BUSINESS ENVIRONMENT

UNIT ± 1 BUSINESS AS A SOCIAL SYSTEM
Business is an integral part of social system and it is influenced by other elements of society which, in term, is affected by the business. Today the whole society is a business environment. Davis and Blomstorm point out that in taking an ecological view of business in a systems relationship with society; three ideas are significant in addition to the systems idea. The three ideas are: 1. Values 2. Viability 3. Public visibility
1. VALUES:

Business like other social institutions, develops certain belief systems and values for which they stand, and there beliefs and values are a source of institutional drive. These values drive from a multitude source, such as the mission of business as a social institution, the nation in which business is located, the type of industry in which it is active and the nature of employees. These values become guides for employee¶s decisions in the interface of business. Second, they become strong motivators for people in a business.
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2.Mission and Objectives : The business domain of the company, priorities, direction of the development, business philosophy business policy etc are guided by the mission and objective of the company.

Example: Ranbaxy¶s thrust in to the foreign markets and developments have been driven by its mission ± ³to become a researcher based international pharmaceutical company.´

3. MANAGEMENT STRUCTURE AND NATURE

The organizational structure, the composition of board of directors, extent of professionalization of management etc, are important factors influencing business decisions. Some management structures and styles delay decision making while some other facilitate quick decision making. The Board of Directors being the highest decision making body which sets the direction for the development of the organization and which oversees the performance of organization, the quality of the Board is a very critical factor for the development and performance of company.
4. INTERNAL POWER RELATION

Factors like the amount of support the top management enjoys from the different levels of employees, share holders, and Board of Directors have important influence on the decision and their implementation. The relationship between the members of the board and between chief executive and the Board are also critical factors.
5. HUMAN RESOURCES

The characteristics of the human resources like skill, quality, morale, commitment, attitude etc., could contribute to the strength and weakness of the organization.
Hossein.H.K Page3 6. COMPANY IMAGE AND BRAND EQUITY

The image of the company matters while raising finance, forming joint ventures or other alliances, soliciting marketing intermediaries, entering purchase on sale contracts, launching new products etc. Brand equity is also relevant in several of these cases.
7. OTHER FACTORS A) Research and development determine a company¶s ability to innovate and compete. B) Marketing ± quality of marketing men, brand equity, distribution network have direct effect on marketing. C)FINANCE 0 financial policies; financial position and capital structure are also affecting business performances. D) Physical Assets ± production capacity, technology, distribution logistics

EXTERNAL ENVIRONMENT FACTORS It consists of 2 types. 1. Micro environment 2. Macro environment I. Micro Environment

The micro environment is also known as the task environment and operating environment became the micro environment forces have a direct bearing on the operations of the firm. These include the factors like « 1. SUPPLIERS An important force in the micro environment of a company is the suppliers, i.e. those who supply the inputs like raw materials and components to the Hossein.H.K Page4 company. The importance of reliable source of supply is for the smooth functioning of business. It is very risky to depend on a single supplier became of skills, lock out or any other production problem with that supplier may seriously affect the company. Hence multisource of supply often helps reduce risks.
2. CUSTOMERS

A business exist only became and its customers. A company may have different categories of customers like individuals, households, industries and other commercial establishment and govt. and other institution.
3. COMPETITORS

A firm¶s competitors include not only other firms which market the same products but also all those who compete for the discretionary income of the consumers.
4. MARKETING INTERMEDIARIES

The immediate environment of the company may consist of number of marketing intermediaries which are ³firms that aid the company in promoting, selling and distributing its goods to final buyers.´ The marketing intermediaries includes middlemen such as agents and merchants who ³help the company find customers or close sales with them.´

´ Media publics. PUBLICS ³A public is any group that has an actual or potential interest in an impact on an organizations ability to achieve its interests. industrial and commercial steps which leads to marketing of new products and to commercial use of new technical process and equipment. their policies and strategies.K Page5 6. ability to provide non financial assistance etc are very important. attitudes. In several cases the customer and the supplier have a collaborative relationship to . the success of the company depends on its adaptability to the environment. the use of new method of production. FINANCIERS Another important micro environmental factor is the financier of the company.5.H.´ 2. Besides the financing capabilities. ³The technical. citizen action publics and local publics are some examples. It includes both hardware and software to solve problems and promote progress. The macro environment is generally uncontrollable than micro environment. Innovative drive of company The term innovation means introduction of new product. Hossein. 1. Customers Needs / Expectation Technological orientation and R&D effects of a company may also be influenced by the customer needs and expectation. MACRO ENVIRONMENT It is also called as general environment and remote environment. TECHNOLOGICAL ENVIRONMENT Technology is one of the important determinants of success of a firm as well as economic and social development of nation. The important macro environment factors as follows: I.

