BUSINESS ENVIRONMENT

INTRODUCTION
A business enterprise has to operate in a given environment. The environment
outside the enterprise is not in the control of the organisation but it directly
influences its plans. and policies. The environment has both opportunities and
challenges. A visionary management will use the opportunities to its advantage and
prepare itself to make best use of challenges also. The New Industrial Policy, 1991
encouraged liberalisation, globalisation and privatisation. The intense competition
from multinationals forced inefficient enterprises to close down but many
managements benefited by introducing new technology and better methods of
production by collaborating with industrial leaders from developed countries. The
Indian industry which was in the habit of operating in a controlled economic system
faced difficulties in copying with the new liberated business environment. The
privatisation of public sector undertakings brought new opportunities for private
sector by offering new investment avenues.A business has to face ever changing
economic, social, technological, political and legal environment and make plans to
use new opportunities to its advantage.

Meaning of Business Environment

Business environment is the sum total of factors, forces, institutions, persons
operating outside the control of a business enterprise but affecting its performance.
Itis the surrounding in which business exists. A businessman will have to deal with
customers, suppliers, follow rules and regulations for carrying out transactions.
Understanding the surroundings is essential to operate a business successfully
Business plans and policies will have to be adjusted as per the environment. No
company can survive by ignoring the impact of business environment. The
environment provides constraints as well as opportunities. Some con favour while
others may not be successful in taking its advantage.

Defination of Business Environment :-

The word (business environment indicates the aggregate total of all people,
organisations and other forces that Industry ane outside the power of industry but
that may affect its production. According to an anonymous writer. "just like the
universe, with hold from it the Subset that describes the system and the rest is
environment Therefore, the financial, cultural, governmental. technological and
different fanes which work outside an enterprise are pant of its environment. The
individual customers or facing enterprises as well as the management, Customer
groups, opponents, media, Courts and other establishments working outside an
enterprise comprase its environment.
Categories of Business

1-Economic Environment:
Economic environment factors have immediate and direct impact on the business. It
consists of factors such as fiscal policy, monetary policy, industrial policy, economic
reforms, economic system of the country.

2-Non-economic Environment. It consists of social, political, legal, cultural

and technological business environment.

Features/Characteristics of Business Environment

The main features of business environment are :

1. Totality of External Factors: Business environment is the sum total of all

theexternal factors that directly or indirectly influence the working of the business.

2. Specific and General Factors: Business environment is influenced by

specific and general factors. Specific factors such as customers, investors,
competitors, supplies etc. affect individual enterprises directly and immediately. The
general factors such as economic, social, political, legal, technological changes
indirectly influence the business enterprises.

3. Inter-related Factors. Various factors influencing business environment are

inter- related to each other. For example, the increase in purchasing power of middle
class families has increased the demand of durables such as washing machines,
refrigerators, televisions, etc.

4. Uncertainty, Business environment is uncertain since rapid changes are taking

place in the factors influencing it. The fast changes taking place in IT sector, finance
sector, fashion industry, etc

5. Complexity: Environment comprises of many factors. All these factors are

related to each other. Therefore, their individual effect on the business cannot be
recognised. This is perhaps the reason which makes it difficult for the business to
face them.

6. Relative Impact. The impact of business environment may differ from

company to company or country to country. These changes may have more impact
on one company as compared to the other company.
7. Dynamic. Business environment is very dynamic and keeps on changing. It is
necessary to keep a constant watch on changes and scan their impact on the
business.

IMPORTANCE OF BUSINESS ENVIRONMENT

Business environment provides opportunities and direction for the future course of
action for the business. A business man should understand the environment properly
andtake advantage of the prevailing situation. Proper assessment of the environment
can help the business in many ways.

1. Identifying Opportunities. (A businessman who is aware of the coming

opportunities, may benefit by his early moves. It requires proper scanning and
understanding of the business environment and grabbing the opportunities coming in
their way.For example, with the entry of Suzuki Company in India for the manufacture
of small cars, there was a chance for automobile parts manufacturers, paint
companies, etc. Those who shifted to serve the needs of Suzuki in the earlier periods
were the maximum gainers.

