You are on page 1of 43

BUSINESS POLICY AND ENVIRONMENT

MODULE 1: INTRODUCTION:
MODULE 2: BUSINESS ENVIRONMENT
BUSINESS
MEANING OF BUSINESS:
Business refers to the economic activities concerned with the production and sale
of goods and services for the purpose of earning profit. Trading, manufacturing, mining,
transportation, banking, etc. are the example of business activities related to industry
and commerce.
DEFINITION OF BUSINESS:
According to Prof. R N Owens, “Business is an enterprise engaged in the
production and distribution of goods for sale in a market or rendering of services for a
price.”
From the above definition it is clear that business refers to all those economic
activities which are concerned with the production or purchases of goods and services
for the purpose of sale at a profit.
CHARACTERISTICS OF BUSINESS:
 Economic activity
 Size of operation is large
 Global market leader
 Technology oriented
 Government control
 Quality of goods and services
 Possibility of loss
 Profit motive
BUSINESS OBJECTIVES:
It is, generally, believed that business is carried on only for profit. It is true to
some extent. But earning profit cannot be the sole objectives of a truly successful
business.
In the words of Urwick, “earning profit cannot be the objectives of a business
any more than eating is the objectives living.”
According to this statement, as man is not living for eating, but is eating for
living, every business must earn profit, but making profit is not the only objectives of a
business.
To conclude, earning of profit is only one of the objectives of business. In fact, a
service to the community is the real objectives of business. It cannot ignore the society
in which it operates.
The objectives of modern business may be broadly classified as:
1. Economic objectives
1
2. Social objectives
1. Economic objectives: Business is basically an economic activity. So the main
economic objectives of a modern business are:
a. Earning of adequate profit
b. Creation of customer
c. Optimum utilization of resources
d. Innovation or research and development

a. Earning of adequate profit:


In the words of Peter F. Drucker, “The problem of any business is not the
maximization of profit but the achievement of sufficient profit to cover the
risks of economic activity and thus to avoid the loss”. Thus, the profit of
any business must be reasonable. It must be sufficient to enable the
business to cover its costs and to stay in the business.

b. Creation of customer:
Business activity of an enterprise can be sustained only if there are
enough customers to buy the product and services offered by the
enterprise. Without a body of customers, a business enterprise cannot
survive. Thus, creation of customers is one of the economic objectives of
a business. A business can create customers by supplying the goods and
services which the customers want. Through market research, a business
can understand what the customers want.

c. Optimum utilization of resources:


The resources available with the business are limited. That means, there
should be optimum utilization of resources. Optimum utilization of
resources implies the following:
I. The resources should not remain idle.
II. At the same time, there should not be shortage of resources.
III. The resources should be put to proper uses.

d. Innovation or research and development:


It is quite essential for a growing business. Without innovation, an
enterprise cannot hope to cope with the changes in the society. Through
innovation, a business enterprise can increase its competitive strength and
improve its image in the minds of the customers. Innovation even helps
the customers in getting better and more economic goods and services.
Thus, innovation is an important feature and objectives of modern
2
business. Research and development helps a concern to find out a new
market, a new product, a new method of production and distribution, etc.

2. Social objectives: The important social objectives of modern business are:


a. Supply of goods which society wants
b. Production according to national priorities
c. Providing employment
d. Paying fair wages and providing other benefits to the employees
e. Development of human resources
f. Regular and timely payment of taxes
g. Social welfare
h. Prevention of pollution
i. Achieving business Globalization

a. Supply of goods which society wants:


A business can enjoy the goodwill of the community only if it is alive it its
responsibility of supplying goods and services of standard quality which the community
wants. If a business fails to maintain a continuous supply of goods quality goods and
services, it will incur the wrath of the society. So, continuous supply of good quality
goods and services to the society is an important socio-economic objective of every
business.

b. Production according to national priorities:


Every business must produce and supply those goods which are needed for the
development of the country, say, production and supply of agricultural inputs like
seeds, fertilizers and pesticides required for agriculture, production of industrial
machinery required for industrial development, supply of cheaper varieties of essential
goods like cloth, edible oil, etc. for the poorer sections of the nation.

c. Providing employment:
One of the important social objectives of a business is to provide employment to
the people in the society.

d. Paying fair wages and providing other benefits to the employees:


It is also an important social objective of a business to provide to its employees
other benefits, such as housing, medical facilities, education, transport, etc.
Fair wages and other benefits will keep the employees contented, and will help
the enterprise to run the business smoothly and efficiently.

3
e. Development of human resources:
One of the important social objectives of a business is the development of
human resources. Human resources can be developed by a business by giving
opportunities to its employees for developing new skill and abilities individual
development.

f. Regular and timely payment of taxes:


One of the social objectives and obligation of every business is to pay the taxes
to the government regularly and in time. This is necessary because the taxes paid by
the business to the government are spent by the government for society.

g. Social welfare:
One of the social objectives of a business unit is to participate actively in the
social welfare activities of the area in which it functions. A business unit can contribute
to the social welfare by running school land colleges, hospitals, maintaining public
gardens, etc.

h. Prevention of pollution:
With growth of industries, pollution has become a serious matter. Pollution
affects the environment and the health of human beings and even animals. So, one of
the social objectives and obligation of every business is to make efforts to prevent the
pollution of air and water.

i. Achieving business globalization:


Businesses want to grow their market share not only within their country’s
border, but also across the globe. You can measure globalization by identifying the
amount or number of export you make. You also can determine your globalization
standing by measuring the market value of your business that is operating in other
countries.

Business in a social system:


 An organization of individuals into groups or structures that have different
functions, characteristics, origin or status. For example, a social system might
break a larger population down into family groups, races, religious affiliations,
gender, wealth categories and social classes.
 These demographic distinctions can be used by the marketing departments of a
business to better target their promotional and sales efforts.
 “Social businesses implement social technologies, strategies and processes that
span across their entire enterprise, creating and optimizing collaborative
4
ecosystem of employees, customers, partners, suppliers, communities and
stakeholders in a safe and consistent way.”- Cheryl burgess

Business in a economic system:


The world’s economic system fall into one of four main categories: Traditional
economy, Market economy, Command economy and mixed economy. An economic
system must define what to produce, how to produce it and for whom to produced it.
1. Traditional economy:
A traditional economic system is one in which each new generation retains
the economic position of its parents and grandparents. Traditional decides what
an individual does for his living, so industry, clothing and shelter are the same as
in previous generations.

2. Market economy:
Market economies are based on consumers and their buying decisions
rather than under government control. Market trends and product popularity
generate what businesses produce. The producers choose how to make products
based on the most economically sound decision; that might means machine labor
to save costs or human labor for specific skills. The buyers decide who gets
which products by what they are willing to pay for what they want.

3. Command economy:
In a command economy, the government controls all economic activity.
One example of a command economy is communism. Command economies are
less flexible than market economies and react slower to changes in consumer
purchasing patterns and flection’s in supply and demand.

4. Mixed economy:
A mixed economy combines qualities of market and command systems
into one. In many countries where neither the government nor the business
entities can maintain the economy alone, both sectors are integral to economic
success.
BUSINESS ENVIRONMENT
INTRODUCTION:
ENVIRONMENT:
In the words of Dr. M.S. Swami Nathan (A winner of economics times standard
award) “A good environment is good business.”

5
In simple words, environment refers to the surrounding in which man lives and
words. In other words it consists of number of factors, events, conditions and
influences arising from different sources.

