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MS-03
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A business organization cannot exist in a vacuum. It needs living persons, natural resources and places and things to exist. The
sum of all these factors and forces is called the business environment.
The success of every business depends on adapting itself to the environment within which it functions. For example, ------------
----------------------------------------------------------------------------------------------- policies. Similarly, a change in the
technology may render the existing products obsolete, as we have seen that the introduction of computer has replaced the
typewriters; the colour television has made the black and -------------------------------------------------------------------------
-------------------------------------------------------------------------------, e.g., the demand for jeans reduced the sale of
other traditional wear. All these aspects are external factors ----------------------------------------------------------------------
----------------------------------------------------------------------------------. Hence, it is very necessary to have a clear
understanding of the concept of business environment and the nature of its various components.
The term business environment connotes external forces, factors ----------------------------------------------------------------
----------------------------------------------------------------------competitors, suppliers, government, and the social, political,
legal and technological factors etc. While some of these factors or forces may have direct influence over the business firm, others
may operate indirectly. Thus, business environment may be defined --------------------------------------------------------------
------------------------------------------------------------------------------------------factors, such as economic factors, social
factors, political and legal factors, demographic factors, and technical factors etc., which are uncontrollable in nature and affects
the business decisions of a firm.
It is important for managers to understand this aspect of the business environment because it can affect their firm and how it
should be run. No business is insulated from the outside environment. Things like political decisions, for example, can have a ----
----------------------------------------------------------------------------- example, the managers must be aware of things like new
competitors entering -------------------------------------------------------------------------------------------------------------
------------------------------------------- own firm, they may well be caught unaware and unready for changes that affect their
firms.
5. To ------------------------------------------------ force
Managers must understand what skilled ------------------------------------------------------------------------------------------
--------------------------------------------------------------so they can attract first-rate candidates to their enterprises. Managers
must be aware of college and university programs that are training suitable -------------------------------------------------------
-------------------------------------------------------------------------------------------------have an edge when it comes to
knowledgeable and business savvy employees.
Example-
1. Political -----------------------------:-
The legal environment of business constitutes legislations related to property and business organisations, laws of contracts,
bankruptcy, mutual obligations of labour -----------------------------------------------------------------------------------------
---------------------------------------------------------------. MRTP and FERA Act are restrictive in nature.
However, some stringent provisions of FERA has been replaced by FEMA. Thus politico-legal environment is quite important for
maintaining a sound and meaningful business environment.
2. Demographic ---------------------------:
Demographic environment is also an important constituent of business environment. Accordingly, demographic factors like, rise
and growth rate of population, age and sex composition of population, rural urban distribution of population, educational levels,
religion, ethnicity, caste, language etc. are all relevant to business conditions.
Size of population, growth rate of population, age-composition etc. influences the demand pattern for various goods. Again, large
labour force and rapid growth of labour supply affect the choice of techniques. Considering the labour supply position and the rate
of wages, technologies of business is being finalized.
The social structure and the values that a society cherishes have a considerable influence on the functioning of business firms. For
example, during festive ----------------------------------------------------------------------------------------------------------
----------------------------------------------of the products. Due to change in family composition, more nuclear families with
single child concepts have come up. This increases the demand for the different types of household goods. It may be noted that the
consumption patterns, the dressing and living styles of people belonging to different social structures and culture vary
significantly.
4. Technological Environment:
The varying technological environments of different countries affect the designing of products. For example, in USA and many
other countries electrical ---------------------------------------------------------------------------------------------------------
-----------------------------------------------. Hence, in order to survive and grow in the market, a business has to adopt the
technological changes from time to time.
5. Natural Environment:
Business is greatly influenced by the nature of natural environment. For example, a ----------------------------------------------
----------------------------------------------------------------------------------------------------------near the sources of
input. Further, governments policies to maintain ecological balance, conservation of natural resources etc. put additional
responsibility on the business sector.
2. What are the major factors of widespread sickness among the SSI units? How can sickness be
identified? Suggest measures to enhance economic viability of the segment.
External Factors:
Internal Factors:
The following ----------------------------------------------------------------------- for industrial sickness:
On the basis of the above definitions of a sick industrial unit, it emerges that the symptoms of the sickness of an industrial unit
manifest themselves in the form of a ---------------------------------------------------------------------------------------------
-----------------------------------------------------------of the unit upon frequent infusion of funds.
(vi) -----------------------------------------------------------------:
There should be well ------------------------------------------------------------------------------------------------ will be a leap in the dark.
Good marketing arrangements will prevent industrial sickness.
3. Examine the progress of Indian economy towards globalization in the post reform years. Comment on
the slow pace of progress of globalization and identify the major reasons.
Economic growth usually refers to quantitative rise in National Income and Per Capita Income of an economy during a period of
time. To understand economic growth in India, a ---------------------------------------------------------------------------------
-----------------------------------------------------------------------when it achieved independence in 1947. Even though India
has started the process of economic development under the Five Year Plans, it continued to face many problems. The major
issues, which India has to deal with a ---------------------------------------------------------------------------------------------
-----------------------------------------------------------, industry and so on.
