in this way, deals with
assembling, infrastructure development andconstruction.
Employees involved in secondary sector are calledblue-collared
workers.Individuals occupied with optional sectorare called industrial laborers.
TERTIARY SECTOR:
22 Fig 2.7: Categories of Tertiary sector

Tertiary sector incorporates both production and exchange. Production involves Business Environment
manufacturing of goods and services that are consumed. Exchange includes trade,
transport and communication channels to minimize distances.
Professionals carry out tertiary employmentsare known as white collared jobs.
2.8 Economic Policy:

An economic policy is a strategy that is planned to impact or control the conduct of
the economy. Financial arrangements are commonly actualized and directed by
the government.
Cases of financial arrangements incorporate choices made about government
spending and tax collection, about the redistribution of pay from rich to poor, and
about the supply of cash.
The adequacy of economic policy can be evaluated in one of two courses, known
as positive and normative economics.
Positive economic aspects endeavor to portray how the economy and monetary
arrangements function without falling back on value judgments, which give the
desired outcomes.
The unique highlight of positive monetary theories is that they can be tried and
either affirmed or rejected. For instance, the theory that "an expansion in the
supply of cash prompts an expansion in costs" has a place with the domain of
positive economic matters since it can be tried by analyzing the information on the
supply of cash and the level of costs.
For instance, the speculation that "the inflation rate is too high" has a place with
the domain of standardizing financial aspects since it depends on value judgment
and in this way can't be tried, affirmed, or negated.
2.9 Aim of economic policy:

The main aim of the economic policy is to spell out clearly what the policy should
achieve which ultimately comes under normative economics.
It is a debatable topic to actually point out the areas that economic policy will cater
to.In spite of this, following are the three main objectives of economic policy,
although they have not been accepted universally.
Fig 2.8: Aim of economic policy 23
Business Environment 2.10 Types of Economic policies:
There are number of policies, which have contributed immensely in the
development of India. There are three main policies, which have a larger share in
the growth of Indian economy. They are as follows:
Fig 2.9: Types of economic policies
1) Monetary policy:
Monetary strategy incorporates changes in the cash supply, the rate of
premium and the swapping scale, albeit a few business analysts treat
changes in the conversion rate at a different approach. The principle money
related strategy measure, right now utilized in many nations, is changes in
the rate of interest.
An increase in the rate of interest helps execute a deflationary monetary
policy. It will probably decrease total interest by bringing down utilization
and investment. Families will spend less because of accessibility of less
flexible pay, costly acquiring and more noteworthy motivator to save.
Firms will contribute less, as they will anticipate that utilization should be
lower. A higher rate of interest may likewise diminish total interest by
bringing down net exports.
Changes in the cash supply, similarly as with changes in loan costs, are
executed by Central Banks in the interest of governments. On the off
chance that the cash supply is expanded by the Bank printing more cash,
repurchasing government bonds or urging business banks to loan more, the
total interest increments. Then again, a decline in the cash supply decreases
total interest.
2) Fiscal Policy
Fiscal policy alludes to changes in government use and tax collection.
Government use and tax assessment happen at two primary dimensions –
national and local. Governments spending are on an assortment of things
including benefits (for the superannuated, jobless and debilitated),
education, human services, transport, defense and interest on national
obligation.
The government sets out the sum it intends to spend and bring up in
Economic Environment assessment income in a budgetstatement. A budget deficit is the point at
24

which the government’s consumption is higher than its income. For this Business Environment
situation, the government will have to borrow to fund its expenditure.
Conversely, a budget surplus happens when government income is more
prominent than government consumption. A decent budgetplan, which
happens less every now and again, is when government consumption and
income are equivalent. The government may intentionally change its use or
tax revenue to stimulate economic activities.
On the off chance the government needs to bring total interest up in request
to increment financial development and work, it will build its consumption
as well as cut tax assessment by bringing down interest rates, lessening the
things burdened or raising expense edges. For instance, government may
cut income tax rates.
This will raise individuals' discretionary cash flow, which will empower
them to spend more. Higher utilization is additionally liable to raise
investment. The government may execute a deflationary financial
arrangement to diminish inflationary weight.
3) Trade Policy
Trade policy decides the extent of regulation and agreements that
emphatically affect both foreign and domestic investment. Changes in
innovation, progression of host nation strategies towards exchange and
venture furthermore, the developing association of worldwide creation
chains inside global endeavors (MNEs) has all served to make exchange
strategies in home and host nations alike a critical fixing in empowering
both foreign and domestic venture and in boosting the commitment of
investment for advancement.
General trade policy aims at concentrated on diminished protection,
accomplishing an all the more outward-arranged exchange routine,
expanded market access for exports, and more prominent worldwide mix,
with focus on expanding monetary effectiveness, aggressiveness, and
export led growth and development.
4) Industrial Policy
Industrial policy is an archive that sets the tone in actualizing, advancing
the administrative jobs of the government. It was a push to extend the
industrialization and inspire the economy to its merited statures. It implied
the inclusion of Indian government in the advancement of industrial sector.
Any industrial policy will have two parts. The first part the
government’sideology, which identifies the kind of industrialization it,
aims at and seconds the guiding rules and regulations supporting that
ideology.in other words it is the set of guiding rules, regulations and
procedures for industries to work.
The main objectives of Industrial policy are:
1. Optimum utilization of natural resources
25
Business Environment 2. To enhance industrial production
3. To enhance production by deploying cutting edge technologies to
lower production cost
4. To balance industrial development for the economy
5. It aims at balanced regional growth
6. To ensure growth and development of small scale and large scale
industries
7. Optimum utilization of foreign investment
2.11 GDP (Gross Domestic Product)

Gross domestic product is the last estimation of the goods and services produced
and delivered inside the geographic limits of a nation amid a predetermined
timeframe, regularly a year. Gross domestic product growth rate is an imperative
pointer of the monetary execution of a nation.
GDP can be measured by three methods:
Fig 2.I0: Ways to measure GDP

(Formula source: https://economictimes.indiatimes.com/definition/gross-
domestic-product)
The nations with the highest GDP in descending order are:

1. The United States
2. China
3. Japan
4. Germany
Economic Environment 5. The United Kingdom

26

6. France Business Environment
7. India
8. Italy
9. Brazil
10. Canada
The distinctive measures of GDP are awesome devices for contrasting the
economies of different nations or how an economy changes after some time.
At the point when business analysts discuss the "size" of an economy, they are
alluding to GDP.
The GDP influences individual fund, ventures and employment development.
Financial specialists take a gander at the development rate to choose on the off
chance that they change their asset allocation.
They additionally contrast nation development rates and choose where the best
open doors are. Most speculators jump at the chance to buy offers of organizations
that are in quickly developing nations.
2.12 Types of GDP:
Fig 2.11: Types of GDP
When looking at the GDP of at least two years, Real GDP is utilized in light of the
fact that, by evacuating the impacts of inflation and focusing only on volumes.
2.13 National Income

National Income alludes to the cash estimation of the considerable number of
goods and services delivered in a nation amid a financial year. At the end of the
day, the ultimate result of all the economic activities of the country amid a time of
one year, esteemed as far as cash is called as a National income.
In the above definition, economic activities include all human activities that result
in goods and services and which can be valued at market price. Foreg: Farmers
produce, production of various kinds of goods and services produced by various Economic Environment
industrial sector and government, services of business mediators etc. 27
Business Environment Apart from this, there are non-economic activities that produce goods and services
but cannot be valued at market price. For eg: service to self, neighbors, by
homemakersetc.
While the economic activities create the stream of products and ventures, it
additionally creates the cash streams as factor payments, for example, wage, lease,
premium, profit of the independently employed. In this manner, national income
can likewise be assessed by including all the factor income and adjusting the sum
of subsidies and the indirect taxes. In this way, the income acquired is called as a
National pay at factor Cost, identified with the money flows.
2.14 Growth Rate:

The GDP growth rate is the percent expansion in GDP from quarter to quarter. It
reveals to you precisely how quick a nation's economy is developing. Most nations
utilize Real GDP to evacuate the impact of inflation.
2.15 Composition and growth trends:

The execution of businesses can be evaluated as far as the rate at which the
industrial yield has grown over a given period of time and the adjustments in the
basic creation of enterprises that have denoted the industrial scene.
2.16 Classification of Industries:
Fig 2.12: Types of Industries
1) Based on Raw Material:
28 Fig 2.I3: Categories of industries based on raw material

2) Based on ownership: Business Environment
Fig 2.I4: Categories of industries based on ownership
3) Based on Size:
Fig 2.15 Categories of industries based on size
2.17 ROLE OF INDUSTRY IN ECONOMICDEVELOPMENT:

Ø Increment In National Income
Ø Developed Standard Of Living
Ø Economic Stability
Ø Improvement In Balance Of Payments
Ø Rise In Agricultural Production
Ø Reduction In The Rate Of Population Growth
Ø Increased Saving And Investment
Ø Increase In The Government Revenue
29
Business Environment 2.18 Conclusion:
India has risen as the quickest developing significant economy in the globe
according to the Central Statistics Organization (CSO) and International
Monetary Fund (IMF) and it is relied upon to be one of the main three financial
forces of the world throughout the following 10-15 years, with a strong support of
democracy and partnership.
India's GDP expanded 7.1%in 2016-17 and is relied upon to achieve a
development rate of 7 % by September 2018
Questions:
Part I
1) Identify two industries of your choice from any sector and study the micro
and macro factors of economic environment that is influencing their
performance.
Part II
Suggested readings:
Companies
6) Dr. V Basil Hans (March 2018), Associate Professor Of Economics, St
Aloysius Evening College, Mangalore, Karnataka, “Business environment
– Conceptual framework and policies”,
Part III
Summary
Ø Economic environment can be defined as the total of the following factors
in the external environment like job opportunities, interest rates, wealth
etc., which affect the purchasing power of the customer and businesses,
thereby affecting the working of a company.
Ø These factors are beyond the control of the organization. These factors can
be large (macro) or small (micro) factors.
Ø The businesses utilize the resources from the environment. These resources
are limited. Therefore, it is very important to ensure proper allocation of
these resources and its optimum utilization.
30 Ø Economic system is a social living being through which individuals make

their living. It is constituted of people, family units, farms, firms, Business Environment
production lines, banks and government, which act and interface to deliver
and expend goods and services.
Ø An economic policy is a strategy that is planned to impact or control the
conduct of the economy. Financial arrangements are commonly actualized
and directed by the government.
Ø Gross domestic product is the last estimation of the goods and services
produced and delivered inside the geographic limits of a nation amid a
predetermined timeframe, regularly a year. Gross domestic product growth
rate is an imperative pointer of the monetary execution of a nation
Ø National Income alludes to the cash estimation of the considerable number
of goods and services delivered in a nation amid a financial year
Part IV
Study Tips:
few firms
Part V
Self-assessment:
1) Discuss the three types of Economic System that exist.
3) Define GDP. Elaborate on the ways to measure GDP.
4) Which are the various types of Industries? What role is it playing in
economic development of our nation?
5) Write a note on Economic policy and its objectives
31
Chapter 3 – Regulatory Environment
1. Understand the various functions of state
2. Explain the role of government in economy
3. Understand legal systems and constitutional environment
4. Explain the various forms of government regulation
5. Establish how state intervenes and controls business environment
Contents
3.1 Functions of State
3.2 Economy and the role of government
3.3 Government and legal System
3.4 The constitutional environment
3.5 Forms of government regulations
3.6 State intervention and control
3.7 Business – Government interface
3.1 Functions of State:

The State is the focal point of Public Finance. The State requires cash and services
for the execution of its responsibilities. The most important question is to
understand the ideology of state and what are its roles and responsibility in the
economy. To answer this we will need to understand few concepts from Political
Science.
According to Aristotle's well-knowndecree:“It is obvious that the State is one
thing that exists in nature, and that man is naturally a political creature." The State
is a life form into which the individual is conceived, and through which alone he
can reach his most desired growth and development. The State is by all accounts
Godgiven to empower society to compose on a fantastic scale for the achievement
of welfare for the betterment of society and humankind.
Few roles of the state, which are most essential in the public eye, are to give
security and safeguard the citizens, guard and ensure basic universal rights,
preserve peace and harmony, ensure justice and lead relations with different states
for betterment of the society.
Regulatory Environment
32

State has 8 main functions to be performed: Business Environment
1) Resistance of power
The security of the nation's regions from outside assaults and remote
intrusions is one of the essential elements of the state. For this, the groups of
military controlled by the country are prepared and utilized.
The advancement of weapons and military innovation is likewise part of
this capacity. The state is autonomous of deciding how to move its military
assets in the way it esteems most essential, regardless of whether via land,
water, air, the internet or space.
2) Guarantee internal security

Ensuring law and order and guaranteeing harmony inside their regions is
one more of the basic role of the state. For the gainful and financial growth
of the state, it is fundamental that the occupants live in a peaceful domain.
The state is obliged to ensure each individual from its domain is sheltered
against a wide range of inequality and abuse. To satisfy this capacity, the
nation's inside security powers are utilized, with the police being the most
well known of all.
In outrageous cases, the state can send the military to ensure social request.
3) Protect the privileges of its residents
The state is responsible for guaranteeing that the principal privileges of
every one of its residents are regarded; the right to life, to training, to work
among others. The Declaration of Human Rights fills in as a manual for
everything the state must ensure to individuals.
The break or infringement of these rights is completely enforceable and can
be accounted for to the capable experts.
4) Administer equity
The fact that all individuals are equivalent before the law, the state is in
charge of taking the essential measures to resolve clashes and exercise
necessary approvals for infringement of the laws. The legal framework is
part of the state’s roles and responsibilities and its obligation towards its
residents.
5) Formulate laws and strategies

As discussed above, the legitimate power stage of the state is in charge of
organizing how the conduct and methodology of the occupants inside their
regions ought to be. The responsibility of maintaining law and order is he
most imperative.
Apart from this, the execution of the strategies necessary for the overall
development of the nation forms an integral part of states functions.
33
Business Environment 6) International relations
No nation can live restricted from the rest of the world. The state is
responsible for setting up the arrangements, techniques and discretionary
systems to build up sound and prosperous relations with other sovereign
states.
Between two nations, it is critical to assemble trust and equivalent
advantage agreements. Connections of this sort advance universal
harmony and the financial, social and innovative improvement of the
countries enhance.
With this equivalent reason, worldwide associations were made, where a
few nations with explicit interests organized unions for better management
of resources and strategies beneficial to all participating nations.
7) Domestic cash and economy

The state is in charge of keeping enough units or duplicates of paper cash
available for use inside the region. Moreover, the estimation of the inner
cash will dependably rely upon the financial parity that the nation has about
production, imports and exports.
The state is in charge of overseeing and directing these financial variables
to guarantee the steadiness of the typical cost for basic items of its
occupants.
8) Other capacities
Despite the fact that the state has the obligation to ensure every one of its
residents, the fulfillment of their fundamental needs, it is additionally in the
ability to advance, permit, concede and ask different associations to bolster
the improvement of the nation by covering these capacities.
In any case, it is very common in all nations that there are schools and
colleges under both state organization and private organization. There are
additionally medical clinics and centers.
The state can allow to numerous associations the concessions of
development and organization of this kind of offices, yet under the lawful
rules and benchmarks of wellbeing and instruction of the nation.
Largely, the state offers or enables these organizations to set up monetary
movement inside their domains with the point of expanding the work offers
of the occupants and the essential improvement of society.
It additionally works similarly in instances of offer of different services, for
example, water, power, communication, transportation, infrastructure,
nourishment, neatness, amusement and excitement, and a lot more items
and services.
34

3.2 Economy and the role of government: Business Environment
From the idea of the monetary framework, a wide range of economies has been
confronted with certain regular essential issues. The major financial issues looked
by an economy might be arranged into two general segments:
(I) Micro-economic issues: called essential issues, which are identified with
the working of the constituents of the economic framework.
(II) Macro-economic issues: identified with the development, solidness, and
administration of the economy overall. The way the essential issues of an
economy are comprehended relies upon the idea of the economy.
While in a socialisteconomy, they are settled by the administration offices, similar
to focal arranging specialist, in a free venture or blended industrialist economy
this assignment is performed by the Price Mechanism or Market System.
In spite of the fact that free undertaking framework is equipped for bringing
financial development, it does not guarantee a steady, supported, and adjusted
development. It turns out to be in this manner unavoidable for the administration
to intercede reasonable rivalry, and help the economy in accomplishing its
objectives – effectiveness, strength, development and financial equity.
Presently, the inquiry emerges with respect to what ought to be the proper part of
the legislature in financial administration of the nation or what to be the shape,
nature and degree of government's obstruction with advertise system. Largely, the
economic role of government can be extensively sorted based on the three
financial frameworks, viz.
a) Capital society or Free Enterprise System,
b) Socialist Economy,
c) The Mixed-Economy System.
Capital Society:
In this framework, the essential parts of the administration are:
(I) To protect what is more, advance free market system wherever it is
conceivable to guarantee a workablecompetitiveness.
(II) To evacuate every single unnecessary limitation on the free activity of
focused market.
(III) To give play area and guidelines of the market diversion through
fundamentalintercessions and controls with the goal that free rivalry can
work successfully. It might be deduced that the administration's part in an
entrepreneur society should be restricted to:
(a) Rebuilding and advancement of fundamental conditions for
Effective working of free market system.
(b) To enter those regions of generation and conveyance in which
Private business enterprise is missing or is wasteful.
This financial framework chips away at the standard of Laissez Faire framework, Regulatory Environment
i.e., the minimum obstruction by the administration or any outside power. The
35
Business Environment essential part of the government, assuming any, is to guarantee free working of the
economy by evacuating hindrances to free competitiveness.
A free Enterprise Economy is described as takes after:

