16028 business environment!
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Business Environment
Business Environment-Text and Cases, Cherunilam Francis, Himalaya Publishing House,Twentieth Revised Edition, 2011
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Business Environment
An overview of Business Environment
Constituents of Business Environment
Business and Society
Industrial Policies
Regulatory Framework
Financial System
Labour Environment
Economic Planning & Development
Global Environment
Latest Changes in Business Environment
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Business Environment
Def: The aggregate of all conditions, events, and
influences that surround and effect it can be
referred to as business environment
Determines the role of the enterprise and the
nature of task.
Determines role of the top management and also
its business policies.
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Components of Business Environment
Different environmental variables exist internally and externally to the
business enterprise
Environmental variables have a positive or negative influence on the
enterprise
Business environment consists of two sub-environments:
Internal environment
External environment consists of :-
Micro/Operating environment
Macro/General environment
Mutual relationships exist between these environments
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Importance
Helps an organization to develop its broad
strategies and long term plans.
Analyze competitors strategies.
Keeps the organization dynamic in approach.
Foresee the impact of socio economic changes at
the national and international level.
Adjust to the prevailing conditions.
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Internal factors
Factors contributing to Strength or weakness :-
Organizational resources
R & D ,and Technological capabilities
Financial capability
Marketing capability
Operations capability
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External Factors
Social Economic
Cultural Geographic
Technological Political
Legal Ecological
Govt. Policies Competitive Market
Condition Locational
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Environmental factors
Social Factorsbusiness is a social institution.
Social responsibility
Satisfy the needs and wants of society goals
Culture, Values, Tastes and Preferences, Social
Integration and Disintegration and so on.are part
of agenda of an organization.
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Economic Factors
Per Capita Income, National Income, Resource
Mobilization
Exploitation of Natural Resources, InfrastructureDevelopment, Capital Formation
Employment Generation, Propensity to Consume
(Luxury or Economic goods), IndustrialDevelopment
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Cultural Factors
Social and religious practices, education, knowledge
and cultural factors
Norms and beliefs
Social stratification (rural parts)
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Geographic Factors
important for global business managers
Geographic Location, Seasonal Variations, Climatic
Conditions
Industrial location policies of Government
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Technological Factors
Rapidly changing
R & D Activity (India must invest)
e.g. Foreign Investment upto 100% in Industries with sophisticated
technology.
Political Factors
Philosophy and approach of political party
Government interventions
Legal Factors
Industrial Licensing, Company formation laws
Laws regarding Industrial disputes, payment of wages, trade unionism,
Monopoly control, Foreign Exchange Regulation
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Ecological Factors
Ecological Imbalance due to change in environment and biotic
factors
Environmental protection and Preservation
Pollution Free Industrial Activity (Carbon Credit)
Legislations
Government Policies
Industrial Policy resolutions and Licensing Policies
Trade Policies, Labor Policies, Location Policies, Export
Import policies, Forex Policies, Taxation policies (Arab
Countries)
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Competitive Market Condition
Socialist centralized authority
Capitalist competitive forcesIndia a Mixed Economy
Location Factors
Taxation Policies
Subsidies
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Political Risk Stability
Government Effectiveness risk hindrance to reforms
Legal & Regulatory Risk slow
Macroeconomic Risk inflation, prices
Foreign Trade and Payment Risk
Export / import duties, tariffbarriers
Tax Policy Risk VAT, GST
Labor Market Risk
Financial Risk
Currency appreciation / depreciation Infrastructure Risk
Country Risk changes in monetary / fiscal policy
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Internal Environment
Within the organization
Factors controlled by the organization
Technology Advancement
Employee Attitude
5Ms Machine, Manpower, Money, Materials,
Management
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Business system/ processa structured, measured set of activities designed to produce a specific
output for a particular customer or market. It implies a strong emphasis on
how work is done within an organization, in contrast to a product focuss
emphasis on what. A process is thus a specific ordering of work activities
across time and space, with a beginning and an end, and clearly defined
inputs and outputs: a structure for action. ... Taking a process approach
implies adopting the customers point of view. Processes are the structure
by which an organization does what is necessary to produce value for its
customers.
