BUSINESS ENVIRONMENT 6.1

UNIT – I1.1 BUSINESS CONCEPT

1. What do you mean by business? What are its characteristics? Or Outline the nature of modern business. Or what is your perception about business in 21st Century?

Ans : Characteristics of Business : The nature of business is very dynamic and it undergoes changes from time to time. Business in 21st Century is characterized by intense competition among firms, aggressive expansion, growth and diversification strategies, keeping pace with sophisticated technology and the like.

Business fundamentally involves exchange of goods and services for income.

Activities of business enterprise are recurring in nature.

Profit motive is the main characteristic of business; however the enlightened organizations endeavour to optimize the profits rather than to maximize it.

Business firms of modern era are strategically oriented to have optimum leverages of strengths, and minimize the impact of weakness and adverse elements in the environment

Globalizaton is the order of the day, and business firms are increasingly becoming global entities, posing and facing competition world over.

Growth of Management education and training contributed to professionalization of business, alienating management from ownership.

Integrated supply chain management is one of the key characteristics of business, which involves integrating procurement, production and distribution operations in the most efficient manner.

Restructuring of organizational designs, marketing mix and business portfolio is necessitated in the current business due to changes in global environment.

Co-existence of public and private sector, and increasing number of public private partnerships (PPP) is another distinguishing feature of modern business. Similarly small and medium firms co-exist with large conglomerates.

Intense competition among domestic firms, and between domestic and multi-national firms: The competition poses several challenges to the firms, but creates immense opportunities as well.

Business is characterized by increasing use of Technology. Technology influences every sphere of business activity

Information revolutionizes the way business is run. Timely availability of reliable information is the key for making right decisions.

2. Write a note on Vision, Mission, Objectives and Goals of Business.

Ans: Vision: Vision is a broad explanation of why the firm exists and where it is trying to lead. Vision gives the organization a sense of purpose, and a set of values to its employees. It answers the question “where do we go from here”. The vision of Infosys is “To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, vendors and society at large”.

BUSINESS ENVIRONMENT 6.2Mission: A mission statement

outlines the fundamental purpose of the organization. A vision becomes tangible as a mission statement. It answers the question “what is our business”. The mission statement of Birla Group reads as “To deliver superior value to our customers, employees, shareholders and society at large”. Similarly the mission statement of Ford Motors is “to improve continually our products and services to meet our customers’ needs, allowing us to prosper as a business and to provide a reasonable return for our stockholders, the owners of our business”.

Objectives: Objectives are more precise statements, giving a clear direction and action plan for accomplishment of mission. Objectives normally cover long-range company aims, more specific department goals, and even individual assignments. Thus objectives may pertain to a wide or narrow part of an enterprise.

Goals: A goal may be defined as an intermediate result to be achieved in a certain time, as part of the grand plan. Specific goals are usually referred to as targets. It may be noted that objectives are the long-term results that an organization seeks to achieve, while goals are the short-term benchmarks that organization strives to reach.

3. Discuss various goals of business.

Ans: The most common goals of business include the following:

Profit: It is the main incentive and motivator for running the business. Even not-for-profit organizations endeavor to work for a surplus- i.e excess of income over expenditure, to ensure long-run survival and growth. Even though profit is the most important criteria for business, progressive organizations work towards the goal of profit optimization rather than profit maximization- the former often involves exploiting the consumer and resorting to unethical and illegal means to enhance profitability, while the latter duly emphasizes on increasing profits by ethical means and genuinely working to satisfy the customers’ needs.

Growth: Every business house strives to grow over the time in terms of its size, market coverage, market share, sales, profits, revenues, brand equity, customer patronage and the like.

Power: Business confers enormous power on owner and endows them with vast resources. Business executives make and unmake political parties and political leaders. The power commanded by business personalities like Mittal, Tata, Vijay Malya, Ambanis and the like is very much evident from their media posturing.

Employee satisfaction and development: Caring for employee satisfaction and providing for their development has been one of the objectives of enlightened business houses. Providing training and development programs, competency enhancement and career planning programs for employees top the agenda of progressive organizations.

Quality Products and services: Offering quality products/ services keeps the firm ahead of its competitors. So the firms desirous of long run survival make no compromise on quality of products and services that they offer to the consumers.

Market Leadership: Firms do seek to carve a niche for themselves in the market place, through innovation in various areas- product, advertising, distribution, finance and the like. Pidilite, for instance, retains its market leadership in adhesive solutions market through its leading brands Fevicol, Feviquick etc.

Challenging: Businesses endeavor to take on challenges from adverse elements, while constantly posing challenges to the competitors. Maneuvering the rivals gives utmost contentment to the firms.

Joy of creation: It is the ability of the business house to provide solution to the diverse needs of various consumer groups through new ideas and innovations. .

Good Corporate Citizenship: It implies that the business unit complies with the rules of the land, pays taxes to the government

BUSINESS ENVIRONMENT 6.3regularly, discharges its obligations to society and cares for its employees and consumers.

1.2 BUSINESS ENVIRONMENT

4. Define Business Environment and Discuss various components (or elements) of Business Environment.

OR

write a note on Micro and Macro Environment of business

OR

Write a note on internal and external environment

OR

Write a note on controllable and uncontrollable environment of business.

Ans: Business Environment consists of all those factors that have a bearing on the business.

Business Environment refers to all external and internal forces that have a bearing on the functioning of business. Environmental Analysis is must for the organizations to identify firm’s strengths & weaknesses that lie in the internal environment and to make out opportunities and threats that exist in the external environment. The survival and success of a business firm depend on its innate strength – resources at its command – and its adaptability to the environment and the extent to which the environment is favourable to the development of the film. The survival and success of a firm, thus, depend on two sets of factors, viz, the internal factors – the internal environment – and external factors – the external environment. However, the term business environment often refers to the external factors.

The external environment has, broadly, two components, viz, business opportunities and threats to business. Similarly, the organizational environment has two

components: strengths and weaknesses of the organization.

As the company, generally, has control over the internal factors, they are generally regarded as controllable factors because it can alter or modify such factors as its personnel, physical facilities, organization and functional means, such as marketing mix, to suit the environment.

The external factors, on the other hand, are, by and large, beyond the control of a company. The external or environmental factors such as the economic factors, socio-cultural factors, government and legal factors, demographic factors, geo-physical factors etc., are, therefore, generally regarded as uncontrollable factors.

Those external factors with have a direct and intimate impact on the firm (like the suppliers and distributors of the firm) are classified as micro environment, also known as task environment and operating environment. There are other external factors which affect an industry very generally (such as industrial policy, demographic factors etc.). They constitute what is called macro environment, general environment or remote environment.

The following Figure gives a bird’s eye view of the important components of business environment.

Impact of Internal environment on business is presented below:-

BUSINESS ENVIRONMENT 6.4 Mission/objectives: Well defined

mission/objectives give clear direction and path to the organization.

Promoters/shareholders values are emulated down the line in organizations. Values upheld by personalities like Tata helped building ethical and social entities that serve the society the most.

Management Structure influences concentration or distribution of powers/decision-making authority at various levels within the organization.

Internal power relationships: The relationship between Board of directors and other key members of the enterprise determine the effectiveness of decision-making and its implementation.

Firms having strong base of Assets and Physical facilities will have absolute control over operations, and could ensure effective implementation of strategies.

Company image & Brand equity helps in raising funds, diversifying activities operations etc. smoothly.

Competent and committed manpower provides greater efficiency, process improvisation and better quality of products/services to the customers.

Research and Development, and Technological capabilities determine a company’s ability to innovate, reduce cost and achieve leadership position.

Impact of External Environment:

Micro Environment: It is the firm’s immediate environment, and micro-environmental factors are more intimately linked with company’s performance. It includes the following elements:

Suppliers: Having a wide network of reliable suppliers ensures procurement of quality material in the right time in right quantities at competitive prices.

Channel Partners: They act as vital link in taking the product from point of production to

point of consumption, providing feedback to the company on customer’s expectations & preferences, and in upholding the image of brands & organizations that they deal with.

Financiers: Reliable financiers are needed for funding the projects, implementing various programs and for smooth functioning of operations.

Competitors: Competitive environment has undergone sea change with the advent of globalization & liberalization. Various firms across diverse sectors compete for the limited disposable income of consumers. A marketer should strive to create primary & selective demand for his product to have an edge.

Customers: Having a large and loyal customer base is required for sustainable growth and development of the firm.

Public : Rising public awareness on various issues like environment, product safety etc., and changing public expectations towards the companies influence their decision making, product policy, pricing, waste disposal, participation in community development and other issues.

Impact of Macro Environment on Business:

Global Environment: It includes factors such as WTO principles and agreements, Trading blocs, Treaties, conventions, declarations, protocols etc. among various countries/regions. It largely influences firm’s overseas operations, revenues and overall corporate performance.

Political & legal environment: Political parties, alliances, their ideologies, the type and tenure of government and similar factors largely determine the economic agenda of the nation. Similarly various laws relating to consumer protection, employee protection, environment protection, Taxation, foreign exchange transactions etc create certain obligations on the firms to do business in a responsible manner.

BUSINESS ENVIRONMENT 6.5 Economic Environment: Factors kike GDP/NI, Per Capita Income, Monetary & Credit Policy of Government, Demand & Supply conditions, Inflation/phase of business cycle etc will have tremendous impact on business.

Social & Cultural environment: It consists of people’s values, attitudes, beliefs customs, traditions and the like that have huge influence on what they want, what they accept and what they don’t.

Technological environment: Development of Information and Communication Technology facilitates fast cross-border spread of cultures, movement of Technology and capital, which have significant implications for business.

Natural Environment: Geographical conditions, climate, monsoon, rainfall, draught availability of natural resources etc… have huge impact on firm’s decisions and operations.

