ENVIRONMENTAL FACTORS AFFECTING

BUSINESS (PESTEL)

 PESTLE analysis is a tool used in business to gain information

about a company’s circumstances (its “environment”), and
what may come of them.
 This simple analysis, which revolves around the Political,
Economic, Social, Technological, Legal, and Environmental
factors that affect a business, is an extension to PEST analysis
(which only looks at the first four of the aforementioned
factors).
 Conducting a PESTLE analysis, much like conducting a SWOT
analysis, is as simple as listing all 6 of the categories, and filling
them out with appropriate factors.
 However, plenty of individuals run into confusion when trying
to decide what falls into which category, and why.
 it may seem that environmental factors have very little to do
with business. On the contrary, though, environmental factors
can affect many different important aspects of business.
 Examples include customer willingness to buy a product (who
needs heaters in a hotter climate?), employee efficiency, and
crop/resource availability.

Examples of environmental factors affecting business include:

 Climate
 Climate change
 Weather
 Pollution
 Availability of non-renewable goods

And consequently,
  Availability of certain renewable goods
 Existence of certain biological species
 Workplace efficiency
 Environment-related laws

Here is how some of the aforementioned examples can affect

business:

 Availability of non-renewable goods 

 The availability of non-renewable goods, especially popular
ones like oil or natural gas, can vastly change the market.
 Should the supply of these goods drop (as is currently
happening), prices might grow higher, greatly affecting
businesses that use the fuels in any significant amounts — like
industrial or logistical ones.
 Existence of certain biological species 
 This point doesn’t need too much explaining.
 Hypothetically speaking, if climate change were to make every
cow and goat extinct, it would not mean good things for any
businesses in the dairy industry.

ECONOMIC ENVIRONMENT SIGNIFICANT ON MY

BUSINESS.

 The term economic environment refers to all the external

economic factors that influence buying habits of consumers
and businesses and therefore affect the performance of a
company.
 These factors are often beyond a company’s control, and may
be either large-scale (macro) or small-scale (micro).

Macro factors include:

  Employment/unemployment
 Income
 Inflation
 Interest rates
 Tax rates
 Currency exchange rate
 Saving rates
 Consumer confidence levels
 Recessions
Micro factors include:

 The size of the available market

 Demand for the company’s products or services
 Competition
 Availability and quality of suppliers
 The reliability of the company’s distribution chain
Significance of Business Environment:
 Business Environment refers to the “Sum total of conditions
which surround man at a given point in space and time.
 In the past, the environment of man consisted of only the
physical aspects of the planet Earth (air, water and land) and
the biotic communities.
 But in due course of time and advancement of society, man
extended his environment through his social, economic and
political function.”
 In a globalised economy, the business environment plays an
important role in almost all business enterprises.
  The significance of business environment is explained with the
help of the following points:

(i) Help to understand internal Environment:

 It is very much important for business enterprise to
understand its internal environment, such as business policy,
organisation structure etc. In such case an effective
management information system will help to predict the
business environmental changes.

(ii) Help to Understand Economic System:

 The different kinds of economic systems influence the business
in different ways.
 It is essential for a businessman and business firm to know
about the role of capitalists, socialist and mixed economy.

(iii) Help to Understand Economic Policy:

 Economic policy has its own importance in business
environment and it has an important place in business.
 The business environment helps to understand government
policies such as, export-import policy, price policy; monetary
policy, foreign exchange policy, industrial policy etc. have
much effect on business.

(iv) Help to Understand Market Conditions:

 It is necessary for an enterprise to have the knowledge of
market structure and changes taking place in it.
  The knowledge about increases and decrease in demand,
supply, monopolistic practices, government participation in
business etc., is necessary for an enterprise.

TECHNIQUES ON ENVIROMENTAL FORECASTING

1. Environmental Forecasting Methods:

Everyone can understand that the economic, technological, political
and social changes are a part of organizational life.

To say the least, forecasting is a most difficult process. Some

forecasting rules are the following:
(a) It is very difficult to forecast, especially, the future.

(b) The moment you forecast you know you’re going to be wrong –
you just don’t know when and in which direction.

(c) If you’re right, never let them forget it.

(d) Regardless of the possibility of error, to be successful,

organizations must forecast their future environment.

Forecasting methods and levels of sophistication vary greatly.

 The methods employed may vary from educated guesses to

computer projections using sophisticated statistical analyses.
 Several factors determine the most appropriate methods of
forecasting, including the nature of the desired forecast, the
available expertise, and the available financial resources.
  All forecasting techniques can be classified as either qualitative
or quantitative.
 Qualitative techniques are based primarily on opinions and
judgments.
 Quantitative techniques are based primarily on the analysis of
data and the use of statistical techniques.
 Several qualitative and quantitative techniques are available to
business.

2. Qualitative Forecasting Techniques:

a. Sales Force Composite:

 Under the sales force composite method, a forecast of sales is
determined by combining the sales predictions of experienced
sales people.
 Because sales people are in constant contact with customers,
they are often in a position to accurately forecast sales.
 Advantages of this method are the relatively low cost and
simplicity.
 The major disadvantage is that sales personnel are not always
unbiased, especially if their sales quotas are based on sales
forecasts.

b. Customer Evaluation:
 This method is similar to the sales force composite except that
it goes to customers for estimates of what the customers
expect to buy.
  Individual customer estimates are then pooled to obtain a total
forecast.
 This method works best when a small number of customers
make up a large percentage of total sales.
 Drawbacks are that the customer may not be interested
enough to do a good job and that the method has no provisions
for including new customers.

c. Executive Opinion:
 With this method, several managers get together and devise a
forecast based on their pooled opinions.
 Advantages of this method are simplicity and low cost.
 The major disadvantage is that the forecast is not necessarily
based on facts.

d. Delphi Technique:

 The Delphi technique is a method for developing a consensus

of expert opinion.
 Under this method, a panel of experts is chosen to study a
particular question.
 The panel members do not meet as a group and may not even
know each other’s identity.
 Panel members are then asked (usually by mailed
questionnaire) to give their opinions about certain future
events or forecasts.
  After the first round of opinions has been collected, the
coordinator summarizes the opinions and sends this
information to the panel members.
 Based on this information, panel members rethink their earlier
responses and make a second forecast.
 This same procedure continues until a consensus is reached or
until the responses do not change appreciably.
 The Delphi technique is relatively inexpensive and moderately
complex.

e. Anticipatory Surveys:

 In this method, mailed questionnaires, telephone interviews, or

personal interviews are used to forecast customer intentions.
 Anticipatory survey is a form of sampling, in that those
surveyed are intended to represent some larger population.

