AKSHARA

INSTITUTE OF MANAGEMENT & TECHNOLOGY.

(Approved by AICTE, New Delhi. & Affiliated to Sri Venkateswara University, Tirupati.)

Business Environment Characteristics of Business:

Unit-I
Q1. What is BE? Explain the Economic
Environment?

Ans: A business firm is an economic unit which

is engaged in the production or distribution, or
both the production and distribution of goods and
Business Environment:
services for the purpose of earning profits.
 Internal Environment
Business Environment is a relationship  External Environment
between a business’s actions and its environment.
Environment is the surroundings of a business by
which business influenced directly or indirectly.
Where the political, economic, social and
technological factors shopping a business
environment are assessed by a business so as to
devise future strategy.

Concept of Business:

Business and society are closely to each

other. Business influences the various aspects of Nature of the Economy:
society and the society in turn affects business.
The general level of development of the
Although business activities also affect social
economy has lot of implications for business it has
outlook values, attitudes, customs, way of thinking
significant bearing on the nature and size demand,
etc., yet it is basically business that has to adapt
government policies affecting business etc.
itself to changing demands of society. It is for this
reason that there has been change in the concept  Low Income Economies
and objectives of business. The concepts of  Middle Income Economies and
business are as follows:  High Income Economies.
Economic Policies:
1) Old Concept of business There are several economic policies which
2) Modern concept of Business can have a very great impact on business.
 Industrial Policy
 Trade Policy
 Foreign Exchange Policy
 Foreign Investment and Technology Policy
 Fiscal Policy
 Monetary Policy

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 AKSHARA
INSTITUTE OF MANAGEMENT & TECHNOLOGY.
(Approved by AICTE, New Delhi. & Affiliated to Sri Venkateswara University, Tirupati.)

Q.2.Explain the Corporate Social Corporate Social Responsibility (CSR)

Responsibility? Arguments Against:
Ans: It takes 20 years to build a reputation and  Restricts the free market goal of profit
only 5 minutes to ruin it. maximization
-Warren Buffer  Business is not equipped to handle social
Business should not only be responsible activities
morally to the stakeholders but also to the society,  Dilutes the primary aim of business
environment and towards a sustainable planet at  Increase business power
large.  Limits the ability to compete in a global
marketplace.
 CSR is an extended model of corporate
governance based on the fiduciary duties Business Responsibilities in the 21st Century:
owed to all the firm’s shareholders.
 CSR is about how companies manage the  Demonstrate a commitment to society’s
business processes to produce an overall values and contribute to society’s social,
positive impact on the society. environmental, and economic goals through
 CSR is the responsibility of corporations to action.
go above and beyond what the law requires  Insulate society from the negative impacts
them to do. of company operations, products and
 CSR is the responsibility of corporations to services.
contribute to a better society and cleaner  Share benefits of company activities with
environment. key stakeholders as well as with
Corporate Citizenship Concepts: shareholders.
 Corporate social responsibility –  Demonstrate that the company can make
emphasizes, obligation and accountability more money by doing the right thing.
to society
UNIT – II
 Corporate social responsiveness –
emphasizes, action, activity Q3. Explain the Non Economic Environment?
 Corporate social performance – emphasizes
outcomes, results Ans: The non-economic environment exercises a
Carroll’s Four Part Definition: strong influence on the business. Normally the
non- economic environmental factors are the key
CSR encompasses the economic, legal, factors for all kinds of business activities in India.
ethical and discretionary (philanthropic) We will now discuss them one by one.
expectations that society has of organizations at a  Political Environment
given point in time.  Legal Environment
 Regulatory Environment
 Demographic Environment
 Technological Environment
 Socio - Cultural Environment
 Regulatory Environment
Political Environment:
The political environment is the state,
government and its institutions and legislations and
the public and private stakeholders who operate
and interact with or influence that system.

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 AKSHARA
INSTITUTE OF MANAGEMENT & TECHNOLOGY.
(Approved by AICTE, New Delhi. & Affiliated to Sri Venkateswara University, Tirupati.)

