Economic & Social Environment

UNIT 1

Propositions
Business is an economic activity A business firm is an economic unit Business decision-making is an economic

Macro-economic Environment
Economic System Nature of the Economy Anatomy of the Economy Functioning of the Economy Economic Planning & Programmes Economic Policy Statements & Proposals Economic Controls and regulations Economic Legislations Economic Trends &Structure & Economic Problems and Prospects

Educati Politi PhysicalSociolog Histori onal cogeograp Non-Eco ical cal -cultural legal hical Economi c System

Structure
Functioni ng Planning Program mes Control & Regulatio ns

Growth &

 Environment - complex phenomenon.

Several subsets,
economic environment, socio-cultural environment, politico-legal environment, technological environment, etc.

Totality of all kinds of environments which have an impact on business.

Environment is external to the firm, i.e., business firms in general have little influence on external forces. Business environment varies from country to country and may even vary in the same country from one point of time to another. Number of problems involved
identification, description, explanation and prediction of environmental factors. The environmental factors are dynamic. Difficult to conceptualise and/or quantify the proportion of change as well as the direction of change in environmental factors.

 Space- Local, regional, national and international environment Time- Past, present and future environment Forces- Market & non-market environment Factors- Economic and non-economic environment The environment consists of all economic institutions, structure of economic system, market forces, govt policies and plans. The national economic environment may or may not act as a stimulant (constraint) for business activity thereby affecting business efficiency. Economic Environment: A subset of the environment consisting of economic institutions, frameworks, nature and structure of the economic system, market forces, economic, fiscal and monetary policies, planning and programmes of the Government, etc

Sociological environment
Social institutions &systems Social values and attitudes Education and Culture Role and responsibility of the Government Social groups and movements Socio-economic order Social problems and prospects

Politico-legal environment
The form of Government The ideology of the ruling party The strength of the opposition The role and responsibility of the bureaucracy Political stability The velocity of Govt. policies, plans and programmes Socio-economic legislations Politico-legal institutions Politico-legal Environment: A subset of the environment consisting of politico-legal institutions, legislation, form of government and prevailing ideologies, values, attitudes and style of functioning of the bureaucracy, etc.

Changing Role of the Government

Capitalist Economies Communism/Socialism Indian Experience

 Capitalist countries- accepting greater roles for the governments

Provision of public goods, ensure non impediment of competitive forces Promote production of commodities with beneficial externalities and curb the production of commodities with detrimental side effects. Measures to reduce interpersonal inequalities in income and wealth, Focus on the removal of poverty,

Communist countries realising that everything cannot be left to the state.

Better in overcoming cases of market failures, cyclic fluctuations, poverty removal and provision of public goods State failure regarding production of commodities, want of the people, material balances (or stocks) and technological up gradation. Getting slowly out from running productive enterprises. Gradually introducing market forces and adopting more decentralised planning techniques.

Increasing attention by both tackle problems of environmental degradation

Economic roles of government in both world are becoming less and less dissimilar