5. What is macro environment? What are its components?

Ans: Macro environment of business consists of Economic, Political and legal, Social and Cultural, Technological, Natural and Global environment. The following figure explains various elements of macro environment and the features of each element.

Global

Environment

Technological

Environment

Economic

Environment

Political

Environment

Social-Cultural

Environment

Natural

Environment

Increasing opportunity as world has become one market

Technology reaches people through business

Growth strategy

Role of legislature

Culture creates people

Manufacturing depends on physical inputs

Improving quality Increased productivity

Economic system

Role of executive

Culture and globalization

Mining and drilling depend on natural environment

Competition from MNCs

Need to spend on R&D

Industry Role of judiciary Culture determines goods and services

Agriculture depends on Nature

Capital and technology transfers

Fast changing technology

Agriculture Constitution of India

Determines People’s attitude to business and work

Trade between two regions depends on geographical factors.

Deciding which markets to enter and how to enter

Rise and decline of products and organizations

Infrastructure New direction for government’s role

Caste system Transport and communication depend on geographical factors.

Adjusting the management process

High expectations of consumers

Money and capital markets

Spirit of collectivism and individualization

The needs of people and demand for various products largely depend on physical environment

BUSINESS ENVIRONMENT 6.6India and WTO Problem of

techno structurePer capita and national income

Education, awareness and enlightenment

System complexity

Population Family and marriage

Increased regulation and stiff opposition

New Economic policy

Authority

Demand for capital

Scientific spirit

Social change Ethics in business

Social responsibility

Corporate governance

6. Explain the importance of environment analysis.

(OR)

“Firms which systematically analyze and diagnose environment are more effective than those which don’t”. Elucidate. Also discuss the limitations of environmental analysis.

Ans: Environmental analysis has several benefits like those mentioned below.

The very idea of environmental analysis makes one aware of the environment-organization linkage.

A corollary of the above is that (environmental analysis helps) an organization to identify the present and future threats and opportunities.

Environmental analysis will provide a necessary and very useful picture of the important factors which influence the business.

Environmental analysis helps to understand the transformation of the industry environment.

Technological forecasting will indicate some of the future opportunities and challenges.

A very important benefit of environmental analysis is its contribution to identification of risks.

Environmental analysis is a prerequisite for formulation of right strategies – corporate, business and functional.

Environmental monitoring helps suitable modifications of the strategies as and when required.

Environmental analysis keeps the managers informed, alert, and often dynamic

It encourages favourable attitude towards change and forward thinking.

BUSINESS ENVIRONMENT 6.7 It minimizes the effects of adverse conditions and changes.

Limitations of Environmental Analysis:

Environmental forecasting has several limitations. Some of the limitations arise from the forecasting techniques used. Further there are also chances of certain errors affecting the reliability of the forecasts.

Environmental analysis does not foretell the future, nor does it eliminate uncertainty for any organization.

Environment analysis is only a tool for strategy development and testing, and not a sufficient guarantor of organizational effectiveness.

Excessive reliance on scanned data may lead to erroneous decisions

Decision making is often constrained by overload of information

In spite of several limitations, organizations do engage in scanning and analyzing the environment to cope with dynamics of business environment.

7. Explain the process (or steps) of environmental analysis.

Ans: The Process of Environmental Analysis: Environmental analysis is a challenging, time consuming and expensive affair. The analysis consists of four sequential steps: (i) scanning, (ii) monitoring, (iii) forecasting, and (iv) assessment.

Scanning - Being the first step in the process of environmental analysis, scanning involves general surveillance of all environmental factors and their interactions in order to (a) identify early signals of possible environmental change, and (b) detect environmental change already under way.

The potentially relevant data for scanning are unlimited but are scattered, vague, and imprecise. The fundamental challenge for analysis in scanning is, therefore, to make sense out of vague, ambiguous, and unconnected data.

Monitoring: Monitoring involves tracking the environmental trends, sequences of events, or streams of activities. It frequently involves following signals or indicators unearthed during environmental scanning. The purpose of monitoring is to assemble sufficient data to discern whether certain trends and patterns are emerging. Thus, as monitoring progresses, the data turn more precise.

Three outcomes emerge out of monitoring: (a) a specific description of environmental trends and patterns to be forecast; (b) the identification of trends for further monitoring, and (c) the identification of areas for further scanning. These outputs (particularly the first) become inputs for forecasting. They will also cause for further scanning and monitoring.

Forecasting: Scanning and monitoring provide a picture of what has already taken place and what is happening. Strategic decision-making, however, requires a future orientation. Naturally, forecasting is an essential element in environmental analysis.

BUSINESS ENVIRONMENT 6.8 Forecasting is concerned with developing plausible projections of the direction, scope, and intensity of environmental change. It tries layout the evolutionary path of anticipated change. For example, how long will it take the new technology to reach the market place? Are current life-style trends likely to continue? These kinds of questions provide the grist for forecasting efforts.

Unlike scanning and monitoring, forecasting is well focused and is much more deductive and complex activity. This is so because the focus, scope and goals of forecasting are more specific than the earlier two stages of environmental analysis.

Assessment :- Scanning, monitoring and forecasting are not ends in themselves. Unless their outputs are assessed to determine implications for the organization's current and potential strategies, scanning, monitoring and forecasting simply provide 'nice-to-know' information. Assessment involves identifying and evaluating how and why current and projected environmental changes affect or will affect strategic management of the organization.

In assessment, the frame of reference moves from understanding the environment - the focus of scanning, monitoring and forecasting - to identifying what the understanding means for the organisation. Assessment, therefore, tries to answer questions such as what are the key issues presented by the environment, and what are the implications of such issues for the organisation.

Linkages among Stages:-

Though conceptually scanning, monitoring, forecasting and assessment are separate activities, they are inextricably intertwined.

For example, upon unearthing an emerging trend through scanning, one might quickly jump to - potential implications for the organisation (assessment) by implicitly forecasting the future path of the trend. If warranted by the potential impact, one may then continue scanning and monitoring. Deriving implications (assessment) often prompts the organisation to the need to conduct further scanning, moni-toring and forecasting. Thus, environmental analysis is not as simple and as linear as moving from scanning to monitoring to forecasting to assessment, and should be carried out diligently.

1.3 ECONOMIC ENVIRONMENT

8. What do you mean by Economic Environment? What are the different factors of economic environment that effect business

(OR)

BUSINESS ENVIRONMENT 6.9

Evaluate Economic Environment in India

(OR)

What are the Components of Economic Environment?

Ans : Economic environment refers to all those economic factors which have a bearing on business. Business depends on economic environment for procurement of inputs & sale of its output.

The major factors of economic environment effecting business are discussed as below:

Growth Strategy of the nation

Economic Systems

Economic Planning

Major sectors of the economy, such as Agriculture, Industry and Infrastructure

Economic Reforms

Human Capital

income & GDP

Distribution of Income & Assets

Global linkages

Growth Strategy: The growth strategy followed in India until 90’s was Soviet Model, with little/marginal participation by private sector. This strategy contributed to overall growth of the economy, but was subjected to severe criticism for its poor focus on agriculture, neglect of export and trade opportunities and excessive protectionism. There has been a major turnaround in the growth strategy in the post-liberalization era.

Economic Systems: Major economic systems adopted in various countries include. Capitalist Model, in which the private enterprises have major control over resources; Socialism, in which the tools of production are organized, owned and managed by government; and Communism which goes further to abolish all private property and property rights to income. Though India adopted Mixed Economic System to facilitate existence of public and private sectors, the role of private sector was very limited. The scenario had drastically changed in 90’s with the phenomenon of Liberalization, Privatization & Globalization.

Economic Planning: India has been planned economy with the central and state governments playing a lead role in determining priorities and allocation of funds & resources across various sectors and regions. However the objectives of economic planning such as rising production & income, full employment, equitable distribution of income and wealth, and equality & justice could not be achieved to the right extent due to lapses in policies and their implementation.

Production, Agriculture & Infrastructure: These are the vital components of the structure of the economy. Great emphasis was laid on development of Industry; with due priority to agricultural sector. However the scenario has been rapidly changing in the last two decades, as the

BUSINESS ENVIRONMENT 6.10service sector growing phenomenally and contributes 51.6% of GDP, while Agriculture and Industry contributes 22.7% and 25.7% respectively.

Economic Reforms: Economic Reforms helped dismantling license, permit, quota Raj, which was taken over by the phenomenon of liberalization, privatization & globalization. Controls are largely slashed/ rationalized, restrictions on FDI & MNCs are removed/relaxed, prices are deregulated (still few price controls exist). Protectionism given way for market oriented policies. Various economic policies that have profound influence on business include: Industrial policy, Foreign Investment policy, Foreign Exchange Policy, EXIM Policy and Monetary and Fiscal Policy.

Human Capital: Of late, required attention is being paid to development of skilled and competent manpower in India. The nation’s excessive population, once viewed to be a burden on the economy, is being shaped into vital resource, which makes India a most attractive manufacturing and outsourcing destination for MNCs. However the problem of unemployment is still in dangerous proportion, especially in the unorganized sector/among unskilled laborers. Programs like Mahatma Gandhi National Rural Employment Guarantee Scheme go in the right direction, if properly implemented.

Income & GDP: They are the most vital indicators of a nation’s economic progress. India’s position on these parameters has been improving over the time in money terms. The situation is even better in terms of purchasing power Parity. India ranks 10 th in terms of Gross National Income in the world, but stands 4th in terms of purchasing power Parity. The rate of economic Growth in India in new millennium has been highly impressive and the future looks to be very promising.

Distribution of Income & Assets: The rising employment, Income, FDI and the like do not compensate for widening inequalities between rich and poor in the society. The number of Millionaires & Billionaires is growing but the fact that the farmers, weavers and other vulnerable & disadvantaged sections committing suicides can not be ignored. The growing inequalities between rich & poor nations has been alarming, as 20% of world population in developed countries control 80% of income/resources while 80% people fight for remaining meager income.

