Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

MODULE -3
Business Around Us

Notes

3
BUSINESS ENVIRONMENT

U

nderstanding the environment within which the business has to operate is very important
for running a business unit successfully at any place
...
Hence it is important to learn
about the various components of the business environment, which consists of the economic
aspect, the socio-cultural aspects, the political framework, the legal aspects and the
technological aspects etc
...

In addition, we shall also acquaint ourselves with the concept of social responsibility of
business and business ethics
...


3
...
For example, when there is a change in the government polices,
Business Studies

53

MODULE -3
Business Around Us

Notes

the business has to make the necessary changes to adapt itself to the new policies
...
Again a change in the fashion or
customers’ taste may shift the demand in the market for a particular product, e
...
, the
demand for jeans reduced the sale of other traditional wear
...
So the business units must have to
adapt themselves to these changes in order to survive and succeed in business
...

The term ‘business environment’ connotes external forces, factors and institutions that are
beyond the control of the business and they affect the functioning of a business enterprise
...
While some of these factors or forces may have direct
influence over the business firm, others may operate indirectly
...
It may also be defined as the set of external factors, such as
economic factors, social factors, political and legal factors, demographic factors, technical
factors etc
...

Social factors
Economic
Factors

Technological
Factors

Political
Factors
Business
Decisions
Legal
Factors

Demographic
Factors

3
...
1 FEATURES OF BUSINESS ENVIRONMENT
On the basis of the above discussion the features of business environment can be
summarised as follows
...

(b) It covers factors and forces like customers, competitors, suppliers, government, and
the social, cultural, political, technological and legal conditions
...

(d) The changes in business environment are unpredictable
...

(e) Business Environment differs from place to place, region to region and country to
country
...
Taste and values
cherished by people in India and China vary considerably
...
1
...
This
interaction helps in strengthening the business firm and using its resources more effectively
...
To be more
specific, proper understanding of the social, political, legal and economic environment
helps the business in the following ways:
(a) Determining Opportunities and Threats: The interaction between the business
and its environment would identify opportunities for and threats to the business
...

(b) Giving Direction for Growth: The interaction with the environment leads to opening
up new frontiers of growth for the business firms
...

(c) Continuous Learning: Environmental analysis makes the task of managers easier in
dealing with business challenges
...

(d) Image Building: Environmental understanding helps the business organisations in
improving their image by showing their sensitivity to the environment within which they
are working
...

(e) Meeting Competition: It helps the firms to analyse the competitors’ strategies and
formulate their own strategies accordingly
...


INTEXT QUESTIONS 3A
1
...

______________________________________________________________
______________________________________________________________
Business Studies

55

MODULE -3
Business Around Us

2
...

(a) The business environment is static in nature
...

___________________________________________________________
(c) The changes in business environment are quite predictable
...

___________________________________________________________

3
...
The economic environment
includes economic conditions, economic policies and economic system of the country
...
All these have a bearing on the strategies adopted by the firms
and any change in these areas is likely to have a far-reaching impact on their operations
...


3
...
1 ECONOMIC ENVIRONMENT
The survival and success of each and every business enterprise depend fully on its economic
environment
...
These
include gross domestic product, per capita income, markets for goods and services,
availability of capital, foreign exchange reserve, growth of foreign trade, strength of
capital market etc
...

(b) Economic Policies: All business activities and operations are directly influenced by
the economic policies framed by the government from time to time
...
Every business firm has to function strictly within the policy
framework and respond to the changes therein
...

(ii) Fiscal policy: It includes government policy in respect of public
expenditure, taxation and public debt
...

(iv) Foreign investment policy: This policy aims at regulating the
inflow of foreign investment in various sectors for speeding up
industrial development and take advantage of the modern
technology
...
Through this
policy, the government announces various duties/levies
...

(c) Economic System: The world economy is primarily governed by three types of
economic systems, viz
...
India has adopted the mixed economy system which implies co-existence
of public sector and private sector
...
2
...
The social structure and the values that a
society cherishes have a considerable influence on the functioning of business firms
...
Due to increase in literacy rate the consumers are becoming more
conscious of the quality of the products
...
This increases the demand for the different
types of household goods
...