2. Benefitting from Rapid Changes. Environment creates newer and better

opportunities for different types of businesses. There may be competition or
downward trends in particular businesses whereas there may be a better scope in
others. An entrepreneur should move with the time and grab the available
opportunities., Reliance has entered oil refining, communication, power sectors in
order to take advantage of new opportunities offered by the environment. An
enterprise should analyse the business trends and adjust the business accordingly
so that it takes the advantage of available opportunities.

3. Helpful in Long-term Planning. With the help of prevailing business

environment, strategic (long-term) planning should be undertaken by forecasting the
likely changes in it. Management should devise ways and methods for taking
advantage of likely changes in business environment., For example, in order to
capture more markets, an enterprise may decide price reduction in future or entering
unexploredmarkets. Such decisions are possible after studying prevailing business
environment and its likely changes in future.
4. Helpful in Preparing Strategies. Business environment helps in
understanding the changes in business structure. One has to assess the impending
psituation and plan accordingly. Business strategies and counter strategies are
essential to face the likely changes. The liberalisation of Indian economy in the last
twenty years has forced many units out of business since they did not plan their
strategies for facing competition from international business. Those who were able
to plan their strategies well in time have been able to survive and grow. Business
environment help in planning business strategies.

5. Matching Technological Needs. Business environment helps in bringing

latest technology in industry. An enterprise should assess its needs and update its
technology to survive in the market. Technological changes are rapid in the last
some years, to cope with this change is essential for every enterprise. Business
environment forewarns about the impending changes in methods of work and the
likely changes in business. An enterprise should make changes as per the
requirements of the situation and take advantage from the situation.

6. Improving Market Share. A proper study of business environment helps an

enterprise to improve its market share. The needs and preferences of the consumers
should be taken into account while deciding about future plans. An enterprise
ignoring market environment may lose business. For example, Hindustan Motors Ltd.
manufacturing Ambassador cars had a monopoly position in car segment. It did not
realise that consumer wants fuel efficient and cheap car. Maruti Udyog grabbed this
opportunity and controlled this market.

7. Encouraging Research and Development. Environmental changes

throw new challenges before the business. In order to meet new challenges there
may be a need to undertake research for finding new products or modifying the
existing ones. Research will help in finding solutions to various problems.
Environmental changes will also help in undertaking more and more development in
various fields.

Components of business environment

Intranal environmet. Extranal environmet

Internal Environment
Internal environmet Includes all those which with in Enfluence business and which
are present with in the business itself . These factors are usually under the control of
business.The study of internal factors is relly important" for the study of internal
environment ,there factors are-

(i) - Objective of business (ii) - policies of business (iii) - production of capacity (iv) -
production of method (v) - manegement information systems (vi) - participate in
manegement (vii) - computation of board director (viii) - manegement attitude (ix) -
organisational structure (x) - Features of human resource etc.

* All the above factors do influence the decision of business but since all these
factors are usually under the control of business they can't be wholly includes in the
business environment.

External environment
*External environment includes all those factors. which inflance business and exist
outside the business. Business has no control over thele factors. The information
about these factors of comportant for the study of the external environment. Some
of these factors and those with which factors which Influence the entity business
Community on this very basic, the external environment can be devided in to two
Parts:

1 - Micro environmet or operating environment

2 - Micro environmet or General environmet

1 - Micro environmet or operating environment

Micro environment means that environment which included these factors with which
business is closely related. These factors influence every industrial unit differently.
These factors and as under-

(1) - customer (2) - suppliers (3) - competitors (4) - public. (5) -

Marketing intermediates
(i) Customers: Customers of an industrial unit can be of different types. They
include household, government, industry, commercial enterprises, etc. The number of
different types of customers highly influence a firm. For example, suppose a firm
supplies goods only to the government. It means that firm has only one customer. If
because of some reason their relations get soured, the supply of goods will stop and
in that case the closure of that firm is certain. This clearly indicates that the
customers do influence business. Therefore, a firm should make efforts to have
different kinds of customers.

(ii) Suppliers: Like the customers, the suppliers also influence business. If a
business has only one supplier and he gets annoyed because of some reason. the
supply of goods can be stopped and the very existence of the business can be
threatened or endangered. Hence, efforts should be made to have various suppliers.

