CPG2B/BPZ6C BUSINESS ENVIRONMENT. Unit : I V

Transcription

1 CPG2B/BPZ6C BUSINESS ENVIRONMENT Unit : I V

2 UNIT I The concept of business environment its nature and significance brief overview of political, cultural & legal economic and social environment and their impact on business and strategic decisions. 2

3 BUSINESS STARTED WITH BARTER SYSTEM 3

4 MEANING & DEFINITION OF BUSINESS MEANING : An organization or economic system where goods and services are exchanged for one another or for money. DEFINITION : According to Bayard O.Wheeler, Business is an institution, organized and operated to provide goods & services under the incentives of private gains. 4

5 MEANING & DEFINITION OF ENVIRONMENT Environment is all the circumstances, people, things, and events around them that influence their life. William F. Gluek says, The environment includes factors outside the firm which can lead to opportunities for or threat to the firm. Although there are many factors, the most important of the factors are socio, economic, technological, suppliers, competitors and Government. 5

6 Characteristics of business 6

7 SCOPE OF BUSINESS 7

8 Types of Business Objectives 8

9 SOCIAL RESPONSIBILITIES OF BUSINESS 9

10 Structure of Business System Business System Industry Commerce Business Concerns Finance Production Marketing Personnel Research & Development 10

11 Meaning of Business Environment: 11

12 Definition of Business Environment 12

13 Nature of Business Environment Internal Environment controllable factors External Environment beyond the control of the firm. External Environmental factors can be further divided into 2 types namely, Micro Envt Have a direct and close impact on the enterprise. Ex Suppliers, Distributors, Debtors, Creditors. Macro Envt - a general impact on the industry to which the enterprise relates. For ex Taxation Policy, Pricing Policy of the Govt. 13

14 Importance of the study of Business Environment 1. Successful Conduct of Business 2. Opening of New Avenues 3. Dynamism in Approach 4. Chances for Growth 5. Control over Environment 14

15 Features of Business Environment 1. Dynamic & Ever Changing 2. Mutual Interdependence between business and environment 3. Business firm along with other firms in the environment change in the environment 4. Strict adherence to rules and regulations 5. Varied environmental forces 6. Complexity of environment 15

16 Forces of Business Environment 16

17 INTERNAL & EXTERNAL FACTORS OF BUSINESS ENVIRONMENT 17

18 Business Environment Physical & Technologic al Factors Social & Cultural Factors Geographical and Ecological or Natural Factors Components of Environment Political & Legal Factors Demograp hic Factors Economic Factors 18

19 Geographical & Ecological Factors of Business Environment 19

20 Demographic Factors of Business Environment 20

21 Economic Environment 21

22 Political & legal factors of Business Environment 22

23 Social & Cultural Environment 23

24 Physical & Technological Factors of Business Environment 24

25 External Forces that affects the Business Environment Socio Cultural Environment International & Global Environment of a business strategy Political & Legal Environment Economic Environment 25

26 UNIT II Political Environment -Meaning Government & Business relationship in India Provisions of Indian Constitutions pertaining to business 26

27 Meaning of Political Environment The political environment is the state, government and its institutions and legislations and the public and private stakeholders who operate and interact with or influence that system. Government actions which affects the operations of a company or business. These actions may be on local, regional, national or international level 27

28 Meaning of Political Environment 28

29 Major Political Factors 29

30 Other Political Factors 30

31 Political Environment 31

32 Legislature The main powers of the legislature policy-making, law making, approving the budgets, exercising control over executives, reflecting public opinion etc. Legislature exerts considerable influence on business It acts as the deciding factor for many important issues of business namely, type of the business activity, nature & size of the business firm etc. 32

33 Executive or State Executive is also called as the State or the Government. Our Constitution provides for a federal set-up, where the powers being divided between the National & State Govts. Govt implements decision made by the legislature. It enacts & enforce laws & regulations under which the business functions. Govt provides infrastructural facilities transportation, power, finance, trained personnel & civic amenities. 33

34 Judiciary Judiciary determines the manner in which the work of the State is to be fulfilled. It has the power to settle legal disputes that affects business considerably. Judiciary functions as the watchdog in order to ensure that both the legislature & the executive function in public interest and within the boundaries of the Constitution. Indian Constitution 34

35 Federal System of the Government India is a federal state & the Union-State financial relations are based on the principle of federal finance. The word Federation, connotes the union of two or more states. In federation, we have on one hand the Federal Govt or Central Govt, & on the other the constituent states. In a Federation there is constitutional division of powers, functions & resources between central & state govt. The 2 set of Govts are independent so far as their own functions & resources are concerned. 35

36 Federal System in India It comprises of a Central Govt, 28 States, & 2 union territories with legislatures, 5 union territories without legislatures, several autonomous regions within states, a three-tiered structure of rural bodies, & 3 levels of urban local bodies. As per the classification of the Planning Commission, 10 states are categorized as special & the remaining considered as general category states. Planning commission is a permanent body, the central & state level finance commissions are setup with a normal periodicity of 5 years. 36

