BUSINESS ENVIRONMENT

“Complex internal and external factor, directly and

indirectly influence the performance of company.”
Element of Business Environment :
 Economic
 Non economic
Objectives of Environmental Study:
 Measurement of Profitability
 Firms develops broad strategies & long term policies
 Measurement of Economic Progress
 Helpful in formulation of eco-policy
 Helpful in understanding of eco-policy
 Management can force impact of socio-economic
changes
Contd…
 Analysis of competition strategies
 Help in analysis& Trade cycle
 Better understanding of internal environment
 Best utilization of resources, Better Planning &
Development
 Better investments plans
 Better input in growth of economy
 Stable Employment
 Study of technology
 Better collaboration & Seeking International
opportunities
 Helps on self dynamic & innovations
Limitation of Environment Analysis
 Unexpected & unanticipated events
 Not a sufficient guarantee of effectiveness in
organization
 Potential not realized because not practicing properly
 Cost of information
 Uncritical faith
 Over cautions approach
Broad classification of Business Environment
based on
 Time: Past, Present, future
 Place: Local, regional, National , international
 Factors: Internal, external
 Activities: Eco or non eco
 Focus: Market, non market.
ECONOMIC SYSTEM
“Rules, ideologies, framework, Sum total of devises
involving complex human relationship, consciously
utilize scarce resources, up gradation of a nation”
Types:
 Capitalism
 Socialism
 Mixed Economy
Characteristics of Economic System:
 A group of people
 Organization of the process of consumption
 Flexibility
Scarcity of Resources:
 Organization of Production
Institutions:
 Assemblies of economic Instructions
 Co-ordinate System
Capitalism:
 Free reign or Free enterprise or Private ownership
Characteristics:
 Private Ownership
 Freedom of choice
 Motive of profit
 Freedom of Enterprise
 Price Mechanism
 Unplanned Economy
 Freedom of Savings & investments
Merits:
 Increase in production,
 High standard of living
 Technological Progress
 Flexibility, Liberty
 Personal Car
 Risk taking
 Full utilization of resources
 Capital Formation
 Personal Care
 Liberty of work
Demerits:
 Inequitable distribution of wealth
 Creation of monopoly
 Unemployment
 Unstable Nature
Cond…

