Project and Finance Management– 1MEHS409

Unit I: Business Environment

Dr. L. Y. Waghmode

Professor, Department of Mechanical Engineering

Annasaheb Dange College of Engineering and Technology,

Ashta
Introduction

• Understanding business environment is very important for any organization because the
nature of business environment is highly dynamic and complex.
• The environment in which a business operates is full of opportunities as well as threats.
• An organization formulates its business strategies in such a way that it is able to capitalize on
the available opportunities and protect itself from the threats which the environment may be
posing.
• The economic, social, political, technological and other forces which operate outside a
business enterprise are part of its environment.
• So also, the individual consumers or competing enterprises as well as the governments,
consumer groups, competitors, courts, media and other institutions working outside an
enterprise constitute its environment.
• The important point is that these individuals, institutions and forces are likely to influence the
performance of a business enterprise although they happen to exist outside its boundaries.
Introduction

Business Environment Definition

The term “Business environment " is the sum of all conditions, events, and influences that surround
and affect business activities and growth.
• The term “Business environment” represents the sum of all the individuals, institutions,
competing organizations, government, courts, media, investors, and other factors outside the
power of the business organizations but affects the business performance.
• Hence, changes in government economic policies, rapid changes in technology, changes in
consumer tastes and preferences, increasing market competition, etc. are outside the business
organizations' power but affect the business performance immensely.

The word ‘business environment’ indicates the aggregate total of all people, organizations and
other forces that are outside the power of industry but that may affect its production. Therefore,
the financial, cultural, governmental, technological and different forces which work outside an
enterprise are part of its environment.
Introduction
Examples:
 An increase in taxes by the government makes everything expensive in the market;
 Technology changes may make the existing product obsolete, political uncertainty creates fear
in the mind of investors,
 Increase in competition in the market due to competitors may affect business profit, and
 Changing in demand and preferences may increase the need for a new product and decrease
the demand for old product.
 Changes in fashions and tastes of consumers may shift demand in the market from existing
products to new ones.
 Political uncertainty may create fear in the minds of investors.

Good knowledge of the environment by business managers allows them not only to recognize and
assess but also to respond to the forces outside to their enterprises.
Importance of Business Environment

1. It Helps in Identifying Opportunities and Making First Mover Advantage

The environment provides numerous opportunities, and it is necessary to identify the opportunities to
improve the performance of a business.
Early identification gives an opportunity to an enterprise be the first to identify opportunity instead of losing
them to competitors. 
Example: ‘Airtel’ identified the need for fast internet and took first-mover advantage by providing 4G speed
to its users followed by Vodafone and Idea.
Asian paints lost market share to Nerolac because it failed to match its technology.

2. It Helps the Firm Identify Threats and Early Warning Signals

The business environment helps in understanding the threats which are likely to happen in the future.
Environmental awareness can help managers identify various threats on time and serve as an early
warning signal. 
Example: Patanjali products have become a warning signal to the rest of the FMCG.
Similarly, if an Indian firm finds that a foreign multinational is entering the Indian market with new
substitutes; it needs to prepare accordingly.
Chinese mobile phones have become a threat for Indian mobile phone manufacturers.
Importance of Business Environment
3. It Helps in Tapping Useful Resources
 Business and industry avail the resources (inputs) from the environment and convert them into usable
products (outputs) and provide to society.
 The environment provides various inputs (resources) the like finance, machines, raw materials, power
and water, labor, etc.
 The business enterprise provides outputs such as goods and services to the customers, payment of
taxes to the government, to investors and so on.
Example: With the demand for the latest technology, manufacturers will tap the resources from the
environment to manufacture LED TVs and Smart TVs rather than collecting resources for color or Black &
White TVs.20

4. It Helps in Coping With Rapid Changes

 The business environment is changing very rapidly, and the industry is getting affected by changing
market conditions.
 Turbulent market environment, less brand loyalty, divisions of markets, changes in fashions, more
demanding customers, and global competition are some examples of changing the business
environment.
Example: Jack Ma started Alibaba as he could see the potential of interest in E-Commerce.
Importance of Business Environment

5. It Helps in Assisting in Planning and Policy Formulation

 The business environment brings both threats and opportunities to a business.
 Awareness of business environment helps in deciding future planning or decision making.
Example: Multiple entries of Chinese phones like VIVO, Gionee, OPPO, etc. have posed a threat to local
players like Micromax, Karbonn, Lava etc. to think afresh how to deal with the situation.