Organisation of factors of production Processing Marketing of output
Logistics
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There are three types of business processes:
Management processes, the processes that govern the operation of a
system. Typical management processes include "Corporate
Governance" and "Strategic Management".
Operational processes, processes that constitute the core business
and create the primary value stream. Typical operational processes are
Purchasing, Manufacturing, Advertising and Marketing, and Sales.
Supporting processes, which support the core processes. Examples
include Accounting, Recruitment, Call center, Technical support.
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The Four Major Process Improvement Areas
Effectiveness
Efficiency
Internal control
Compliance to various policies
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Classification of business, industries
Agriculture and mining
Financial
Information businesses
Manufacturers
Real estate
Retailers and distributors Service businesses
Transportation
Utilities
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Classification of Industries
Based on nature of activity
Extractive Industries
Genetic IndustriesManufacturing Industries
Construction Industries
Service Industries
IT Industries
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Based on Competitive Structure
Monopoly(Monopsony/ bilateral monopoly)
DuopolyOligopoly
Monopolistic Competition (product differentiation)
Perfect Competition
Based on Size
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Based on Use
Basic Industries
Capital Goods Industries
Intermediate Industries
Consumer Goods Industries
Based on Input
Agro Forest
Marine Metal
Chemical
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Based on Proprietary
Public
Private
Joint
Co-operative
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Characteristics and goals of business
Advises on and supports decision making throughout the
organization.
Supports the management of risk and complexity.
Is valued by other parts of the organization for the support it
gives to their activities.
Is usually involved in the development and implementation of
strategy. Always advises managers on the business implications of data
it produces.
Plays an active role in decisions on the business portfolio.
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continued
Originates cost reduction strategies for the whole organization.
Is proactive in generating forward looking information to influence
business strategy.
Directly communicates with external stakeholders concerning business
performance.
Is involved in the organization's environmental, social and governance
performance.
Initiates and leads change.
Leads in the identification and assessment of new business opportunities.
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Characteristics of Business
Exchange of goods and services for Income
Recurring activities
Profit motive
Risks
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Goals of Business
Justify the organization
Provide direction
Basis for management by objectives Help strategic planning
Help coordination
Provide standards for assessment and control
Help decentralisation
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Environmental Analysis
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Techniques for environmental analysis
Scanning (Verbal And written information)
Monitoring (Spying / in-depth study)
Forecasting (anticipating the future )
Assessment
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Steps in Environmental Forecasting
Identification of relevant Environmental Variable
Collection of Information
Selection of forecasting Technique
Monitoring
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Types of Forecasting
Economic Forecast
GDP growth rate distribution of income
Structural changes in GDP per capita income
Investment & output trends price trends
Social Forecasts
population growth/decline age structure
Rural/ urban distribution migration
Factors related to family ethnic composition
Expenditure pattern social attitudes
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Political Forecasts
changes in political power/ political ideologies
Technological Forecast (TIFAC)
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Techniques for Environmental
Forecasting
Econometric Techniques
While extrapolations assumes that everything continues as in
the past, econometric model assume that only the relationshipremains the constant
use casual
relationship
casual relationships
then specified by
using domain
knowledge
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Trend Extrapolation
Simple linear relationship Non linear relationship
Scenario Development
Premising Method System Diagram Method
Critical Site Method The newspaper Headline Method
Logical Possibilities Method
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Judgment Models
Brain Storming
Delphi Method
Strategic Issues Analysis
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Importance of Business
Environmental Analysis Awareness
SWOT
Transformation of Industry
Risk identification
Strategy Formulation
Information
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Limitations of Environmental
Forecasting
Errors in selecting variable in the predictive model
Errors in selection of the functional forms for linking
the variables
Time & cost factor
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Economic Environment
Business fortunes and strategies are influenced by the
economic characteristics and economic policy dimensions. The
economic environment includes the structure and nature of
the economy, the stage of development of the economy,
economic resources, the level of income, the distribution ofincome and assets, global economic linkages, economic
policies etc
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Nature of the Economy
On the basis of per capita income
Low income $975
High income $11,906
Middle income $3,856
Developed/ developing economies
High income (oil exporting)Inequalities in distribution of income
Income elasticity of demand
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Transition economies
Liberalization
Macroeconomic stabilizationRestructuring and privatization
Legal and institutional reforms
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Structure of The Economy
Contributing sectors
primary, secondary, large, medium, small
Integration with the
global economies
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Economic policies
Industrial Policy
liberalization in 1991/ MRTP Act
Trade Policyliberalization of import policy
Foreign Exchange Policy
Fiscal Policy
Monetary policy
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Economic Conditions
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POLITICAL AND GOVERNMENT
ENVIRONMENT
The political environment includes factors such as the
characteristics and policies of the political parties, the nature
of the Constitution and government system and the
government environment encompassing the economic and
business policies and regulations.
