Attempt the following.
1) Importance of business environment.
(A) Business Environment: A business is defined as buying and selling activity to generate income. The business consists of several interrelated and interacting elements. Business is an economic and social activity of the society. Society is an integral part of the business and its interest cannot be ignored.
The business environment consists of the economic, social, legal, technological, and political situation.
The business obtains money, material, machinery and manpower, and other resources from the environment.
According to B. O. Wheeler- A business environment is “the total of all things external to firms and individuals which effect their organisation and operations”.
According to the Oxford English Dictionary- “Business Environment refers to those aspects of the surroundings of a business enterprise which influence or affect its Operations and determine its effectiveness.” Basically business environment consists of all internal and external factors that influence the nature and scope of business activity.
(B) Importance of Business Environment:
(I) Flexible and Dynamic: Changing environmental factors should be appraised from time to time. So as to keep the business flexible and dynamic. The new opportunities and threats created by the environment can be appraised by the corporate planners to make the most of it. Turbulent market conditions, less brand loyalty, more demanding customers, and intense global competition are some of the images of today’s business environment. In order to cope with these significant changes, the organization must understand and examine the environment and develop a suitable course of activity.
(II) Opportunities and Threats: Study of business environment enables a business enterprise to visualize future problems that can arise as also future business prospects in advance. Deriving benefit from honorable business opportunities is possible as also it can face the problems boldly. Awareness of the environment helps an organisation to take advantage of such opportunities instead of losing them to the competition. It helps the organisation to identify various threats on time and serves as an early signal.
(III) Competition: Understanding the business environment helps to obtain qualitative information which in turn is useful in formulating business plans, policies, and strategies for the future course of action.
(IV) Utilization of Resources Optimally: Optimum use of available resources for the business enterprise is possible by studying the business environment. It enables the enterprise to take full advantage of the policies implemented by the government.
(V) Strength and Weakness Identification: With the change of technology and global development it helps to analyze individual strengths and weaknesses of the business understanding the challenges, appropriate decisions are taken on a timely basis.
(VI) Knowledge: Study of the environment is necessary to discover and exploit new opportunities for business expansion broad strategies and long term planning enables the development of a formidable business wait.
(VII) Image Building: Environment-study makes it possible for the business to expand and to make it acceptable and agreeable to different social groups. By fulfilling its social obligations towards different groups of society, a business can create goodwill and reputation for itself.
(VIII) Adaptability to Socio-Economic Changes: A business organization needs to show its keen intentions towards adapting to the socio-economic changes.
2) Social environment.
Business is an economic and social activity. It has to produce goods according to the requirement of the customers. Satisfying customers is the basic need of business. Therefore, while manufacturing or producing’ goods, the business has to take into consideration social factors like traditions, customs, education, habits, values, lifestyles, thinking and earnings of the people of the country. Changes in the social environment are a must and management has to take into consideration these factors which determine the following aspects.
(1) Social Aspect: Literacy level, educational system, tradition and customs, the transition of labour, etc. are important aspects of the social environment. It helps to analyze the needs of the people and accordingly the business opportunities are identified.
(2) Social Trends: Business practices and procedures must be in tune with social beliefs. A growing number of working women and changing lifestyles have increased the demand for household appliances in India.
(3) Social Values: Cultural and social values. (Social justice, national integration, etc.), family organization and caste structure, social institutions, and groups, are taken to consider while making practices and procedures of the business.
(4) Traditions: Customs and traditions. (Diwali, Id, Christmas, etc.) also has an effect on the business. The businessmen have to be more responsible for the demand of the people accordingly.
3) Economic environment.
he economic environment comprises economic condition economic policies and economic systems which are the important factors influencing development and trade cycles, national income, etc.
(1) Economic Condition: If refers to the present state of the economy of a country or region based on the gross domestic product, per capita income, availability of capital, etc.
(2) Economic Policies: The government frames economic policies from time to time influencing business activities. In order to control the business in the interest of the politics. e.g.- Intestinal policy, monetary policy foreign investment policy, etc.
(3) Economic System: It refers to the scope of private business and extent of government regulation on economic activities determines the nature of the economic system i.e. capitalist social or mixed economic
4) Political environment.
Political dimensions or environment includes the country’s political system or its ideologies or condition i.e. dictatorship or democracy or communist government or socialistic government.
It indicates the general stability and peace in the country and att1tude 0f the elected government representatives towards business.
Political stability builds up confidence among business people to invest in long term projects for the growth of the economy.
In India we have adopted a mixed economy and growth rate often remains moderate. Indian political system comprises three vital institutions like Legislature, Government, and Judiciary.
(1) Legislature: the legislature is a very powerful force that decides the nature of the business, programs, project for the development of the country through policy-making, lawmaking, budget approving, etc.
(2) Government: The framework of policies are implemented by the government which affects the business organization to undertake the responsibilities of the society.
(3) Judiciary: It determines the work of executives to carry out the policies in a systematic manner, in order to settle the relationship between citizens and the government.
5) Impact of new economic policy on business and industry.
(A) Introduction: On July, 1991, the Government of India announced its New Industrial Policy. It brought about radical changes in the Economic Policy. The three main pillars of Economic reforms are L-P-G- (Liberalisation, Privatisation, and Globalisation). The main purpose was to modernise India’s Industrial system, implement new techniques, remove unproductive control, encourage private investment, and integrate our economy with the global economy.
(B) Impact of changes in Government Policy on Business and Industry:
(1) Budgetary Support: The Central Government’s budgetary support for financing the public sector outlays have declined over the years. In order to survive and grow, PSUs have to be more efficient and self-sufficient so as to compete with the private sector.
(2) Increase in Competition: Competition for Indian firms has increased due to the changes in the rules of industrial licensing and entry of foreign firms. for e.g. Service Industries like Insurance, Banking, Telecommunications, Hotel, and Airlines, etc. which were earlier in the public sector are now facing, competition from private players such as Bajaj Alliance, Max Life, Star Life, Insurance, low-cost airlines like Indigo, etc.
(3) New Trade Policy: The new trade policy has helped the Indian Firms to enter into foreign markets and earn the foreign exchange required for importing raw materials, spare parts and components they needed t for keeping their production lines going.
(4) Demanding Customers: Today’s market is customer-oriented as customers are well informed and there is a growing awareness among them about the malpractices adopted by traders, consumer rights, consumer education, and so on. Moreover, competition in the market gives the customer a wider choice in purchasing good quality products and makes customers more demanding.
(5) Need for Human Resource Development: New technologies require expert knowledge and skill in various fields. Moreover, newer markets made it compulsory for companies to acquire trained personnel with a high degree of competence and commitment. Hence, there is a need for well-trained staff and thereby develop human resources.
(6) Change in Technological Environment: Increased competition and advancements in the field 0f technology have forced the business units to develop new ways to survive and grow in the market and keep pace with the latest technological developments.
(7) Change in the Concept of Marketing: Earlier business organisations were production oriented but due to the fast-changing business world it has now become market-oriented. This changed to a societal concept where the needs of society are kept in mind by the producers. The latest is relationship marketing whereby it is not only producing goods for consumers but maintaining long term relationships with them so as to sustain them.