6. It Helps in Improving Performance

 Environmental studies reveal that the success of any enterprise is closely bound with the changes in the
environment.
 The enterprises which monitor and adopt suitable business practices not only improve their
performance but become leaders in the industry also.
Example: Apple has been successful in maintaining its market share due to its proper understanding of the
environment and making suitable innovations in its products.
Components of Business Environment

Internal - It combines the factors that exist within the company. These are –
• Human resources
• Value system
• Vision and mission
• Labor union
• Corporate culture

External - An external Environment includes those outside factors that exercise an influence on
a business’s operations. It is further classified into two segments.
• Macro - Socio-cultural, political, legal, and global factors fall into this category.
• Micro - This environment has a direct and immediate impact on a business. It consists of
customers, investors, suppliers, etc. 
Features of Business Environment

1. The business environment is the sum of all external factors that affect its growth.
2. The business environment includes both general and specific forces.
Specific forces include investors, customers, competitors, and suppliers.
These factors affect individual enterprises directly and immediately in their day-to-day
working.
General forces include social, political, legal, and technological conditions.
The general forces affect the business environment individually.
3. The business environment is dynamic.
4. The business environment is highly uncertain.
5. The business environment is a relative concept as it differs from country to country and even
region to region.
Dimensions of Business Environment

The dimension of the business environment refers to all the factors, that constitute direct or indirect
influence over business activities. Dimensions of the business environment involve economic, social, legal,
technological and political circumstances.

1. Social Environment 
It implies the tradition, culture, customs, and values of a society in which the business exists. 
 Tradition: In India, festivals like Diwali, Christmas, and Holi provide a financial opportunity for several
market segments like sweet manufacturers, gifting products suppliers, etc. 

 Value: A company that follows long-held values like social justice, freedom, equal opportunities, gender
equality, etc. excels in that given society.

 Recurrent Trends: It refers to development or general changes in a society like consumption habits,
fitness awareness, literacy rate, etc. which influence a business. For example, the demand for organic
vegetables and gluten-free food is increasing; therefore, companies that manufacture food items keep
this in mind to attract more crowds. 
Dimensions of Business Environment

2. Legal Environment 
 It includes the laws, rules, regulations, and acts passed by the government. A company has to operate
by abiding by the rules and regulations of laws like the Consumer Protection Act 1986, Companies Act
1956, etc. A proper understanding of these laws assists in the smooth operations of a company. 
Example: A cigarette-selling company compulsorily has to put the slogan “smoking is injurious to health” on
every packaging.   

3. Economic Environment 
It involves market conditions, consumer needs, interest rate, inflation rate, economic policies, etc. 
• Interest Rate - For example, interest rates of fixed-income instruments prevalent in an economic
environment impact the interest rate it will offer on its debentures.
• Inflation Rate - A rise in the inflation rate leads to a price hike; hence, it limits businesses. 
• Customer’s Income - If the income of customers increases, the demand for goods and services will rise
too. 
• Economic Policies - Policies like corporate tax rate, export duty, and import duty influence a business.
Dimensions of Business Environment

4. Political Environment 
It consists of forces like the government's attitudes towards businesses, ease-of-doing-business policies, the
stability of the governing body, and peace within the country. All of these factors are extremely crucial for a
company to sustain itself.  If the central and local government sanctions, policies, or acts are in favour of
businesses, the nation's overall economy strengthens due to increasing employment, productivity, and
import and export of various products. 
Example - A pro-business government will make foreign investments more attractive in that country.   