Global Linkages: It includes elements such as magnitude and nature of cross-border trade and investments, and membership of WTO, IMF, World Bank, Trading Blocs, etc. India has been the active member in various international bodies. Its cross-border flows are rising, but India’s contribution in Global Trade is dismally low at about 1%.

To conclude, the economic environment in India is turning out to be positive and promising as Indian firms are increasingly exploiting global opportunities, and MNCs are being increasingly inclined to do business in India.

10. How is economic environment important for business?

Ans: Economic environment refers to all those economic factors which have a bearing on business. Business depends on economic environment for procurement of inputs & sale of its output.

The impact of economic environment on business may be understood from the following facts.

Business depends on economic environment for pooling various resources.

Crucial business decisions viz. what to produce, how to, how much, when, where etc.

BUSINESS ENVIRONMENT 6.11are largely influenced by the factors in economic environment.

Economic Environment reflects government’s policy towards various sectors of the economy viz., Manufacturing, Agriculture & Services. The quantum of credit available for various sectors, interest rates, subsidies, incentives/controls, price regulations, taxation structure and other such vital factors.

It determines the extent of protection or competition faced by the organization.

It influences firm’s decisions with respect to pricing, promotion, business growth, expansion and diversification.

It influences overall investment climate in the country and flow of FDI into the country.

The following table shows various variables of Economic environment and their relevance to business.

Variable Relevance to Business

Income & employment

Purchasing power of people & demand for goods & services.

GDP trends Overall investment climate in the country.

Distribution of income

Prevailing inequalities in income & wealth distribution.

Price Trends _____/output discuss inventory ____ profitability, ____ investment etc.

Tradeand BOP Trends

Degree of flexibility on exports and imports, incentives/controls.

Industrial policy.

Role & Scope for private investment.

Monetary policy.

cost and availability of credit, its impact on demand

Global linkages.

Fosters open competition, removal of trade barriers, protectionism abandoned.

Economic planning.

Priority areas/sectors of investment.

Global economic Trends.

Influences outsourcing Foreign investment, etc.

To conclude, analysis of economic environment enables the organization to leverage the favorable factors, and take steps to minimize the impact of adverse factors in the environment.

11. Do you think the present economic environment in India is favourable to business?

Ans : Yes. The present economic environment in India is largely favourable with favourable macro economic indicators – impressive growth rate in GDP @ 7% +, which is commendable during the spell of recession world over. Thanks to the strong fundamentals of the domestic economy, series of stimulus packages ushered in by the government and partial recovery of the global economy, Indian economy is going strong. The sales of various manufacturing units such as Automobile, PCs, consumer electronics, industrial goods, etc have been rising, while exports register an impressive growth during latter half of F.Y 2009-10.

The recovery of IT sector is very much evident from the companies’ expansion plans, new recruitments and further investments. The opportunities in sectors like Telecom, Retail, Automobile Consumer Electronics, FMCG, Pharma, Insurance & Financial services, real estates and the like are plenty.

India is 4th largest economy in the world in terms of purchasing power parity and 2nd

rapidly growing economy after China, and is competing strongly with China in attracting FDI.

However there are still several controls on flow of FDI in various sectors, while rapidly changing political environment in some states including that of Andhra Pradesh that could adversely affect the economic climate.

To conclude, the economic environment in India is by and large favourable, however prudence demands caution and meticulous scrutiny of problems and prospects of every business decision.

BUSINESS ENVIRONMENT 6.12

12. Give a comparative account on pre-reform and post-reform economic environment in India.

Ans :

Indian Economic Reforms and

Environmental Change

Pre-1991 situation

Post-1991 situation

Consequent/implication

of the change

Private sector excluded from many important industries. In a number of other important industries public sector had priority to establish new undertakings.

All but a few industries are open to the private sector.

Enormous scope for private investment. Considerable freedom to decide the portfolio strategy. Competition increases substantially and public sector loses its monopoly/dominant positions.

Entry, involving investment above specified exemption limit, are restricted by licensing.

All but a few industries are free from licensing.

Reinforces the above factors.

Entry of large firms was subject to MRTP Act restrictions, besides licensing.

No MRTP Act restrictions on entry.

Reinforces the above factors.

Licensing and MRTP Act restrictions on growth of

All but a few industries are free from

Companies can grow organically and by acquisitions. Firms will grow in size and several industries will

existing undertakings.

licensing restrictions on growth. No MRTP Act restrictions on growth.

witness consolidation of firms. A small number of firms would eventually dominate the industry in several cases.

Limited scope for foreign capital and technology.

Foreign capital and technology policies have been substantially liberalized.

Entry of many foreign firms by Greenfield projects and acquisitions. Opportunity for Indian firms for acquiring technology and establishing joint ventures. Substantial increase in competition.

Highly restrictive import policy.

Imports substantially liberalized.

User industries can benefit by global sourcing. Import competing firms face stiff competition. Global competition emerges in the Indian market. Indian firms will have to improve their competitiveness and become more innovative to face the global competition.

1.4 RESPONSIBILITY OF BUSINESS

13. Define Social Responsibility of Business. Discuss the responsibility of business towards various sections (or interest groups or stakeholders) of society

Ans: Social Responsibility, also refereed to as corporate social responsibility, is understood as the obligation of decision makers to take actions, which protect and improve the welfare of society as a whole along with their own interests. There is no unanimity of opinion as to what constitutes social responsibility of business. The important generally accepted responsibilities of the business

BUSINESS ENVIRONMENT 6.13to different sections of the society are described below.

Responsibility to Shareholders: The responsibility of a company to its shareholders, who are the owners, is indeed a primary one. The fact that the shareholders have taken a great risk in making investment in the business should be adequately recognized.

1. To protect the interests of the shareholders and employees, the primary business of a business is to stay in business.

2. To safeguard the capital of the shareholders and to provide a reasonable dividend, the company has to strengthen and consolidate its position and improve its business and build up its financial independence.

3. To provide clean and transparent administration of the enterprise and making necessary disclosures from time to time.

4. By innovation and growth the company should consolidate and improve its position and help strengthen the share prices. At the same time, it should avoid indulging in tampering of share prices and mislead the investors.

5. The shareholders are interested not only in the protection of their investment and the return on it but also in the image of the company. It shall, therefore, be the endeavour of the company to ensure that its public image is such that the shareholders can feel proud of their company.

It may be mentioned here that the shareholders also have certain responsibilities which they have to discharge to protect their own interests. They shall not only offer whole-hearted support and co-operation in the positive efforts of the company but shall also guide and control properly its policies and activities. At the same time, they shall appreciate the responsibility of the business to other sections of society – to the workers, consumers and the community.

Responsibility to Employees: The success of an organization depends to a very large extent on the morale of the employees and their whole-hearted co-operation. Employee morale depends to a large extent on the discharge of the

company’s responsibilities to them and the employer-employee relationship. The responsibility of the organization to the workers includes:

1. The payment of fair wages;

2. The provision of the best possible working conditions;

3. The establishment of fair work standards and norms;

4. The provision of labour welfare facilities to the extent possible and desirable;

5. Arrangements for proper training and education of the workers;

6. Reasonable chances and proper system for accomplishment and promotion;

7. Proper recognition, appreciation and encouragement of special skills and capabilities of the workers;

8. The installation of an efficient grievance handling system;

9. An opportunity for participating in managerial decisions to the extent desirable.

The Committee that conducted the social audit of Tata Iron and Steel Company (TISCO) observes that “not only should the company carry out its various obligations to the employees as well as the larger community as a matter of principle, but his has also led to a higher degree of efficiency in TISCO works and an unparalleled performance in industrial peace and considerable team spirit and discipline which have all resulted in high productivity and utilization of capacity”. Thus, by discharging its responsibilities to the employees, the business advances its own interests.

It may, however, be pointed out that the expenditure on labour welfare, etc., should have relevance to the financial position of the company and the economic conditions of the nation. This aspect has to be particularly taken note of by public sector enterprises. Such expenditure shall not exceed the socially and

BUSINESS ENVIRONMENT 6.14economically warranted limits and shall not cause undue burden on the consumers or the general public. It shall not result in the formation of islands of affluence or comfort in the midst of poverty and suffering at the expense of society.

Responsibility to Consumers: According to Peter Drucker, “there is only one valid definition of business purpose; to create a customer”. It has been widely recognized that customer satisfaction shall be the key to satisfying the organizational goals. Important responsibilities of the business to the customers are:

1. To improve the efficiency of the functioning of the business so as to (a) increase productivity and reduce prices, (b) improve quality and (c) smoothen the distribution system to make goods easily available.

2. To do research and development, to improve quality and introduce better and new products.

3. To take appropriate steps to remove the imperfections in the distribution system, including black-marketing or profiteering by middlemen or anti-social elements.

4. To supply goods at reasonable prices even when there is a seller’s market.

5. To provide the required after-sales services.

6. To ensure that the product supplied has no adverse effect on the consumer.

7. To provide sufficient information about the products, including their adverse effects, risks, and care to be taken while using the products.

8. To avoid misleading the customers by improper advertisements or otherwise.

9. To provide an opportunity for being heard and to redress genuine grievances.

10. To understand customer needs and to take necessary measures to satisfy these needs.

Responsibility to government: They include:

1. Payment of taxes from time to time

2. Compliance to various laws, rules and regulations

3. Provide vital information to facilitate policy decision making

4. Participate in effective implementation of various schemes, programs etc.

Responsibility to the Community: A business has a lot of responsibility to the community around its location and to the society at large. These responsibilities include:

1. Taking appropriate steps to prevent environmental pollution and to preserve the ecological balance.

2. Rehabilitating the population displaced by the operation of the business, if any.

3. Assisting in the overall development of the locality.

4. Taking steps to conserve scarce resources and developing alternatives, wherever possible.

5. Improving the efficiency of the business operation.

6. Contributing to research and development.

7. Development of backward areas.

8. Promotion of ancillary and small-scale industries.

9. Making possible contribution to furthering social causes like the promotion of education and population control.

10. Contributing to the national effort to build up a better society.

14. What are the arguments for and against social responsibility of business?

Ans: Arguments for and Against Social Involvement: The important arguments for and against the social involvement of business are given below.