(iii) Competitors: The competing firms can influence business in a number of

ways. They can do so by bringing new and cheap products in the market, by
launching some sale promotion scheme or other similar methods.

(iv) Public: Public has different constituents like the local public, press or media,
etc. The attitude or behaviour of these constituents can affect business units. For
example, the local population can oppose some established firm whose business is
excessively noisy. Similarly, if the media gives some favourable report about a
particular company the price of its share can register an increase on this count.

(v) Marketing Intermediaries: The marketing intermediaries play a significant

role in developing any business unit. They are those persons who reduce the
distance between the producers and agents. For example, a company sells itsgoods
with the help of agents and if because of some reason all the agents g annoyed with
the company and refuse to sell its goods, there can be a crisis f the company.

(2) Macro Environment or General Environment:

Macro environment means that environment which includes those factors which
have a distant relation with business. A prominent feature of these factors is that
they influence all the business units almost in the same way.
DIMENSIONS/ELEMENTS OF BUSINESS ENVIRONMENT

Business environment consists of external factors, which directly or indirectly

influence the working of a business enterprise. These factors may be divided into
two categories:

1. Specific Environment. It directly influences the working of a business

enterprise. These factors include customers, owners, employees, suppliers
creaditors, competitors, trade unions, government, etc.

2. General Environment. It indirectly influences the working of a business

enterprise. The factors in this category include economy, social, political,
technological and legal factors.

DIMENSIONS/ELEMENTS OF BUSINESS ENVIRONMENT

ECONOMIC SOCIAL TECHNOLOGICAL POLITICAL LEGAL

ENVIRONMENT. ENVIRONMENT ENVIRONMENT ENVIRONMENT ENVIRONMENT

Economic Environment

(Economic environment includes all those forces which regulate resources, factors
of production, generation and distribution of income and wealth in a social set up
Economic environment has direct impact on the working of every business Economic
policies bring new opportunities and may also bring constraints. A business has to
assess the impact of economic policies and take decisions for availing opportunities.
The new economic policy of 1991 brought lot of opportunities for the businessmen.
Some Components or Aspects of Economic Environment:

1. The role of public and private sectors in the economy.

2. The rate of growth of GDP, GNP, Per Capita Income.

3. Rates of savings and investments.

4. Balance of trade and balance of payments and changes in foreign exchange

resources.

5. Agricultural and industrial production trends.

6. Supply of money in the economy.

7. Transport and communication facilities.

Example of Economic environment

1-Rate of Growth of GDP-

As shown in the Above bar, graph rate of gross domestic product (GDP) of the
Country is increasing over the years. GDP is an important aspect for a Country. When
GDP increases per capita income increases. As a result purchasing power of the
people in creases and corresponding to that demand demand of the goods also
increases which is ultimately a beneficiary for business organisation. So, Increase in
GDP of the country shows development and facilitates the business and growth of
the economy. Whereas decrease in GDP affects adversely to the business and show
less growth and development.

2. Balance of payment:-
Balance of payment shows the imports and exports of goods and services done by
the country. Any change in balance of payment affects the businessman. involved in
the business of import-export. If the import increases it shows that we are dependent
on foreign countries. On the other hand if the experts increases it means that we are
in surplus situation and other countries are dependent on us for the supply.
3- Reserve Bank of India
Various financial sector reforms were made after new economic policy 1991:-

→ Role of RBI was changed from Regulator"to facilitator'.

→ Cash reserve ratio (CRR) and statutory liquidity ratio (SLR) were reduced to
increase the money supply in the market.

→ Foreign investment limit was raised and made allow to invest in indian financial
market under strict guidelines of reserve Bank of India (RBI).

As a result there was a positive impact on the economy of. India.

4. Demonetisation of Indian 500 and 1000 Rupees Currency notes :

As in India there are more cash transactions in the business, the demonetisation Rs
500 and 1000 Rs. notes recently hit the indian economic environment and affected
the business. adversely. As it restricts the business transactic which affects the
purchase and sell of goods. and services. Due to this retail business market was
adversely affected and demand of the products went down due to unavailability or
shartage of Currency notes.

MAJOR ELEMENTS OF ECONOMIC ENVIRONMENT

1. Economic systems such as sociallistic economic system capitalistic economic

system and mixed economic system.