may encourage private R & D by various incentives.. policy The govt.H. Hossein.´ i.K Page6 3. Demand conditions The size of demand influences the choice of the technology . and market is . DEMOGRAPHIC ENVIRONMENT The importance of demographic factors to business is clear from the facts that ³Management is men´ & ³Market is people. Management in Men.develop the product or solutions. If the customers are highly demanding. 7. Govt. Competitive dynamics Competition compels the adoption of the best technology and constant endeavor to innovate.K Page7 II.e. 5. 8. Machinery and Money. 9. 6. 4. Research organization The technological environment of business is enriched by researched organizations which develops new technologies and provide other technical inputs. Substitutes Emergence of new substitutes or technological improvements or substitutes which alter technological change. The size of demand influences the choice of the technological scale. Hossein. Material. The govt. like a capital goods supplier etc. Fast growing trend of demand would encourage development of technology of large scale. Social forces Certain social forces like pretext against environment pollution or other ecological problems demand for eco-friendly products. contributes to the development to the technology by its own direct involvement by establishing research organization and funding R & D. companies would be compelled to be innovative. Suppliers offering Many times technological changes are encouraged by the suppliers of a company.H.

Accordingly the low income. tastes and preferences. middle and high income economies. . Family size 5. the stage of development of economy. economic resources. nature of family have very significant implication for business. Income distribution 4. ethnic. Education 7. Social class 8. Age structure 2. ECONOMIC ENVIRONMENT Business partners and strategies are influenced by the economic characteristics. density of population. III. economic policies etc. Occupation 6. global economic linkages. 1. age composition. The economic environment includes the structure and nature of the Hossein. Nature of the Economy The general level of development of the economy has lot of implication for business ± it has significant bearing on the nature and size demand. Religion 9. Nationality Demographic factors such as size of population. beliefs. Race 10. level of income.K Page8 economy.H. Gender 3. rural ± urban distribution. income levels. growth rate. policies affecting business. attitudes and sentiments. The widely used method of classification of the economies is on the basis of per capita income. govt. Important demographic bases of market segmentation include the following:1.people in the sense that the demand depends on the people and their characteristics ± the number.

product mixes etc. large. d) Foreign investment and technology policy . For example. b) Trade policy It can affect the fortunes of firms. This mean the firm should come up with quality. These factors and the nature of each sector have business implication. For example a policy of protecting the home industry may greatly help the import competing industries. Structure of the economy Factors such as contribution of different structure like primary (agricultural). medicine. India is one of the largest producers of agricultural products. public. 2. because of the small and fragmented nature of land holdings. Choice of technology. Important economic policies are a) Industrial policy It defines the scope and role of different sectors like private.Low income economies are economies with very low per capita income. c) Foreign exchange policy Exchange rate policy and policy in respect of cross border movement of capita are important for business. High income economies are economies with very rich income per capita. joint and cooperative. 3. Middle income economies are sub divided into lower middle and upper middle income where income per capita is neither very high nor low. secondary (industrial) & tertiary (secondary) sectors. small sectors to economy. efficient collection and processing of products become difficult. state of operation. The land holding pattern also makes productivity improvements difficult. while liberation of the impart policy may create difficulties for such industries. Economic policies There are several economic policies which can have very great impact on business. cost. It may influence the location of industrial undertakings. and marketing and after sales service etc.

often use tax incentives or disincentives to encourage or discourage certain activities. The pattern of public expenditure may affect the develop of industries.g.. by increasing the quantity and quality of domestic supply of many goods and services. E. . vocational aspects in the global context etc. strategy in respect of public expenditure and revenue can have significant impact on business. e) Fiscal policy Govt. energy resource. 2. Climatic and weather conditions: It affects the location of certain industries like cotton textile industry. IV. NATURAL ENVIRONMENT The natural environment ultimately is the source and support of everything used by business ± every raw material. Industries with material index tend to be located near the raw material sources. It influences the location of some industries. such as natural endowments. Resource availability is the fundamental factor is the development of business in the society. For example ± 1% reduction in cash reserve ratio will significantly increase loan able funds with commercial banking systems. by its policy towards the cost and availability of credit. topographic factors. Topographic factors may affect the demand pattern in some cases. The natural environment determines what can be got done in a society and how institution can function. life sustaining factor etc. are all relevant to business. E. 1. investments and consumer spending in economy. f) Monetary policy The central bank. Such as govt.Geographical factors: differences in geographical condition between markets may sometimes call for changes in the market mix. a reduction of taxes like excise duty or sales tax may help improve the demand. weather and climatic conditions.Foreign investment and technology policy will increase domestic competition at the same time it would benefit many domestic firms ± by permitting global sourcing of capital and technology. Thus geographical and ecological factors. in hilly areas Jeeps are greater demand than cars. can significantly influence savings.g. For ex: when industry suffers from recession.