Arguments for Social Involvement Business:

BUSINESS ENVIRONMENT 6.151. Business which survives using the resources

of the society has a responsibility to the society.

2. Business which is an integral part of the social system has to care for the varied needs of the society.

3. Social involvement of business would foster a harmonious and healthy relationship between the society and business to the mutual benefit of both.

4. Social responsibilities like recycling of waste may have favourable financial effects.

5. Social involvement may discourage additional government regulation and intervention.

6. Social involvement may create a better public image for the company which may help it in attracting customers, efficient personnel and investors.

Arguments against Social Involvement of Business:

1. Business should confine to its own business. There are government and social organizations to carry out social activities.

2. Involvement in social activities could adversely affect the economic health of a business enterprise. It may be noted that the expenditures on social welfare has been imposing severe burden on TISCO.

3. If the cost of the social involvement of the business is ultimately passed on to the consumers, there is no point in exalting the social involvement of business. Sometimes there could even be a net loss to the society because of the high cost of the corporate sector undertaking such activities.

4. Many companies involve themselves in social activities because of the tax exemptions on the income spent on special social purposes.

5. If the social involvement of a business enterprise causes an increase in the price of its product, it could affect its

competitiveness both in the domestic and international markets.

6. Social involvement of business could lead to an increase in the domination or influence of business over the society.

17. What are benefits and challenges involved in CSR?

Ans: Being good in CSR provides bundle of benefits to the organization. The major benefits that organizations gain include:

Building a reputation as a responsible business unit, improved consumer perception towards the enterprise

Sales of 'environmentally friendly' products continue to grow - and these products often sell at a premium price-means more profits to the firms

Reducing resource use, waste and emissions doesn't just help the environment - it saves you money too.

A good reputation makes it easier to recruit and retain competent employees, which means employees may stay longer, reducing the costs and disruption of recruitment and retraining. Employees are better motivated and more productive.

CSR helps ensure effective compliance with regulatory requirements.

Activities such as involvement with the local community are ideal opportunities to generate positive press coverage.

Good relationships with local authorities make doing business easier.

Understanding the wider impact of business can help develop new products and services.

CSR can make business more competitive and reduces the risk of sudden damage to reputation (and sales).

Investors patronage In spite of several benefits, implementation of CSR programmes poses several challenges to the firms. The main challenges include:

BUSINESS ENVIRONMENT 6.16 Lack of community participation in CSR

activities: Need to build local capacities Issues of transparency Non-availability of well organised non-

governmental organisations: Narrow perception towards CSR

initiatives: Non-availability of clear CSR guidelines: Lack of consensus on implementing CSR

issues Lack of resources, skill, competent

manpower and the like.

18. What are the key drivers of social responsibility?

Ans: The key drivers for CSR include the following:

Enlightened self-interest:- creating a synergy of ethics, a cohesive society and a sustainable global economy where markets, labour and communities are able to function well together.

Social investment: - contributing to physical infrastructure and social capital is increasingly seen as a necessary part of doing business.

Transparency and trust: - business has low ratings of trust in public perception. There is increasing expectation that companies will be more open, more accountable and be prepared to report publicly on their performance in social and environmental arenas

Increased public expectations of business: - globally companies are expected to do more than merely provide jobs and contribute to the economy through taxes and employment.

The shrinking role of government: In the past, governments have relied on legislation and regulation to deliver social and environmental objectives in the business sector. Shrinking government resources, coupled with a relaxation of regulations, has led to the exploration of voluntary and non-regulatory initiatives instead.

Demands for greater disclosure: There is a growing demand for corporate disclosure from

stakeholders, including customers, suppliers, employees, communities, investors, and activist organizations.

Increased customer interest: There is evidence that the ethical conduct of companies exerts a growing influence on the purchasing decisions of customers. In a recent survey by Environics International, more than one in five consumers reported having either rewarded or punished companies based on their perceived social performance.

Growing investor pressure: Investors are changing the way they assess companies' performance, and are making decisions based on criteria that include ethical concerns. A survey by Environics International revealed that more than a quarter of share-owning Americans took into account ethical considerations when buying and selling stocks.

Competitive labour markets: Employees are increasingly looking beyond paychecks and benefits, and seeking out employers whose philosophies and operating practices match their own principles. In order to hire and retain skilled employees, companies are being forced to improve working conditions.

Supplier relations: As stakeholders are becoming increasingly interested in business affairs, many companies are taking steps to ensure that their partners conduct themselves in a socially responsible manner. Some are introducing codes of conduct for their suppliers, to ensure that other companies' policies or practices do not tarnish their reputation.

19. Critically evaluate the CSR performance of Corporates in India and abroad.

Ans : The Indian Situation : The Indian business sector presents a mixed picture as far as social responsibility is concerned. J.R.D. Tata, who was instrumental in conducting the first social audit in India and perhaps in the world, was of the opinion that while on the side of production, of growth, of efficiency, Indian industry, on the whole, did

BUSINESS ENVIRONMENT 6.17remarkably well, usually against odds and in spite of crippling infrastructural shortages. On the distributional side, however, its record was often poor and, in some respects, dismal, judged by the size of the black-market, the volume of black money and the general corruption that pervaded our economic life.

The Sachar Committee suggested that companies in the public sector, which were very much a part of the total corporate sector and accounted for about 70 per cent of the total investment in the corporate sector, must reckon with the social cost and social benefits arising out of any given investment. The business firms should be made accountable at least to the extent of informing the public about the extent and manner in which it has or has not been able to discharge its social obligations in the course of its own economic operations. It has also been repeatedly emphasized that the report on social responsibility of the company should not be in a vague or general manner, but should have an element of particularization and certainty.

Here is a glance of CSR initiative of prominent business houses in India.

Tata Group: Involved in development of Sciences & Technology, healthcare, Centre for Human Resource development, promoting Art & literature, rural development and the like.

Birla Group: Involved in Technical education, agricultural research, medicine, art & culture, Temple building, renovation & archeology, scientific research, education etc.

Godrej: Involved in education, health & medicine, sports, environment protection, family planning art, wildlife, etc.

Hindustan Unilever: Involved in community development, rural education and entrepreneurship, upliftment of rural women, protection of girl children etc.

Bajaj : Community development, higher education, upliftment of widows/orphans

scholarships, spiritual, and cultural development, literacy etc.

Infosys: Community development calamity relief, development of ICT in rural areas, spreading awareness of health, hygiene and literacy in slums etc.

Global Scenario:

IBM : IBM - Japan’s ‘e-elder’ initiative is a national program using training materials and other support from IBM Japan which will hire and train seniors as instructors for other seniors in an effort to help elder citizens (expected to make up one-fifth of Japan’s population by 2008) more fully participate in a Web-based society.

HP: In Singapore, HP staff raised nearly $295,000 for charity in 2003 and received a SHARE Gold Award from the Community Chest of Singapore for employee participation exceeding 50%. One event was Gladiathon, a fundraiser in support of the President's Challenge 2003. Leading by example was the Managing Director from HP Asia Pacific, who wore a gladiator costume and competed with other IT industry leaders in the battle for charity. HP was the largest corporate donor of this event, raising a total of $121,000.

Microsoft: Microsoft works closely with international organizations such as the World Food Programme, Save the Children, and Mercy Corps to provide technology-based development assistance through the HEART (Humanitarian Empowerment and Response through Technology) program. It now contemplates to work closely with India, especially in the states of UP and Bihar to protect children.

Apart from above organizations, other organizations – both Indian & foreign are increasingly engaged, and getting more responsive to the dire needs of the society at large.

1.5 PROFESSIONALIZATION IN INDIA

BUSINESS ENVIRONMENT 6.18

20. What do you mean by profession? What are its characteristics?

Ans: "A profession is a vocation founded upon specialized educational training, the purpose of which is to supply disinterested counsel and service to others, for a direct and definite compensation, wholly apart from expectation of other business gain". Characteristics of profession:

1. Skill based on theoretical knowledge:

2. Professional association

3. Extensive period of education:

4. Testing of competence

5. Institutional training

6. Licensed practitioners: Professions seek to establish a register or membership so that only those individuals so licensed are recognized as bona fide.

7. Work autonomy:

8. Code of professional conduct or ethics:

9. Self-regulation: Professional bodies tend to insist that they should be self-regulating and independent from government. Professions tend to be policed and regulated by senior, respected practitioners and the most highly qualified members of the profession.

10. Control of remuneration and advertising: Where levels of remuneration are determined by government, professional bodies are active in negotiating (usually advantageous) remuneration packages for their members.]

11. High status and rewards:

12. Legitimacy: Professions have clear legal authority over some activities (e.g. certifying the insane) but are also seen as adding legitimacy to a wide range of related activities.

13. Inaccessible body of knowledge: In some professions, the body of knowledge is relatively inaccessible to the uninitiated. For example, Medicine, law, architecture and the like.

19. Critically evaluate the statement “There is no scope for professionalism in family owned businesses” in the Indian context.

Ans : The growth of management education and training has contributed to the growing professionalization, which in turn, has contributed to the growing social orientations of business.