BUSINESS ENVIRONMENT:
Business environment is the sum of all external and internal factors that
influence a business.
Keith Devis - “Business Environment is the aggregate of all conditions, events
and influences that surround and affect it.” All the activities of the business are
motivated by profit.
The definition of business environment means all of the internal and external
factors that affect how the company functions including employees, customers, and
management, supply and demand and business regulations.
Types of environment can be broadly divided into two types they are:-
a. Internal environment
b. External environment

a. Internal environment
The internal environment refers to all the factors within the organization which
the firms can exercise control over it. The can alter and modify such factors as its
personnel, physical, facilities, organizational resources are under its control.
Factors influence the internal environment
 Objectives of the firm
 Business policy
 Management structure and nature
 Professional skills
 Human resources
 Image and brand equity of company
 Internal power relationship
 Technological capabilities
 Marketing resources
 Vision, mission
 Management control system
 Strategy formulation and implementation

b. External environment
The external environment includes all the factors outside the organization. These
factors cannot be control by the firm. It is classified into two factors i.e.
 Micro environment
6
 Macro environment

a. Micro environment:
Micro environment is also called task environment or operating environment. It is
not common for every business, its vary from one organization to another. These
factors which effect business are as follows:
a) Customers
b) Suppliers
c) Marketing intermediaries
d) Competitors
e) Public

a) Customers:
 Customer is the king of a market.
 A business firm manufactures products or provides services to meet the
needs of customers.
 Satisfying the needs of customers is ultimate goal of any business.
 Business can exist only when consumers buy its product or its services

b) Suppliers:
 Suppliers are those who supply inputs like raw material, spares and
components to the firm.
 Business should have sufficient stocks of raw materials for the day to day
functioning.
 It is very risky to depend on a single supplier because a strike, lockout, or
other problems with the suppliers may seriously affect the company.

c) Marketing intermediaries:
 Marketing intermediaries include middlemen such as agents who help the
company to find the customers.
 He acts as bridge between sellers and ultimate customers.

d) Competitors:
 Competitors directly or indirectly help in the growth of the companies.
 Helps in undertaking research and development activities.
 Competition is one of the important factors which influence the operations
and decisions of a firm. Competition may be three types.
 Competition among the products manufactured by the same firm.
 Competition among the firms manufacturing similar products.
7
 Competition that exists among firms manufacturing unrelated products.

e) Public:
 The word public refers to people in general.
 A firm operates in an environment surrounded by several types of public
like media public, financial public and local public.
 Media public includes news papers, magazines, television and radio.
 Financial public includes financial institution like commercial banks and
development banks
 Local public are people living in the surrounding area of the firm.

b. Macro environment:
Macro environment of a company refers to all those economic and non economic
factors which exercise their influence on the business activity. These factors are
common to all the companies they are:
a) Economic environment
b) Socio-cultural environment
c) Political and Legal environment
d) Technological environment
e) Natural environment
f) Demographic environment

a) Economic environment
The economic environment includes those factors that affect consumer
purchasing power and spending patterns. The business sector has
economic relation with government, capital market, household sectors and
global sector. These sectors together influence the trends and structure of
the economy.
It classified in to six areas:
i. Economic condition
ii. Economic system
iii. Economic policies
iv. Economic growth
v. Currency exchange
i. Economic condition: The general economic conditions prevailing
 National income
 Per capital income
 Economic resources
 Distribution of income and assets
8
 Economic developments etc. are important determinants of business
strategies.
ii. The economic system:
Operating in the country also affects the business enterprise to a very
great extent. The economic system of a country may be capitalist, socialist
and communist or mixed.
iii. Economic policies:
The government decides the economic environment of business through
 Budget
 Industrial policy and regulations
 Economic planning
 Import and export
 Business law
 The size of the national income
 Demand and supply of various goods etc.
iv. Economic growth:
The stage of economic growth of the economic has direct impact on the
business strategies.
 Increased economic growth rate
 Increase in consumption expenditure
 Industrial performance
 Opportunities and threats
v. Currency exchange:
Currency exchange rates have direct impact on the business environment.

b) Socio-cultural environment:
 The socio-cultural factor should be analyzed while formulating
business strategies.
 The buying and consumption habits of people, language, beliefs
and values, customs and traditions, tastes and preferences
occupation, education are all factors that affect business.
 For a business to be successful, the business strategy should be
appropriate in the socio-cultural environment.
 The marketing mix will have to be designed in a way that suits the
environmental characteristics of the market.
 The different in language sometimes poses serious problems even
necessitating a change in the brand name preeti was a good brand
name in India, but it did not suit for the overseas market and

9
hence it was appropriate to adopt “prestige” for the overseas
market.

c) Political and Legal environment


 Political and legal environment has a close relationship with the economic system
and economic policy of the government.
 Political system prevailing in a country determines the rate and direction of
development of business in that country. It includes
i. Legislature
ii. Executive
iii. Judiciary
 Now days every business in nature of legal contract than social contact.
 The government has bought out many legislations on matters like wage fixation,
managerial remuneration, safety and health of the workers.

d) Technological environment:
 By the technology we understand all the skill, knowledge and producers for
making, using and doing useful things.
 According to JK Gal braith “technology is a systematic application of scientific
or other organized knowledge to practical tasks.”
 Technological factors also sometimes pose problems. A firm which is unable to
cope with the technological changes may hardly survive.
 Further the differing technology environment of different markets or countries
may call for product modifications.
 Technological development may increase the demand for some existing
products.
 For ex: - the voltage stabilizers help, increase the rate of electrical appliance in
markets characterized by frequent voltage fluctuations in power supply.

e) Natural environment:
 Natural environment which include factors like climate, land, water resources,
fisheries, mineral resources, rainfall, forests etc.
 The important constituents of natural environment are:
 Natural resources
 Weather and climate conditions
 Topographical factors
 Vocational aspects in the global context
 Port facilities
 For example, in hilly areas jeeps may be in greater demand than cars.
10
f) Demographical environment:
 Demographical factors like size of the population, population growth rate, age
composition, life expectancy, family size, occupational status, employment
pattern, educational levels, religion etc. are the factors relevant to business.
 A fast increase of population indicates growing demand for many products high
population growth rate also indicate enormous increase in labor supply.
 The labor shortage and rising wages encourage labor saving technologies
environment of the developing countries are encouraging labor intensive
methods of production the population growth rate is an important environment
factors that affects the business
 The occupational and spatial mobility’s of population have implication for
business.
 If labor is easily mobile between different occupations and regions, labor supply
will be relatively smooth and this also affects the wage rate.
 If the labor is highly heterogeneous in respect of language, caste and religion,
etc personnel management is likely to become a more complex problem.

11
MODULE 3: BUSINESS ETHICS
ETHICS
 Ethics refer to system of moral principal – a senses of right and wrong and
goodness and badness of actions and their motives and consequences.
 Business ethics refers to the application of ethics to business.
 To be more specific, business ethics is the study of good and evil, right and
wrong and just and unjust action of businessmen.
BUSINESS ETHICS
 Business ethics does not differ from generally accepted norms of good and bad.
 If dishonesty considered to be unethical and immoral in society, then any
businessman who is dishonest with employees, customers, shareholders or
competitors is acting unethical and immorally. If protecting others from any harm
is considered to be ethical.
OBJECTIVES OF BUSINESS ETHICS:

 To provide a comprehensive framework for ethical decision-making in business.


 To examine the intensity of ethical issues as an important element influencing
the ethical decision-making process.
 To introduce individual factors that may influence ethical decision-making in
business.
 To introduce organizational factors that may influence ethical decision-making in
business.
 To explore the role of opportunity in ethical decision making.
 To explain how knowledge about the ethical decision-making framework can be
used to improve ethical leadership.
 To provide leadership styles and habits that promotes an ethical culture.