conservation of non-replenish able resources have resulted additional responsibilities and problems for business. 1. packaging storage conditions etc. The fact that the investments in the business should be recognized. policies aimed as preservation of environment purity and ecological balance. 3. 2. further. The installation for efficient grievance handling system 9. govt. Responsibility to employees The success of an organization depends to a very large extent on the morale of the employees and their whole hearted co-operation. CORPORATE SOCIAL RESPONSIBILITY The important generally accepted responsibilities of the business to different sections of the society are described below. It has been widely recognized that customer satisfaction shall be the key to satisfying the organizational goals. the company has to strengthen and consolidate its position. appreciation and encouragement of special skills and capabilities of workers.The provision of labor welfare facilities to the extent possible and desirable 5. building materials. environmental pollution another disturbance of the ecological balance have carried great concern. Some . medicines etc. food. Proper recognition. weather and climatic conditions may call for modification to the products. The provision of best possible working condition 3. Weather and climatic factors can affect the demand pattern of clothing. Establishment of fair working standards and norms 4. An opportunity for participating in managerial decisions to the extent desirable. Ecological factors: It assumes great importance. E. The payment of fair wages 2. Responsibility to consumers The customer is the foundation of business and keeps it in existence. The responsibility of the organization to the workers include ± 1. the depletion of natural resources. there is good demand for desert coolers. To protect the interests of the shareholders and to provide a reasonable dividend. Responsibility to shareholders The responsibility of a company to its shareholders. in region where temperature is very high in summer. who are owners is a primary one. 3. 8.g.Weather and climatic factors affect the demand of certain types of products. Reasonable chances and proper system for accomplishment and promotion 7. Arrangements for proper training and education of the workers 6.

important responsibilities of business to customers are ±1. 4. 2. To avoid misleading the customers by improper advertisement. Rehabilitating the population displaced by operate of the business 3. To improve the efficiency of the functioning of business so as to increase productivity and reduce prizes. Responsibility to community A business has a lot of responsibility to the community around its location and to society. Taking appropriate steps to prevent environmental pollution and preserve ecological balance. Develop of backward areas 8. 4. Contribution to the national effort to build up a better society . Taking steps to conserve scares resources and developing alternatives 5.To provide sufficient information about the product including adverse effects. To do research and development. risks and care to be taken while using the products. smoothen the distribution system to make goods easily available. to improve quality and introduce better of new products. 3. Assisting in the overall development of locality 4. 6. Promotion of small scale industries 9. To provide opportunity for being heard and to redress genuine grievances. 2. Contributing to research and development 7. Improving the efficiency of the business operation 6. To understand customer needs and to make necessary measures to satisfy these needs. To supply goods at reasonable prizes 5. 8. 9. 7. improve quality. To take the steps to remove the imperfection in the distribution system including black marketing or anti-social elements. promotion of education and population control 10. To ensure that the product supplied has no adverse effect on the customer. The responsibilities include ± 1.

This means that the business should be conducted according to certain self-recognized moral standards. Ensure sincerity and accuracy in advertising. should therefore. 2. to control production. Make accurate business records available to all authorized persons. Business. suppliers. even informal. 3. authority and dignity. politicians etc. 6. administrators. It uses 4 questions that are called the 4 way of ethical behavior for any business forces ± ‡ ‡ ‡ ‡ Is it truth? Is the fair to all concerned? Will it build goodwill and friendship? Will it be beneficial to all concerned? LIST OF IMPORTANT ETHICAL PRINCIPLES THAT A BUSINESS SHOULD FOLLOW: 1. Do not resort to hoarding. 7. Pay taxes and discharge other obligation promptly 8. 5. NOTE: In the 1930¶s Rotary International developed the code of ethics that is still used extensions. Refrain from secret kickbacks on payoffs to customers. A profession is bound by certain ethical principles and rules of conduct which reflect its responsibility. being a social organ. 10. labeling and packaging. Do not destroy or distort competition 4. Do not tarnish the image of competitors by unfair practices. Ensure payment of fair wages to and fair treatment of employees. 9. Do not deceive or cheat customers by selling substandard or defective products by under measurements or by any other means. ISSUES IN CORPORATE GOVERNANCE . The professionalization of business management. Do not farm cartel agreements. black marketing or profiteering. be reflected in the increasing acceptance of business ethics. shall not conduct itself in a way detrimental to the interests of society and the business sector itself. price etc to the common detriment.BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY BUSINESS ETHICS The term business ethics refers to the system of moral principles and rules of conduct applied to business.