TYPES OF POLITICAL SYSTEMS: Regulatory Environment:

 Constitutional framework
 Democracy  Policies relating to pricing and foreign
 Totalitarianism investment
 Mixed  Policies related to the public sector, SSIs,
development of backward areas and control
LEGAL ENVIRONMENT: of environmental pollution
Q4. What is meant Natural Environment ?
 The set of rules and regulations to be Explain the Pollution?
abiding by law stimulating and surrounding Ans: Natural environment means all living and
the business is known as legal environment non-living things that are naturally on Earth. In a
 Each nation develops and adapts a legal narrow sense, it is an environment that is not
system that fits its own economic, political influenced by people. The environment that is
and social goals influenced by humans can be called "the built
 Two basic types of legal systems in global environment" or cultural landscape.
community
 Common Law DEFINITION OF POLLUTION:
 Code Law When Harmful Substances Contaminate the
Demographic Environment: Environment, it is Called Pollution. Pollution
refers to the very bad condition of environment in
Studies of a population based on factors terms of quantity and quality.
such as age, race, sex, economic status, level of There are Five types of Pollution:
education, income level and employment, among
others.  Air Pollution
Demographics are used by governments,  Water Pollution
corporations and non-government organizations to  Noise Pollution
learn more about a population's characteristics for  Land Pollution
many purposes, including policy development and  Radio Active Pollution
economic market research.
 Growth of population UNIT – III
 Age Composition
 Life Expectancy Q5. What is Social change? Discuses the Wave
 Sex Ratio front analysis?
 Fertility and Mortality rates Ans: Social change as a sociological term is
 Inter-state migration defined as alterations in basic structure of a social
Technological Environment: group or society. Social change is an even present
 Sources of technology phenomenon in social life, but has become
 Technological development especially intense in the modern era. (Ex:
 Impact of technology Globalization).The concept of Social change
Cultural Environment implies measurement of some of the characteristics
 Social Customs & Rituals and practices of a group of individuals.According to Sociologist
 Lifestyle patterns , Ann Swidler, Culture is like a “Tool kit” form
 Family structure which people select different understanding and
 Role & position of men, women, children behaviors.
and aged in family & society – Warren
Buffer

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 AKSHARA
INSTITUTE OF MANAGEMENT & TECHNOLOGY.
(Approved by AICTE, New Delhi. & Affiliated to Sri Venkateswara University, Tirupati.)

Wave Front Analysis: THE THIRD WAVE -- THE NEW

Wave front analysis is a general descriptor SYNTHESIS
for a number of methods used to quantify and The new technologies of the Third Wave
analyze the optical quality of an optical system will bring:
such as the eye. Diversified, renewable, energy sources.
Civilization can be divided into three major (Ex. -- bio-electronics, piezo-electronics, new
phases: computer systems which shut everything down for
nano-seconds between actual activity.)
1. First Wave: the agricultural revolution Methods of production which make factories and
assembly lines obsolete.
2. Second Wave: the industrial revolution  Electronics and computers...
the information age  The space industry...
3. Third Wave:
(just now beginning)  Pushing into the depths of the sea...
Each wave, develops its own "super-  An intelligent environment.
ideology," or Zeitgeist, with which it explains  A new social memory...
reality and justifies its own existence.  Development of the "electronic cottage"
 The home-centered society
 Technology  Families will become non-nuclear.
 Social Patterns  Radically changed corporations.
 Information Patterns  New code of behavior.
 "Power" Patterns  Rise of the Prosperous.
 Breakup of the nation state.
THE FIRST WAVE
Q6.What is meant by cultural? Discuses
 The agricultural revolution took thousands Cultural Dynamics?
of years to play out.
 Extent of spread: "Today the First Wave Ans: Culture is an integrated system of
has virtually subsided. Only a few tiny learned behavior patterns that are characteristic
tribal populations, in South America or of the members of any given society.
Papua New Guinea, for example, remain to
be reached by agriculture" (Toffler 1980, Characteristics of Culture:
13).
 Use of High Yielding Varieties (HYV) of Learned - Culture is not inherited or biological
seeds based it is acquired by learning and experience.
 Irrigation, Use of insecticides Shared - People as members of a group,
 Use of pesticides Organization or Society share culture, it is not
 Consolidation of holdings specific individuals.
 Land reforms
 Improved rural infrastructure Trans generational- Culture is passed on form
 Supply of agricultural credit one generation to the next.
THE SECOND WAVE
The industrial revolution took three Symbolic- Culture is based on the human Capacity
hundred years to mature. of symbolize.
HUMAN LIFE WAS SPLIT into two
Adaptive- Culture is based on the human Capacity
halves: PRODUCTION AND CONSUMPTION.
to Change or adapt.

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 AKSHARA
INSTITUTE OF MANAGEMENT & TECHNOLOGY.
(Approved by AICTE, New Delhi. & Affiliated to Sri Venkateswara University, Tirupati.)

