BUSINESS ENVIRONMENT IN AN ECONOMY HAS THREE BASIC PROPOSITIONS:

BUSINESS IS AN ECONOMIC ACTIVITY

BUSINESS FIRM IS AN ECONOMIC UNIT

BUSINESS DECISION-MAKING IS AN

ECONOMIC PROCESS

ECO. ENVT.

NON- ECO. ENVT.

BUSINESS ENVIRONMENT

ECO. ENVT

NATIONAL GLOBAL

BUSINESS

POLITICALNATURAL

SOCIO-CULTURAL

NON-ECO. ENVT

LEGAL

TECHNOLOGICAL

DEMOGRAPHIC

MACRO- ENVIRONMENT OF BUSINESS

MICRO- ENVIRONMENT OF BUSINESS

INPUT SUPPLIERS

WORKERS & THEIR UNIONS PUBLIC

BUSINESS

CUSTOMER COMPETITORS

MARKET INTERMEDIARIES

INTERNAL ENVT.

MICRO/MACRO EXTERNAL

ENVT.

BUSINESS

• SOCIAL ENVT.

• POLITICAL ENVT.

• LEGAL ENVT.

• GLOBAL ENVT.

BUSINESS SECTOR HAS TO DEAL WITH:

GOVERNMENT

IT DEPENDS UPON THE TYPE OF GOVT. IN A PARTICULAR ECONOMY 

THE BASIC PROBLEM OF EVERY ECONOMY IS:

 

Contd..

CAPITAL MARKET

HOUSEHOLD SECTOR

ALLOCATION OF RESOURCES & SUBSEQUENT PRODUCTION i.e.

 

DUE TO OPEN UP OF THE ECONOMY:

WHAT TO PRODUCE

HOW TO PRODUCE

WHOM TO PRODUCE

WHEN TO PRODUCE

• ENGAGED IN INT. TRADE AND COOPERATION

• TECHNICAL REVOLUTION

• ROLE OF MNC

• ECOLOGICAL BALANCE

ROLE OF THE GOVT. TOWARDS SOCIAL SECTOR

IS IT GOVT. ONLY? OR

WHO COULD BE THE OTHER PLAYERS:

•PRIVATE SECTOR

• NGO’S

• SOCIAL ACTIVIST/ORGANISATIONS

• INTERNATIONAL BODIES

THEREFORE, MANAGER SHOULD KNOW ABOUT THE

MAGNITUDE AND DIRECTION OF CHANGES AT NATIONAL

AS WELL AS AT INTERNATIONAL BUSINESS

ENVIRONMENT.

WHAT ARE THE CRITICAL ELEMENTS OF ECO. ENVT. OF BUSINESS

• INSTITUTIONAL FRAMEWORK:

RELATIVE ROLES & RESPONSIBILITIES OF THE

PRIVATE SECTOR

PUBLIC SECTOR

GOVT.

Contd…

• PHYSICAL ANATOMY OF NATIONAL ECONOMY:

LEVEL OF PCI INDICATE THE LEVEL OF GROWTH & DEVELOPMENT

AVAILABLE NATURAL, HUMAN & MATERIAL RESOURCES OF A COUNTRY.

OCCUPATIONAL DISTRIBUTION OF LABOUR

FORCE, PATTERN OF FOREIGN TRADE,

STRUCTURE OF SAVINGS, INVESTMENT &

CAPITAL FORMATION, PATTERN OF INCOME

DISTRIBUTION & THE DEGREE OF

URBANISATION.

• FUNCTIONING OF THE ECONOMY:

NATURE OF MONETARY TRANSACTIONS AFFECT THE PRICE LEVEL-WHICH INFLUENCE THE REAL VALUE OF ALL ECONOMIC VARIABLES.

ROLE OF CENTRALISED PLANNING,

ADMINISERED PRICE MECHANISM & FREE

MARKET PRICING & CENTRAL BANKING.

