CHANDRAGUPT INSTITUTE OF

MANAGEMENT PATNA

BUSINESS ENVIRONMENT AND POLICY

COURSE INSTRUCTOR- PROF. SENAPATI

Group Members:-
• ANJALI
• DEEP SANJANA
• KHUSHBOO KUMARI
• NAZIA SADAF
• RAHUL KUMAR
• SATYAM
• SUMIT KHARE
 BUSINESS ENVIRONMENT

• Environmental scanning refers to possession and utilization of information about

occasions, patterns, trends, and relationships within an organization’s internal and
external environment.
• Internal analysis of the environment is the first step of environment scanning.
Organizations should observe the internal organizational environment. This includes
employee interaction with other employees, employee interaction with management,
manager interaction with other managers, and management interaction with
shareholders, access to natural resources, brand awareness, organizational structure,
main staff, operational potential, etc.
 Business environment

Public

Internal External
History
•After independence India has implemented import substitution but due to lack of
efficiency in industries India had to propose Liberalization, Privatization and Globalization
• With implementation of liberalization Globalization and Privatization India ended the
License raj and liberalize the certification.
•Post liberalization in 1991 India has undergone a paradigm shift owing to its competitive
stand in the world.
• During 2000 India had also implemented FDI.

CURRENT SCENARIO
• Now with developed infrastructure having machine in industries India is relying on import
substitution.
•The import substitution has been implemented on some products which are not essential
such as sugar, cashew, fresh fruits and processed and packaged items etc.
 Macdonald’s

• McDonald's is an American fast food company, founded in 1940 as a restaurant operated by Richard and
Maurice McDonald, in San Bernardino, California, United States.
• McDonald's is the world's largest restaurant chain by revenue, serving over 69 million customers daily in
over 100 countries across approximately 36,900 outlets as of 2016.
• McDonald's opened its doors in India, the 95th country, in 1996.
The first McDonald’s restaurant opened on Oct. 13, 1996 at Basant Lok, Vasant Vihar, New Delhi. It was
also the first McDonald’s restaurant in the world not serving beef on its menu.
• There are 290+ outlets in India running in India.
• Westlife Development is the master franchisee of McDonald’s restaurants in the eastern and southern
markets.
• McDonald’s India’s northern & eastern business is operated by partner Vikram Bakshi, also managing
director of CPRL.
 PESTLE analysis McDonald's
• Political
 Political stability and importance of Restaurants
sector in the country's economy.
 Risk of military invasion
 Level of corruption - especially levels of
regulation in Services sector.
 Bureaucracy and interference in Restaurants
industry by government.
INDIAN CONTEXT
• Relation from Trump govt.
• Role of FSSAI : told companies to refrain from advertising products
having high fat and sugar content especially from kids channels.
• Coming 2019 Election
• Corruption: India ranks 81st among 175 countries
• Rejection on proposal of ban on fast food advertisement.
• The Delhi High Court has ordered the regulation of junk food
consumption among school children.