Principles of business ethics:


The following list if principles incorporate the characteristics and values that most
people associate with ethical behavior. Ethical decision making systematically considers
these principles.
1. Honesty.
2. Integrity.
3. Promise-keeping & trustworthiness.
4. Loyalty.
5. Fairness.
6. Concern for others.
7. Respect for others.
8. Law abiding.

12
9. Commitment to excellence.
10. Leadership.
11. Reputation and morale.
12. Accountability.

1. HONESTY.
Ethical executives are honest and truthful in all their dealings and they do not
deliberately mislead others by misrepresentations, overstatements, partial truths, or any
other means.

2. INTEGRITY.
Ethical executives demonstrate personal integrity and the courage of their
convictions by doing what they think is right even when there is great pressure to do
otherwise; they are principled, honorable and upright; they will fight for their beliefs.
They will not sacrifice principle for expediency, be hypocritical, or unscrupulous.

3. PROMISE-KEEPING & TRUSTWORTHINESS.


Ethical executives are worthy of trust. They are candid and forthcoming in
supplying relevant information and correcting misapprehensions of fact, and they make
every reasonable effort to fulfill the letter and spirit of their promises and commitments.
They do not interpret agreements in an unreasonably technical or legalistic manner in
order to rationalize non-compliance or create justifications for escaping their
commitments.

4. LOYALTY.
Ethical executives are worthy of trust, demonstrate fidelity and loyalty to persons
and institutions by friendship in adversity, support and devotion to duty; they do not
use or disclose information learned in confidence for personal advantage. They
safeguard the ability to make independent professional judgments by scrupulously
avoiding undue influences and conflicts of interest. They are loyal to their companies
and colleagues and if they decide to accept other employment, they provide reasonable
notice, respect the proprietary information of their former employer, and refuse to
engage in any activities that take undue advantage of their previous positions.

5. FAIRNESS.

13
Ethical executives and fair and just in all dealings; they do not exercise power
arbitrarily, and do not use overreaching nor indecent means to gain or maintain any
advantage nor take undue advantage of another’s mistakes or difficulties. Fair persons
manifest a commitment to justice, the equal treatment of individuals, tolerance for and
acceptance of diversity, the they are open-minded; they are willing to admit they are
wrong and, where appropriate, change their positions and beliefs.

6. CONCERN FOR OTHERS.


Ethical executives are caring, compassionate, benevolent and kind; they like
the Golden Rule, help those in needs, and seek to accomplish their business objectives
in a manner that causes the least harm and the greatest positive good.

7. RESPECT FOR OTHERS.


Ethical executives demonstrate respect for the human dignity, autonomy,
privacy, rights, and interests of all those who have a stake in their decisions; they are
courteous and treat all people with equal respect and dignity regardless of sex, race or
national origin.

8. LAW ABIDING.
Ethical executives abide by laws, rules and regulations relating to their business
activities.

9. COMMITMENT TO EXCELLENCE.
Ethical executives pursue excellence in performing their duties, are well informed
and prepared, and constantly endeavor to increase their proficiency in all areas of
responsibility.

10. LEADERSHIP.
Ethical executives are conscious of the responsibilities and opportunities of their
position of leadership and seek to be positive ethical role models by their own conduct
and by helping to create an environment in which principled reasoning and ethical
decision making are highly prized.

11. REPUTATION AND MORALE.


Ethical executives seek to protect and build the company’s good reputation and
the morale of its employees by engaging in no conduct that might undermine respect
14
and by taking whatever actions are necessary to correct or prevent inappropriate
conduct of others.

12. ACCOUNTABILITY.
Ethical executives acknowledge and accept personal accountability for the
ethical quality of their decisions and omissions to themselves, their colleagues, their
companies, and their communities.

DIFFERECE BETWEEN MORAL AND ETHICS:

Comparison chart
Ethics Morals

What are The rules of conduct recognized in Principles or habits with respect
they? respect to a particular class of human to right or wrong conduct. While
actions or a particular group or morals also prescribe dos and
culture. don'ts, morality is ultimately a
personal compass of right and
wrong.

Where do they Social system - External Individual - Internal


come from?

Why we do it? Because society says it is the right Because we believe in something
thing to do. being right or wrong.

Flexibility Ethics are dependent on others for Usually consistent, although can
definition. They tend to be consistent change if an individual’s beliefs
within a certain context, but can vary change.
between contexts.

The "Gray" A person strictly following Ethical A Moral Person although perhaps
Principles may not have any Morals at bound by a higher covenant, may
all. Likewise, one could violate Ethical choose to follow a code of ethics
Principles within a given system of as it would apply to a system.
rules in order to maintain Moral "Make it fit"
integrity.

Origin Greek word "ethos" meaning Latin word "mos" meaning


“character" "custom"

15
Ethics Morals

Acceptability Ethics are governed by professional Morality transcends cultural


and legal guidelines within a norms
particular time and place

Doctrine of trusteeship:
Doctrine is derived from Latin word ”doctrina”which means
a codification In law,(codification is the process of collecting and restating the law of
a jurisdiction in certain areas) Of beliefs or a body’s, taught principles or positions, as
the essence of teachings in a given branch of knowledge or belief system.

Trusteeship is a socio-economic philosophy that was propounded by Mahatma Gandhi.


It provides a means by which the wealthy people would be the trustees of trusts that
looked after the welfare of the people in business.

Principles of Trusteeship: Gandhian Principles of Trusteeship are discussed in


following main points:-

1. Reduce In equalities:
This concept tries to reduce inequalities. It tries to reduce the gap between the
rich and poor. It tries to reduce exploitation.

2. Change of Attitude of Businessmen:


According to Mahatma Gandhi, businessmen should change their attitude. They
have no morale right to accumulate unlimited wealth while most of their countrymen
live in poverty and misery. Each businessman should take enough wealth to live
honorably. He should distribute the remaining wealth back to the society. Gandhiji
advised the rich businessmen to voluntarily surrender their surplus wealth. If not
done so, the poor masses may revolt (fight) one day and plunder their entire wealth
by force.

3. Social Pressure:
People must put social pressure on businessmen to follow the principle of
trusteeship. They should boycott (not purchase) the products of those who do not
practice trusteeship.

4. Legal Pressure:
If voluntary measures and social pressure do not work, legal pressure must be put on
the businessmen to follow the principle of trusteeship.

5. Socialism:

16
This concept gives more importance to socialism. That is, the society is given
much more importance than an individual. So, the wealth of the society should be
distributed equitably to all its members.

6. Consider Social Needs:


Businessmen should produce only those goods and services which are useful for
all members of the society. They should not produce goods and services, which are
used only by few individuals.

7. Equal distribution of wealth:


According to Gandhiji, all the wealth of the society should be distributed
equitably. There should not be concentration of wealth in few hands.

8. Earn money by Hard work:


A person should earn his living by doing hard work. Earning money without doing
hard work is just like stealing.

9. No Right to Private Ownership:


This concept does not give the right to private ownership except when it is
necessary.

10. Government Regulation:


The Government should regulate trusteeship. No Individual should be allowed to
use his wealth for selfish satisfaction or against the interest of society.

