Business environment

syllabus

objective
To understand the business scene and factors and trends for strategic policy formulation

prof. Anil Pande

topics
Social issues Political issues Ecological issues Business ethics Social responsibility Energy management Family V/s professional business management Industrial units Joint ventures Technology transfer Multi-national corporations Administered pricing Business resources Economic trends
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Books and references

Business envirnment text & cases
Justin Paul/ McGrow-Hill publisher

Indian Economy
Mishra and puri

Business environment
Francis Cherunilum

Business environment
Ashwathappa

Case studies:
Collections from:
Books, news papers, magazines, net.
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Allocation of marks
External exam Internal assignment
1. 2. 3. 4. Internal assignment: Project: Presentation: Attendence: GD/ Presentation: total

: 60 marks (100) : 40 marks

10 10 10 10 40
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Political environment and economic thought

 Every country in the world has an economic system to facilitate the production, trade and consumption of goods. Countries across the world have evolved through different ideologies to follow a mix of different thoughts.

prof. Anil Pande

History of economic thoughts and economic systems

Term economics coined in around 1870 Popularized by Alfred Marshall As a substitute for political economy.
The major thinkers were:
Adam Smith. David Ricardo. Karl Marks.

History can be divided into 2 phases:

Pre-modern
Was popular among Greeks, Roman, Medieval Arabs, .

Modern
Thought developed by Adam Smith. Systematic economic theory got its shape.
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Pre- modern economic thought

Ancient scientists made several observations and contributions. Economics can be applied to any type of organisation. Economic theory centers around system of exchange, trading, buying and selling. Focus on capitalistic societies. Money has a rational basis and profit is derived from utilising labour and capital to produce goods for trade. Economist felt that the framework of economics is relevant and stretch enough to apply to any form of th4e society.
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Modern economic thought

Work of this period is called as classical economics. Adam Smith , founder of economic theory, wealth of nations, in 1776. Even today his work is gospel in market economics. His study a center piece of capitalism. Marxist economics not held high, but used in some mainstreams. 19th century saw marginal revolution or neo classical theories.
Focuses on concepts of marginalism and opportunity cost.

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Economic systems
An economic system is a mechanism which deals with the production, distribution and consumption of goods and services in a particular society and comprises of people, institutions and their relationships.
Addresses problems like allocation and scarcity of resources.

In other words, an economic system defines the institutional framework regulating the business environment in a country.
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Market economy
a basis for several right wing systems such as capitalism
Economic system operates in a free market and is not planned or controlled by central authority. It is theoretically possible (because it excludes taxation and regulations of any kind) Called as free economy or free enterprise system Government intervention is possible
Difference in market and planned economy is How govt influence is used and not degree of government influence.
If govt wants more steel, it collects more taxes to buy steel at market price. In planned economy government order for more steel production. Ex: US and Canada.
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Planned or command economy

a basis for left wing system such as communism

This system refers to the theory political and economic development proposed by Karl Marx and developed and implemented by V.I. Lenin. Communism, people rule both politically and economically. According to Marx, the govt is instrument of class oppression, and the society which emerges in its final stage is classless.
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 It is totalitarian system of govt in which single authoritarian party controls means of production with professed aim of establishing a society with equal rights. A system in which the means of production are own and operated for the public by the government. Government determines type, quality, quantity and price of the goods produced. Communism promises to provide for everyone's need and to have no social class.
Ex: cuba, Vietnam
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Mixed economy arguably a centrist economy

Ex: India and Poland

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Economic growth and development

Focus on analysis of factors and policies that drive growth and social development and poverty alleviation. Policies for growth:
International trade Financial markets Health Education Public infrastructure

Increase in national income is first step of economic growth of a country.

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 Economic development:
An activity that assist in in the inducement of commercial and social endeavors. Process stimulates self sustaining economic processes, creates jobs at acceptable wages, produce goods and services to meet the social needs. It provides resources needed to make further investment in education, govt services, amenities ,infra and quality of life. ED can be measured in
Human development index Gender empower measure Human poverty index Human freedom index.

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economic growth and national income

NI- income of country in given year-measure of economic growth. NI study for 2 reasons 1. NI growth rate and data provides formal structure for macroeconomic analysis Knowledge of NI, its accounts, movements.
FOUR VERSIONS OF NATIONAL INCOME:
Gross domestic product GDP Gross national product GNP Net domestic product NDP Net national product NNP
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 GDP- basic measure of national output and economic growth. GDP is the value of all final goods and services produces within the countrys geography, irrespective of its ownership of resources. All values valued at the market price and money values are added together to get GDP. GDP per capita is GDP/Population.

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 GNP- is income produced through countrys owned resources, irrespective of place of production. GNP is calculated by adding factor payments (receipts) from abroad to GDP. GDP=GNP- NFIA (NET FACTOR INCOME FROM
ABROAD) NDP = GDP- depreciation ( net domestic product)
Capital is used to yield output, it wears out or depreciates.

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The national income measurement is carried out on the market prices and at a factor cost.
GNP at market prices- indirect taxes+ subsidies=GNP at factor cost
GNP at factor cost-net factor income from abroad= GDP at factor cost GNP at factor cost depreciation( capital consumption)= NNP at FC GDP at FC depreciation = NDP at FC

Economic growth of country is measured in: % growth of national income. Per capita income is good indicator
Economic growth= rise in total output Growth can occure in_
Increased use of land labour, capital and resources

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Difference between growth and development

Growth Uni-dimentional Income based economy Development Multi-dimentional Standard of living based society

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Indian economy an overview

Case study:

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MEASUING DEVELOPMENT
Human evelopment index:
Devised by united nations development programme to measure economic growth and social development.

Social & economic factors Standard of living Life expectancy Literacy and inequalities in income distribution
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 Human development index:

Takes into account 3 major factors
Life expectancy at birth Levels of educatonal attainment Gross domestic product per capita

HDI scorres from 0 to 1

Human development is the process of enlarging peoples choices

Three essential choices
1. Long and healthy life 2. Acquire knowledge 3. To have access to resources for decent standard of living
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GDP GROWTH IN india

9 8 7 6 5 4 3 2 1 0

PERCENTAGE

PERCENTAGE

Linear (PERCENTAGE)

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