Business Environment Components of Business environment: Business environment consists of all those external & internal factors that

t have a bearing on the business. A business firm is an open system as it affects and is affected by outside events and factors which make up the external environment. Apart from external forces a business firm is affected by a number of internal factors. INTERNAL ENVIRONMENT Value System. Mission and Objectives. Organizational Structure. Corporate Culture & Style of Functioning Quality of Human Resources. Labor Unions. Physical Resources &Technological Capabilities. External Micro Environment

EXTERNAL MACRO ENVIRONMENT Economic Env Social & Cultural Env Political & Legal Env Technological Env Demographic Envi Natural Env Ecological Effects

COMPONENTS OF BUSINESS ENVIRONMENT: Political Environment Social Environment Regulatory Environment Natural/Physical Envir Economic Environment Technological Envir Demographic Envir international Environment Political Environment: Influence exerted by political institutions viz., legislature, executive &, judiciary. Political env and economic envi are closely connected. Business cannot remain unaffected by politics Political envi creates new problems & new opportunities It is extremely sensitive &, fluid ECONOMIC ENVIRONMENT It is the net outcome of economic policies of the govt Industrial, licensing, Monetary, Exim, budgetary, labor policy etc collectively create economic environment. Conducive economic environment brings rapid expansion of business activities. SOCIAL AND CULTURAL ENVIRONMENT The needs and expectations of various social groups create social environment for business. Social environment is supplemented by cultural environment Business needs social support for its survival and growth. TECHNOLOGICAL ENVIRONMENT Technological environment is the result of technological developments

 Businessmen should be ever alert to adapt changed technology in their business. Moreover, to-days technology is tomorrows junk. REGULATORY (LEGAL) ENVIRONMENT Comparatively new component. What business can do and what business cannot do are decided by the RE. RE Creates a framework of regulations and legal provisions within which the business units have to operate. Profound impact on major decisions concerning both investment and operations in business. DEMOGRAPHIC ENVIRONMENT Demographic factors consist of age and sex composition. Family size, religion and economic status of the population Labor supply improves along with rise in population. The study of demographic environment has priority over other areas of total business environment as business depends on people NATURAL/PHYSICAL ENVIRONMENT Physical factors are uncontrollable. It covers natural resources, climate etc Physical environment creates opportunities and problems International Environment: International events include mainly world political and economic. Factors like war, political conditions, leadership and economic policy changes in major countries, create international environment. Development Issues of Indian Economy Some of the vital development issues affecting Indian economy are: 1.High Population: Population has increased by 2.8 times since 1951. In 2001, it has crossed 102.9 crore.

 The high growth of population is a major problem 2. Poverty: India has the largest number of people living below poverty line. In 1999-2000, about 26% of Indias population was below poverty line. 3. Low Literacy: In 2001, about 65% of population was literate. whereas in other Asian countries like Korea, Thailand, Philippines, the literacy rate is over 95%, The low literacy rate affects the social and economic development of a country. Low Capital Formation: In India, the savings rate is low, which affects investment and capital formation. In 2003-04, the Gross Domestic Capital formation was about 26%, whereas in China, it was more than 40%. 5. Unemployment India faces the problem of chronic unemployment. In 1999-2000. about 7.32% of the labour force was unemployed on Current Daily Status (CDS) basis, which works out to 27 million people (total labour force in 1999-00 was 363 million). Fiscal Imbalance: India faces the problem of huge fiscal deficit. In 2003-04, the fiscal deficit was 4.6% of GDP. Due to fiscal deficit, the Government borrowings increase, which in turn results in high interest payments. 7.Trade Deficit: In 2009-10, Indias merchandise exports were about 88 billion US dollars and imports were about 102 billion VS dollars, resulting in trade deficit of 14 billion US dollars. 8.Inequality of Income and Wealth: According to World Development Report, 2003, the top 10% of Indias population had a share of income of 33.5% and bottom 10% had a share of only 3.5%. STRUCTURAL CHANGES IN INDIAN ECONOMY

 India has undergone several structural changes in its economy to move from underdeveloped stage to a developing stage. The High Population: Indias population has increased by 2.8 times since 1951. In 1951, the population was 36.1 Crore. In 2001, it has crossed 102.9 Crore. Poverty: India has the largest number of people living below poverty line. In 1999-2000, about 26% Indias population was below poverty line. Low Literacy: In 2001 about 65% Of population literate, where as in other Asian countries like Korea, Thailand, Philippines, the literacy rate is over 95%. Low Capital Formation: In 2003-04, the Gross Domestic Capital Formation was about 26%, whereas in China, it was more than 40% Unemployment: India faces the problem of chronic unemployment. In i999-20002 about 7.32% of the labor force was unemployed on Current Daily Status (CDS) basis, which works out to 27 million people (total labor force - 363 million). Fiscal Imbalance: In 2003-04, the fiscal deficit was 4.6% of GDP. Due to fiscal deficit, the Government borrowings increase, which in turn results in: high interest payments-Increase in money supply-inflation-crowding out effect. Trade Deficit: Indias trade deficit is on the increase due to high imports. In 2003-04, Indias merchandise exports were about 64 billion USD and imports were about 78 billion USD, resulting in trade deficit - 14 billion USD Inequality of Income and Wealth: According to World Development Report, 2003, the top 10% of Indias population had a share of income of 33.5% and bottom 10% had a share of only 3.5%.

3. Structural Changes in Indian Economy India has undergone several structural changes in its economy to move from underdeveloped stage to a developing stage. . The structural changes, which have taken place in Indian economy during the planning period Sectoral Contribution to National Income: During the planning period, there have been changes in the sectoral contribution to GDP Over the years there has been a shift in the sectoral contribution to national income from agriculture to secondary and tertiary sectors. Sectoral Contribution to GDP In percentage Sources of Domestic Savings Household sector savings as a percent of GDP has increased from 6% in 1950-51 to 24% in 200304. The private corporate sector savings has increased from4% to 0.9% and Public sector from 0.3% to 1.8% of GDP, during the same time period Increase In Agricultural Production: The food grains production has increased from 82 million tones in 1960-61 to 174 million tones in 2002 03, and estimated to have increased to about 212 million tones in 2003-04. The increase in agricultural production has resulted in Indias self-sufficiency in food grains.