Business Studies

• Capitalist
Economy:
Emphasis on
private ownership
...

• Mixed Economy:
Co-existence of
public and private
sectors
...
All these aspects have a bearing on the strategies adopted
by the business firms
...
It sends a signal of strength, confidence to various interest
groups and investors
...
You may be aware that Coca-Cola, a cold drink widely
used even now, had to wind up operations in India in late seventies
...
Most of the labour unions in
India are affiliated to various political parties
...

also adversely affect the business operations
...

(c) Legal Environment
This refers to set of laws, regulations, which influence the business organisations and their
operations
...
The important legislations that concern the business enterprises include:
(i)

Companies Act, 1956

(ii)

Foreign Exchange Management Act, 1999

(iii)

The Factories Act, 1948

(iv)

Industrial Disputes Act, 1972

(v)

Payment of Gratuity Act, 1972

(vi)

Industries (Development and Regulation) Act, 1951

(vii) Prevention of Food Adulteration Act, 1954
(viii) Essential Commodities Act, 2002
(ix)

The Standards of Weights and Measures Act, 1956

(x)

Monopolies and Restrictive Trade Practices Act, 1969

(xi)

Trade Marks Act, 1999

(xii) Bureau of Indian Standards Act, 1986
(xiii) Consumer Protection Act, 1986
(xiv) Environment Protection Act
(xv) Competition Act, 2002
Besides, the above legislations, the following are also form part of the legal environment of
business
...


Notes

(ii) Judicial Decisions: The judiciary has to ensure that the legislature and the government
function in the interest of the public and act within the boundaries of the constitution
...

(d) Technological Environment
Technological environment include the methods, techniques and approaches adopted for
production of goods and services and its distribution
...
For example, in USA and many
other countries electrical appliances are designed for 110 volts
...
In the modern competitive age, the pace of
technological changes is very fast
...
It may be noted that
scientific research for improvement and innovation in products and services is a regular
activity in most of the big industrial organisations
...

(e) Demographic Environment
This refers to the size, density, distribution and growth rate of population
...
For example a
country where population rate is high and children constitute a large section of population,
then there is more demand for baby products
...
The high rise of population indicates
the easy availability of labour
...
Moreover, availability of skill labour in certain areas
motivates the firms to set up their units in such area
...
Thus, a firm that keeps a watch on the changes on the demographic
front and reads them accurately will find opportunities knocking at its doorsteps
...
These factors include the availability of natural resources, weather
and climatic condition, location aspect, topographical factors, etc
...
For example, sugar factories are set up
only at those places where sugarcane can be grown
...
Further, government’s policies to
maintain ecological balance, conservation of natural resources etc
...

Business Studies

59

MODULE -3
Business Around Us

INTEXT QUESTIONS 3B
1
...
Identify the types of non-economic environment in the following cases:
(a) Demand for new clothes increases during festive session
...

(c) Coca-Cola is now being freely sold in the Indian market
...

(e) Availability of skilled labour in a particular region
...
3 RECENT DEVELOPMENTS IN INDIAN ECONOMY
The economic environment of business in India has been changing at a fast rate mainly due
to the changes in the economic policies of the government
...
To speed up the
industrial growth and solve various economic problems, the government took several steps
like state ownership on certain categories of industries, economic planning, reduced role
of private sector, etc
...
All these efforts resulted a mixed response
...
But rate of industrial growth was slow, inflation increased and government
faced a serious foreign exchange crisis during eighties
...
This policy abolished industrial
licensing in most of the cases, allowed private participation in most industries, disinvestment
was carried out in many public sector industrial enterprises and opened up the economy
considerably
...
Let us discuss the developments under three heads, viz
...


(A) LIBERALISATION
Liberalisation refers to the process of eliminating unnecessary controls and restrictions on
the smooth functioning of business enterprises
...

60

Senior Secondary

MODULE -3
Business Around Us

(iii) freedom in fixing prices of goods and services;
(iv) simplifying the procedure for imports and exports;
(v) reduction in tax rates; and

Notes

(vi) simplified policies to attract foreign capital and technology to India
...
This has resulted in easy entry of foreign business organisations
in India
...
Ultimately, liberalisation
has helped us in achieving a high growth rate, easy availability of goods at competitive
rates, a healthy and flourishing stock market, high foreign exchange reserve, low inflation
rate, strong rupee, good industrial relations, etc
...
Due to the policy reforms announced in 1991, the expansion of public
sector has literally come to a halt and the private sector registered fast growth in the postliberalised period
...