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Government consisting of three distinct sets of
powers
Legislature
Executive
Judiciary
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Functions of state
Opportunities for trade
Distributions of powers
Core functions such as Law and order Role of the State in development of industries
environment , financial and monopolies
Expansion in role play not only in the infrastructureand utilities but also in education and healthcare
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Classification of functions of State
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Impact of State
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Economic Role of the Government
Depend upon the type of role the govt. is playing
Capitalist
Communist Regulatory
reservation of the industries (IDR Act 1951)
ceilings on the profit margins, dividend
Indirect controls fiscal n monetary policy
Direct control are discretionary in nature
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Promotional Role
Building up the infrastructure in the developed / developing
countries
Entrepreneurial Role
Redefining role from public to the private sector
SOEs
Putting up capital-intensive projects
e.g. steel, capital goods, petrochemicals, fertilizers
Planning Role
utilization of the resources on the basis of available
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Trends in Political philosophies
Political and economic changes
USSR (Union of Soviet Socialist Republics)
Eastern Europe
Hostilities b/w countries affecting the business of firm in the
3rd countirs e.g Arab with Israel
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Government and Legal Environment
Standards for the products to be marketed
Children in the commercial advertisements
Advertisement of alcoholic liquor
Packaging containing statutory warning
Advertisement of baby foods
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Economic roles of Government of
India The Preamble
The Fundamental Rights
Fundamental duties
Directive principles
Freedom of Trade, Commerce and Intercourse Separation of Powers
Division of Power
Expansion in State Intervention
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Natural and Technological
Environment Natural Environment
resource available
location of business
climatic and weather conditions
Technological Environment
Hard/ Soft Technology
International communication
e- commerce
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Innovation
Radical
Incremental
Next- Generation
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Major reasons for new product failure
The better mousetrap no one wanted
Me- too product
Lack of marketing Environmental ignorance
Technological Dog product
Price crunch
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Product and Process Innovation
To make the product cheaper
It generally varies with the time
Because until the product design has been
standardized manufacturer cannot focus on
improving the production process that producesuch design
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Technology S-Curve
Technology Leadership and Followership
Technology and competitive advantage
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Source of Technological Dynamics
Innovation Drive of the company
Customer need
Demand condition
Suppliers offerings
Competitive Dynamic
Substitutes
Social Factors
Technical Facilities
Government Policy
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Time lags in Technology
Developing and developed
Obsolete technology
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IT revolution in Business Environment
Impact of Technology on Globalization
ICT and Marketing
Transfer of Technology
Promotion and Regulation
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Importance of Demographic
Environment
Age structure Gender
Income Distribution Family SizeFamily Life cycle Occupation
Education Social Class
Religion Race
Nationality Population size
e.g formation of EU
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Falling Birth Rate and Changing Age
Structure
Affecting the growth of the developed/developing markets
Shrinking the various types of markets, e.g. Baby product
Increasing the market for various industries such as Hotels,
airlines and restaurants
Large share of disposable income available
Type of labour homogeneous/ heterogeneous
Implications for the government
Depends upon the amount of population below the poverty
line
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Migration and Ethnic Aspects
Situation of different countries e.g. USA and Japan
Detroit, Miami, Silicon Valley
Changing economic shapes from Melting Pot to
Salad Bowl
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Societal Environment
Business and Society
Professionalization
Business Ethics
Business and Culture
Technological Developments and Social Changes
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Business and Society
Social Institution, performing a social mission and
having a broad influence on the way people live and
work together
Values
Viability
Public Visibility
f l
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Professionalization
Acquiring specialized knowledge and skill for
management
Acquiring authority and freedom to take the right
decision
No ideological bias in the discharge of the functions
Decisions and actions guided by certain ethical
consideration
h
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Business Ethics
Not deceiving the customers