licensing system etc.Corporate governance is defined as the process and structures by which business and affairs of corporate sector is directed and managed. ethical norms its performances. promotional activities etc. vision and visibility. Objectives 1.Accountability . 2. Regulatory Role Government regulation of the business may cover a broad spectrum extending form entry into business to the final results of business. The reservation of industries to small scale. 1. integrity and accountability of the management.. It is about the value orientation of organization. the direction of development and visibility of its performances and practices. . The concept of corporate governance primarily hinges on complete transparency. amount to regulation of conduct to business. regulate the entry.Societal needs . To enhance shareholders value and protect the interest of other shareholders by enhancing the corporate performances and accountability. To build up an environment of trust and confidence amongst those having completing and conflicting interest. The government normally plays four important roles in an economy. They are. The state also regulates relationship between enterprises. Promotional Role .. Business fortunes and strategies are influenced by the economic characteristics and economic dimension. public and cooperative sectors.Transparency .Value creation for stakeholders ECONOMIC ROLE OF GOVERNMENT The government plays an important role in almost every national economy of world. Corporate governance is concerned with the values. Regulations of product mix.Investor protection . 2.

A number of factors such as socio-political ideologies. HR etc. Facilities: Enterprise can develop globally from home country bare depends on facilities available like the infrastructural facilities. finance. The promotional role of the state also encompasses the provisions of fiscal. Planning role State plays an important role as planner. Resourceful companies may find it easier to thrust ahead in global market.H. R & D support. Giving up distinction between domestic and foreign market and developing global outlook of business. Resources include finance. Entrepreneurial Role Entrepreneurial role includes establishing and operating business enterprises and bearing risks. 4. company and grand image. In developing countries. The state will have to assume direct responsibility to build up and strengthen infrastructure such as power.Business freedom: There should not be necessary govt. R&D. assumes significance. monetary and other incentives and development of priority sectors and activities. 4. the promotional role of the govt. dearth of private entrepreneurship. . where the infrastructural facilities for development are inadequate and entrepreneurial activities are scarce. For growth Essential conditions for globalization 1. Govt. foreign investments etc. support: Govt support can encourage globalization. like infrastructural facilities. restriction like import restriction. Hossein. Expanding business globally 2.The promotional role played by the government is very important is developed as well as in duping countries.K 3. absence of inadequate competition in certain segments and resultant exploitations of consumers have contributed for the growth of state owned enterprises. 2. 3. marketing. 3. financial market reforms. institutions for training and other promotional activities. transport. To maximize profit 4. GLOBAL ENVIRONMENT Globalization is an attitude of mind ± which views the entire world as a single market so that the corporate strategy is based on the dynamics of the global business environment. Globalization encompasses the following: 1. Resources: It decides the ability of firm to globalize.

5. How to go global? Important foreign market entry strategies ± 1. product differentiation. Contract manufacturing. 6. 8. product quality. . Turnkey contracts ± A turnkey contracts is an agreement by seller to supply a buyer with a facility fully equipped and ready to be operated. 3. Joint ventures: Joint venture is a very common strategy of entering foreign market. Competitiveness: A firm may drive a competitive advantage from any one or more of the factors such as low costs and price. When an assembly operations are labour intensive and labour is cheap in foreign country. a firm in one of their nations which wants to enter the other market will have to operate third country base. 4. Any form of association which implies collaboration for more than a transitory period is a joint venture. Finalizing is a form of licensing in which a parent company grants another independent entity the right to do business. 9. It does not have risk in the development.Assembly operations: Assembly facilities in foreign markets are very ideal when there are economies of scale in the manufacture. Management contracting: In this supplier brings together a package of skills that will provide an integrated service to clients without risk on owner.Third country location: Third country location is also an entry strategy.5. are easy way of entering foreign markets. Licensing & franchising: It involves minimal commitment of resources and effort on the part of international marketer. 7. marketing strength etc. 2. technology superiority.Exporting: Exporting the most traditional mode of entering global market. a company doing international marketing contracts with firms in the foreign countries to manufacture the products while retaining the responsibility of marketing the product. when there is no commercial transaction between two nations for some reasons. A joint venture may brought about by a foreign investor buying an interest in a local company. Wholly owned manufacturing facilities: It provides the firm with complete control over production and quality.