• ECONOMIC PLANNING & PROGRAMMES

• ECONOMIC POLICY STATEMENTS AND LEGISLATIONS:

POLICY STATEMENTS AFFECTING BOTH

INDUSTRY AND AGRICULTURE

RBI WORKS THROUGH THE INSTRUMENT OF

MONEY AND CREDIT POLICIES

GOVT. CONTROLS THROUGH FISCAL-CUM-

BUDGETARY POLICIES.

• FLUCTUATIONS & TRENDS IN MACRO-

ECONOMIC VARIABLES:

• ECONOMIC PROBLEMS & PROSPECTS:

INFLATION/RECESSON

UNEMPLOYMENT

NON-ECONOMIC ENVT. OF BUSINESS

POLITICAL ENVT. OF BUSINESS:

• GOVT. IS A POLITICAL INSTITUTION:- ENACTS & EXECUTES SOCIAL POLICIES IN ORDER TO MAXIMISE SOCIAL BENEFITS & MINIMISE SOCIAL COSTS.

• IN THE PRESENT GLOBAL BUSINESS SCENARIO, GOVT. POLICIES, PROGRAMMES & LEGISATIONS AFFECT THE BUSINESS MOST.

 

CRITICAL ELEMENTS:

 

• FROM & STRUCUTURE OF THE GOVT.

• STRENGTH OF THE OPPOSITON IN LEGISLATURE

• ROLE & RESPONSIBILITY OF THE BUREAUCRACY

• DIRECTION & SPEED OF THE GOVT.

• POLICIES & PROGRAMMES.

• SOCIO-ECONOMIC LEGISLATIONS

• POLITICO-LEGAL INSTITUTIONS

SOCIO – CULTURAL ENVT. OF BUSINESS:

 

• BUSINESS MUST CHARGE SOCIAL RESPONSIBILITY, SOCIAL OBLIGATION & SOCIAL COMMITMENT

CRITICAL ELEMENTS:

 

• SOCIAL INSTITUTIONS & SYSTEMS: CASTE SYSTEM, JOINT FAMILY SYSTEM, CHILD MARRIAGE ETC.

EVOLVED THROUGH HISTORY, CULTURE & HERITAGE.

 

• SOCIAL VALUES & MOVES: WHICH HAVE GONE FOR RAPID CHANGES

CUSTOMS, TRADITIONS & CONVENTIONS ARE NOT RIGID ANYMORE.

VIEWS TOWARDS AUTHORITY, RESPONSIBILITY & DELEGATION OF POWER.

VIEWS TOWARDS ACHIEVEMENT & WORK

VIEWS TOWARDS OWNERSHIP & MANAGEMENT

THEREFORE, THERE IS A NEED FOR BUSINESS EDUCATION & ITS IMPACT ON BUSIENSS ETHICS, BUSIENSS MORALITY & ORG. CULTURE.  SOCIAL RESPONSIBILITY OF THE GOVT.

SOCIAL GROUPS & SOCIAL MOVEMENTS:

SHOULD CREATE BUSINESS CLIMATE THROUGH SOCIAL MOVEMENTS & SOCIAL POLICY FORMULATLION ON SUBJECTS LIKE:  SCIENCE & TECHNOLOGY

ECOLOGY & FORESTRY

FAMILY PLANNING ETC

SOCIAL PROBLEMS & PROSPECTS:

AS SOCIETY MOVES FROM ‘PRE-INDUSTRIAL’ TO ‘POST INDUSTRIAL’ STAGES OF DEVELOPMENT IT MAY EXPERIENCE:-

GROWING UNEMPLOYMENT & POVERTY

POOR HOUSING & SANITATION

PRESSURE ON INFRASTRUCTURE

URBAN CONGESTION, POLLUTION & INCREASING INCIDENCE OF ANTI-SOCIAL ACTIVITIES.

WHAT IS NEEDED?

SOCIAL COST-BENEFIT ANALYSIS OF INDUSTRIAL DEVELOPMENT. 

ECONOMIC ROLES OF THE GOVERNMENT:

• AS A REGULATOR

•AS PROMOTOR TO BUSINESS

•AS A GOOD ENTREPRENEUR &

•A VERY EFFECTIVE PLANNER