5. Technological Environment
• It comprises the knowledge of the latest technological advancements and scientific innovations to
improve the quality and relevance of goods and services. 
• A company that regularly keeps track of these news can mould its business strategies accordingly.
Example: A Watch Company that sells smart watches and traditional watches will prosper as smart watches
are trendy recently. 
Dimensions of Business Environment
Example:
(I) The Court Passed an Order That All Schools Must Have Water Purifier for the School Children.
(II) Society, in general, is More Concerned About the Quality of Life.
(III) Innovative Techniques Are Being Developed to Manufacture Water Purifier at Competitive Rates.
(IV) Incomes Are Rising and Children at Home Are Also Drinking Purified Water.
(V) the Government is Also Showing Positive Attitude Towards the Water Purifier Business.
Identify the Different Dimensions of Business Environment by Quoting From the Above Details.
Dimensions of Business Environment
(I) The Court Passed an Order to Ban Polythene Bags as These Bags Are Creating Many Environmental Problems
Which Affect the Life of People in General.
(II) the Society, in General, is More Concerned About the Quality of Life.
(III) the Government Decided to Give Subsidy to Jute Industry to Promote This Business.
(IV) Innovative Techniques Are Being Developed to Manufacture Jute Bags at Low Rates.
(V) Incomes Are Rising and People Can Afford to Buy These Bags.
Identify the Different Dimensions of Business Environment by Quoting the Lines From the Above Particulars.
Dimensions of Business Environment
Q.2 Mr. Manmohan owns an electronic shop in a small city. He happened to attend a seminar on impact of globalization on
commerce and trade. He was surprised to see how technology has brought the people so close that has increased the
scope of doing business at a large scale. He was excited to apply the technology in his business.
(a) which dimension of business environment is referred to here? Explain briefly.
(b) what more should Manmohan do to expand his business? (suggest any two)
External Environment
Introduction
• External environment factors are elements that exist outside of a company's internal environment that
can affect a company's operations.
• These outside forces can help the business or present challenges to its current processes.
• Managers often keep track of external environment factors so they can recognize and resolve the issues
the factors cause and make appropriate changes.

Importance
• External environment factors are important because they can cause direct and indirect effects on
business operations, personnel and revenue.
• The external environment of a company changes constantly in ways beyond the company's control,
but executives and managers can track these changes and minimize their consequences.
• Choosing to monitor the dynamic nature of external environment factors allows businesses to protect
themselves against predictable events and mitigate the effects of unexpected changes.
External Environment
External Environment Factors
1. Technological factors
As technology continues to advance, companies can benefit from these breakthroughs or face challenges in competing
with them. For example, a company that manufactures GPS devices for personal cars may experience a decline in
business because of the integration of GPS on mobile devices, but they can confront these challenges by developing new
products.
2. Economic factors
The state of the economy plays an important role in every aspect of daily life from the well-being of personnel to the
ability of a company to thrive. When the economy trends downward and unemployment rises, businesses may have to
work harder to keep their staff and change their processes to continue earning revenue.
3. Political and legal factors
Because of the inconsistent nature of politics, businesses monitor legislative bills closely to prepare for potential changes.
Policies that can have long-term effects on companies include:
• Taxation
• Tariffs
• Employment law
• Import restrictions
• Intellectual property law
External Environment
External Environment Factors
4. Demographic factors
Demographics that affect business decisions and processes include:
Age, Gender, Nationality, Belief system, Marital status, Occupation, Income, Level of education etc.
For example, when mobile phone companies emerged in the 1990s, their marketing efforts focused on
young, successful professionals.
5. Social factors
Where people live, their personal values and their socioeconomic status affect what, where and why people
make purchases. Businesses take social factors into consideration when developing and marketing products,
and many use current events, movements and social issues to appeal to their customers.
6. Competitive factors
Businesses can increase their market share and stay relevant to their customers by keeping track of their
competitors. They can identify and evaluate successes and challenges, thus learning what to incorporate into
their own processes and how to prevent revenue loss. They can also use the information they gather to
develop ideas for product changes, product relaunches and new product development.
External Environment
External Environment Factors
7. Global factors
Executives have a duty to keep track of both domestic and global issues, especially if they conduct
business internationally. By learning about social issues that affect those in other countries and their
cultural norms, consumer trends and economic status, company leaders can provide their teams with
relevant training.
8. Ethical factors
Because each individual has a distinct concept of ethics and morality, some companies may find it
challenging to balance the personal lives of staff members with their expectations in the workplace.
9. Natural factors
As environmental awareness continues to grow, more consumers have realized the effects of business
processes on the planet. Some consumers have used their purchases to support companies that develop
ecologically friendly practices, such as using compostable packaging and solar energy. By paying attention
to these external concerns and changing their operations, businesses can make changes that help them
protect the environment, retain customers and increase revenue.
General Environment
Introduction
 Many forces can influence how a business performs in the marketplace.
 When considering strategic business decisions, organizations analyze the six general environmental
forces. These forces, which spell out PESTEL, are categorized as (P)olitical, (E)conomic, (S)ociocultural,
(T)echnology, (E)nvironment and (L)egal factors.
 Understanding the variety of factors and how they affect business can direct how your organization
seeks to achieve its goals and how they articulate themselves.
 The general environment, or macro-environment, is the variety of factors beyond an organization's
control that affect their operation and performance.
 These external influencers can determine whether a business experiences opportunities or setbacks in
the marketplace.
 The general environment can shape how a company brands itself, the products they choose to sell and
how it interacts with other businesses and regulatory agencies.
 Companies also examine the general environment when conducting market research and strategic
analyses.
General Environment