CROSS CULTURAL DYNAMICS: Types of Economic Systems:

Cross culture in the Business world refers These questions are answered by the type of
to a company’s efforts to ensure that its people economic system a nation has. There are four types
interact effectively with professionals from of economies:
backgrounds different from their own.  Pure Market Economy
Like the adjective cross- culture, it implies  Pure Command Economy
a recognition of national, regional, and ethics  Traditional Economy
differences in manners and methods and a desire to  Mixed Economy
bridge them.
PROCESS/MAINTAINING CULTURE: The Role Of Government In Economic
 Selection of employees Development:
 Actions of top management The ultimate goal of a government is to
 Socialization
promote human welfare in the country. It works as
an agent of economic development. Governments
Selection of employees:
provide the legal and social framework, maintain
 Careful selection-right person at the right
the competition, provide public goods and services,
job
national defense, income and social welfare,
 Interviewer should be trained enough to
correct for externalities, and stabilize the economy.
value for company culture
 Selecting only those who match with the
Functions of State:
culture
Actions of top management:
 Culture is depending on them
 Defensive Function
 Their ideas are to be expressed through culture  Administrative Function
 It make them understand how much  To Provide Social Security
Socialization:  Economic Functions
 The adaptation of culture by the new
entrants is called socialization How the State Accelerates Economic Growth:
 Important to make people aware about
culture  Ensuring Economic stability and full
UNIT – IV employment
 Comprehensive Planning
Q7.What is Economic systems? Explain the  Control Over Market Forces
Role of Government in Economic development?  Provision of Social and Economic
Overheads
Ans: An economy, or economic system, is the way  Agricultural Development
a nation makes economic choices about how the  Industrial Development
nation will use its resources to produce and  The Entrepreneurial Functions
distribute goods and services.
Also called factors of production, are all the Q8.Explain the Industrial policy? Discuses the
things used in producing goods and services. LPG?
They fall into four categories:
 Land Ans: The Industrial Policy plan of a country,
 Labor sometimes shortened IP, is its official strategic
 Capital effort to encourage the development and growth of
 Entrepreneurship the manufacturing sector of the economy.

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 AKSHARA
INSTITUTE OF MANAGEMENT & TECHNOLOGY.
(Approved by AICTE, New Delhi. & Affiliated to Sri Venkateswara University, Tirupati.)

The World Bank (1992) has provided a The Path of liberalization:

working definition of industrial policy as
“government efforts to alter industrial structure to  Relief for foreign investors
promote productivity based growth.”  Devaluation of Indian rupees
Industrial policy is probably the most  New industrial Policy
important document, which indicates the  New trade policy
relationship between government and business.  Removal of import Restrictions
 Liberalization of NRI remittances
RESOLUTION OF INDUSTRIAL POLICY OF  Freedom to import technology
INDIA:  Encouraging foreign tie-ups
 MRTP relaxation (The Monopolistic and
 INDUSTRIAL POLICY RESOLUTION Restrictive Trade Practices Act)
1948 (6 April, 1948)  Privatization of public sector
 INDUSTRIAL POLICY RESOLUTION
(30th April, 1956) Privatization:
 INDUSTRIAL POLICY FEB 2, 1973
 INDUSTRIAL POLICY DEC 23, 1977 Privatization means transfer of ownership
 INDUSTRIAL POLICY STATEMENT OF and/or management of an enterprise from the
JULY, 1980 public sector to the private sector.
 INDUSTRIAL POLICY, JULY 24, 1991 Privatization is opening up of an industry
that has been reserved for public sector to the
LIBERALISATION, PRIVATISATION, private sector.
GLOBALISATION (LPG): Privatization means replacing government
monopolies with the competitive pressures of the
July 1991,India has taken a series of marketplace to encourage efficiency, quality and
measures to structure the economy and improve innovation in the delivery of goods and services.
the BOP position. The new economic policy
introduced changes in several areas. Benefits of privatization:
 Improved efficiency
The policy have salient feature which are: -  Lack of political interference
 Short term view
 Liberlisation (internal and external)  Increased competition
 Extending Privatization Globalization:
 Globalisation of the economy Globalization implies integration of the
Which are known as “LPG”. (liberalization, economy of the country with the rest of the world
privatization, globalization economy and opening up of the economy for
foreign direct investment by liberalizing the rules
Liberalization: and regulations and by creating favorable socio-
economic and political climate for global business.
Liberalization refers to the relaxation of the According to IMF: -”The growing
previous government restriction usually in area of economic interdependence of countries worldwide
social and economic policies. through increasing volume and variety of cross
When government liberalized trade , it border transaction in goods and services and of
means it has removed the tariff ,subsidies and other international capital cash flows, and through the
restriction on the flow of goods and services more rapid and widespread diffusion of
between the countries. technology.”

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 AKSHARA
INSTITUTE OF MANAGEMENT & TECHNOLOGY.
(Approved by AICTE, New Delhi. & Affiliated to Sri Venkateswara University, Tirupati.)