• Economical • McDonald's generally import raw materials from US. So the

 Exchange rates & stability of host country currency.
exchange rate fluctuation may affect operation in India.
 Infrastructure quality in Restaurants industry
• The Big Mac Index (BERGONOMICS) US .19 Big mac and India
 Skill level of workforce in Restaurants industry.
.39
 Labor costs and productivity in the economy
• Ease of doing business- 77/190
 Business cycle stage (e.g. prosperity, recession,
• Global Competitive Index- 40/137
recovery)
• Unemployment Rate- 3.4%
 Economic growth rate
• Inflation rate- 4.74%
 Unemployment rate
• Consumption per capita of QSR- 50% once in a weak, 17% twice
 Inflation rate
and thrice and 9% not consuming.
 Interest rates
 Per capita consumption
• Social
 Demographics and skill level of the population
 Class structure, hierarchy and power structure in the society.
 Education level as well as education standard in the Domino's
Pizza, Inc. ’s industry
 Culture (gender roles, social conventions etc.)
 Entrepreneurial spirit and broader nature of the society.
Some societies encourage entrepreneurship while some
don’t.
 Attitudes (health, environmental consciousness, etc.)
 Leisure interests
• Technological
 Recent technological developments by Domino's
Pizza, Inc. competitors
 Technology's impact on product offering
 Impact on cost structure in Restaurants industry
 Impact on value chain structure in Services sector
 Rate of technological diffusion
• Gender role.
• Consumer sophistication and confidence.
• Paucity of time.
• Increase in disposable income.
• Awareness towards harmful affects of fast food
in society.
• Consumption of Beef in Indian society.
• Emphasis on biodegradable products.
• Easy banking
• Electricity
• High-speed network connection( Experience of the
Future).
• Radio frequency identification device.
• Online marketing through digital platforms.
 • Environmental
 Weather
 Laws regulating environment pollution
 Air and water pollution regulations in Restaurants
industry
 Recycling
 Waste management in Services sector
 Attitudes toward “green” or ecological products
 Attitudes toward and support for renewable energy
JOINT TASK FORCE
• McDonald’s and EDF created a joint task force to work together to
understand the role of materials and packaging used at
McDonald’s.
• Slogan- We love Green
• Special fund to support green movement.
• It has introduced policies for enhancing the recycled content of its
packaging material and for reducing the use of polystyrene.

• Legal
• A QSR primarily requires five licenses, namely: Food
 Anti-trust law in Restaurants industry and overall in the
License from FSSAI, GST registration, Local Municipal
country.
Corporation Health License, Police Eating House license,
 Discrimination law
and fire license.
 Copyright, patents / Intellectual property law
• Other legal policies such as Intellectual property
 Consumer protection and e-commerce
rights(2007), The consumer protection act (1989), The
 Employment law
monopolies and restricted act (1969) etc. are there to
 Health and safety law
provides bright future in India.
 Data Protection
• GST- 5%
• FDI- 100%
IMPORT SUBSTITUTION
IMPORT + SUBSTITUTION

Substituting the imported goods with domestically produced goods.

 Merits
• Growth of local industries
• Protects Infant Industries
• Employment Generation
Demerits
• Lack of competition
• Consumer have less number of options
• Consumer have to satisfy with the quality that is available
• Lack of technology leads to adverse effect in economy
 Import Substitution in India
Food grains, Raw
India import increasing by Material, Capital
84.5% from 1950-60 equipment's

Dependency
on import
were rising

Import
Deficiency on
substitution
BOP(Balance
and Export Import substitution Export promotion
of Payment)
promotion

Information's of this slide is extracted from the http://www.indianmirror.com/indian-industries/industries-

given link and YouTube home.html
How India benefited From Import Substitution Policy
To establish
To become
strong
self-reliance
industrial base

To save country
To promote
foreign
Infant Industry
exchange
 Ways of Import Substitution
Tariffs- Quotas-
Impose tax Specific
on import number of
goods good

Import goods Less number

become of imported
expensive goods

So consumer
Decrease in will shift to
Demand domestic
goods
 Export Promotion

• Meaning of Export:-
An export is a function of international trade whereby goods produced in
one country are shipped to another country for future sale or trade. The
sale of such goods adds to the producing nation's gross output.
• Meaning of Promotion:-
Encouragement of the progress, growth or acceptance of something.
• Meaning of Export Promotion:-
Refers to the policies of government that offers encouragement to the
exporters with a view to enhance the exports of the country.
Principle Objectives Of Export Promotion
• Compensate the exporters for the high domestic cost of
production.
• Provide necessary assistance to the new and infant exporters to
develop the export business.
• Increase the relative profitability of the export business vis-e-vis
the domestic business.
Incentives
• Export incentives are a widely employed strategy of export
promotion.
• The main aim of these incentives is to increase the profitability
of export business.
• Important export incentives in India include rebate of duties, cash
compensatory support, income tax concession, interest subsidies,
freight subsidy etc.
 FDI- FOREIGN DIRECT INVESTMENT
• FDI stands for Foreign Direct Investment. It’s a component of a country’s national financial accounts.
• Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations.
• It does not include foreign investment into the stock markets(FII).
• It was promoted in India after economic reforms(globalisation) in mid 1991.