No Black-marketing
Not distorting or destroying the competition
Sincerity and accuracy in advertising, labeling and packaging
No unfair practices
Making accurate business records
Pay taxes and discharge other obligations
Ensure payment of fair wages
Refrain from secret payoffs to customers, suppliers,
administrators, politicians
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Role of Trade Associations in
Maintaining Business Ethics
Education and persuasion
Forming code of Ethics
Moral Sanctions
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Business and Culture
Cultural differences are the most significant and
troublesome variables encountered by the
multinational company
Meaning of culture
human product of social interaction
acceptable patterns for meeting biological and social needs
cumulative learning patterns
symbolic quality, and basic determinant of personality
El f l
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Elements of culture
Knowledge and beliefs
Ideals
Preferences
Organization of culture Social structure and integration of traits, complexes
and patterns
Stratification
Common institutes of Modern Culture
economic system, political administrative system, education
system, religion, family,
C l l Ad i
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Cultural AdaptationManner in which a social system or an individual fits
into the physical or social environment
adaptation to the oil prices
adaptation to the diseases
adaptation of a worker to the organization
Cultural Shock
Cultural Transmissiondropping some ideas and acquiring new traits
transmission is horizontal as well as vertical
i h b i
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Importance in the business
The role of advertising in the transmission
Media communication
Formulating promotional strategy
Identifying the reference group and their influence
Cultural Conformity
Either conform or deviate
Required knowledge and appropriate skill
Blind conformity
Cultural Lag
C lt l T it
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Cultural Traits
Low- Context and High- Context Cultures
importance of facts and figures
importance of relationships, atmosphere and
attitude
Masculine and Feminine Cultures
Monochronic and Polychronic Society
trends of the changing society
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Universalism vs. Particularism
Cultures with high universalism, focus on rules than
relationship
Deal is deal, no relationship
Individualism vs. Communitarianism
Neutral vs. Emotional
Specific vs. Diffuse
Achievement vs. Ascription
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Religion
Marketing of Beef products, type of food (slaughteredanimal/ bird for Muslims, Christians rituals)
Religion influencing the attitude towards work and
wealth Religion deciding the working hours and the
holidays and finding some days to be religious to
launch a new products
Introduction of promotional schemes
Handing of different industries in specific countries
e.g. Banking Industry in Islamic regions
Eth d i ti
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Ethnodomination
Domination of certain type of ethnic groups in some
particular trade
Languages
Problems of having different languages in one
country, e.g. three languages in Switzerland
40 languages in South America
200 languages in Zaire
40 ethnic groups in Kenya
Some of the same words having different meanings
or connotation in the different places
Fiera by Ford, Nova by Chervorlet
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Cultural and Organizational Behavior
Centralized vs. Decentralized Decision making
Safety vs. Risk
Individual vs. Group Reward
Informal vs. Formal Procedure
High vs. Low Organizational Loyalty
Cooperation vs. Competition Short-term vs. Long-Term Horizon
Stability vs. Innovation
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Other Social/Cultural Factors
Consumer preferences, habits and beliefs
share ofNescafe and Bru
use of bicycle
eating habits, preferences b/w countries
nature of use, occasion of use
values and beliefs associated with colour
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Etiquettes
hugging and kissing while embracing
laughter
handshake
properly responding to a guests invitation/treat
gift giving/ the way of giving it
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Some Social Trends
number of working women
number of double income households
unmarried couples living together
high divorce rate/ remarry
person living alone
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Technological Development and Social
Changes Impact of development and the industrial age
Changing social life and status of women
Changing the way we communicate and transport
Change in the cast system because of
industrialization
Use of the natural resources
Adverse effects on society
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Social Responsibility of Business
Classical and Contemporary Views
Social Orientation of Business
Factors Affecting Social Orientation
Responsibilities to Different Sections
The Indian Situation
Arguments for and Against Social Involvement
Social Audits
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Classical and Contemporary Views
Contemporary view of business is an ecologicalone
Meeting stakeholders expectations
Business is an economic entity and cannot jeopardize itsprofitability meeting social needs
Long term benefit for the society
Social power of the business to influence outcomes
Related to the size of the company and to the industry it is in
