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A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Concept of Business:
- Business is an economic activity:
(Economic activity may be in the form of consumption,
production, distribution and exchange)
- A business firm is an economic unit:
(An economic unit transforms a set of input into a flow of output,
either goods and services or a combination of both)
- Business decision making is an economic process:
(Choice among a set of alternative courses of action which is the
essence of all economic problems)
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Objectives of Business:
- Profit:
- Growth:
Strategies adopted to achieve growth are:
- Add more productive markets
- Diversify into new areas
- Integration forward or backward
- Increase market share, Expand markets
- Cut down cost & increase productivity
- Power:
- Employee Satisfaction & Development:
- Quality products & services:
A. J Institute of Management,
Mangalore
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Corporate
Culture
Company
Image,
Brand Equity
Physical
Resources
Value
System
Business
Organisation
Organisation
Structure
A. J Institute
of Management,
Internal
Environment
Mangalore
Mission &
Objectives
Internal
Power
Relationship
Human
Resource
External Environment:
External environment consists of those factors that affect a
business enterprise from outside.
External environment is generally classified into micro
environment and macro environment.
External Micro environment includes Suppliers of Inputs,
customers, competitors market Intermediaries and publics.
External Macro Environment are classified into Economic,
social, technological, political and legal and demographic
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Com
peti
to
Suppliers of
Inputs
ers
m
sto
u
C
rs
Management
nc
a
n
Fi
Pu
blic
s
s
i er
Marketing
intermediaries
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Suppliers: They are the persons who supply raw material and
required components to the company.
Customers:
- Wholesalers
- Retailers
- Industries
- Government and Other Institutions
- Foreigners
Market Intermediaries:
- Middleman
- Marketing Agencies
- Financial Intermediaries
- Physical Intermediaries
Competitors
Public
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Economic
Environment
Business
Organisation
Natural
Environment
Demographic
Environment
A. J Institute
of Management,
External
Macro
Environment
Mangalore
Technological
Environment
Economic Environment:
(Factors that affect consumer purchasing power and spending
patterns)
(Business Cycles, Inflation, Unemployment, interest rates,
income)
- Economic Conditions of Public
- Economic Policies of the country
- Economic System
- Other Economic Factors: Infrastructural Facilities, Banking,
Insurance companies, money markets, capital markets etc.
Political Environment:
Governments relationship with organization encompasses
subsidies, tariffs, import quotas, deregulation of industries
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Demographic Environment:
It is a study of perspective of population i.e. its size, standard of
living, growth rate, age-sex composition, family size, income
level, education level etc.
International Environment:
It is particularly important for industries directly depending on
import or exports. The factors that affect the business are:
Globalization, Liberalization, foreign business policies, cultural
exchange.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Environmental Analysis:
(The interest is in environmental trends and events that have the
potential to affect strategy. This analysis should identify such
trends and events and then estimate their likelihood and impact)
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Economic Environment
Essentials of Business Environment (K. Aswathappa)
Business Environment (Francis Cherunilam)
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Economic Environment :
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.
The economic environment represents the economic conditions in
the country where the international organization operates.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
1. Economic Conditions:
Economic Policies of a business unit are largely affected by the
economic conditions of an economy. Any improvement in the economic
conditions such as standard of living, purchasing power of public,
demand and supply, distribution of income etc. largely affects the size
of the market.
If a region depends to a significant extent on any particular industry or
sector, business in that region would be significantly affected by
fortunes of that industry.
(Oil exporting countries, Agriculture linked)
Business cycle is another economic condition that is very important for a
business unit. (Depression, Recovery, Prosperity, Boom, Decline,
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
- Depression:
It is a protected period in which business activity in the country
is far below the normal. It is characterized by a sharp reduction
of production, mass unemployment, low employment, falling
prices, falling profit, low wages, contraction of credit, a high rate
of business failures and an atmosphere of all round pessimism
and despair.
- Recovery (or Revival):
It implies increase in business activity after the lowest point of
the depression has been reached. The entrepreneurs begin to feel
that the economic situation was after all not so bad. This leads to
improvement in business activity. The industrial production
picks up slowly and gradually. The volume of employment also
steadily increases. There is a slow rise in prices accompanied by
a small rise in profits.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
- Recession:
Over-optimism is replaced now by over-pessimism characterized
by fear and hesitation on the part of the businessmen. The failure
of some businesses creates panic among businessmen.