Limitations of Principles of Trusteeship:


Critical Evaluation / Limitations / Applicability of the Principles of Trusteeship is
highlighted in following important points:-
1. This concept is not relevant in today's competitive business world because every
businessman tries to earn maximum profits and accumulate huge wealth.
2. It demotivates the hardworking businessmen. The businessmen will lose their
creativity, and they will become lazy. This will slow down the economic development
of the country.
3. This concept is based on the concept of Socialism. However, today socialism is
outdated.
4. Businessmen feel that the welfare of the society is not their responsibility. It is the
responsibility of the Government.
5. This concept is not accepted by shareholders who invest their money to earn the
highest dividend.
6. This concept is against capitalism. Today, capitalism is proving very successful all
over the world. Poverty levels are very low in capitalist countries when compared to
the poverty statistics of socialist nations.

17
ETHICAL PRACTICES IN BUSINESS:
Here are a few ethical business practices that should be followed to build an honest
reputation and ensure smooth running of any organization.
1. Investors:
Ensuring safety of their money and timely payment of interest.

2. Employees:
Provision of fair opportunities in promotions and training, good working
environment and timely payment of salaries.

3. Customer:
Complete information of the service and product should be made available.
Personal information of the customers should not be used for personal gain.

4. Competition:
Unscrupulous tactics, competitor bashing and wrong methods should be avoided
while handling competitors.

5. Government:
Rules and regulations regarding taxes, duties, restrictive and monopolistic trade
practices and unlawful activities like corruption and bribing should be adhered to.

6. Environment:
Polluting industries should ensure compliance with the government norms
regarding air, water and noise pollution.

UNETHICAL BUSINESS PRACTICES


You might find many companies who blatantly thrive on unethical behavior and
practices. A free environment is present or promoted where acts of violation of norms
to amass wealth in an unethical manner is followed.

Following are some of the activities that come under the ambit of unethical practice.

1. Political donations and gifts.


2. Neglect of social interest.
3. Creation of cut throat competition with other business institutions.
4. Spreading of corruption.
5. Presentation of false returns of income and statement.
6. Production and distribution of illegal opposed to public policy.
7. Accumulation of profit by illegal means.
8. Trading with enemy countries.
9. Exploitation of society.

18
10. Encouraging smuggling activities.
11. Avoiding penalty or compensation for unlawful act.
12. Lack of transparency and resistance to investigation.
13. Harming the environment by exceeding the government prescribed norms for
pollution.

GOOD ETHICS AND GOOD BUSINESS:


The specifics for business include providing leadership in building the business,
but also in contributing to the greater good:

 Communicate your values and business goals.


Doing the right thing for the business starts with defining core values. Then
create business goals to tackle the few critical issues and opportunities for the
business. To be effective, communication has to be two-way and continuous, to
keep the “right thing” as “top of mind” for all team members.

 Align the organization to your values and goals.


Ensure everyone is in alignment to live the values and focus on and execute the
goals. Make the tough decisions to ensure the success and profitability of the
business, and make the tough personnel decisions to put the right people in the
right positions, giving them the training they need.

 Manage priorities for the short-term as well as the long-term.


Just as people must manage their personal and work responsibilities.
 Endeavor to beat, not meet, industry standards.
Doing the right thing is not just “getting by”, or squeezing within the letter of the
law. It means knowing and living by the spirit of the law, as well as not waiting
for new laws and regulations to fix problems. The same is true of employee
standards, and social responsibilities.

 Create winning teamwork.


Leading people to do the right thing as a team is one of the most challenging
things to teach and coach. Making a team work well requires constant
communication, demonstrating accountability, ensuring motivation, recognition
and continual learning.

 Look at yourself from your customer’s perspective.


The right thing is for every business leader to value every customer and realize
the important of each in building the business. Your appreciation of your every
customers focus on delivering value to them is a pre-requisite to customer
satisfaction, growth, and success.

 Balance work and life.

19
We are all in business to be successful, but we are all people too. Another way to
send a strong message about doing the right thing is to step up to the thorny
“quality of life” issues, including balancing one’s work and personal life, work at
home, and providing the right health, social, and spiritual needs.

SOCIAL RESPONSIBILITY OF BUSINESS

Introduction:
 Business depends on the society for the needed inputs like money, men
and skills.
 Business also depends on the society for market where products may be
sold their buyers.
 Thus, business depends on society for existence, sustenance and
encouragement.
 Dependence of business on society is so complete that as long as the
latter wants the former, business has reason to exist.
 Once society ceases to have any use for business, it has no place and
reason to live.
 Being so much dependent, business has definite responsibility towards
society. Popularly called the social responsibility of business, or corporate
social responsibility(CSR)
 Social responsibility of business refers to what the business does, over
and above statutory requirement, for the benefit of the society.
 Corporate social responsibility (CSR) refers to the moral responsibility of
business to the society by the virtue of being a part of the society.

Definition of social responsibility


 According to Keith devis, “Social responsibility is the obligation of the decision
makers to take decisions which protect and improve the welfare of the society as
a whole along with their own interests.
 In the words of Andrews, “By social responsibility, we mean the intelligent and
objective concerned for the welfare of the society that restrains individual and
corporate behavior from ultimate destructive activities, no matter how
immediately profitable and leads in the direction of positive contribution to
human betterment.

FORCES PRESSURING SOCIAL RESPOSIVENESS:


I. Government programmes
II. Community interest and Demands
III. Environmental Concerns
IV. Shareholders/Investors Pressures
V. Competitive advantage

20
Government Programmes:
Governments are the most significant forces pressuring firms for social actions.
Most government pressures concern compliance with existing regulations. But
governments are also major sources of potential rules, a fact which businesses need to
take note of. Governments ask businesses to volunteer to help them solve their
problems.

Community interest and demands:


Firms undertake many programmes that benefit society in general, not
necessarily favoring stakeholders. Programmes can range widely, from helping rebuild
disadvantaged sections to providing executive talents to run government undertakings.

Environmental concerns:
Environmental programmes of firms mainly result from standards established by
government agencies. The government of India, for example, enacted the environment
Protection act 1986. The main objective of the act is to protect and improve the
environment and the prevention of hazards to human beings, other living creatures,
plant and property.

Shareholder/Investors Pressures:
Large shareholders such as pension funds have long-range interests in the
financial success of their investments. Some of them, obviously, exert pressure on firms
to respond appropriately to community social interest. For example, shareholders of
Pepsi Co. launched a campaign to force the company to pull out of Myanmar because of
the human right violation of the military regime in that country. Pepsi Co. did oblige the
shareholders.

Competitive advantage:
Comprise four interdependent factors: -
Factors conditions, demand conditions, related and support industries, and context for
strategy and rivalry.

Social responsibilities towards different section of the society:

Responsibility towards owners:


The foremost responsibility of business towards owners in the case of non
corporate organizations. It implies responsibility to owners but in the case of corporate
organization it implies responsibility to shareholders.

21
Social responsibility of business to its owners or shareholders includes the following:
 It should give a fair and regular return on their investment in the form of
dividends.
 It should use the resources provided by them effectively and for the purpose as
mentioned in the memorandum.
 It should make every effort for appreciation of their capital so that the enterprise
can attract new capital from the market very easily.
 It should give full regular and accurate information on the progress and financial
position of the company.

Responsibility towards consumers or customers:


Customer’s satisfaction is the ultimate aim of all economic activities. A customer
is once who has got a favorable options about the company and its products and
services. The business owes a great responsibility towards the consumers and this
responsibility can be discharge in the following ways.
 It should supply product/service at right quality, at right time, at right place and
at reasonable prices.
 The products or services supplied should meet the needs and tastes of
consumers of different clauses and with different purchasing powers.
 It should inform educate and guide the consumer about the arrival and use of
new products released to the market.
 It should be honest & truthful in the matter of advertising and warranty. It
should not mislead the consumer by false advertise.
 It should not indulge in black marketing, hoarding, profiteering or in restrictive or
unfair trade practices.

