BUSINESS ENVIRONMENT

TMRWOHF…The Man Ran Weirdly On Half Foot

EPNSTHF…..Every Paa Needs Someone To Hear For
Features of B.E. :

1. Totality of external forces: Business environment is the sum total of all things
external to business firms and, as such, is aggregative in nature.

2. Specific and general forces: Business environment includes both specific and
general forces. Specific forces affect individual enterprises directly and immediately in
their day-to-day working. General forces have impact on all business enterprises and
thus may affect an individual firm only indirectly.

3. Dynamic nature: Business environment is dynamic in that it keeps on changing

whether in terms of technological improvement, shifts in consumer preferences or
entry of new competition in the market.

4. Uncertainty: Business environment is largely uncertain as it is very difficult to predict

future happenings, especially when environment changes are taking place too
frequently as in the case of information technology or fashion industries.

5. Relativity: Business environment is a relative concept since it differs from country to

country and even region to region. Political conditions in the USA, for instance, differ
from those in China or Pakistan. Similarly, demand for sarees may be fairly high in India
whereas it may be almost non-existent in France.

6. It is homogeneous

Social Transition :

Social change Or Social Transition refers to an alteration in the social order of a society. It may
refer to the notion of social progress or socio cultural evolution, the philosophical idea that
society moves forward by dialectical or evolutionary means. It may refer to a paradigmatic
change in the socio-economic structure, for instance a shift away from feudalism and towards
capitalism. Accordingly it may also refer to social revolution, such as the Socialist revolution
presented in Marxism, or to other social movements, such as Women's suffrage or the Civil
rights movement. Social change may be driven by cultural, religious, economic, scientific or
technological forces.The following points comes under social Transition:
 Urbanization
 Education
 Sex ratio
 Unemployment rate
 Population
 Literacy Rate
 Poverty
 Basic Services like Electricity, Water etc.

DEMOGRAPHICS
Demography is the statistical study of human populations and sub-populations. It encompasses the
study of the size, structure, and distribution of these populations, and spatial and/or temporal
changes in them in response to birth, migration, aging and death.
The demographics of India are inclusive of the second most populous country in the world,
with over 1.21 billion people (2011 census), more than a sixth of the world's population. Already
containing 17.5% of the world's population, India is projected to be the world's most populous country
by 2025, surpassing China, its population reaching 1.6 billion by 2050. Its population growth rate is
1.41%, ranking 102nd in the world in 2010.
India has more than 50% of its population below the age of 25 and more than 65% hovers
below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years,
compared to 37 for China and 48 for Japan.

 Today, in India, attitudes are changing. A very young population is currently coming of age and
entering the workforce.
 Consumer spending is booming. According to projections, there will be a rise of middle-class
population of half a billion people over the next two decades.
 This population boom is increasingly seen as an asset, not just to the Indian nation, but to the
global economy.
 India’s sustained but slow growth, its youthful population, and its conservative approach to
financial globalization have run countercyclical to the long-term trends of the world economy.
 The real gains of a population boom depend on policies that allow the young to attain high levels
of education, find jobs, and contribute to the economy.
 Russia and Cuba failed to gain from their demographic positives, including a large supply of young
workers during that time.
 In India and countries with similar demographics today, the failure to create opportunity can turn
the dividend into a crisis. India experienced these problems throughout the 1970s and 1980s,
when unemployment and lack of income mobility fed extremist movements across the country
and the rise of the underworld in major cities.

Demographic Dividend

David Bloom said when young working-age adults comprise a disproportionate percentage of a
country’s population, the national economy is affected in positive ways. And yet it’s clear that if a
country’s colleges and schools are in good health and if a significant proportion of the population is
graduating from them, the prospects of economic growth are promising. When conditions are right,
large numbers of young workers can drive a nation’s growth to remarkable levels.
The economic advantage comes from young workers who are unencumbered by families or
other responsibilities, the members of this dividend generation don’t have to spend their incomes on
children, and they don’t worry as much as previous generations about financial security and health
expenses. They may diverge from traditional career paths into more entrepreneurial directions, and
when these risks pay off, the results for the economy are innovation, productivity gains, and rapid
growth.

Issues arising from Demography

1. For a long time demographers have been concerned about the global population explosion. Latest
predictions are that the population is still growing overall but the rate of growth is declining and
may actually decline in the future. Asian and African regions are booming, but Europe is in
decline.

2. Birth rates are declining in developed economies with average family size reducing and also in
some developing economies that have had effective public policies to control the population
growth rate.

3. The vast majority of people are living in today’s developing economies - in Asia, Africa and Latin
America - creating what is called the Demographic Divide. This polarization is expected to
continue.
4. People are living longer in both developed and developing economies. Developed economies have
aging populations with this being the new demographic concern (taking over from population
explosion)

5. Immigration will increase (as a result of the Demographic Divide) and as developed economies
look for sources of labor.

6. Developed economies with lower birth rates and people living longer will experience a lower
Demographic Dividend than developing economies.

7. The declining work force will induce people to work longer and retire later. Immigration will
provide a supplement to the work force in developed economies.

Impact on Business

1. Clearly international trade will continue to grow. The significant improvements in communications,
transportation and trade regulation mean we will be doing more cross border business. More
importantly, a growing population, especially one with more disposable income, creates demand
for goods and services. The world will consume more - and inevitably this will create demand for
natural resources, and contribute more to environmental degradation.

2. The battle for talent will continue and getting good people may become harder in developed
economies. Conversely, there is a growing talent pool in the developing economies as more
people gain full educations. This all points to a labor market that will become more global, and this
will support further immigration.

3. Business support functions are being increasingly provided by service providers. Payroll was one
of the earliest, but all sorts of functions are now outsourced. Recent trends have seen outsourced
processes now include email hosting and exchange server hosting. These will be provided from
low cost centers, typically offshore. This trend will continue. As more business processes become
technology-based, and with broadband becoming ubiquitous, it will be easier and more cost
effective to outsource than finding qualified employees to perform tasks in-house.

