Economic Environment of Business

Q.6 What is E-Commerce? Discuss objectives and benefits of E-commerce.

What is E-Commerce: E-Commerce is a general term for any type of business, or

commercial transaction that involves the transfer of information across the Internet. Electronic
Commerce (EC) is the paperless exchange of business information using Electronic Data
Interchange. E-Commerce consists of the buying and selling of products or services over
electronic systems such as the Internet and other computer networks. This covers a range of
different types of businesses, from consumer-based retail sites to business exchanges trading
goods or services between corporations. Technological developments are allowing users to
order to deliver goods and services over the web and even make payments online. Electronic
Commerce has expanded rapidly over the past five years and this growth is forecast to continue
or even accelerate. E-commerce has indeed started or made people think to change the way
business is done or we shop. Progressive companies have started taking initiative to enable
their business over the web to avoid being left out when E-commerce takes a definite shape

Typical Objectives of E- commerce

1. To communicate company name, its strong points, products and services, benefits,
prices, customer list, etc. to new customers & prospects
2. To build national web presence on-line
3. To achieve increased sales volume through on-line
4. To reduce overall marketing expenses
5. To cut costs of printing marketing materials
6. To enhance customer service
7. To provide instant information to prospects and customers
8. To use the Internet to showcase product or service
9. To offer an interactive web demo that sells product

The Benefits of E-commerce:

• E-commerce allows people to carry out businesses without the barriers of time or
distance. One can log on to the Internet at any point of time, be it day or night and
purchase or sell anything one desires at a single click of the mouse.
• The direct cost-of-sale for an order taken from a web site is lower than through
traditional means as there is no human interaction during the on-line electronic purchase
 order process. Also, electronic selling virtually eliminates processing errors, as well as
being faster and more convenient for the visitor.
• Ecommerce is ideal for niche products. Customers for such products are usually few.
• Ecommerce is the cheapest means of doing business.
• Ecommerce has provided the solution by decimating the costs, which are incurred.
• From the buyer’s perspective also e-commerce offers a lot of tangible advantages.
1. Reduction in buyer’s sorting out time.
2. Better buyer decisions
3. Less time is spent in resolving invoice and order discrepancies.
4. Increased opportunities for buying alternative products.

The strategic benefit of making a business ‘ecommerce enabled’, is that it helps reduce the
delivery time, labour cost and the cost incurred in the following areas:

5. Document preparation
6. Error detection and correction
7. Reconciliation
8. Mail preparation
9. Telephone calling
10. Data entry
11. Overtime
12. Supervision expenses

Operational benefits of e commerce include reducing both the time and personnel required to
complete business processes, and reducing strain on other resources.

____________________________________________________________________________

Q. Explain the functions of IMF

Functions of IMF

The IMF is the world's central organization for international monetary cooperation. It is an
organization in which almost all countries in the world work together to promote the common
good.The IMF's primary purpose is to ensure the stability of the international monetary system
—the system of exchange rates and international payments that enables countries (and their
citizens) to buy goods and services from each other. This is essential for sustainable economic
growth and rising living standards. Another purpose is to maintain stability and prevent crises in
the international monetary system, the IMF reviews national, regional, and global economic and
financial developments. It provides advice to its 184 member countries, encouraging them to
adopt policies that foster economic stability, reduce their vulnerability to economic and financial
crises, and raise living standards, and serves as a forum where they can discuss the national,
regional, and global consequences of their policies. The IMF also makes financing temporarily
available to member countries to help them address balance of payments problems—that is,
when they find themselves short of foreign exchange because their payments to other countries
exceed their foreign exchange earnings. And it provides technical assistance and training to
help countries build the expertise and institutions they need for economic stability and growth.
The IMF performs three main activities:
1. monitoring national, global, and regional economic and financial developments and
advising member countries on their economic policies "surveillance"
2. lending members hard currencies to support policy programs designed to correct
balance of payments problems
3. offering technical assistance in its areas of expertise, as well as training for government
and central bank officials

1. Global and Regional surveillance IMF does reviews by the IMF's Executive Board of
global economic trends and developments. The main reviews are based on World Economic
Outlook reports and the Global Financial Stability Report, which covers developments,
prospects, and policy issues in international financial markets; both reports are normally
published twice a year. In addition, the Executive Board holds more frequent informal
discussions on world economic and market developments. Regional surveillance involves
examination by the IMF of policies pursued under regional arrangements. IMF pays close
attention to the impact of the larger economies' policies on smaller economies. It also studies
the impact of global economic and financial conditions on the economic performance of
individual countries and the repercussions of national policies at the regional level.