• Means of generation are exclusive by the general population who procure
and possess.
• Private additions are the fundamental spurring and directing power for
completing financial exercises;
• Both purchasers and firms appreciate the opportunity of decision;
customers have the opportunity to devour what they need to and firms have
the decision to create what they need to;
Socialist Economy:
In contract with the industrialist framework, the part of government in a Socialist
economy is considerably more comprehensive. While in the previous, the
legislature is expected to assume a constrained part in the monetary circle, in the
last mentioned, it works outfar reaching control on every single monetary
movement.
In the socialist framework, not just,there is an entire detachment with the
expectation of complimentary venture and market component yet additionally
these frameworks are revoked by law. The private responsibility of creation is
supplanted by the State possession.
Every monetary action are midway arranged, controlled and directed by the State.
All choices with respect to creation assets, portion, business, evaluating and so
forth, are brought together in the hands of government or the CentralArranging
Authority.
The administration-controlled economies are additionally called as Command,
Centrally arranged or Communist economies. Such economies are, in
contradistinction to the free endeavor economies, controlled, directed and
oversaw by the administration offices.
Alternate highlights of an unadulterated communist economy are:

• Means of generation are claimed by the public or by the state for the sake of
the group – private responsibility for and property is abrogated;
• Social welfare is the directing element for financial exercises – private
additions, inspirations and activities are missing,
• Freedom of decision for the customers is checked to what society can bear
the cost of for all; also,law executes the part of market powers and rivalry.
Mixed Economy:
Regulatory Environment In this framework, a noteworthy piece of the economy, the private segment,
36 ispermitted to work on the standards of free endeavor framework or free market

componentinside a wide political and monetary arrangement structure. The other Business Environment
piece of the economy, the Public Sector area, is composed and overseen along the
socialist model.
Another method formaking or growing public sector in general area is
nationalization of existing enterprises. The advancement, control and
administration of general society division enterprises are the sole duty of the State.
Aside from controlling and dealing with people in general area enterprises, the
administration controls and directs the private area through its industrial, money
related and financial arrangements.
There are two distinct types of the Mixed Economies.

• Mixed Capitalist Economies
A blended Capitalist economy is a variation of the free venture monetary
framework. To this classification fall the exceedingly created countries like
the United States, U.K., France, Japan and so on.
Despite the fact that these economies have an extensive government part,
their private areas work on the standards of the free venture framework.
The legislature assumes a noteworthy part in protecting industrialist
method of generation, guaranteeing a workable rivalry in factor and item
showcases, giving foundation to advancement of private segment financial
exercises.
• Mixed Socialist Economies

Mixed Socialist Economies have generally completed extraordinary
financial changes and changed their economies for private business
enterprise. The administration of these nations volunteers control and
direct the private part exercises as per the arrangement targets.
Apart from this, below are the other roles of government:

Government duties to business are a lot more significant than the commitments of
business to the government. Government has the power, will and assets to choose,
shape, guide and control businesses. Being rightfully chosen and having
acknowledged the blended economy, our legislature is clear about the job it needs
to play and the obligations it needs to release towards business houses. As
supporter and controller of business exercises, the government has been releasing
its commitments successfully, disappointments in any case. In particular, the
government’s duties towards business are as per the following:
a. Foundation and implementation of laws:

Government sets up and upholds laws and controls under which the
businesses discharge their duties. The Government orders laws and
controls covering all parts of business. Government is in charge of defining Regulatory Environment
the “rules of the game”, which make the business frameworks work easily
37
Business Environment and which help look after competition, and if monopolies are created, to
direct them or enhance them by government tasks. It is the obligation of
government to uphold the laws and to give an arrangement of courts to
settling disparities between firms, people, or government offices.
b. Preservation of order:
Government has the duty of keeping up order and ensuring safety of people
and property. It is difficult to carry on business without a serene
atmosphere.
c. Finance and credit:

The government gives an arrangement of cash and credit by methods for
which exchanges can be influenced. It is additionally the duty of the
government to control money and credit and ensure the uprightness of the
rupee, that is, to prepare for quick fall in its value.
d. Efficient development:
Efficient development suggests equal regional growth, fair justice, equal
employment opportunities to the unemployed and protecting the economy
against unbalanced growth and development. The government has the
assets and abilities to guarantee systematic development.
e. Infrastructure:
Business requirements for its successful working are infrastructural offices
as transportation, electricity, fund, prepared staff and municipal
enhancements. It is the duty of the government to ensure these facilities are
provided to the corporates so that they can carry out their operations
smoothly.
f. Data:
Government offices distribute and give an extensive volume of business
data. The branches of trade, industry, agribusiness, labour, health, training,
banking, and atomic vitality give information services and so on.many state
and nearby governments give data profoundly valuable to business.
g. Help to small businesses:

Government gives the required offices and empowers the small-
scaleindustries to develop.
h. Exchange of technology:
The ISRO, a focal government undertaking, has effectively spun-off in
38

excess of 130 items/processes from its labs to the Indian business in the Business Environment
most recent decade. Out of these, 110 are actively used for production
purpose.
I. Government rivalry:
Government rivals are private firms for directing competition, enhancing
quality, or to enhance private activities with government programs.
Government may manage the costs changed for purchasers.
j. Assessments and licenses:

Food and medications organization conducts investigation exercises for
guaranteeing quality items to purchasers. Government issues licenses to
skilled business foundations to carry on various exercises.
k. Taxes and quotas:
The government to shield business from remote challenges utilizes taxes
and quotas. The government grants necessary inducements and subsidies.
3.3 Government and legal system

During independence, India had an incredibly immature and lopsided industrial
structure. Only one-sixth part of national income was contributed by industries.
The nation had a few ventures like cotton materials, jute and sugar, however there
were no, substantial and capital merchandise enterprises on which projects of
future industrialization could be based.
Whatever real ventures were there, they were largely gathered in a couple of
territories, for example, Bombay. Surat, Ahmedabad. Jameshedpur, Calcutta,
Delhi and so on.While the remaining part of the nation remained mechanically
dismissed.
Due to this, after independence, the government of India needed to embrace
powerful measures to build the beat of industrialization. Efforts were needed to
correct regional growth disparity and ensure India is put on the track of developing
nations by focusing on growth of capital goods industries.
With this ideology in mind, the government undertook a number of tasks to ensure
that India is an industrialized economy. It enacted various rules, regulations, and
policies that would help the industrial sector of India to boom and develop.
Following are few policies enacted by the government:

1) The Industrial Policies
2) Industrial Licensing
3) Exclusive small sector policy / MSE sector
4) Foreign Trade policy
5) Laws regulating businesses like Companies Act, Sale of goods Act,
Negotiable instrument act and Partnership Act 1932 etc. 39
Business Environment Let us understand each one of the above:
1) The Industrial Policy
Industrial policy is an explanation, which characterizes the job of
government in industrial advancement. The role of public and private
segments and the contribution of large and small industries in
industrialization of the nation. Apart from this, it also focuses on foreign
capital and its need for development.
To sum things up, it is adeclaration of targets to be accomplished in the
region of industrial advancement and the measures to be received towards
accomplishing these purposes. The industrial strategy therefore formally
shows the circles of action of the general population and the private
divisions.
It sets down principles and methods that would administer the development
and growth of industrial action. This policy is neither fixed nor rigid. It is
altered, adjusted and redrafted as per the changed circumstances,
necessities and points of view of improvements. The first industrial policy
was drafted in the year 1948. After this, several amendments have been
made keeping in mind the economic condition and market scenario.
Industrial policy of 1991 completely changed the face of industrialization
in India. It openly accepted the LPG (Liberalization, Privatization and
globalization) so that India can be put up on the world map as one of the
fastest growing economy.
2) Industrial Licensing:
The Industrial Development and Regulation Act of 1951, provides the basic
guidelines and procedures required for industrial development in India.
The Act makes it mandatory for every new industry to register itself with
the central government.
As per the law,“industrial undertaking” is defined as a fully planned
industry that is operational in one or more factories and which is owned by
individuals, authorities or even government.
After the economic reform of 1991, India embraced globalization and freed
the industrialization from the clutches of License raj. However keeping in
mind the larger interest of the nation, the government has made it
mandatory for few originations like public health, safety and national
security to abide by the licensing norms
With progressive delicensing of industries, only five industries have been
retained under compulsory licensing under the Industries (D&R) Act, 1951
viz.
(i) Distillation and brewing of alcoholic drinks;
(ii) (ii) Cigars and cigarettes of tobacco and manufactured tobacco
substitutes;
Regulatory Environment (iii) (iii) Electronic aerospace and Defense equipment: all types;
40

(iv) (iv) Industrial explosives including detonating fuses, Safety Fuses, Business Environment
gun powder, nitrocellulose and matches;
(v) (v) Hazardous chemicals: viz. (a) Hydrocyanic acid and its
Derivatives; (b) Phosgene and its derivatives; (c) Isocyanides and di-
isocyanates of hydrocarbon, not elsewhere specified (example:
Methyl Isocyanate)
Source:https://dipp.gov.in/sites/default/files/chapter1.2_2.pdf
3) Exclusive small sector policy/ MSE sector

The strategy of - reservation of things for selective assembling by small
scale enterprises was figuredto guarantee the mass creation of. Consumer
products in the small-scaleindustrial segment and to grow employment
openings through the setting up of small-scale enterprises units.
Following are the objectives with which small-scale enterprises were
formed:
1) Development of job opportunities
2) Enhancement of produce , pay and upliftment of standard of living
3) End of financial backwardness of rural and underdeveloped
territories.
4) To lessen regional imbalance
5) To give work and provide a regular source of income to the needy
population living in remote and semi-urban places.
6) To enhance the quality of goods produced in cottage industry to
increase output and profits.
7) To encourage import substitution.
8) To support entrepreneurship and independence.
With this ideology, the government had laid down various norms for development
of small-scale enterprises because in India majority of the population was from
villages. Government had to ensure that a source of livelihood is catered for the
masses so that they do not have to migrate from their place to city in search of jobs.
This would help the government to reduce the disparity amongst the regions about
their development.
A number of initiativeshave been chalked out in the various amendments of the
Industrial policy Resolution starting from 1948 to 2005-2006. All the
initiativesare aimed at developing this sector and aid them to overcome the
challenges faced by this sector for their development.
With the focus of developing Indian economy at par with other developing
nations, small sector enterprises paly avery crucial role. Before 2006, these sectors
were known as small and village industries, after the enactment of MSMED
(Micro Small and Medium Enterprise Development act) they are known as Micro Regulatory Environment
Small Enterprises.
41
Business Environment 4) Foreign Trade Policy
The main purpose of the policy is to expedite the growth of Indian exports
and imports of goods and services produced in the country with aim of
employment generation and increase in the value of the country.
The Government, through the approach, fundamentally centers on
receiving a twin methodology of advancing traditional and sunrise
segments of exports including services. Further, it plans to streamline the
way towards working together.
Span of the Policy
The Foreign Trade Policy (FTP) was hailed off in the financial year of
2015-16, and will stay compelling until 31 March 2020. Amid this period,
all exports and imports of the nation will be represented by the strategy. The
Government endeavors to make India a noteworthy accomplice in
worldwide exchange by 2020.
Briefly Foreign trade policy is aimed at reducing the hindrances for smooth
operation of business for both participating nations.
5) Laws regulating Businesses

A business has number of stakeholders. It is the duty of the firm to ensure
that the rights and interest of all its stakeholders are protected and it has
discharge its obligations in the most correct manner. To safeguard the
interest of stakeholdersand to ensure that the workers are not exploited and
to avoid any illegal unfair trade practices, a number of legislations have
been passed in INDIA. It is the obligation of the owners of the enterprise to
carry on their operations within the stipulatedguidelineslaid down by
various enactments of the nation.
Let us briefly understand the various laws, whichaffect the working of
business houses in India:
1) Indian Companies Act 1956

In India, the Companies Act, 1956, is the most vital bit of enactment that
engages the Central Government to control the arrangement, financing,
working and ending up of organizations. The Act contains the system with
respect to authority, money related, and managerial aspects of an
organization. It aims to protect the consumer’s interest along with
supervising the working of companies governed by the law.
2) Sale of goods Act 1930

It is an Act to characterize and change the law identifying with the sale of
goods. It tells about the meaning of sale of goods, guarantees and
conditions, property exchange and incorporates the privileges of unpaid
dealer. The agreements for the sale of goods are liable to lawful standards
like the every single other contract .This law is incorporated into section VII
42 of the Indian Contract Law, 1872[sections 2(5) and three]. It originally
came into power from first July 1930. It has been re-framed again in 1930 as Business Environment
sale of goods act [section 4].
Contract of sale of goods:
An agreement of sale of goods act is an understanding contract between the
merchant and purchaser to transfer the goods at a concurred cost. This
incorporates transfer of goods, both with quick impact (called as deal) and
at a future date (known as agreement of sale)
3) Negotiable Instruments Act 1881
Negotiable instruments are one of the methods of payments of transactions.
Transactions can be settled through money or some other mode for
instance, through a cheque and other negotiable instruments.
The aim of the act is to ensure legal protection to all kinds of negotiable
instruments used for sale of goods and services.
4) Partnership Act 1932
Whenever at least two people hold hands to set up a business and offer its
benefits and misfortunes it is called Partnership. Section 4 of the Indian
Partnership Act 1932 characterizes partnership as the 'connection between
people who have consented to share the benefits of a business carried on by
all or any of them representing all'.
The aim of the act is to ensure that there is a contract between the parties.
The contract is to share the earnings and profits. All the parties of the
contract or any one representing all can carry out the business.
Apart from the above, there are a number of laws, which the firms need to
adhere to depending upon their size, production type etc.
All these legislatures aim to protect the firm and the consumer from being
exploited by each other. The larger prospective is to create a win win
situation for the firm, consumer and economy as a whole.
3.4 Governo-Economic regulations:

The economic issue of resource allocation obviously has a political measurement,
given its center around the possession, control and utilization of riches delivering
resources inside society. This enables connects to be made between a nation's
picked economic framework and its political administration. A valuable method
for idiom to possible connections is shown in below figure:
Political Environment
Economic
Environment
Fig 3.1: Economic- Regulatory Environment

Political framework 43
Business Environment Political frameworks can be described as extending from democratic to
authoritarian, contingent upon the level of public involvement in decision-making
processes. Essentially, economic frameworks can be believed to extend from free
market to planned, as per the level of state intervention during the time spent in
resource allotment.
This two-dimensional display subsequently accommodates four noteworthy
mixes of Governo-Economicframeworks; going from democratic– free market
from one viewpoint (quadrant 1) to authoritarian– planned on the other (quadrant
3).
In applying this model to particular cases, plainly free-market deals with resource
allotment are overwhelmingly connected with democratic states. Such a
connection is not astounding. Democratic system, overall, incorporates the idea of
people having the capacity to express their inclinations through the polling booth
and having the chance to supplant one government with another at occasional
interims. In free markets comparable procedures are at work, with people
successfully 'voting' for products and enterprises through the cost framework and
their communicated inclinations being reflected in the example of asset
designation.
Practically speaking, obviously, the photo is significantly more muddled than
recommended by this straightforward polarity. Some authoritarian states, for
example, have prevalently entrepreneur financial frameworks (quadrant 4), while
some democratic nations have a generous level of government intervention (i.e.
moving them towards quadrant 2), either by decision or from need (e.g. wartime).
Added to this, even in states where the political or on the other hand financial
framework has all the earmarks of being the same, significant contrasts can
happen at an operational or potentially institutional level and this gives every
nation a level of uniqueness, not satisfactorily depicted by the model. Therefore, it
is yet the case that the fundamental congruity amongst democratic and free-
market system speaks to a capable and unavoidable impact in the business
condition of the world's democratic states
3.5 State intervention and control:

Economic system is a social living being through which individuals make their
living. It is constituted of every one of those people, family units, firms,
manufacturing plants, banks and government, which act and cooperate to create
and expend products and enterprises.
The Concept of Economic Scarcity
Like 'Politics', the term 'Economic' has a tendency to be utilized as a part of an
assortment of ways and settings to portray certain parts of human conduct,
running from exercises, for example, delivering, circulating and devouring, to the
possibility of cheapness in the utilization of an asset (e.g. being 'practical' with
reality). Present day definitions push how such conduct and the organizations in
which it happens (e.g. family units, firms, governments, banks), areworried about
the fulfillment of human needs and needs through the change of resources into
Regulatory Environment goods and ventures, whichare consumed by society. These procedures are said to
44 happen under states of 'Economic Scarcity'.

