note on business environment

1. UNIT- II
Social Changes: Social change refers to an alteration in the social order of a society. Social
change may include changes in nature, social institutions, social behaviors, or social relations.
Social change may refer to the notion of social progress or socio cultural revolution, the
philosophical idea that society moves forward by dialectical or evolutionary means.
Wave front Analysis by Alvin Toffler: “the world has not served into lunacy, and that, in fact,
beneath the clatter and jangle of seemingly senseless events there lies a startling and potentially
hopeful pattern... The Third Wave is for those who think the human story, far from ending, has
only just begun"
1. First Wave: the agricultural revolution
2. Second Wave: the industrial revolution
3. Third Wave: the Information revolution
Wave front: Each wave, or civilization phase, develops its own "super- ideology," or Zeitgeist,
with which it explains reality and justifies its own existence. This ideology impacts all the
spheres which make up a civilization phase:
• technology
• social patterns
• information patterns
• "power" patterns
THE FIRST WAVE: The agricultural revolution took thousands of years to play out.
• Extent of spread: "Today the First Wave has virtually subsided. Only a few tiny tribal
populations, in South America or Papua New Guinea, for example, remain to be reached by
agriculture" (Toffler 1980, 13).land was the basis of economy, life, culture, family structure, and
politics" (Toffler 1980, 21).
THE SECOND WAVE
• The industrial revolution took three hundred years to mature.
• Extent of spread: "..having revolutionized life in Europe, North America, and some other parts
of the globe [the western Soviet Union, Japan, Hong Kong, Singapore, Taiwan, Australia, New
Zealand, South Korea, and parts of mainland China]... continues to spread as many countries,
until now basically agricultural, scramble to build steel mills, auto
RESULTS OF ALL THESE FACTORS
• The spread of literacy
• Improvement of roads and transport
• A widening split between consumer and producer
• A new social character: industrial man
• Dependence of survival on money
• Creation of the nuclear family
• Factory-like schools
THE THIRD WAVE -- THE NEW SYNTHESIS
• To see the new, emerging, patterns we must resist two powerful Second Wave forms of
thinking: Analysis. We cannot see the future in the same way we solve problems--by dismantling
problems into their component parts. We must practice, instead, synthesis.
• Linearity. We must resist the temptation to be seduced by straight lines. Tomorrow will not be
just an extension of today. Trends, no matter how powerful, do not continue in a

2. Third Wave in organization
• "For Third Wave civilization, the most basic raw material of all--and on that can never be
exhausted--is information... With information becoming more important than ever before, the
new civilization will restructure education, redefine scientific research and, above all, reorganize
the media of communication... Instead of being culturally dominated by a few mass media, Third
Wave civilization will rest on inter- active.
Cultural dynamics: Business environments are changing at a very fast rate owing to
(I) Globalization in the system of production and distribution of goods and services
(ii) Liberalization and Pluralism in international trade and investment
(iii) Innovation in production, communication and information technology
(iv) Tapping of new markets under severe
Cultural process & Cultural lag:
• The term cultural lag refers to the notion that culture takes time to catch up with technological
innovations, and that social problems and conflicts are caused by this lag. Subsequently, cultural
lag does not only apply to this idea only, but also relates to theory and explanation. It helps by
identifying and explaining social problems and also to predict future problems. • As explained by
James W. Woodward, when
Secular Outlook
• As the lines between interest rate and credit risk become blurred, finding sources of “safe
spread” becomes even more critical - with investments based on traditional, broad sector
classifications worthy of review.
• Diversification is still as important as ever, but we believe investors need to look at risk factors
rather than traditional asset classes when making asset allocation decisions
. • To meet the challenges ahead, investors
Community development • A community is a social unit of any size that shares common values.
Although embodied or face-to-face communities are usually small, larger or more extended
communities such as national community, international community and virtual community are
also studied.
• The United Nations defines Community development as "a process where community members
come together to take collective action and generate solutions to common problems.” It is a
broad term given to the practices of civic leaders, activists, involved citizens and professionals to
improve various aspects of communities, typically aiming to build stronger and more resilient
local communities. Community development seeks to empower individuals and groups of people
by providing them with the skills they need to effect change within their communities. These
skills are often created through the formation of large social groups working for a common
agenda. Community developers must understand both how to work with individuals and how to
affect communities' positions within the
Consumerism: Consumerism is a social and economic order and ideology that encourages the
acquisition of goods and services in ever-greater amounts. Early criticisms of consumerism are
present in the works of Thorstein Veblen (1899)
• In the domain of politics, the term "consumerism" has also been used to refer to something
quite different called the consumerists movement, consumer protection or consumer activism,
which seeks to protect and inform consumers by requiring such practices as honest packaging
and advertising, product guarantees, and improved safety standards. In this sense it is a political
movement or a set.