Responsibility towards employees:


The responsibility towards its employees includes the following:
 It should recognize human values in the business and treat the employees as
responsible human being and not merely in the machine.
 Ti should raise the employee morale through financial and non-financial
motivations. Where the morale is high, the output is bound to be high.
 It should recognize the density of labor and provide proper opportunities to the
employees for utilizing their talent and aspirations.
 Is should reward them with fair wages and offer them material incentives to
improve their productive capacity.

Responsibility towards government:

22
The business in order to strengthen the hand of government has the following
responsibilities towards the government.
 The management of the business should strictly follow the rules and regulations
and the laws passed by the government.
 It should pay taxes and dues to the government honestly and regularly.
 It should not indulge incorrupt practices such as corrupting the public servants
through bribery and donations.
 It should maintain fair trade practices and policies.
 It should help in tacking problems like unemployment, poverty, price raising,
import substitutions etc.

Responsibility towards society:


The responsibility of the business to these people of the society includes the
following:
 It should avoid the exploitation of minorities and weaker sections of the
community and provide all the kind of help in their development.
 It should avoid unnecessary and wasteful expenditure.
 As a good citizen should strengthen the culture and cohesion of the society.
 It should utilized the national resources efficiency and effectively.
 It should avoid all types of environmental pollutions since environment
purification is so essential for human welfare.

Doctrine of social responsibility:


 The doctrine of social responsibility holds that individuals and organizations
should advance the interests of society at large.
 Social responsibility is behavior by business over and above legal requirements,
voluntarily adopted because businesses deem it to be in their long interest.
 They can do this by abstaining from harmful actions and by performing socially
beneficial acts.
 Although the doctrine of social responsibility applies to people and organizations,
much of the discussion focuses on business and the extent to which social
responsibility should influence business decisions.
 Social responsibility is intrinsically linked to the concept of sustainable
development. Business need to integrate the economic, social and environmental
impact in their operations.
 Social responsibility is not an optional “add-on” to business core activities but
about the way in which businesses are managed.

Rationale of social responsibility:


23
i. It protects and promotes stakeholders interest
ii. Boots up brand image and reputation
iii. It contributes to social concern and promotion of common welfare programmes
iv. It increases sales and customers loyalty
v. Ensures ecological balance
vi. It focuses on human elements
vii. Social responsibility of corporate lies in abiding by rules and regulations
viii. It contributes to profits and wealth maximization
ix. It reduces business risk

INTRODUCTION
 The Monopolistic and Restrictive Trade Practices MRTP Act, 1969,was enacted
 To ensure that the operation of the economic system does not result in the
concentration of economic power in hands of few,
 To provide for the control of monopolies, and
 To prohibit monopolistic and restrictive trade practices.

The MRTP Act extends to the whole of India except Jammu and Kashmir. Unless the
Central Government otherwise directs, this act shall not apply to:
 Any undertaking owned or controlled by the Government,
 Any undertaking owned or controlled by a corporation (not being a company
established by or under any Central, Provincial or State Act,
 Any trade union or other association of workmen or employees formed for their
own reasonable protection as such workmen or employees,
 Any undertaking engaged in an industry, the management of which has been
taken over by any person or body of persons under powers by the Central
Government,
 Any undertaking owned by a co-operative society formed and registered under
any Central, Provincial or state Act,
 Any financial institution.

Restrictive Trade Practice


Section 2(o) defines restrictive trade practices
 To maximize profits and market power, traders often attempt to indulge in
certain trade practices which tend to obstruct the flow of capital into the stream
of production.
 It may also bring manipulation of prices or conditions of delivery or affect the
flow of supplies in the market so as to impose unjustified costs.

24
INQUIRY INTO RESTRICTIVE PRACTICES

The Commission may inquire into any restrictive trade practice

1. Upon receiving a complaint from any trade association, consumer or a


registered consumer association, or
2. Upon a reference made to it by the Central or State Government or
3. Upon its own knowledge or information

RELIEF AVAILABLE

The commission shall if after making an inquiry it is of the opinion that the practice is
prejudicial to the public interest, or to the interest of any consumer it may direct that–

1. The practice shall be discontinued or shall not be repeated;


2. The agreement relating thereto shall be void in respect of such restrictive trade
practice or shall stand modified.
3. The Commission may permit the party to any restrictive trade practice to take
steps so that it is no longer prejudicial to the public interest

However no order shall be made in respect of

1. any agreement between buyers relating to goods which are bought by the
buyers for consumption and not for ultimate resale;
2. A trade practice which is expressly authorized by any law in force.

Unfair Trade Practice


WHAT IS UNFAIR TRADE PRACTICE?

An unfair trade practice means a trade practice, which, for the purpose of promoting
any sale, use or supply of any goods or services, adopts unfair method, or unfair or
deceptive practice.

 Misleading advertisement and False Representation


 Falsely representing that goods and services are of a particular standard,
quality, grade, composition or style.
 Falsely representing any second hand renovated or old goods as new.
 Representing that goods or services, seller or supplier has a sponsorship,
approval or affiliation which they do not have.
 Making a false or misleading representation concerning need for, or usefulness
of goods or services.

25
 Giving to public any warranty, guarantee of performance that is not based on
an adequate test or making to public a representation which purports to be
such a guarantee or warranty.
 False and misleading claims with respect to the price of goods or services.
Unfair practices may be categorized as under:

1. FALSE REPRESENTATION

2. FALSE OFFER OF BARGAIN PRICE-

3. FREE GIFTS OFFER AND PRIZE SCHEMES

4. NON-COMPLIANCE OF PRESCRIBED STANDARDS

5. HOARDING, DESTRUCTION, ETC.

6. INQUIRY INTO UNFAIR TRADE PRACTICES

The Commission may inquire into


Any unfair trade practice

i. Upon receiving a complaint from any trade association, consumer or a


registered consumer association, or
ii. Upon reference made to it by the Central Government or State
Government
iii. Upon an application to it by the Director General or
iv. Upon its own knowledge or information.

7. RELIEF AVAILABLE

After making an inquiry into the unfair trade practice if the Commission is of the
opinion that the practice is prejudicial to the public interest, or to the interest of any
consumer it may direct that–

i. The practice shall be discontinued or shall not be repeated;


ii. The agreement relating thereto shall be void in respect of such unfair
trade practice or shall stand modified.
iii. Any information, statement or advertisement relating to such unfair trade
practice shall be disclosed, issued or published as may be specified
iv. The Commission may permit the party to carry on any trade practice to
take steps to ensure that it is no longer prejudicial to the public interest
or to the interest of the consumer.

26
However no order shall be made in respect a trade practice which is expressly
authorized by any law in force.

The Commission is empowered to direct publication of corrective advertisement and


disclosure of additional information while passing orders relating to unfair trade
practices.

Monopolistic Trade Practices


Section 2 (i) of the Act defines MTP while section 31 provides for investigation into
such practices by MRTP commission
 Monopolistic trade practice is that which represents abuse of market power in
the production and marketing of goods and services by eliminating potential
competitors from market
 And taking advantage of the control over the market by charging unreasonably
high prices,
 Preventing or reducing competition,
 Limiting technical development,
 Deteriorating product quality
 Or by adopting unfair or deceptive trade practices.
 A monopolistic trade practice is deemed to be prejudicial to the public interest,
unless it is expressly authorized under any law or the Central Government
permits to carry on any such practice.
INQUIRY INTO MONOPOLISTIC TRADE PRACTICES

The Commission may inquire into

Any monopolistic trade practice,

1. Upon a reference made to it by the Central Government or


2. Upon an application made to it by the Director General or
3. Upon it own knowledge or information

RELIEF AVAILABLE

1. Where the inquiry by the Commission reveals that the trade practice inquired
into operates or is likely to operate against public interest, the Central
Government may pass such orders as it thinks fit to remedy or present any
mischief resulting from such trade practice.
2. On an inquiry report of the Commission, the Central Government may-
i. Prohibit the owner(s) of the concerned undertaking(s) from continuing to
indulge in a monopolistic trade practice; or
ii. Prohibit the owner of any class of undertakings or undertakings
generally, from continuing to indulge in any monopolistic trade practice
in relation to the goods or services.