The financial expert's concept of 'scarcity' focuses on the connection between a Business Environment
public’s needs and wants and the resources accessible to fulfill them.
Fundamentally, financial analysts contend that while needs and wants have a
tendency to be unlimited, the assets, which can be utilized to meet those needs and
wants, are limited and in like manner, no public whenever has the limit to
accommodate all its genuine or potential necessities.
The supposition here is that both individual and aggregate needs and wants
reliably exceed the methods accessible tofulfill them, as exemplified, for
example, by the failure of governments to give moment human services, the best
streets, instruction, barrier, railroads, etc. at once and put and of a quality
advantageous to the client. This being the situation, 'decisions' must be made by
the two people and society concerning needs in the utilization of resources, and
each decision definitely includes a sacrifice I.e. forfeiting an option.
Financial experts depict this forfeit as the 'opportunity cost' or 'genuine cost' of the
choice
Thatis takenand it is one, which is looked by people, associations, governments
and society alike. From a societal perspective, the presence of economic scarcity
postures three genuine issues concerning the utilization of resources:
1 What to utilize the accessible resourcefor? That is, the thing that goods and
services ought to be delivered (or not created) with the resources
(sometimes depicted as the 'weapons v. food' contention)?
2 How best to utilize those assets? For instance, in what blends, utilizing what
procedures and what strategies?
3 How best to disperse the products and services delivered with them? That is, who
gets what, what amount and on what premise?
Largely, these issues have a tendency to be illuminated in an assortment of ways,
including deal (deliberate, two-sided trade), price signals and the market, lining
and apportioning, government guideline and corruption (e.g. assets designated in
return for individual favors), and cases of every one of these arrangements can be
found in most, if not all, social orders, constantly.
Understanding this qualification is basic to an examination of the manner by
which business is directed what's more, speaks to the establishment on which a
significant part of the resulting analysis is build
The Centrally Planned Economy

In this kind of monetary framework – related with the post-Second World War
communist economies of Eastern Europe, China, Cuba and somewhere else – the
majority of the key choices on productionare taken by a central planning authority,
typically the state and its organizations.Under this game plan, the state regularly:
• claims and additionally controls the primary economic resources;
• Sets up needs in the utilization of those resources;
• sets output target for organizations which are to a great extent under state
possession as well as control; 45
Business Environment • guides resources with an effort to accomplish these predetermined targets;
The way that an economy is centrally arranged does not really infer that all
economic decisions are taken at central level; as a rule basic decision making
might be regressed to subordinate offices, including nearby boards of trustees and
enterprises.
Eventually, the issue of coordinatinginput and output in a modern planned
economy is, obviously, an overwhelming work and one which perpetually
includes a variety of state organizers and a focal plan or outline ordinarily
covering various years (e.g. a five-year design).
Under such an arrangement, the state organizers would build up yearly yield
focuses for every segment of the economy and for every endeavor inside the area
and would recognize the contributions of materials, work and capital expected to
accomplish the set targets and would assign resources accordingly.
Given that the yields of a few businesses are the contributions of others, it isn't
hard to perceive how the in general viability of the arrangement would depend
partially on a high level of co-task and coordination amongst parts and
undertakings, and also on practical insight, great choices also, a significant
component of good fortunes.
3.6 Business – Government Interface:

Economic activity can be depicted as a stream of monetary resources into firms
(i.e. productive associations), which are utilized to deliver products for
utilization, and a comparing stream of installments from firms to the suppliers of
those resources, who utilize them fundamentally to buy the products and
enterprises created. These streams of assets, generation, pay and consumption in
like manner speak to the key exercises of an economy at work. The below figure
3.2 outlines the stream of assets and of products and benefits in the economy –
what financial specialists depict as ‘real flow'.
Fig 3.2: Real Flow for Assets and Products

(Source: Rai University, Business Environment)
46

Essentially, firms utilize monetary assets to create products and services, which Business Environment
are consumed by people or government, by importers, or by other firms (capital
development). This utilization offers ascend to a stream of uses that speaks to a
pay for firms, which they use to buy advance resources with a specific to deliver
additional product for utilization. This stream of salary and consumptions is
appeared in the below figure 3.3.
Fig 3.3: Stream of Salary and consumption

(Source: Rai University, Business Environment)
The model of economy driven by business and government is illustrated in fig

3.4.Itis a helpful explanatory instrument, which features some crucially critical
parts of monetary action, which are of direct importance to the study of business.
Fig 3.4: Economy model driven by Business & Government

(Source: Rai University, Business Environment) Regulatory Environment
47
Business Environment The model shows, for instance, that:
1. Wage streams around the economy, going from families to firms and back
to family units and on to firms, etc.These pay streams have relating genuine
streams of resources, products and services.
2. What constitutes a wage to one group (e.g. firms) speaks to a use to another
(e.g. family units), showing that pay in the economy is identified with
spending on utilization of products and enterprises and on resources (e.g.
the utilization of work).
3. The yield of firms must be identified with expenditure by families on
products and services, which thusly is identified with the wage the they get
from providing resources.
4. The utilization of resourcesshould be related with expenditure by families
on products, given that resources are utilized to generateproduct available
to be purchased to families.
5. Levels of pay, yield, consumption and work in the economy are, in
actuality, interrelated.
From the perspective of firms, it is obvious from the model that their fortunes are
personally associated with the spending choices of family units and any
adjustments in the level of spending can have repercussions for business
movement at the miniaturized scale and the large-scale level.
To pick up a clearer perspective of how the economy functions and why changes
happen over time, it is important to refine the fundamental model by consolidating
various other key factors affecting monetary movement. These factors – which
incorporate funds,venture spending, government spending, tax collection and
abroad exchange.
Questions:
Part I:
1) Make a scrapbook from the newspaper articles identifying the various
interventions done by the government about performance of industries and its
implication on the economy as whole.
Part II:
Suggested Readings:
Companies
Regulatory Environment 5) Business Environment by K. Chidambaram and V. Alagappan, Publisher:
48 Vikas Publishing House Pvt. Ltd.

Part III: Business Environment
Summary:
Ø Few roles of the state, which are most essential in the public eye, are to give
security and safeguard the citizens, guard and ensure basic universal rights,
preserve peace and harmony, ensure justice and lead relations with different
states for betterment of the society.
Ø Government duties to business are a lot more significant than the
commitments of business to the government. Government has the power,
will and assets to choose, shape, guide and control businesses. Being
rightfully chosen and having acknowledged the blended economy, our
legislature is clear about the job it needs to play and the obligations it needs
to release towards business houses.
Ø The government undertook a number of tasks to ensure that India is an
industrialized economy. It enacted various rules, regulations, and policies
that would help the industrial sector of India to boom and develop.
Ø The economic issue of resource allocation obviously has a political
measurement, given its center around the possession, control and
utilization of riches delivering resources inside society. This enables
connects to be made between a nation's picked economic framework and its
political administration.
Ø Economic system is a social living being through which individuals make
their living. It is constituted of every one of those people, family units,
firms, manufacturing plants, banks and government, which act and
cooperate to create and expend products and enterprises.
Ø Economic activity can be depicted as a stream of monetary resources into
firms (i.e. productive associations), which are utilized to deliver products
for utilization, and a comparing stream of installments from firms to the
suppliers of those resources, who utilize them fundamentally to buy the
products and enterprises created.
Ø These streams of assets, generation, pay and consumption in like manner
speak to the key exercises of an economy at work
Part IV:
2) They should relate the theory to current economic environment by
analyzing few industries or firms of their choice.
Part V:
1) What are the features of mixed economic system?
2) What is the role of government in economy?
3) What is centrally planned economy?
49
Chapter 4 – Socio-Cultural Environment
1. Explain the social responsibility of Business towards society
2. Know and understand social Audit
3. State the impact of culture and other socio-cultural factors on Business
4. Explain Consumer Protection Act
5. DiscussConsumer rights
6. Explain right to information Act
7. Explain Business ethics and corporate governance
Content
4.1 Social responsibility of Business towards society
4.2 Variables influencing Social orientation
4.3 CSR in India
4.4 Social Audit
4.5 Impact of Culture on business
4.6 Consumer Protection Act
4.7 Consumers Rights
4.8 Business Ethics
4.9 Corporate Governance
4.1 Social responsibility of Business towards society:

The term Social Responsibility can be characterized as the commitment of
organization towards the public and others concerned. Social Responsibility of
business alludes to what the business does, far beyond statutory necessity, for the
advantage of the public.
Customary vs. Present day perspective of Social Responsibility
Social Obligation:
Friedman contends that the benefit earned by business has a place solely with the
investors of the business and these benefitscannot be redirected to some other
social reason. He contended that when firms choose to spend the association's
assets for 'social great', they add to the expenses if working together, which must
be passed on to the purchasers through higher costs or consumed by investors
Socio-Cultural
through littler profit. 'Moral conduct pays…in any event over the long haul.
50 Environment

Social Responsiveness: Business Environment
Social responsiveness implies that an organization takes part in social activities in

light of some famous social need.
Social Responsibility:
Social duty implies a business' expectation, past its legitimate and monetary
commitment, to for the correct things and act in ways that are useful for society.
Social duty is a moral or philosophicalproposition that an element whether it is
government, corporates, association or an individual has an obligation to society.
Corporate social obligation (CSR, likewise called corporate duty, corporate
citizenship, and responsible business) is an idea whereby firms think about the
interests of society by assuming liability for the effect of their activity on
consumers, suppliers, employees, shareholders, communities and the
environment at large.
Social responsibility of Business towards Shareholders:

- Ensuring effective running of business
- Gradual and positive growth of capital
- Logical and fair return of invested monetary and non-monetary interest
- Timely payment of interest.
- Ensure safe work ethics to safeguard investments
Social responsibility of Business towards Consumers:

- Must provide qualitative Product and service.
- Complete and regular supply of goods and services.
- Proper communication of benefits/side effects of services/products should
be made.
- Unfair means should be avoided to gain unhealthy profits.
- Proper methods of Grievance settling and after sale service should be in
place.
Social responsibility of Business towards Employees:

- Ethical and ergonomic working environment.
- Sufficient opportunities to grow in career.
- Timely payments should be considered an ethical practice.
- Social security like Provident Fund, Pension, group insurance, etc. Should
be implemented.
- Regular training and development activities should be practiced.
Socio-Cultural
Environment
51
Business Environment Social responsibility of Business towards Local Community:
- Should use suppliers from local area for the production of goods and
providing services.
- Should encourage junior business group by inspiring with healthy
competition.
- Should not defame local competition by providing false information about
them to consumers.
- Should help and support the weaker and unskilled part of community.
- Should provide assistance in developing facilities for field of Health,
Educational and technology.
Social responsibility of Business towards Government:

- Building of business unit as per government guidelines.
- Paying all liable taxes and other interest with honesty.
- Should not follow Monopolistic business approach.
- Should follow norms for Pollution control and employability laid by
government.
- No malpractice of corruption and bribing should ever take place under any
circumstance.
Social responsibility of Business towards Society:

- Should protect and preserve the societal cultural values.
- Should generate employment for the immediate society members.
- Should vow to protect the environment
- Should put down measures to conserve Natural resources and wildlife.
- Should promote Sports and cultural activities.
Social Orientation of Business:

The degree of social orientation of organizations shifts generally and changesas
per the need of time.
There are three models, which portray development and degree of social
orientation of organizations:
• Carroll's model
• Halal's model
• Ackerman's model
Socio-Cultural
52 Environment

Fig. 4.1: Models of Business Orientation
4.2 Variables influencing Social Orientation:

Fig 4.2: Variables influencing Social orientations
1. Promoters and top officials of firm

The reverence and prophecy of Top management and promoters is one of
the important factors that impact the corporate social duty
Socio-Cultural
Environment
53
Business Environment 2. Governing body
Board of executives chooses significant arrangements and asset allotment
of an organization
3. Partners and inner power relationship
It is important for a firm to bring together the interest points of all the
diverse members of work group together to form a synergy to achieve the
common decided goal.
4. Societal components
It is inclined by a certain characteristics of the society and the broad attitude
and anticipation of the society regarding social responsibility of business
5. Industry and exchange affiliations
It affects the conduct of the firm by establishing professional and ethical
codes and norms for collective decisions
6. Government and laws
Regulations are the society’s categorization of right and wrong. Firms
participating in it shall play and should comply the rules of the game.
7. Political impact
Pressure exercised by special interest groups in society and media to
control corporate practices .e.g., Ngo’s like environmentalist, consumer
interest groups and etc.
8. Contenders
The competitive forces influence social obligation of firms. Few
organizations dowellfor the society and some are encouraged to do
something.
9. Assets
Its monetary position and the other resources of the firm also effect social
participation of firms.
10. Ethical impacts
Business ethics should be a regular practice at all the businesses units in
order to maintain sanity of business and people involved.
11. Legal Obligations:
Government has laid down certain specific legal structures for all kinds of
businesses that exist, for then to follow and comply with their regulations
so as to have similar business practices being carried out.
12. Economic Obligations:
Making profit is any businesses’ main aim, but they should also consider
about the overall economic development as well in the geographical
location they carry out business.
Socio-Cultural
54 Environment

4.3 CSR in India Business Environment
CSR is not a new concept in India. As far back as their initiation, corporates like
the Tata Group, the Aditya Birla Group, and Indian Oil Corporation, to give some
examples, have been engaged with serving the society. Through gifts and
philanthropy occasions, numerous different associations have been doing their
part for the public.
The essential target of CSR in nowadays is to expand the firm's general effect on
the public and partners. An expanding number of organizations all through their
business tasks and procedures in effect extensively coordinate CSR approaches,
practices and projects.
Organizations have particular CSR groups that detail approaches, methodologies
and objectives for their CSR projects and put aside spending plans to support
them. These projects are regularly controlled by social logic, which have clear
destinations, are very much characterized, and are lined up with the standard.
Here are some famous CSR activities carried out by big business groups as their
contribution to society:
1) TATA Group: TATA Group have got a lots of different business groups
under their umbrella and they do all their CSR individually:
Ø TATA Steel: They spend total of 5-7 % of its total profit after tax.
I) SHG (Self Help Group):
i) Over 500 SHG currently working under Poverty alleviation
program.
ii) Over 700 villages have programs for Women empowerment
iii) Portable water to rural community via 2600 tube wells to
benefit over 4 lakh people.
II) Healthcare projects:

i) Includes facilitation of child education, immunization and
childcare and creation of AIDS awareness.
III) Economic empowerment::

i) Economically empowering3 backward tribes of Jharkhand,
Orissa and Chhattisgarh.
ii) Estimated expenditure of INR 100 crore for above mentioned
project to benefit 40,000 tribal living in 400 villages in above 3
states.
Ø TATA Motors:
I) Pollution control: Socio-Cultural
i) Joint venture with Cummins Engine company, USA in 1992 for Environment 55
emission control engines to introduce EURO norms.
Business Environment ii) Introduced CNG engines for Busses and Passenger car Indica.
iii) Established an advance emission testing unit.
II) Restoring Ecological balance:

i) Planted 8000 trees in works and in township along with 2.4
million trees in Jamshedpur.
ii) Half million trees planted in Poona region.
iii) Directed all suppliers to pack products in material other than
wood.
III) Human Capital:

i) Introduced Scholarship program Vidyadhanam to supports 211
students.
ii) Out of 211 students, 132 students are from underprivileged part
of society.
iii) Entered into Public-Private partnership (PPP) for upgrading 10
Industrial Technical Institute (ITI).
Ø TATA Tea:
I) Established Srishti welfare Center at Munnar, Kerala for
education, training and rehabilitation for special need children
and Adults.
II) Vocational training under Athulya a project of Srishti for
Stationary makingtraining for physically challenged.
III) Aranya project for nurturing lives of disabled and to revive
ancient art of natural dye by training individuals on various
methods of Block printing, tie and die.
2) BHEL Group:
Ø EMRP, Mumbai: Financial support for rehabilitation center for
cerebral palsy and Autism children at Swayam rehabilitation trust.
Ø HEP, Bhopal: Scholarships to Orphans, widows, differently abled for
ITI & polytechnic courses at Jyoti disabled school, Bhoal.
Ø HRDI, Nioda: Providing scholarship to poor & needy below the
poverty line students across India through agency – Foundation of
Academic Excellence and Access (FAEA).
3) Jindal Group:
Socio-Cultural Ø Women Empowerment:
56 Environment