3. Quantitative Forecasting Techniques:

a. Time-Series Analysis:

 This technique forecasts future demand based on what has

happened in the past.
 The basic idea of time-series analysis is to fit a trend line to
past data and then to extrapolate this trend line into the future.
 Sophisticated mathematical procedures are used to derive this
trend line and to identify and seasonal or cyclical fluctuations.
  Usually, a computer program is used to do the calculations
required by a time-series analysis.
 One advantage of this technique is that it is based on
something other than opinion.
 This method works best when a significant amount of
historical data is available and when the environmental forces
are relatively stable.
 The disadvantage is that the future may not be like the past.

b. Regression Modeling:
 Regression modeling is a mathematical forecasting technique
in which an equation with one or more input variables is
derived to predict another variable.
 The variable being predicted is called the dependent variable.
 The input variables used to predict the dependent variable are
called independent variables.
 The general idea of regression modeling is not determined how
changes in the independent variables affect the dependent
variable.
 Once the mathematical relationship between the independent
variables and the dependent variable has been determined,
future values for the dependent variable can be forecast based
on known or predicted values of the independent variables.
 The mathematical calculations required to derive the equation
are extremely complex and almost always require the use of a
computer-. Regression modeling is relatively complex and
expensive.
c. Econometric Modeling:
 Econometric modeling is one of the most sophisticated
methods of forecasting.
 In general, econometric models attempt to mathematically
model an entire economy.
 Most econometric models are based on numerous regression
equations that attempt to describe the relationships between
the different sectors of the economy.
 Very few organizations are capable of developing their own
econometric models.
 Those organizations that do use econometric models usually
hire the services of consulting groups or company that
specialist in econometric modelling.
 This method is very expensive and complex and is, therefore,
primarily used only by very large organizations.

4. Environmental Scanning:
 We now turn to discuss the methods techniques employed by
the organizations to monitor their relevant environment and to
gather data to derive information about the opportunities and
threats that affect their business.
 The process by which organizations monitor their relevant
environment to identify opportunities and threats affecting
their business is known as environmental scanning.

REGULATORY ENVIRONMENT HAS MORE

IMPACT ON BUSINESS THAN ECONOMY

 We owe the intensity of the current regulatory environment to

misdeeds in the financial system, which led to the near collapse

of the financial system and an acute economic downturn six

years ago.

 The regulations were meant as a cure and a preventive

measure, and intended to change how business is done.

 They have definitely accomplished the latter.

 The regulatory environment is now the top issue that can have

the most impact on a company.

 Thirty-four percent of CEOs are spending more time with

regulators or government officials, or considering doing so.

 The two sectors currently most affected by the regulatory

environment in the U.S. are healthcare and financial services.

 In the financial sector, there are a number of regulatory

mandates oriented toward transparency and reducing overall

market risk.
 The sheer quantity of regulations coming at financial services

companies can be hard to grasp.

 New regulations are expensive in terms of compliance, as

companies need to transform data tracking and gathering

systems, reporting functions and, in some cases, their

organizational structures.

 At the same time, these regulations can limit revenue growth

and profitability by, for example, increasing capital ratio

requirements and limiting certain products or activities.

 The regulatory burden is a threat to traditional community

banking.

 It is troubling that we don’t always know what the regulators

are going to want.”

 Other industries, such as energy, are also affected by a strong

regulatory component. 

 “A constructive regulatory environment can either help or hurt

us.
 Complying with regulations generally creates a drag on

businesses.

 Regulatory compliance can add costs, slow down processes

and restrict expansion.

 Considering that the CEOs and their organizations already

focus on the regulatory issues, it makes sense to derive value

out of new regulatory compliance processes.

 "One way to do so is to take data and insights that in the past

have been used almost exclusively for compliance purposes

and use them to drive additional value”.

 With these insights, better decision making outside of the tax

function may be possible.

 In fact, the regulatory environment is so impactful that in

highly regulated industries companies are changing their

business models as a result of regulations.

RIGHTS TO INFORMATION
 The Right to Information (RTI) is an act of the Parliament of
India which sets out the rules and procedures regarding
citizens' right to information.
 It replaced the former Freedom of Information Act, 2002.
 Under the provisions of RTI Act, any citizen of India may
request information from a "public authority" (a body of
Government or "instrumentality of State") which is required to
reply expeditiously or within thirty days.
 In case of matter involving a petitioner's life and liberty, the
information has to be provided within 48 hours.
 The Act also requires every public authority to computerize
their records for wide dissemination and to proactively publish
certain categories of information so that the citizens need
minimum recourse to request for information formally. [1]
 The RTI Bill was passed by Parliament of India on 15 June
2005 and came into force with effect from 12 October 2005.
 Every day on an average, over 4800 RTI applications are filed.
In the first ten years of the commencement of the act over
17,500,000 applications had been filed.
 Although Right to Information is not included as
a Fundamental Right in the Constitution of India, it protects the
fundamental rights to Freedom of Expression and Speech
under Article 19(1)(a) and Right to Life and Personal Liberty
under Article 21 guaranteed by the Constitution.
 The authorities under RTI Act 2005 are called public
authorities. The Public Information Officer (PIO) or the First
Appellate Authority in the public authorities perform quasi-
judicial function of deciding on the application and appeal
respectively.
 This act was enacted in order to consolidate the fundamental
right in the Indian constitution 'freedom of speech'.
 Since RTI is implicit in the Right to Freedom of Speech and
Expression under Article 19 of the Indian Constitution, it is an
implied fundamental right.
GLOBALIZATION & EXPLAIN IT’S CHALLENGES FOR

INDIAN BUSINESS(BENEFITS)

1. Globalization is the word used to describe the growing

interdependence of the world’s economies, cultures, and

populations, brought about by cross-border trade in goods and

services, technology, and flows of investment, people, and

information.