gave the public sector a dominant role in the industrial development of the nation led to rapid growth of the State Owned Enterprises (SOEs) sector in India.g. this strategy seeks to enhance the long term competitive advantage of the firm by farming alliance with competitors.g. General Motors acquisition of fisher body company (an auto parts manufacturer). Conglomerate Mergers: takes place when two firms operate in different industries. (a retailer) by Mobil Oil Company) UNIT ± 2 ECONOMIC STRUCTURE OF INDIA Mixed economy of India consists of public and private sector. Mergers and acquisitions: It have very good market entry strategy as well as expansion strategy.10. E. Policy on the public sector has been guided by the Industrial Policy Resolutions 1956 and 1991 which gave a strategic role in the economy. Strategic alliances: It is also used as market entry strategy it is also known as coalition. It provides instant access to markets and distribution network. 11. .g. E. Acquisition of Montgomery Ward and Co. Types of Mergers 1.. 12. India was based agrarian economy with weak industrial base. Vertical Merger: Occur when two firms each working at different stages in the production of the same good combine.Horizontal Merger: Takes place where the two margin companies¶ products similar product in the some industry. low level savings and investments and near essence of infrastructural facilities. E. in 1998 ± combination of Chrysler cooperation and similar sense to create Dainles Chrysler. 2. Public sector The object of accelerating the pace of eco-development and the political ideology. Counter trade: It is a form of international trade in which certain export and import transaction are directly linked with each other.

trading and marketing activities. more than ½ of steel and aluminium and 1/3rd of fertilizers. coal.These enterprises came to cover a wide spectrum of activities in basic strategic industries like steel. To promote balanced regional development 6. PSEs as a whole have made huge profits mainly because of the enormous profits made by several public sector monopolies.. heavy engineering. on one hand and consumer goods. iron and steel. IP of 1956: All the industries of basic & strategic importance or in the nature of public utility services should be in public sector.¶s socioeco policies. financial services. copper & primary lead. excluding radio receiving sets and mineral oils. Many of the loss making PSE have been either in non-priority sectors or in the sectors where the private sector has proved to be more efficient. lignite. development of small industries etc. petroleum. At the beginning of the 1990. minerals and metals. chemicals. To promote import substitution. ship building. Entire output in case of petroleum. 2. Growth & performance of public enterprise The Industrial Policy Resolution of 1948 made it clear that the manufacture of arms and ammunitions. manufacture of telephone. contracts and consultancy services. tourist service.. To assist the development of small scale and ancillary industries 7. To create employment opportunities 5. about 98% of zinc with 90% of coal. To promote redistribution on income & wealth 4. public sector was dominant in many industries. transportation. . services. the production & control of atomic energy and the ownership and management of railway transport would be the exclusive monopoly of the company. fertilizers and pharmaceuticals etc. telegraph and wireless apparatus. save and earn foreign exchange for the economy. Objectives: It was promoted as an instrument for implementation of the govt. aircraft manufacture. 1. To earn return on investment and thus generate resources for development. After 6 months industries were coal. on the other. 3. To help in the rapid eco growth and development and industrialization of the country and create the necessary infrastructure for economic development.

mustard. urad. the average annual growth rate of value added in the service sector in the developing economics was 3. 1980 ± 1990.5% compared to the GDP growth rate of 3%.9%. The growth rate of trade in services has been faster than that of goods. Between 1970 and 1990 international trade is services increases by an average of 12% & 8% during 1990-97. The share of services in the GDP of India increased from 39% 1980 to 46% 2000. Growth in services and in additions the electronic commerce has added to the new trade pattern.H. Minimum Support Prices: for barley. gram. Services are used in production of goods and other services. sunflower seed. Statutory Minimum Price: for sugarcane. ground nut.K Page38 . Hossein. Due to competition in services there is reduction of prices and improvement in quality.9% and 7.3% The service sector of India grew at 6. compared to the corresponding GDP growth rates of 5. soyabean and cotton (kapas). The service sector is the largest and fastest growing sector.Agri commodities like wheat and paddy have procurement prices fixed for them.8% and 5.7% & 3. The growing importance of services is reflected in the international trade too.9% during the above periods. moong. Exports of commercial services have been borrowing on every continent throughout the 1990s. Trends in Service Sector: As an economy develops the share of the primary sector in the GDP and employment declines and those of other sectors increase. 1990-98 ± 3. The service sector now contributes more than 60% of the world GDP. jute and tobacco.

Region/country 1980 1990 1999 World 56 60 61 High Income Economics 59 64 64 Low and Middle Income economies (developing countries) 42 46 54 India 39 42 46 Trends in GDP Govt. expenditure as % of GDP 10% in 20th century 20% in 1960 50% in 1995 .Contribution of service to value added as % of GDP.