The banks begin to withdraw loans from business enterprises.
Prices collapse and confidence is rudely shaken. Building
construction slow down and unemployment appears in basic,
capital goods industries which gradually spread to other
industries as well.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
2. 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.
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.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
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.
* 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.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
- Economic Planning:
In Mixed economy, the Government adopts the instrument of
economic planning. This is necessary for the public sector
enterprises which have to work according to some plan and to
achieve certain pre-determined objectives.
In the same way, the Private Sector cannot be left to develop in
its own way. To ensure a coordinated and fast economic
development the programmes of both the sector are drawn in
such a way that growth in one complements the growth in the
other.
- Free and Controlled Economic Development:
The Mixed Economic System considered to be more appropriate
to remove the demerits of the capitalist and communist economic
systems. Encouragement is given to free economic activities
and at the same time steps are also taken to control economic
activities.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
3. Economic Policies:
Government frames economic policies. Economic Policies affects
the different business units in different ways. It may or may not
have favorable effect on a business unit.
All the business enterprises frame their policies keeping in view
the prevailing economic policies.
Important economic policies of a country are as follows:* Monetary Policy:The policy formulated by the central bank of a country to control
the supply and the cost of money (rate of interest), in order to
attain some specified objectives is known as Monetary Policy.
The central bank, by its policy towards the cost and availability of
credit, can significantly influence the savings, investment and
consumer spending in the economy.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
5. Economic Legislations:
Economic Legislations Besides the above policies, Governments
of different countries frame various legislations which regulates
and control the business.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Sectors of Economy:
* Primary Sector
The primary sector involves the extraction of raw materials
from the Earth.
In the U.S. and similarly in most other modern world countries,
there is a decline in the proportion of the population that works in
the primary sector. Currently, only 3% of our nation's labor force
is engaged in primary sector activity. This is a big change from
the mid-19th century in which two-thirds of the labor force was
engaged in this sector.
* Secondary Sector
The secondary sector involves the transformation of raw
materials into goods. This transformation results in wood being
made into furniture, steel being made into cars or textiles being
made into clothes
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
* Tertiary Sector:
The tertiary sector involves the supplying of services to consumers
and businesses. This sector provides services to the general population
and business, including retail, sales, transportation and restaurants.
* Quaternary Sector
The quaternary sector of the economy consists of intellectual activities.
Activities associated with this sector include government, culture,
libraries, scientific research, education, and information technology.
* Quinary Sector
Some consider there to be a branch of the quaternary sector called the
quinary sector, which includes the highest levels of decision making in
a society or economy.
This sector would include the top executives or officials in such fields
as government, science, universities, nonprofit, healthcare, culture, and
the media.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Socio-Cultural Environment
Essentials of Business Environment (K. Aswathappa)
Business Environment (Francis Cherunilam)
Introduction:
A set of beliefs, customs, practices and behaviours that exist
within a population.
The socio-cultural is an important environmental factor that
should be analysed while formulating business strategies.
The cost of ignoring the customs, traditions, taboos, tastes and
preferences, etc., of people could be very high.
Social Environment:
Social environment of business means all factors which affects
business socially. Every business works in a society, so societies
' different factors like family, educational institutions and
religion affects business .
The cultural factors like buying and consumption habit of the
people, customs and traditions, tastes and preferences, languages
etc. are the factors that affect the strategy of the business.
Cultural Environment:
The cultural environment mean a environment which affect the
basic values, behaviours, and preferences of the society-all of
which have an effect on consumer marketing decisions.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Family -:
Family is basic part of society from the birth of a person and upto death.
he lives in family so personal decision of buying and selling of goods are
affects from family.
In the culture of a family, it may happen that parent does not allow to use
any product, then sale of such product will decrease.
So businessman must analyze different families needs.
Many occasion of family like marriage of any family member , can
increase the demand of goods .
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Educational institutions -:
Educational institutions are also main part of societies .
They provide good knowledge, education, awareness, thinking, what should
students buy or not to buy .