In India, as a result of these steps, the post liberalisation phase has witnessed a massive
expansion of the private sector business in India
...
1,39,806 crores in 1992-93 to Rs
...


(C) GLOBALISATION
Globalisation means ‘integrating’ the economy of a country with the world economy
...
To achieve these objectives of globalisation, the government has adopted
various measures such as reduction in custom duties, removal of quantitative restrictions
or quotas on exports and imports, facilitating foreign investment and encouragement of
foreign technology
...

Business Studies

61

MODULE -3
Business Around Us

INTEXT QUESTIONS 3C
1
...
Write ‘L’ for Liberalisation, ‘P’ for Privatisation and ‘G’ for Globalisation
...

(b) Disinvestment of shares of public sector industrial enterprises
...

(d) Reduction in custom duties
...


3
...
It uses the scarce resources of
the society to continue and grow
...
However, it is observed that, in practice,
there are a few socially undesirable aspects of business such as, polluting the environment,
non-payment of taxes, manufacturing and selling adulterated products, giving misleading
advertisement and so on
...


3
...
1 MEANING OF SOCIAL RESPONSIBILITY
Social responsibility of business refers to the obligation of business enterprises to adopt
policies and plans of actions that are desirable in terms of the expectation, values and
interest of the society
...


3
...
2 SOCIAL RESPONSIBILITIES TOWARDS DIFFERENT GROUPS
It needs to be noted that the responsibilities of those who manage the business cannot be
limited to the owners
...

Let us now look at the responsibilities of the business towards all these groups
...
They should be provided with a fair
return on their investment
...
It has to be ensured that the rate of dividend is commensurable with the risk
involved and the earnings made
...
This is governed primarily by company’s
performance
...
The working conditions must be good in respect of safety, medical
facilities, canteen, housing, leave and retirement benefits etc
...
Preferably, there should
also be a provision for their participation in management
(c) Responsibility towards the Consumers: A business enterprise must supply quality
goods and services to the consumers at reasonable prices
...

(d) Responsibility towards the Government: A business enterprise must follow the
guidelines of the government while setting up the business
...
It should not indulge in any
corrupt practices or unlawful activities
...
So it should contribute towards the general welfare of the community
...
It
must take every step to protect the physical and ecological environment of the society
...

Looking at the importance of the social responsibilities of business towards various groups,
it would have been better if the companies act provided for the reporting of the social
activity in the annual report of the companies
...
The
prominent among them are Cement Corporation of India, Indian Oil Corporation, Tata
Iron and Steel Company, Asian paints and ITC
...

Social Responsibility undertaken as reported by some
companies
Larsen and Toubro Ltd
...
L & T believes in the
merits of detailed analysis, planning, implementation and evaluation of results
...

Business Studies

63

MODULE -3
Business Around Us

Oil and Natural Gas Corporation Ltd
...
In recognition of these initiatives, the world council of corporate
governance conferred the Golden Peacock Award to ONGC for
‘Corporate Social Responsibility in Emerging Economies-2006’ at the 7th
International Conference on Corporate Governance held in May 2006 in
London
...
(RIL)
Towards community assistance and social development, RIL provides
financial as well as administrative support for supplying drinking under to
villages in the vicinity of its manufacturing site and also established primary
health centers
...

Grasim Industries Ltd
...
Its work is based on the felt needs of the communities
...
During the year 2005-06 it reached out
to nearly 6 lakh persons and provided services like health care, child
care, education, mass marriage programme, infrastructure development,
etc
...


3
...
It
highlighted the
social values
concerning
business and forced
the companies from
practices against
consumer interest
and environment
protection
...
It is concerned with what is right
and what is wrong in human behaviour on the basis of standard behaviour or conduct
accepted by the society
...
are considered ethical
...
It
provides certain code of conduct to carry on the business in a morally justified manner
...


INTEXT QUESTIONS 3D

Notes

1
...