2. Lending to countries in difficulty

Any member country—rich or poor—can turn to the IMF for financing if it has a balance of
payments need—that is, if it cannot find sufficient financing on affordable terms in the capital
markets to make its international payments and maintain an appropriate level of reserves. The
IMF is not an aid agency or a development bank. Its loans are intended to help its members
tackle balance of payments problems, stabilize their economies, and restore sustainable
economic growth. Unlike the World Bank and other development agencies, the IMF does not
finance projects.

3. Technical assistance and training

The IMF is best known for its policy advice and its loans to countries in times of economic crisis.
But the IMF also shares its expertise with member countries by providing technical assistance
and training in a wide range of areas, such as central banking, monetary and exchange rate
policy, tax policy and administration, and official statistics. The objective is to help improve the
design and implementation of members' economic policies, including by strengthening skills in
institutions such as finance ministries and central banks.

__________________________________________________________________________

Q. What is economic environment? Discuss capitalism, Socialism and Mix economy.

Ans .

Various environmental factors such as economic environment, socio-cultural environment,

political, technological, demographic and international, affect the business and its working. Out
of these factors economic environment is the most important factor. Those Economic factors
which have their affect on the working of the business is known as economic environment. It
includes system, policies and nature of an economy, trade cycles, economic resources, level of
income, distribution of income and wealth etc. Economic environment is very dynamic and
complex in nature. It does not remain the same. It keeps on changing from time to time with the
changes in an economy like change in Govt. policies, political situations.

Elements of Economic Environment:- It has mainly five main components:-

1. Economic Conditions
2. Economic System
3. Economic Policies
4. International Economic Environment
5. Economic Legislations

Economic Systems:- An Economic System of a nation or a country may be defined as a

framework of rules, goals and incentives that controls economic relations among people in a
society. It also helps in providing framework for answering the basic economic questions.
Different countries of a world have different economic systems and the prevailing economic
system in a country affect the business units to a large extent. Economic conditions of a nation
can be of any one of the following type:-
 1. Capitalism:- The economic system in which business units or factors of production are
privately owned and governed is called Capitalism. The profit earning is the sole aim of
the business units. Government of that country does not interfere in the economic
activities of the country. It is also known as free market economy. All the decisions
relating to the economic activities are privately taken. Examples of Capitalistic
Economy:- England, Japan, America etc.

2. Socialism:- Under socialism economic system, all the economic activities of the country are
controlled and regulated by the Government in the interest of the public. The first country to
adopt this concept was Soviet Russia. The two main forms of Socialism are: -

(a) Democratic Socialism:- All the economic activities are controlled and regulated by the
government but the people have the freedom of choice of occupation and consumption.
(b) Totalitarian Socialism:- This form is also known as Communism. Under this, people are
obliged to work under the directions of Government.

3. Mixed Economy:- The economic system in which both public and private sectors co-exist is
known as Mixed Economy. Some factors of production are privately owned and some are
owned by Government. There exists freedom of choice of occupation and consumption. Both
private and public sectors play key roles in the development of the country.

_________________________________________________________________________

Q. Define Social Responsibility of Business. How corporate houses protect

environment?

Ans.

Social responsibility is a voluntary effort on the part of business to take various steps to satisfy
the expectation of the different interest groups. Another definition of CSR is that it is voluntary
approach that a business enterprise takes to meet or exceed stakeholder expectations by
integrating social, ethical, and environmental concerns together with the usual measures of
revenue, profit, and legal obligation. Business come forward and be responsible towards
interest groups considering the following points:
i. Public Image - The activities of business towards the welfare of the society earn goodwill
and reputation for the business.
ii. Government Regulation - To avoid government regulations businessmen should
discharge their duties voluntarily.
iii. Survival and Growth -Every business is a part of the society. So for its survival and
growth, support from the society is very much essential.
iv. Employee satisfaction - Besides getting good salary and working in a healthy atmosphere,
employees also expect other facilities like proper accommodation, transportation,
education and training.
v. Consumer Awareness - Now-a-days consumers have become very conscious about
their rights. They protest against the supply of inferior and harmful products by forming
different groups.
.Business Responsibility for protect environment Protection