3. UNIT - IV
Economic system: An economic system of production and exchange of goods and
services as well as allocation of resources in a society. It includes the combination of the
various institutions, agencies, entities (or even sectors as described by some authors) and
consumers that comprise the economic structure of a given community. A related concept
is the mode of production.
The study of economic systems includes planning, coordination, and reform
productive enterprises; factor and product markets; prices; population, public economics;
financial economics, national income, product, and expenditure; money; inflation
international trade, finance, investment, and aid consumer economics; welfare and
poverty performance and prospects
The role of government in economic development : The Government as Prime Mover
Phase: In the first phase, lasting from 1940 to 1979, government was assigned a primary,
entrepreneurial role.
1. The Government as a Problem Phase: This second phase, lasting from 1979 to
about 1996, was a continuation of the neoclassical "getting prices right" line of
thought. Neo-classical trade theorists (Krueger, and Bhagwati), who came to
dominate the field of economic development, emphasized that international trade
can provide a substitute
Indian economic planning: The planning is nothing but to make decisions with respect
to the use of available resources. The Economic planning is nothing but the long term
plans of government to co- ordinate and develop the economy. In India the economic
planning was started in the year 1950.
The first Prime Minister, Pt. Jawaharlal Nehru was also its first chairman.
Objectives of Economic Planning
 Economic Growth
 To reduce the economic inequalities
 Balanced regional development
 Modernization
 Reduction of Unemployment
 To improve national income and raise the standard of living in the country
 To attain rapid industrialization with an emphasis on basic and heavy industries
2. Industrial policy
1. The Industrial Policy plan of a country, sometimes shortened IP, is its official
strategic effort to encourage the development and growth of the
manufacturing sector of the economy.

4. 2. The government takes measures "aimed at improving the competitiveness and
capabilities of domestic firms and promoting structural transformation.
3. “A country's infrastructure (transportation, telecommunications and energy
industry) is a major part of the manufacturing sector
4. LPG: The economy of India had undergone significant policy shifts in the
beginning of the 1990s.
5. This new model of economic reforms is commonly known as the LPG or
Liberalization, Privatization and Globalization model.
6. The primary objective of this model was to make the economy of India the fastest
developing economy in the globe with capabilities that help it match up with the
biggest economies of the world.
3. Highlights of the LPG Policy
1. Foreign Technology Agreements
2. Foreign Investment
3. MRTP Act, 1969 (Amended) Monopolistic and Restrictive Trade Practice
4. Industrial Licensing
5. Deregulation
6. Beginning of privatization
7. Opportunities for overseas trade
8. Steps to regulate inflation
9. Tax reforms
4. Liberalization: Liberalization was introduced to put an end to these restrictions and open
up various sectors of the economy.
1. Liberalization measures were introduced in 1980s in areas of industrial licensing,
export- import policy, technology up gradation, fiscal policy and foreign
investment, reform policies initiated in 1991 were more comprehensive
5. Liberalization with..
1. Deregulation of Industrial Sector (Industrial licensing)
2. Financial Sector Reforms (Investment banks, stock exchange)
3. Tax Reforms (government’s taxation and public expenditure)
4. Foreign Exchange Reforms (Foreign exchange market, payments crisis, Rupee
values)
5. Trade & Investment Policy Reforms (international competitiveness of industrial
6. Privatization : Privatization, also spelled privatization, may have several meanings.
Primarily, it is the process of transferring ownership of a business, enterprise, agency,
public service, or public property from the public sector (a government) to the private
sector, either to a business that operates for a profit or to a nonprofit organization.
1. It may also mean government outsourcing of services or functions to private
firms, e.g. revenue
2. Privatization has also been used to describe two unrelated transactions.
1. The first is the buying of all outstanding shares of a publicly
traded company by a single entity, making the company privately owned.
2. This is often described as private equity.
3. The second is a demutualization of a mutual organization or cooperative to
form a joint-stock company
Forms of privatization: There are four main methods of privatization:

5. Share issue privatization (SIP) - selling shares on the stock market
Asset sale privatization - selling an entire organization (or part of it) to a strategic
investor, usually by auction or by using the Treu hand model
Voucher privatization - distributing shares of ownership to all citizens, usually
for free or at a very low price.
7. Globalization: Globalization is the process of international integration arising from the
interchange of world views, products, ideas and other aspects of culture.
1. Advances in transportation and telecommunications infrastructure, including the
rise of the telegraph and its posterity the Internet, are major factors in
globalization, generating further interdependence of economic and cultural
activities.
2. The term globalization has been increasingly used since the mid-1980s and
especially since the mid-1990s.
3. In 2000, the International Monetary Fund (IMF) identified four basic aspects of
globalization: trade and transactions, capital and investment movements, migrati
on and movement of people, and the dissemination of knowledge.
4. Further, environmental challenges such as climate change, cross-
boundary water and air pollution, and over-
8. Public, Private, Joint and Co-operative Sectors: A vast percentage of population was
extremely poor. There existed considerable inequalities in income, low level of
employment opportunities, serious regional imbalances in economic attainments and lack
of trained man-power in various fields of management.
 It was, thus, obvious that if the country was to speed up its economic
growth and maintain it in the long run at a steady level, a big push was
required.
 As such, State’s intervention in all the sectors of the economy, was
inevitable because private sector had neither the necessary resources in
terms of funds, managerial and scientific skill, nor the will to undertake
risks involved in large long-gestation investments.
 Among the imperatives were removal of regional, imbalances, accelerated
growth of agricultural and
9. Objectives of Public Sector:
1. To help in the rapid economic growth and industrialisation of the country and
create the necessary infrastructure for economic development.
2. To earn return on investment and thus then generate resources for development.
3. To promote redistribution of income and wealth.
4. To create employment opportunities.
5. To promote balanced regional development.
6. To assist the development of small scale and ancilliary industries.
10. Growth and Performance of Public Enterprises They are :
1. IOCL – Indian Oil Corporation Limited (It was ranked 135 in Fortune’s global
500A (2007),
2. BPCL - Bharat Petroleum Corporation Limited

6. 3. HPCL – Hindusthan Petroleum Corporation Limited
4. ONGC – Oil and Natural Gas Corporation Limited (Oil exploration and crude oil
producing company)
5. SAIL – Steel Authority of India Limited (India’s largest integrated steel producer)
6. IPCL – Indian Petrochemicals Corporation Limited
7. BHEL – Bharat Heavy Electricals Limited (Biggest power equipment
manufacturer in India)
8. NTPC – National Thermal Power Corporation (which produces
11. Private Sector: In a mixed economy, the private sector too has an important role to play.
The Industrial policy resolution 1956 had made it very clear that private sector will also
have the opportunity to development and expand.
1. The policy of the state was to encourage the development of industries in the
private sector in accordance with the programs formulated in successive five year
plans.
2. By ensuring the development of transport, power and other services. And by
appropriate budget allotment.
12. Joint Sectors: The term joint sectors refers to the enterprise owned and managed jointly
by the private sector and government (public undertakings).
The main objectives of joint sectors are:
1) To decrease the concentration of economic power.
2) Social control of industry,
3) Acceleration of economic development
4) Promotion of mixed economy
13. Industry Analysis: A market assessment tool designed to provide a business with an
idea of the complexity of a particular industry.
1. Industry analysis involves reviewing the economic, political and market
factors that influence the way the industry develops.
2. Major factors can include the power wielded by suppliers and buyers,
the condition of competitors, and the likelihood of new market entrants.
Issues in Defining an Industry
3. What part of the industry corresponds to our firm’s goals?
4. What are the key ingredients of success in that part of the industry?
5. Does our firm have the skills needed to compete in that part of the industry?
6. Will the skills enable us to seize emerging opportunities and deal with future
threats?
7. Is our definition of the industry flexible enough to allow necessary adjustments to
our business concept as the industry grows?
Characteristics of Industry Structure
Structural attributes – Enduring characteristics giving an industry its distinctive character
Variations among industries involves examining