Professionalization imparts a certain social responsibility and dignity to management. A professional is one who possesses systematic knowledge and skill to perform certain responsible function with authority and who is bound by certain ethics in the use of his knowledge and skill. In this connection, Peter Drucker observes: “Management is independent of ownership, rank, or power. It is objective function and ought to be grounded in the responsibility for performance. Professional-management is a function, a discipline, a task to be done; and managers are the professionals who practice of this discipline, carry out the functions, and discharge these tasks, it is not longer relevant whether the manager is also an owner; if he is it is incidental to his main function, which is to be a manager.”

From what have been stated above, it is clear that professional of business management means that the business should be managed by men:

Who have formally acquired the specialized knowledge and skill for management

Who have authority and freedom to take the right decision

Who have no ideological bias in the discharge of the functions; and

Whose decisions and actions are guided by certain ethical consideration

BUSINESS ENVIRONMENT 6.19 Though progress has been made in the direction of professionalisation of management in India, there is still a long way to go, particularly in many enterprises which are owned and managed by families. Professionalisation does not, of course, mean that the owners shall not be the managers; but it certainly means that the managers should have proper management education and qualifications. In business circles, there has been a growing awareness of the need for professionalizing management; and, as a result, many “family concerns’ have taken steps towards professional management of their enterprises.

Professionalization makes business more efficient, dynamic and socially responsible. The growth of management education in the country, and the facilities abroad to obtain management education have contributed to professionalization in the business field.

1.6 ETHICS

20. Define a) Ethics and b) Business Ethics.

Ans : Ethics refers to the code of conduct that guides an individual in dealing with others. It deals with personal conduct and mortal duty and concerns human relations with respect to right and wrong. It governs the behavior of individuals and standards governing the interrelationship between individuals.

The term business ethics refers to the system of moral principles and rules of conduct applied to business. Business ethics means that the business should be conducted according to certain self-recognized moral standards. Business, being a social organ, shall not conduct itself in a way detrimental to the interests of society and the business sector itself.

21. What do you mean by ethical dilemmas?

Ans : Ethical dilemma is a complex situation that will often involve an apparent mental conflict between moral imperatives, in which to obey one would result in transgressing another. This is also called an ethical paradox. The ethical content of the policies of top managers in the organization can have enormous impact throughout the company. Organizations often confront with decision making that help them save costs or rise profits/revenues, which may not strictly conform to ethical standards. Eg: Bribing the bureaucrats for getting clearances, advertising a product as new/improved when it is not actually the one, discriminatory pricing and the like.

22. Outline the importance of ethics in business. Suggest strategies for improving ethical conduct of business.

Ans: Ethics is important to business for several reasons as stated below:

Ethics corresponds to basic human needs. It is a human trait that man desires to be ethical; not only in his private life but also in his business affairs where, being a manager, he knows his decisions may affect the lives of thousands of employees.

Values create credibility with the public. A company perceived by the public to be ethically and socially responsive will be honored and respected even by those who have no intimate knowledge of its actual working.

Values give management credibility with employees

Values help better decision making.

Ethics and profit go together. A company which is inspired by ethical conduct is also profitable one.

Law cannot protect society, ethics can

Strategies for improving ethical decision making:

1. Apply intuition to make dispassionate assessment.

BUSINESS ENVIRONMENT 6.202. Empathy ie looking at issue from other’s

point of view while making decision.

3. Write down pros and cons in the form of a balance sheet. The balance sheet approach helps decision making by presenting information in an organized way.

4. Sort out ethical priorities before problems arise. Prioritization shall help consider alternatives when one is not under stress.

5. One should commit oneself publicly on ethical issues. He should identity potential areas of ethical conflict and make clear his opposition to padding expense accounts, stealing supplies from the company, price fixing or damaging ecology.

6. One should set a good personal example for employees.

23.Enumerate the guidelines for managing ethics at workplace.

Ans : Strategies for Managing Ethics in the Workplace : The following guidelines ensure the ethics management programme is operated in a meaningful fashion:

1. Recognize that managing ethics is a process. Ethics is a matter of values and associated behaviours. The best way to handle ethical dilemma is to avoid their occurrence in the first place.

2. Make ethics decisions in groups, and make decisions public, as appropriate. This usually produces better quality decisions by including diverse interests and perspectives, and increases the credibility of the decision process and outcome by reducing suspicion of unfair bias.

2. Integrate ethics management with other management practices.

3. Use cross-functional teams when developing and implementing the ethics management programme.

4. Value forgiveness. An ethics management programme may at first actually increase the number of ethical issues to be dealt with because people are more sensitive to their occurrence. Help people recognize and address their mistakes and then support them to continue to try operating ethically.

5. Goods and services must conform to the commitment promised to customers. Business must be realistic and truthful in stating claims.

6. Customers must be given best possible service and treated with respect and fairness.

7. Business must understand and respect the needs, concerns and welfare of the community and society. It should use knowledge and experience for upgrading the quality of life. All business endeavours must combine the qualities of private excellence for public good.

8. The best way of promoting high standards of business practices is through self-regulation. The Code has been designed as an instrument of self-regulation to serve as a voluntary guideline towards better quality of life and higher standards of business practice.

9. Ethics Committees: Setting up ethics committees and Ethics Hot lines go a long way in upholding ethics in business.

BUSINESS ENVIRONMENT 6.21

UNIT – II

2.1 POLITICAL ENVIRONMENT

24. Write a note on preamble?

Ans : The Preamble is an introduction to the Constitution and contains its basic philosophy. The Preamble to the Indian Constitution states that

“We the people of India having solemnly resolved to constitute ourselves into a Sovereign, Socialist, Secular, Democratic Republic and to secure to all citizens:

“Justice- social, economic and political; Liberty of thought, expression, belief, faith and worship; Equality of status and opportunity; and to promote among them all fraternity assuring the dignity of the individual and the unity and integrity of the Nation.

The preamble of Indian constitution provides a roadmap for governance, functioning of business and ensures equality and dignity for human life.

25. What is political environment? Outline the impact of political environment on business

Ans: The political environment includes factors such as characteristics and policies of the political parties, the nature of the constitution and government system and the government environment, encompassing the economic and business policies and

regulations. These factors may vary very significantly across different countries, different provinces in a country and also over the time. The vital institutions under political system include legislature, executive and judiciary, each bestowed with well defined role and authority. They have profound influence on business. The businessman of today cannot limit himself to the problems internal to his business unit but has to intelligently keep himself constantly abreast of the national problems. Such an understanding will help him in the long run while dealing with his own managerial and business problems being influenced by the political environment. Public opinion is a very important aspect of modern life. In a democracy, any act must be supported by public opinion to be upheld and sustained. Even so the business activity must get the support of public opinion. Political leaders are the representatives of the public and the spokesmen of its opinion. Therefore, business and politics are closely related. Without a clear understanding of dynamics of politics and the support and encouragement from the politicians, business cannot prosper. The business strategy adopted by the businessman is to be framed keeping in mind what is the present political situation, what are going to be the steps taken by political forces in the country and abroad and what will be the repercussions of different political developments on the life of business. If the general atmosphere in the political circle is against business-specially the private sector, the businessman has to deal with it by making necessary modifications in his attitude, policies and practices. If he does not care for the political environment he may be meeting with the failure as the political forces may finish the chances of his success by creating insurmountable obstacles in his way. The case of Maruti Limited which was set up for the manufacture of mini-cars in good example of how the change of political forces affects favorably or adversely the business venture. During the emergency, when the country was governed by the Congress (I), Mr. Sanjay Gandhi was able to

BUSINESS ENVIRONMENT 6.22get all sorts of assistance from the Government including huge finance because of his close relations with the then Prime Minister Mrs. Indira Gandhi. With the change in Government, i.e., when the Janata party came into power, the same concern had to see its dooms day as so many charges of corruption and bungling were laid against Maruti Limited and its Directors because of which the business came to a close and the legal battle is still going on. The political climate determines the prospects and problems of any concern. Reliance Retail business in Uttar Pradesh faced many hurdles and suffered huge losses since Mayavathi Government came to power. Similarly investment in Telangana Region had drastically slowed down if not turned negative- that may largely be ascribed to political factors.

26. “Constitution in India had put several roadblocks in the process of industrial development” Discuss.

Ans: For over five decades, the constitution has been guiding the destiny of our country. It is said that the constitution has put several roadblocks which checked the pace of country’s economic progress- roadblocks manifested through communal clashes, moral disintegration, growing regional and parochial tendencies, corrupt bureaucracy, umpteen regulatory agencies and their implementing agencies, and topping all, the helplessness of the government in curbing the menace of the undesirable elements. Partly the problem lies with the background against which the constitution was drafted and adopted. It is high time that we have a re-look at the constitution. It is not helping the country to attain the goals that it was meant to achieve. The dream of prosperous and free society did not come true. Socialism which the constitution seeks to achieve has become irrelevant. From 1991 onwards, there has been a restructuring of the economy from the command to a market oriented one. The changes in the economic system need to be incorporated in the political system also.

Countries are getting integrated into global villages. Directive principles are not legally enforceable in the courts, and the state can not be held responsible for not formulating public policies in conformity with directive principles. Inclusion of two confusing words in the preamble- socialistic and secular- lead to deterioration of relationship between various religious communities.

2.2 LEGAL ENVIRONMENT

27. Write a note on impact of a) Legislature, b) Executive or government and c) Judiciary on business

Ans : Impact of legislature on business : Various laws like consumer protection Act, Environment protections Act, MRTP Act or Competition Act, Companies Act, various Acts governing employee welfare /security viz. factories Act, PF Act, ESI Act, Gratuity Act, workmen compensation Act etc., create several obligations on the part of organizations. Contravention of the provisions of any law/act calls for severe penalties to the firm.

Impact of Executive or Government on business: Executive is the law implementation agency. Keeping in tune with federal setup, the powers are divided between the central and State Government. The role of the govt. is vital as it facilitates smooth conduct of business.