4. Aging populations will put additional strains on governments to deliver health and aged care
services. The private sector’s role in these areas will rise as governments move to outsource the
delivery of these services, or simply privatize them.

5. Target investments will move beyond the traditional equity and property markets which are
already overheated in terms of valuation. As people grow older they tend to have more money
(savings) than young people.

RURAL URBAN DIVIDE

Rural- urban disparities are seen in all spheres of human life - economic and non-economic. The
extent of disparities, however, differs from country to country. India is the largest democracy with
consistent economic growth rate since independence. India is also third largest scientific and
technological workforce. In agriculture India produces sugar, groundnut, tea, fruits, rice, wheat,
Vegetables and Milk in a large scale. With regard to demographic profile more than 720 billion i.e. one
third of its population live in rural areas. Despite these developments, there is a wide gap between
rural and urban India with respect to technology, living condition, economic empowerment etc. Many
in rural India lack access to education, nutrition, health care, sanitation, land and other assets and
they are trapped into poverty. In rural India there is high number of Infant Mortality with low Life
Expectancy at Birth Rate. Rural India mostly depends on agricultural sector. The growth rate in
agricultural sector (primary sector) is 2-3 % when compared to secondary and tertiary sector which
are growing at the rate of 8-12 %. Due to this there is a large scale migration of labor forces from
rural to urban in search of employment. 8-12 % growth rate in the secondary and tertiary sector help
Urban India as an emerging global information based economy still urbanization of poverty is a major
concern.
Today 74.7 percent of the population lives in rural areas and 24.3 percent inhabit urban areas. In
urban areas there is a heavy concentration of telephones, televisions and doctors. As 70 percent of
the country’s population mainly in rural areas lack access to primary health care the worst affected is
the elderly, young women and children.

1. Major environmental issues in rural areas are deforestation, soil erosion, overgrazing,
desertification, and water pollution from runoff of agricultural pesticides. In urban areas there are
issues of water pollution from sewage and air pollution from industrial effluents and vehicle
emissions.

2. Although India boasts more than 200 universities mainly in urban areas and has one of the largest
educational systems it has failed to wipe out illiteracy. For those that are educated there are no
jobs as more than 40 million people are unemployed. India has the largest share of illiterate
women in the world. The poor educational status of the girl-child increases the fertility rate,
maternal and infant mortality, and malnutrition in the family. Rights of women to land and
property are rarely recognized.

3. One of the major factors affecting fertility rates in India is the illiteracy of women. India has a total
fertility rate of 2.98 children born per woman. The literacy rate (defined as those age 15 and over
that can read and write) is 65.5% for males and 37.7% for females. The infant mortality rate is
61.47 deaths per 1000 live births. The life expectancy for males is 62.55 years and for females
63.93 (CIA.gov 2002). During the 1960’sthe average for the total fertility rate of developing
countries (including India) was six children born per women. It is currently close to three children
born per woman. Life expectancy has risen over the years as well. This indicates that India has
gone through a demographic transition from low deaths and high births to lower deaths and fewer
births.

4. Although population is a contributing factor, the cause of poverty is the uneven distribution of
resources by the state namely the rural urban divide. A good example of a state that has achieved
equal rights among men and women and has a higher standard of living is the Southern state of
Kerala. Where despite it being one of the poorest states in the countries it has through greater
and equal access to healthcare and increased literacy achieved better standards of living than
richer states in India. Increased access to health care and literacy among the people is evidently a
clear way to improve standards of living.

In order for an improvement in the living conditions for the masses in the country it is key that the
government make the masses a priority. Poverty alleviation has to be the primary aim at the state
and national level. Every policy must work towards this aim in one way or another. As history has
shown a disregard for the poor coupled with self serving policies leads to a worse situation for
everyone. If the policy makers don’t care about the environment they are living in they should
consider the fate of future generations as the living conditions in India are unsustainable for most
people whether they live in urban or rural areas. The highly uneven distribution of resources in urban
areas is evidence of what the state has continually promoted. The industrialists and politicians have
formed and alliance and usurped the resources of the masses. In urban are as resources are readily
accessible only to the few who are of the industrial class and/or politicians. While the rural areas
continue to be neglected. It is hoped that the new population policy is truly an integrated effort which
emphasizes education and choices for the girl/woman. If I were to devise policy my priorities would be
as follows:

1. I would bridge the gap between the rural and the urban by funding much needed rural
infrastructure such as roads, plumbing, and sanitation facilities. I would get much needed basics
like water to remote are as where it would be most needed.

2. Access to healthcare is another crucial element of improving the quality of life for people. Making
distribution a priority is key and the main impediment to improving the living conditions of people.
Effective distribution of health resources especially to those that most need it (those most at risk)
would work to prevent most major epidemics.

3. I would put in place stringent anti-pollution laws for industry:

 A. Conservation areas and no dumping laws for the ocean.
B. If an industry is inefficient it will be shut down and the space that the companies/factories
occupied will be transferred to housing and or other project that would increase social welfare
especially work towards poverty alleviation at the local, state and national levels.

DIGITAL DIVIDE

The digital divide is most commonly defined as the gap between those individuals and communities
that have, and do not have, access to the information technologies that are transforming our lives.
The "digital divide" refers to the fact that certain parts of the population have substantially
better opportunities to benefit from the new economy than other parts of the population. Most
commentators view this in purely economic terms.

Major Reasons of Digital Divide

 Reason1: Economic Divide: In its simplest form, the digital divide is manifested in the fact that
some people can't afford to buy a computer. We should recognize that for truly poor developing
countries, computers will remain out of the average citizen's reach for 20 years or more.