Suppose if a student is habitual to drink the tea and if his teacher advice him
that this is harmful to his health after his guidance students can avoid to drink tea
after this the sale of tea will decrease .
Religion -:
Religion is also effects the business socially.
Religion means the system in which group of persons trust in God .
Different religions have different principles , rules and regulations in which they
sacrifice to use some products and to eat some food ,
In Hindu religion, they never use leather products. This affects the sale of leather
industries .
So, businessman must analyse the targeted audience and after listening their
religious thoughts , he should produce the goods .
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
McDonalds
Strategy of McDonalds in India, which made them Benefit in Social
Environment of India
McDonalds Made segment according to Demographic Factor in
the Society of India.
McDonalds Made their food according to Religion in India.
McDonalds Educate the customer towards their food rather than
Indias Traditional Food.
So that Indias People Taste & Preference Changed, Which is
Beneficial to McDonalds.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Culture:
Culture is the software of the mind- the social programming that
runs the way we think, act and perceive ourselves and others.
Culture is defined as a complex whole which consists of customs,
attitudes, beliefs and values of a society. The set of shared
attitudes, values, goals, and practices that characterizes an
institution, organization or group.
Culture includes both conscious and unconscious values, ideas,
attitudes, and symbols that shape human behaviour and that are
transmitted from one generation to the next.
Culture is the total way of life of people
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Interrelated
interactive
Nonmaterial
Culture
- also known as subjective or
abstract culture includes tangibles
such as religion, perception,
attitudes, beliefs, and values.
and
Belief
Value
Characteristics of Culture:
- Learned:
Culture is not inherited or biologically based, it is acquired by
learning and experience
- Shared:
People are member of a group, organization, or society share
culture, it is not specific individuals.
- Tran generational:
Culture is passed on from one generation to the next.
- Symbolic:
Culture is based on the human capacity to symbolic or use one
thing that represent another.
- Adaptive:
Culture is based on the human capacity to change or adapt, as
opposed to the more genetically driven adaptive process of
animals.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Elements of Culture:
* Knowledge and Beliefs:
It refers to a peoples prevailing notions of reality. They include
myths and metaphysical beliefs as well as scientific realities.
* Ideals:
It refer to the societal norms which define what is expected,
customary, right or proper in a given situation.
* Preferences:
It refer to societys definitions of those things in life which are
attractive or unattractive as objects of desire.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
* Cultural Conformity:
Individuals In a culture tend either to conform to the cultural
norms or to deviate from them.
* Cultural Lag:
Cultural lag thesis put forward by William F Orgburn says that
the various parts of modern culture do not change at the same
rate, and that since is a correlation and interdependence of parts,
a rapid change in one part of our culture requires readjustments
through changes in various correlated parts of that culture.
Culture Traits:
* Low-context and High-context Cultures
* Masculine and Feminine
* Monochronic & Polychronic Societies
* Universalism vs. Particularism
* Individualism vs. Communitarianism
* Neutral vs. Emotional
* Specific vs. Diffuse
* Achievement vs. Ascription
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Others
Social Responsibility
Social Values &Movers
Social Institutions &
Systems
Family System:
* Earlier, Joint Family System was prevalent.
* Now, Nuclear family is being preferred.
The joint family is being split into smaller units of nuclear family.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Marriage:
* Marriage is one of the basic elements of culture and peoples
attitude towards marriage influences culture a lot.
* Marriage is a social event that concerns the whole society.
In India, marriages are a family affair. The marriage season is
a big opportunity for business.
Attitude:
* Attitudes include things such as individual freedom, democracy,
truth and honesty, justice love and marriage to name a few.
* Attitude towards work is important as it determines motivation,
morale, job satisfaction, productivity etc.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Ethics:
* Ethics in business deals with the ethical path business firms
ought to adopt.
Ethno domination:
* In many countries one or other industry or trade is dominated
by certain ethnic groups. This is particularly true of trade.
* Ethno domination in channel of distribution is defined as a
situation where an ethnic group occupies a majority position is a
channel of distribution with respect to the ownership and control
of physical and financial resources, or through manipulation of
social environment.