The mutual impact of govt. and business towards each other is show below :

Govt. to Business Business to Govt.

Variable Relevance to Business

Maintaining Law and order.

Payment of Taxes.

Licensing. Providing information for making policy decisions.

Money & credit. Taking up & completely contracts/project.

Facilitate fair Participation in voluntary

BUSINESS ENVIRONMENT 6.23competition. programs.

Facilitate growth & development of business.

Service to Govts. bodies.

Providing Infrastructure

Implementation of rules, policies, programs envisaged by the govt.

Exchange of information.

Protecting the interests of small industries.

Facilitate transfer & adoption of technology.

Govt. also influences business by fixing tariffs and quotas. With the advent of liberalisaton, privatization and globalization, the role of government changed from regulator to a facilitator. However the role of government continues to be relevant as licensing continues, though the list of industries subject to licensing is reduced, subsidies and tariffs continue though on a reduced scale.

Impact of Judiciary on business: The role of the judiciary is to ensure that the executive authority conforms to the general rules laid down by the legislature. It also settles the relationship between private citizens on the one hand, and between citizens and the government on the other. The power of the judiciary to settle legal disputes affects business considerably. Judiciary has the power to penalize the erring organizations /employers, duly protecting their rights.

28. Discuss various roles and functions of government with respect to business.

The functions of government with respect to business include basic, intermediate and activist functions, while the government also plays the role of regulator, entrepreneur, planner and promoter of business. The functions and roles of government may be summarized as below:

Functions of Government

Economic Roles of Government

Basic Functions

These include the pure public goods such as the provision of property rights, macro-economic stability, control of infectious diseases, safe water, roads, and protection of the destitute.

Regulatory Role

Regulation may cover a wide spectrum extending from entry in to a business through the conduct of the business to final results of the business, and also the exit. Regulation is very important for the proper functioning of a market economy.

Intermediate Functions

These, include matters such as management of externalities (e.g.: pollution), regulation of monopolies, and the provision of social insurance (pensions, unemployment benefits).

Entrepreneurial Role

Direct participate of government in business was very common particularly in the socialist and developing countries. Reasons included ideological and dearth of private entrepreneurship and capital. Privatization, however, has become widespread since the med 1980s.

Activist Functions

These involve measures to stabilize and promote markets and to redistribute assets/income.

Planning Role

The national necessity for proper utilization of scarce resources and prioritization of development objectives and ideological reasons have made this an important role of governments in the developing and socialist countries.

Promotional Role

This is also more important in developing countries than in the developed because speedy development of the industry and commerce and the economy requires the development of the infrastructure, including facilitating organizations.

BUSINESS ENVIRONMENT 6.24

29. Name the fundamental rights which influence business.

Ans: The constitution of India provides for 8 fundamental rights. The rights and their implications for business are discussed as below:

Right to equality: Prohibits any discrimination on citizen on the grounds of religion, caste, sex, region, race etc. However protective discrimination in the case of disadvantaged groups like SC, ST, BC etc continues

Right to freedom, which guarantees freedom of speech and expression, to assemble, to form associations or unions, move freely and reside and settle anywhere in India, and to practice any profession, trade or occupation- all of which have profound economic implications for individuals and business firms.

Right to life and personal property, which includes right not to be subjected to the bonded labour, right to decent environment, right to pure drinking water, good roads etc.

Right to freedom of religion Right to cultural and educational freedom Right against exploitation, which prohibits

exploitation through trafficking, forced labour etc.

Right to constitutional remedies, this guarantees judicial protection for exercising fundamental rights except under extraordinary circumstances. The government of India enacted Right to Education Act, which makes education for children between 6 and 14 yrs free and compulsory, which is likely to rewrite the destiny of the nation.

The fundamental rights enshrined in the constitution guarantee several economic rights to the citizens, but reasonable restrictions are imposed in public interest.

30. Write a note on judicial activism.

Ans: It refers to the review power vested with courts on various government decisions and

legislations. Activism implies the right of the court to act on certain cases/issues upon its own knowledge (acting suo motto) without waiting for some one to petition. Judicial activism is felt necessary to ensure distribute justice, restore faith in the people towards social and political institutions and to check declining values in the society. However an over/hyper active judiciary could disrupt executive power and it may lead to government by judiciary, which is not supported by any popular mandate.

Indian scenario of judicial activism seems to be promising, and some steps taken by the apex court certainly enhanced the status of the judiciary.

2.3 DEMOGRAPHIC ENVIRONMENT

31. State the impact of Demographic environment on business

Ans: It is conventionally said that Management is Men, Material, Machinery and Money. Even if all the other Ms are excellent, it would not be of use unless the Men are the right ones (in terms of quality, potential, motivation & commitment etc.)

Market is people in the sense that the demand depends on the people and their characteristics – the number, income levels, tastes and preferences, beliefs, attitudes and sentiments and a host of other demographic factors. No wonder, demography is an important element of macro environment

Important elements of demographic environment include the following.

Age structure

Gender

Income distribution

Family size

BUSINESS ENVIRONMENT 6.25 Family life cycle (For example: Young, single:

young, married, no children; young married with children ……)

Occupation

Education

Social class

Religion

Race

Nationality

The demographic environment differs from country to country and from place to place within the same country or region. Further it may change significantly over time. Peter Ducker, who emphasizes the tremendous economic and business implications of demographic changes, suggests that any strategy, that is any commitment of present resources to the future expectations, has to start out with demographics.

Various demographic factors that influence business include:

Population size: Larger the size of population greater the opportunity for business. Eg: India & China are attracting MNCs given to the size of population in respective countries.

Population Growth Rate: It determines pattern of demand for various product, services, and govt. spending on social sector.

Age composition: It determines needs, income/ earning capacity, ability to work, physical stamina of people of different age groups.

Ethnic composition: People belonging to different caste, religion, race, nationality etc exhibit different buying patterns and behaviour. The organizations should tailor the products/services according to ethnic composition.

Density of population: With rising density of population, especially in urban and semi-urban areas, the demand/need for compact houses, household goods vise.

Rural – Urban distribution: People in rural and urban areas have different levels of income and purchasing power. So accordingly the organization should design their marketing mix.

Family Size & Nature of family: The demand for consumer electronics for instance, will be greater with nuclear family system and vice versa.

Income levels: Higher the incomes, greater the spending on comforts & luxuries and vice-versa.

Family life cycle: Double income families with no/single kid have higher levels of income & purchasing power than the families with grown-up children.

32. Write a note on family life cycle and social class.

Ans: Family life cycle implies various stages in family life resulting in different buying patterns. It takes into account changes in family structure and behavior accompanying progression from birth to death. Some stages are single, newly married without children, and married with children. At each stage, the person plays a different social role and buys symbols of that particular role at the time. For example, the buying pattern with little children is to buy toys. The different stages in people's lives influence what they buy, when, how much and how frequently they buy and the like.

Social class implies the Group of people within a society who possess the same socioeconomic status. In many cases the upper class has been distinguished by the possession of largely inherited wealth, while the working class has consisted mostly of manual labourers and semiskilled or unskilled workers, often in service industries, who earn moderate or low wages and have little access to inherited wealth. The middle class includes the middle and upper levels of clerical workers, those engaged in technical and professional occupations, supervisors and managers, and such self-employed workers as small-scale shopkeepers, businesspeople, and farmers.

BUSINESS ENVIRONMENT 6.26

33. Explain the impact of Technology on Organization economy & society.

Ans : Impact of Technology : The impact of technology may be analyzed under heads: (a) technology and social change, (b) economic effects of technology, and (c) technology and plant level changes .

Impact on society / social implications

Business firms bring technology to people for its application.

Technological advancements foster greater expectations among the consumers’ towards products/organizations. Eg: a person buying mobile phone expects music, camera etc. than just the facility to talk.

Rapid developments in technology make the system more complex.

It brings about vast social changes among food habits, work culture, life styles etc.

It also radically changes the communication and interpersonal relationships among people, the family systems and so on.

Economic implications:

Increased productivity

Need for spending higher sums on R & D.

Jobs became mole intellectual than just routine/mechanical.

It creates problems of Techno structure; that is the difficulty in motivating and retaining highly qualified and skilled managers/employees

Results in emergence of hybrid managers with multiple skills /talents

Sophistication of Technology calls for greater controls by the government. Eg: Abuse of Info Tech prompted the government to enact IT Act, 2000.

Increased competitions: Accessibility of high-end technology to firms intensifies competition.

It calls for increased capital and investment.

Rise and decline of products and organizations : Eg: Due to developments in IT sector, organizations like Infosys, Wipro etc became dominant players, while emergence of mobile phones with MP3 player lead to fall in demand for walkmans.

Boundaries of carrying out business by organizations are redrawn and redefined.

Impact on Organizations:

Organization structure need to be redrawn, employee need to be tackled, greater emphasis on Total Quality Management, e-commerce and Flexible Manufacturing Systems are some of the major implications of Technology on Organizations.

34. What is technology policy of GOI? Bring out the highlights of Technology policy of GOI.

Ans : Science and Technology Policy 2003

Objectives of the Policy

To ensure that the message of science (and technology reaches every citizen of India.

To ensure food, agriculture, nutritional, environmental, water, health and energy security of the people on a sustainable basis

To mount a direct and sustained effort on the alleviation of poverty, enhancing livelihood security, removal of hunger and malnutrition, reduction of drudgery and regional imbalances, and generation of employment

To vigorously faster scientific research in universities and other institutions

To promote the empowerment of women in all science and technology activities and ensure their full and equal participation

To provide necessary autonomy and freedom of functioning for all academic and R&D institutions

BUSINESS ENVIRONMENT 6.27 To use the full potential of modern science

and technology to protect, preserve, evaluate, update, add value to, and utilize the extensive knowledge over the long civilizational experience of India.