I) Anjor: Program made to increase literacy among women for Business Environment
increasing empowerment.
II) Girls Ashram:Program for providing accommodation and education
to girl orphan child.
III) Mahila Kalyan Evam vikash samiti:Program for women for training
Papad making.
Ø Health:
I) MIS for vatsalya swasthya sangini:Computer tablet enabled program
for data management. It also empowers local women by involving
them in the program.
II) Cleft Lip surgery:Aiming to bring smiles by providing special
surgeries for cleft lip people.
Ø Education:
I) TEI: Teacher Engagement Index to evaluate teachers on regular
intervals.
II) QC:Quality Circle to ensure quality teaching in schools.
III) Self-defense training: Training girl student from class 7th till 12th on
basic self-defense techniques.
4) Bharat Petroleum:
Ø Education: For encouraging motivated students, Balwadis is available for
school children.
Ø Grain Bank: For moral uplifting of karjat based farmers, IRCED came
together to make a grain bank for farmers so that grains are easily accessible
to them at lower cost.
Ø Infrastructure development: Construction of Public toilet sheds for
schools, jetty for fisherman and tree plantation programs are regularly
being carried out at regular intervals for providing required infrastructure
support to society.
5) Indian Oil:
Ø For Backward class: Allotment of Fuel stations to Schedule castes & Tribes
for community development.
Ø For Rural development:Introduced Kisan seva Kendra to provide quality
product & services to people in rural areas.
Ø Environment-Protection Initiative:invested 7,000 crore for producing
Green belts in different areas.
Socio-Cultural
Environment
57
Business Environment 4.4 Social Audit
A social review is a formal audit of an organization's undertakings in social
obligation. A social review takes a gander at variables, for example, an
organization's record of beneficent giving, volunteer movement, energy usage,
honesty, sage and hygienic workplace, and specialist pay and advantages to assess
what sort of social and natural effect an organization is having in the areas where it
works.
Social Audits are discretionary. Organizations can pick whether to perform them
and whether to discharge the outcomes openly or just utilize them inside.
Social audit is an inner examination of how a specific business is influencing its
society. It fills in as a route for a business to check whether the moves being made
are affecting the firm and it is surrounding in a positive manner or it is adversely
affecting the firm’s goodwill and reputation amongst its internal and external
stakeholders.
In the time of corporate social responsibility, when enterprises are frequently
anticipated that they would convey an incentive to buyers and investors and
meeting environmental and social guidelines regarded attractive by a few
individuals from the overall population, social audits can enable organizations to
make, enhance and keep up a positive advertising picture. An excellent reputation
and goodwill ultimately affects the bottom line of the firm.
Things Examined in a Social Audit:

Social Audit analyzes issues with respect to inward practices or arrangements and
how they influence the distinguished society. It is aimed at social obligation of
firms towards its surrounding and its stakeholders.
This can incorporate operations influencing the budgetary strength of a region,
any natural effect coming about because of processes carried out and the amount
of transparency maintained by the firm in revealing its true picture to the public at
large.
There is no standard process set as what must be considered as the society during
social audit. This enables a business to extend or get the extension in light of its
objectives.
While one organization may wish to comprehend the effect it has on a little scale
society, for example, a specific city, others may grow the range to incorporate a
whole state, nation or the world all in all.
Benefits of Social Audit findings:

Ø As social audit is intentional, the aftereffects of the review are not required
to be discharged to the overall population or any administrative office.
Ø While positive outcomes might be deliberately revealed, negative
outcomes might be kept inside and used to recognize potential upgrades
that can make the aftereffects of the following social audit ideal.
Socio-Cultural
Environment Ø For instance, if a firm is found to be believed by the society that it is not
58 associated with any philanthropic activities for the betterment of the
society, the firm should expand endeavors that will help the organization to Business Environment
uplift its public image.
Ø Example: Beauty care products firm The Body Shop made open the
consequences of a social audit in the mid-1990s that demonstrated the
organization was not doing what is needed toward sustainability.
Considering that review, in the years since, the organization has joined a
wide range of arrangements toward its objective of turning into the most
economical, green agreeable organization on the planet. In 2016, to stamp
its 40th year of presence, The Body Shop laid out key manageability
targets, including: helping 40,000 financially defenseless individuals get to
work everywhere; ensuring the majority of its characteristic fixings are
traceable and economically sourced; and controlling the greater part of its
stores with inexhaustible or carbon-adjusted vitality.
Methods of Social Audit:

Social Audit provides companies with a framework which can help them in
understanding the ways how to make proper goal oriented plans and strategies.
These can help companies in achieving Mission & Vision and to keep a check on
regular intervals at how the strategies are working.
Below are the steps for social audit process:

Ø Structure for Auditing process
i) Generating the program for certain goal to be achieved.
ii) Process of implementing particular program
iii) Assessment of quality of service provided in program
iv) Feedback from beneficiaries for further activities.
v) Managing the irregularities.
Ø Stakeholder identification
i) Programme beneficiaries
ii) Local bodies
iii) Government authorities involved in programme
iv) Media
v) Civic bodies
Ø Verification of achievements and said goals

i) Collecting data from focused group
ii) Interviews and questionnaires
iii) Case study
iv) Articles, reports & Digital libraries Socio-Cultural
v) Internal progress / review reports. Environment
59
Business Environment Ø Findings and cross verification
i) Generating the final outcome of data collected for verification of the
achievements of programs and then implementing relative changes in the
programs to achieve the goal desired.
Companies ACT 2013 for CSRs

Government has laid down certain policies for all companies that is called
Companies ACT 2013 and has a section 135 that deals with Social Responsibility
clause that is mandatory for them to follow. CSR provisions for companies are:
i) Net worth of Rs. 500 crore or more
ii) Turnover of Rs. 1000 crore or more
iii) Net profit of Rs. 5 Crore
Once companies fall in any of the above mentioned category they are supposes to
form a CSR committee with directors as members. The main function of the
committee is:
i) Generate a CSR policy for company to indicate the activeness in the said
field.
ii) Ensuring company owns all the CSR activities being carried out.
iii) Ensuring a minimum %age spent that is predefined by government in the
act, which could be 2% of the average net profit.
Once companies follow all the clauses and regulations of CSR, it is mandatory for
them to display it on the company board. The broad aspects of activities a
company can get indulge itself into are:
i) Helping in eradicating Poverty, promoting health care, the like.
ii) Promoting Educational policies for people in need and of special abilities.
iii) Promoting gender equality
iv) Environmental sustainability and ecological balance.
v) Safe guarding natural heritage and rural development.
4.5 Impact of Culture on Business

Culture:
Culture in the present setting is not quite the same as the customary, more solitary
definition, utilized especially in Western dialects, where the word frequently
infers refinement. Culture is the convictions, values, attitudes, and practices of a
gathering of individuals.
It incorporates the conduct example and standards of a particular group, the
Socio-Cultural guidelines, the presumptions, the discernments, and the rationale and thinking that
60 Environment are particular to a group. Generally, every one of us is brought up in a conviction

framework that affects our individual points of view to such an expansive degree, Business Environment
to the point that we cannot generally represent, or even understand, its impact. We
are similar to different individuals from our way of life.
Fig 4.3: Collaborators of culture

Culture is extremely the aggregate programming of our brains from birth. This
aggregate programming recognizes one gathering of individuals from another.
The test is that at whatever point we manage individuals from another
cultureregardless of whether in our own particular nation or all aroundwe
anticipate that individuals will carry on as we do and for similar reasons.
Culture mindfulness most normally alludes to having a comprehension of another
culture's esteems and point of view. This does not mean programmed
acknowledgment; it implies understanding another culture's attitude and how its
history, economy, and society have affected what individuals think.
Impact of Culture on Business

Culture has turned out to be a standout amongst the most essential business points
of 2016. Presidents and HR pioneers now perceive that culture drives individuals' Socio-Cultural
conduct, development, and client benefit: 82 percent of overview respondents Environment
61
Business Environment trust that "culture is a potential upper hand” (Source: Global Human Capital
Trends).Knowing that authority conduct and reward frameworks
straightforwardly affect hierarchical execution, client benefit, worker
engagement, and maintenance, driving organizations are utilizing information
and behavioral data to oversee and impact their way of life.
Culture is a business issue, not just a HR issue. The CEO and official group should
assume liability for the firm’s culture, with HR supporting that obligation through
estimation, process, and framework.
While culture is generally seen as essential, it is still to a great extent not surely
known. A number of associations think that it is hard to quantify and significantly
more hard to oversee culture. Just 28 percent of overview respondents trust they
comprehend their culture well, while just 19 percent trust they have the "right
culture." (Source: Global Human Capital Trends)
Culture can decide achievement or disappointment amid times of progress:
Mergers, acquisitions, development, and product cycles can either succeed or fall
flat relying upon the arrangement of culture with the business' goals and
objectives.
Culture unites the certain and unequivocal reward frameworks that characterize
how an organization functions practically speaking, regardless of what a
hierarchical graph, business system, or corporate statement of purpose may state.
An amazing number of organizationsmore than 50 percent in the current year's
revieware right now endeavoring to change their culture in light of diverse talent
groups and increased global competition.
(Source: https://www2.deloitte.com/insights/us/en/focus/human-capital-
trends/2016/impact-of-culture-on-business-strategy.html)
In a period in which awful news voyages shortly, the firm’s culture is both
transparent and is directly linked to its work image. Incredible organizations
intentionally develop and deal with their culture, handing it into an upper hand
over the commercial center.
Have you at any point asked why certain organizations enlist incredible architects,
convey apparently unlimited advancements, and create reliable development,
while others generally appear to rehash themselves? A vast piece of the
appropriate response, in single word, is culture.
Once a firm builds up an unmistakable comprehension of its culture and settles on
a bearing for social change, it is basic to move quickly from examination to
activity.
Moving from conversing with doing is the best way to build momentum. For
organizations considering a social change, an opportunity to begin is currently in
light of the fact that numerous organizations are as of now route ahead in building
or transforming their culture.
Examples:
Socio-Cultural
62 Environment

1) Mc-Donald’s: Business Environment
McDonald hascompromised with its most important constituent in order to

respect, and to please, its Indian customers. Many Indians do not eat beef or pork,
or any meat at all.
Vikram Bakshi, managing director of McDonald's India North, it was of utmost
urgency to bring together an Indianized menu for local people to connect with it
and that should also cut across all the cultures. Hence McAloo Tikki, Curry Pans,
Pizza McPuff, McVeggie burger came into existence. This turned out to be highest
sale grossing menu items.
Fig 4.4: Mcdonalds Veg Menu board
2) Kellogg’s
Kellogg has set up a branch in India and began
offering Corn Flakes. What they did not
understand was that Indians imagine that to
begin the day with something cool like frosty
drain on their grain is a stun to the framework.
Also, in the event that they pour warm drain on
Kellogg's Corn Flakes, they right away
transform into wet paper.
This was the biggest reason for Initial failure of
Kellogg’s in India. They failed to understand the
Breakfast eating Values or Culture of Indians.
Fig 4.5: Kellogg’s logo
Source: https://www.slideshare.net/dousunum/effects-of-culture-on-
Socio-Cultural
business?from_action=save
Environment
63
Business Environment 4.6 Consumer Protection Act
Other than essential necessities, we require an assortment of things in our
everyday lives, for example, mobile phones, computerized cameras, cleansers,
scents, beauty care products and numerous more things. Along these lines, every
one of us are purchasers in the literal sense.
When we purchase things from the market as a customer, we expect an incentive
for cash, i.e., right quality, right amount, right value, data about the method of
utilization, and so forth. In spite of this, there are instances when the consumer is
cheated.
In such a case, a large portion of us do not know how we should tackle this issue
and to whom we should look for redressal against our objections. A large number
of us additionally do not have the foggiest idea about our "rights" as a customer
and frequently dither to grievance or even face unreasonable practices.
We additionally do not have plan of action to expensive prosecution to look for
equity and we keep on bearing such treachery. Here that customer discussions
exist can enable you to look for equity against out of line rehearses without
acquiring over the top suit costs. The beneath article gives essential data of what is
Consumer Protection Act, 1986, its favorable circumstances for customers,
fundamental privileges of the purchasers and buyer redressal gatherings in
addition to other things.
The Consumer Protection Act, 1986 was enacted to give a less difficult and
speedier access to customer grievances. The main aim of the act is to give
protection to consumers against insufficiencies and imperfections in products and
services. It additionally looks to secure the privileges of a customer against unfair
trade practices, which might be practiced by manufacturers and dealers.
The set-up of consumer forum is to give alleviation to both the parties, and
debilitate long prosecution. In a procedure called ‘informal adjudication’,
gathering authorities intercede between the two parties and urge compromise.
This Act has provided machinery whereby customers can record their dissensions,
which will be heard by the consumer forum with extraordinary powers so that
necessary action can be taken against the blundering providers and the
conceivable remuneration might be granted to shopper for the hardships he has
experienced.
The purchaser under this law is not required to deposit tremendous court charges,
which prior used to stop buyers from moving toward the courts. The rigors of court
systems have been supplanted with basic techniques when contrasted with the
typical courts, which helps in speedier redressal of grievances. The arrangements
of the Act are compensatory in nature.
Consumer courts handle cases related to goods and services for personal use. They
do not redress defects in products and services for commercial use.
4.7 Consumer Rights

In order to prevent the customers from any malpractices or unfair trade practices
Socio-Cultural
of suppliers, manufacturers, 8 consumer rights have been envisioned.
64 Environment

Fig 4.6: Rights reserved for consumers
1) Right to safety :
As indicated by this the customers have the privilege to be ensured against
the promoting of products and services, which are risky to life, and
property, this privilege is imperative for protected and secure life. This
privilege incorporates worry for buyer's long haul enthusiasm and for their
present prerequisite.
Many times, there are manufacturing defects in pressure cookers, gas
chambers and other electrical machines, which may prove to be fatal to the
end user. This right shields the purchaser from offer of such dangerous
products or services.
2) Right to Information:
Right to information implies privileges to be given to the customer
expected to make an educated decision or choice about components like
quality, amount, strength, virtue models and cost of item. The privilege of
right to information now goes past staying away from misdirection and
insurance against misdirecting publicizing, inappropriate marking and
different practices.
For e.g. when you purchase an item or use any service, you ought to be
educated about a) how to use the item b) the unfavorable wellbeing impacts
of its utilization c) Whether the fixings utilized are condition cordial or not
and so on.
Because of the consistently expanding impact of the market and the
regularly changing scenario with respect to cost wars and hard-offer
procedures, the shopper's entitlement to right to information turns out to be
significantly more vital. The privilege of right to information implies
significantly more than straightforward exposure of the item's weight or
cost.
A purchaser has the privilege to know how the item has been prepared,
regardless of whether it has been tried onanimals or not, whether Socio-Cultural
environment friendly strategies and assets have been utilized as a part of its Environment
65
Business Environment creation process, what sorts of chemicals are utilized into its assembling
and what could be their effect on customer wellbeing.
3) Right to Choice
As indicated by this right, each customer has the privilege to pick the
merchandise or goods and services of his or her likings. The privilege to
pick implies a confirmation of accessibility, capacity and access to an
assortment of items at fair and just competitive price.
The maker, provider, or retailer should not constrain the client to purchase a
specific brand only. Shopper ought to be allowed to pick the most
appropriate item from his perspective.
4) Right to be heard
As indicated by this privilege the purchaser has the privilege to be heard or
to represent him to advocate his concern. In the event that a customer has
been misused or has any grievance against the item then he has the privilege
to be heard and be guaranteed that his/her interest would get due thought.
This privilege incorporates the privilege to represent in the legislature and
in other arrangement making bodies. Under this privilege, the
organizations must have grievance cells to attend to the grievances of
clients.
5) Right to Redress
As indicated by this privilege the buyer has the privilege to get
compensation or look for redressal against unfair trade practices or some
other misuse. This privilege guarantees justice to shopper against misuse.
The privilege to redressal incorporates pay as cash or substitution of
merchandise or repair of deformity in the products according as per the
general inclination of customer. The government at national level and state
level sets up different redressal discussions.
6) The right to consumer education

As indicated by this it is the privilege of shopper to gain the learning and
aptitudes to be educated clients. It is less demanding for educated shoppers
to know their rights and take necessary actions however this privilege
guarantees that unskilled purchaser can look for information about the
current laws and organizations that are set up to safeguard their interest.
The government of India has included customer training in the school
educational modules and in different college courses. Government is
likewise making utilization of media to make the purchasers mindful of
their rights and make smart utilization of their cash.
Socio-Cultural
66 Environment