Firms have a moral or social responsibility to commit resources to environmental protection

There are companies to commit resources voluntarily to environmental protection. The
importance of CSR has increased with globalization, as both investors and customers have
become highly sensitive to societal and environment issues. According to Dr. Madhav Mehra
(Mehra), President of the UK-based World Environment Foundation and the World Council for
Corporate Governance, the importance of CSR would further increase as the future market
would be driven by a younger population (around 54% of India's population is below 25) for
whom social, ethical, and environmental issues were very important and who liked to be
informed about the organizations they were buying from or investing in.

Example: ONGC took several measures to reduce pollution and support conservation of
resources through the utilization of waste. The company formulated its Environment Policy as
early as 1983 and adopted environment protection as one of its objectives in 1988.
It even created a separate department called the Department of Environment (DoE) to ensure
that environmental safeguards were in place. The environment policy of the company made it
mandatory to submit an "environmental impact assessment report to the DoE at the time of
project formulation.
____________________________________________________________________________

Q. 4 Explain the Directive Principles of State Policy What are rationale and extent of state
intervention?

Ans. the Directive Principles of State Policy are guidelines to the central and state governments
of India, to be kept in mind while framing laws and policies. These provisions, contained in Part
IV of the Constitution of India, are not enforceable by any court, but the principles laid down
therein are considered fundamental in the governance of the country, making it the duty of the
State to apply these principles in making laws to establish a just society in the country. Directive
Principles are classified under the following categories: Gandhian, economic and socialistic,
political and administrative, justice and legal, environmental, protection of monuments and
peace and security

Object of the Directive Principles of State Policy

The purpose of the Directive Principles is to fix certain social and economic goals for immediate
attainment by bring about a non-violent social revolution.

1. Welfare State: The Constitution envisages the establishment of a “Welfare State” at the
federal level as well as the State level. In a Welfare State, the primary duty of the Government is
to secure the welfare of the people.

2. Social Revolution: The Directive Principles of State Policy set forth the humanitarian
socialist precepts that were the aims of the Indian social revolution, i.e., to work for an
egalitarian society, where there is no concentration of wealth, where there is plenty, where there
is equal opportunity for all, to education, to work, to livelihood and where there is social justice.

3. Emphasizes the ideals of Preamble: The Directive Principles emphasizes the goal of the
Indian polity is not laissez faire, but a Welfare State, where the State has a positive duty to
ensure to its citizens social and economic justice and dignity of the individual

Under Directive Principles of State Policy, it is the duty of the State to apply these principles in
making laws. These lay down that the State shall strive to promote the welfare of people by
securing and protecting as effectively as it may, a social order, in which justice-social, economic
and political-shall form in all institutions of national life. The State shall direct its policy in such a
manner as to secure the right of all men and women to an adequate means of livelihood, equal
pay for equal work and within limits of its economic capacity and development, to make effective
provision for securing the right to work, education and to public assistance in the event of
unemployment, old age, sickness and disablement or other cases of undeserved want. The
State shall also endeavour to secure to workers a living wage, humane conditions of work, a
decent standard of life, and full involvement of workers in management of industries. In the
economic sphere, the State is to direct its policy in such a manner as to secure distribution of
ownership and control of material resources of community to subserve the common good, and
to ensure that operation of economic system does not result in concentration of wealth and
means of production to common detriment.

Some of the other important directives relate to provision of opportunities and facilities for
children to develop in a healthy manner; free and compulsory education for all children up to the
age of 14; promotion of education and economic interests of scheduled castes, scheduled tribes
and other weaker sections; organisation of village panchayats; separation of judiciary from
executive; promulgation of a uniform civil code for whole country; protection of national
monuments; promotion of justice on a basis of equal opportunity; provision of free legal aid;
protection and improvement of environment and safeguarding of forests and wildlife of the
country; promotion of international peace and security; jonourable relations between nations;
respect for international law; treaty obligations; and settlement of international disputes by
arbitration.

____________________________________________________________________________