To accomplish national strategic and security-related objectives, by using the latest advances in science and technology.

To encourage research and innovation in areas of relevance for the economy and society particularly by promoting close and productive interaction between private and public institutions in science and technology

To substantially strengthen enabling mechanisms that relate to technology of development, evolution, absorption and up gradation from concept to utilization.

To establish an intellectual Property Rights (IPR) regime, which maximizes the incentives for the generation and protection of intellectual property by all types of inventions

To ensure that all efforts are made to have high.=speed access to information of affordable costs.

To encourage research and application for forecasting and preventing and mitigation of natural hazards, particularly, floods, cyclones, earthquakes, drought and landsides.

To promote international science and technology cooperation towards achieving the goals of national development and security, and make it a key element of India’s international relations

To integrate scientific knowledge with insights from other disciplines

Strategies to Realize Objectives:-

In order to realize the above objectives, the policy spelt out several strategies. The strategies include:

1. To ensure science and technology governance and investments.

2. Optimal utilization of existing infrastructure and competence.

3. Strengthening of the infrastructure for science and technology in academic institutions.

4. New funding mechanisms for basic research.

5. Human resource development.

6. Technology development, transfer and diffusion.

7. Promotion of innovation.

8. Interaction between industry and scientific laboratories.

9. Utilization of indigenous resources and traditional knowledge.

10. Development of technologies for mitigation and management of natural hazards.

11. Generation and management of intellectual property.

12. Creation of awareness among public about science and technology.

13. Achieving international science and technology cooperation.

14. Build a new and resurgent India that continues to maintain its strong democratic institutions and traditions.

35 . What is natural environment? Give a detailed note on impact on natural environment on business.

Ans : Natural Environment : As Watrick and Wood observe “the natural environment ultimately is the source of and support of everything used by businesses (and almost any other human activity) - every raw material, every energy source, every life-sustaining factor, even every waste disposal site.

A country's territorial size, geographical location, natural resources, climate, rivers, lakes and forests constitute its physical environment. The physical environment influences political and economic

BUSINESS ENVIRONMENT 6.28activities, shapes cultural characteristics such as language and religion, and determines land usage, transportation, and commercial flows. The natural environment determines what can be got done in a society and how institutions can function. Resource availability is the fundamental factor in the development of business in societies.

Differences in geographical conditions between markets may sometimes call for changes in the marketing mix. Geographical and ecological factors also influence the location of certain industries. For example, industries with high material index tend to be located near the raw material sources.

The dreadful earthquakes that ravaged several areas of Gujarat in early 2001 and the potential for such occurrences in a number of other places would influence the decision making in respect location of business. It is also likely to affect the demand for flats and accommodation in high rise buildings. It could also influence the choice of building technology, design, material etc.

Topographical factors may affect the demand pattern in some cases. For example, in hilly areas, with a difficult terrain, jeeps may be in greater demand than cars. Similarly, in several regions where the temperature is very high in summer, there is good demand for desert coolers; but they are not at all used in some of the States in India. In regions characterized by very cold climate in winter and very hot climate in summer both room heaters and air conditions may in good demand in the respective seasons. Weather and climatic factors can affect the demand pattern for clothing, building materials and designs, food, medicines etc. Further, weather and climatic conditions may call for modifications to the product, packaging, storage conditions etc. Abnormal weather conditions (e.g. winter season in Jammu & Kashmir region) can disrupt the transportation of export products while unforeseen changes in the weather can threaten companies which produce seasonal goods. Topography will influence the routing of goods and the choice of transport mode, which in turn will affect cost and thus impact on the price offered to the buyer.

Ecological factors have recently assumed great importance. The depletion of natural resources, environmental pollution and the disturbance of the ecological balance has caused great concern. Government policies aimed at the preservation of environmental purity and ecological balance, conservation of non-replenishable resources, etc., have resulted in additional responsibilities and problems for business, and some of these have the effect of increasing the cost of production and marketing. Externalities have become a very important problem the business has to confront with.

Although the physical environment is not considered one of the core components of the SLEPT factors (Social, Legal, Economic, Political and Technological factors) it is an environment that can impact upon success of a firm’s exports and consequently needs to be considered.

2.6 POLLUTION

36. What are the causes of environment pollution and what are the measures to prevent and control pollution?

Ans: Pollution is the introduction of contaminants into an environment that causes instability, disorder, harm or discomfort to the ecosystem i.e. physical systems or living organisms. Pollution can take the form of chemical substances or energy, such as noise, heat, or light. Pollutants, the elements of pollution, can be foreign substances or energies, or naturally occurring; when naturally occurring, they are considered contaminants when they exceed natural levels.

The measures for prevention and control of pollution include the following:

Adoption of cost effective cleaner technologies

Spreading awareness messages through programs for the prospective and existing entrepreneurs on usage of cleaner technologies and pollution control

BUSINESS ENVIRONMENT 6.29 Waste minimization for improvement of

productivity and creation of Waste minimization circle

Assistance for sustainable development, to be facilitated by the Government of India through fiscal incentives, technology, trainings etc

An additional system of taxation to be introduced based on concentration of waste

Encourage industry to regard 'pollution' as an economic problem

To decide the cost of water, power, fuel, etc through market instruments

Tax exemption on waste selling, resource recovery and reuse to be introduced

Incentives may be introduced on waste selling, resource recovery, reuse, etc

Allowance for capital investment and cleaner technology from foreign and private players

Simplification of Environmental clearance procedures for the industries located in industrial estates

Encourage Common Effluent Treatment Plant

Encourage common captive power plant and steam generation unit

During relocation of units detailed action plan to be prepared based on environmental risk assessment change of technology waste minimization

Small industries to get assistance from government

Further Research and development of cleaner technologies is proposed

Measures that could be taken by individuals to check pollution:

Use unleaded gasoline in cars Keep vehecles properly maintained to

keep it in good running condition to avoid smoke emissions

Never use open fires to dispose of wastes Have a proper waste disposal system

especially for toxic wastes Take very good care of pets and their

wastes. Never throw, run or drain or dispose into

the water, air, or land any substance in

solid, liquid or gaseous form that shall cause pollution.

Do not cause loud noises and unwanted sounds to avoid noise pollution.

Do not litter in public places. Anti-litter campaigns can educate the populace.

In India the following Acts and Rules governs the various Pollution Control Measures -

The Water (Prevention and Control of Pollution) Act, 1974

The Water Prevention and Control of Pollution Cess Act, 1977

The Air (Prevention and Control of Pollution)Act, 1981

The Environment (Protection) Act, 1986 The Batteries (Management and Handling)

Rules, 2001 The Municipal Solid Wastes (Management

and Handling) Rules, 2000 The Recycled Plastics Manufacture and

Usage Rules, 1999 The Rules for the Manufacture, Use,

Import and Export and Storage of Hazardous micro-organisms

Genetically engineered organisms or cells, 1989

The Manufacture, Storage and Import of Hazardous Chemical Rules, 1989

The Hazardous Wastes( Management and Handling ) Rules, 1989

The Bio-Medical Waste ( Management and Handling ) Rules, 1998

Dumping and disposal of fly ash discharged from coal or lignite based thermal power plants on land, 1999

Noise Pollution( Regulation and Control ) Rules, 2000

The Ozone Depleting Substances ( Regulation and Control )Rules, 2000

The 2-T Oil ( Regulation of Supply and Distribution) Order, 1998

The Public Liability Insurance Act, 1991 The National Environment Appellate

Authority Act, 1997 The National Environment Tribunal Act,

1995 Forest (Conservation) Act, 1980 The Biological Diversity Act, 2002

37. What are the functions and problems of trade unions?

BUSINESS ENVIRONMENT 6.30Ans : Meaning : Under the Trade Unions, Act, the expression trade union includes both employers’ and workers’ organizations. According to the Indian Trade Unions Act, 1926, a “Trade union means any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workmen and employers, or between workmen and workmen, or between employers and employers, or for imposing restrictive conditions on the conduct of any trade or business, and includes any federation of two or more trade unions. According to V.V. Giri, “trade unions are voluntary organizations of workers formed to promote and protect their interests by collective action.”

Functions of Trade Unions: Trade unions are intended to protect the rights and enhance the welfare of the members in particular and of the working class in general. According to the National Commission on Labour (NCL), the important functions of the trade unions are:

1. To secure for workers fair wages.

2. To safeguard security of tenure and improve conditions of service.

3. To improve opportunities for promotion and training.

4. To improve working and living conditions.

5. To provide for educational, cultural and recreational facilities.

6. To co-operate in and facilitate technological advance by broadening the understanding of workers of its underlying issues.

7. To promote identity of interests of the workers with their industry.

8. To offer responsive co-operation in improving levels of production and productivity, discipline and high standard of quality.

9. To promote individual and collective welfare.

Social Responsibilities of Trade Unions: While the unions have the right to fight for their legitimate rights, it is high time they

realized that they have no right to misuse their organized might to deny the unorganized innocent public their legitimate rights.

As the NCL observes, it is imperative that unions keep the well-being and progress of the community constantly before them even in the midst of their endeavours to help the working class. Unions have a stake in the success of the national plans for economic development, since these are formulated and implemented as much for maximizing production as for distributing the product in an equitable manner. Unions have to adapt themselves to changing social needs, and rise above the divisive forces of caste, religion and language. In this context, some important social responsibilities of trade unions appear to be in the field of:

1. Promotion of national integration;

2. Generally influencing the socio-economic policies of the community through active participation in their formulation at various levels; and

3. Instilling in their members a sense of responsibility towards industry and the community.

The unions should make every worker understand full, first, his duties and responsibilities and then, his rights and privileges. This means that the objects of a trade union should be such as to instill in the individual worker a spirit of self-reliance, toleration and co-operation.