E.g. South Canara district in Karnataka boasts several
commercial banks and NBFIs like Syndicate bank, Canara Bank,
Vijaya Bank, Corporation Bank, ICDS etc.
Trichur in Kerala is home of some banks like South Indian Bank,
Catholic Syrian Bank, Lord Krishna Bank and NBFIs.
Most Kerala based large banks are promoted predominantly by
Christians.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Language:
* India is multi linguistic. (18 officially recognized languages)
* Marketing plans become costlier and more complex due to this
huge diversity. The advertising campaigns have to been launched
in National as well as local languages.
* Pepsis come alive slogan was considered offensive in some
places as to the locals it meant come out of the grave.
* Reebok had to discontinue its INCUBUS brand as in medieval
folklore, Incubus was a devil who terrorized women.
* Ford Motors truck named Fiera meant Ugly old women in
Spanish.
* General Motors Chevrolet Nova in Spanish meant No-Vaa- it
doesnt go they changed the name to Caribe
* Unspoken language-Thumbs-up in America indicate its all
right in Greece the gesture is obscene
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Transitions:
- Migration to metros & medium sized towns
- Joint Families Nuclear families Individualistic approach
- Heavy influence from West on lifestyle
- Decrease in Agricultural activities
- The transition to the technological industrial society gives rise
to a different experiential ethos leading to emergent new maps of
the society.
- The Indian society and individuals have to make choices in the
context of this transition and their choices will shape the
emergence of todays society and organizations.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Demographic CHANGES:
* Age Structure
* Gender
* Income Distribution
* Family size
* Occupation
* Education
* Social Class
* Religion
* Race
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Activist Functions:
Coordinating private activity
Fostering Markets
Cluster initiatives
Redistribution
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Asset redistribution
Intermediate functions:
Addressing Externalities
Basic education
Environmental protection
Regulating Monopoly
Utility Regulation
Antitrust Policy
Types of Intervention:
Formal and informal controls
Formal controls are usually those emanating from legislations as
for e.g. FERA, Companies Act1956, Competition Act 2002 etc.
Formal controls are very powerful & when we think of
Government control over business, we generally mean formal
controls.
Informal controls refer to the controls which various groups
impose upon themselves out of need & custom.
Coercive and Inducive controls
Coercive regulation requires performance of certain actions or
refraining from others in order to avoid penalties.
For instance taxes must be paid or may result in fine.
Inducive controls hold out a promise of reward for compliance
with the desired line of action.
For example: subsidies may be granted to stimulate certain
activities.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Promotional and Regulatory ControlsPromotional measures are of positive in nature, & include such
activities as expansion of public sector, operation of
developmental banks, revival of sick units, removal of regional
imbalances, encouragement to small scale units provision of
incentives & subsidies & export promotion.
Regulatory measures ensure orderly development of industries
with least wastage of resources
Consequences of controls:
- Controls have resulted in wastage of national resources
- Wastage of time is another consequence of controls
- Controls have bred corruption at various levels
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Preamble:
We The people of India have solemnly resolved to constitute
India into a Sovereign Socialist, secular*, Democratic Republic
to secure to all its citizens:
Justice, social, economic and political;
Liberty of thought, expression, belief, faith and worship;
Equality of status and opportunity;
And to promote among them all
Fraternity assuring the dignity of the individual and the unity
and integrity* of the Nation.
Preamble to the Constitution give some indications of the
need and scope for state intervention in the functioning of the
economy
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Fundamental Duties
To abide by the constitution and respect its ideals and
institutions, the national flag and national anthem.
To uphold and protect the sovereignty, unity and integrity of
India.
To defend the country and render National Service when called
upon to do so.
To promote harmony and the spirit of brotherhood amongst all
the people of India transcending religious, linguistic and regional
or value to renounce disrespectful practices against dignity of
women.
A. J Institute of Management, Mangalore
Prof. K Deepak Rao
Technological Environment
Essentials of Business Environment (K. Aswathappa)
Business Environment (Francis Cherunilam)
Business Environment (Suresh Bedi)
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Introduction:
Definition of Technology :
J. K. Galbraith defines technology as a
systematic application of scientific or other organized
knowledge to practical tasks
* Among all the segments of macro-environment, technological
environment exerts considerable influence on business.