 Reason2: Usability Divide: Far worse than the economic divide is the fact that technology remains
so complicated that many people couldn't use a computer even if they got one for free. Many
others can use computers, but don't achieve the modern world's full benefits because most of the
available services are too difficult for them to understand. Problem, but nobody cares about this
massive user group.

Impact of Digital Divide

 On Employment and Productivity:

1. Access to the technologies and ensuring that workers possess the education and skills to use
them are the fundamental policies that developing countries need to consider.

2. Vast swathes of the globe remain ‘technologically disconnected’ from the benefits of electronic
marvels: revolutionizing life, work and communications in the digital era.

3. Internet users in Africa and Middle East account for only 1 percent of the global Internet users
(Report 2001).

4. East Asian economies of China, Malaysia, Thailand, Philippines and others, for example have
been able to make rapid progress in high-tech areas and were able to capture a significant
share of the world market for semiconductors and other data processing equipment.

5. India has seen its software sector grow by 50 percent throughout the 1990s, creating not just
exports but thousands of domestic jobs and a technological talent pool that is drawing
international attention from industrialized countries and large MNCs.

 On Consumers

1. E-Commerce involves conducting business activities using electronic data transmission

involving computers, telecommunications networks, and streamlined work processes.

2. The business-to-consumer (B2C) e-commerce is a form of e-commerce in which customers deal

directly with organization, avoiding any intermediaries.

3. Worldwide, businesses and individuals use e-commerce to reduce transaction costs, speed the
flow of goods and information, improve the level of customer service, and enable close
coordination of activities among manufacturers, suppliers, and customers.
 4. E-commerce also enables consumers and companies to gain access to worldwide markets.

5. E-commerce requires a supportive legal framework in the banking and industrial sectors, as
well as legal and juridical changes in response to challenges that have emerged in tandem
with the new technologies. These include standards and protection of digital signatures, the
liability of value- added networks, regulation of certification authority, protection of intellectual
property, and computer crime and data protection.

6. The complexity of these issues is a major obstacle for countries that lack the technical capacity
to design and implement needed reforms.

7. A second major capacity issue involves human resource development and specialized technical
skills. E-commerce is computer and network intensive, requiring skilled programmers and
applications-development personnel. Furthermore, as the majority of Internet content and
programming languages are English-based, intensive language training is necessary. In
addition, consumers also require both basic literacy and computer skills.

8. First, the digital transmission of goods and services will render traditional customs procedures
and domestic taxation systems archaic and/or obsolete.

9. E-commerce makes it increasingly difficult for countries to distinguish between goods and
services. WTO rules approach trade in goods and services differently; Goods are generally
subject to tariffs while trade in services is limited by restrictions on national treatment and/or
quantitative controls regarding market-access.

TECHNOLOGY

Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or
methods of organization in order to solve a problem or perform a specific function. It is also the
application of science (the combination of the scientific method and material) to meet an objective or
solve a problem.

What Does Technology Do for Us?

1. Technology provides a stage plan for society by being a blue print-of how to do things over and
over again.
2. Improves Standard of Living .
3. Makes delivery of knowledge and education possible to remote areas.
4. Makes learning a creative process.
5. Helps in reduce waste, esp. of precious resources.
6. Makes exploration of new markets and lower- cost suppliers possible and easy .
7. Can potentially improve medical care .
8. Increases productivity.
9. Adds many new innovative dimension to business .
10. Assists in creation of new job opportunities .
11. Aids in better management practices .
12. It fuels innovation and creativity
13. Bridges Geographical and other barriers .

Technological change (TC) is a term that is used to describe the overall process of invention,
innovation and diffusion of technology or processes. In essence TC is the invention of a technology (or
a process), the continuous process of improving a technology (in which it often becomes cheaper)
and its diffusion throughout industry or society. In short, technological change is based on both better
and more technology.
Drivers of Change?

Why has Technology become an important part of Business environment?

1. First, technology has been developed that has made information preparation and
dissemination inexpensive. This technology has taken the form of low- cost, high-speed digital
and cable video and data transmission, hardware that produces information quickly and
easily, and the development of software that makes preparation, data, and communication
tools available to individuals who previously did not have access to needed information. With
these technology developments, time, space, and other temporal constraints to information
have been reduced and, in many cases, eliminated.

2. A second major development that has significantly impacted business has been globalization.
Faster methods of transportation, together with instantaneous information, have allowed the
world to become one giant marketplace. Consumers can now buy products from foreign firms
as easily as they can from a local store. Organizations such as General Motors have to worry
not only about what Chrysler and Ford are doing, but also what Toyota, Volkswagen, and
BMW are doing as well. Instead of having only two major American competitors, General
Motors and all other business organizations now have to compete with similar companies
throughout the world. In addition, with the increased availability of inexpensive information,
more is known about these competitors and about General Motors than ever before. If a
General Motors product has deficiencies, for example, the world knows about and can act on
those problems instantly.

There have been a number of business developments because of these changes. Some of the
most obvious are:
1. An increased pace of change in the business world.
2. Shorter product life cycles and shorter competitive advantages.
3. Emergence of new companies and new industries.
4. Emergence of new professional services.
5. Outsourcing of non-value-added, but necessary, services.
6. Increased uncertainty and the explicit recognition of risk.
7. Increasingly complex business transactions.
8. Changes in financial reporting.
9. Increased focus on customer satisfaction.

Technologies that changed the world!

1. Morse Telegraph – 1837

 Morse Code, invented in 1837 by Samuel Morse
 It allowed long, detailed messages to by transported over huge distances via wire
  This technology not only changed the way people communicated, it changed the way armies
communicated.

2. The Telephone – 1877

 The Telephone was invented in 1877 by Alexander Gram Bell.
 Telephone revolutionized communication by allowing voices to be transmitted via cable to a
receiver on the other end of the line.
 Few other technologies have had the staying power of the telephone, as it has been modified
throughout the years and is still used today

3. Radio – 1894
 First demonstrated in 1894 by Oliver Lodge and Alexander Muirhead at Oxford University
 the radio consisted of a devise that emitted a signal of radio waves and a receiver which
received and interpreted the information into sound.
 The radio was first developed as a military technology but was soon employed to entertain and
educate the general public.