7) The right to healthy and sustained environment Business Environment
In a nation like India, a vast area of the populace searches for sustenance
security, guaranteed safe water supply, safe house, training and wellbeing.
Most consumers relate almost no to imported merchandise stacked in stores
.For India's 1 billion populaces, nourishment security and a sheltered
situation are more squeezing needs than any other consumer right. The
developing nation’snatural resources likewise fill in as an asset base for the
developed up world's industrial yield.
8) The right to basic needs

Access to nourishment, water and shelter are the premise of any customer's
life. Without these crucial pleasantries, life cannot exist. In September
2001, India's stock of food grains were around 60 million tones, yet 33% of
the Indian populace lives beneath the poverty line and shoppers frequently
go hungry or remain seriously malnourished, prompting weakness.
The recent starvation deaths in Orissa are a valid example. An
exceptionally essential target of the conceptualization and presence of
purchaser rights is to guarantee that buyers have a guaranteed food supply,
protected and safe homes, and essential pleasantries of life like sanitation
and consumable water, and power supply.
Urbanization is viewed, as a characteristic of advancement however for
rural population, living conditions in urban communities is exceptionally
poor. The number of inhabitants in urban communities is developing
quickly in India and after 1988; the level of urban poor has been more than
that of the rural poor. Around 20 to 25 of the urban family units live in
slums, make-move provinces or refugee settlements due to non-
accessibility of reasonable and decent surroundings in urban territories.
As per new estimates, in urban regions alone, there is a lodging deficiency
of 17 million units. This is resulting in habitat crisis in India. In provincial
India, the circumstance is similarly awful, with a vast piece of the populace
yet living in make-move homes and hutment.
With non-permanent lodging come with absence of sanitation furthermore,
different pleasantries like running water and power supply are also limited
or completely absent. Because of thriving populace, the vast majority
population does not have access to dry toilets in rural and urban regions.
9) The right against exploitation by unfair trade practices

The Act talks about how to prohibit certain wrong practices of business and
related trading methods that are not relevant for business. It consists of
following:
Protects firms against false representation of goods, their quality,
composition, styles and model;
Protects firms against false sponsorship or endorsement of any company or Socio-Cultural
brand ambassador for the performance and quality of service / product; Environment
67
Business Environment Protects against misleading price or offer or free gift or Prize;
Protects against including or excluding any warranty or guaranty on a
product;
Protects against bait marketing for offering free services / products with
other product/service at a certain prize that was never intended
4.8 Business Ethics

Organizations have to cater to two major issues namely social duty and
responsiveness. The discharge of these duties is completely associated with the
ethical standards followed by the managers of the firm. Ethics means values or
principles that decide what is right or wrong.
Business ethics is worried about truth and justice and has an assortment of
viewpoints, for example, desires of society, reasonable rivalry, promoting,
advertising, social duties, buyer independence, and corporate conduct in the
nation of origin and also abroad.
Types of Business Ethics:
Fig 4.7: Segmentsof Business Ethics
1) Moral Management:
Moral Management endeavors to take after moral standards and statutes,
moral, however they never damage the parameters of moral principles.
They try to succeed just inside the thoughts of decency, and justice. Moral
supervisors take after the law in letter as well as in soul. The Moral
management approach is probably going to be to the greatest advantage of
the organization in the long run.
2) Amoral Management:
This approach is neither Moral nor immoral. It overlooks moral
contemplations. Amoral Management is comprehensively classified into
two kinds intentional and unintentional.
Socio-Cultural
68 Environment • Intentional amoral mangers prohibit moral issues since they presume

that general moral principles are not good for business Business Environment
• Unintentional amoral managers do exclude moral concerns since

they are unmindful or unfeeling to the ethical ramifications.
3) Immoral Management:
Immoral management is equal to “unethical” practices in business. This
management not only overlooks apprehensions, it aggressively disregards
ethicalbehavior in conduct of Business.
Reasons for Business Ethics:

Ø Ethics relates to fundamental human needs. It is human quality that
man wants to be Ethical, in his private life as well as in his business.
These essential ethics require the organization to be morally
arranged
Ø Values make validity with public. An organization perceived by
general society to be morally and socially responsive will be honored
and respected. The firm hasintegrity and reliability with its
employees as it has the same with society.
Ø A moral mentality enables the management to settle on better
choices, since morals will compel an administration to take different
angles financial, social, and moral in making decision
Ø Value driven organizations are certain to be effective over the long
haul, however in the short run, they may lose cash
Ø Ethics is vital in light of the fact that the government, law and legal
counselors can't do everything to protect the society
4.9 Corporate Governance

Corporate disappointments and failures with the way numerous corporate
capacities have prompted the acknowledgment, universally, of the need to set up a
legitimate framework for corporate governance. Corporate governance is worried
about holding the balance amongst monetary and social objectives and amongst
individual and common objectives.
The governance system is there to support the proficient utilization of assets and
similarly to require responsibility for the stewardship of those assets. The
objective is to align the goal of people, organizations, and society.
The motivator to companies and to the individuals who possess and oversee them
to embrace universally acknowledged governance gauge is that these principles
will help them to accomplish their vision, mission and attract investments
Advantages of Corporate Governance:

Ø Investigations of firms in India and abroad have demonstrated that Socio-Cultural
business sectors and speculators take notice of all around oversaw Environment
69
Business Environment organizations, react positively to them, and reward such
organizations, with higher valuations. At the end of the day, they
have an arrangement of good corporate governance.
Ø Strong corporate governance is essential to versatile and dynamic
capital advertises and is an imperative instrument of investor
protection.
Ø Corporate governance counteracts insider exchanging.
Ø Under corporate governance, corporates are relied upon to scatter the
material price sensitive data in an auspicious and appropriate way
and furthermore guarantees that until such data is made open,
insiders swear off executing in the securities of the organization.
Ø The guideline ought to be 'reveal or stop'. Great corporate
governance, other than ensuring the interests of investors and every
other partner, adds to the effectiveness of a business venture, to the
production of riches and to the nation's economy.
Ø Great corporate governance is viewed as crucial from medium and
long haul points of view to empower firms to contend globally in
supported way and make them, to enhance way of life tangibly as
well as to upgrade social union.
Pre-requisites for good Corporate Governance

Good corporate governance needs the following pre-requisites:
Ø An appropriate framework comprising of unmistakably
characterized and satisfactory structure of roles, authority and
responsibility
Ø Vision and standards, which demonstrate improvement way,
standardizing contemplations, and rules and standards for execution.
Ø An appropriate framework for managing, observing, reporting and
control.
Questions:
Part I
1) Try and map the consumer rights available to consumers in the ever
emerging food and food delivering sector.
Part II
Suggested readings:
Socio-Cultural 3) Business Environment by Justin Paul, Publisher: The McGraw Hill
Environment Companies
70

4) Business Environment: Text and Cases by Francis Cherunilam, Publisher: Business Environment
Part III
Summary
Ø Any business that is being carried out in market is supposed to make profits
but is also important for it to give it back to the society that where the
business is being carried out. These social obligations and responsiveness
in in form of corporate responsibility that is for its Shareholders,
Consumers, Employee, Local community, Government and Environment.
Ø Business orientation is important for a business as it gives an insight of how
to conduct ethically with Political environment, Government, Legal,
Economic restrains, employees, consumers, shareholders, directors,
suppliers and all the entities that are associated with business. This can be
made simple by understanding Ackerman’s Model, Carol’s Model and
Halal’s model.
Ø CSR – Corporate Social Responsibility is a major age old activity that all
the companies do and with the introduction of Company’s Act 2013, this is
made a mandatory rule for all the companies falling under certain criteria
defined in section 135 of the law.
Ø Companies can do CSR in the field of : Women empowerment, girl welfare,
educational sector, health care sector, backward / needy tribes of a state.
Ø Social auditing is done to understand how much a company is giving to
society and how exactly is it benefiting them. It is important to assess,
monitor, regularize and alter the methods in which we are doing business so
as to maintain the sanity of business.
Ø Social culture in which a company is carrying out its business acts as a
major catalyst in deciding what to do and how to do to please and gain faith
of local community. Understanding how McDonalds and Kellogg’s did this
is phenomenal.
Ø As there are certain rights to companies, there are certain rights reserved for
consumers also from government side.These cover a broad spectrum of
Safety, Healthcare, information, choice, to be heard, education, health care,
basic needs and exploitation.
Ø Considering all that is there to be achieved, Business ethics is important for
a company to follow any of these three ethic models: Moral, Amoral and
Immoral.
Ø Corporate groups not only need to do CSR for customers but for their
corporate clients and suppliers also, this is achieved by following good and
fair practices of Corporate governance.
Socio-Cultural
Environment
71
Business Environment Part IV
Study Tips:
few firms
Part V
Self-assessment:
1) Define corporate governance? Why is it assuming greater relevance
nowadays?
2) What do you understand by ethics? Why it is important for business?
3) List down the various rights of consumers. Elaborate on any two rights.
4) Write a note on Consumer Protection Act
5) List down the variables influencing Social orientation of business.
Socio-Cultural
72 Environment

Chapter 5: Natural and Technological Environment:
1. Understandnatural environment
2. Discuss the Technological environment and its impact on business
3. Explain Innovation, Business Technology and Competitive advantage.
4. Explain the Economic effect of Technology
5. Explain Technology Policy
6. Discuss government promotional facilities
Contents
5.1 Natural Environment,
5.2 Technological environments and their impact on business,
5.3 Innovation and business technology and competitive advantage,
5.4 Economic effects of technology,
5.5 Technology policy and government promotional facilities.
5.1 Natural Environment:

Organizations in the modern or assembling industry regularly work with various
types of equipment, hardware, and substance delivering specialists. As a result, a
business' everyday tasks can represent a continuous risk to the common habitat. To
diminish the probability of harm to the environment, government and state
controls require organizations consider certain regular natural factors in their
general tasks designs.
Managing business operations is one way government organizations secure the
environment. Organizations must meet certain measures that assistance to lessen
any unfriendly impacts an organization's daily works have on the environment.
Therefore, normal ecological components, for example, clean water and clean air,
direct how organizations lead their everyday activities.
Organizations are continuously dependent on their surrounding for their
resources, to name it: raw material, labour, land, capital etc. It is therefore
obligatory on the part of the businesses to carry out sustainable business activities
that do not hamper the natural environment. Because danger to the natural
environment will not only affect the society but also the firm in the long run
because it is dependent on this surrounding for its resources.
Let us now understand how ecological factors have gained more importance in Natural and Technological
recent times: Environment
73
Business Environment 5.2 Technological environments and their impact on business:
Each work environment can be profited by technology. Indeed, even a small pipes
business with three agents can utilize programming to track customers and archive
all parts of work.
Accounting and advertising programming programs are accessible to help small
and large organizations. In spite of the fact that technology is intended to spare
time and vitality, recall that innovation can delete the human touch if it is conveyed
too far.
G.K. Galbraith definesTechnology as an "efficient utilization of scientific or other
organized information to practical assignments”.
Technological elements:
Advancements, government approach, mechanical introductions, innovative
work, technology import and assimilation, mechanical obsolesce are the variables
establishing technological environment.
Innovation is one of the components to assess the worldwide intensity of the
organizations.
Highlights of technological environment:
1. The foremost element is technology changes quick. Technological changes
on individuals whether they are set up for it or not.
2. The time hole between thought and usage is falling quickly. The time gap
between introduction of a new concept and its production is shortening
extensively.
3. Business pioneers should dependably look for changes and advancement
occurring. New advancements must be received and new thoughts must be
investigated, otherwise the businesses would perish.
4. The impacts of innovation are across the board. Innovation swells through
society until each network is influenced by it.
5. Technology is stimulating in its own. Technology benefits from itself.
Technology makes technology conceivable.
6. Innovative condition is an overwhelming set of learning, thoughts, and
techniques. It is probably going to be the aftereffect of an assortment of
inward and outside exercises.
7. Technological setting is dynamic. Business implies need to receive the
most recent innovation to endure and to have the competitive edge.
Further, let us understand the impact of Technology on businesses

1) Speed of Connections:
Technology sorts out the workplace. Everything from payroll to inventory
is overseenmore effectively with very much outlined technological tool.
Reports, for example, letters or government recommendations for contract
Natural and Technological work, are less challenging to compose and& alter on the PC. Telephone
Environment frameworks incorporate innovation for three-way or four-way calling, for
74

instance, to spare time. Telephone calls additionally spare flight cost and Business Environment
hotel costs if group calls are gainful.
2) Adaptable Options:
Essentially all advanced technology, from cell phones to tablets, spares
time and vitality. Rather than staying in the workplace, as labourers did
minimal over 10 years back, people can handle business on the go.
Electronic users enable business travellers to get to daily papers, messages,
and teleconnectivity.
This makes travelling less lumbering, since paper materials can remain in
the workplace. Messaging business partners from an electronic gadget
implies there is no compelling reason to come back to the workplace after
work in case you aregoing around town.
3) Live Operators:
Technology can baffle customers who need to contact you. For instance,
people calling a work area for answers to an inquiry will notcontact a live
individual. Squeezing numbers to impart your necessities, for example, "1
for yes" or "2 for no”, depersonalizes the connection amongst clients and
the organizations they criticise. Having a live administrator as an early
choice keeps guests considerably more joyful.
4) Responsibility Concerns:
It is reasonable that technology can enable workers to avoid genuine
obligations. Each entrepreneur knows voice message and email can
conflict with an organization's primary concern. A representative who
needs to slack off for an hour or two in a private office may give voice call a
chance to accept calls and disregard critical messages. Amid this
downtime, business calls that may have brought about deals or imperative
connections are diffused or gone for good.
5) Worldwide Interfacing:
Work projects and business profits all associate with globalization
empowered by technology. Everybody can interface with those in remote
nations with the snap of a mouse. Decades ago, it would have taken months
or years to discover an advance with a remote accomplice or partner. Today,
you can construct a business with somebody in another nation in a matter of
weeks - or even days.
Technology has positive effects on worldwide business. The Internet
makes it workable for individuals to discuss effectively with partners in
different nations. Online business makes it feasible for buyers to buy nearly
anything from anywhere. Nevertheless, innovation additionally adversely Natural and Technological
affects business. Environment
75
Business Environment 6) Business Relationships:
Web Technology -, for example, chat rooms, Skype and other programming
- has made it conceivable to hold meetings without all being physically
present in a similar place. A downside is that gathering with someone over
the Internet is considerably less personal than meeting face to face.
Ironically, while every day network has enhanced client servicing, it has
been hindering to the workplace condition. Businesspersons used to meet
in eateries and on golf courses. Today, the absence of physical closeness
diminishes brainstorming and communications that utilization is a
personal touch.
Negative impact of Technology on business:

1) Worker Morale:
Introducing monitoring programming in the work environment sends the
message to workers that the organization does not believe them, as
indicated by survey about done under the aegis of Professor Howard Besser
while instructing at New York University.
In few Research Study about the impact of the web on their work, almost
50% of the workers who reacted said their managers block their access to a
few sites. However, the employees felt web utilize had expanded their
efficiency yet in addition their chance spent working. Giving
employeesresponsibility, trust, and respect helps their morale and
profitability.
2) Brick and Cement:
The popularity of web-based business has negatively affected physical
retail locations. Small stores are discovering increasingly hard to sustain
both Internet organizations and bigger retail locations. For instance, local
bookshop must compete with Amazon.com and crosswords. At times, the
local bookshop ends up leaving business.
5.3 Innovation, Business technology and competitive advantage

Let us first understand what is Innovation?
Innovation, as far as it matters, can allude to something new or to a change
made to a current item, thought, or field. One may state that the primary
phone was a creation, the main cell phone either an invention or an
innovation, and the first smart phone was an innovation.
Everybody can transform. Innovation implies concocting better
approaches for getting things done. Bringing advancement into your
business can enable you to spare time and cash, and give you the upper hand
to develop and adjust your business in the commercial center.
Innovation for the most part alludes to changing procedures or making
Natural and Technological increasingly compelling procedures, items, and thoughts.
Environment
76 For organizations, this could mean actualizing new thoughts, making

dynamic items or enhancing your current services. Advancement or Business Environment
Innovation can be an impetus for the development and accomplishment of
your business, and help you to adjust and develop in the commercial centre.
Being imaginative does not just mean designing. Innovation can mean
changing your plan of action and adjusting to changes in your condition to
convey better items or services. Fruitful advancement ought to be an in-
assembled piece of your business system, where you make a culture of
development and lead the route in inventive reasoning and imaginative
critical thinking.
Innovation can improve the probability of your business succeeding.
Organizations that develop make increasingly effective work forms and
have better profitability and execution.
The Five Forces Model