* Broadly speaking, technology refers to the application of
knowledge, skills, scientific principles or even ideas to the
production or improvement of goods and services that have
utility and value.
* New technologies provide monopolistic advantages to firms
which are ahead of rivals in technology and may even maintain
the lead through sustained technological development.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Features of Technology:
* Technology relates to change:
Technology forces change on people whether they are prepared
for it or not. In modern society, it has brought so much change
that it creates what is called FUTURE SHOCK.
* Technology is that its effects are widespread:
* Technology is that it feeds on itself :
Technology makes more technology possible. Technology acts
as a multiplier to encourage its own faster development.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
IMPACT OF TECHNOLOGY:
Impact of Technology
Technology
A. Social implications
High expectation
of consumers
Systems complexity
Social changes
Social systems
B. Economics implications
Increased productivity
Organisation structure
Resistance to change
Fear of risk
Problems of technostructure
e-Commerce
Telecommuting
Transportation
Markets
Boundaries redefined
Technology transfers
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
* Social change:
- Change in social life
- Changes the pattern of social life
- Technology helps iron out social differences but has created
status differences instead.
- Technology has impacted the way we cook, communicate, use
of media and work.
* Social System:
Technology has brought, along with it, new words, new food,
dress and food habits.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
4. Technological discontinuity:
The process of old replaced by new is called technological
discontinuity. The R & D manager must determine when to
abandon present technology and then to develop or adapt new
technology.
5. Decision on owing R & D or outsourcing:
6. Product or Process Innovation:
7. Investments in biotechnology:
Biotechnology is the use of living systems and organisms to
develop or make useful products. For thousands of years,
humankind has used biotechnology in agriculture, food
production and medicine.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Economic Legislations
Business Taxation
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
VAT:
Value Added Tax (VAT) is a kind of indirect tax levied in parts at every stage
of the production and distribution process. It is levied on each business on
the value they added to their purchase of raw material. Ultimately it is the
customer who generally pays the full amount of the VAT.
VAT was implemented with the objective of eliminating multiplicity of taxes
such as entry tax, turnover tax, sales tax, surcharge, excise duties etc., to
eliminate interstate tax, to make the tax structure simpler and to widen the
tax net, thus increasing revenue for the state
VAT is a tax on value added. Thus, tax is paid at every state from which a
good or service passed, but it is paid on the value added only, and not on
whole cost. Everybody in the production and distribution chain pays the tax
it is paid only in the difference.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
CENVAT:
GOI had set up Indirect Taxation Inquiry Committee in 1976 under the
chairmanship of Shri L K Jha.
The Finance Act 2000, had introduced the new Central Value Added Tax
(CENVAT)
CENVAT is basically an input duty relief scheme under Central Excise to
reimburse the user manufacturer with the duty paid on the input which he has
absorbed as part of purchase price when buying the same for producing finished
products.
A tax purely based on selling price of a product, has cascading effect, which has
the following disadvantages:
* Computation of Exact Tax Content Difficult
* Varying Tax Burden
* Discourages Ancillarisation
* Increases Cost of Production
* Concessions on the Basis of Use is not Possible
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Foreign Investment:
Foreign Capital:
Foreign capital means investment in the productive activities of a
country by a foreign government, private foreign investors &
international institutions such as World Bank, IMF, ADB etc.
* International factor mobility has made significant contribution
to the development of many country.
* Russia, China, America, France, Germany & others had
development after foreign capital assistance.
* Most of the under developed countries suffer from low level of
income & low level of capital accumulation.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Industrialization &
Economic Development
Breaking Vicious
Circle of Poverty
Technological Transformation
Role of
Foreign Capital
Development of Infrastructure
Development of Heavy
Industries
Employment Generation
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
- Technological transformation:
Backward and developing countries of the world suffer from
technological backwardness.
(Low productivity of labour and capital due to abundance of
unskilled labour and obsolete capital equipment)
The inflow of capital from advanced countries apart from
removing capital deficiencies, brings in advanced technology and
skills, organizational expertise and market management.
At present, India is fairly advanced in technological development
with the help of USA, UK, France, Germany and Japan etc.