2. Economic policies, such as, Export-Import Policy, Taxation Policy, Industrial Policy,
etc.

(iii) Economic Conditions, such as, National Income, General Price Level, Rate of
Interest, etc.

Impact of Economic Environment on Business

(i) A decrease in the Bank Interest Rates significantly increases the demand of goods
and vice-versa.

(ii) A rise in the income of people leads to increase the demand of goods and vice-
versa.

(iii) High inflation rate increases the cost of business.

Social Environment

Social environment consists of all the social and cultural forces within which firms
operate) It represents the customs and traditions, values, norms and ethics, culture,
beliefs, social trends of a society in which a business operates.Social and cultural
values exercise a significant influence on business. Population and income levels
affect the pattern of demand. 'Both parents working' concept has led to more
spending on family facilities. The occasions like Dussehra, Diwali, Ganesh Puja,
Pongal, Id, Christmas etc. bring more demand for all types of goods. The businesses
create more inventories to meet additional demands of customers during these
occasions.

Some Aspects of Social Environment:

1. Family structure and values

2. Quality of life

3. Birth and death-rates

4. Education and literacy rates

5. Consumption habits of people

6. Social attitudes, customs, rituals, etc.

7. Social concerns regarding pollution, status of women, corruption.

8. Attitude of customers towards innovation, life style, etc.

9. Income and wealth distribution.

10. Demographic factors

Examples of social environment:-

1. Change in clothing style of the people :-

In today's world due to rapid changes taking place. in fashion trends people are
changing their lifestyle rapidly. In olden days people used to wear a particular clothes
for long period of time. So, while comparing the clothing system. we can say that
people have started getting attracted to westem clothes by giving up their traditional
clothes so their is great opportunity for businessman in doing business of western
clothes.
2. Change in food habits :-
These food includes many healthy food items used in olden days. As people are
getting attracted to western culture they are also getting attracted to fast food and
have decreased the Consumption of traditional food so, there is great demand for
fast food and opportunities for businessman. Due to its ready and cheap availability
nowadays. these foods are being produced widely because of the increasing demand.

3. Importance or place of women in workforce :-

Equity for women isn't a women's issue when women fulfills their potential, everyone
benifits. Earlier women use to work in houses as housewites but due to significant
changes in the social environment women have become the part of workforce. This
has also given rise to women empowerment which means giving equal status to men
and women. in the society. equity also means no discrimination on account of sex,
religion, language, caste belief or nationality.

4. Literacy rates in India :-

Literacy rate in India is a key for socia - economic progress. As shown in the above
graph people's ideology have changed and they have started educating their children
and especially the girl child. Due to change in social environment literacy rate
amoung male and female have. increased significantly as shown in the Above graph
over the years.

Major Elements of Social Environment

(i) Traditions: It refers to social practices that have lasted for decades, such as,
Diwali, Id, Christmas, Guru Purv, etc.

(ii) Values: It refers to moral principles prevailing in the society, such as, Freedom,
Social Justice, Equality, etc.

(iii) Social Trends: It refers to a general change or development in the society,

such as, health and fitness trend among urban dwellers.
Impact of Social Environment on Business

(i) A large number of festivals (traditions) in India provides opportunities for various
businesses.

(ii) Individual freedom is a value which creates freedom of choice in the market.

(iii) Social justice is a value which creates the social responsibility of business.

(iv) Equality is a value which emphasises that an enterprise must give

equalremuneration to male and female employees for the same work.

(v) Health and fitness trend has created demand for gyms, mineral water, etc.

Technological Environment,

Technological environment relates to scientific improvements and innovations which

provide new and better ways of producing goods and services and new methods and
techniques of operating business. A businessman has to monitor regularly the
changes taking place in the industry in order to remain in business. Those ignoring
technological changes may find themselves out of business. When new economic
policy of 1991 allowed globalisation of Indian economy, Indian businessmen were
finding difficult to compete with multinational companies because they did not
improve their technology and methods of production.