Johnson: Policy employing the central banks control of the supply of money as an instrument for achieving the objective of general economic policy. 1. Sluggish economic growth I. High rate of economic growth 3. Instruments of control are some at aggregate level 3.7% increase Consumer durables has a negative growth of 6. Involuntary unemployment 4. the central govt. Balance of payment is in disequilibrium 3.5% industrial production by 7. Why? Necessary? In free enterprise economy.4% total industrial stood at 2. debits and credits) 2.0% 2002 ± 03 ± 5.0%. Prices in free market fluctuate (govt. Unit ± III Monetary and Fiscal Policy Monetary and Fiscal policy are two powerful instruments of economic management. 1997 ± 1998 ± Economy growth 2001 ± 4. Determines the supply of money as well as the supply of bank credit Main objectives are: 1. According to economists: Monetary policy is the changes in the supply of money. Central Bank administers both 2.7% 2002-03 ± 4.In developing countries. expenditure was nearly 15% of GDP. 1960 in 1990 it was double of 1960. Greater equality in the distribution of income and wealth India¶s Taxation Policy 1950-1990 . Credit policy is the changes in the supply of credit (different in broader sense) Both policies 1. Maximum feasible output 2. 2003-04 ± 8. Inequality in distribution of income and wealth 5. Fuller employment 4. Price stability 5.3%. The Monetary Policy Def: Hary G.

entertainment Industrial Finance Sources of finance for small and medium scale industries . domestic borrowing. Gift tax New in 1950 4. Central Excise duty is imposed on all imaginable nonagriculture products. so that rate of capital formation could be stepped up from 5% of national income to say 20%. Expenditure tax 5. The taxes imposed are from 1950. The repayment near slow. Estate government imposes tax on Hossein. Taxable potential was very low as income was low and per capita borrowing was lower. So taxation policy was formulated. The problem faced was how to mobilize adequate financial resources to finance the development programmes chalked out in 5 year plans. High import duty is imposed on almost all items of exports. external borrowing on foreign aid had the potentials of yielding adequate development finance. Revenue function Revenue collection is the primary objective of India¶s tax policy. estate duty 2. Capital gains tax A tax rates were imposed on direct indirect taxes. The state and central government levies taxing power extensively and intensively. Financial resources has to be increased 4 times.K Page58 1) Agricultural income tax on large holding tax 2) Surcharge of cash crops 3) Profession tax 4) Tax on urban property 5) Sales tax on motor spirit 6) Motor vehicle tax 7) Tax on passengers and goods. 1.independence period. The known source of development finance taxation. Wealth tax 3.Was formed primarily to meet the financial needs of the country in the post.H.

production and final disposal. This operates 5 schemes ± 4 for small borrowers and one for S & MI. 90 crores to small units with nationalization more advance to S & M industries. the objective of the scheme was to provide a measure of protection to specified banks irrespective of their loans to small borrowers in the priority sectors of S & MI. technical and other assistance to fulfil orders. In order to manufacture ancillaries and component parts required by the large-scale industries. 2. this is a important phase.600 crores. order for output of SI unit. SBI with RBI took the initiative of setting up a pilot scheme for the provision of credit for small scale industries. c) National Small Industrial Co-op. The banks charge rate of interest often ranging between 24 to 36% and not be able to raise necessary capital. protecting and promoting the S / I in India. 25. . To secure govt. To secure coordination between large and small scale industries to enable small scale. The schemes was extended to all branches of SBI. the administration was with RBI. In urban areas. To provide financial. 3. (NSIC) Was set up in February 1955. b) Credit Guarantee Scheme for S & M I Came into force in July 1980. The capital varies in rural areas they have to borrow from money lenders or land owners and pay high interest rate. Others CBs were slow in lending by March 1966 they had made advances amount to Rs.Both medium and small scale industries require capital for plant and machinery. The advances to small borrowers is Rs. for the purpose of assisting. Functions are 1. but was transferred to the Deposit Insurance & Credit Guarantee Co-op (DICGC). a) Loans by Commercial Banks For long time CBs did not bother small and medium scale industries. 515 Credit institute are participating in the 5th scheme. financing. capital is better mobilized.

4. Extends financial support to state small industries development corporation for providing scarce raw materials to marketing the end products of industrial units in the SSI. Stimulate the promotion of new industries 2. To underwrite and guarantee loans from banks and other credit institute. Functions: 1. SIDBI Set up by Govt. Coordinate functions of other banks and financial institutions 3. It conducts surveys and secures contracts from central government. . Grants direct assistance as well as refinance loans extended by primary lending institute for financing export of products manufactured by last for industrial concerns in SSI. Technical upgradation and modernization of existing units. Mission: 1. It has taken over the outstanding portfolio of IDBI relating to the small scale sector worth over Rs. Assist the expansion and modernization 3. Long term or medium term loans.000 crores. Refinances loans and advance extended by primary lending institute and provide resources support system. 3. Role: 1. SIDBI was set up to ensure larges flow of financial assistance to SSI. Administer small industries for fund and national equity fund. expanding channel for marketing. 250 crores ± which can be increased to Rs. of India under a Special Act of the Parliament in April 1990 as wholly owned subsidiary of SIDBI. Furnish technical and managerial aid 1. Principal interest for SBI 2. It also introduced hire purchase of machineries on easy payments. both rupee loans and foreign currency loans. 5. Authorised capital of SIDBI is Rs. Rediscount on discounts bills arising from sale of machinery. 2. 1. 4. hire purchase and marketing support to IU. 4.000 crores. Provided financial support to NSIC for providing leasing.