Organizations can utilize technology to increase upper hand and increase
ROI. A business is driven by five noteworthy powers and these consist of:
Fig 5.1 Porter’s Five force model
All these five powers will decide the achievement of any business, so organization
can utilize technology to pick up their upper hand basing on those five
components.
(1) Buyer power:
Buyer power is high when purchasers have numerous options of whom to
purchase from, and it is low when their decisions are few.
As a company, this is the thing that you have to follow, if the purchasers in a
specific industry hold a great deal of energy that industry is less appealing
to enter, in light of the fact that these purchasers can without much of a
stretch move their interest towards your opposition and your business will Natural and Technological
be left hanging. Environment
77
Business Environment (2) Supplier power:
Supplier power is high when purchasers have couple of choices of whom to
purchase from, and low when there are numerous choices.
As an organization, this is the thing that you have to know, if the providers
in a specific market hold a considerable amount of drive, that market or
industry will be less appealing to enter.In financial aspects, powers of
demand and supply are key factors in business growth.
(3) Threat of substitute product or services:

If there are not very many options to use a product or service the danger of
substitute,product, or services will be low, so this will be a lucrative
industry to enter in light of the fact that clients will have less option.
This can come about when there are substituting costs related with the
product or services, a few buyers will feel hesitant to change to another
product or services.
(4) Threat of new entrants:

The threat of new entrants is high when it is simple for competitors to enter
the market. As a company,this is the thing that you have to know. In the
event that it is simple for others to enter the market, withdrawn far from that
market, and in the event that it is troublesome for them, at that point this can
be uplifting news for you. Entrepreneurs can utilize technology to make it
difficult for others to enter their business sectors.
(5) Rivalry among existing competitors:

An industry is less appealing when the contest among existing competitors
is high and more alluring when it is low. As a company, you should
dependably think about the force of rivalry in any given industry.
Now that you have taken in the five powers, which drive a business, let us
figure out how you can utilize technology to increase upper hand.
1) Utilize Technology to Increase purchaser's drive for a particular

product or service:
In any aggressive market, purchasers will have numerous options.
Therefore, for any private venture to increase upper hand in such a
tight market, it should utilize technological benefit to pull in clients'
consideration towards its services or product. In can incorporate, the
web to elevate prizes and coupons to its clients and rewards on
different social networks (Facebook or Interest).
Prizes can be set in such a way, that at whatever point a client buys a
Natural and Technological product or utilize a service. They get points, which can be changed
Environment over into shopping vouchers, so every client can go to their store with
78 that coupon they get anX%discount. With such offers, clients will

occupy their energy to your services or products and this will keep Business Environment
you a leader of the market.
2) Utilize innovation to lessen provider control:

As we found in the pointsabove, that a high supplier, power can
influence a business particularly when the supplier chooses to hold
goods or services with a point of increasing costs. For any business to
succeed, it must discover tactics to reducesupplier'sdrive, and the
ideal approach to do this is to find elective sources of resource.
Web can enable a business to discover more suppliers in their field.
Web has a chain of B2B commercial centres, which can enable
private companies to discover optionalsuppliers. A B2B commercial
centre is a web based organization, which unites purchasers and
sellers. For this situation, the purchaser is an entrepreneur and a
merchant is a supplier. A decent case of prominent Business-to-
Business online commercial centres is Alibaba.com.
3) Utilize innovation to make entry barriers:

For any business to succeed, it must make boundaries to its market
utilizing technology. On the off chance that the market is so natural to
enter, the business will not get by for so long. Most popular business
giants like "Pepsi, Facebook, Reebok, Google”have made best use of
the technology to sustain and grow in market that gives them upper
hand in market over their rival companies.
In the event that you possess a private company, you can likewise
utilize technology to be the best in market. An entry barrier is
aproduct or service speciality that buyers have generally expected
from organizations in a specific industry. Entry barriers make it more
troublesome for competitors to enter a specific market.
5.4 Economic effects of technology:

Technology has reformed the way organizations lead business by empowering
private ventures to even the odds with bigger ventures. Private companies utilize a
variety of tech - everything from servers to cell phones - to create upper hands in
the economic market place. This enables proprietors to make operations utilizing
the best technology accessible.
Effect on Operating Costs:
Entrepreneurs can utilize technology to decrease business costs. Basic
enterprise tool empowers a firm to automate back office work, for example,
record keeping, bookkeeping and finance. Portable devices permit home
offices and field reps to interact continuously. Entrepreneurs can likewise
utilize technology to make secure conditions for keeping up delicate
business data. Natural and Technological
Environment
79
Business Environment Enhanced Communication:
Business technology enables independent companies to enhance their
communication like messages, sites, and applications. Utilizing a few sorts
of communication oriented specialized techniques, empower organizations
to engage the monetary market with their message.
Organizations may likewise get more buyer input through these electronic
communication strategies. Technology enhances official correspondence
too. For instance, social intranet gives workers anentryway to access and
refresh interior archives and contract and refresh information to different
offices in a split second.
Expanded Productivity:
Private companies can expand their representatives' profitability using
Technology. Computer programs and business software ordinarily enable
workers to process more data than manual techniques. Entrepreneurs can
likewise actualize business technology to diminish the measure of human
work in business capacities. This enables private companies to abstain from
paying work costs alongside representative advantages.
Widen Customer Bases:

Technology enables independent ventures to reach new monetary markets.
As opposed to simply offering shopper products or services in the
neighbourhood market, private ventures can achieve territorial, national,
and worldwide markets.
Retail sites are the most widely used way a private company offersproduct
in a few diversemarkets. Sites provide an easy choice that shoppers can get
to day in and day out when intending to buy products. Entrepreneurs can
likewise utilize web publicizing to achieve new markets and clients
throughweb standards or advertisements.
Joint effort and Outsourcing:

Business technology enables organizations to outsource business
capacities to different organizations in the national and global business
condition. Outsourcing can enable organizations to bring down expenses
and spotlight on finishing the business work they do best.
Specialized help and client support are two normal activities organizations
outsource. Entrepreneurs may consider outsourcing a few activities if they
do not have the correct offices or accessible labour.
5.5 Technology policy and government promotional facilities.

Each organization or association with computers needs IT policies set up to
Natural and Technological
represent the utilization and services of those frameworks. Technological policies
Environment
80 for organizations incorporates satisfactory utilization of Technology, security,

business congruity, and IT administrations and guidelines. Business Environment
Use:
Worthy utilization of Technological, strategies unmistakably characterize
what is viewed as satisfactory utilization of your organization's IT
frameworks, equipment, programming, and Telephones, for example, your
fax machines and phones. Satisfactory utilization of email and voice
message frameworks can likewise be canvassed in your general routine
use.
Security:
Security methods symbolize network access, passwords, permissions,
approval strategies, antivirus and firewall establishments, data storage and
utilize and framework security and classification.
Congruity:
Technological congruity cover components, for example, disasterrecovery,
back up and site administration. You ought to have some kind of
progression arrangement set up paying little heed to your organization's
size, as any organization is defenceless against data loss and catastrophic
events, regardless of whether you have just a single PC
Technology:
An IT servicepolicy defines its benefits inside your organization, including
user training, division of duties inside your IT office, framework
procurement, execution and support, seller contracts and business
planning. It guides whether your workers are not permitted to utilize and
whether they are permitted to associate individual gadgets to your system.
The Government of India has attempted a few activities and organized
arrangement measures to encourage a culture of development and
entrepreneurship in the nation.
Employment creation is a premier test confronting India. With a
noteworthy and one of a kind statistic advantage, India, nevertheless, can
possibly develop, raise entrepreneurs, and make occupations for the
advantage of the country and the world.
In the current years, a wide range of new projects and chances to sustain
advancement has been made by the Government of India over various
areas. From drawing in with the scholarly world, industry, financial
specialists, little and huge business visionaries, non-administrative
associations to the most underserved areas of society. These are:

Environment
81
Fig 52: Government promotional policies for empowerment
• Start-up India:
Through the Start-up India activity, Government of India advances
business enterprise by tutoring, supporting, and encouraging new
companies for the duration of their life cycle. All the more vitally, a 'Store of
Funds' has been made to enable new companies to access financing.
• Make in India:
Designed to change India into a worldwide outline and assembling centre,
the Make in India activity was propelled in September 2014 and unify data
about opportunities in India's manufacturing segment.
• Aral Innovation Mission (AIM):

AIM is the Government of India's undertaking to advance a culture of
development and enterprise, and it fills in as a stage for advancement of
excellent Innovation Hubs, Grand Challenges, new companies and other
independent self-employment, especially in innovation driven territories.
• STEP - Support for Training and Employment Program designed for

Women:
STEP was propelled by the Government of India's Ministry of Women and
Natural and Technological Child Development to prepare women with no entrance to formal expertise
Environment preparing offices, particularly in rural India.
82

• Digital India: Business Environment
The Digital India activity was propelled to modernize the Indian economy
to makes all taxpayer haveaccess to electronic platform. The activity
expects to change India into a carefully engaged society and knowledge
economy with all-inclusive access to goods and services.
• Department of Science and Technology (DST):

The DST includes a few arms that work over the range on every single
significant task that require scientific and mechanical intervention.
The Technology Interventions for Disabled and Elderly, for example, gives
mechanical answers for address challenges and enhance life quality of the
elderly in India through the utilization of science and technology.
• Stand-Up India:
Launched in 2015, Stand-Up India looks to use institutional credit for the
advantage of India's underprivileged. It means to empower financial
participation of, and share the advantages of India's development, among
women,entrepreneur, Scheduled Castes and Scheduled Tribes.
• Pradhan Mantri Kaushal Vikas Yojana (PMKVY):

A leader activity of the Ministry of Skill Development and
Entrepreneurship (MSDE), this is a Skill Certification activity that means
to prepare youth in industry-applicable with abilities to improve livelihood
and creation of employability
• National Skill Development Mission:

Launched in July 2015, the mission expects to build cooperative energies
crosswise over areas and States in skilledindustries and initiatives. With a
dream to make a 'Talented India' it is intended to assist basic leadership
crosswise over areas to give aptitudes at scale, without trading off on
quality or speed.
• Science for Equity Empowerment and Development (SEED):

SEED expects to give chances to encouraged researchers and field level
labourers to embrace activity, area specific project for financial gain up,
especially in rural territories.

Environment
83
Business Environment Questions:
Part I: Make a small report on how technology has changed evergreen clothing
sector.
Part II:
Suggested readings:
Companies
Part III:
Summary:
Ø Organizations are continuously dependent on their surrounding for their
resources, to name it: raw material, labour, land, capital etc. It is therefore
obligatory on the part of the businesses to carry out sustainable business
activities that do not hamper the natural environment.
Ø Advancements, government approach, mechanical introductions,
innovative work, technology import and assimilation, mechanical
obsolesce are the variables establishing technological environment
Ø Innovation is one of the components to assess the worldwide intensity of
the organizations.
Ø Innovation, as far as it matters, can allude to something new or to a change
made to a current item, thought, or field. One may state that the primary
phone was a creation, the main cell phone either an invention or an
innovation, and the first smart phone was an innovation.
Ø Organizations can utilize technology to increase upper hand and increase
ROI.
Ø Technology has reformed the way organizations lead business by
empowering private ventures to even the odds with bigger ventures.
Ø Private companies utilize a variety of tech - everything from servers to cell
phones - to create upper hands in the economic market place. This enables
proprietors to make operations utilizing the best technology accessible.
Ø Technological policies for organizations incorporates satisfactory
utilization of Technology, security, business congruity, and IT
Natural and Technological administrations and guidelines.
Environment
Ø The Government of India has attempted a few activities and organized
84

arrangement measures to encourage a culture of development and Business Environment
entrepreneurship in the nation.
Part IV
Study Tips:
few firms
Part V
Self-assessment:
1) Explain five forces model.
2) Explain the various government promotional policies.
3) Write a note on economic effect of Technology.

Environment
85
Chapter 6 – Global Environment and Institutions
1. Understand what isGlobalization
2. Discuss the challenges and benefits of globalization
3. Explain the effect of globalization on Indian Business
4. Explain GATT and WTO
5. Explain the functions of WTO
6. Explain Foreign Trade Act and EXIM Policy
7. Discuss what is FEMA
Content
6.1 Globalization
6.2 Need for Globalization?
6.3 Features of Globalization
6.4 Advantages of Globalization
6.5 Disadvantages of Globalization
6.6 Globalization and Indian Economy
6.7 Impact of Globalization in India
6.8 GATT
6.9 Implications of GATT in India
6.10 WTO
6.11 Implications of WTO in India
6.12 Foreign Trade (Development and Regulation) Act, 1992
6.13 EXIM Policy
6.14 FEMA
6.1 Globalization
Globalization is a term for the procedure by which neighborhood, local or national
marvels end up incorporated on a worldwide scale. India's monetary joining with
the rest of the world was exceptionally restricted due to the prohibitive monetary
arrangements took after until 1991.
Indian firms bound themselves, by what's more, huge, to the home market.
Global Environment and
Institutions Outside venture by Indian firms was extremely immaterial. With the new financial
86 approach introduced in 1991, the scenario has changed.

Ø Globalization has in truth turned into a trendy expression with Indian firms Business Environment
now and numerous are extending their abroad business by various
techniques. Globalization might be characterized as " the developing
financial reliance of nations worldwide through expanding volume and
assortment of cross fringe exchanges in products and enterprises and of
worldwide capital streams, and furthermore through the more fast and far
reaching dispersion of innovation".
Globalization might be considered at two levels Viz, at the full-scale level (i.e.,
globalization of the world economy) and at the miniaturized scale level (i.e.,
globalization of the business and the firm). Globalization of the world economy is
accomplished, clearly, by globalizing the national economies. Globalization of
the economies and globalization of business are especially reliant.
6.2 Need for Globalization

Ø The quick contracting of time and separation over the globe because of
speedier correspondence, speedier transportation, developing money
related streams and fast innovative changes.
Ø The residential markets are not any more satisfactory rich. It is important to
hunt for global markets and to set up abroad production houses.
Ø Firms may decide for going global to discover political soundness, which is
moderately great in different nations.
Ø To get innovation and administrative expertise, organizations frequently
set up abroad plants to diminish high transportation costs.
Ø Some organizations set up plants abroad to be near to their crude materials
supply and to the target markets for their finished products.
Ø The US, Canada and Mexico have signed the North American Free Trade
agreement (NAFTA), which will evacuate all boundaries for trade
exchange among these nations.
Ø The establishment of the World Trade Organization (WTO) is stirring
expanded cross-fringe exchange.
6.3 Features of Globalization

Following are the highlights of the present period of globalization:
1) New markets
Ø Growing worldwide markets in services like banking, insurance and
transport.
Ø New money related markets which are deregulated,
comprehensively connected, working day and night, with activity
with location no more a hindrance, with new instruments, for
example, derivatives.
Ø Deregulation along with exponential increase in the numbers of Global Environment and
mergers and acquisitions. Institutions
Ø Global customer markets with worldwide brands. 87
Business Environment 2) New Actors
Ø Multinational partnerships incorporating their creation and
showcasing, commanding food creation.
Ø The World Trade Organization is the main multilateral association
with specialist to implement national governments to obey and
follow the rules and to run the show.
Ø A global criminal court framework really taking shape
Ø A flourishing global system of NGOs.
Ø Regional alliances multiplying and picking up significance. Example
European Union, Relationship of South-East Asian Nations,
Mercosur, North American Free Trade Affiliation, Southern African
Development Community, among numerous others.
Ø More strategy coordination groups like G-7, G40, G22, G77, OECD
3) New guidelines and norms

Ø Market financial approaches spreading across the world, with
greateremphasis on privatization and liberalization than in prior
decades.
Ø Widespread selection of vote based system as the decision of political
administration.
Ø Human rights traditions and instruments developing in both scope
and number of signatories and developing mindfulness among
individuals around the globe.
Ø Unanimityin objectives with common game plan acts as motivation
for advancement.
Ø Resolutions and concernsfor the worldwide condition on matters like
biodiversity, ozone layer, disposal of hazardous wastes,
desertification, and environmental change.
Ø Multilateral considerationsfor global trade keeping in mind
environmental and social conditions.
Ø New multilateral agreements for services, IPR’s (Intellectual and
Property Rights) innovation, communications which have greater
impacts on participating national governments than any past
assertions.
Ø The multilateral agreement on investment is currently a debatable
topic. Consensushas not been reached so far on the same.
4) New Tools of correspondence

Ø Internet and electronic interchanges connecting numerous
individuals at the same time.
Institutions Ø Cellular telephones.
88
Ø Fax machines.
Ø Faster and less expensive transport via air, rail and road. Business Environment
Ø Computer-supported outline
Globalization is thus connecting the world. Distance, location, time are no more
the factors to cause any hindrance in todays globalized world.
6.4 Advantages of Globalization:

Ø Profitability develops even more immediately when nations deliver
products and services in which they have relative preferred advantage.
Ø It raises the standard of living at a much greater pace.
Ø Global rivalry and imports keep a cover on costs, so inflation is less inclined
to crash financial development of the economy
Ø Innovation with fresh ideas are the fruits of globalization
Ø Export employments frequently pay more than different occupations.
Ø Autonomous capital streams offer access to foreign investments thereby
keeping lending rates low
6.5 Disadvantages of Globalization:

Ø Millions have lost employments because of imports or production has
moved abroad. Another after effect is low remuneration due to plenty of
labor supply
Ø Millions of others fear losing their employments, particularly at those
organizations which are working under tremendous competitive pressure
Ø Workers confront pay cut requests from businesses, which frequently
debilitate to outsource their employments.
Ø Services and white-collar jobs are more severely affected as they move
offshore.
Ø Employees can lose their competitive advantage when organizations
assemble progressed Manufacturing plants in low-wage nations, making
them as beneficial as those at home.
Ø Opponents of globalization propose that it will bring about harm to nature,
will lead to pollution, social homogenization, work misfortunes, and an
imperialistic inconvenience of western thoughts and values on developing
nations.
Ø If globalization succeeds,there would be no political, social, social, or
mechanical divisions, detachments, or hindrances between countries. The
planet would become one uniform, equivalent, homogeneous nation.
6.6 Globalization and Indian Economy

Factors supporting globalization:
Institutions
89
Fig 6.1 Factors supporting globalization

1) Innovation:
Innovation has resulted in great technological advancement is almost every
sphere of life. Because of innovation in communication channels,
connecting with people across the globe takes only few seconds, thanks to
development of social media platform. In addition, continuous innovation
is one of the competitive factors that firms can have to supersede their
competitors.
The joining of innovation in India has changed occupations which required
specific aptitudes and needed basic leadership abilities to broadly
characterized employments with higher responsibility that require new
aptitudes, for example, numerical, diagnostic, correspondence and
intelligent abilities. Therefore, more openings for work are made for
individuals.
2) LPG Reforms:
In1991, India got freedomfrom License Raj, which was hindering
development and growth in the Indian Economy. With LPG India
witnessed more prominent monetary advancement, which has put Indian
economy as one of the fastest growing economy in the world.
3) Faster Transportation:
Improved transport, making worldwide travel less demanding. For
instance, there has been a quick development in air-travel, empowering
more noteworthy development of individuals and merchandise over the
globe.
4) Rise of WTO:
The arrangement of WTO in 1994 prompted lessening in levies and non-tax
boundaries over the world. It additionally prompted the expansion in the
Institutions
90 organized commerce amongst the various participating nations.