4. Microchip – 1958
 Developed by a Texas Instruments engineer named Jack Kilby
 microchips forever changed the world of computing.
 This single invention dictates the pace by which we live our daily lives.
 Without the microchip, we would have no computers, not internet, and no cell phones.

5. Laptop Computer – 1981

 The first laptop computer was released and marketed in 1981 by the Osborne Corporation.
 Known as Osborne 1 the device consisted of a 5 inch display and a single floppy drive.
 The Osborne originally sold for $1,795, today it can be purchased via eBay for around $200.

6. Compact Disc – 1982

 The compact disc totally revolutionized the way people listen to music.
 Developed in 1982 by Sony, it offered a small compact digital format on which music or other
data could be stored.
 The first album to ever be released on CD was Billy Joel’s classic 1978 album 52nd street.

7. mp3 – 1993
 Developed in 1993 as way of compressing audio files into a manageable format, the mp3
created an efficient way of storing music and other audio without sacrificing the quality of the
sound.
 Mp3 technology opened the door for other technologies like Napster,
 The mp3 format also paved the way for the rise of small digital audio players like the Apple
iPod.

8. Facebook – 2004
 Facebook was founded by Mark Zuckerberg with his college roommates and fellow students
Eduardo Saverin, Dustin Moskovitz and Chris Hughes from Harvard.
 As of April 2012, Facebook has more than 900 million active users.

Relationship Between Technology and Business?

1. Technology offers the ability to change internal business process in order to gain efficiency
and improve quality. With such improvements in business process, costs can be reduced and
profits increased.
2. E.g. being able to communicate instantly with clients and customers by email or scanning
documents into PDF files or other readable formats v/s paper mails which are more time
consuming
3. Protection of the business' “Trade Secrets” is a concern. There is always a great need about
maintaining the confidentiality of any special information that gives a competitive edge. This
kind of special knowledge is often referred to as "proprietary information" or "trade secrets.”
4. One way companies protect such information is to limit its access and sign “Confidentiality
agreements” with persons to whom disclosure can’t be avoided, implying legal risks of misuse
of such information.

Affects of Technology on Marketing Strategies

1. Improvement in the current products. Removal of old and obsolete products from productions e.g.
BW TV sets, old cameras etc.

2. New methods to communicate promptly and effectively.

3. Outsourcing: For Example company A makes a contract with another company (Company B) to
conduct its business. Company B is recruiting their own employees, and work for company A as
outsourcing company to promote their products and services to selected target segments.
Outsourcing may be unavoidable due to employment, labor and other legal restrictions.

4. Technology helps organize the work environment. Everything from payroll to inventory is
managed more efficiently with well-designed software in place. Documents, such as letters or
government proposals for contract work, are easier to write and edit on the computer. Phone
systems include technology for three-way or four-way calling, for example, to save time.

5. One disadvantage to technology is it’s possible to actually slow down work with it. For example,
checking one’s email too often negatively affects productivity. It’s better to stay focused in
making 20 calls versus checking email every 15 minutes. Distractions, such as phone calls are
also an issue.

6. Technology can frustrate clients who need to reach you. For example, individuals calling a help
desk for answers to a question might not reach a live person. Pressing numbers to communicate
your needs, such as “1 for yes” or “2 for no,” depersonalizes the relationship between customers
and the companies they patronize.

7. It’s likely that technology can help workers dodge true responsibilities for example employees
may purposely switch off cell phones or avoid checking emails, or may not respond in a timely
fashion.

8. Global Interfacing: Work projects and business profits all connect to globalization enabled by
technology. Everyone can connect with those in foreign countries with the click of a mouse.
Decades ago, it would have taken months or years to find an inroad with a foreign partner or
associate. Today, you can build a business with someone in another country in a matter of weeks
-- or even days.

New technologies create new products, new markets, new suppliers and new processes. MP3 players,
computer games, online gambling and high definition TVs are all new markets created by
technological advances. Online shopping, bar coding and computer aided design are all
improvements to the way we do business as a result of better technology. Technology can reduce
costs, improve quality and lead to innovation. These developments can benefit consumers as well as
the organizations providing the products. But there are certain warning points that business, society
and Governments shall also take into consideration.

Technology for Development

 Technology can be applied to almost all possible dimensions of development; naming a few would
be
1. Socio-economic development
2. Industrial development
3. Educational progress
4. Medical research
5. international development
6. human rights
 7. Areas pertaining to defense and security
8. Environment and Agriculture

 Computer technology has had an enormous impact on education and health care. The
advancements in medical technology, for example, have contributed to longevity in many
societies.

 In addition, the introduction of robots in many factories has reduced the need for labor.

 Unfortunately, there is a negative side to technological progress. The introduction of nuclear

weapons, for example, has made the destruction of the human race a frightening possibility. In
addition, factories using modern technologies have polluted both air and water and contributed to
various environmental and health-related problems.

 Because of the advances of international communication, the increasing economic

interdependence of nations, and the serious scarcity of vital natural resources, the transfer of
technology has become an important preoccupation of both industrialized and developing
countries.

 The transfer of technology is essential for attaining a high level of industrial capability and
competitiveness. Multinational corporations are playing an increasingly important role in
technology transfer because they invest abroad to expand production, marketing and research
activities.

 There is also a growing consciousness amongst governments of the need to increase technology
transfer to the developing countries to help stabilize their economic and social conditions.

Disadvantages of Technology in Business

1. Implementation Expenses:

 Every business must consider startup costs when implementing any type of information
technology system. In addition to the cost of hardware and software, some technology vendors
require businesses to purchase user licenses for each employee that will be operating the system.
 Businesses must examine the cost of training employees in unfamiliar technology.
 Systems malfunction, and when they do, businesses must engage skilled technicians to
troubleshoot and make the necessary repairs.
 These expenses present a major disadvantage of information technology in business, particularly
to businesses that are entering the technology era for the first time.