During the period 1950-51 and 1999-2000, a -------------------------------------------------------------------------------------
-------------------------------------------------------------------respectively, while per capita NNP growth rate was only 1.71
per cent. The per capita NNP at constant (1993-94) prices (real per capita income) increased from Rs. 3687 in 1950-51 to Rs.
10306 in 2000-01. Thus during the 41 years period, the per capita income more than doubled itself approximately.
Consequences ---------------------------------------:
The implications of a -------------------------------------------------------------------------------------------------------------
-------------------------------------------in goods and services and in movement of capital. As a result domestic economic
developments are not determined entirely by a -----------------------------------------------------------------------------------
---------------------------------------------------------------------economy, while formulating and evaluating its domestic
policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. This
constrained the policy option available to the a -----------------------------------------------------------------------------------
---------------------------------------------------------------------on various sector of Indian Economy.
.
Conclusion-
Economic Reforms were introduced by a -----------------------------------------------------------------------------------------
---------------------------------------------------------------. Some measures of delicensing, raising the MRTP limit from Rs.
20 crores to Rs. 100 crores, broad-banding scheme etc., were taken, but the government did not take a categorical position on
issues relating to privatisation and globalisation.
Liberalisation, globalisation and privatisation are intended to achieve certain long-term goals of society. These goals are: (i) higher
growth of national and per capita income, (ii) full employment, (iii) self-reliance, (iv) reduction of inequalities of income and
wealth, (v) reduction of ----------------------------------------------------------------------- based on growth with social justice.
1. ----------------------------------------:
During the recent times, there is not a --------------------------------------------------------------------------------------------
------------------------------------------------------------. Unless the variations in taxes and public expenditure are neatly
timed, the desired counter-cyclical effects can not be realized.
() ------------------------------------- Lag:
This is the interval between the time when a --------------------------------------------------------------------------------------
------------------------------------------------------------------. Such a lag has a duration of 3 months. It can be reduced if the
forecasting is satisfactory.
4. Fiscal -----------------------------:
When monetary policy is general in nature and impersonal in impact, the fiscal policy, in contrast, is selective. The former permits
the market mechanism to operate smoothly. a ------------------------------------------------------------------------------------
--------------------------------------------------------------------upon ones value judgements. A particular set of fiscal
measures may have an excessively harsh impact upon certain sectors, while leaving others almost unaffected.
5. Inadequacy -------------------------- Measures:
In anti-depression fiscal policy, the expansion of a -------------------------------------------------------------------------------
-------------------------------------------------------------------------results or not. In case the injections or withdrawals from
the circular flow are more or less than what are required, the system will fail to move in the desired direction. This results in
exaggeration of instability in the economy.
7. ----------------------------- Effect:
The compensatory fiscal policies of the government may a -----------------------------------------------------------------------
---------------------------------------------------------------------------------of the government in economic activity at the
onset of recession strengthens the pessimistic expectations of the private entrepreneurs. The expansion of public spending may be
associated with a curtailment of private spending. Consequently, the fiscal measures may be self-offsetting.
There has been tremendous increase in total public expenditure during the perioc -----------------------------------------------------------
----------------------------------------------------------------------------------------------------------------- crores in 2005-06.
1. Population ------------------------------------ of planning, the population of India has increased from 36.1 crore in 1950-51, it has
crossed over 102 crore in 2001. The growth in a ----------------------------------------------------------------------------------
----------------------------------------------------------------------, whereas the aging population requires transfer payments
like old age pension, social security & health facilities.
5. Debt Servicing- The internal debt as well as external debt is on the iocrease a -------------------------------------------------
-------------------------------------------------------------------------------------------------------of which, the government
has to make huge amounts of money towards interest payments. The interest payment of the central government has increased
from 21,500 crore in 1990-91 to Rs.1,39,823 crores in 2006-07.
6. Expansion --------------------------- Machinery- There has been a --------------------------------------------------------------
------------------------------------------------------------------------------------------be incurred on administrative machinery
in respect of police, tax administration, administration of public sector enterprises, etc.
11. Increase in -------------------------------- territories- There has been tremendous increase in grant in aid to state and union
territories during planning period. According to Tata Statistical a -----------------------------------------------------------------
---------------------------------------------------------------------------------------. The grant in aid to states and union
territories has increased significantly both for developmental purposes like construction of roads, railways, etc. and for non-
developmental purposes like police administration, tackling terrorism and naxalite activities, etc.
13. Education- Education not only contributes to mental development of man but also raises productivity. Moreover mass
education is necessary condition for the success of democracy. a -----------------------------------------------------------------
---------------------------------------------------------------------------------------for medical & technical education which
involves heavy expenditure. There is a tremendous rise in total public expenditure in India during the period 1961-2007 without
adequate increase in revenues. This has resulted in huge deficit in budget in India.
Based on above discussion we can say that yes, in India growth of public sector expenditure is justified.
5. Explain major trends in volume, composition and direction of Indias foreign trade in recent years. Do
you think that these trends portray a favorable trade environment in the country?
Britishers strongly believed that India was a country well suited to supply raw materials and other primary goods and a good
market place for British manufacturers. So at the a -------------------------------------------------------------------------------
-------------------------------------------------------------------------and light manufactured consumer goods dominated
India's export basket. During the post independence period India's composition of exports changed. Now exports of India's are
broadly classified into following four categories.
Table below shows composition of India's export from 1990-91 to 2005-06.
3) Oceanic Trade:
Most of Indias trade is by sea, India a -------------------------------------------------------------------------------------------
---------------------------------------------------------in our export trade was 21.8 per cent and in import trade 19.1 per cent.
8) ------------------------------------ Trade:
It refers to the countries with whom a country trades. Main changes in the direction of foreign trade are as under:
In 2009, India had a global export share of 1 per cent or more in 48 out of a total of 99 commodities at the two-digit Harmonized
System (HS) level, but a significant share a --------------------------------------------------------------------------------------
------------------------------------------------------------------had an increase in global share by 0.5 per cent point or more in
2009 over 2008.
Noticeable is the near doubling in share of pearls, precious stones, metals, coins, etc., with growth in trading activity, and the fall
of nearly 2 percentage points in lac, gums, a --------------------------------------------------------------------------------------
------------------------------------------------------------------, 11 lost their shares in 2009 over 2008.
In the top 100 imports of the world at the four-digit HS level in 2011, India has only 6 items in the top 50; it has only 5 items with
a share of 5 per cent and above and 18 items a ------------------------------------------------------------------------------------
--------------------------------------------------------------------compared to 2010.
India has a very high export share in world imports in the case of only two four-digit HS items, jewellery and diamonds. While
India can increase its shares further in the a ---------------------------------------------------------------------------------------
-----------------------------------------------------------------its competence.
Most of the items come under the three Es, electronic, electrical, and engineering items and some textiles items. Greater focus on
these items could lead to a perceptible increase in Indias share of exports in world imports.
The musical chairs for the top slot among the top three a -----------------------------------------------------------------------
---------------------------------------------------------------------------------first in 2011-12 by China, and China in turn
relegated to second position by the UAE in 2012-13 (April-November).
The final word for 2012-13 is not yet out as the USA is inching closer to China with its share increasing by around one
percentage point and that of China falling. At 10 a -----------------------------------------------------------------------------
---------------------------------------------------------------------------show that among its top 15 trading partners, India
had bilateral trade surplus with four countries in 2011-12, viz. the UAE, USA, Singapore, and Hong Kong.
In 2012-13 (April-November), Indias trade balance with the UAE has turned slightly negative while it has improved further
with the USA and Hong Kong. Another important trend a ---------------------------------------------------------------------
-----------------------------------------------------------------------------------billion respectively in 2011-12. In 2012-13
(April-November), the export-import ratio with China worsened further to 0.23 from 0.31 in 2011 -12.
A country with a balance of payments surplus is probably exporting much of its production. In addition, its government and
residents are savers, providing enough capital to finance a ------------------------------------------------------------------------
--------------------------------------------------------------------------------its residents to spend more and build a larger
domestic market. This will keep it from being too dependent on export-driven growth. It will also allow its companies to refine
goods and services, using the domestic ------------------------------------------------------------------------------------------
-------------------------------------------------------------- fluctuations.
Similarly, a favorable balance of payments should not always make a country complacent. A poor country may have a favorable
balance of payments due to large inflow of foreign loans and equity capital. A developed country may have adverse balance of
payments due to massive assistance given to developing countries.
Thus, a deficit or surplus of balance of a -----------------------------------------------------------------------------------------
---------------------------------------------------------------of the period under review.
It does not provide data about assets and liabilities that relate one country to others. However, despite all these short comings, the
significance of balance of payments lies in the fact that it provides vital information to understand a countrys economic dealings
with other countries.
1. ---------------------- gaps:
2. ---------------------------:
3. --------------------------------------------- development:
5. Mobilisation of surplus:
6. Self reliance:
Public enterprises a --------------------------------------------------------------------------------------------------------------
------------------------------------------exchange through exports.
8. --------------------------------------:
Public enterprises help in the establishment of a welfare state in the country. These enterprises supply essential commodities at
cheaper rates.
2) Policies and programs to provide infrastructure and services such as highways, parks, affordable housing, crime prevention, and
educational programs and projects.
Example of --------------------------------
In the United States, our periods of large economic growth are mostly associated with new technology. The Industrial Revolution
and the development of the Internet are two examples. When a -------------------------------------------------------------------
-------------------------------------------------------------------------------------, economic growth usually follows.
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