27
3. The Central Government may also make an order:
i. Regulating the production, storage, supply, distribution, or control of any
goods or services by an undertaking and fixing the terms of their sale
(including prices) or supply;
ii. Prohibit any act or practice or commercial policy which prevents or
lessens competition in the production, storage, supply or distribution of
any goods or services;
iii. Fixing standards for the goods used or produced by an undertaking;
iv. Declaring unlawful the making or carrying out of the specified
agreement;
v. Requiring any party to the specified agreement to determine the
agreement within the specified time, either wholly or to specified extent;
vi. Regulating the profits which may be derived from the production,
storage, supply, distribution or control of any goods or services; or
vii. Regulating the quality of any goods or services so that their standard
does not deteriorate.

POWERS OF THE COMMISSION


MONOPOLIES AND RESTRICTIVE TRADE PRACTICE COMMISSION:
Complaints regarding monopolistic trade practice, unfair trade practice and
restrictive trade practice can be made to the MRTP commission at the following
address:
Director General (Investigation & Registration)
MRTPC
Bikaner House Baracks
Shahjahan Road
New Delhi 110011.

The MRTP Commission has the following powers:

1. Power of Civil Court under the Code of Civil Procedure, with respect to:
i. Summoning and enforcing the attendance of any witness and examining
him on oath;
ii. Discovery and production of any document or other material object
producible as evidence;
iii. Reception of evidence on affidavits;
iv. Requisition of any public record from any court or office.
v. Issuing any commission for examination of witness; and
vi. Appearance of parties and consequence of non-appearance.
2. Proceedings before the commission are deemed as judicial proceedings within
the meaning of sections 193 and 228 of the Indian Penal Code.
3. To require any person to produce before it and to examine and keep any books
of accounts or other documents relating to the trade practice, in its custody.

28
4. To require any person to furnish such information as respects the trade practice
as may be required or such other information as may be in his possession in
relation to the trade carried on by any other person.
5. To authorize any of its officers to enter and search any undertaking or seize any
books or papers, relating to an undertaking, in relation to which the inquiry is
being made, if the commission suspects that such books or papers are being or
may be destroyed, mutilated, altered, falsified or secreted.

MRTP AND THE NEW INDUSTRIAL POLICY


 MRTP Act became effective in June 1970
 Emphasis was placed on increasing productivity
 Major amendments to the Act were carried on in 1982 and 1984.
 MRTPC was set up

PROCEDURE OF ACTION ON COMPLAINT:


 Inquiry may be initiated through a complaint by an individual or registered
consumer organization.
 Fact finding investigation is carried on by the Director General.
 If no prima facie case is made, the complaint is dismissed; else an order is
passed to that effect.
 The commission may restrain the party concerned from carrying on the trade
practices by granting temporary injunction.
 Final order is passed. Compensation may be granted to the complainant.

29
MODULE 4: BUSINESS POLICY:

INTRODUCTION:
Policies are standing plans which provide a board frame work within which
decisions are to be taken. They are guide to action.
Business policy basically deals with decisions regarding the future of an ongoing
enterprise. Such policy decisions are taken at the top level after carefully evaluating the
organizational strengths and weakness in terms of product, price, quality, leadership
position, resources etc., in relation to its environment.
In other words, business policy is the study of the roles and responsibilities of
top- level management, the significant issues affecting organizational success and the
decisions affecting organizational in the long run.

DEFINITIONS OF BUSINESS POLICY:


According to Jerry “A business policy is an implied overall guide, setting up
boundaries that supply the general limits and direction in which managerial action will
take place.”
According to this definition, policy reveals the management’s intentions for the
future. They spell out clearly the sanctioned general direction and areas within which
work has to be done.

FEATURES OF BUSINESS POLCY:


An effective business policy must have following features:
1. Specific: Policy should be specific. If it is uncertain, then the implication will
become difficult.
2. Clear: Policy must be unambiguous. It should avoid use of jargons and
connotations. There should be no misunderstandings in the following the policy.
3. Reliable/Uniform: policy must be uniform enough so that it can be efficiently
followed by the subordinates.
4. Appropriate: policy should be appropriate to the present organizational goals.
5. Simple: a policy should be simple and easily understood by all in the
organization.
30
6. Inclusive/Comprehensive: in order to have a wide scope, a policy must be
comprehensive.
7. Flexible: policy should be flexible in operation/application. This does not imply
that a policy should be altered always, but it should be wide in scope so as to
ensure that the line managers use them in repetitive/routine scenarios.
8. Stable: policy should be stable else it will lead to indecisiveness and uncertainty
in minds of those who look into it for guidance.
IMPORTANCE OF BUSINESS POLICY:
1. Policies bring in uniformity in decision making
2. They serve as precedents and thus reduce repetitive thinking and analysis.
3. Policies help in decentralizing the decisions making process.
4. As all policies aim at accomplishing objectives, activities at various levels are
coordinated.
5. They form the basis for measuring performance of managers.
6. Decision making becomes faster because of the policies.
7. Employees at various levels will have freedom to take decisions within the
boundaries of the policies.
8. Policies provide basis for delegation of authority.
9. Top management would be free routine decision making process.

Essentials of business policy:


1) They should lead to achievement of objectives.
2) They should be simple and understandable.
3) They should support other policies at different levels.
4) They should be capable of relating objectives to functions and physical and
human resources.
5) They should not be ambiguity in policies.
6) They should be in writing.
7) They should be stable and flexible.
8) They should be progressive and positive in their approach.
9) They should be in consistent with public policy.
10)They should be fair and reasonable to all concerned.
11)They should be in consistent with ethical standards of business.

Purpose of business policy:


The purpose of business policy is three fold:
 To integrate the knowledge gained in various functional areas of management;
 To adopt a generalist approach to problem solving; and

31
 To understand the complex inter linkages operating within an organization
through the use of systems approach to decision making and relating them to
changes taking place in the external environment.

CLASSIFICATIONS OF BUSINESS POLICIES:


There are six types of business policies.
I. Classification of business policies based on Management levels:
1. Top level management policies
2. Middle level management policies
3. Lower level management policies

II. Classification of business policies based on functional areas:


1. Production policies
2. Marketing policies
3. Financial policies
4. Personnel policies

c. Classification of business policies based on Expression:


1. Oral policies
2. Written policies

d. Classification of business policies based on Nature of origin:


1. Original policies
2. Appealed policies
3. Imposed policies
4. Derivative policies

e. Classification of business policies based on Scope of organization:


1. Basic policies
2. General policies

f. Classification of business policies based on Managerial functions:


1. Planning policies
2. Organizing polices
3. Directing polices
4. Controlling polices

I. Classification of business policies based on Management levels:

32
1. Top level management policies
 These policies are derived from the top management planning.
 The top management comprises of the Board of Directors,
Chairmen/President, Managing Directors, etc.
 The top level management frame policies by themselves and responsible
for these.
 The Top level management policies are concerned with the decision
regarding investment, determination of site and location, machine
selection, long range product selection, sales forecasting, sizing of
enterprises, acquisition and merger of two or more units, settlement of
problems of executives regarding their promotion, transfer, retirement,
etc. and accomplishment of the organization objectives/goals.
 They set the objectives, define the goals, establish the policies these
policies are put into effect and judge the results.