2. Countries have built economic partnerships to facilitate these

movements over many centuries.

3. But the term gained popularity after the Cold War in the early

1990s, as these cooperative arrangements shaped modern

everyday life. 

4. This guide uses the term more narrowly to refer to

international trade and some of the investment flows among

advanced economies, mostly focusing on the United States.

5. The wide-ranging effects of globalization are complex and

politically charged.
6. As with major technological advances, globalization benefits

society as a whole, while harming certain groups.

Understanding the relative costs and benefits can pave the way

for alleviating problems while sustaining the wider payoffs.

Economically, globalization involves goods, services, data,

technology, and the economic resources of capital.

7. The expansion of global markets liberalizes the economic

activities of the exchange of goods and funds. Removal of cross-

border trade barriers has made the formation of global

markets more feasible.

8. Advances in transportation, like the steam locomotive,

steamship, jet engine, and container ships, and developments

in telecommunication infrastructure, like the telegraph,

Internet, and mobile phones, have been major factors in

globalization and have generated further interdependence of

economic and cultural activities around the globe.

9. Though many scholars place the origins of

globalization in modern times, others trace its history to long

before the European Age of Discovery and voyages to the New

World, and some even to the third millennium BCE. 

10. The term globalization first appeared in the early 20th

century (supplanting an earlier French term mundialization),

developed its current meaning sometime in the second half of

the 20th century, and came into popular use in the 1990s.

11. Large-scale globalization began in the 1820s, and in the

late 19th century and early 20th century drove a rapid

expansion in the connectivity of the world's economies and

cultures.

12. In 2000, the International Monetary Fund (IMF)

identified four basic aspects of globalization: trade

and transactions, capital and investment movements, migratio

n and movement of people, and the dissemination of

knowledge. 
 13. Globalizing processes affect and are affected

by business and work organization, economics, sociocultural

resources, and the natural environment.

14. Academic literature commonly divides globalization into

three major areas:

  Economic Globalization
  Cultural Globalization
  Political Globalization.
The Benefits of Globalization?
Globalization impacts businesses in many different ways. But those
who decide to take on international expansion find several benefits,
including:
1. Access to New Cultures
 Globalization makes it easier than ever to access foreign
culture, including food, movies, music, and art.
 This free flow of people, goods, art, and information is the
reason you can have Thai food delivered to your apartment as
you listen to your favourite UK-based artist or stream a
Bollywood movie.
2. The Spread of Technology and Innovation
 Many countries around the world remain constantly
connected, so knowledge and technological advances travel
quickly.
 Because knowledge also transfers so fast, this means that
scientific advances made in Asia can be at work in the United
States in a matter of days.
3. Lower Costs for Products
  Globalization allows companies to find lower-cost ways to
produce their products.
 It also increases global competition, which drives prices down
and creates a larger variety of choices for consumers.
 Lowered costs help people in both developing and already-
developed countries live better on less money.
4. Higher Standards of Living Across the Globe
 Developing nations experience an improved standard of living
—thanks to globalization. 
 According to the World Bank, extreme poverty decreased by
35% since 1990. Further, the target of the first Millennium
Development Goal was to cut the 1990 poverty rate in half by
2015.
 This was achieved five years ahead of schedule, in 2010.
 Across the globe, nearly 1.1 billion people have moved out of
extreme poverty since that time.
5. Access to New Markets
 Businesses gain a great deal from globalization, including new
customers and diverse revenue streams.
 Companies interested in these benefits look for flexible and
innovative ways to grow their business overseas.
  International Professional Employer Organizations (PEOs)
make it easier than ever to employ workers in other countries
quickly and compliantly.
 This means that, for many companies, there is no longer the
need to establish a foreign entity to expand overseas.
6. Access to New Talent
 In addition to new markets, globalization allows companies to
find new, specialized talent that is not available in their current
market.
 For example, globalization gives companies the opportunity to
explore tech talent in booming markets such
as Berlin or Stockholm, rather than Silicon Valley.
  Again, International PEO allows companies to compliantly
employ workers overseas, without having to establish a legal
entity, making global hiring easier than ever.

The Challenges of Globalization?