7. • Concentration – Extent to which industry sales are dominated by only a few firms
• Economies of Scale – Savings firms within an industry achieve due to increased
volume
• Product Differentiation – Extent to which customers perceive products of firms in
industry as different
• Barriers to Entry – Obstacles a firm must overcome to enter an industry
14. Sector Analysis Sector analysis is typically employed by investors who are practicing a
sector- rotation strategy, or by those who are using a top-down approach to selecting
stock to invest in.
1. In the top-down approach to investing, the most promising sectors are identified
first, and then the investor reviews the companies within that sector to determine
which individual stocks will ultimately be purchased.
15. Indian Agri Sector: The written history of agriculture in India dates back to the Rig-
Veda, written about 1100 BC.Today, India ranks second worldwide in farm output.
Agriculture and allied sectors like forestry and fisheries accounted for 13.7% of
the GDP(Gross Domestic Product) in 2013, about 50% of the total workforce. The
economic contribution of agriculture to India's GDP is steadily declining with the
country's broad-based economic growth. Still, agriculture is demographically the broadest
16. Industrial development and regulation Growth of the industrial sector at a higher rate
and on a sustained basis is a major determinant of a country's overall economic
development. In this regard, the Government of India has issued industrial policies,
from time to time, to facilitate and foster the growth of Indian industry and maintain its
productivity and competitiveness in the world market.
17. The main objectives of the Act is to empower the Government:-
1. to take necessary steps for the development of industries;
2. to regulate the pattern and direction of industrial development;
3. to control the activities, performance and results of industrial undertakings in the
public interest.
4. The Act applies to the 'Scheduled Industries' listed in the First Schedule of the
UNIT-5
Monetary policy : Monetary policy is the process by which monetary authority of a country,
generally a central bank controls the supply of money in the economy by its control over interest
rates in order to maintain price stability and achieve high economic growth.
• In India, the central monetary authority is the Reserve Bank of India (RBI) is so designed as to
maintain the price stability in the economy.
• Price Stability
• Controlled Expansion of Bank Credit
• Promotion of Fixed Investment
• Restriction of Inventories and stocks