General Environment Factors

1. Political factors
Changes in politics and regulations may determine how freely a business can operate. Political factors
include government influences such as changes in trade tariffs and tax policies that may impact a business.
For example, a nation with a stable government and consistent trade regulations often attracts more
international business.
2. Economic conditions
Economic conditions can affect how well an organization performs in the marketplace. Economic
conditions and factors can include things such as unemployment rates, consumers' disposable income,
interest rates and gross domestic product.
3. Sociocultural factors
Another factor affecting organizations is social demographics and socioculturalism, or a combination of
social and cultural contributors. Some sociocultural factors include population size and cultural trends as
well as demographics like age, gender and race. When advertising to consumers, businesses keep their
target demographics in mind to find ways to best reach their audience.
General Environment

General Environment Factors

4. Technology
Technology often helps businesses improve their own internal processes, but technological developments that
occur in the general environment also shape how businesses operate. Depending on the organization, these
improvements can negatively or positively affect their operations. For example, cameras are becoming less
common household items as more people use their cell phones to take similar quality images. The technological
advancement of cell phones changed the camera industry.
5. Environment
Environmental factors like climate change, natural disasters and pollution levels can affect the supply chain or
increase costs for raw materials. This is clear in the recent trend of energy companies creating clean energy
alternatives for their consumers, such as solar and wind energy. A specific example in the general environment
impacting businesses is when some plastic water bottle companies switched to using recycled plastic to
manufacture their bottles.
6. Legal
Some legal factors include health and safety regulations, employment laws, antitrust laws and discrimination
laws. These also could include industry-specific regulators, which create rules that shape the competition in a
specific industry.
Task Environment
Introduction
 Task Environment of an organization is the environment which directly affects the organization
from attaining business goals.
 Task Environment is the set of conditions originating from suppliers, distributors, customers,
stock markets and competitors which directly affects the organization from achieving its goals. 
 Suppliers, distributors, customers, competitors all form part of the entire ecosystem in which an
organization operates.
 Every business needs the other business to make sure that the best product is created for the
customer meeting the needs and also earns profit.
 These interdependent conditions form the task environment.
 Task environment helps in identifying the environmental factors responsible for the success of
the company or a product.
Task Environment
Task Environment Factors
1. Competitors
Competitors generally look for higher margins and for this they provide unique features
to its products, thus try to create differentiation.
Example: Adidas, Nike, Puma all shoe manufacturers produce shoes catering for
different segments in different styles and charge premium accordingly.
2. Customers
Organizations also compete for customers as well as for wholesalers, retailers etc.
Customers decide the fate of any company and hence companies try their level best to
lure them.
Example: Customers might start looking for some other alternative due to shift in
consumer behavior like moving from conventional vehicles to electric vehicles. The shift
might have been caused by the competitors.
Task Environment
Task Environment Factors
3. Suppliers
Suppliers have high bargaining power if the raw materials being supplied are rare or if
there are less number of suppliers in the market. So it’s important to hold on the
