BUSINESS ENVIRONMENT IN AN ECONOMY

HAS THREE BASIC PROPOSITIONS:

 BUSINESS IS AN ECONOMIC ACTIVITY

 BUSINESS FIRM IS AN ECONOMIC UNIT

 BUSINESS DECISION-MAKING IS AN
ECONOMIC PROCESS
 BUSINESS ENVIRONMENT

ECO. NON- ECO.

ENVT. ENVT.
MACRO- ENVIRONMENT OF BUSINESS
ECO. ENVT

NATIONAL GLOBAL

BUSINESS

NATURAL
POLITICAL

TECHNOLOGICAL
SOCIO-
CULTURAL
LEGAL
DEMOGRAPHIC

NON-ECO. ENVT
 MICRO- ENVIRONMENT OF BUSINESS

INPUT SUPPLIERS

WORKERS &
THEIR UNIONS PUBLIC

BUSINESS

CUSTOMER COMPETITORS

MARKET INTERMEDIARIES
 MICRO/MACRO
INTERNAL BUSINESS EXTERNAL
ENVT. ENVT.

• SOCIAL ENVT.

• POLITICAL ENVT.

• LEGAL ENVT.
• GLOBAL ENVT.
BUSINESS SECTOR HAS TO DEAL WITH:

 GOVERNMENT

 CAPITAL MARKET

 HOUSEHOLD SECTOR

IT DEPENDS UPON THE TYPE OF GOVT. IN A

PARTICULAR ECONOMY
 
THE BASIC PROBLEM OF EVERY ECONOMY IS:
 
Contd..
ALLOCATION OF RESOURCES & SUBSEQUENT
PRODUCTION i.e.
 WHAT TO PRODUCE
 HOW TO PRODUCE
 WHOM TO PRODUCE
 WHEN TO PRODUCE

DUE TO OPEN UP OF THE ECONOMY:

• ENGAGED IN INT. TRADE AND COOPERATION

• TECHNICAL REVOLUTION

• ROLE OF MNC
• ECOLOGICAL BALANCE
ROLE OF THE GOVT. TOWARDS SOCIAL SECTOR

 IS IT GOVT. ONLY? OR

 WHO COULD BE THE OTHER PLAYERS:

•PRIVATE SECTOR

• NGO’S
• SOCIAL ACTIVIST/ORGANISATIONS

• INTERNATIONAL BODIES

THEREFORE, MANAGER SHOULD KNOW ABOUT THE

MAGNITUDE AND DIRECTION OF CHANGES AT NATIONAL
AS WELL AS AT INTERNATIONAL BUSINESS
ENVIRONMENT.
WHAT ARE THE CRITICAL ELEMENTS OF ECO.
ENVT. OF BUSINESS

• INSTITUTIONAL FRAMEWORK:

 RELATIVE ROLES & RESPONSIBILITIES OF

THE
 PRIVATE SECTOR
 PUBLIC SECTOR
 GOVT.

• PHYSICAL ANATOMY OF NATIONAL ECONOMY:

Contd…
 LEVEL OF PCI INDICATE THE LEVEL OF
GROWTH & DEVELOPMENT

 AVAILABLE NATURAL, HUMAN & MATERIAL

RESOURCES OF A COUNTRY.

 OCCUPATIONAL DISTRIBUTION OF LABOUR

FORCE, PATTERN OF FOREIGN TRADE,
STRUCTURE OF SAVINGS, INVESTMENT &
CAPITAL FORMATION, PATTERN OF INCOME
DISTRIBUTION & THE DEGREE OF
URBANISATION.
• FUNCTIONING OF THE ECONOMY:

 NATURE OF MONETARY TRANSACTIONS

AFFECT THE PRICE LEVEL-WHICH
INFLUENCE THE REAL VALUE OF ALL
ECONOMIC VARIABLES.

 ROLE OF CENTRALISED PLANNING,

ADMINISERED PRICE MECHANISM & FREE
MARKET PRICING & CENTRAL BANKING.