Some Aspects of Technological Environment

1. Development of IT sector

2. Technological advances. in computers.

3. Innovations in manufacturing sector.

4. Import of latest technology in various sectors.

5. Scientific improvements
Examples of technological environment:-

1. Change in Farming methods:-

Earlier farmer used to have bullocks in the farm for various purposes but after new
technological advancement now we have tractors in the field. It provided relief to the
farmer as their work got easy, simplified and faster. It also gave businessman. an
opportunity to expand business of tractors and other modern farming equipments.

2-Early water supply and present water supply:-

Earlier, women had to walk several miles to to get water but now due to techno
logical advancement pipelines provide every houses. with water. So people don't
have to walk for water. Also business for Tapes, shower, Wash-basin, etc has
increased which creates wider opportunities for the businessmen involved in this
business.

3. Changes in photo Copier and xerox machines :-

Earlier printers could only print black and white photo due to availability of only black
ink. And no color print were offered by printers. Moreover machine used to be
difficult to operate. But nowadays due to technological advancement modern
printers offers both black and white and colour print as well. Moreover the overall
efficiency of printers is increased which does work faster than old ones Also
operating has become easy & smooth.

Major Elements of Technological Environment

(1) Discovering new ways of producing goods and services.

(ii) Discovering new methods of operating a business.

Impact of Technological Environment on Business

(i) With the advent of television in the market, the cinema and the radio industry were
adversely affected.

(ii) With the arrival of the photostat machines in the market, the carbon paper
industry suffered a setback.

(iii) With the entry of synthetic thread in the market, the cotton cloth industry was
badly affected.

(iv) The digital watches have almost eliminated the market of the traditional watches.
Political Environment
Political environment consists of factors relating to government affairs.) It includes
the political party system in the country, their ideologies, system followed for
governance, government attitude towards different sections of society, etc. Political
environment directly influences the working of business. A businessman has to scan
the impact of prevailing political environment in the country and take suitable
decisions.

Some Aspects of Political Environment.

1. Present political system.

2. Constitutional framework.

3. Political structure 1 centre-state relations.

4. Political philosophy and stability of the government.

5. Degree of politicisation of business and economic system.

6. The extent and nature of government's intervention in business.

7. Foreign policy of the government.

Examples of political environment:-

1. Foreign policy of Government :-

Currently, Modi government is in power which puts emphasis on more of foreign
investment and foreign trade which creates wide range of opportunities for
businessman doing foreign trade. Political leaders meet various other political
leaders of the world to make better relationship in terms of financial and economical.
As a result we can say that these policies of government may put constraints and
may offer opportunities to the businessman.

2. Constitution of the country:-

Constitution is the framework which defines the fundamental political principles,
establishing the structure, procedures, power and duties of government bodies and a
complete set of fundamental rights and duties of the Citizens. The Constitution of
India is the supreme. Law of India. So any changes in the Constitution of the country
will affect the business directly either in favour or in against the business
organisation.
3. Values and Ideology of political parties
i- BJP: It stands for Bhartiya Janata party. The BJP government promotes
industrialisation at large scale and looks forward for the overall development of the
Country. Moreover they supports the Hindu nationalism.

(i) Congress :- It stands for Indian National Congress. These govemment promotes
areas of agriculture, social- democracy, secularism, Gandhian socialism and Social
liberalisation.

(iii) AAP:- It stands for Aam Aadmi party. Ideology of AAP is democratic socialism
and anti-corruption. They look forward for the development and upliftment of poor
and normal people.

4.Swachha Bharat Abhiyan :-

The Campaign was officially launched on 2 october, 2014 at Rajghat New Delhi, by
prime minister Narendra Modi- It is India's largest ever cleanliness drive with 3 million
government employees, especially school and college students from all parts of India,
participating in the Campaign. It covered an area of 40Hil statutory cities. and towns
to clean the streets, roads and intrastructure of the Country. The Campaign
represents the political ideology the BJP government.

Major Elements of Political Environment

(i) Political stability in the country

(ii) Peace in the country.

(iii) Attitude of the government towards business.

(iv) Type of government, i.e., single party government or multi-party government.

(v) Ideologies of various political parties.

Impact of Political Environment on Business

(i) In 1977, the Janata Government adopted a stringent attitude towards the
multinational companies. As a result of this attitude, the multinational companies
like the IBM and the Coca-Cola had to ignore India.