8. • Promotion of Exports and Food Procurement Operations
• Desired Distribution of Credit • Equitable Distribution of Credit
Fiscal policy: In economics and political science, fiscal policy is the use of
government revenue collection (mainly taxes) and expenditure (spending) to influence the
economy.
• According to Keynesian economics, when the government changes the levels of taxation and
government spending, it influences aggregate demand and the level of economic activity.
• The two main instruments of fiscal policy are changes in the level and composition of taxation
and government spending in various sectors. These changes can affect the
following macroeconomic variables, amongst others, in an economy:
• Aggregate demand and the level of economic activity;
• Savings and Investment in the economy
• The distribution of income
India’s Trade policy • Foreign trade in India includes all imports and exports to and from India.
• At the level of Central Government it is administered by the Ministry of Commerce and
Industry
 Free trade agreements
• A free-trade area is the region encompassing a trade bloc whose member countries have
signed a free trade agreement (FTA).
• Such agreements involve cooperation between at least two countries to reduce trade
barriers—import quotas and tariffs— and to increase trade of goods and services with each other.
• If people are also free to move between the countries, in addition to FTA, it would also be
Budget: A budget is a quantitative expression of a plan for a defined period of time.
• It may include planned sales volumes and revenues, resource quantities, costs and expenses,
assets, liabilities and cash flows.
• It expresses strategic plans of business units, organizations, activities or events in measurable
terms
Budget Purpose: Budget helps to aid the planning of actual operations by forcing managers to
consider how the conditions might change and what steps should be taken now and by
encouraging managers to consider problems before they arise. It also helps co-ordinate the
activities of the organization by compelling managers to examine relationships between their
own operation and those of other departments.
CAPITAL MARKET: The market where investment instruments like bonds, equities and
mortgages are traded is known as the capital market. The primal role of this market is to make
investment from investors who have surplus funds to the ones who are running a deficit.
 The capital market offers both long term and overnight funds.The different types of financial
instruments that are traded in the capital markets are:
 equity instruments
 credit market instruments,
 insurance instruments,
 foreign exchange instruments,
 hybrid instruments and
 derivative instruments.
 Types of capital market: There are two types of capital market: Primary market, and
Secondary market

9.  Primary Market: It is that market in which shares, debentures and other securities are sold for
the first time for collecting long-term capital. This market is concerned with new issues.
Therefore, the primary market is also called NEW ISSUE MARKET. In this market, the flow of
funds is from savers to borrowers (industries), hence, it helps directly in the capital formation of
the country. The money collected from this market is generally used by the companies to
modernize the plant, machinery and buildings, for extending business, and for setting up new
business unit.
 Features of Primary Market:
It Is Related With New Issues.
It Has No Particular Place.
It Has Various Methods Of Float Capital
Following are the methods of raising capital in the primary market:
i) Public Issue
ii) Offer For Sale
iii) Private Placement
iv) Right Issue
v) Electronic-Initial Public Offer
Secondary Market: The secondary market is that market in which the buying and selling of the
previously issued securities is done. The transactions of the secondary market are generally done
through the medium of stock exchange.If an individual has bought some security and he now
wants to sell it, he can do so through the medium of stock exchange to sell or purchase through
the medium of stock exchange requires the services of the broker. Presently, there are 24 stock
exchange in India. .
Features of Secondary Market:
• It Creates Liquidity
• It Comes After Primary Market
• It Has A Particular Place
• It Encourage New Investments
Money market:
 Short term instruments
 Pure discount securities
 Contracts up to 1 year
 Huge volume and vigorous competition
 No physical place
 Essentially for professionals ( banks, fin. institutional investors, brokerage firms, companies)
 Liquidity ( fine spreads based on interest rate of lending and borrowing)
 Creditworthiness (risk and return)
RBI credit policy: In its efforts to keep inflation under check and spur economic growth, the
RBI has a quiver full of arrows that it uses to control the flow of money into the economy:
• Bank rate is the rate at which RBI lends to commercial banks. This influences the interest rates
commercial banks charge their customers.
 The cash reserve ratio stipulates the minimum proportion of deposits that banks must hold
with the central bank. When the RBI increases the CRR, banks have fewer funds to lend or
invest since they have to park more money with the central bank, helping it control liquidity in
an economy