 While globalization offers many benefits, it’s not without
challenges. Velocity Global’ s 2020 State of Global Expansion
Report: Technology Industry reveals some of the top
challenges that U.S. and UK tech leaders face when taking their
companies global, and leaders of other companies likely face
the same obstacles.
 Some of the hurdles companies face when going global include:
1. International Recruiting
 It’s not surprising that 30% of U.S. and UK tech leaders
cited international recruiting as their most common challenge.
 Recruiting across borders creates unknowns for HR teams.
 First, companies create a plan for how they will interview and
thoroughly vet candidates to make sure they are qualified
when thousands of miles separate them from headquarters.
 Next, companies need to know the market’s demands for
salaries and benefits to make competitive offers.
 To ensure successful hires, HR teams must factor in challenges
like time zones, cultural differences, and language barriers to
find a good fit for the company.
2. Managing Employee Immigration
 Immigration challenges cause a lot of headaches internally,
which is why 28% of U.S. and UK tech leaders agreed it was
one of their top challenges.
 Immigration laws change often, and in some countries, it is
extremely difficult to secure visas for employees that are
foreign nationals.
 The U.S., for example, is getting stricter with granting H-1B
visas, and Brexit makes immigration to the UK difficult.
 3. Incurring Tariffs and Export Fees
  Another challenge both U.S and UK tech leaders said they face
in the report is incurring tariffs and export fees—29% agreed
this is a challenge for their global businesses.
 For companies looking to sell products abroad, getting those
items overseas can be expensive, depending on the market.
4. Payroll and Compliance Challenges
 Another common global expansion obstacle is managing
overseas payroll and maintaining compliance with changing
employment and tax laws.
 This management task gets even more difficult if you’re trying
to manage operations in multiple markets.
5. Loss of Cultural Identity
 While globalization has made foreign countries easier to
access, it has also begun to meld unique societies together. The
success of certain cultures throughout the world caused other
countries to emulate them. But when cultures begin to lose
their distinctive features, we lose our global diversity.
6. Foreign Worker Exploitation
 Lower costs do benefit many consumers, but it also creates
tough competition that leads some companies to search for
cheap labour sources.
 Some western companies ship their production overseas to
countries like China and Malaysia, where lax regulations make
it easier to exploit workers.
7. Global Expansion Difficulties
 For businesses that want to go global and discover the benefits
of globalization, setting up a compliant overseas presence is
difficult.
 If companies take the traditional route of setting up an entity,
they need substantial upfront capital, sometimes up
to $20,000, and costs of $200,000 annually to maintain the
business.
 Additionally, global businesses must keep up with different
and ever-changing labour laws in new countries.
  When expanding into new countries, companies must be aware
of how to navigate new legal systems.
 Otherwise, missteps lead to impediments and severe financial
and legal consequences.
8. Immigration Challenges and Local Job Loss
 The political climates in the United States and Europe show
that there are different viewpoints on the results of
globalization.
 Many countries around the globe are tightening their
immigration rules, and it is harder for immigrants to find jobs
in new countries.
 This rise in nationalism is mainly due to anger from the
perception that foreigners fill domestic jobs or at companies
moving their operations abroad to save money on labour costs.

ENVIROMENTAL FORECASTING LIMITATIONS

 Forecasting is essentially a process of analysing the past and

present business movements and trends to obtain some idea or
clues regarding future trends and business movements.
 Forecasting is looking into the future so that we can accordingly
plan for it.
 However, forecasting is not a haywire process.
 It is a systematic approach with well thought-out, scientific
methods and procedures.
 It involves a thorough and proper analysis of data and facts with
the help of both quantitative and qualitative techniques.
Limitations of Forecasting

Along with the benefits, there are also some limitations of forecasting.
Let us take a look at a few of them,
1] Just Estimates
 The future will always be uncertain.
 Even if use the best of forecasting techniques and account for
every aspect imaginable, a forecast is still just an estimate.
 One can never predict future events with 100% success.
 So even the best-laid plans may amount to nothing.
 This will always remain one of the biggest limitations of
forecasting.

2] Based on Assumptions
 The basis of any forecasting method is assumptions,
approximations, normal conditions, etc.
 This makes these forecasts unreliable.
 So, one must always keep in mind the inherent limitations of
forecasting and be cautious in being over-reliant on them.

3] Time and Cost Factors

 The data and information required to make formal forecasts are
generally a lot.
 And the collection and tabulation of such data involve a lot of
time and money.
 The conversion of qualitative data into quantitative data is also
another factor.
 One must be careful that the time, money and effort spent
forecasting must not outweigh the actual benefits from such
forecasts.

MONETARY POLICY IN INDIA

 Monetary policy is a set of tools that a nation's central
bank has available to promote sustainable economic growth
by controlling the overall supply of money that is available to
the nation's banks, its consumers, and its businesses.
 Monetary policy is the process by which the monetary
authority of a country, generally the central bank, controls the
supply of money in the economy by its control over interest
rates in order to maintain price stability and achieve high
economic growth.
 In India, the central monetary authority is the Reserve Bank of
India (RBI).
 The Reserve Bank of India Act, 1934 (RBI Act) was amended by
the Finance Act, 2016, to provide a statutory and
institutionalised framework for a Monetary Policy Committee,
for maintaining price stability, while keeping in mind the
objective of growth.
 The Monetary Policy Committee is entrusted with the task of
fixing the benchmark policy rate (repo rate) required to
maintain inflation within the specified target level.
 As per the provisions of the RBI Act, three of the six Members
of the Monetary Policy Committee will be from the RBI and the
other three Members will be appointed by the Central
Government.
  The Government of India, in consultation with RBI, notified the
'Inflation Target' in the Gazette of India Extraordinary dated 5
August 2016 for the period beginning from the date of
publication of the notification and ending on the March 31,
2021 as 4%.
 Monetary Policy in India is developed by the Reserve
Bank of India as it is the central bank of India.