(ii) The new government encouraged the multinational companies for investment in
India. This led to the opening of the doors of the Indian market for the multinational
companies. Consequently, the Coca-Cola entered the Indian market once again.
(iii) It was only because of the political interest that Hyderabad came to be known as
Cyberabad. In other words, it came to be recognised as the centre of Information
Technology (IT). As a result, many IT companies came to be established there.

Legal or Regulatory Environment

Legal framework refers to the framework of laws and legislations within which a
business enterprise has to work. Legal environment puts restraints and also brings
opportunities to the businessmen

Some Aspects of Legal Environment

1. Rights and duties of citizens as specified in the constitution

2. Various laws and legislative acts.

3. Various laws relating to licensing.

4. Various industrial laws restricting trade practices.

5. Various taxation laws relating to VAT, income tax, etc.

6. Laws relating to foreign trade.

Major Elements of Legal Environment

(i) The Acts or Legislations passed by the government.

(ii) The decisions taken by various commissions and agencies.

(iii) The judgements of courts.

Impact of Legal Environment on Business

(i) By removing control on the capital market, a huge amount of capital was collected
by issuing various new issues in the primary market.

(ii) With introduction of relaxation in Foreign Direct Investment (FDI) and Foreign
Exchange, many multinational companies entered the Indian market. Consequently,
there has been a tremendous increase in the foreign exchange reserves in the
country.

NEW INDUSTRIAL POLICY (NEW ECONOMIC POLICY)

Govt. of India announced New Industrial Policy in July, 1991. This policy gave a new
direction to the economy. This policy ushered a new era by announcing new
initiatives for private sector. An effort was made to remove hurdles in the path of
development.

Features new industrial policy

1. Abolition of Industrial Licensing: Only three industries remained under licensing

system.

2. Limited Role for Public Sector. Except three industries, all other industries were
opened for private sector.

3. Liberalisation of Foreign Investments. Foreign investments were allowed over 50

per cent in large number of industries, these investments could go upto 100 per cent
in some sectors.

4. Liberalised Foreign Trade. Restrictions were removed on foreign trade. Import

duties were cut and procedures were simplified.

5. Technology upgradation. Permission was automatically granted to

Indiancompanies for signing technology improvement agreements with foreign
companies.

6. Setting-up of Foreign Investment Promotion Board. In order to promote foreign

investments in India, a board was set-up.

7. Incentives for Small scale sector. Enhanced support was announced to encourage
small scale sector.
 Major Changes in New Economic Policy

Liberalisation Globalisation Privatisation

Liberalisation

Concept of liberalisation
Liberalisation refers to the removal of all unnecessary controls and restrictions on
business and industry. It is the process of freeing the economy from licence system
and other regulations. The industry and trade is given the freedom to grow of their
own and reducing the role of government. Liberalisation process was started with
the Industrial Policy, 1991.

Features of Liberalisation

1. Abolition of License. License requirement in most of the mdustries was abolished.

The need for license was limited to some of the industries like hazardous chemicals,
products for defence purposes, etc.

2. Removal of Restrictions. Permitted no restriction on expansion or contraction of

the business activities.

3. Free Movement of Goods and Services. Restrictions on the movement of goods

and services were removed.

4. Freedom of Fixation of Prices. Allowed freedom in fixing the prices of goods and
services.

5. Relaxation in Taxation. Reduced tax rates for enabling the business units to
enhance their business operations.

6. Lifting Controls. Lifted unnecessary controls on the economy. nob it pair

7. EXIM Procedures Simplified. Government simplified the procedures relating to

Exports and Imports.

8. Foreign Direct Investment. Through simplification in the exports and import

procedures, government tried to attract F.D.I. from foreign multinationals.
Following measures were taken in this regard :

(i) Licensing system was abolished except for few industries.

(ii) Liberalised import regime by reducing custom duties, tariff rates and encouraged
exports by cutting export duty, giving subsidies, liberalising finance, etc.

(iii) Private sector was allowed entry to all sectors except three: No restrictions on
expansion plans.

(iv) Freedom in fixing prices.

(v) Simplification of procedures for attracting foreign capital.

(vi) Banks were allowed to fix lending rates.

PRIVATISATION

Concept of privatisation

Privatisation refers to the process of reducing the role of public sector and
increasing. the role of private sector. The ownership, control and management of
public sector enterprises is given to the enterprises in the private sector.