• ECONOMIC PLANNING & PROGRAMMES

• ECONOMIC POLICY STATEMENTS AND
LEGISLATIONS:

 POLICY STATEMENTS AFFECTING BOTH

INDUSTRY AND AGRICULTURE

 RBI WORKS THROUGH THE INSTRUMENT OF

MONEY AND CREDIT POLICIES

 GOVT. CONTROLS THROUGH FISCAL-CUM-

BUDGETARY POLICIES.

• FLUCTUATIONS & TRENDS IN MACRO-

ECONOMIC VARIABLES:
• ECONOMIC PROBLEMS & PROSPECTS:
 INFLATION/RECESSON
 UNEMPLOYMENT

NON-ECONOMIC ENVT. OF BUSINESS

 POLITICAL ENVT. OF BUSINESS:

• GOVT. IS A POLITICAL INSTITUTION:- ENACTS &

EXECUTES SOCIAL POLICIES IN ORDER TO
MAXIMISE SOCIAL BENEFITS & MINIMISE
SOCIAL COSTS.

• IN THE PRESENT GLOBAL BUSINESS SCENARIO,

GOVT. POLICIES, PROGRAMMES & LEGISATIONS
AFFECT THE BUSINESS MOST.
 CRITICAL ELEMENTS:

• FROM & STRUCUTURE OF THE GOVT.

• STRENGTH OF THE OPPOSITON IN LEGISLATURE

• ROLE & RESPONSIBILITY OF THE BUREAUCRACY

• DIRECTION & SPEED OF THE GOVT.

• POLICIES & PROGRAMMES.

• SOCIO-ECONOMIC LEGISLATIONS

• POLITICO-LEGAL INSTITUTIONS
 SOCIO – CULTURAL ENVT. OF BUSINESS:

• BUSINESS MUST CHARGE SOCIAL

RESPONSIBILITY, SOCIAL OBLIGATION &
SOCIAL COMMITMENT

 CRITICAL ELEMENTS:

• SOCIAL INSTITUTIONS & SYSTEMS: CASTE

SYSTEM, JOINT FAMILY SYSTEM, CHILD
MARRIAGE ETC.
 EVOLVED THROUGH HISTORY, CULTURE &
HERITAGE.
 
• SOCIAL VALUES & MOVES: WHICH HAVE GONE FOR
RAPID CHANGES

 CUSTOMS, TRADITIONS & CONVENTIONS ARE NOT

RIGID ANYMORE.

 VIEWS TOWARDS AUTHORITY, RESPONSIBILITY &

DELEGATION OF POWER.

 VIEWS TOWARDS ACHIEVEMENT & WORK

 VIEWS TOWARDS OWNERSHIP & MANAGEMENT

THEREFORE, THERE IS A NEED FOR BUSINESS
EDUCATION & ITS IMPACT ON BUSIENSS ETHICS,
BUSIENSS MORALITY & ORG. CULTURE.
 
 SOCIAL RESPONSIBILITY OF THE GOVT.

 SOCIAL GROUPS & SOCIAL MOVEMENTS:

SHOULD CREATE BUSINESS CLIMATE

THROUGH SOCIAL MOVEMENTS & SOCIAL
POLICY FORMULATLION ON SUBJECTS LIKE:
 
 SCIENCE & TECHNOLOGY
 ECOLOGY & FORESTRY
 FAMILY PLANNING ETC
 SOCIAL PROBLEMS & PROSPECTS:

 AS SOCIETY MOVES FROM ‘PRE-INDUSTRIAL’ TO ‘POST

INDUSTRIAL’ STAGES OF DEVELOPMENT IT MAY
EXPERIENCE:-

 GROWING UNEMPLOYMENT & POVERTY

 POOR HOUSING & SANITATION

 PRESSURE ON INFRASTRUCTURE

 URBAN CONGESTION, POLLUTION & INCREASING

INCIDENCE OF ANTI-SOCIAL ACTIVITIES.
WHAT IS NEEDED?

SOCIAL COST-BENEFIT ANALYSIS OF

INDUSTRIAL DEVELOPMENT.
 
ECONOMIC ROLES OF THE GOVERNMENT:
• AS A REGULATOR
•AS PROMOTOR TO BUSINESS
•AS A GOOD ENTREPRENEUR &
•A VERY EFFECTIVE PLANNER