2. Job Elimination:

 Implementing information technology into business operations can save a great deal of time
during the completion of daily tasks.
 Paperwork is processed immediately, and financial transactions are automatically calculated.
Although businesses may view this expediency as a boon, there are untoward effects to such
levels of automation.
 As technology improves, tasks that were formerly performed by human employees are now
carried out by computer systems.
 This leads to the elimination of jobs and, in some cases, alienation of clients. Unemployed
specialists and once-loyal employees may have difficulty securing future employment.

3. Security Breaches:

 The ability to store information in an electronic database facilitates quicker, more efficient
communication. In the past, an individual would sift through stacks of paper records to retrieve
data.
 With properly implemented technology, information can be recovered at the touch of a button.
Although information technology systems allow business to be conducted at a faster pace,
they are not without their flaws.
  Information technology systems are vulnerable to security breaches, particularly when they
are accessible via the Internet.
 If appropriate measures are not in place, unauthorized individuals may access confidential
data. Information may be altered, permanently destroyed or used for unsavory purposes.
 Risk of cyber crime when utilizing technology

4. Disconnectedness:

 With technology playing such a large role in the workplace, people have become disconnected
from final products and each other.
 Job tasks are often delineated; therefore, fewer people are a part of the final creation. This can
lead to dissatisfaction or workplace boredom. In addition to this, as more employees utilize
technology in everyday communication; messages are being misunderstood, often making
workers appear rude.
 People reading email, texts or instant messages, for instance, cannot accurately measure tone
or utilize body language as points of reference. However, venues such as video conferencing
eliminated some communication obstacles.

5. Distractions:

 Aside from issues ceasing work production such as system failures, interruptions can include
email and instant messages.
 According to CNET News, on average, it takes eight minutes for a person to return to a creative
state.
 There are other forms of technology vying for employee time including online games, music
and videos.

ECOLOGICAL
Issues, Concerns and Impact on Business

Ecology is the scientific study of the way that living organisms interact with their environment.
Studies the Earth's ecosystem including both the living and non-living parts of the environment.
Plants, animals, fungi, and bacteria as well as the rocks, water and atmosphere make up an
ecosystem.

Ecology : Major Issues

1. Climate Change
2. Species are going extinct, mostly because of climate change and habitat loss.
3. The huge biodiversity loss - not only happening in land but in oceans as well.
4. Acid Rain.
5. Pollution: Both air and water.
6. Experiments of Genetic engineering.
7. Excessive Fishing.
8. Energy Crisis.
9. Poaching/ Hunting of Animals.
10. E-waste: unwanted computer parts and electronic items, form the electronic waste, Most of
the electronic waste products are toxic and non-biodegradable.
11. Cutting of Forests.
12. Green House effect.
13. Global warming.
14. Fuel Economy: important for us to maintain our vehicles to achieve fuel efficiency.
15. Genetic Erosion: phenomenon where the limited gene pool of an already endangered species
decreases further on account of an increasing number of deaths in the existing population of
the species.
16. Ocean Dumping.
17. Oil spills.
18. Noise Pollution.
19. Ozone Depletion .
20. Hazardous waste / Toxic waste.
 21. Soil Erosion.
22. Excessive use of Pesticide.
23. Nuclear Issues .
24. Depletion of Resources: Mining, Fishing, Logging etc.
25. The Ocean Dead Zones: In oceans around the world, there are eerie areas that are devoid of
nearly all life. These ‘dead zones’ are characterized by a lack of oxygen, and they’re caused by
excess nitrogen from farm fertilizers, emissions from vehicles and factories, and sewage. The
number of dead zones has been growing fast – since the 1960’s, the number of dead zones has
doubled every 10 years .
26. Destruction of Rain forest .
27. High levels of CO2 in the atmosphere.
28. Melting of Polar ice caps .

What is Sustainable Development?

“Sustainable development is development that meets the needs of the present without compromising
the ability of future generations to meet their own” .The entire world is interconnected, actions of one
nation or continent have far reaching affects on all parts of the world: not just on Human beings but
also on flora and fauna. Example:
 Air pollution from America affects air quality in Asia.
 pesticides sprayed in costal farming areas could harm fish stocks of all major oceans and seas
 The economic policies we endorse today will have an impact on urban poverty when our
children are adults.

Mostly needs are conflicting, for example you may demand more eco-friendly companies in your state
for cleaner air; less pollution but you may not be willing to substitute your vehicle for a cycle which is
more nature friendly.
For example, industrial growth might conflict with preserving natural resources. Yet, in the long term,
responsible use of natural resources now will help ensure that there are resources. Sustainable
development is about finding better ways of doing things, both for the future and the present. It
might call for a change in the way we work and live now, but this doesn't mean our quality of life will
be reduced.

What is to be sustained?
 NATURE: Earth, Biodiversity, Ecosystems
 LIFE SUPPORT: Ecosystem, Resources, Environment
 COMMUNITY: Cultures, Groups, Places

What Is to be Developed?
 PEOPLE: Child survival, Life expectancy, Education Equity Equal opportunity
 ECONOMY: Wealth, Productive sectors, Consumption
 SOCIETY: Institutions ,Social capitals ,States, Regions

Effect Of Environmental Issues On Business

1. Laws made for protection of the environment may require businesses to change equipment and
procedures to meet imposed standards, which costs businesses money.

2. Businesses that manufacture products create, at some point in the manufacturing process,
manufacturing waste. Environmental laws and good environmental citizenship prohibit the
indiscriminate dumping of manufacturing byproduct, so businesses must decide how best to
dispense with it.