suppliers and maintain good relationship with them. Acting intelligently, companies often
maintain more number of suppliers to reduce risk of deserting by anyone.
Example: Kriti Nutrients Ltd. in India is supplier of lecithin to Nestle (for baby foods)
4. Distributors
Distributors who become intermediary between retailers and wholesalers or between
manufacturer and wholesaler play a vital role in a task environment.
Example: In case of CPG products, distributors are the most important players in terms of
increasing reach of a product across markets, customers and channels.
Business Ethics
Introduction
• Ethical principles in business are the moral standards set by a company as a whole and
individual employees within an organization.
• These principles take into account values, standards, regulations and common industry rules
that dictate how people behave in the workplace and how a business operates in the
community.
• Consumers are increasingly aware of how businesses run.
• Organizations with a solid moral foundation develop trust and gain credibility with clients and
employees.
• A strong reputation builds a loyal customer base.
• Achieving success legally and ethically is a more sustainable, stable approach to long-term
success.
Business Ethics
Ethical Principles in Business
1. Honesty: Commitment to telling the truth, regardless of the consequences. It encourages trust among
colleagues and between a business and the public. Employees want to work for honest leaders, business
owners want honest employees and clients want to do business with honest partners.
2. Integrity: Adhering to a set of moral standards at all times, even if no one is aware of your choices.
Working with integrity, leads to respect and confidence in your decisions. Strong integrity can influence your
honesty and obedience to rules and regulations.

3. Loyalty: Remaining faithful to business partners, coworkers and clients to demonstrate commitment. You
can develop lasting partnerships and a firm foundation for future success when you prove your alliance and
honor these agreements. This can extend to maintaining relationships with suppliers, sharing a promotion
opportunity with coworkers in your department or honoring financial commitments to the community.
4. Creation of ethical practices
Leaders might develop a defined code of ethics for their business practices and share this with all employees.
Explaining exactly what a company expects of employees reduces stress and confusion, creating clear
expectations and a shared mission for everyone.
Business Ethics
Ethical Principles in Business
5. Implementation of ethical practices
Beyond writing a code of ethics, companies must include protocols to implement and enforce these policies.
Consider regular training on the company's practices incorporating scenarios that team members can discuss
and work through.
6. Compliance: The most basic level of ethical business practices means complying with any laws related to
your business. From international trading regulations, state tax codes and local building ordinances,
companies must ensure all practices adhere to these guidelines.

7. Fairness: Fairness means avoiding preferential treatment and encouraging everyone to share their thoughts
and ideas. A fair workplace promotes inclusion and equity in-house as well as for clients and customers.
Fairness creates a unified environment where employees feel comfortable, which increases engagement.
Fairness might encompass the following areas:
• Hiring new employees
• Promoting team members
• Delegating tasks
• Reviewing performance
Business Ethics
Ethical Principles in Business
8. Respect: Treating others with respect is a core principle in business ethics. Each team member deserves a
voice and the ability to share opinions and ideas in a supportive environment. Workplaces that promote
individual respect can experience enhanced collaboration and teamwork among employees.

9. Trustworthiness: Trustworthy workers keep their word to customers, colleagues and business partners.
Honoring commitments proves that others can count on you, making you a trusted employee and
coworker.