SIGNIFICANCE & BENEFITS OF ENVIRONMENTAL

ANALYSIS WITH EXAMPLE

The following is the need and importance of environmental

scanning:
1. Identification of strength:
 Strength of the business firm means capacity of the firm to gain
advantage over its competitors.
 Analysis of internal business environment helps to identify
strength of the firm.
 After identifying the strength, the firm must try to consolidate
or maximise its strength by further improvement in its existing
plans, policies and resources.
2. Identification of weakness:
 Weakness of the firm means limitations of the firm.
 Monitoring internal environment helps to identify not only the
strength but also the weakness of the firm.
 A firm may be strong in certain areas but may be weak in some
other areas.
  For further growth and expansion, the weakness should be
identified so as to correct them as soon as possible.
3. Identification of opportunities:
 Environmental analyses help to identify the opportunities in
the market.
 The firm should make every possible effort to grab the
opportunities as and when they come.
4. Identification of threat:
 Business is subject to threat from competitors and various
factors.
 Environmental analyses help them to identify threat from the
external environment.
 Early identification of threat is always beneficial as it helps to
diffuse off some threat.
5. Optimum use of resources:
 Proper environmental assessment helps to make optimum
utilisation of scare human, natural and capital resources.
 Systematic analyses of business environment help the firm to
reduce wastage and make optimum use of available resources,
without understanding the internal and external environment
resources cannot be used in an effective manner.
6. Survival and growth:
 Systematic analyses of business environment help the firm to
maximise their strength, minimise the weakness, grab the
opportunities and diffuse threats.
 This enables the firm to survive and grow in the competitive
business world.
7. To plan long-term business strategy:
 A business organisation has short term and long-term
objectives.
  Proper analyses of environmental factors help the business
firm to frame plans and policies that could help in easy
accomplishment of those organisational objectives.
 Without undertaking environmental scanning, the firm cannot
develop a strategy for business success.
8. Environmental scanning aids decision-making:
 Decision-making is a process of selecting the best alternative
from among various available alternatives.
 An environmental analysis is an extremely important tool in
understanding and decision making in all situation of the
business.
 Success of the firm depends upon the precise decision-making
ability.
 Study of environmental analyses enables the firm to select the
best option for the success and growth of the firm.
Some benefits of using an environmental analysis include:
 Forecasting the future
 Identifying threats and allowing them to develop a strategy for
response
 Helping achieve business objectives
 Forming effective strategies and marketing programs for a
business
 Improving organizational performance

CO-ORPERATE SOCIAL RESPONSIBILITY (CSR)

1) CSR is a management concept whereby companies integrate

social and environmental concerns in their business operations
and interactions with their stakeholders.
2) CSR is generally understood as being the way through which a
company achieves a balance of economic, environmental and
social imperatives (“Triple-BottomLine- Approach”), while at
the same time addressing the expectations of shareholders and
stakeholders.

3) In this sense it is important to draw a distinction between CSR,

which can be a strategic business management concept, and
charity, sponsorships or philanthropy.

4) Even though the latter can also make a valuable contribution to

poverty reduction, will directly enhance the reputation of a
company and strengthen its brand, the concept of CSR clearly
goes beyond that.

5) Promoting the CSR amongst SMEs requires approaches that fit

the respective needs and capacities of these businesses, and do
not adversely affect their economic viability.

6) UNIDO based its CSR programme on the Triple Bottom Line

(TBL) Approach, which has proven to be a successful tool for
SMEs in the developing countries to assist them in meeting
 social and environmental standards without compromising
their competitiveness.

7) The TBL approach is used as a framework for measuring and

reporting corporate performance against economic, social and
environmental performance.
8) It is an attempt to align private enterprises to the goal of
sustainable global development by providing them with a more
comprehensive set of working objectives than just profit alone.
9) The perspective taken is that for an organization to be
sustainable, it must be financially secure, minimize (or ideally
eliminate) its negative environmental impacts and act in
conformity with societal expectations.

Purpose of Corporate Social Responsibility

1. Boost Employee Engagement and Morale

 A company that is socially responsible can increase the
engagement of its workforce.
 Increasingly so, workers want to be part of something bigger
than just their job.
 So rather than go into the office, work, go home, and repeat,
they are part of something more meaningful.
 Some firms have dedicated CSR teams that focus on events to
help charities.
 For instance, sports or sponsored events may be organised to
raise money.
  The aim is to get employees involved and feel like they are also
contributing to society, but with the support of their employer.

2. Betterment of Society
 Much of the CSR that is conducted is through charities.
Whether that is to assist with manual labour, or helping fund
them. Charities such as Cancer Research, the Salvation Army,
or the Red Cross foundation, all benefit from CSR in some
shape or form.
 In turn, such charities receive the funding they need to help
fight against cancer, help the homeless, and contribute to
disaster relief.
 We also have some businesses that are actively donating to
good causes.
 For example, Amazon donated $3 million to the Canter for
Science and Innovation at Seattle University.
 The aim was to increase access to STEM and computer science
education to women and other minorities.

3. Brand Image
 Corporate Social Responsibility can play an important role in a
brands image and reputation.
 For instance, a study by Edelman, and Young & Rubicam,
found that 87% of consumers from the UK expect firms to
consider their societal impact as much as their own, while
more than 70% of people make a point of buying from
companies with views similar to their own.
 So, it is not only morally beneficial, but it can also help the
company’s bottom line.
 If customers are more likely to shop at ethical companies, it
means more business for them.
  So even though there are greater costs, it can prove to be a
win-win through higher demand.

INDUSTRIAL POLICY

1) Industrial policy is a document that sets the tone in

implementing, promoting the regulatory roles of the
government. 
2) It was an effort to expand the industrialization and uplift the
economy to its deserved heights.
3) It signified the involvement of the Indian government in the
development of the industrial sector.
4) Industrial Policy of 1948

5) The first industrial policy after independence was announced on

6th April 1948.
6) The main goal of this policy was to accelerate the industrial
development by introducing a mixed economy where the
private and public sector was accepted as important in the
development of the economy.
7) An industrial policy (IP) or industrial strategy of a country is
its official strategic effort to encourage the development and
growth of all or part of the economy, often focused on all or
part of the manufacturing sector. 
 8) The government takes measures "aimed at improving the
competitiveness and capabilities of domestic firms and
promoting structural transformation."
9) A country's infrastructure (including transportation,
telecommunications and energy industry) is a major enabler of
the wider economy and so often has a key role in IP.
10) Industrial policies are interventionist measures typical
of mixed economy countries.
11) Many types of industrial policies contain common elements
with other types of interventionist practices such as trade
policy.
12) Industrial policy is usually seen as separate from
broader macroeconomic policies, such as tightening credit and
taxing capital gains. 
13) It saw the Indian economy in socialistic patterns.
14) The large industries were classified into four categories:

Industries with exclusive State Monopoly/Strategic industries: 

  It included industries engaged in the activity of
atomic energy, railways and arms, and ammunition.
Industries with Government control: 
 This category included industries of national importance.
  18 such categories were mentioned in this category such as
fertilizers, heavy machinery, defense equipment, heavy
chemicals, etc.
Industries with Mixed sector: 
 This category included industries that were allowed to operate
independently in the private or public sector.
 The government was allowed to review the situation to acquire
any existing private undertaking.
Industry in the Private sector: 
 Industries which were not mentioned in the above categories
fall into this category.
 High importance was granted to small businesses and small
industries, leading to the utilization of local resources and
creating employment.