2. Middle level management policies:


 The Middle level management consists of the head of the personnel
administration department, production manager, sales manager,
marketing manager, financial manager, etc
 They lay down the policies regarding the establishment of organization,
installation of proper departments, method and techniques of productions,
deciding about the sources of manpower, selection of the best suited
executives, staff and employees, assigning of duties to each departments
and to each individual, deciding about wages salaries, incentives plans for
them, exploration of new market and market decisions about the channel
of distributions, obtaining necessary finances, costs, solving problems of
actual sales activities etc.
 They frame policies on these matters and these policies are known as
middle level management policies.

3. Lower level management policies:


 The lower level management policies are men who have direct supervision
over the working force in office, factory, sales field, and other areas of
activity of the concern.
 They are directly related to the accomplishment of the task for the small
sub-division of the whole enterprise.
 They check out the policies for the assignment of the jobs to the best
suited persons, the provision of adequate tools, raw materials, training the

33
workers, issuing of orders, maintaining of quality, improving working
conditions, and moral maintaining discipline etc.

II. Classification of business policies based on functional areas:

1. Production policies:
These policies are framed and concerned with:
i. The product to be produced(product line, type of product)
ii. The type of technology, processes, equipments and tools, to be used
iii. The selection of factory/office/plant site, location and layout
iv. The decision regarding the scale of production
v. Making of production budget, manufacturing costs and deciding about
total cost and cost of installation and its maintenance
vi. The selection of junior executives
vii. The organization and co-ordination of their activities
viii. Inventory control
ix. Collective bargaining and labor relations
x. Selection of system of quality, cost and production control
Production policies are the basic determination of the total policy making
procedure.

Key issues of production policy.


The following are the key issues of production policy:
1. Involvement of the firm in production processes
2. Choice of production processes
3. Estimates of production capacity
4. Maintenance/replacement of the existing production facilities

1. Involvement of the firm in production processes


The relevant questions to be asked in this connection are:
a. Should the firm manufacture the product that it intends to sell or buy it?
b. If it is to be manufactured, should the activity consist of assembling purchased
components or making the components as well?
c. Should the firm make or buy the raw materials for the components
The only justification for investment in production can be that the same money
cannot be deployed more profitably elsewhere is business. But even with such a
decision, it remains to be decided what is to be the extent of commitment to
production. I.e. vertical integration

34
Factors governing integration of production:
i. Coordination of activities
ii. Saving of costs
iii. Safeguard against uncertainty or restricted supply
iv. Limited flexibility
v. Optimum scale and economy of production
vi. Financial strength and capability
vii. Limitations of management capabilities

i. Coordination of activities
Manufacture of raw material and components for the product to be sold ensures
supplies in accordance with their required quality, quantity and timely availability. It
also provides for flexibility and adjustment to changes in needs.

ii. Saving of costs


The selling costs of the suppliers of materials and components are saved if the
user company produces rather than buy the items.

iii. Safeguard against uncertainty or restricted supply


If a company has to depend on a few suppliers with limited capacity or there is
uncertainty of ready availability of suppliers, it is desirable that the company should
have a captive source of supply of vital plant and machinery and ingredients.

iv. Limited flexibility


With integrated production activities, it may be difficult to introduce changes in
product design. Once heavy investments are made in developing manufacturing
facilities, introducing new products or changing product design with consequential shifts
in the plant facilities are likely to be too costly to bear.

v. Optimum scale and economy of production


Production to be commercial must be so planned as to conform to the volume
required for deriving the economy of scale. If the requirement of any components is too
small, it may be uneconomical to set up plant with large capacity and make full use of
the same. If the requirement is irregular, the plant may be idle at intervals.
On the other hand, a large capacity may be installed and the balance of output
in excess of internal requirements may be sold to other user firms. This implies,
deploying resources for a subsidiary activity and diverting managerial attention from the
primary activity.

35
vi. Financial strength and capability
A company with strong financial positions may be able to expand through vertical
integration of activities and these by make substantial improvements in the
manufacturing of components or raw materials.

vii. Limitations of management capabilities


Managerial competence based on specification in and familiarity with the primary
activity is not always capable of undertaking new activities with equal efficiency. In
adequate attention to the new activities may lead to sub optimal performance in those
areas.

2. Choice of production processes


There are different aspects of choice of production process.
a. Technology to be used
b. Division of labor
c. Mechanization of operations
d. Size and location of production units

a. Technology to be used
The technology to be used is uniquely given in case of certain industries.
Example: manufacturing of paper, cotton and woolen textiles etc. but it may not be so
with respect to many other products on the choice of technology, depends the decisions
regarding equipments, personnel, methods of operational and organization so, the
organization must adopt a suitable technology as required by the production process.

b. Division of labor
Division of labor has been the characteristics feature of large scale
manufacturing units job enlargement is recognized as a superior means of securing
higher productivity and efficiency. Thus, in deciding how much emphasis to give to
division of labor, management has to take into account the policies bearing on
standardization of products, mechanization, and type of labor to be employed and style
of motivation.

c. Mechanization of operations
Technological advances have enlarged the scope of mechanization and
automation in many industries. Automatic electrical appliances are fast replacing
electrical equipment’s. The recent policy of government of India to allow import of
foreign technology in certain industries to improve the competitive ability of Indian
enterprise is a factor which is likely to influence management decision.
36
d. Size and location of production units
For large enterprises, the decision with respect to size of plant needs to be
examined with two alternatives in view,
 Large size with centralized location
 Dispersal of operating units with small size of plant capacity.

Centralized location of a large size plant has both positive and negative implications
large size offers advantages of large scale production, economics of scale centralized
location also facilitates top management control from the corporate headquarters. But
there are limiting factors which do not permit large size and centralized location one
limiting factors is the cost of transportation of raw material of finished products which
may reduce the economies of large-scale production the high cost location in urban and
metropolitan centers is another constraint industrial concentration is regulated by
government.
Smaller plants have distinct advantages if located in suburban area employees do
not have to face the urban problems of community to and from the workplace. There is
greater scope for face to face interaction among the executives and operatives and the
managers have firsthand knowledge of operations.

3. Estimates of production capacity


One of the determinants of the plant size is the desired production capacity.
There are several aspects of this policy issue, such as,
i. Normal requirements and peak demand for the product.
ii. Backward vertical integration with lower capacity
iii. Provision for growth
iv. Balanced facilities
The choice of production capacity centers round two extreme alternatives:
a. Installing capacity to meet maximum demand at all times with idle capacity as a
necessary concomitant
b. Installing smaller capacity and allowing excess demand to go unsatisfied
provided, it does not have unbearable consequences.

4. Maintenance/replacement of the existing production facilities


If the existing plant capacity and services facilities are well maintained, there are
distinct advantages, and management can according decide on plant capacity to be
initially created. Depending on personal preferences of the executives and the
philosophy of management, determining the altitude towards upkeep and maintenance,
the policy may be one of high level conditioning of work environment, or a
37
discriminating policy with deliberate decisions to provide for proper maintenance of only
those facilities which are of critical importance like production, stores etc.
The important of preventive maintenance is recognized in al work places for
several reasons. It helps to reduce repairs, particularly those caused by breakdown of
machines in use preventive maintenance costs may be fairly high but the corresponding
pay-off may justify the same operations research techniques may be useful to balance
the need for maintenance staff and maintenance work involved.
2. Marketing policies
As a critical functional area, marketing has received increasingly greater
attention in the completive business words since the early modern era. The old concept
of marketing focused on the firms existing products or services and considered
marketing to consider of selling and promotion to maximize sales at a profit the new
concept in control focuses on the firms existing and potential customers and seeks to
earn profit through customer satisfaction with an integrated marketing programmers.