modernization / replacement. jointly undertaken by Indian companies. asset credit and venture capital. CRISIL ± Credit Rating Information Services of India Ltd set up ICICI in association with UTI to provide credit rating services to corporate sector. ICICI has undertaken the administration and management. funded by US AID with a grant of US 40 M to support selected research and technical development proposal in Indian energy sector. . loans. This consisted of foreign currency. KICI promoted the housing development finance corporation (HDFC). Programme for the Advancement of Commercial Tech (PACT) set up with a grant of us $ 10 M provided by US AID to assist market oriented R & D activity.480 crores in 1955 up to March 1990. 2. rupee loans. 5. Apart from HDFC. 3. Programme for acceleration of commercial energy research (PACER). leasing credit. by the large and growing number of small investors in the middle income group of the community. 8090 crores. Provides financial services such as deferred capital. Commenced leasing operation in 1983. While its disbursement amounted to Rs. other institute are 1. 12.2. The total financial assistance amounted to Rs. guarantee and subscription of shares and debentures. to extend facilities of investment in equity capital of companies. instalment sale. UTI ± Unit Trust of India UTI was formally established in February 1964. Technical Development and Information Company of India Ltd (TDICI) promoted by ICICI to finance the transfer and upgradation of technical provide technical information/ 3. export orientation and pollution control etc. equipment of energy conversation. In 1977. 4. Participates in equity capital and in debenture and underwrites new issues of shares and debenture. 4. Guarantees loans from other private investment sources. It provide leasing assistance for computerization.

IRBI was established in March 1985. of India passed and act converting the IRCI into Industrial Reconstruction Bank of India (IRBI). Export ± Import Bank of India Commonly known as Exem Bank. Stimulate and pool the savings of the middle and low income group. By selling units of the trust among as many investors as possible in different parts of the country. Capital Resources Authorized capital of Exim Bank is Rs. Enable them to share the benefits and prosperity of the reply granting industrialiszation in the country.Initial capital was 5 Crores which was subscribed fully by RBI. for revival. the Govt. 100 Cr. IRBI extends credit to sick small scale units emphasis on continuous modernization. assisting and promoting industrial development and rehabilitating industrial concern. 3. Functions: . 5 crores in industrial and corporate securities. By paying divides to those who have bought the units of the trust. It could be achieved in three fold: 1. can raise currency from govt. the LIC. was set up on January 1982 to take over operations of the internal financial wing of the IDBI (to provide financial assistance to exporters and importers). 2. the SBI and scheduled banks and other financial institutions. Industrial Reconstruction Bank of India (IRBI) Was set up in 1971 April an institution named IRCI ± Industrial Reconstruction Corporation of India under Indian Companies Act to look after ³sick´ industries and for speedy reconstructions and rehabilitation and developing infrastructure facilities like transport and marketing etc. and foreign currency from other countries. 200 crore and paid up capital is Rs. On August 1984. Wholly subscribed by the Central Govt. By investing the sale proceeds of the unit and also the initial capital fund of Rs. Primary objective: [two fold] 1. It provides refinance facilities to CB¶s and FI against export ± import. 2. improve productivity and upgrade technology. The management and direction is entrusted in the hands of the trust and in hands of Board of Trustees.

Till 1976 it was a wholly owned subsidiary of the RBI. Financing of joint ventures in foreign countries 2. c) Overseas Investment d) Pre-shipment credit 3.1.Direct Assistance: By way of projects loans. . Indirect Assistance: 1. Loans to cities in India include a) Export bills re discounting schemes of short bills b) Refinance of export credit. Loans to foreign govt. Can refinance term loans to industrial concerns repayable within 3 to 25 years given by the IFCI and State finances. of India. IDBI ± Industrial Development Bank of India Set up 1947 to provide long term finance in industry. Presently 9 lending operations are undertaken: 1. It subscribes to purchase and underwrite the issue of stocks. Financing for exports and imports of good and services 2. soft loans. 2. companies & PI are provided under: a) Overseas buyers credit scheme b) Lifes of credit to foreign govts and relending facility to banks overseas. underwriting of a direct subscription to industrial securities. Loans to Indian companies a) Direct financial assistance to exporters b) Technical consultancy services c) Oversees investment d) Pre-shipment credit 2. In 1976. technical refund loans and equipment finance loans. IDBI was delinked from RBI and was taken over the Govt. Financing for exports & imports of machinery 3. shares and bonds or debentures. Functions of the IDBI 1.