ECONOMIC ROLE OF GOVERNMENT

Role

1. Government: Regulator of Business:

 The entire regulatory legislation and policies stand covered

under this segment.
 On the one hand, there is a very large indirect area of
government control over the functioning of private sector
business through budgetary and monetary policies.
  But against this there is also a fast-expanding area of direct
administrative or physical controls through which the
government seeks to ensure that private investment and
production in industry and the use of scarce resources conform
to government’s basic socio-economic objectives.
 They have become necessary tools in a system which seeks to
avoid total nationalisation of resources.
 Government’s regulatory functions with regard to trade,
business and industry aim at laying down the limits for the
private enterprise.
 The regulatory functions of the Government include
(i) restraints on private activities
(ii) control of monopoly and big business
(iii) development of public enterprises as an alternative to private
enterprises to ensure competitive dualism
(iv) maintenance of a proper socio-economic infrastructure.

2. Government: Promoter of Business:

 The promotional role of the government in relation to

industries can be seen as providing finance to industry, in
granting various incentives and in creating infrastructure
facilities for industrial growth and investment.
  For example, our government has identified certain backward
areas as ‘No Industry Districts’.
 To promote development of such areas, Government provides
subsidies and tax holiday to attract investment in backward
areas.
 In this way the government will help the process of balanced
development and thereby remove regional disparities.
 The government is assisting the development of small-scale
industries.
 The District Industrial Canters are assisting the development of
small industries.
 The government is actively helping the industrial development
of the country by providing finance to them through the
development banks.

3. Government as an Entrepreneur:

 The impressive growth of the public sector in India from a

small beginning bears testimony to the role of the government
as an entrepreneur.
 Private investors are solely guided by private profit motive and
hence they are not interested in developing products of
 common public use and social services which yield relatively
lower returns.
 But as a “social entrepreneur” the government does not
hesitate to take them up.

4. Government as the Planner:

 In its role as a planner, the government indicates various

priorities in the Five-Year Plans and also the sectoral allocation
of resources.
 Mixed economies are democratically planned economies.
 The government tries to manage the economy and its business
activities through the exercise of planning.
 Planning is the most important activity in a modern mixed
economy.
 The idea of economic planning can be traced to three different
sources: Rationalism, Socialism and Nationalism.
 Economists advocate a planned economy on the ground that it
can be a rational economy which can utilize the available
resources in an optimal manner.

ECONOMIC SYSTEM, FEATURES

  An economic system is a means by which societies or
governments organize and distribute available resources,
services, and goods across a geographic region or country.
 Economic systems regulate the factors of production, including
land, capital, labour, and physical resources.
 An economic system encompasses many institutions, agencies,
entities, decision-making processes, and patterns of
consumption that comprise the economic structure of a given
community.
 Functions of Economic System:

The basic function of every economic system is to provide solution

to the fundamental problems faced by every community.

The main functions of the economic system are:

(a) To bring about a balance between supply and effective demand
for goods and services in an optimal manner as far as possible;

(b) To determine what goods and services are to be produced and in

what quantities (food-grains or defence goods, fertiliser or clothing,

(c) To allocate scarce resources among the industries producing

goods and services (i.e., allocation of scarce iron ores for
automobiles or among washing machines or steel utensils);

(d) To determine the best possible productive methods for the full
utilisation of the resources of the society (e.g., coal to be mined by
human labour or by machinery, electricity from thermal power plant
or hydro-electric power plant, labour-intensive or capital-intensive
method for farming, etc.); and

(e) To distribute the products of agriculture and industry among

members of the community (i.e., distribution among the few rich or
among many poor).
EXIM POLICY

Meaning:
1) Exim Policy or Foreign Trade Policy is a set of guidelines, terms
and instructions, established by the Directorate General of
Foreign Trade in/for matters related to the import and export
of goods in/from India’
2) The EXIM Policy of India contains several policy measures and
related decisions taken by the government (central) in the
sphere of imports and exports to/from the country.
3) In addition, it also describes the various export promotion
measures, policies and procedures related thereto.
4) The Foreign Trade Policy is prepared and announced by the
Central Government (Ministry of Commerce) of the country.
5) India's Export Import Policy also known as Foreign Trade
Policy, in general, aims at developing export potential,
improving export performance, encouraging foreign trade and
creating favorable balance of payments position.

6) The Directorate General of Foreign Trade is the chief governing

body for the matters pertaining to such a policy.
7) In addition, the policy is steered according to the regulations
stated in the Foreign Trade Development and Regulation Act.
 8) The current, Foreign Trade Act has replaced the earlier law in
this regard, known as the imports and Exports (Control) Act
1947.
2. History of EXIM Policy in India

1) Whilst the trade policies during 1950s and 1960s were

designed to lay emphasis on self-reliance and self-sufficiency of
the country; the policies during (and post) 1970s were driven
by the objectives of export led growth and increased efficiency
and competitiveness.
2) In the year 1962, the Government of India appointed a special
EXIM Committee to review the previous export import policies
of the Government.
3) Later, Mr. V. P. Singh, the then Commerce Minister announced
the Exim Policy on the 12th of April, 1985.
4) Initially, the EXIM Policy was introduced for the period of three
years with main objective to boost the export business in India.
5) The trade policy, however during this period was of a
restrictive sort. In this context, the year 1991 is considered as a
‘watershed’ as far as the trade sector of the country is
concerned.
6) It was in/during this year that the country evidenced massive
trade liberalization measures and departed from the prevalent
protectionist trade policies.