- Development of adequate infrastructure:
Development of adequate infrastructure is a necessary condition
for further economic development and growth. (transport and
communication, irrigation, power, educational, training and
research institutions etc)
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Foreign Investment
Wholly owned
subsidiary
Joint Venture
Portfolio Investment
Acquisition
Investment by FIIs
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Investment in GDRS,
ADRS, FCCBs etc
- Portfolio Investment:
When the investor makes only investment & does not retain
control over the enterprise is known as Portfolio investment.
The investor is interested only in return on his capital & does not
want control over the use of the invested capital.
Portfolio Investment is investment by individuals, firms or public
bodies (like governments/ government organizations) in financial
instruments (such as stocks & government bonds)
Portfolio investment is for a short period & is influenced by short
term gains.
Portfolio investors have no direct responsibility for promotion &
management of the enterprises.
The LDCs strongly prefer for the portfolio investment rather than
foreign direct investment as there is no control over the
management.
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Portfolio Investment
1. Direct investment
responsibility
2. Direct control on particular
company/industry
3. Less liquidity
4. Long term finance
1. Indirect investment
responsibility
2. No control on
company/industry
3. More liquidation
4. Short term finance
- Foreign Collaboration:
In recent years there has been joint participation of foreign &
domestic capital.
India has been encouraging this form of import of foreign capital.
There are three types of foreign collaboration
* Joint participation between private parties
* Foreign firms & Indian Government
* Indian Government & foreign government
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
Country
August 1991
to March
2002
2002-03 (April
-March)
2003-04
(April
-March)
2004-05
(April
-March)
2005-06
(April -Sept)
Cumulative inflows
(from Aug 1991 to
Sept 2005)
% age with
inflow
1.
Mauritius
27,446
(6,632)
3,766
(788)
2,609
(567)
5,141
(1,127)
3,882
(882)
42,844
(10,096)
35.55
2.
U.S.A.
12,248
(3,188)
1,504
(319)
1,658
(360)
3,055
(668)
1,409
(320)
19,974
(4,856)
16.49
3.
Japan
5,099
(1,299)
1,971
(412)
360
(78)
575
(126)
342
(78)
8,348
(1993)
6.93
4.
Netherlands
3,856
(986)
836
(176)
2,247
(489)
1,217
(267)
161
(37)
8,317
(1,954)
6.90
5.
U.K.
4,263
(1,106)
1,617
(340)
769
(167)
458
(101)
843
(192)
7,950
(1,905)
6.60
6.
Germany
3,455
(908)
684
(144)
373
(81)
663
(145)
167
(38)
5,343
(1,317)
4.43
7.
Singapore
1,997
(515)
180
(38)
172
(37)
822
(184)
521
(118)
3,690
(893)
3.06
8.
France
1,947
(492)
534
(112)
176
(38)
537
(117)
35
(8)
3,229
(768)
2.68
9.
South Korea
2,189
(594)
188
(39)
110
(24)
157
(35)
26
(6)
2,669
(698)
2.21
10.
Switzerland
1,200
(325)
437
(93)
207
(45)
353
(77)
170
(39)
2,366
(579)
1.96
Total
92,611
(23,829)
14,932
12,117
17,138
A.
J
Institute
of
Management,
(3,134)
(2,634)
(3,754)
9,553
(2,171)
1,46,351
(35,522)
Mangalore
Country
2012-13
( April -
2013-14
(April March)
March)
2014-15
(April 14January, 2015)
Cumulative
Inflows
(April 00 January 15)
%age to total
Inflows (in terms of
US $)
1.
Mauritius
51,654
(9,497)
29,360
(4,859)
46,663
(7,662)
417,148
(86,187)
36 %
2.
Singapore
12,594
(2,308)
35,625
(5,985)
32,152
(5,262)
157,959
(30,707)
13 %
3.
U.K.
5,797
(1,080)
20,426
(3,215)
6,906
(1,148)
107.791
(21,911)
9%
4.
JAPAN
12,243
(2,237)
10,550
(1,718)
9,802
(1,611)
90,446
(17,879)
7%
5.
Netherlands
10,054
(1,856)
13,920
(2,270)
19,094
(3,136)
75,393
(14,371)
6%
6.
U.S.A.