______________________________________________________________
______________________________________________________________
______________________________________________________________
2
...

(a) When the organisation pays the taxes on time
...

(c) When the company organises sport meet for the general public for a particular
locality
...

(e) When the organisation provides proper medical facility to the staff members
...
6 WHAT YOU HAVE LEARNT
•

The term ‘business environment’ connotes external forces, factors and institutions that
are beyond the control of the business and they affect the functioning of business
enterprises
...
Business environment is multifaceted,
complex, and dynamic in nature
...

It differs from place to place, region to region and country to country
...
it
open up new frontiers of growth for the business firms
...
It helps the firms to
analyse the competitors’ strategies and formulate their own strategies accordingly
keeping in mind its own strength and weakness
...


Notes

(i)

Social Environment

(ii) Political Environment
(iii) Legal Environment
(iv) Technological Environment
(v) Demographic Environment
(vi) Natural Environment
•

Recent Developments in Indian Economy
(a) Liberalisation: Liberalisation refers to the process of eliminating unnecessary
controls and restrictions on the smooth functioning of business enterprises
...

(c) Globalisation: Globalisation means ‘integrating’ the economy of a country with
the world economy
...


•

Social Responsibility of Business
Social responsibility of business refers to the obligation of business enterprises to
adopt policies and plans of actions that are desirable in terms of the expectation,
values and interest of the society
...


•

Social Responsibilities Towards Different Groups
(a) Responsibility towards the shareholders or owners
(b) Responsibility towards the Employees
(c) Responsibility towards the Consumers
(d) Responsibility towards the Government
(e) Responsibility towards the Community

•

Business Ethics
Business ethics are the moral principles, which guide the behaviour of businessmen or
business activities in relation to the society
...


66

Senior Secondary

MODULE -3
Business Around Us

3
...


Privatisation

Notes

3
...
State any two features of business environment
...
Mention the different types of business environment
...
List the various elements of non-economic environment of business
...
State any two effects of liberalisation of Indian economy
...
What is meant by the term ‘ethics’?
Short Answer Type Questions
6
...

7
...

8
...

9
...
What are the effects of Globalisation of Indian economy?
Long Answer Type Questions
11
...

12
...

13
...

14
...

15
...

Business Studies

67

MODULE -3
Business Around Us

3
...
(a) The business environment is dynamic in nature
...

(c) The changes in business environment are quite unpredictable
...

3B
1
...
Through this policy
Government decides the duties or taxes on import of goods and services
...
(a) Social environment
(b) Technological environment
(c) Political environment
(d) Natural environment
(e) Demographic environment
3C
1
...
It
implies free flow of goods and services, capital, technology and labour across the
national boundaries
...
(a) L
(b) P
(c) L
(d) G
(e) P
4D
1
...
The objectives, practices, techniques and behaviour of business
must be in conformity to the standards set by the society
...
(a) Responsibility towards Government
(b) Responsibility towards Consumer
(c) Responsibility towards Community

68

Senior Secondary

MODULE -3
Business Around Us

(d) Responsibility towards Owners/shareholders
(e) Responsibility towards Employees

DO AND LEARN

Notes

1
...

2
...
How many
industries or business units are set up based on it? Prepare a report
...
Once he had gone to the nearest town
...
Inside the park he read a small board - ‘This Park is maintained
by KCS Ltd’
...
He was filled with
curiosity
...
One day he met his friend’s father
...
K
...

Satish

: Good Morning Uncle
...
Mohan : Good Morning Satish? How are you?
Satish

: Very fine! How about you?

K
...
Mohan : You are right
...
But
why?
Satish

: Uncle! Today when I went to the park, I observed that the company
KCS Ltd
...
Well, why should a company divert its attention from its regular
activities and indulge in an activity which only increases its expense?

K
...

Satish

: Social Responsibility? What is that?

(Mr
...
Mohan explained to Satish about the concept of social responsibility of business
...
1 Meaning of Business Environment
3
...
1 Features of Business Environment
3
...
2 Importance of Business Environment
3
...
2
...
2
...
3 Recent Developments in Indian Economy
3
...
4
...
4
...
5 Business Ethics

Senior Secondary



---