FISCAL POLICY

1) Fiscal policy refers to the use of government spending and tax

policies to influence economic conditions,
especially macroeconomic conditions, including aggregate
demand for goods and services, employment, inflation, and
economic growth.
2) Fiscal policy is often contrasted with monetary policy, which is
enacted by central bankers and not elected government
officials.
3) Fiscal policy is largely based on the ideas of British
economist John Maynard Keynes (1883-1946), who argued
that economic recessions are due to a deficiency in the
consumer spending and business investment components of
aggregate demand.
4) Keynes believed that governments could stabilize the business
cycle and regulate economic output by adjusting spending and
tax policies to make up for the shortfalls of the private sector.
5) His theories were developed in response to the Great
Depression, which defied classical economics' assumptions
that economic swings were self-correcting. Keynes' ideas were
highly influential and led to the New Deal in the U.S., which
involved massive spending on public works projects and social
welfare programs.
 6) In Keynesian economics, aggregate demand or spending is
what drives the performance and growth of the economy. 

7) Aggregate demand is made up of consumer spending, business

investment spending, net government spending, and net
exports.
8) According to Keynesian economists, the private-sector
components of aggregate demand are too variable and too
dependent on psychological and emotional factors to maintain
sustained growth in the economy.

WORLD BANK

1. The World Bank is an international organization dedicated

to providing financing, advice, and research to developing
nations to aid their economic advancement.
2. The bank predominantly acts as an organization that
attempts to fight poverty by offering developmental
assistance to middle- and low-income countries.
3. The World Bank is an international organization that
provides financing, advice, and research to developing
nations to help advance their economies.
4. The World Bank and International Monetary Fund (IMF)—
founded simultaneously under the Bretton Woods
Agreement—both seek to serve international governments.
5. The World Bank has expanded to become known as the
World Bank Group with five cooperative organizations,
sometimes known as the World Banks.
6. The World Bank Group offers a multitude of proprietary
financial assistance, products, and solutions for
 international governments, as well as a range of research-
based thought leadership for the global economy at large.
7. The World Bank's Human Capital Project seeks to help
nations invest in and develop their human capital to
produce a better society and economy.
8. The World Bank is a provider of financial and technical
assistance to individual countries around the globe.
9. The bank considers itself a unique financial institution that
sets up partnerships to reduce poverty and support
economic development.
10. The World Bank supplies qualifying governments with
low-interest loans, zero-interest credits, and grants, all to
support the development of individual economies.
11. Debt borrowings and cash infusions help with global
education, healthcare, public administration, infrastructure,
and private-sector development.
12. The World Bank also shares information with various
entities through policy advice, research and analysis, and
technical assistance.
13. It offers advice and training for both the public and
private sectors.

SWOT, PESTEL ANALYSIS (VVV IMP)

1. SWOT Analysis is one of the tools to undertake the SITUATION

ANALYSIS.

2. Any strategy formulation exercise (evolving a corporation’s

mission, objectives, strategies and policies) starts with the
situation analysis.
3. The Situation Analysis involves assessing the strategic fit
between external opportunities and internal strengths as also
external threats and internal weaknesses.

4. SWOT analysis is a strategic planning method used to evaluate

the Strengths, Weaknesses, Opportunities, and Threats
involved in a project or in a business venture.

5. It involves specifying the objective of the business venture or

project and identifying the internal and external factors that
are favourable and unfavourable to achieving that objective.

6. A SWOT analysis must first start with defining a desired end

state or objective. A SWOT analysis may be incorporated into
the strategic planning model.

7. Strengths: attributes of the person or company those are

helpful to achieving the objective(s).

8. Weaknesses: attributes of the person or company those are

harmful to achieving the objective(s).

9. Opportunities: external conditions those are helpful to

achieving the objective(s).
10. Threats: external conditions which could do damage to
the objective(s).

11. Internal and external factors

12. The aim of any SWOT analysis is to identify the key

internal and external factors that are important to achieving
the objective. These come from within the company's unique
value chain.

13. SWOT analysis groups key pieces of information into two

main categories:

14. Internal factors – The strengths and weaknesses internal

to the organization.

15. External factors – The opportunities and threats

presented by the external environment to the organization -
Use a PEST or PESTLE analysis to help identify factors
16. SWOT analysis is just one method of categorization and
has its own weaknesses. For example, it may tend to persuade
companies to compile lists rather than think about what is
actually important in achieving objectives. It also presents the
resulting lists uncritically and without clear prioritization so
that, for example, weak opportunities may appear to balance
strong threats.
17. It is prudent not to eliminate too quickly any candidate
SWOT entry. The importance of individual SWOTs will be
revealed by the value of the strategies it generates. A SWOT
item that produces valuable strategies is important. A SWOT
item that generates no strategies is not important

PEST Analysis

18. PEST analysis stands for "Political, Economic, Social, and

Technological analysis" and describes a framework of macro-
environmental factors used in the environmental scanning
component of strategic management.

19. Some analysts added Legal and Environmental factors

and expanded it to PESTEL or PESTLE, which is popular in the
UK. The model has recently been further extended to STEEPLE
and STEEPLED, adding education and demographic factors. It
is a part of the external analysis when conducting a strategic
analysis or doing market research, and gives an overview of
the different macro environmental factors that the company
has to take into consideration.

20. It is a useful strategic tool for understanding market

growth or decline, business position, potential and direction
for operations.