3,033
(557)
4,807
(806)
9,646
(1,582)
65,376
(13,510)
6%
7.
CYPRUS
2,658
(490)
3,401
(557)
3,104
(513)
38,834
(7,959)
3%
8.
Germany
4,684
(860)
6,093
(1,038)
5,018
(821)
36,623
(7,340)
3%
9.
France
3,487
(646)
1,842
(305)
3,617
(592)
22,323
(4,471)
2%
10.
Switzerland
987
(180)
2,084
(341)
1,792
(293)
14,895
(3,009)
1%
Total
Inflows
from all countries
121,907
155,489
1,199,919
A. J147,518
Institute of Management,
(22,423) Mangalore
(24,299) Prof. K(25,525)
Deepak Rao (243,228)
Sectors
2006-07
(Apr
March)
2007-08
(Apr
March)
2008-09
(Apr
March)
2009-10
(Apr
Nov)
Cumulative
inflow (April
00 to Nov 10)
% age to
total inflow
(in terms of
US$)
1.
Service Sector
(financial & non financial)
21,047
(4,664)
26,589
(6,615)
28,411
(6,616)
20,958
(4,392)
105,411
(23,640)
21%
2.
11,786
(2,614)
5,623
(1,410)
7,329
(1,677)
4,350
(919)
43,846
(9,872)
9%
3.
Telecommunication
2,155
(478)
5,103
(1,261)
11,727
(2,558)
12,338
(2,554)
40,706
(8,931)
8%
4.
2,121
(467)
8,749
(2,179)
12,621
(2,801)
13,586
(2,844)
37,369
(8,357)
8%
5.
Construction Activities
4,424
(985)
6,989
(1,743)
8,792
(2,028)
13,544
(2,868)
35,721
(8,059)
7%
6.
Power
713
(157)
3,875
(967)
4,382
(985)
6,908
(1,437)
20,919
(4,627)
4%
7.
Automobile Industry
1,254
(276)
2,697
(675)
5,212
(1,152)
5,609
(1,177)
20,677
(4,565)
4%
8.
Metallurgical Industries
7,866
(173)
4,686
(1,177)
4,1,57
(961)
1,935
(407)
13,440
(3,130)
3%
9.
401
(89)
5,729
(1,427)
1,931
(412)
1,328
(272)
11,504
(2,666)
2%
10.
1,707
(362)
11,274
(2,496)
2%
930
920
3,427
A. J Institute(229)
of Management,
(205)
(749)
Mangalore
Prof. K Deepak Rao
2012-13
( April March)
2013-14
(AprilMarch)
2014-15
(April 14January,
2015)
Cumulative
Inflows
(April 00 January 15)
1.
Service Sector
(financial & non financial)
26,306
(4,833)
13,294
(2,225)
16,159
(2,642)
2.
CONSTRUCTION
DEVELOPMENT:
7,248
(1,332)
7,508
(1,226)
4,359
(722)
112,916
(24,028)
10 %
3.
TELECOMMUNICATIONS
(radio paging, cellular mobile,
basic telephone services)
1,654
(304)
7,987
(1,307)
16,978
(2,832)
83,697
(16,995)
7%
4.
2,656
(486)
6,896
(1,126)
8,023
(1,308)
67,694
(14,125)
6%
5.
DRUGS &
PHARMACEUTICALS
6,011
(1,123)
7,191
(1,279)
7,559
(1,259)
63,630
(12,856)
5%
6.
AUTOMOBILE INDUSTRY
8,384
(1,537)
9,027
(1,517)
12,529
(2,045)
60,725
(11,857)
5%
7.
1,596
(292)
4,738
(878)
3,408
(562)
48,642
(10,230)
4%
8.
POWER
2,923
(536)
6,519
(1,066)
3,704
(612)
46,359
(9,512)
4%
9.
METALLURGICAL
7,878
2,488
A. J Institute 3,436
of Management,
(1,466)
(568)
(406)Rao
Mangalore
Prof. K Deepak
201,728 (42,101)
% age to total
inflow (in
terms of US$)
40,738
(8,481)
17 %
4%
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
DRIVERS
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao
A. J Institute of Management,
Mangalore
Prof. K Deepak Rao