3. Many implement recycling programs; others sell what they can of the waste to other
manufacturers who use it in their own manufacturing processes as raw material.
4. From a business point of view going green might not always appear to be economically efficient,
but in many cases companies will have no option since government policy and subsequent
legislation will compel them to follow certain lines of action.

5. There will obviously be costs involved: Buying eco-friendly equipment, packaging and materials
can be expensive. Initial costs can be higher, even if the variable costs work out cheaper in the
long run. Light bulbs are a good example. Environmentally friendly bulbs can cost three times as
much as conventional bulbs, but they last much longer.

6. Most consumers claim to be really environmentally conscious, with a genuine belief in the need to
reduce their carbon footprint, but product cost is often uppermost in their minds. If for instance,
they have a choice of an organic all-natural bar of soap that costs twice as much as a standard
bar, many will instinctively opt for the cheaper one.

7. Effective marketing is very important if a company wishes to sell green products. Well informed
sales staff are also necessary because customers are not always equipped to recognize what
makes a product green.

8. Packaging is being made recyclable and many products are now being made in ways that make
recycling very much easier.

9. It is also important to look at supply chains when considering environmental business issues. A
garment made of organic cotton might appear to be very environmentally friendly, but this would
definitely not be the case if it was made using child labor in a far eastern sweatshop.

10. Many firms take their Corporate Social Responsibility (CRS) very seriously and take the view that
promoting themselves as being socially responsible gives them a significant commercial
advantage.

Major Areas that Organizations should consider include:

 energy management
 waste management
 carbon management
 water management
 sustainable procurement of raw materials
 ethical labor standards within the supply chain
 product composition· eventual disposal at the end of the lifecycle.

Corporate Social Responsibility (CSR):

Corporate Social Responsibility (CSR) is the responsibility of an organization for the impacts of its
decisions and activities on society, the environment and its own prosperity, known as the “triple
bottom line” of people, planet, and profit.
A solid business plan, embedded into the business culture, reflecting organizational values and
objectives through strategic CSR application, will help to build a sustainable and profitable future for
all.

Corporate social responsibility and business

1. The suppliers: choice and the way to deal with them. For example, trading with suppliers who
pollute the environment could be as irresponsible as doing so yourself.

2. Treatment towards employees: complying with legal requirements, healthy working conditions,
proper wages and salaries
3. Effects on local community and active involvement: environment ,use of resources more
efficiently and reduce pollution and waste.

4. Environmental Impact

Dealing with Consumers under CSR

Some actions that may help a firm to engage in CSR:

1. Brochures should be written in plain English/ Local language, telling the truth without hiding
anything in the 'small print'.
2. There shall be honesty about products and services. Customers should be told what they want
to know, including what steps are taken to be socially responsible.
3. If something goes wrong, it should be acknowledged: the problem should be addressed.
4. Customers may reward the firm with their loyalty. Listening to consumers can also help you
improve the products and services you offer them.

Dealing with Suppliers under CSR

Some suggestions in this regard:

1. Use of local suppliers as much as possible. This helps to support local community and also
reduces the energy wasted and carbon emissions from deliveries
2. When selecting suppliers their employment, health and safety and environmental practices
should also be evaluated.
3. The reputation can be damaged by being associated with businesses that abuse the rights of
their own workers or their local environment.
4. Treatment towards suppliers should be fair, .For example; being paid on time can make a big
difference to them.

Benefits of CSR

1. Increase customer retention

2. Develop and enhance relationships with customers, suppliers and networks
3. Attract, retain and maintain a happy workforce and be an Employer of Choice
4. Differentiates the business firm from other competitors
5. Improves business reputation and standing
6. Generates positive publicity
7. Improved financial performance
8. Lower operating costs
9. Enhanced brand image and reputation
10. Increased sales and customer loyalty
11. Greater productivity and quality
12. Product safety and decreased liability.
13. Greater use of renewable resources

Green Washing

Green washing or "green sheen", is a form of spin in which green PR or green marketing is
deceptively used to promote the perception that an organization's aims and policies are
environmentally friendly. Whether it is to increase profits or gain political support, green washing may
be used to manipulate popular opinion to support otherwise questionable aims.
It attempts to deceive us, making us think that a company with an awful environmental track
record actually has a great one. Not all environmental advertising is dishonest, of course. But any
advertising legitimately labeled as "green washing" is dishonest, and that's a problem.
The term is generally used when significantly more money or time has been spent advertising
being green rather than spending resources on environmentally sound practices.E.g. IBM has been
running advertisements claiming that replacing computers twice as often as normal is somehow a
best practice in green technology. These claims are completely untrue, as the proper disposal of
retired PC’s has actually become a critical environmental concern.

PEST Analysis

A scan of the external macro-environment in which the firm operates can be expressed in terms of
the following factors:

1. Political
2. Economic
3. Social
4. Technological

The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the
analysis of these macro environmental factors.

Political Factors

Political factors include government regulations and legal issues and define both formal and informal
rules under which the firm must operate. Some examples include:
1. tax policy
2. employment laws
3. environmental regulations
4. trade restrictions and tariffs
5. political stability

Economic Factors

Economic factors affect the purchasing power of potential customers and the firm's cost of capital.
The following are examples of factors in the macro economy:
1. economic growth
2. interest rates
3. exchange rates
4. inflation rate

Social Factors
Social factors include the demographic and cultural aspects of the external microenvironment. These
factors affect customer needs and the size of potential markets. Some social factors include:
1. health consciousness
2. population growth rate
3. age distribution
4. career attitudes
5. emphasis on safety

Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels, and
influence outsourcing decisions. Some technological factors include:
1. R&D activity
2. automation
3. technology incentives
4. rate of technological change

REGULATORY ENVIORNMENT

Regulatory environment consists of laws and regulations that are developed and enforced by state
and local governments in order to exert control over business practices through out their jurisdiction.
These laws and regulations cover a huge variety of Organizations.