Features of Globalization: Importance of Monetary Policy:

 Opening and planning to expand business Gross National Product (GNP) = C + I + G + X

throughout the world. Where: C = Private Consumption expenditure
 Erasing the difference between domestic I = Private Investment Expenditure
market and foreign market. G = Government Expenditure
 Buying and selling goods and services X = Net Exports
from/to any countries in the world. C, I, X can be influenced by the monetary policy
 Basing product development and which can also influence the private consumption
production planning on the global market and investment spending and exports and imports.
consideration. OBJECTIVES OF MONETARY POLICY:
 Global sourcing of factor of production i.e.
raw-material, components , machinery,  Price stability
technology, finance etc. are obtained from  Credit availability
the best source anywhere in the world.  Stability of exchange rate
 Global orientation of organizational  Full employment
structure and management culture  High rate of economics growth
 Distribution of money
UNIT – V
Fiscal Policy:
Q9. Explain the Monetary and Fiscal Policies?
Fiscal Policy refer to the policy of the
Ans: Monetary Policy: Govt. Towards taxation, public expenditure and
public debt. Govt.s can influence business
Definition: Monetary policy is the macroeconomic activities through Fiscal measures.
policy laid down by the central bank. It involves
management of money supply and interest rate and Objectives:
is the demand side economic policy used by the o Accelerating the rate of investment.
government of a country to achieve o Achieving full employment.
macroeconomic objectives like inflation, o Achieving rapid economic
consumption, growth and liquidity. development.
The factors are: o Promoting foreign trade.
 Interest Rates. o Establishing a welfare state.
 Inflation.
 Money supply : ( Commonly referred to as
Measures of fiscal policy:
M3.)
M1- Narrow Money. M2- M1 plus post office
Fiscal policy is the policy under which the
savings & Bank deposits. M3 - Broad Money.
government of a country uses fiscal measures (or
Money supply is sought to be controlled
instruments) to correct excess demand and
through general and selective controls.
deficient demand and to achieve other desirable
General or quantitative methods of money or
objectives. There are mainly three types of fiscal
credit control includes: Bank Rate Policy.
measures, viz.
RBI’ s Monetary policy has been characterized
 Taxes
as one of controlled expansion. It is said that RBI
 Public expenditure
has failed both in expansion and control of credit
 public borrowing
and money in the economy

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 AKSHARA
INSTITUTE OF MANAGEMENT & TECHNOLOGY.
(Approved by AICTE, New Delhi. & Affiliated to Sri Venkateswara University, Tirupati.)

Q10. What is Trade Policy? Discuses the Free Relation with other Countries:
Trade agreements?
Since Independence, India has always tried
Ans: to keep healthy relation with the neighboring
Trade policy reforms have been one of the countries, especially when trading is concerned.
major planks of the new economic policies
initiated from July 1991 on wards. India govt. to pave the way for free trade
A commercial policy (also referred to as a with at least the southern countries of Asia.
trade policy or international trade policy) is a set
of rules and regulations that are intended to By 2016, India will be trading at Zero duty
change international trade flows, particularly to with a dozen countries.
restrict imports. FTA FTA by FTA by FTA
Signed 2011 2016 ongoing
Types of Trade Policy: Indo- Brunei Philippines China
Thailand
National trade policy: Every country formulates (9th Oct,
this policy to safeguard the best interest of its trade 2003)
and citizens. Indo Indonesia Cambodia Singapore
Bilateral trade policy: This policy is formed Srilanka
between two nations to regulate the trade and (28th Dec,
business relations with each other. 1998)
International trade policy: International - Malaysia Laos -
economic organizations, such as Organization for - - Myanmar -
Economic Co-operation and Development - - Vietnam -
(OECD), World Trade Organization (WTO) and
International Monetary Fund (IMF), define the The bold vision of an Asian economic
international trade policy under their charter. community which will include ASEAN, China,
Japan, Korea and India. [ The 3rd Asean - India
The 1991 Trade policy: summit. P.M. Manmohan Singh].
 Liberalisation of imports and exports
 Liberal Exchange Rate Management
FTAs are arrangements between two or
 Rationalisation of tariff structure.
more countries or trading blocs that primarily
 Changes in the system of export incentives
agree to reduce or eliminate customs tariff and non
Free Trade Agreement (FTA): tariff barriers on substantial trade between them.
Free Trade Agreements (FTAs) have
FTAs, normally cover trade in goods (such
proved to be one of the best ways to open up
as Agricultural or industrial products) or trade in
foreign markets to U.S. exporters. Trade
services (such as banking, construction, trading
Agreements reduce barriers to U.S. exports, and
etc.).
protect U.S. interests and enhance the rule of law
in the FTA partner country.
FTAs can also cover other areas such as
intellectual property rights (IPRs), investment,
government procurement and competition policy,
etc.

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