UNCTAD ranked India at 3rd position in 2010 as the attractive destination for FDI, which further rose to second most attractive
destination for FDI in 2012, as ranked by A.T Kearney FDI Confidence Index.

NEED FOR FDI

• FDI helps in gain a foothold in a new geographic market
• Increase a firm’s global competitiveness and positioning
• Fill gaps in a company’s product lines in a global industry
• Reduce costs in areas such as R&D, production, and distribution
• Development of technology, knowledge, skills and employment
Advantages of FDI to host country

• FDI bridges the gap between savings and demand for resources for investment.
• Provides managerial, technical and administrative expertise to local enterprises.
• Encourages local enterprises to set up supporting industries.
• Increases the GDP of the country and generates employment opportunities.
• Encourages competition.
• Creates Revenue for the Government and Economic development of the host.
• Access to international market
• Increase domestic savings and investment.
• Integration with the global market.

Challenges for the host country

• Difference in language and culture.

• Domination by the foreign player.
• Exploitation by the foreigner.
• Disclosure of country’s secrets.
• Less control.
 FDI IN INDIA
Indian policy in FDI
• Economic reforms 1991.
• It allowed level playing field to foreign players in number of sectors.
• Floating exchange rate system was adopted.
• Rupee made convertible in current account.
• Tax rate applicable on foreign companies have come down progressively.
• The FDI limits in number of sectors has been progressively increased.
Recent policy Initiatives
• FDI in Aviation increased from 40% to 49%,FDI up to 100% permitted in Infrastructure
development of townships, other construction projects.
• FDI limit in telecom increased to 74%
• FDI in exploration and mining of coal, Lignite, permitted up to 74%.
• FDI up to 20% allowed in FM Broadcasting.
• 100% FDI permitted in tea plantations, Modernizations of Airports, ports and courier services.
 FDI-related Institutions in India
 FIPB(Foreign Investment Promotion Board)
 Provides a single window for all matters regarding FDI as well as other promotion of investment in India.

SIA(Secretariat for Industrial Association)

 This helps in seeking approval from government of India help investors regarding other policies of investment.

FIIA(Foreign Investment Implementation Authority)

 It provides a quick service platform to foreign investors viz. After care service and other necessary approvals.
Ways of flow of FDI
1. Automatic route
 No need of approval from any legal agency, just have to inform RBI within 30 days of
receipt of remittances.

2. Prior Government Approval Route

 In some sectors investors have to take prior permission from government and other agency like FIPB
to invest as FDI.

3. CCFI Route
 For investment of more than 6000 million, investors requires to take permission from CCFI.

 All of these foreign exchange are regulated by FEMA

• Mode of Entry:
1. Alliance
2. Joint Venture
3. Expansion
4. Acquisition
5. Minority Stake

 Greenfield FDI
when new factories or shops are build
 Brownfield FDI
when shop/factories are purchased or taken on rent
• For promoting FDI there are many SEZ’s developed in India where there is very less tax is imposed on companies

FDI in Multi-Brand Retail Trading

• Earlier FDI was not at all allowed in M-B retail trading whereas it was allowed in single brand retails up to some
extent.
• However in 2006 there was allowance of 100% ownership to M-B retails
• This attracted companies like Wall-mart and Carrefour towards India.
 FDI prohibited sectors:
• Gambling and lottery
• M-B retail trading
• Securities
• Housing and real estate
• Agriculture Except Tea plantation

Present Scenario
• 51% allowance of FDI in M-B Retails
• Minimum investment of $100 million
• 30% of raw materials to be purchase from India’s SME’s
• Malls only in cities with more than 10 lakh population
• Procure materials from farmers(1st Priority)
• Same brand internationally
• Foreign investor would be the owner of the brand

• * All the above mentioned things are also the key concerns of the FDI
Impact of FDI
• Increase competition
• Removal of middlemen
• Control food inflation
• Employment
• Increase of choices for consumers
• Global best practice and technology
Recent Trends in India
• Service sector acquire more than 21% of total FDI
• Increase in FDI in telecommunication sector
The Foreign Direct investment (FDI) has displayed increase in absolute numbers from $45.15 billion in
2015 to $60.97 in 2018 but the rate of growth in FDI inflows is falling consecutively since the last two
years. Recoding a growth of just 1.24 per cent in 2018.