37 Doctrine of Laissez Faire The classical economists like Adam Smith, advocated the policy of Laissez faire under 4 distinct features : The factors of production such as land, labour, capital & organization are privately owned with & production takes place at the initiative of the private enterprise. People have freedom of choice regard to consumption, occupation, saving, investment & production. Income is received in monetary terms through the sale of goods produced or services rendered by factors of production or from profits of private enterprise. The free market economy is not planned, controlled or regulated by the Govt, which only satisfies the collective wants through public services. The two motive powers of free market economy are profit motive & competition. 37

38 Responsibilities of Business towards Government Regular payment of Taxes Deduction of Tax at source Co-operating with the Government Providing necessary information for taking Decisions Responsibilities of Government towards business Enacting & Enforcing Law Providing Monetary System Balanced regional Development & Growth Provision for basic infrastructure Supply of information Assistance to small scale industries Transfer of technology Conducting inspections 38

39 The Preamble of the Indian Constitution The Preamble to the Constitution lays down that the attainment of social, economic and political justice & equality of status and of opportunity should be among the most important basic guiding principles of the functioning of the State. As if these were not enough, the Constitution was amended in 1976 to add among other things that India should be socialist state. Thus, the Preamble gives some indications of the need and scope for state intervention in the functioning of the economy with a view to discharging its duties & responsibilities of the realization of economic & associated objectives. 39

40 Directive Principles Vs. Fundamental Rights In the early days, the Supreme Court held that Fundamental Rights were a Sacro Sant Part of the Constitution & nothing including the Directive principles could override them. Hence there was a false impression that the Directive principles are not justiceable. In recent years the view that Fundamental Rights should be subordinated to the Directive Principles has been gaining ground. They should not be taken lightly & it is not correct to say that they have no binding force. They represent the broad signposts which state policy must follow. 40

41 UNIT III Social Environment Cultural heritage Social attitudes Impact of foreign culture castes and communities Joint family systems Linguistic & religious groups Types of social organization Social responsibilities of business. 41

42 Social Environment & Cultural Environment Introduction: Social & Cultural environment denotes the influence made by certain factors, which are beyond the control of the business. Social & Cultural environment is man-made and he has created by using the natural environment with skill & culture. 42

43 The Caste System Caste is a very ancient system. Originally, society was divided into 2 parts namely, The Aryans They came to India as invaders with vast differences in color, religion, customs & manners when compared to the original inhabitants. The Aryans were the conquerors & were of a fair complexion The Non-Aryans They were conquered & were dark. Caste is a type of social class having strictly hereditary basis. 43

44 Impact of caste system on business The Anthropological Survey of India (ASI) identified more than 4,6000 castes that make up the Indian Society. Identity assertion, social mobilization, politicization of caste, & intercaste tensions are some of the dominant socio-cultural features on Indian society. Business and industry are affected, as the corporate culture within is largely a microcosm of the wider socio-cultural environment outside 44

45 Social Institutions The family, caste system, the joint family system, the child marriage, inheritance system are important social institution. social institution 45

46 The Family The family is the most universal of all social institutions. We cannot see any society without the family system. The family has no age. It is common to all social systems. It is the smallest but the closest group of society. Joint Family System Joint family system is a very old concept. Under this system, all members of the family would live together & enjoy the income of the family. The land & properties are commonly owned and they work together to fulfill their wants 46

47 Child Marriage It was very common in India about 60 years ago. In those days children's got married at the age of 5 or 6. Early marriage in those days was one of the reason for over population. Those days have gone, now mostly marriages are made in teen ages only. At that time, couples will be in a position to decide about their future and lead a life independently. All these social changes have impact on business. Child Marriage 47

48 Impact of English Culture British rule in India influenced the Indian social system greatly. The British was least bothered about improving the economy of India but they showed keen interest in acquiring the wealth & prosperity and took them to their motherland. The British imperialism brought about the unification of the country and enabled the people to think as one nation. British only introduced the parliamentary form of Government. British rulers in India only introduced the concept of Rule of Law. All were equal & If anyone violated the law, was punished irrespective of caste & status. The British Govt set up a systematic framework for administration. Competitive examinations system was also introduced. 48

49 Social Attitudes The process of socialization forms the social attitudes among individuals. Words & deeds of an individual reflects the attitudes of the people. At the time of interaction between individuals & groups, the influence of the social attitudes can be seen. An attitude denotes an adjustment of the individual towards some selected person, group or institution. An attitude determines a particular expectation. If the events are in line with these expectations then there is satisfaction. But if the events are contrary, then there will be dissatisfaction. Attitudes could be formed to the social as well as economic aspects of the environment. 49