10. Responsibility: Being responsible in the workplace means taking ownership of your tasks.
Responsibility includes thinking about how your actions can affect those around you and making choices
that consider other people. Employers and employees depend on responsible workers to make the best
decisions without requiring constant supervision. Being responsible demonstrates maturity, capability and
discipline.
11. Accountability: Accountability is important for employees to be held to a company's ethical standards. If
most team members support a business's ethical code, they will expect others to behave the same way. This
creates a culture of high moral expectations that encourages all team members to act ethically.
Business Ethics
Ethical Principles in Business
12. Compassion: In business, compassion can mean that organizations increase involvement in charitable
causes and interpersonal interactions between colleagues. It involves taking the time to understand the
thoughts and feelings of another person.
13. Social consciousness: As the world becomes increasingly connected, social issues receive more and
more attention. Consumers look for businesses that use their platform to bring awareness to and support
change on social issues. Customers might prefer to do business with companies that take these extra steps
to impact society positively.

14. Environmental consciousness: The global climate crisis remains a focus for business owners,
employees and clients. Ethical business practices include making choices to limit or reduce your negative
impact on the environment.

15. Transparency: Transparency can refer to organizational structure, criteria for hiring and firing and
addressing mistakes when they occur. For example, if a business must raise prices, it can communicate the
reasons directly and honestly to consumers. This openness is another way to develop trust among
employees and customers.
Social Responsibility of Business
Introduction
 Business and Society are correlated with each other. As business fulfill the needs of society and society
gives business the resources required to it.
 The different businesses operating in society play our important role in functioning of society in different
ways like business provide employment to various people of society.
 Social responsibility is a moral obligation on a company or an individual to take decisions or actions that
are in favor and useful to society.
 Social responsibility in business is commonly known as Corporate Social Responsibility or CSR.
 For any company, this responsibility indicates that they acknowledge and appreciate the goals of the
society, and therefore, would support them to achieve these goals.
 According to concept of Social Responsibility of business the objective of managers for taking decision
related to business is not only to maximize profit or shareholder value but also to serve and protect the
interest of other members of its society like consumer, worker and community as a whole.
Social Responsibility of Business
Types of Social Responsibility
Economic Responsibility
 Every business is engaged in economic activities.
 So, the prime social responsibility of every business should be economic responsibility.
 Hence they should sell products and service which can satisfy the need of the society.
Legal Responsibility
 The company should comply with the political and legal environment of the country.
 The company should consider protecting the environment.
Ethical Responsibility
 This type of responsibility expects a certain type of behavior or conduct from the company.
 This behavior may not be documented by law.
Discretionary Responsibility
 These are voluntary actions taken by the entities in case of natural calamities, helping poor people etc.
 They help them by providing a charitable contribution, education activities etc.
 It prevents investments of charitable funds into speculative activities.
Social Responsibility of Business
Social Responsibilities Towards Different Interest Groups
1. Responsibility Towards the Shareholders
 Shareholders are the owners of the company.
 The company should make all the efforts to maximize and protect shareholder’s wealth.
 Sharing of useful information with the shareholders, utilization of funds etc.
2. Responsibility Towards the Workers
 Workers are the key persons behind company success.
 Management of the enterprise must provide the proper working conditions to the workers.
 Workers should get fair salaries and wages.
3. Responsibility Towards the Consumers
 It is the consumer who buys the company’s product & services.
 So, it is the responsibility of the company to provide the right quality, right quantity with the right price
to the consumer.
 There should not be the unfair trade practices like adulteration, poor quality to the customers etc.
Social Responsibility of Business
Social Responsibilities Towards Different Interest Groups
4. Responsibility Towards the Government & Community
 Enterprises must follow the laws and regulations of the country/ state in which it is operating.
 The organization should interact with society to know what they require.
 It should maintain proper infrastructure, proper disposal system and should not cause harm to the
society in any manner.