 Wastage of Resources
 Lower welfare of society
 Class conflict, Regional inequalities
 Materialistic opportunities
 Absence of maximum satisfaction
Socialism:
Marx is the father of scientific socialism Meaning
Material means owned by society  equal opportunities
& responsible to community, to increase national
income of country
Characteristics:
 Emphasis on equality – Economic & Social
 Ownership of the means of production
 Welfare of the society
 Economic Planning
 Reduction in class distinction
 Elimination of competition
 Prices decided by the Govt.
 Removal of social exploitation
 Employment Opportunities
 Lack of commercialization
Merits:
 Utilization of Economic Resources
 Social Welfare
 Economics Equality
 Removal of unemployment
 Economic stability
 No class struggle
 Greater eco-efficiency
 R & D
 Emphasis on quality production
Demerits:
 Misallocation of resources
 Unreal Nature
 Loss of efficiency
 Loss of spirit & enthusiasm
 Bureaucracy & Red Tapisim
 Loss of freedom
 Administrative complexities
 Difficulties of Management
 Lack of consumer sovereignty
Mixed Economy:
“Two Sectors Private + Public Sector undertaking 
Advantages of capitalism + Socialism”
Characteristics:
 Free Market + Centrally planned Economy
 Production activities  Private + Govt.
 Prices – Individuals goods( Market force) & Govt.
produced goods(Govt. decided)
 Govt. aim  Social Welfare.
 Importance of eco planning
 State regulation of private sector
 Allocation of resources then price mechanism & Govt.
Distribution
Merits:
 Eco Stability & proper allocation & Resources
 Advantage of free initiatives & enterprise
 Rapid Eco development
 Social welfare
 Equal opportunities
 Controlled price mechanism
 Strong/vigilant govt. policies
Demerits:
 Conflict between two sectors
 Unrealistic
 Sign of weakness
 Endangers freedom
 Excess is , bureaucracy
 Lack of incentives
 Misuse of resources
Backdrop:
Need for reforms:
 In 1980s- Monetary losses– public sector industries,
growing inefficiency of resources (+)Consumption (+)
Expenditure > revenue  high govt. borrowings,
Overprotection to industry, mismanagement of firm,
Poor Technical development, shortage of Foreign
exchange, imprudent borrowings  mismanagement
of foreign funds.
 In 1991- 3 weeks of Foreign exchange reserves left –
imports, National debt – 60% of GNP, Gulf war hike
administration. prices  excess liquidity, Higher
rate of inflation, Wholesale prices = 12 % of annual
average rate
Major areas of Economic Reforms:
Fiscal-
 Reduce overall public sector deficit
 Control public expenditure
 Higher tax and non tax revenues
 Reduction of subsidies
 Administered prices
 Streamline work
 Budgetary support to central public enterprises
Monetary-
 Inflationary pressures
 Support the targeted balance of payment
 broad money (M3)
 Reverse Money
 Lower growth of broad & reserve money will be
sought
Price Policy-
 Reducing Budgetary Subsidies
 Promoting flexible price structure
 Higher number of Administrative Prices
 Savings (rail, bus)
 Agriculture (sugar)
 Public sector greater freedom in setting prices
External Policy –
 Strategies of Ex-Im compression measures
Industrial Sector-
 Industrial licensing abolished15 industries
 Security & strategic
 MRTP Act
Foreign Investment Policy, Trade policy-
 Quantitative restrictions
Public sector –
 Portfolio reviewed
 Provide greater degree to management
 Efficiency
 Sick industries revived
 Budgetary support reduced
Major strategies –
 Allow privet sector freedom to run activities restricted
 Liberalization
 Capital markets
MULTINATIONAL CORPORATIONS
MNC
“Headquarters at one country while the enterprise
carries operations at a no. of other countries as well”
Features:
 Produce rather than distribute abroad as well as in the
headquarter country
 Operate in min. no. of nation (6eg)
 Derive min % of its income from foreign operation
 Min. ratio of foreign total no. of employee or foreign
total value of assets
 Management team with geocentric orientations
 Directly control F.I.
Organizational Models: Multinational Corporations:
 Pre war (1920’s & 1930’s) Europe declaration of
assets and responsibilities, portfolio of International
Business
Characteristics:
 Grow in spontaneous manner
 Managerial headquarters in home countries
 Operations- Host countries
 Operate on the basis of internationally owned assets
 Free dominantly large size: Sustain by: Management
skills
 big advertisement budgets
 modern technology
 BOD- Citizen of home country
 Control production activity with FDI in >1 Developed
Country
Types:
 Service MNC
 Manufacturing MNC
 Trading MNC
Role:
 Transfer of capital
 BOP
 Linkage effects
 Employment opportunities & HR capital
 Quality products at relative cheaper cost
 Others- Vehicles of peace, Political
 Relations
 Break domestic monopoly
 Rapid process of development
 Research & Development
 Exchange of cultural values
Demerits:
 Unfavorable effects on BOP- Foreign exchange
 Host country
 Profit home,
 Transfer of technology: Tech. transfer is capital
incentive & import oriented not highly advanced
 Exploitation of resources - Price lower,higher
 Lab. Lower Production high
 Objectives:
 Raising standard of living
 Ensuring full employment
 Full use of resources
 Expansion of Production and International trade
 Consultation to developing country
INDUSTRIAL SICKNESS
“According to sick industrial companies act, 1985  sick
– accumulates losses equal to or exceeding at the end
of financial year. It’s entire net worth and also
suffered cash losses in such financial year and also in
the previous year”
Features:
 Slow turn-over
 Frequent request for overdrafts
 Failure to honor bills on maturity
 Inexplicable delays in the submission of stock
statements
 Slow off take of stock
 Over valuation of stocks
 Diversion of stocks
Types:
 Actual( 50% or >of capacity )
 Incipient( <50%of capacity)
Causes of industrial sickness-
Internal Causes:
 Lack of managerial expertise and experience
 Wrong choice of location
 Poor planning
 Financial problem
 Wrong choice – tech
 Labour problem
External Causes:-
 Declined in demand
 Lower market share
Cond…
 Problem in availability of inputs
 Industrial and tone policy Excessive govt. control
 Natural calamities
 Competition
 In economic size
Consequences:-
 Generation of unemployment
 Adverse climate for further industrial growth
 Adverse affect on living of working class
 Higher non-performing loans for banks, S.I.U 
progress adverse  dependents of large units
 Adverse affect on industrial production and industrial
climate
 Hardship for investors
 Pocket of public suffers
Remedial measures of industrial sickness:
 Steps taken by banks
 Policy framework of the government
 Concessions by Govt.
 Steps for detecting sickness early
 The industrial investment Bank of India
 Board for industrial and financial reconstruction
Objectives of licensing:
 To limit industrial capacity
 To direct investment in industries
 To regulate the location
 To prevent monopoly and concentration of wealth
 To protect small scale industries
 Technical and economic development
 To encourage new entrepreneurs
Current Licensing Policy:
 Industries reserved for public sector,
 Industries retained under compulsory licensing,
 Items for manufacture reserved for small-scale sector
Objectives of industrial licensing:
 To divert investments as per objectives of five year
plans
 To help regional balance
 To check concentration of capacity in industry in a few
hands
 To achieve optimum utilization of resources
 To encourage growth of small scale industries
 To encourage new entrepreneurs
APT Contact
 Landline No. 4082444 /
2445 / 2453
 Mobile No. 9755557307
 Website :
www.aptinfoservices.com
 E-mail :
info@aptinfoservices.com