BUSINESS ENVIRONMENT

MEANING:-
BUSINESS ENVIRONMENT MEANS FORCES AND INSTITUTIONS IN AND
OUTSIDE THE BUSINESS WHICH IT’S MEMBERS MUST DEAL TO ACHIEVE
ORGANIZATION’S GROWTH. IT IS CLASSIFIED INTO ECONOMIC
ENVIRON-MENT (INCLUDES FISCAL POLICY, MONETARY POLICY) AND
NON-ECONO-MIC ENVIRONMENT (SOCIAL, POLITICAL AND LEGAL
FACTORS)

IMPORTANCE:-
(1)FIRST MOVER ADVANTAGE
(2)WARNING SIGNAL
(3)SENSITISE THE MANAGEMENT
(4)BASIS OF STRATEGY
(5)SOURCE OF INTELLECTUAL STIMULATION
(6)IMAGE BUILDING
(7)CONTINOUS LEARNING

DIMENSIONS OF BUSINESS ENVIRONMENT:-

(1)ECONOMIC ENVIRONMENT
(2)SOCIAL ENVIRONMENT
(3)POLITICAL ENVIRONMENT
(4)LEGAL ENVIRONMENT
(5)TECHNOLOGICAL ENVIRONMENT

NEW INDUSTRIAL POLICY

1-NEW INDUSTRIAL POLICY
DELICENSED SEVERAL INDUSTRIES EXCEPT FEW SPECIFIED ONES
• ABOLITION OF INDUSTRIAL REGISTRATION SCHEMES
• INFORMATION TECHNOLOGY BILL PASSED BY THE PARLIAMENT
• FOREIGN EXCHANGE MANAGEMENT ACT ’99 WHICH REPLACED
FERA
• FTZ REPLACED WITH SEZ
• AGRO-ECONOMIC ZONE INTRODUCED
• RESTRICTIONS ON ACQUISITION OR TRANSFER OF SHARES HAVE
BEEN REMOVED

2-NEW TRADE POLICY

ALL IMPORTS LIBERALIZED EXCEPT FOR FEW NON-PERMITTED LIST
OF
 ITEMS
ABOLITION OF EXPORT DUTIES
CHEAPER EXPORT CREDIT AND CUTS IN IMPORT DUTY
SIMPLIFICATION OF PROCEDURES RELATING TO EXPORT
CONVERTABILITY OF RUPEE ON TRADE ACCOUNT ALSO ACTED AS
AN
INCENTIVEFOR EXPORTS
STEEP REDUCTION IN IMPORT TARRIFS ON NUMBER OF ITEMS,
INCLUDING NUMBER OF ITWEMS

3-BANKING SECTOR REFORMS

PHASED REDUCTION OF STATUTORY LIQUIDITY RATIO (SLR)
DISINVESTMENT UPTO 49% OF TOTAL EQUITY WAS ALLOWED
ALLOWED SETTING OF NEW PRIVATE SECTOR BANKS
INSURANCE REGULATORY AND DEVELOPMENT ACT (IRDA) PASSED
BY
THE PARLIAMENT

4-FISCAL REFORMS
REDUCTION OF FISCAL DEFICITS
REFORMS ON TAXATION SYSTEM
CORPORATE AND PERSONAL INCOME TAX SCALED DOWN
INDIRECT TAX: SUBSTANTIAL REDUCTIUONS WERE MADE IN THE
EXCISE
AS WELL AS IMPORT DUTIES

5-CAPITAL MARKET REFORMS

SECURITIES AND EXCHANGE BOERD OF INDIA (SEBI) MADE A
STATUTO-
RY BODY
PRIVATE SECTOR HAS BEEN ALLOWED TO SET-UP MUTUAL FUNDS
BONUS ISSUES MADE MORE LIBERAL

IMPACT OF CHANGES IN GOVERNMENT POLICY ON

BUSINESS:-
(1) DESTABILIZATION OF PROTECTED ENVIRONMENT
(2) THREAT FROM MNC
(3) ALL ROUND COMPETITION
(4) BUYER’S MARKET
(5) EXPORT A MATTER OF SURVIVAL
(6) WORLD CLASS TECHNOLOGY
(7) CORPORATE VULNERABILITY
(8) PAST FAILURE FAIL TO GUIDE THE FUTURE
MANAGERIAL RESPONSE TO CHANGES IN BUSINESS
ENVIRONMENT:-
(1) ACQUISITION AND MERGERS
(2) DIVERSIFICATION SPREE
(3) CONSOLIDATION OF MNC’S
(4) BRAND BUILDING
(5) DISTRIBUTION AND SELLING
(6) CAPITAL STRUCTURE
(7) CUSTOMER FOCUS
(8) PRODUCTION CAPACITY
(9) TECHNOLOGY
(10) COMPENSATION LEVELS
(11) LABOUR