Unit Dec. 1991. FDI is eligible for automatic approval. only 36 industries were eligible for automatic approval of FDI upto to 5!% of the total equity. RBI has given general permission to hold title of immovable properties. was issued lists where lists of industries were.Modernisation has number of adverse effects your society. Tech collaborations were to be considered on the basis of annual royalty payments which were linked with the value of actual production. opportunity for promoting foreign investment in India shall also be fully exploited has liberalized the Indian policy towards foreign investment and tech. Important of technical was consider on merits it substantial exports were guaranteed over a period of 5 to 10 years and reasonable proposals for exports. which observes that while freeing the Indian economy from official controls. The new policy has also made the import of capital goods automatic provided the foreign exchange requirement for such import is ensured through foreign equity. Films have immoral effect on society. . Now there are different types industries depending on the ceiling of foreign equity participation. % of royalty depended on production and limit to 5 years (payment). Govt. Govt. The Foreign Exchange Regulation Act (FERA) 1973 served as a tool for implementing the national policy on foreign private investment in India. a) i) Foreign investment may be permitted b) Only foreign tech collaboration (but no foreign investment) may be permitted. Silent Feature 1. policy till 1991 India was following a very restrictive policy town foreign capital and technical. FERA empowered RBI to regulate or exercise direct control over the activities of foreign companies and foreign nationals in India. 1996. There is concentration of economic power in few hands. New Policy The industrial policy statement of July 24.

histogram. standard deviation. Geographic a) Region b) Urban. suburban. strawness. scope and application. Probability multiple and partial correlation pass on distribution 3. rural c) Climate d) Cety size e) Population Density . Regression. classification and tabulation. 2.1. correlation. Definition. Hypothesis or anova Segmenting Consumer Market 1. Industries in which FDI does not exceed Statistic: 1.

under 40 young children with or without older children Education III Stage ± married head. under increase no children Age II stage ± married head. under 40. Demographic Income I Stage ± single or mallied head. older children Stage in life cycle IV stage ± married head. 40 or older. no children under 20 Social class .2.

Kind of business activity 2.Payment of dividends abroad. INDIAN INVESTMENT IN FOREIGN COUNTRIES Until 1991. subject to certain .V Stage ± head living along over 40. 4. the scope of private investment. The public sector was assigned as monopoly or dominant position in most important industries. Although Govt. 2. India companies made very little investments abroad. Psychographic Bases: How people act Different to measure a) Personality b) Life style c) Readiness to buy Segmenting Industrial market: 1. Usual purchasing procedure 4. These factors either limited the scope of foreign investment in India. 5. 3. Foreign equity participation was normally subject to 40%. sources. These discourage foreign investments. Direct foreign investment in India is adversely affected by the following factors ± 1. When the public sector needed foreign investment.. Corporate taxation was high and tax laws and procedures were complex. no children Sex Occupation Religion Race 3. Six of user: Give lower prices to those buyers who buy in large quantities. Foreign investment was normally permitted only in high technology industries. there was a marked preference for the foreign govt. Users geographical location 3. of India¶s policy had been one of the encouraging foreign investments by Indian companies. and therefore. repatriation of capital etc. both domestic and foreign was limited. 6. as well as inward remittances was subject to stringent laws like Foreign Exchange Registration Act (FERA) 1973.

Ensuring full employment 3. The new economic policy of India is expected to encourage foreign investments by Indian companies. the govt. in many cases. financing restriction has been based. as a result of the international desire to liberalize trade. policies seriously constrained the potential of Indian companies to make a foray into the foreign countries through investment. Developing full use of resource of the world 4. GATT General Agreement on Trade and Tariffs The predecessor of WTO was born in 1948. Raising the standard of living 2. Further. areas of business opened to private companies have been substantially enlarged and foreign tie up policies have been liberalized.conditions. Indian companies have established subsidiaries and joint ventures in a number of countries in different manufacturing and service sectors. By restricting the areas of operations and growth. The curbs on growth. And the other important objectives are 1. a seller¶s market and this made Indian companies to ignore foreign markets. Objectives The primary objective of GATT was to expand international trade by liberalizing trade so as to bring about all round economic prosperity. the domestic market is becoming increasingly competitive. even by mergers and acquisition. have been removed. All these factors should encourage the Indian companies to invest in other countries and to take advantage of the economic liberalization in many countries. Expansion of production and international trade Rules of GATT . Added to this was the attraction of protected domestic market which was. several factors like domestic economic policy and domestic economic situation were deterrent to foreign investments by Indian companies.

The countries that adhere to GATT should work towards the reduction of tariffs and other barriers to international trade. . Any proposed change in tariff. or other type of commercial policy of a member country should not be undertaken without consultation of other parties to the agreement. 2. which should be negotiated within the framework of GATT.1.

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