Features of Privatisation

(i) The role of public sector is reduced.

(ii) The role of private sector is increased.

(iii) There is a disinvestment in public sector undertakings whereby more than 51%
ownership is given to private sector.

(iv) The future growth and development initiatives are given to private sector.
Privatisation was needed for the following reasons:

(i) There was a need for more and more investments and government had limited
resources.

(ii) Need for professional management.

(iii) Freedom in decision-making process

(iv) Use of resources properly.

(v) There was a need to bring personal touch in working.

Following methods were adopted for privatisation :

(i) The number of public sector undertakings was reduced to 3 sectors only. All other
sectors were opened for private investment.

(ii) Board for Industrial and Financial Reconstruction (BIFR) was set-up to decide
whether a unit can be restructured or be closed down.

(iii) Central government decided to withdraw from industrial sector and public sector
units were to be privatised through disinvestment process.

GLOBALISATION

Concept of globalisation
Globalisation means integrating the economy of a country with the world economy.
This implies that there should not be a bar on the entry of foreign investors coming
to the country and entrepreneurs from the country are also allowed entry in other
countries. There is a free flow of imports and exports and foreign exchange
regulations are also avoided.In fact globalisation means internationalisation of the
economy of the country. In 1991, Government of India took a number of steps which
encouraged liberal imports and exports and removed many restrictions on entry of
foreign businessmen.
Main Features of Globalisation

(I) Free movement of goods and services among different countries

(ii) Free movement of capital and labour across borders.

(iii) Unrestricted flow of technology and information.

(iv) A common acceptable mechanism for the settlement of disputes.

Objectives of Globalisation

(i) Import liberalisation

(ii) Export promotion

(iii) Expanding the market for customers

(iv) Interdependence on foreign markets

Following measures were taken in this regard :

(i) The imports were liberalised by removing many restrictions. Capital goods were
also allowed to be imported.

(ii) Foreign Exchange Regulation ACT (FERA) was replaced by Foreign Exchange
Management Act (FEMA).

(iii) Foreign direct investments were liberalised by allowing more than 50 per cent
share in some sectors.

(iv) Convertibility of rupee was allowed.

(v) Import duties were reduced greatly.

(vi) Export duty was abolished.

(vii) Tariff structure was rationalised.

Impact of Government Policy Changes (Economic Reforms)
The New Economic Policy, 1991 brought many changes in policies relating to
business. The globalisation, privatisation, and liberalisation were the outcome of new
economic policy. The impact of policy changes can be described as follows:

1. Ease in Entering Business. The new economic policy abolished licensing

system. A new business could be started only after getting a licence. The licensing
system was actualy the main hurdle in the entry of new units. After the economic
reforms the establishing of new units became easy.

2. Increase in competition. The liberalisation policy allowed free entry of

multinational corporations into Indian market. This increased intense competition for
Indian firms. The MNCs had better technology and produced better quality products.
Those firms which could not adjust their working as per the emerging situation faced
closure. MNCs also acquired many firms for creating monopoly for their products

3. Rapidly Changing Technology Environment. Prior to new economic

policy there was not much competition in Indian markets. The entry of MNCs brought
gobal competition and introduced latest technology into production methods. The
Indian firms were required to adopt latest technology and improved methods of work.
In order to improve technology there was a need to increase efforts on Research and
Development (R and D). Many firms started investing more on R and D and improving
skills of labour force.

4. More Demanding Customers. Before economic reforms there was a

shortage of products in the market. The licensing system helped in manipulating
markets by getting less production than the demand. It was a producers market
where customers were at the mercy of the manufactures. The change in economic
policy encouraged the entry of more people in every area of business. Moreover,
MNCS started creating manufacturing facilities in India. The products became
abundant and the customers because choosy. So it became customer oriented
market. The producers started adopting methods to attract customers for their
products. Now the situation is such that goods are produced as per needs and
preferences of customers.