Tackle only those social problems in which it has competence
Willingness to absorb the burden and the cost
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Social Orientations of Business
Social Responsibility Models
A firm has the following four categories of obligations of
corporate performance
Economic LegalEthical Discretionary
Extent of Social Orientation and Involvement
Anti- Social Indifferent
Peripheral Socially Oriented
Committed and Very Active
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Factors affecting Social Orientation
Promoters and Top Management
Board of Directors
Stakeholders and Internal Power Relationship Societal Factors
Industry and Trade Association
Government and Laws
Political Influences
contined
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contined.
Competitors
Resources
Ethical Influences
The Golden Rule
The Utilitarian Principle
Kants Categorical Imperative
The Professional Ethic
The TV Test
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Responsibilities to Different Sectors
Responsibilities to Shareholders
develop and improve business
providing dividendsinnovation and growth
brand image
Responsibilities to Employees
fair wages best possible working condition
welfare facilities training and education
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Proper system for accomplishment and promotions
Proper recognition, appreciation and encouragementof special skills
Efficient grievance handling system
Opportunity for participating in managerial decisions
Responsibility to Consumers
to be efficient to do R & D
remove the imperfections in distribution
continued
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continued
stability in Price and after sale services
the product supplied with no adverse effects
to provide sufficient information
to avoid misleading the customers
redress genuine grievances
understand customer needs and to take necessary
measures
continued
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continued
Responsibility to the community
to prevent environmental pollution
to maintain ecological balance
rehabilitating the population displaced by the
operation of the business
overall development of the locality
to conserve scarce resources and developing
alternatives
continued
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continued.
to improve the efficiency of the business operation
contribution to research and developments
development of backward areas
promotion of ancillarization and small scale
industries
furthering social causes
contribution to the national effort to build up a
better society
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Arguments For and Against Social
EnvironmentFor
To use of the resources of the society, need to be
responsible for the society To become an integral part of social system, need
to care for the need of the society
Social involvement maintain healthy relationship Have favorable financial effects e.g. recycling
Sometime discourage additional govt. regulation
Public image
continued
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continued
Against
Business should confine to its own business
Involvement of social activities could affect the
economic health
High cost ultimately passed on to the consumer
Affecting the competitiveness of the company
Avoiding tax brackets
Dominance of business over the society
Social Audit
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Social Audit
Identification of the firms activities having
potential social impact
Assessment and evaluation of the social cost and
social benefits of such activities
Measurement of the social costs and benefits
Reporting
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Objectives and Benefits of Social Audit
Evaluate the social the social dimensions of the
performance of the company
Accurate identification of requirements Prioritization of developmental activities as per
requirements
To take measures to improve the socialperformance of the company
Public Visibility
Boost the public image
M th d f S i l A dit
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Methods of Social Audit
Social Process Audit
Financial Statement Format Audit
Macro-Micro Social Indicator Audit
Constituency Group Audit
Partial Audit
Comprehensive Audits Corporate Rate approach
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Obstacles to Social Audits
Yet to gain wide acceptance and appreciation
Non availability of well accepted methodology
available
No agreement as to the items to be included
Impossible to quantify the social costs and benefits
of different activities
May be resistance within the company
Fear of dismal or unsatisfactory picture that may be
presented by the social audits
The Indian Situation
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The Indian Situation
Responsibility of the corporate sectors
Public vs. Private sector
Consumer Rights
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Consumer Rights
The increase in the consumer awareness leads to
growth of consumerism and growing demand of
consumer protection
Right against exploitation by unfair trade practices
Right to protection of health and safety from the
goods and services the consumer received
Right to be heard if there is any grievance or
suggestion
Right to get the genuine grievances redressed
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Right to be informed about
quality and performance standard
ingredients of the products
operational requirements
possible adverse effects
other relevant facts concerning the product