Regulations can include both formal legal instruments and more informal instruments, such as
guidance, that are issued by all levels of government. “Regulation” can also include rules issued by
non-governmental bodies, such as self-regulatory bodies to whom governments have delegated
regulatory powers. The main forms of regulation which fall within the scope of this general definition
can be grouped into three categories:
1. command and control instruments: these directly regulate behavior, typically through
permit and authorizing procedures
2. incentive based instruments: these modify behavior using incentives and disincentives,
which are usually financial
3. other instruments: these often contain a non-mandatory element and aim to affect behavior
by
(i) improving the supply of information
(ii) raising the voluntary commitment, both at an individual and collective level, to change
existing practices

Role of The Government

The role of government is to provide the means by which businesses can operate in competitive input
and output markets without the constraints caused by imperfections such as monopoly practices,
price controls or other barriers to growth. This requires:
1. An efficient infrastructure.
2. The establishment of economic institutions and competitive market structures.
3. The establishment of legal institutions that support the growth of business enterprises.

Infrastructure Issues

 Transport
 Energy Generation (Electricity)
 Water
 Telecom
 Technology and Innovation etc

Laws and Regulations may cover:

 Lines of Authority and other powers of an organization

 Defines licensing or registration requirements
  Provides for incentives and punishment for non-compliance
 Addresses packaging and labeling issues
 Tax Policy with reference to specific industry
 Labor Laws
 Environmental Laws etc
 Safety standards
 Storage Specifications
 Import Export Rules, tariffs and duties
 Quality standards
 Tax Policy with reference to specific industry
 Customs duty, Excise, Transport Taxes etc.

Indian Examples
 For instance, in 1992, the Supreme Court ordered the closure of a number of tanneries in
Kanpur as they were polluting Holi Ganga.
 In August 1993 several foundries (metal casting factories) around the TajMahal were ordered
to be closed down because of air-pollution caused by them had adverse impact on the
whiteness of TajMahal.
Enabling Business Environment

The business enabling environment (BEE) includes norms and customs, laws, regulations, policies,
international trade agreements and public infrastructure that either facilitate or hinder the movement
of a product or service along its value chain.
An enabling business environment is one where the set of conditions that affect private sector
behaviour encourage the growth of private sector activity and enterprise development.

How Laws and Regulations provide Impetus to Business?

 Sound macroeconomic policy

 Appropriate competition policy
 Investment and trade liberalization
 Legal and judicial reform
 Public administration reform
 State enterprise reform
 Tax reform
 Product markets reform
 Financial sector reform
 Capital market reform
 Sound environmental and social standards
 Reform of infrastructure and other sectors
 Sector development loans
 Project loans
 Technical assistance
 Co financing

Enablers

1. Accountability is required by those elected or appointed in decisions that affect the public. This
may focus on accounting for the allocation, use and control of public spending and resources,
ensuring that budgeting, accounting and auditing comply with legally acceptable standards, but
also in the establishment and enforcement of corporate governance.

2. Transparency requires public access to information on the policies and actions of government.
This includes the full disclosure of public accounts, allowing public participation in policy making
and implementation, and allowing discussion and criticism. It also includes disclosure of accurate
and timely information on economic, financial and market conditions on which individuals and the
business community make decisions.
3. Combating corruption is essential and the misappropriation of public assets or public trust, or
fraudulent practice in the private sector for personal gain is detrimental to the establishment of
good governance.

FOREIGN DIRECT INVESTMENT (FDI)

India has exchange controls, whereby investments to and from India are governed by the Reserve
Bank of India (RBI), which is the federal bank and the apex exchange control authority in India.
Foreign Direct Investment (FDI) under the current framework is permitted from all categories of
investors and in all sectors except:
 Atomic Energy
 Lottery Business
 Gambling and Betting
 Agriculture

Definition: FDI refers to investment in a foreign country where the investor retains control over the
investments. It typically takes the form of starting a:
 Subsidiary,
 Acquisition - Acquiring a stake in an existing firm.
 Starting a joint venture in the foreign country.
 Green field investment (GFI) - which involves the establishment of a wholly new operation in
a foreign country.

Factors affecting FDI

1. Stable, predictable, macro economic policy

2. An effective and honest government
3. A large growing market
4. Freedom of activity in the market
5. Minimal government regulation
6. Protection of property rights, patents and copy rights
7. Reliable infrastructure
8. Availability of high quality of production
9. A strong local currency
10. A favourable tax climate
11. Freedom to operate between markets

Advantages of Direct Foreign Investment

1. It goes direct into capital formation, thus it helps in pushing the rate of growth of the economy.

2. FDI may induce more domestic investment, for example many ancillary domestic units may be
set up to help main industrial unit.

3. FDI spreads and promotes modern technology and efficient management of enterprises.

4. FDI can lead to transfer of technology and growth of skills.

5. Returns on foreign investments are profit linked thus they are flexible and more better than
foreign loans which have rigid interest and loan amortization requirements.

6. FDI lead to introduction of new products, creation of new tastes and specific needs of the
recipient country are met.

7. FDI leads to welfare of the country and individual, it knits the country together and links it with
the global trade and commerce.

Sources of FDI
• Mauritius is the largest source of FDI. The Mauritius based investments are US investment routed
through Mauritius. It has tax advantage of double tax avoidance agreement that India has with
Mauritius. This agreement means that a foreign investor has the option of paying tax either in
India or in Mauritius. Lowest tax rates prevail in Mauritius in the world.

• Second position is that of USA

• The trend in source of finance has changed in 1990’s earlier on India depended on western
countries but now many more countries are also investing the list in descending order of
investments.
1. Mauritius
2. USA
3. Japan
4. U.K.
5. Germany
6. Netherlands
7. South Korea
8. France
9. Italy

Harmful effects of FDI

Foreign investment has a number of disadvantages and in some cases its cost might exceed benefits
to the recipient country.