5) Improved versatility of capital: Business Environment
In the previous couple of decades there has been a general lessening in

capital boundaries, making it less demanding for cash flow to stream
between various economies.
This has expanded the capacity for firms to get back. It has additionally
encouraged foreign direct investments in developing and emerging
markets like India thereby lowering the lending rates.
6) Rise of MNCs:
Multinational organizations working in various topographies have
prompted a dissemination of best practices. MNCs source assets from
around the world and offer their items in worldwide markets prompting
more prominent nearby connection.
These elements have helped in monetary advancement and globalization
has encouraged the world in turning into a "worldwide town". Expanding
association between individuals of various nations has prompted in wider
choices for the customer at very competitive prices.
6.7 Impact of Globalization in India

Let us understand the impact of globalization in India sector wise:
1) Effect of Globalization on Students and Education Sectors:
Because of globalization, the accessibility of study books and data on the
web or the World Wide Web (www) has expanded enormously.
Nonetheless, the over the top cost factors have made higher and particular
training beyond the reach of poor and middle class.
Many outside colleges have begun teaming up with Indian colleges and
study establishments. This has influenced the course charges. For
Engineering, Medical and Management courses, the course charges are
drifting around Rs.20 to Rs.50 lakhs. Astute students from poor and middle
class may need to agree to earn daily wages, as they cannot bear the cost of
for the same.
2) Impact on Health Sector

It is incredible that in India, destitute individuals need to spend at least
Rs.200 for an insignificant regular chilly or minor stomach illnesses,
because of the multinationals pharmaceutical organizations occupied with
soaring expense of normal medicines under their brand names.
The private division doctor's facilities like Apollo, Medicare will be just
excessively happy, making it impossible to set up a bill of Rs.5 lakh to
Rs.10 lakh for heart or Kidney operation. The observing of health
electronically through the web will worsen the situation in the future to
come. Death will be the least demanding alternative for poor after the
impact of globalization in health sector. Global Environment and
Institutions
91
Business Environment 3) Impact on Agricultural area:
The globalization of exchange in the agriculture segment is maybe turned
out to be a major blooper. The agriculturists should pay a substantial cost,
for better assortment of imported seeds having protection from illnesses,
because of the patent rights forced by WTO.
Well beyond, the Indian farmer cannot trade their produce to rich nations
due to stringent quality parameters forced by remote shoppers. The
extensive scale suicide by Indian farmers in Karnataka, Punjab and
Haryana under the weight of substantial advances is straightforwardly
credited to this.
The Indian farming is nearly on its deathbed. The base cost of palatable rice
is Rs.12 per kg and apples from Australia at Rs. 100 to Rs.150 per kg,
whichcannot be managed by poor.
4) Impact on Employment area:

The business situation in India is most likely the most exceedingly bad as of
late because of globalization. The limitations of utilization of child labor
work and reasonable pay to laborers have seriously influenced the
customary enterprises like cottage, handloom, craftsman’s and cutting,
carpets, gems, clay, and crystal and so on., where the specific aptitudes
acquired for ages were passed on to the cutting edge from the early age of 6
to 7 years.
The globalization and exchange limitations affected by WTO have
essentially executed business in these areas.
Conclusion:
Negative aspects:
In spite of the fact that globalization and liberalization of trade have brought about
the accessibility of vast number of value items at reasonable prices, the general
monetary advantages are refuted because of the moderate demise of small-scale
industries that were employing a substantial populace.
The increasing expense of essential sustenance items like clothing, footwear,
grains, palatable oils, petroleum and kerosene, medicines and health care services,
diminish in farm yield, diminish in buying power of poor are a portion of the
disturbing issues that have offered ascend to genuine questions about the
advantages of globalization.
The expanding wide hole between poor people and the rich is a noteworthy reason
for worry as this has resulted in increasing number of crime rates, wilderness, anti-
nationalactivities, psychological warfare, snatching, coercing and so on. The
globalization procedure, that empowers venture of outside cash, may end up being
a genuine 'debt rap' in future as was seen in case of Indonesia, Brazil, Korea and
some different nations.
In addition, for a typical man, the globalization is of no significance. He needs a
Institutions
92 secured source as far as procuring cash, earn his livelihood, has sensible

investment funds and acknowledges an inconvenience free life. Consequently, Business Environment
globalization may just add to the India's troubles.
Positive aspects:
The greatest commitment of globalization is in the field of quality and
improvement of items with different highlights to suit the Indians. There are
assortments of semi-prepared food items to suit each taste in the market, which has
helped us to spare time. Globalization has contributed colossally to approach
imperative data towards quality instruction. Due to globalization, the
communication division has a huge lift.
We have now mobile phones; web and the accessibility of most recent medications
are sparing important lives alongside great specialists sitting over the Web for
guidance. Because of globalization, the automaker like Maruti cannot take us for a
ride.
Presently, wide decisions are accessible to choose electronic merchandise. Life is
more OK with less expensive ventilation systems. Above all, the corrupt Indian
producers are not ready to show us a good time. On account of globalization, we
can dream to send a man to the moon because of a superior economy and
innovative capability.
6.8 GATT:
The General Agreement on Tariffs and Trade was the first multilateral organized
commerce assertion. It was operational from June 30, 1948 until January 1, 1995.
It was replaced withthe more vigorous World Trade Organization.
Purpose:
The reason for GATT was to wipe out unsafe trade protectionism, which had
brought down the worldwide down by 65 percent amid the Great Depression. By
evacuating tariffs, GATT enhanced global trade. It reestablished economic
wellbeing to the world after the destruction of World War II.
Provisions of GATT:
There are three provisions of GATT:
1) GATT had three primary arrangements. The most critical prerequisite was
that every participating member should give most supported country status
to every participating nation. That implies all members must be dealt with
similaritywith regards to levies. It barred the specific tariffs among
individuals from the British Commonwealth and customs unions. It
allowed taxes if their expulsion would make genuine damage to local
makers.
2) Second, GATT disallowed confinement on the quantity of imports and
exports. The exemptions were: Global Environment and
Institutions
93
Business Environment Ø At the point when the government had an overflow of agricultural
items.
Ø In circumstances when the country needed to protect its balance of
payments because of low foreign reserves.
Ø Developing nations that expected to protect its young businesses.
Likewise, nations could limit exchange for reasons of national security. These
included securing licenses, copyrights and open ethics.
3) The third arrangement was included 1965. That was becauseeven
moredeveloping nations joined GATT, and it wished to advance them.
Developed nations consented to abolish duties on imports of developing nations to
help their economies. This was favorable for developed nations as in the long run
as it would increase the number of middle class customers across the globe.
GATT and WTO

GATT lives on as the establishment of the WTO. The 1947 agreement itself is
dead. In any case, its rationaleswere fused into the GATT in 1994 assertion. This
was aimed to keep the trade assertions going while the WTO was being set up. The
GATT 1994 is itself a part of the WTO agreement.
Initially there were 23 member countries. This number increased to 100 by 1993.
Benefits of GATT
Ø For 47 years, GATT decreased levies. This helped world trade grow by 8
percent a year amid the 1960s. That was speedier than world monetary
development. Trade developed from $332 billion in 1970 to $3.7 trillion in
1993.
Ø It was viewedas a great achievement that prompted numerous more nations
to join. By 1995, there were 128 members, producing no less than 80
percent of world trade.
Ø By expanding exchange, GATT helped world peace. In the 100 years prior
to GATT, the frequency of wars was ten times more prominent than 50 years
after GATT.
Ø By demonstrating the benefits of free trade, GATT stirred other exchange
agreements. It set the phase for the European Union. In spite of the EU's
issues, it has forestalled wars between its members.
Ø GATT additionally enhanced correspondence by giving motivations to
smaller nations to learn English, the dialect of the world's biggest customer
market. This selection of a typical dialect lessened misjudging. It
additionally gave less developed nations an upper hand. English gave them
understanding into the developed nation's way of life, advertising
promotion of the goods and services and their customer’sneeds.

Institutions
94

Disadvantages of GATT Business Environment
Ø Low levies devastated local businesses, adding to high joblessness in those

divisions.
Ø Governments sponsored numerous enterprises to make them more focused
on a worldwide scale. U.S. and EU agriculture were significant
illustrations. In the mid-1970s, the Textile and clothing businesses were
exempted from GATT. At the point when the Nixon Administration took
the U.S. dollar off the highest quality level in 1973, it brought down the
estimation of the dollar compared to other currencies. That further brought
down the U.S. export cost.
Ø By the 1980s, the nature of world exchange had changed. GATT did not
address the trade of services. For instance, financial services progressed
toward becoming globalized. Foreign direct investment had turned out to
be more imperative. Therefore, when U.S. venture bank Lehman Brothers
collapsed, it debilitated the whole worldwide economy. National banks
joined hands to cooperate so that they could be out of the blue to address the
2008 financial crisis. They were compelled to give the liquidity to frozen
credit markets.
Ø Like other organized free trade agreements, GATT diminished the
privileges of a country to control its own kin. The membership expected
them to change local laws to pick up the trade benefits. For instance, India
had enabled organizations to make generic adaptations of medications
without paying a permit expense. This helped more individuals to bear the
cost of medication. GATT expected India to expel this law. That raised the
cost of medications distant for many Indians.
Ø Exchange assertions like GATT frequently destabilize little, conventional
economies. Nations like the United States that subsidize agricultural
exports can make local farmers bankrupt. Unable to rival with these low
cost grains, the agriculturists move to urban areas searching for work,
frequently in industrial facilities set up by multi-national partnerships.
Regularly these processing plants move to different nations with bring
down cost work, leaving the agriculturists jobless.
6.9 Implication of GATT in India

Ø The new GATT plan and WTO regime, which consolidated different trade
off recommendations of Arthur Dunkel and which was finished at Geneva
on 15December 1993, have some genuine ramifications on Indian
agribusiness.
Ø Amid the formation of the GATT understanding, feelings of dismay were
communicated from different corners that India's enthusiasm for
horticulture will be antagonistically influenced because of the proposed
concession to rural issues in Uruguay Round.
Ø Questionswere raised that the nation might be compelled to diminish the
subsidy accessible to the farmers, and mandatorily open up to farming Global Environment and
imports. Institutions
95
Business Environment Ø It was likewise expected that the conventional privileges of farmers to hold
and trade seeds might likewise be obliged. Subsequent to making a great
deal of portrayal in the last gathering, some extra arrangements were made
into the last assertion.
Ø An intensive examination of this new understanding prompts the end that in
general the nation's advantages will not just be ensuredhowever, India may
likewise hope to profit because of agribusiness being incorporated into the
crease of GATT.
Ø The understanding has stipulated that nations with a total appropriation of
more than 10 percent of the estimation of rural produce should decrease
them. In any case, the present dimension of endowment in India is well
beneath this dimension and this stipulation will in this manner not influence
the nation.
Ø Agriculturists' advantage will likewise be totally ensured once the
proposed 'sui generis' enactment to secure plant assortments becomes
effective. Under the proposed enactment, rights of the farmers to hold and
trade seeds will not be influenced.
Ø The focal element of the concession to agribusiness is the decrease
underway subsidies paid by developed nations to their farmers and the
rolling back of a portion of the non-tariffboundaries, which have confined
agrarian exchange.
Ø These arrangements will give advantage to India as the agrarian exports of
the nation appreciate giving it an upper hand. In this manner, India's
agrarian exports will get an appreciated upgrade, when the impetus
structures in the residential economy are starting to work further bolstering
their good fortune.
6.10 WTO (World Trade Organization)

The World Trade Organization (WTO) is the main worldwide global association
managing the principles of trade between countries. At its heart are the WTO
assertions, talked and signed by majority of the world's exchanging countries and
sanctioned in their parliaments. The objective is to help makers of merchandise
and enterprises, exporters, and merchants lead their business.
The Uruguay round of GATT (1986-93) brought forth World Trade Organization.
The individuals from GATT seared on an assertion of Uruguay round in April
1994 in Morocco for building up another association named WTO.
It was officially constituted on January 1, 1995, which replaced GATT as a
powerful formal, association. GATT was a casual association, which controlled
world exchange since 1948.
In spite of the brief idea of GATT, WTO is a perpetual association, whichhas been
built up based on international treaty affirmed by participating nations. It
Global Environment and accomplished the global status like IMF and IBRD, however it is not an office of
Institutions the United Nations Organization (UNO).
96

Structure: Business Environment
The WTO has about 153 individuals representing more than 97% of world
exchange. Around 30 others are negotiating participation. Decisions are made by
all the member nations. This is ordinarily done by accord.
A majority share vote is likewise conceivable yet it has never been utilized as a
part of the WTO. The WTO's agreements have been ratified in every one of the
member nation’s parliaments.
The WTO's top-leveldecision-making body is the Ministerial Conferences, which
meets at least once in every two years. Beneath this is the General Council
(ordinarily diplomats and heads of designation in Geneva, yet occasionally
authorities sent from member nations) which meets a few times each year in the
Geneva headquarters. The General Council additionally meets as the Trade Policy
Review Body and the Disputes Settlement Body.
At the following level, the Goods Council, Services Council and Intellectual
Property (TRIPs) Council answer to the General Council. Various particular
boards of trustees, working gatherings and working parties manage the individual
agreements and other areas, for example, nature, environment, advancement,
participation applications and provincial exchange assertions.
The WTO secretariat, situated in Geneva, has around 600 staff and is headed by a
Director-General. Its yearly spending plan is around 160 million Swiss Francs. It
does not have branch workplaces outside Geneva. Since decisions are taken by the
member nations themselves, the secretariat does not have the basic decision
making part that other global organizations are given.
The secretariats principle obligations are to supply specialized help for the
different boards and panels and the ministerial conferences, to give specialized
help to developing nations, to analyze world exchange and to disclose WTO
undertakings to people in general and media. The secretariat likewise gives a few
types of legal help to settle disputes and guides governments wishing to become
members of WTO.
Objectives of WTO:
The imperative goals of WTO are:
1. To enhance the way of life of member nations.
2. To guarantee full work and wide increment in effective demand.
3. To develop generation and exchange of products.
4. To build the trade of services.
5. To guarantee ideal usage of world assets.
6. To ensure the safety of environment.
7. To acknowledge the idea of sustainable development.
Functions of WTO
1. To actualize guidelines and arrangements identified with trade policy Global Environment and
review mechanism Institutions
97
Business Environment 2. To give a stage to participating nations to choose future techniques related
with trade and tariff.
3. To facilitate execution, organization and task of multilateral and respective
assertions of the world trade.
4. To direct the rules and procedures identified with dispute settlement.
5. To guarantee the ideal utilization of world assets.
6. To help worldwide associations, for example, IMF and IBRD for setting up
lucidness in Universal Economic Policy assurance.
6.11 Implications of WTO in India