Despite Prime Minister Narendra Modi's 'Make in India' campaign and improvement in Ease of Doing
Business rankings, the country's foreign direct investment (FDI) growth rate has declined in the past
couple of years.
The main sectors which benefited from the FDI inflows in the last fiscal were:-
• Services ($6.7 billion)
• Computer software and hardware ($6.15 billion),
• Telecommunications ($6.21 billion),
• Trading ($4.34 billion),
• Construction ($2.73 billion)
• Automobile ($2 billion)
• Power ($1.62 billion).
India’s Foreign Trade Policy (FTP/EXIM)
 Introduction
• The Foreign Trade of India is guided by the Export-
Import (EXIM) policy of the Government of India and is
regulated by the Foreign Trade Development and
Regulations Act,1992.
• FTP contains various decisions taken by the government
in the sphere of Foreign Trade, i.e. with respect to import
and export of the country and more especially export
promotions measures, policies and procedures.
• It is a set of guidelines and instructions established by the
DGFT(Directorate General of Foreign Trade).
• The present FTP is for a period of 5 years i.e. from 2015-
2020.
 Objectives of the FTP ( EXIM) Policy
• FTP provides a framework for increasing the export of
goods and services as well as generation of employment
and increasing value additions in the country, in line with
the ‘Make in India ‘programme.
• To enhance the techno local strength and efficiency of
Indian agriculture, industry and services thereby
increasing competitiveness.
• To provide quality consumer products at reasonable
prices.
• Opportunities and encourage the attainment of
internationally accepted standards of quality.
 Major Changes incorporated in FTP
• Five Schemes of FTP namely Focus Product
Scheme(FPS), Market Linked Focus Product
Scheme(MLFPS), Focus Market Scheme(FMS), Vishesh
Krishi and Gram Udyog Yojana (VKGUY), Agriculture
Infrastructure Incentive Scrip(AIIS) are merged into a
single scheme “Merchandise Exports from India Scheme
(MEIS)”. MEIS is also available for SEZ (Special
Economic Zone) units.
• Earlier “Served from India Scheme (SFIS)” is changed to
“Service Exports From India Scheme (SEIS)”.
• By these two schemes MEIS and SEIS, exports of goods
and services are incentivized.
 MEIS

• The incentives and reward given under this scheme vary

from country to country and are in the range of 2% to 5%
for most items.
• Agriculture and village industry products to be supported
across the globe at rates of 3% and 5% under MEIS.
• Higher level of support to be provided to processed and
packed agricultural and food items.
• Industrial products to be supported in major markets at
rates ranging from 2% to 3%.
 SEIS

Reward under this scheme are:-

• 5% rate – Professional services, Research and development services, Business
services, hotel and restaurants, Construction and engineering services, Educational
services, Health and social services, Transport and auxiliary services,
Recreational, cultural and sporting services,.
• 3-5%- Tourism and Travel services.
• 3%- Other specified services.
 Niryat Bandhu - Hand Holding Scheme for new export /
import entrepreneurs.
• DGFT is implementing the Niryat Bandhu Scheme for mentoring new and
potential exporter on the intricacies of foreign trade through counseling, training
and outreach program.
• Considering the strategic significance of small and medium scale enterprises in the
manufacturing sector and in employment generation, ‘MSME clusters’ have been
identified, based on the export potential of the product and the density of
industries in the cluster, for focused interventions to boost exports.
Impact on the economy

• The focus in this FTP has been “Simplicity and Stability.”

• A big step has been taken by cleaning up the plethora of export promotion
schemes and clubbing them under two schemes i.e. MEIS and SEIS.
• In this FTP the IT and ITES(Information technology enabled services) dominated
the basket. The share of this segment is 50% and 90% in services export basket.
• By extending benefits under EPCG on domestic procurements and offering them
more products under MEIS, the policy seeks to further incentives the exports.