Meaning:
Marketing policies relate to policies in market analysis, business laws, display,
salesmanship, advertising etc. they are concerned with the technical process of
marketing carrying both product mix and market mix.
The product mix includes decisions regarding the type, quality and quantity of product,
product design, contents, shape, methods and techniques of production etc.
Marketing mix covers the issues of channels of distribution, advertising policies,
packaging and branding decisions, consumer psychology and behavior, pricing of
product etc.
Since, the modem concept of market treat “consumer as king”, every product is brought
to satisfy his needs. Hence this concept is very vast.

The policy in this field deals with:


1. Spotting out of the present and potential markets, the size and natural of
consumers
2. The degree of competition in the market and how best could it be met.
3. The location prospects and persuading them to persuading them to purchase
4. Fixing price of a product, offering rebates, discounts and other concessions.
5. Compensating salesmen adequately and providing them with training and
development opportunities.
6. Selecting channels of distribution or employing representatives and agents
7. Dividing the total market into branch or dealer areas
8. Establishing advertising policies
9. Setting up sales control policies
38
10. Establishing sales volume and expense budgets

Marketing is a social and managerial process by which individual and groups obtain
what they need through creating, offering and exchanging products of value in the
market.
Marketing management is the process of planning and executing the conception,
pricing, promotion and distribution of goods, services and ideas to create exchange with
target groups that satisfy customer and organizational objectives.
Customers are values maximizes, a customer satisfaction is a function of the
products perceived performance and the budget expectation and strong companies
management.
Four core business processes are:
a. The new product realization process
b. The inventory management process
c. The order to remittance process and
d. The customer service process
Customer influence the company’s profitability significantly therefore, companies
cannot afford to lose a customer, it is estimated that the cost of attracting a new
customer is five times the cost of keeping a current customer satisfied therefore, the
marketers wants to retain the customer by adding financial and social benefits to the
product, quality of the product plays a vital role in retaining the customer.

Elements of marketing policy:

1. Market-oriented strategic planning:


2. Differentiating and positioning the market offering
3. Developing new product
4. Choosing a general attack strategy
5. Managing product lines brands and packing
6. Designing and pricing strategies and programmers
7. Market channels
8. Promotion or marketing communications
9. Electronic markets
10. On-line marketing

1. Market-oriented strategic planning:


It refers to the managerial process of devolving and maintaining a viable relationship
with organization’s objectives, skill, resources and changing market opportunities. The

39
purpose of strategic planning is to shape the company’s business and its products so
that they yield target profit and growth.

2. Differentiating and positioning the market offering:


The key to competitive advantage and competitive industry is product
differentiating. A market offering can be differentiated along with five dimensions.
i. Product
ii. Service
iii. Personnel
iv. Channel
v. Image

3. Developing new product:


Successful new product development requires the firm to establish an effective
organization for managing and development process. The stages of new product
development process include,
i. Idea generation
ii. Idea screening
iii. Concept development and testing
iv. Marketing strategy development
v. Business analysis
vi. Product development
vii. Market testing and commercialization
New product idea should be evaluated in terms of the product meeting the needs,
products ability to meet superior profitability etc.

4. Choosing a general attack strategy:


Five options are available to attack an enemy after knowing their objectives.
i. Frontal attack
ii. Flank attack
iii. Encirclement attack
iv. By-pass attack
v. Guerrilla attack

5. Managing product lines brands and packing:


Product is the vital element of the marketing mix. Product strategy requires for
making coordinated decisions on product mix, product lines, brands, packaging and
labeling. A product mix is the set of all products and items that a particular seller offers
to customers for sale. The decisional areas of product mix include the width (refers to
40
numbers of product lines), the length (refers to number of items), the depth(refers to
number of variants offered) and the consistency (refers to how products remain stable
in the market).
Branding is a major issues in product strategy, companies must decides whether or
not to brand, whether to produce producer brands or distributor brands and whether to
use line extensions, brand extensions, multiband, new brands or co-brand.
Well-designed packages can create convenience value for producers and thus they
act as fair second commercial for the product marketer’s should develop packaging
concept and test it functionally.

6. Designing and pricing strategies and programmers:


Price plays a phenomenal role in marketing mix. Out of ‘4ps’, the only revenue
earning ‘p’ is price, whereas, the other three ps are cost.
The price and quality of the product compete with each other in setting the price
companies follows six step procedures in setting its pricing policy. The company should
formulate the pricing objectives like survival, maximum current profit, maximum current
revenue, highest sales growth and highest setting pricing policy, market skimming
product quality leadership the above diagram represents the procedure of price setting
policy.

Selecting the pricing Determining demand Estimating costs


policy

Selecting the final price Selecting a pricing Analysis of costs,


method competitors, prices and
others

Then the company estimates the demand for the product, estimates the costs
behavior at different levels of output. Then it examines the competitor’s price, costs and
offers and selects a pricing method. The pricing method include, costs plus or markup
pricing, target return pricing, perceived value pricing, value pricing, going pricing and
sealed pricing. Then the company selects the final price, taking into account the
psychological factors, the influence of other three ps and the influence of non-price
factors.
Companies normally set more than one price taking into consideration the
geographical demand, costs, market segment requirements, purchase timing, order
levels etc. the price adoption strategies include:
a. Geographical pricing
41
b. Price discounts and allowances
c. Promotional pricing
d. Discriminating pricing
e. Product mix pricing

7. Market channels/place:
Most of the firms sell the product through middlemen, agents, dealers etc. rather
than selling the product directly to the end users. The host market intermediaries
perform a variety of functions and help the manufacturers. The company’s decision of
selecting channels affected other decision.
Channels decision is based on analyzing customers need, establishing channel
objectives and identifying and evaluating the benefits of major channels should be
developing long term relationship with the market intermediaries.

8. Promotion or marketing communications:


Modern marketing requires the companies should communicate with their present
and potential customers, intermediates and other stake holders. The marketing
communication mix consists of advertising, sales promotion, personnel selling, public
relations, publicity and direct marketing, developing effective communication objectives,
designing the massage, selecting the communication channels, establishes the total
promotional budget, decide on the promotion mix, measure the promotion’s results and
manage and coordinating the integrated communication process.

9. Electronic markets:
Electronic marketing are sponsored information utilities that describe the product
and services offered by marketers and allow customer to get information, identify their
needs and place order. Then the product is delivered to the customer electronic
markets permit fast price changes based on yield management and change the role of
place in market mix.

10. On-line marketing:


The interested customer can order for product all 24 hours just through computers.
Customers can have information about the different competitive products. Companies
can quickly changes the prices of products the cost of marketing is less to the online
marketers. Online marketers build and develop relationships directly with the
customers.
Marketer can conduct their marketing online by creating an electronic storefront,
participating in groups: building relationship, placing advertisements online by using
emails.
42
Conclusion:
Use of these methods often has a vital role in sales promotion during the
introductory and maturity stages of the product life cycle another feature of the use of
promotional tools is that their effects are immediately known and benefits can be
measured easily and these tools have the quality of drawing immediate attention of the
buyers.

3. Financial policies

43