Importance of Social Responsibility

 Behaving in a socially responsible manner gives business benefits to organizations.
 It may involve costs in short run but has proved beneficial in the long run.
 For companies, community involvement can be helpful in supporting efforts to enter new markets,
attract potential employees, and establish or strengthen the reputation of the company, its brand and
products.
Social Responsibility of Business

Importance of Social Responsibility

Social responsibility of business is important from the following point of view.

1. From employees’ point of view: Getting employment and healthy working conditions.
2. From Customer point of view: Business follows ethical practice and manufactures the product which is
as per expected quality and reasonable price.
3. From investor point of view: Protection to the investor fund with help of development and growth of its
business as well as expected return to investors with profit earned by it.
4. From Suppliers point of view: Payments on time as well as reasonable demands of them are satisfied by
company, leading to loyal suppliers.
5. From government point of view : Businesses pay regular taxes and follow the norms of government
then it is considered as social responsibility of business which is duly fulfilled by it.
6. From Society point of view: Businesses provide good products, try to maintain clean environment,
provide opportunity to participate to business as well as work for the overall development of society.
Social Responsibility of Business
Advantages of Social Responsibility
• Justification for existence and growth
• The long-term interest of the firm
• Avoidance of government regulation
• Maintenance of society
• Availability of resources with business
• Converting problems into opportunities
• A better environment for doing business
• Holding business responsible for social problems

Disadvantages of Social Responsibility

• Violation of profit maximization objective
• Burden on consumers
• Lack of social skills
• Lack of broad public support
Effect of Globalization
Introduction
• The term globalization refers to the integration of the economy of the nation with the world economy.
• It is a result of the collection of multiple strategies that are directed at transforming the world towards a
greater interdependence and integration.
• It includes the creation of networks and pursuits transforming social, economical, and geographical
barriers.
• Globalization tries to build links in such a way that the events in India can be determined by the events
happening distances away.
• To put it in other words, globalization is the method of interaction and union among people,
corporations, and governments universally.
• It is the outcome of the policies of liberalization and privatization.
• It attempts to establish links in such a way that the events or happenings in India can be influenced by
the events happening miles away.
Effect of Globalization
Globalization in the Indian economy
 Indian society is changing drastically after urbanization and globalization. The economic policies have
had a direct influence in forming the basic framework of the economy.
 Economic policies established and administered by the government also performed an essential role in
planning levels of savings, employment, income, and investments in the society.
 Cross country culture is one of the critical impacts of globalization on Indian society.
 It has significantly changed several aspects of the country, including cultural, social, political, and
economical.

Reasons of Globalization
1. Making global travel easier by improving transportation.
2. Advanced technology made communication and sharing of information easier.
3. Minimized tariff barriers and encouraged global trade.
4. Broadening of global media.
Effect of Globalization
Examples of Globalization
• Travel: The capacity to travel to other places and experience their cultures.
• Transportation:  The international transportation systems, such as air travel and shipping.

Arguments in favor of Globalization

• Greater access to global markets
• Advanced technology
• Better future prospects for large industries of developing countries to become important players in the
international arena.
Arguments against Globalization

 The benefits of globalization accrue more to the developed countries as they are able to expand their
markets in other countries.
 It compromises the welfare of people belonging to the developing countries.
 A market-driven globalization increases the economic disparities among nations and the people.
Effect of Globalization
Advantages of Globalization
Increase in employment: 
 With introduction of special economic zones (SEZ), there is an increase in the number of new jobs
available including the export processing zones (EPZ) centre in India employing thousands of people.
 Another additional factor in India is cheap labor. This feature motivates the big companies in the west
to outsource employees from other regions and cause more employment.
Increase in compensation: 
 After globalization, the level of compensation has increased as compared to the domestic companies
due to the skill and knowledge a foreign company offers. This opportunity also emerged as an alteration
of the management structure.
High standard of living: 
 With the outbreak of globalization, the Indian economy and the standard of living of an individual has
increased. This change is notified with the purchasing behavior of a person, especially with those who
are associated with foreign companies. Hence, many cities are undergoing a better standard of living
along with business development.