50 Linguistic & Religious Groups Indian society is a pluralistic society characterized by multitude of ethic, linguistic, religious and caste divisions. Hindus 80% Sikhs 2% Muslims 15% On the basis of language, Indian society stands divided into linguistic groups. The constitution of India recognizes 22 languages as major languages, which are spoken by 87% of the population. There are 1652 mother tongues in India, out of which Hindi 31% Telugu 9% The linguistic diversity of people for their regional language forced the Govt to reorganize the Indian states on the language basis. Language has emerged as a key factor of social & political pressure in India. 50

51 Social Structure of Indian Society Complex society Rural Society Economically backward country Illiteracy Diversified Languages Racial Diversity Caste Existence of communalism Regionalism Tradition Lack of free movement 51

52 Social Responsibilities of Business Every business unit should have a social obligation of being managed efficiently & profitably. Closure of any business has the impact on employees, creditors & customers. In view of Keith Davis Social responsibility begins where the law ends. A firm is not being socially responsible. It merely complies with the minimum requirements of law, because this is naturally any good citizen would do. Social responsibility goes one step further. It is a firm s acceptance of the social obligation beyond the requirements of law. 52

53 Scope of Social Responsibility 1. Internal & External Responsibilities 2. Maintaining Ecological Balance a. Environmental Planning b. Environmental Status Evaluation c. Environmental Impact Assessment 3. Covers Public Sector Also 53

54 UNIT IV Economic environment Economic systems & their impact of business Macro economic parameters like GDP Growth rate population Urbanization Fiscal Deficit Plan Investment per capita income & their impact on business decisions Five Year Planning. 54

55 Economic Systems - Introduction The economic system in a country exerts a great influence on the development prospects. Government regulates economic activities based on the country s economic system only. The economic activities are carried out with a view to earn, save & spend 55

56 Types of Economic System 1. Capitalism 2. Socialism 3. Mixed Economy 56

57 MICRO & MACRO ECONOMIC PARAMETERS Micro Economic parameters are controllable internal forces whereas the Macro Economic Parameters are uncontrollable external forces, otherwise called as general economic factors. They exert considerable influence over business. Follow the link given below for macro environment: Macro Environment Most important ones are discussed as below 1. National Income 2. Population Growth 57

58 Concepts of National Income GDP Gross Domestic Product NDP Net Domestic Product Per Capita Product / Income 58

59 Population Growth In India the size of the population is large and it is also growing fast. Human beings are not only ends but also means for economic activities. If they are in right numbers, they are assets & if it is not so and if they are huge in number in fact they are liabilities. Its study is vital to the progress of the economy and to the well-being of the people. 59

60 Types of Planning Five Year Plan : 60

61 Five Year Planning In India The Planning Commission has set the following as the objectives to be obtained through the successive 5 year plans. 1. Rapid in national income & per capita income in order to eradicate poverty & raise the standard of living of people. 2. Rapid industrialization & un employment. 3. Reduction in equalities in distribution of income. 4. Establishment of a socialist pattern of society. 61

62 UNIT V Financial Environment Financial System Commercial Banks Financial Institutions RBI Stock Exchange IDBI Non-banking Financial Companies [NBFC s]. 62

63 Introduction to Financial Environment The financial system consists of a variety on institutions, markets, instruments & services. The financial system is concerned with money, credit and finance. Money refers to the current means of payment Credit Loan is a sum on money to be repaid, normally with interest. It refers to the debt of economic unit. Finance is monetary resources consisting of debt & ownership funds of the state, business concern or person. 63

64 INDIAN FINANCIAL SYSTEM Financial Institutions Financial Markets Financial Instruments Financial Services Banking Institutions Money Market Money Market Instruments Venture Capital Merchant Banking Portfolio Services Non- Banking Institutions Capital Market Capital Market Instruments Factoring Mutual Funds Leasing Credit Rating 64

65 Financial Market Chart Financial Markets Money Market Capital Market Unorganized Short Call Term Money Bill Market Market Organized Comme rcial Papers 182 days Treasury Bills Market Sub markets Certificate Of Deposits Gild edged market Industrial Securities Market Development Financial Institutions Financial System 65

66 Banking System 66

67 Commercial Banks Introduction The commercial banks play a significant role in the economic activities of the nation. They are almost an indispensable factor in the modern society & form the core of the money market. Modern Banking operations touch almost every sphere of economic activity. They are inter linked in an inseparable way to all section of the economy like agriculture, industry, trade, commerce, imports, exports etc. 67

68 Commercial Banks Role of RBI 68

69 Role of RBI in economic development Role & Functions of RBI 69

70 Role of Commercial Banks in the Economic Development of a Country Banks play a decisive role in the development of industry & trade. They are acting not only as the custodian of the wealth of the country but also as resources of the country, which are necessary for the economic development of a nation. 70

71 The contributions made by banks for the economic development of the nation 1. Capital formation 2. Creation of credit 3. Channelizing the funds to productive investment 4. Balanced regional development 5. Fuller utilization of resources 6. Encouraging right type of industries 7. Bank rate policy 8. Bank monetize debt 9. Finance to government 10. Bankers as employers 11. Banks are entrepreneurs 71

72 IDBI 72

73 NBFC S 73

74 NBFI s 74