10. • Statutory liquidity ratio defines the minimum proportion of their deposits that banks have to
maintain at the close of business every day
 Repo rate is the rate the central bank charges to lend to banks against securities. If banks have
to pay more to borrow money, they may increase the rates they charge their customers or may
borrow less, thus reducing inflation.
• Reverse repo rate is the rate at which the RBI borrows money from banks. So if the RBI
hikes the reverse repo rate, banks will be happy to keep more funds with the RBI since they get a
higher rate of return.
Mobilization of savings for Investment: the mobilization of savings entails three distinct
operations :
• firstly, the increase in the saving ratio ;
• secondly, the process of collecting savings from the savers ; and,
• thirdly, the process of transmitting savings to borrowers for investment.
Mobilization of Savings (case on Dharaka Mahela Scheme) :The group must determine the
amount to be saved by each member; A specific day should be agreed for payment of savings to
ensure regular savings; Each group member should be given a savings book into which amounts
saved are recorded by group officials; The group should open a groups savings account into
which all members' savings will be deposited.
Industrial sickness: Industrial sickness is defined in India as "an industrial company (being a
company registered for not less than five years) which has, at the end of any financial year,
accumulated losses equal to, or exceeding, its entire net worth and has also suffered cash losses
in such financial year and the financial year immediately preceding such financial year"
Causes of sickness in small scale industry: Internal causes for sickness
• Lack of Finance
• Bad Production Policies
• Marketing and Sickness
• Inappropriate Personnel Management
• Ineffective Corporate Management
External causes for sickness • Personnel Constraint
EXIM policy: Exim Policy or Foreign Trade Policy is a set of guidelines and instructions
established by the DGFT in matters related to the import and export of goods in India.
The Foreign Trade Policy of India is guided by the Export Import in known as in short EXIM
Policy of the Indian Government and is regulated by the Foreign Trade Development and
Regulation Act, 1992. • DGFT (Directorate General of Foreign Trade).Exim Policy Committee
to review the government previous export import policies. The committee was later on approved
by the Government of India. • Mr. V. P. Singh, the then Commerce Minister and announced the
Exim Policy on the 12th of April, 1985. • Initially the EXIM Policy was introduced for the
period of three years with main objective to boost the export business in India
Indian EXIM Policy contains various policy related decisions taken by the government in the
sphere of Foreign Trade, i.e., with respect to imports and exports from the country and more
especially export promotion measures, policies and procedures related thereto.
• Trade Policy is prepared and announced by the Central Government (Ministry of Commerce).
FDI in manufacturing and Service : Foreign direct investment (FDI) inflows into the services
sector experienced a boom during the 1990s.By 2002, services accounted for 60% of the world

11. stock of FDI, a four-fold increase since 1990 (UNCTAD, 2004). • The main recipients of FDI
have been profit- seeking producer services which range from network-intensive services such as
electricity, telecommunications, and transport to finance. A potentially powerful means to
achieve such improvements is FDI which can lead to increases in the quality and variety of
services available and lower their cost. Manufacturing firms may also benefit from their
interaction with foreign services suppliers through spillovers of management, organizational,
marketing, or technological knowledge.
Competition Commission: The Competition Commission was a non- departmental public
body responsible for investigating mergers, markets and other enquiries related to regulated
industries under competition law in the United Kingdom. It was a competition regulator under
the Department for Business, Innovation and Skills (BIS).
The Commission has been in past engaged in undertaking advocacy with ministries, regulators,
state governments and other authorities. For examples: The Commission has given its opinion on
the draft of Petroleum and Natural Gas Regulatory Bill, 2005. • Warehousing (Development and
Regulation) Bill, 2006 Indian Post Office (Amendment) Bill, 2007, and the Shipping Trade
Practices Bill,
Indian and Chinese economy:
Economy Size: Chinese economy: USD 11.22 trillion.
Indian economy: USD 2.45 trillion.
GDP Growth Rate: India’s GDP growth for June (2017) quarter was at 5.7 percent.
China's GDP growth for second quarter (2017) was at 6.9 percent.
Trade: China's July (2017) trade balance was $46.74 billion.
India's July (2017) trade deficit was $11.49 billion.
India-China Bilateral Trade: India's trade deficit with China was at USD 46.56 billion (2016).
China's exports to India totaled USD 58.33 billion (2016).
India's exports to China was at USD 11.76 billion (2016).
Gold Reserves: China's gold reserves rose to $75.084 billion (Latest data).
India's gold reserves rose $19.94 billion (Latest data).
Forex Reserves: India's forex reserves was $3.081 trillion (Latest data).
China's forex reserves for July USD 394.55 billion (Latest data).
Unemployment Rate: The registered unemployment rate in Chinese cities stood at 3.95 percent
at the end of the second quarter (2017), the lowest level in recent years.
India's number of employed in August (2017) was at 4.4%.