21. The growing importance of environmental or ecological

factors in the first decade of the 21st century have given rise
 to green business and encouraged wide spread use of an
updated version of the PEST framework.

22. STEER analysis systematically considers Socio-cultural,

Technological, Economic, Ecological, and Regulatory factors.

The Model's Factors

23. Political factors are how and to what degree a

government intervenes in the economy. Specifically, political
factors include areas such as tax policy, labour law,
environmental law, trade restrictions, tariffs, and political
stability. Furthermore, governments have great influence on
the health, education, and infrastructure of a nation.

24. Economic factors include economic growth, interest

rates, exchange rates and the inflation rate. These factors have
major impacts on how businesses operate and make
decisions. For example, interest rates affect a firm's cost of
capital and therefore to what extent a business grows and
expands. Exchange rates affect the costs of exporting goods
and the supply and price of imported goods in an economy

25. Social factors include the cultural aspects and include

health consciousness, population growth rate, age
distribution, career attitudes and emphasis on safety. Trends
in social factors affect the demand for a company's products
and how that company operates. For example, an aging
 population may imply a smaller and less-willing workforce
(thus increasing the cost of labour).

26. Technological factors include ecological and

environmental aspects, such as R&D activity, automation,
technology incentives and the rate of technological change.
They can determine barriers to entry, minimum efficient
production level and influence outsourcing decisions.
Furthermore, technological shifts can affect costs, quality, and
lead to innovation.

27. Environmental factors include weather, climate, and

climate change, which may especially affect industries like
tourism, farming, and insurance. Furthermore, growing
awareness to climate change is affecting how companies
operate and the products they offer (both creating new
markets and diminishing or destroying existing ones).

28. Legal factors include discrimination law, consumer law,

antitrust law, employment law, and health and safety law.
These factors can affect how a company operates, its costs,
and the demand for its products.

ENVIRONMENTAL SCANNING

 Environmental scanning meaning is the gathering of information

from an organizations internal and external environment, and
 careful monitoring of these environments to identify future threats
and opportunities.
 It is the analyses of all factors that may affect the future of the
organization.

Importance of Environmental Scanning

1] SWOT Analysis
As we saw previously in the environmental scanning meaning, it is a
complex process.

The close study of the internal and external environment of an

organization will reveal some very valuable information, i.e., the
strengths, weaknesses, opportunities, and threats of a company.

Strength:
 After analysis of the internal environment of a company, we
will be able to identify the strengths that give the company a
competitive advantage.
 The entrepreneur can use this information to maximize these
strengths and earn more profits.
Weakness:
 Study of the internal environment also point out the
weaknesses of the company.
 For the growth and stability of the company, these identified
weaknesses must be corrected without delay.
Opportunity:
 Analysis of the external environment helps with the
identification of possible opportunities.
  The entrepreneur can prepare to capitalize on these.
Threats:
 Analysis of the external environment will also help in the
identification of any business threats from competitors or any
other factors.
 The company can come up with a strategy to diffuse such
threats or minimize its impact.
2] Best Use of Resources
 Environmental scanning helps us conduct a thorough analysis
and hence leads to the optimum utilization of resources for the
business.
 Whether it is capital resources, human resources or other
factors of production, their best use and utilization is very
important for any business.
 Environmental scanning will help us avoid any wastages and
allow for the most effective and economical use of these
resources.

3] Survival and Growth of the Business

 It is a very competitive world and for any business to survive
and thrive it is a difficult task.
 But if the business employs all the techniques of environmental
scanning it can gain a significant advantage.
 It will allow the firm to prepare for future threats and
opportunities while at the same time eliminating their
weaknesses and improving on their strengths.

4] Planning for Long Term

 A business must have a plan for both short term and long term.
 The planning of long-term objectives can only occur after proper
analysis and environmental scanning meaning.
  This will help the entrepreneur plan the necessary business
strategy.

5] Helps in Decision Making

 Decision making is the choice of the best alternative done by
management.
 Environmental scanning allows the firm to make the best
decision keeping in mind the success and growth of the
business.
 They point out all the threats and weaknesses.
 And they also identify the strengths of the firm.

MEANING OF ENVIRONMENTAL FORECASTING

 Forecasting is a way of estimating the future events that

have a major impact on the enterprise.

 Environmental forecasting is a technique whereby

managers attempt to predict the future characteristics

of the organizational environment and hence make

decisions today that will help the firm deal with the

environment of tomorrow.
  Forecasting involves the use of statistical and non-

statistical, or qualitative, techniques.

 “Estimating the intensity, nature and timing of the

external forces that may affect the performance of a

firm, disrupt its plans, or force a change in its

strategies.”

TYPES OF FORECASTING:

1. Economic Forecast

2. Social Forecast

3. Political Forecast

4. Technological Forecast

Economic forecast

 As a economic environment is a very critical

determinant of business prospects, economic forecasts

is very important.
  The Economic factors often considered include general

economic conditions, GDP growth rate, per capita

income, structural changes in GDP, Investment and

output trends in different sectors and

subsectors/industries, price trends, trade and BOP

trends etc.

Social forecast

 Social trends have significant implications for business

strategy.

 It is, therefore, very essential to forecast the possible

changes in the relevant social variables.

 Important factors include:

1. Population growth/decline

2. Ethnic composition

3. Life Styles
 4. Social attitudes

5. Income levels

Political forecast

 Political forecast has an important part in envisioning

properly the future scenario of business. Relevant

factors include:

1. Changes in the relative power of Political party.

2. Political alliances and political ideologies etc.

3.  Political forecasts also cover industrial policy,

commercial policy, and Fiscal policy, International

political developments are also important.

Technological forecast

 Innovation and other technological developments can

drastically alter the business environment.

 Technological forecasts, therefore, assumes great

significance.

 It encompasses not only technological innovations

but also the pace and extent of diffusion and

penetration of technologies and their implications.