5. New Marketing Strategies. Earlier the producers were first producing the
goods and then going to customers for selling them by adopting selling concept. The
things have now changed. A businessman has to first conduct market research to
know the requirements of the customers and then go for production. This is known
as marketing concept. So new marketing strategies are needed to get market share.
6. Emphasis on Human Resource Development. The introduction of
latest technology has become essential for every business. This requires higher
competency skills and training of workers. There is a need to give emphasis for
human resource development. The employees should be given proper training for
using technology and their skills should be regularly updated. The firms are now
giving proper attention to human resources in order to stay in the competitive
environment.

7. Thrust on Exports. The entry of more firms in Indian makets have shifted the
emphasis on exports. Every firm is trying to enter foreign markets to increase sales.
Many firms have opened their export division for earning foreign exchange from
external markets. Some MNCs have set up manufacturing facilities in India and are
meeting foreign demands by exporting from here. Exports are essential for both
survival and growth.

8. Change in Public Sector Policy. The role of public sector has been limited
to three sectors only. These units have been asked to meet their own financial needs
or face disinvestment if it is not possible. Earlier the losses of public sector units
where met through special sanctions from budgets. This policy has reduced financial
burden on government treasury. These units are supported to survive of their own
and donot depend on government help,

Samsung company

Introduction
Samsung is a South Korean multinational enterprise company headquartered in
Samsung town, Seoul. It comprises numerous subsidiaries and affiliated businesses;
most of them united under the Samsung brand, and is the largest South Korean
chaebol (business conglomerate).Samsung was founded by Lee Byung-chul in 1938
as a trading company. Over the next three decades the group diversified into areas
including food processing, textiles, insurance, securities and retail. Samsung entered
the electronics industry in the late 1960s and the construction and shipbuilding
industries in the mid-1970s; these areas would drive its subsequent growth.
Following Lee's death in 1987, Samsung was separated into four business groups
Samsung Group, Shinsegae Group, CJ Group and Hansol Group. Since the 1990s
Samsung has increasingly globalized its activities, and electronics, particularly
mobile phones and semiconductors, have become its most important source of
income. For over 70 years, Samsung has been dedicated to making a better world
through diverse businesses that today span advanced technology, semiconductors,
skyscraper and plant construction, petrochemicals, fashion, medicine, finance, hotels,
and more. Samsung Electronics leads the global market in high-tech electronics
manufacturing and digital media.
History of Samsung
Samsung, South Korean company that is one of the world's largest producers of
electronic devices. Samsung specializes in the production of a wide variety of
consumer and industry electronics, including appliances, digital media devices,
semiconductors, memory chips, and integrated systems. It has become one of the
most recognizable names in technology and produces about a fifth of South Korea's
total exports.

Samsung was founded as a grocery trading store on March 1, 1938, by Lee Byung-
Chull. He started his business in Taegu, Korea, trading noodles and other goods
produced in and around the city and exporting them to China and its provinces. After
the Korean War, Lee expanded his business into textiles and opened the largest
woolen mill in Korea. He focused heavily on industrialization with the goal of helping
his country redevelop itself after the war. During that period his business benefited
from the new protectionist policies adopted by the Korean govemment, whose aim
was to help large domestic conglomerates by shielding them from competition and
providing them easy financing.

During the 1970s the company expanded its textile-manufacturing processes to

cover the full line of production from raw materials all the way to the end product to
better compete in the textile industry. New subsidiaries such as Samsung Heavy
Industries. Samsung Shipbuilding, and Samsung Precision Company (Samsung
Techwin) were established. Also, during the same period, the company started to
invest in the heavy, chemical, and petrochemical industries, providing the company a
promising growth path.

Samsung first entered the electronics industry in 1969 with several electronics-
focused divisions their first products were black-and-white televisions. During the
1970s the company began to export home electronics products overseas. At that
time Samsung was already a major manufacturer in Korea, and it had acquired a 50
percent stake in Korea Semiconductor.
 Conclusion

⚫ Indian business environment is relatively not conducive for encouraging new

business

⚫ Slow processing of permits and licenses

⚫ The political, financial and economic
⚫environments also further complicate the scenario for business
⚫Our businesses themselves are not very clean, and many businesses are paying
fines, penalties, including three prominent private sector banks for money laundering
 Reference

For successfully completing my project file i have taken help from the following
website links :-

* www.google.com.

* www.wikipedia.com

* www.youtube.c .com

* Google images.