right to choose the best from a variety of offers Right to a physical environment that will protect
and enhance the quality of life
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Exploitation of Consumer
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Exploitation of Consumer
By stimulating the weak points and the soft corners
of their mind
Misleading, false or deceptive advertisements
Deliberately giving the half truths
Projecting the potency of the drug, without
elaborating the risks
Consumerism
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Consumerism
The dedication of those activities of both public and
private organizations which are designed to protect
individuals from practices that impinge upon their
rights as consumershas the following important role to play
Consumer Education
Product Rating
Liaison with Government and with Producers
Utility of Consumerism
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Utility of Consumerism
Producers and the sellers will not take the
consumer for granted
Provide feedback for the business
Minimize the imperfections on the distribution
front
Make the government more responsive
Consumer Protection
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Consumer Protection
The Business
The Government
UN Guidelines
Different Government ActsSherman Act and the Clayton Act of the USA
Federal Act of Switzerland
Act Against Restraint of Competition of SpainFederal Trade Commission (FTP)
The consumer
Non-Governmental Organizations
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UN Guidelines for the Consumer
Protection Objective
to assist countries in protecting the consumers
to facilitate production and distribution
to encourage high level of ethical conduct
to assist countries in curbing abusive business practices
to facilitate the development of independent consumer groups
to further international cooperation
to encourage the development of market conditions
continued..
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General Principles & Guidelines
Physical safety
Promotion and protection of consumers economic
interest
Standards for safety and quality of consumer goods
and services
Distribution facilities for essential consumer goods
and services
Consumer redresses
Education and information Programs
Consumer Protection and
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Consumer Protection and
Consumerism in India
Plight of the Indian Consumer
Short supply of many goods and services
Lac of effective competition
Unfamiliarity of the consumer with product features
Low literacy and unsatisfactory information
Legal system in India Consumerism not well organized and developed
Poor performance of Public Sector monopolies
Implementation of standards
continued.
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Government Measures
Statutory regulations
Competition Act Industries Act
Essential commodities Act Prevention of food Adulteration Act
Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act
Trade Marks and Merchandise Marks Act Sale of Goods Act
Indian Patents and Design Act Agricultural Products Grading and Marketing Act
Indian Standard Institutes Certification Act Standard Weights and Measures Act
Import and Export Control Act Packaged Commodities Order
Price and Stock Display Order Consumer Protection Act
Growth of Public Sectors
Consumerism
Continued..
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Opportunity for Industry
Importance of Marketing
Sharing of information with the consumers
Testing the safety of the products Dealing with the consumers complaints
Overplaying the claims
Investments in R & D
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Corporate Governance
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p
Governance is the process whereby people inpower makes decisions that create, destroy or
maintain social system, structures and processes
To make the balance between economic and socialgoals and between individual and communal goal
To align as nearly as possible the interest of
individuals, corporations and society Corporate Governance is concerned with the value,
vision and the visibility
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Reasons for the Growing demand of
Corporate Governance While companies grew phenomenally, accounting
standards went haywire
Investors suffers on account of unscrupulousmanagement of the companies
To pay adequate attention to redress investors
grievances Timely dissemination of information
Securities market regulations
Necessitatin Facilitatin set of factors
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Importance of Corporate Governance Prerequisite
Regulatory and Voluntary Actions
Organization for Economic Cooperation and Development(OECD)
Fairness,
Transparency,Accountability and
Responsibility
d f l
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Recommendation of Birla Committee
Mandatory recommendations
Applicability
Board of Directors
combination of executive and non-executive
non-executive at least 30% (if one of them is chairman)
non-executive at least 50% (if one of them is MD and chairman)
Independent Directors
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Audit Committee and Remuneration Committee
Accounting Standards and Financial Reporting
Management
assisting in the decision making process
implementation of policies and code of conduct
day to day affairs
Information System
compliance to all regulation
Services to shareholders
Effective internal control
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Shareholder
