JAIPUR NATIONAL UNIVERSITY, JAIPUR

School of Distance Education & Learning

Internal Assignment No. 1

Master of Business Administration / DM

Paper Code: MBA– 101

Paper Title: Business Environment

Last date of submission: Max. Marks: 15

Note : Question No. 1 is of short answer type and is compulsory for all
the students.
It carries 5 Marks. (Word limits 50-100)

Q. 1. Answer all the questions:

(i) Name two elements of internal environment affecting business.

Answer:- The two elements of inernal environment which affects business

are Human Resource and Financial and Marketing Resources.

(ii) What is multi national enterprise?

Answer:- A multinational enterprise is an organization that owns or controls

production of goods and services in one or more countries other than teir
own country. It can also be referred as Multinational Corporation.

(iii) Give two suggestions to the problems of small scale industries.

Answer:- The suggestion to various problems faced by small scale industries

are as follows:-
  Firstly, there should be proper and adequate provision for financing
these units through banks and other institutions at such rate of interest
which these undertaking can bear.

 Secondly, they should be given adequate degree of priority in the

allocation pattern of essential, but scarce, raw materials, imported
components and equipment.

(iv) Define privatization.

Answer:- The transfer of ownership, property or business from the

government to the private sector is called privatization. The government
ceases to be the owner of the entity or business.

(v) What do you understand by fiscal policy?

Answer:- Fiscal policy is the means by which a government adjusts its

spending levels and tax rates to monitor and influence a nation's economy.

Note: Answer any two questions. Each question carries 5 marks (Word
limits 500)

Q. 2. What is technology? Explain the impact of technology on business

Q. 3. Explain Monetary policy & its effect on business

Answer:- Monetary policy is the macroeconomic policy laid down by the
central bank. It involves management of money supply and interest rate and
is the demand side economic policy used by the government of a country to
achieve macroeconomic objectives like inflation, consumption, growth and
liquidity. Monetary policy is generally categorized as:
 1) Expansionary, which increases liquidity and demand, and
consequently, drives economic growth.
2) Contractionary, which restricts money supply to reduce inflation and
slow the rate of economic activity.
Higher interest rates make loans more expensive. As a result, people are less
likely to buy houses, autos, and furniture. Businesses can't afford to expand.
The economy slows. If not exercised with care, the contractionary policy can
push the economy into a recession.
Central banks use expansionary monetary policy to lower unemployment
and avoid recession. They increase liquidity by giving banks more money to
lend. Banks lower interest rates, making loans cheaper. Businesses borrow
more to buy equipment, hire employees, and expand their operations.
Individuals borrow more to buy more homes, cars, and appliances. That
increases demand and spurs economic growth.

Q. 4. What is International Trade? Explain various Trade Reforms related to

foreign trade announced in India in recent times.

Answer:- International trade is the exchange of capital, goods,

and services across international borders or territories. The various trade
reforms related to forign trade that has been made in recent times are as
follows:-
 Reduction in mandatory documents required for Export and
Import: The number of mandatory documents required for exports
and imports of goods from/into India have been reduced to three each.

 Merchandise Exports from India Scheme and Service Exports

from India Scheme: This (MEIS) scheme is for export of specified
goods to specified markets and the (SEIS) scheme is for incresing
exports of notified services. There would be no conditionality attached
 to any scrips issued under these schemes. Duty credit scrips issued
under MEIS and SEIS and the goods imported against these scrips are
fully trasferable. Also the measures has been taken to promote defence
and hi tech items. At the same time e-commerce exports of handloom
products, books, stationary, customized gifts and garments send
through courier or foreign post office will get benefit of MEIS (for
value upto INR 25,000). This will not only capitalize our strength in
these areas and increased exports but also increse employment
opportunities.

 Promotion of Exports of goods and services: The focus I still on

increasing the exports of various goods and service through various
schemes and policies which will also increase employment
opportunies in country.

 Special Economic Zones (SEZ) Scheme:Athough the export rate is

high from these zones but they also face several challenges. In order
to boost export from SEZs, it has been decide to extend the benefits
of both the reward scheme (MEIS and SEIS) to units located in SEZs.
It will benefit the manufacturing sector in terms of oth technological
transfer and gainful employment.

 Encouraging manufacturing and exports under 100%

EOU/EHTP/STPI/BTP schemes: The steps include fast track
clearance facility for these units, permitting them to share
infrastructure facilities, inter unit trasfer of goods and services,
permitting them to set up warehouses near the port of export and to
use duty free equipment for training purposes.

 Mentoring new and potential exporters through “Niryat Bandhu

Scheme”: The scheme has been made to achieve the objectives of
Skill India. In lie of importance of small scale and medium scale
enterprises in the manufacturing sector and in emploment generation
“MSME Clusters” has been identified, based on the export potential
of products and the density of industries in the cluster for focused
intervention to boost exports. It wil specifically aim at incresing
exports from MSME sectors.
JAIPUR NATIONAL UNIVERSITY, JAIPUR
School of Distance Education & Learning
Internal Assignment No. 2

Master of Business Administration / DM

Paper Code: MBA – 101

Paper Title: Business Environment

Last date of submission: Max. Marks: 15

Note : Question No. 1 is of short answer type and is compulsory for all
the students.
It carries 5 Marks. (Word limits 50-100)

Q. 1. Answer all the questions:

(i) Name two elements of external environment affecting business.

Answer:- The two elements of external environent affecting business are as

follows:-

a) Political factor like change in governemnet policies or new legislation.

b) Economic factor like inflation and unemployment

(ii) What do you understand by globalization?

Answer:- Globalization is the process of interaction and integration among

people, companies, and governments worldwide. It is the change in a
business from a company associated with a single country to one that
operates in multiple countries.
(iii) What is monetary policy?

Answer:- Monetary policy is the policy adopted by the monetary

authority of a country that controls either the interest rate payable on very
short-term borrowing or the money supply, often targeting inflation or
the interest rate to ensure price stability and general trust in the currency.

(iv) What is Disinvestment?

Answer:- Disinvestment means to sell off certain assets such as a

manufacturing plant, a division or subsidiary, or product line. It is described
as the opposite of capital expenditure. It is either a strategic move by
organization or for raising funds to meet any general of specific needs of
organization.

(v) What is International Trade?

Answer:- International trade is the exchange of capital, goods,

and services across international borders or territories. It gives consumers
and countries the opportunity to be exposed to goods and services not
available in their own countries, or which would be more expensive
domestically.

Note: Answer any two questions. Each question carries 5 marks (Word
limits 500)

Q. 2. Explain various challenges to disinvestment programme.

Answer:- The term disinvestment refers to the action of an organization or

the government in selling or liqidiating an asset or subsidiary. It is the
withdrawal of capital from a country or a corporation. The various
challenges to disinvestment programme as follows:-

 Opposition from work force: Disinvestment is seen by workforce

employed in various PSUs as a threat to job security. The organised
labour and trade unions generally strongly opposes any move towards
privatisation.

 Social Problem: Process of disinvestment is not favored socially as it

is against the interest of socially disadvantageous people and society
at large. This process will definitely affect the social objectives of the
government.

 Political Problem: The government at the centre faces opposition

from a number of parties has posed a serious threat to this programme.
Conflicting interest has made it difficult to arrive at a national
consensus.

 Economic Problem: Most of the units identified for disinvestment are

in a very bad shape which does not offer good returns. The
government due to paucity of funds is also not in a position to revive
it.

 Lack of transparency: The Government has failed to maintain

transparency in the various stages of disinvestment process which has
decreased its reliability.

 Lack of co-operation and co-ordination: Lack of coordination

between disinvestment ministry and other concerned ministries has
also greatly affected the disinvestment program.
  Less number of bidders & low valuation of equity:- The number of
bidders for equity has been small not only in the case of financially
weak PSUs, but also in that of better performing PSUs. Besides, the
government has often compelled financial institutions, UTI and other
mutual funds to purchase the equity which was being unloaded
through disinvestment. These organizations have not been very
enthusiastic in listing and trading of shares purchased by them as it
would reduce their control over PSUs. Instances of insider trading of
shares by them have also come to light. All this has led to low
valuation or under pricing of equity.

 Ownership of Unit:- In many cases, disinvestment has not really

changed the ownership of PSUs, as the government has retained a
majority stake in them. There has been some apprehension that
disinvestment of PSUs might result in the crowding out of private
corporates (through lowered subscription to their shares) from the
primary capital market

Q. 3. Explain Fiscal policy & its effect on business

Q. 4. What is Foreign Direct Investment? Explain its importance. Explain

government policies regarding FDI.

Answer:- Foreign Direct Investment (FDI) refers to an investment made by a

foreign individual or a company in the productive capacity of another
country. It can be considered as the movement of capital across national
frontiers in a manner that allows the investor to have a control over the
investment. The investors can invest in existing industries/business or can
promote new industries.
The importance of Foreign Direct Investment is as follows:-

1. Increased Employment and Economic Growth: Creation of jobs is

the most obvious advantage of FDI. It is also one of the most
important reasons why a nation, especially a developing one, looks to
attract FDI. Increased FDI boosts the manufacturing as well as the
services sector. This in turn creates jobs, and helps reduce
unemployment among the educated youth - as well as skilled and
unskilled labour - in the country. Increased employment translates to
increased incomes, and equips the population with enhanced buying
power. This boosts the economy of the country.

2. Human Resource Development: This is one of the less obvious

advantages of FDI. Hence, it is often understated. Human Capital
refers to the knowledge and competence of the workforce. Skills
gained and enhanced through training and experience boost the
education and human capital quotient of the country. Once developed,
human capital is mobile. It can train human resources in other
companies, thereby creating a ripple effect.

3. Development of Backward Areas: This is one of the most crucial

benefits of FDI for a developing country. FDI enables the
transformation of backward areas in a country into industrial centres.
This in turn provides a boost to the social economy of the area. The
Hyundai unit at Sriperumbudur, Tamil Nadu in India exemplifies this
process.

4. Provision of Finance & Technology: Recipient businesses get access

to latest financing tools, technologies and operational practices from
 across the world. Over time, the introduction of newer, enhanced
technologies and processes results in their diffusion into the local
economy, resulting in enhanced efficiency and effectiveness of the
industry.

5. Increase in Exports: Not all goods produced through FDI are meant
for domestic consumption. Many of these products have global
markets. The creation of 100% Export Oriented Units and Economic
Zones have further assisted FDI investors in boosting their exports
from other countries.

6. Exchange Rate Stability: The constant flow of FDI into a country

translates into a continuous flow of foreign exchange. This helps the
country’s Central Bank maintain a comfortable reserve of foreign
exchange. This in turn ensures stable exchange rates.

7. Stimulation of Economic Development: This is another very

important advantage of FDI. FDI is a source of external capital and
higher revenues for a country. When factories are constructed, at least
some local labour, materials and equipment are utilised. Once the
construction is complete, the factory will employ some local
employees and further use local materials and services. The people
who are employed by such factories thus have more money to spend.
These factories will also create additional tax revenue for the
Government, that can be infused into creating and improving physical
and financial infrastructure.
8. Improved Capital Flow: Inflow of capital is particularly beneficial
for countries with limited domestic resources, as well as for nations
with restricted opportunities to raise funds in global capital markets.

9. Creation of a Competitive Market: By facilitating the entry of

foreign organisations into the domestic marketplace, FDI helps create
a competitive environment, as well as break domestic monopolies. A
healthy competitive environment pushes firms to continuously
enhance their processes and product offerings, thereby fostering
innovation. Consumers also gain access to a wider range of
competitively priced products.

The various government policies regarding FDI are as follows:-

1. Procedure under automatic route:- FDI in sectors/activities to

the extent permitted under automatic route does not require any
prior approval either by the Government or RBI. The investors are
only required to notify the Regional Office concerned of RBI
within 30 days of receipt of inward remittances and file the
required documents with that office within 30 days of issue of
shares of foreign investors.

2. Procedure under Government Approval:- FDI in activities not

covered under the automatic route require prior government
approval. Approvals of all such proposals including composite
proposals involving foreign investment/foreign technical
collaboration are granted on the recommendations of Foreign
Investment Promotion Board (FIPB).
3. Prohibited Sectors:- The extant policy does not permit FDI in the
following cases:

 Gambling and betting

 Lotery Business
 Atomic Energy
 Retail Trading
4. General permission of RBI under FEMA:- Indian companies
having foreign investment approval through FIPB route do not
require any further clearance from RBI for receiving inward
remittance and issue of shares to the foreign investors.

5. Industrial Licensing:- With progressive liberalization and

deregulation of the economy, industrial license is required in very
few cases. Industrial licenses are regulated under the Industries
(Development and Regulation) Act 1951.

6. Small Scale Sector:- An industrial undertaking is defined as small

scale unit if the capital investment does not exceed Rs. 10
million(approximately $ 222,222). The Government has reserved
certain items for exclusive manufacture in the small-scale sector.

7. Location restrictions:- Industrial undertakings to be located

within 25kms of the standard urban area limit of 23 cities having a
population of 1million as per 1991 census require an industrial
license. Industrial license even in these cases is not required if a
unit is located in an area designated as an industrial area before
1991 or non-polluting industries such as electronics, computer
software, printing and other specified industries.