1. Payments of dividends and Royalty: A large sum of money flows out of the country for paying
dividends and royalty, technical fees and interest to the foreign investors which is not good for
economy.

2. Elitist or luxury orientation production : Foreign investors particularly MNC’s are more
interested in production of luxury goods for rich people like toiletries, colour televisions, music
systems, cellular phones, luxury cars, etc. This leads to diversion of funds for production of
non-essentials items.

3. Agreements loaded in favour of Foreigners: because of week bargaining power of developing

countries and acquire foreign participation in the face of foreign exchange shortage.

4. Multiple collaborations and over import of equipment: This leads to over stocking and
stagnation of funds.

5. Restrictive clauses in agreements: There are:

1. No technology transfer
2. Manufacturing is to be carried out as specified
3. Control over overseas purchase
4. Control over production
5. Control over pricing and marketing
6. Control over exports to only specific countries.

7. Distortion of economic resources: It distorts

a) Domestic entrepreneurship
b) Unnecessary product differentiation
c) Heavy advertisement
d) Excessive profits
e) Unsuitable products and technology
f) Monopolies and economic power is concentrated.

FDI in India

Indian Government’s Policy towards FDI

• At the time of Independence the attitude of government was that of fear and suspicion. Because
of exploitative and “draining away” of resources policy of British East India company. This attitude
was expressed in “Industrial Policy of 1948”. Thus foreign capitalists were dissatisfied as a result
of this Prime Minister had to assure them in 1949 that:
1. There shall be no discrimination between foreign and Indian capital.
2. FDI’s will be provided with full opportunities to earn profits.
3. In case foreign enterprises are compulsorily acquired and nationalized they shall be
compensated in a just, fair and equitable manner.

• In the industrial policy resolution of 1956 Government’s vision about FDI was more pragmatic and
clear. Government said that:
1. Economic growth in the country will depend on foreign as well as domestic investment.
2. For the Industrial, agricultural and overall growth of the country we need:
a) Foreign Technology
b) Management Skills
c) Marketing expertise

Foreign Direct Investment (FDI) in India presently is USD 19.38 billion. FDI in November stood at USD
1.74 billion, an increase of over 60 percent from the USD 1.08 billion the country received in the last
year. "India's share of world FDI has jumped from 0.78 percent in 2005 to 2.45 percent in 2009,".The
2009 survey of the Japan Bank for International Cooperation, has ranked India as the second-most
promising country for overseas business operations after China.

Indian retail sector today is valued at $450 billion, and is increasing day by day due to its increasing
middle class population and their spending power. Indian retail sector has two parts: organized and
unorganized sector. Organized sector which forms around 20 -30 % in other countries , here in India it
forms only about 6% while rest is all unorganized consisting of small retailers called as ‘kirana
shops’, paan/beedi wala, convenience stores, departmental stores, pavement vendors etc. Organized
retail consists of supermarkets, hypermarkets and modern retail outlets, malls, exclusive brand
outlets etc which are located in urban areas or metros.

FDI in retail sector is not allowed, it is only allowed up to 51 % in single brand and government is still
considering the opinion of allowing FDI in multi brand segment.

FDI in retail sector will have both positive and negative effect if allowed.

1. Both organized and unorganized sector will face adverse competition from global players. Wal-
Mart has a turnover of $256 billion and growing at an average of 12 -13 % annually. Average size
of its stores is 85000sq ft and average turnover is $51 million. Organized sector retail outlets in
India like pantaloons, reliance cannot compare with the giant let alone the small retailers.

2. Indian government still fears that if FDI is allowed in retail then unorganized sector will be affected
very badly and it will result in a large lot of unemployed retailers and other youth which is
employed in the supply chain, this unemployed lot can’t be absorbed in manufacturing or service
sector which can ultimately push a large chunk of population below poverty line.

Major challenges that lie ahead are:

1. Economies of scale: the global players have economies of scale and are perfect in cost cutting
and providing the consumer the best at lowest price which still is a major challenge for Indian
retail firms. The way they perform their process itself builds an entry barrier for other new firms.

2. Brand name: They bring with them world class products which have high quality and a highly
valued brand name. The domestic brands don’t have that charm and attracting power as of global
brands.
3. Technology: Global players are highly advanced in technology. The tools, equipments, kind of
warehouses they use, their way of performing processes are highly advanced and cannot be
compared with those used by Indian retail firms, which in turn provides better services and better
quality products even in categories like perishable food etc.

4. Attract skilled employees: The work culture of global players is quite different from those of
Indian players. They believe in earning profits by cutting costs as much as possible and at the
same time are conscious towards career of their employees. Their approach is more oriented
towards achieving ends rather than means. Attractive salary and high incentives can also attract
skilled employees towards global players which is also a threat for big Indian retail firms.

5. Better infrastructure: Better storage facilities, better transportation medium and high
investment can pose another threat to Indian retail firms which can hardly match the capabilities
of giants on their own.

6. Joint ventures: Global players may not prefer to enter into joint ventures with Indian firms and
may also close down the existing ventures in wholesale and single brand which may adversely
affect the Indian firms. This is possible when 100% FDI is allowed in multi-brand retail.

SOCIAL INCLUSION

A definition of social inclusion

“A socially inclusive society is defined as one where all people feel valued, their differences are
respected, and their basic needs are met so they can live in dignity. Social exclusion is the process of
being shut out from the social, economic, political and cultural systems which contribute to the
integration of a person into the community”.
Just opposite of social inclusion is social exclusion. Social exclusion refers to the multiple and
changing factors resulting in people being excluded from the normal exchanges, practices and rights
of modern society. Poverty is one of the most obvious factors, but social exclusion also refers to
inadequate rights in housing, education, health and access to services. It affects individuals and
groups, particularly in urban and rural areas, who are in some way subject to discrimination or
segregation.

The various Factors of Social Exclusion are:

1. Poverty
2. Religion
3. Education
4. Sex
5. Age
6. Migration