General Body Meetings
Rights of the shareholders
Conclusion
various steps taken by SEBI
Disclosure of the IPO
Information in directors reports
Declaration of quarterly results
Mandatory appointment of compliance Officer
Copy of complete balance sheet
Guidelines for preferential allotment
Providin fare and trans arent framework
Industrial Policies and Regulations
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Industrial Policies and Regulations
Indicate the restrictive role of the public, private,
joint and cooperative sectors and underlined the
national priorities and the economic development
Industrial development and thereby the economic
development to a very significant extent
Industrial policy upto 1991
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Reservation of industries
Dominance of public sector
Industrial Policy Resolution of 1956
Entry and growth restrictions
Restrictions on foreign capital and technology
The new industrial policy
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Objectives
Redefinition of public sector
Liberalization of foreign investment
Related measures
Evaluation of the New Policy
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Government stand on the privatization is not clear
Policy and the procedural systems in India are very
complex for foreign businesses
Process of deregulation and decontrol by the
governments
Industries Development and
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Industries Development and
Regulation Act (IDRA) Objectives
to take necessary steps for the development of industries
to regulate the pattern and direction of development
control of the activities, performance and results of industrial
undertakings
continued..
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Main Provisions
Development Measures
Regulation of Entry and Growth
Supervision and Control
Take over of Management
Price and Distribution ControlExemptions
Industrial Licensing
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Issuance of letter / letter of intent
Level of investments
The New Policy - Industries for which the licensing iscompulsory
Distillation and brewing of alcoholic drinks
Industries using Tobacco/ Tobacco substitute
Electronic Aerospace and defense equipment
Industrial explosives including detonating fuses, safety fuses,gun powder, nitrocellulose and matches
certain specified hazardous chemicals
Locational Policy
Public Private Joint and
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Public, Private, Joint and
Co-operative Sectors
Public Sectors
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Objectives
To help in rapid growth and industrialization
To earn ROI and thus generate resources for
development
To promote distribution of income and growth
To create employment opportunities
To promote balance regional development To assist development of small scale and ancillary
To promote import substitute
continued..
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Growth and performance of Public Enterprises
Industrial Policy Resolution
Major of the Central public Sector investment wasin steel, coal, minerals & metals, power and
petroleum sectors
Comparison of Investment vs. Profit in PSEs Factors involved in the unsatisfactory growth of
Public sector
New Public Sector Policy
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New Public Sector Policy
Many public enterprises becoming a burden
Withdrawal of public sector from
industries based on low technology
small scale and non- strategic area
inefficient and unproductive areas
areas with low social responsibility
areas where private sector has developed sufficient
enterprise and purpose
continued
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The main element of current Government Policy
Bringing down the government equity in PSU to 26%
Restructure and revive potentially viable PSUs
Close down PSUs which cannot be revivedFully protect the interest of workers
Set up of the new department for Disinvestments
Better utilization of national resources
Public Sectors Rathnas
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O i ti f P bli E t i
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Organization of Public Enterprises
Ministry
Departmental Undertaking
financing from treasury
governmental control on budget, accounting and
audit
civil servants as staffing
suit against the government
continued
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Government Company
51% ownership
directors appointed by the government
a body corporate created under a general law
can sue and can be sued, enter into contract
created by executive decision of government
funding by the government
exempt from the personnel, budget, accounting and audit
employees are not civil servants
continued..
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Principal defects attributed to a governmentcompany
evading state owned enterprise responsibilities
regulating laws are reserved to government
declaration of profits and appointments reserved
extent of autonomy can be materially affected by
government agencies
Public Corporation
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Created by special laws defining its objectives,powers and privileges and its relationship with
government
Is a body corporate and can cue and can be sued,
enter into contracts and acquire property in its ownname
Usually independently financed
Not subject to the budget, accounting and auditlaws and procedures applicable to government
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