WTO has resulted in favorable as well as unfavorable effects on Indian economy.
Below are the favorable implications of WTO in India:
1) Increase in export earnings:
Ø Increase in trade income can be seen from development in stock fares
and growthin service exports
Ø Growth in stock exports:The foundation of the WTO has expanded
the exports of developing nations because ofreduction in tax and
non-duty exchange obstructions. India's stock exports have
increasedfrom 32 billion us $ (1995) to 185 billion u $ (2008-09).
Ø Growth in service exports:The WTO presented the GATS (general
Agreement on Trade in Services) that provedbeneficial for nations
like India. India's service exports expanded from 5 billion us $
(1995)to 102 billion us $ (2008-09) (programming services
accounted) for 45% of India's serviceexports)
2) Agricultural exports :
Ø Reduction of exchange barriers and domestic subsidies raise the cost
of rural items ininternational market, India would like to profit by
this as higher export earningsfrom agriculture
3) Textiles and Clothing :

Ø The eliminating of the MFA will to a great extent advantage the
textile sectors. It will assist the developingcountries like India to
build the export of materials and clothing.
4) Foreign Direct Investment:

Ø As per the TRIMs assertion, limitations on foreign direct investments
have been pulled back bythe participating countries of the WTO.
This has profited developing nations by method for foreigndirect
Global Environment and venture, euro values and portfolio speculation. In 2008-09, the net
Institutions remote directinvestment in India was 35 billion us $.
98

5) Multi-parallel principles and discipline: Business Environment
Ø It is normal that reasonable exchange conditions will be made,

because of rules and discipline related topractices like hostile to
dumping, subsidies and countervailing measure, shields and
disputesettlements. Such conditions will profit India in its endeavor
to globalize its economy.
Unfavorable implications of WTO in India:
1) TRIPs Protection of Intellectual property rights has been one of the
significant worries of the WTO. As a member from the WTO,India
needs to consent to the TRIPs standards. However, the concurrence
on TRIPs conflicts with the Indian patent act, 1970, in the following
ways:
Ø Pharmaceutical segment: Under the Indian Patent act, 1970, just
process licenses are conceded to chemicals, drugs and medicines.
Along these lines, an organization can legitimately make once it had
the item patent. So Indian pharmaceutical organizations could offer
great quality items (solutions) at low prices. However under TRIPs
assertion, item licenses will likewise be conceded that will raise the
prices of prescriptions, in this way keeping them far from the needy
individuals, luckily, most ofdrugs fabricated in India are off –
licenses thus will be less affected.
Ø AgricultureSince the concurrence on TRIPs reaches out to
agriculture also; it will have considerableimplications on Indian
agribusiness. The MNG, with their tremendous money related assets,
may alsotake over seed generation and will in the end control food
production. Since a largemajority of Indian populace relies upon
agriculture for their livelihood, thesedevelopments will have
genuine consequences.
Ø Micro-living beings: Under TRIPs Agreement, patentinghas been
reached out to smaller scale organismsas well. These plants generally
advantage MNCs and not developing nations like India.
2) TRIMS :
Ø The Agreement on TRIMs additionally supports developedcountries,
as there are no rules in theagreement to define worldwide guidelines
for controlling business practices of foreigninvestors.
Ø Likewise, following the TRIMs assertion will negate our goal of self-
dependent development in light of locally accessible innovation and
resources.
3) GATS:
Ø The Agreement on GATS will likewise support the developed
countries more. Hence, the rapidlygrowing service sector in India
will now need to contend with mammoth foreign firms. Global Environment and
Moreover,since outside firms are permitted to transmit their benefits, Institutions
99
Business Environment profits and eminences to their parentcompany, it will cause foreign
exchange trouble for India.
4) TRADE AND NON –

Ø TARIFF Barriers:Reduction of exchange and non-tariff obstructions
has unfavorably influenced the exports of variousdeveloping
countries. Different Indian items have been hit by non-levy
boundaries. Theseinclude textiles, marine items, agriculture,
pharmaceuticals, basmati rice, carpets,leather products etc.
5) LDC exports:
Ø Many member countries have consented to give duty free quota for
showcase access
6) World Trade items beginning from slightest developed countries like India
should now bear the unfriendly impact of rivaling shabby LDC
exportsinternationally. In addition, LDC exports will likewise go to the
Indian market and thuscompete with locally created goods.
CONCLUSION:
Thus, WTO is an effective body that will sanction worldwide laws on different
matters. It will likewise globalize numerous nations and help them to build up
their focused advantagesand look for profits by cutting edge innovation of other
nations.Though nations like India will confront difficult issues by going along to
the WTO agreements,it can likewise profit by it by exploiting the changing
international environment.
6.12 Foreign Trade (Development and Regulation) Act, 1992

History of Foreign trade in India:
1) Import control was presented in 1940
2) In 1946 the Emergency arrangements statute was declared to proceed the
import exchange control
3) Import and Export(control) Act came into drive with impact from 25th
March 1947
4) Finally the Import and Export(control) act was supplanted by the Foreign
Trade(Development and Regulation) Act, 1992

Institutions
100

Main provisions of the act: Business Environment
Fig 6.2: Provisions of Foreign trade Act

Ø The act empowers the Central Government to make arrangements for the
advancement and in addition, direction of foreign trade by the method for
encouraging imports into and in addition enlarging exports out from the
nation and in the various issues identified with foreign trade.
Ø This actauthorizes the legislature to define and additionally declare the
export and import policy and to likewise continue changing the same as per
the market scenario. The governmenthas additionally been given a wide
power to preclude, limit and control the exports and imports as well as
specific cases of foreign trade.
Ø The act accommodates certain arrangements particularly that of the
Director-General to advise the Central Government in detailing import and
export strategy and to execute the same.
Ø The act orders each importer as well as exporter to acquire a code number
called the 'Importer Exporter Code Number (IEC)' from the Director-
General or the approved officer.
Ø The act gives the balancing of all the budgetary focuses as far as imports
and exports with the goal that the country achieves the very pinnacle of
economic advancement. The foremost aim here is to incorporate
facilitation of sustain growth about the exports of the nation. The
circulation of quality merchandise and ventures to the residential buyer at
global competitive costs, incitement of managed monetary development by
giving access to fundamental crude materials and also upgrade of
innovative quality and proficiency of Indian agriculture, industry and in
addition services and change of their competitiveness to meet a wide range
of necessity of the worldwide markets.
Present scenario of Foreign Trade Policy
Ø Currently the Foreign Trade Policy of our nation is in its 6th portion of the
five-year arrangement that was before presented in the year 1992 by the
Government of India. Global Environment and
Institutions
Ø The new Foreign Trade policy of the nation was reported on the 1st of April 101
Business Environment 2015 by the Government of India, Ministry of Commerce and Industry.
Ø This current Foreign Trade policy reaches out for the period 2015-2020.
Ø The real point of the current Foreign Trade policy presented in the nation is
only the advancement of export potential, improvement inexport
execution, consolation of Foreign Trade and the making of favorable
balance of payment. This arrangement, otherwise called the Export Import
Policy (EXIM Policy) is refreshed each year on the most recent day of
March with all the new upgrades, adjustments and modifications. Schemes
updated or modified become effective from the 1st day of April every year.
6.13 EXIM Policy

Ø The Export-Import Policy (EXIM Policy), reported under the Foreign
Trade (Development and Regulation Act), 1992, would mirror the degree
of controls or progression of Foreign Trade and demonstrate the measures
for export advancement. Despite the fact that the EXIM Policy is declared
for a five-year time frame, reporting a Policy on March 31st consistently,
within the broad framework of the Five Year Policy, for the ensuring year.
Ø A vital component of the EXIM policy since 1992 is freedom. Permitting,
quantitative confinements and other regulatory and optional controls have
been considerably diminished.
Ø The Union Commerce Ministry, Government of India reports the
incorporated Foreign Trade Policy FTP in each five year. This is
additionally called EXIM policy. This strategy is refreshed each year with a
few changes and new plans. New plans become effective on the main day
of monetary year, i.e., April 1, consistently.
Ø Export Import (EXIM) Policy outlines standards and directions for exports
and imports of a nation. This approach is otherwise called Foreign Trade
Policy. It gives strategy and technique of the legislature to be taken after for
progressingexports and controlling imports. This policyis occasionally
explored to consolidate important changes according to changing domestic
and global condition. In this policy, approach of government is towards
different sorts of exports and imports is passed on to various exporters and
merchants.
Ø Export alludes to pitching merchandise and enterprises of different nations,
while import implies purchasing products and ventures from different
nations. Presently in the time of globalization, no economy on the planet
can stay cut-off from rest of the world. Export and import assume a critical
part in the monetary improvement of all the developed and developing
economies. With the development of global associations like WTO,
UNCTAD, ASEAN, and so on.world exchange is developing at a quick
rate.
Objectives of EXIM Policy:
1) To encourage supported development in export to accomplish a share
of at least 1 % of worldwide stock trade.
Institutions
102 2) To strengthen supported financial development by giving access to
fundamental crude materials, intermediates, parts, consumables and Business Environment
capital merchandise required for increasing production and
providing services.
3) To upgrade the innovative quality and productivity of Indian
agribusiness, industry and services, in a manner enhancing their
competitive quality while creating new work openings, and to
support the accomplishment of globally acknowledged models of
value.
4) To furnish buyers with great quality merchandise and ventures at
globally competitive costs while in the meantime making a level
playing field for the domestic produce.
6.14 FEMA
FEMA, The Food Exchange Management Act of 1999 that was passed by the
winter session of Indian Parliament has majorly focused on fair trade of foreign
trade and their payments. This also deals with advancement and supports all
aspects of latest foreign trade practices.
This act makes offenses identified with foreign civil offenses. It stretches out to
the entire India supplanting FERA, which had turned out to be incongruent with
the pro liberalization policyof Government of India.
Switch from FERA
Ø FERA was introduced in 1947.
Ø It however failed in restricting activities of MNC’s with regards to their
expansion strategies
Ø FERA was slowly turning out to be redundant.
Ø FERA was amended in 1993 and was called FEMA
Ø The purpose was to liberate the controls on foreign trade and exchange in
India.
Ø Example: Coca-Cola was India's most popular soft drink until 1977. Had to
leave Indian market due to the then restrictive government policies. They
make a comeback in 1993, after the introduction of FERA(Foreign
Exchange Regulation Act).
(Source:https://en.wikipedia.org/wiki/Foreign_Exchange_Management_Act)
Features of FEMA:
Ø Activities, for example, payments made to any individual outside India or
receipts from them, alongside the deals in foreign trade and foreign security
is confined. FEMA enables the central government to force the limitations.
Ø Without general or particular authorization of the FEMA, it limits the
exchanges including foreign trade or foreign security and payments from
outside the nation to India – the exchanges ought to be made just through an
approved authority. Global Environment and
Ø The Central Government, in light of open intrigue, can confine Institutions
103
Business Environment arrangements in foreign trade under the present record by an approved
individualby and large.
Ø In spite of the fact that offering or drawing of foreign trade is done through
an approved individual, the RBI is enabled by this Act to subject the capital
account transactions to various limitations.
Ø Occupants of India will be allowed to complete exchanges in foreign trade,

foreign security or to possess or hold immovable property abroad if the
money, security or property was claimed or obtained when he/she was
living outside India, or when it was acquired by him/her from somebody
living outside India.
Questions:
Part I:
1) Make a small report on how Globalization made a path to endian markets
and how it helped the Indian economy. (Take any one sector for report).
Part II:
Suggested Readings:
Companies
Part III:
Summary:
Ø Globalization might be characterized as " the developing financial reliance
of nations worldwide through expanding volume and assortment of cross
fringe exchanges in products and enterprises and of worldwide capital
streams, and furthermore through the more fast and far reaching dispersion
of innovation".
Ø Globalization is thus connecting the world. Distance, location, time are no
more the factors to cause any hindrance in todays globalized world.
Ø In spite of the fact that globalization and liberalization of trade have
brought about the accessibility of vast number of value items at reasonable
Global Environment and prices, the general monetary advantages are refuted because of the
Institutions moderate demise of small-scale industries that were employing a
104
substantial populace.
Ø The greatest commitment of globalization is in the field of quality and Business Environment
improvement of items with different highlights to suit the Indians.
Ø The World Trade Organization (WTO) is the main worldwide global
association managing the principles of trade between countries. At its heart
are the WTO assertions, talked and signed by majority of the world's
exchanging countries and sanctioned in their parliaments. The objective is
to help makers of merchandise and enterprises, exporters, and merchants
lead their business.
Ø WTO is an effective body that will sanction worldwide laws on different
matters. It will likewise globalize numerous nations and help them to build
up their focused advantages and look for profits by cutting edge innovation
of other nations. Though nations like India will confront difficult issues by
going along to the WTO agreements, it can likewise profit by it by
exploiting the changing international environment.
Ø The reason for GATT was to wipe out unsafe trade protectionism, which
had brought down the worldwide down by 65 percent amid the Great
Depression. By evacuating tariffs, GATT enhanced global trade. It
reestablished economic wellbeing to the world after the destruction of
World War II.
Ø The Foreign Trade (Development and Regulation ) Act 1992 empowers the
Central Government to make arrangements for the advancement and in
addition, direction of foreign trade by the method for encouraging imports
into and in addition enlarging exports out from the nation and in the various
issues identified with foreign trade.
Ø The Export-Import Policy (EXIM Policy), reported under the Foreign
Trade (Development and Regulation Act), 1992, would mirror the degree
of controls or progression of Foreign Trade and demonstrate the measures
for export advancement
Ø The Foreign Exchange Management Act, 1999 (FEMA) is an Act of the
Parliament of India "to solidify and alter the law identifying with foreign
trade with the target of encouraging external trade and payments and for
advancing the efficient advancement and support of foreign trade showcase
in India".
Part IV
few firms
Part V
Self-assessment:
1) Define Globalization. List down the various advantages and disadvantages
of globalization. Institutions
105
Business Environment 2) Write notes on following
a. GATT
b. WTO
c. EXIM Policy
3) Discuss the salient features of Foreign Trade Policy.
4) Explain the features of FEMA

Institutions
106

W Business Environment

Uploaded by

Copyright:

Available Formats

W Business Environment

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

W Business Environment

Uploaded by

Copyright:

Available Formats

CONTENTS

Unit Contents Page No.

1 Introduction to Business Environment 1-16

2 Economic Environment 17-31

3 Regulatory Environment 32-49

4 Socio-Cultural Environment 50-72

5 Natural and Technological Environment: 73-85

6 Global Environment and Institutions 86-106

“Only for Private Circulation”

1.2: Understanding Business environment:

1.3: Nature of Business:

Fig: 1.1 Types of Diversification

Diversification is of three types:

1.4: Scope of Business:

“Only for Private Circulation”

Following are the goals of business:

1.6: Objective of Business:

“Only for Private Circulation”

1.7: Understanding Environmental Analysis:

Internal Environment External Environment

Fig: 1.3 Factors influencing Business Decision

Factors influencing Business Decision:

“Only for Private Circulation”

Stages of Environmental analysis:

1.8: Benefits of environmental analysis:

Below are the few advantages of environment alanalysis:

Global Technological Economic Political Social-Cultural Natural

• Expanding • Increased • Growth • Role of Law • Culture makes • Manufacturing

Table No. 1 Features of Environmental factors

1.10: Environmental Forecasting:

1.11: Forecasting Techniques:

Fig 1.4 Forecasting techniques

1.12 Benefits of Forecasting:

“Only for Private Circulation”

2. Pointing out of grave areas:

1.13 Limitations of Environmental Forecasting:

2. No Assurance as to Organization Effectiveness:

3. Not completely Dependable:

4. Absenteeism of Strategic Approach:

“Only for Private Circulation”

“Only for Private Circulation”

Chapter 2 – Economic Environment

2.2 Following are the Macro factors:

Fig 2.1: Macro Factors

“Only for Private Circulation”

Fig 2.2: Components of Macro Factors

2.4 Nature of economy:

2.5 Economic System:

Fig 2.3: Types of Economic Systems

It might be summarizedthat the government’s part in capitalist society should be

“Only for Private Circulation”

Mixed economy is a combination of Capitalist and Socialist economy. In this

2.6 Structure of Economy:

2.7 The economic structure can be divided into three categories:

Fig 2.4: Types of Economic Structure Economic Environment

Fig 2.5: Types of Primary sector

Fig 2.6: Types of Secondary sector

“Only for Private Circulation”

2.8 Economic Policy:

2.9 Aim of economic policy: