To open a shop is easy,

to keep it open is an art.

-Chinese proverb

BUSINESS ENVIRONMENT
Meaning of Business Environment

Types of Business Environment

Case Study

Nidhi Gupta

BUSINESS ENVIRONMENT
What is Business Environment? Business environment encompasses all those factors that affect a company's operations, and includes customers, competitors, stakeholders, suppliers, industry trends, regulations, other government activities, social and economic factors and technological developments.

Types of Business Environment

Internal Environment External Environment
Internal Environment

Business Decision

External Environment

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BUSINESS ENVIRONMENT

Internal Environment
Promoters / Shareholders values
Vision / Mission / Objectives Management Structure / Nature

External Environment

Macro Environment Micro Environment

Customers
Suppliers Demographic Factors Competitors Political / Govt. Factors Publics Natural Factors Financiers Technological Factors Marketing intermediaries Global Factors

Economic Factors
Social/ Cultural Factors

Internal power relationship

Company image / Brand Equity Physical Assets / Facilities

R&D and technological capabilities

Human Resources Marketing capabilities

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BUSINESS ENVIRONMENT
Bajaj Pulsar Case Study
Political / Government / Regulatory Environment Technological Environment Competitive Environment

Economic Environment
Socio-cultural and demographic environment

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BUSINESS ENVIRONMENT
ROLE OF GOVERNMENT IN ECONOMIC ACTIVITY

Economic Roles of Government

Case Study (Remains of a Dream)

Nidhi Gupta

BUSINESS ENVIRONMENT
ROLE OF GOVERNMENT IN ECONOMIC ACTIVITY

Regulatory Role
Promotional Role Entrepreneurial Role Planning Role

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BUSINESS ENVIRONMENT
BUSINESS ETHICS

Definition, Meaning & Views Codes of Business Ethics Role of Trade Associations Three Basic Principles of Business Ethics Salient Features of a Corporate Ethical Programme Case Study (A Question of Ethics)

Nidhi Gupta

BUSINESS ENVIRONMENT
BUSINESS ETHICS Definition and Meaning The word ethics is derived from Greek word ethos that means custom Business ethics refers to the system of moral principles and rules of conduct applied to business According to Peter Drucker, every individual and organ in society should abide by certain moral codes and there is no separate ethics for business Traditional and Expanded Views Traditional (Individualistic) View Individuals are responsible for lapses in business ethics Expanded (Institutionalised)View Ethical considerations are integral part of management strategy and decision making Back
Nidhi Gupta

BUSINESS ENVIRONMENT
BUSINESS ETHICS Rotary Internationals Code of Ethics (1930) Is it the truth? Is it fair to all concerned? Will it build goodwill and better friendship?

Will it be beneficial to all concerned?

Hippocratic oath of the Greek physician : Primum non nocere (not knowingly do harm) A professional should carefully evaluate his decision and ensure that his actions will not produce negative effects This code rules out all anti-social business practices Back
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BUSINESS ENVIRONMENT
BUSINESS ETHICS

Role of Trade Associations Education and Persuasion Code of Ethics Moral Sanctions

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BUSINESS ENVIRONMENT
BUSINESS ETHICS

Three Basic Principles of Business Ethics Utilitarianism Principle of Rights Principle of Justice

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BUSINESS ENVIRONMENT
BUSINESS ETHICS

Salient Features of a Corporate Ethical Programme Top Management Commitment Ethical Code Communication System Enforcement

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BUSINESS ENVIRONMENT
CORPORATE SOCIAL RESPONSIBILITY

Definition and views Illustration diagram Dimensions of Social Responsibility Social responsibility models Classification of companies on basis of CSR Factors influencing CSR Case Study (Amway)
Nidhi Gupta

BUSINESS ENVIRONMENT
CORPORATE SOCIAL RESPONSIBILITY

What is Corporate Social Responsibility (CSR)?

CSR is about business giving back to the society. CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large"

Contradictory views on CSR

Classical View Businesses are meant to make money. It has only economic objectives and it should use its resources to maximise profits while following the legal and ethical code of conduct. Contemporary View Businesses are social institution. They are an integral part of the society and have a broad influence on the way people live and work together.

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CORPORATE SOCIAL RESPONSIBILITY

Back Illustrated diagram of CSR

BUSINESS ENVIRONMENT
CORPORATE SOCIAL RESPONSIBILITY

Dimensions of Social Responsibility

Responsibility towards Shareholders
Responsibility towards Employees Responsibility towards Consumers Responsibility towards Suppliers Responsibility towards Competitors Responsibility towards Government Responsibility towards Local Community Back
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BUSINESS ENVIRONMENT
CORPORATE SOCIAL RESPONSIBILITY

Social Responsibility Models

Economic

Discretionary

Legal
Economic Legal Back
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Ethical Discretionary

Business

Ethical

BUSINESS ENVIRONMENT
CORPORATE SOCIAL RESPONSIBILITY

Classification of companies on the basis of extent of CSR

Anti-Social Indifferent

Peripheral
Socially Oriented Committed and Very Active

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BUSINESS ENVIRONMENT
Factors influencing CSR
Promoters and Top Management

Board of Directors
Stakeholders and Internal Power Relationship Societal Factors Industry and Trade Associations Government and Laws Political Influences Competitors Resources

Ethical Influences

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BUSINESS ENVIRONMENT
CORPORATE GOVERNANCE

What is Corporate Governance? Reasons for Corporate Governance Features of good corporate governance Importance of Corporate Governance Recommendations of Birla Committee Recommendations of CII code Case Study (Infosys)
Nidhi Gupta

BUSINESS ENVIRONMENT
CORPORATE GOVERNANCE What is Corporate Governance?

Made up of two terms: Corporate + Governance.

Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a company is directed, administered or controlled.

It is how the people in power direct, monitor and lead corporations, and thereby either create, modify or destroy the structures and systems under which they operate.
An important theme of corporate governance is the nature and extent of accountability of particular individuals in the organization towards its stakeholders in particular and society in general.

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BUSINESS ENVIRONMENT
CORPORATE GOVERNANCE Reasons for good Corporate Governance

Dilution of wealth of minority shareholders

No protection of interest of various stakeholders Inadequate attention to shareholders services To give boost to the capital markets and attract foreign investors Financial crisis in developed and developing economies Growing awareness among companies Demand of transparency by the investors, collaborators and buyers

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BUSINESS ENVIRONMENT
CORPORATE GOVERNANCE

Features of good Corporate Governance

Disclosure and transparency

Prevention of corporate fraud and crimes

Accountability to the stakeholders Disbursements of rights to the shareholders Integrity and ethical behavior Effective and responsible board members

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BUSINESS ENVIRONMENT
CORPORATE GOVERNANCE Importance of Corporate Governance Strong corporate governance is mandatory for resilient and robust capital markets and important instrument for investor protection. It attracts positive interest of markets and investors resulting in higher valuations of the company. It is effective in resisting insider trading practices by regulating the distribution of sensitive information about the company in timely manner to all stakeholders and shareholders. The principle is disclose or desist. This applies to entities other than companies like stock exchanges, financial institutions etc. It is vital for long-term sustainability of a firm. It also enables them to compete internationally and make them flourish and grow so as to provide employment, wealth and satisfaction.

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BUSINESS ENVIRONMENT
CORPORATE GOVERNANCE
Recommendations of Birla Committee Applicability Board of Directors Audit Committee Directors Remuneration (Remuneration Committee is non-mandatory) Accounting Standards and Financial Reporting Company Management Shareholders Back
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References: Business Environment by Suresh Bedi Business Environment by Francis Cherunilam

BUSINESS ENVIRONMENT CORPORATE GOVERNANCE

Recommendations of CII Code A single well performing board which should meet at least 6 times a year

Composition of Board of Directors

No directorship in more than 10 companies Commission for non-executive directors Attendance record of directors should be furnished Audit committee mandatory for listed companies with turnover of Rs. 100 crore or above or paid up capital of Rs. 20 crore Disclosure of detailed information to the shareholders Compliance certificate to be provided to major Indian stock exchanges
References: Business Environment by Suresh Bedi Business Environment by Francis Cherunilam
Nidhi Gupta

BUSINESS ENVIRONMENT CORPORATE GOVERNANCE

Recommendations of CII Code (contd.) The domestic issue should have the same quality and quantity of disclosure as a GDR issue Greater funding by the government to the corporate sector against shares and other papers Eliminate the provision of having nominee directors, except in cases of serious debt default. The rating information of the company should be given in the prospectus and issue documents

Companies defaulting on fixed deposits should not be allowed further deposits.

References: Business Environment by Suresh Bedi Business Environment by Francis Cherunilam

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