Problems/ shortcomings of Trade Unions in India:

1. Lack of concerned, experienced and trained individuals involved in collective bargaining process.

2. Lack of sharing of information among trade unions to understand the new developments in the industry.

3. Intra-union and inter-union rivalry4. Excessive political interference5. Lack of unity and coordination within and

among members and leaders

BUSINESS ENVIRONMENT 6.316. Poor financial state that prevents the

unions from taking up employee education/ awareness/ support programs

7. Lack of compassion and commitment among leaders towards members

8. Ignorance of workers9. Divisive policies of management and so

on.

38. What are the measures to strengthen the Trade Union movement?

Ans: The interests of employees can best be protected and promoted by the creation of a trade union having a bargaining power equal to that possessed by the management. A strong trade union is, therefore, necessary to safeguard the interests of labuor and to help in achieving the targets of production. As V.V. Giri states, “If the trade union movement is not united and strong enough to achieve these objectives, the industrial structure to be built in India on the basis of full-fledged socialist democracy would not have firm foundations and the State, in spite of its best ideals and designs, would find it difficult to assure fundamental rights to the working class.”

i) Need for Unity: At present political rivalries which often come in the way of settlement of disputes, disunity among the ranks of workers and multiplicity of trade unions are responsible for lack of strength and poor bargaining power of the unions. Unity in the movement is a necessity. Unity among trade unions and strength are two essential factors for promoting the interests of workers and for maintaining real industrial peace.

ii) Eliminating Unhealthy Political Influence: At present trade union leadership is in the hands of politicians, because the movement is controlled by the political parties. The trade union leaders because of their loyalty to the ideology of their parties are prepared to sacrifice the interests of the working classes to serve party ends. It is high time that the workers realize the utter uselessness of party politics in trade unionism.

iii) One Union, One Industry: Multiplicity of unions in the same industrial establishment leads to inter-union rivalries which ultimately cut at the root of the movement. It

weakens the power of collective bargaining and reduces the effectiveness of workers in securing their legitimate rights. So far, one union for one industry has not yet been achieved in India. This is highly essential to improve the effectiveness of the movement.

iv) Working Class Leadership: In India, as in other countries, trade unions were formed by the so called ‘outsiders’. The workers were poor and illiterate and were in constant dread of being thrown out of employment. The ‘outsider’ with his influence in the local area was, therefore, requested by the workers to assist in forming trade unions and to represent their grievances to their employers. It is essential that trade unions should be taken over by the workers themselves. This would encourage working class leadership to come forward to run their trade unions.

v) Responsible Trade Union Leadership: Trade union leaders should also acquire full understanding of the constitutional and legal rights available to the unions. They must try to make use of these rights to secure and promote workers’ interests. Personal integrity, patience, understanding, industry and courage are some of the qualities a trade union leader should have.

vi) Responsibilities of workers: At present, trade unions confine their attention to the workers’ demands. It is high time that they inculcate in the workers a sense of discipline and responsibility to do full day’s work for a fair day’s wages.

Trade union movement has a bright future, provided some of the suggestions mentioned above are followed. It is highly satisfying that the Government is attaching great importance to the development of trade unionism on healthy lines.

39. Give a detailed note on recent trends in trade union moment in India.

Ans : Trends in Trade Union Movement :

1. A major trend witnessed these days is the change in the attitude of unions towards

BUSINESS ENVIRONMENT 6.32the management, industry, government and the economy. The change is reflected in-

Unions are becoming substantially matured, responsive and realistic in their thinking and actions. Gone are the days of cat-call strikes, bandhs, gheraoes and violence.

Unions are reconciled to the economic reforms. Their accent is an opposing the adverse impact of reforms and not the reforms per se.

More emphasis on issues like productivity, Total Quality Management (TQM), technology, competition, MNCs, exports, and the like

Unions have accepted that there is surplus labour everywhere and the organization needs to be trimmed. Unions are, therefore, extending cooperation to schemes like voluntary retirement and the golden handshake. 35,000 workers of National Textile Corporation alone have retired voluntarily.

2. Depoliticisation of unions is another trend witnessed these days. It is too well known that the federations of the unions are affiliated to one political party or the other. In many leading companies such as Telco, Voltas, Siemens, Hindustan Level, Blue Star, Pfizer, Tomco, and Hoechst, there are unions but not affected by political parties

3. Multiplicity of unions. Multiplicity is caused by ideological rifts, personal ambitions of leaders, craft divisions among workers and the like. The Bokaro Steel Plant is blessed with 68 of them. Calcutta Corporation has the unique distinction of having about 100 unions. The Singareni Collieries in Andhra Pradesh has 36 unions.

4. External leadership: Individuals who were not connected with a factory would assume the

leadership mantle of the union. Partly the fault for outsider leadership lies with the Trade Unions Act, 1926 itself. The Act permitted external participation to the extent

of 50 per cent of the strength of office bearers in a Union.

5. Concentration in organized sector: The labour movement in India, despite its broad sweep and deep roots, has largely concentrated its energies in the organized sector, which provides employment to less than 10 per cent of the labour force. It has not been able to make any significant headway in the unorganized sector and the rural sector.

Rise of new types of employment opportunities – especially in knowledge-based industries - where unionization will have no role to play. Professionalization of the service sector is also likely to weaken the need for collective bargaining.

7. There is a comprehensive change in the mindset of the country’s working class. The individual has replaced the collective. In an economy that is increasingly becoming globalised, it is not dearness allowance that matters, it is the dollar earnings that do. Annually-renewable contracts will become the order of the day, as wage agreements become redundant.

8. Signs of unity: Many unions, including those affiliated to Left Parties, have joined together to fight for such causes as disinvestment, closure and modernization. The merger between AICTU and HMS is on the cards. Union after union, in their respective annual conventions, is calling for united movement.

9. Professionalization of trade union movement is yet another trend witnessed these days. To counter criticisms and also fight organized forces of employers, trade unions, through various institutions such as Ambedkar Institute of Labour Studies, Maniben Kara Institute and National Labour Institute are trying to upgrade the quality leadership, personnel, as well as the services rendered.

BUSINESS ENVIRONMENT 6.3340. What is meant by culture? What are its characteristics and elements (or components)?

Ans : Nature of Culture : Culture is understood as that complex whole which includes knowledge, belief, art, morals, law, customs and other capabilities and habits acquired by an individual as a member of a society. It includes the thought and behavioral patterns that members of a society learn through religion, language and other forms of symbolic interaction-their customs, habits, beliefs, and values, the common viewpoints which bind them together as a social entity. Cultures change gradually, picking up new ideas and dropping old ones, but many of the cultures of the past have been so persistent and self-contained that the impact of any sudden change tears them apart, uprooting their people psychologically.

The following characteristics of culture are worth mentioning:

1. Learned – Culture is not inherited or biological based, it is acquired by learning and experience.

2. Shared – People as members of a group, organization, or society share culture; it is not specific individuals.

3. Transgenerational – Culture is passed on from one generation to the next.

4. Symbolic – Culture is based on the human capacity to symbolize or use one thing to represent another.

5. Adaptive – Culture is based on the human capacity to change or adapt, as opposed to the more genetically driven adaptive process of animals.

41 . Discuss the impact of culture on business.

Ans : Impact of Culture on Business :

Culture creates people. It trains people along particular lines, there are sub-cultures within culture. It conveys a sense of identity to organizational members.

Culture & Globalization: As business units go international, the need for understanding and appreciating cultural differences across various countries is essential. Workforce diversity becomes major issue in cross-cultural environment.

Culture determines what type of goods/services people like/dislike; Eg products like cosmetics, Fashion goods, Liquor, etc. are largely consumed/prohibited on cultural lines.

Language & culture: The interrelationship between language and culture is very strong. All languages have limited set of words that in turn constrain the ability of the users to understand or conceptualize the world.

Culture determines attitudes towards work, ethics, business, time, interpersonal relationships and so on.

It determines individualism vs collectivity, which effects employee morale, motivation, unity, and the like.

Ambitious/complacent: Culture makes a person to be ambitious or complacent. Ambitious individual is highly motivated, is wealth acquisitive while complacent employee is satisfied with status quo.

Culture determines education that in turn influences labour characteristics, wage structure, workforce distribution, employment and the like.

BUSINESS ENVIRONMENT 6.34 Culture determines family system which has high relevance to protection in inheritance, property

rights, morality, care for sick and helpless and so on.

It determines exercises of authority and management style.

Others factors: Other elements of culture such as Religion, Scientific outlook, caste /creed etc. have profound impact on business.

42 . Write a note on community development.

Ans : Community development (CD), is a broad term applied to the practices of civic leaders, activists, involved citizens and professionals to improve various aspects of local communities. Community Development Exchange defines community development as: “The process of developing active and sustainable communities based on social justice and mutual respect. It is about influencing power structures to remove the barriers that prevent people from participating in the issues that affect their lives. It involves carrying a set of values and practices which plays a special role in overcoming poverty and disadvantage, knitting society together at the grass roots and deepening democracy. There are active citizens who use CD techniques on a voluntary basis, and there are also other professions and agencies which use a CD approach or some aspects of it

Community workers (officers) facilitate the participation of people in this process. They enable connections to be made between communities and with the development of wider policies and programmes. Community Development expresses values of fairness, equality, accountability, opportunity, choice, participation, mutuality, reciprocity and continuous learning. Educating, enabling and empowering are at the core of Community Development.

There has been growing need for, and incidence of participation of business firms in community development programmes. Rising awareness among corporates and its employees ensure continuous and effective participation by business firms in CD programmes.

43. What is consumerism? Write a brief note on consumerism.

Ans : Consumerism : Consumerism is a movement to inform consumers and protect them from business malpractices. The movement focuses on inferior and dangerous merchandise, unfair business practices and false or misleading advertisements. Unfair practices by businessmen abound; artificial scarcities are created; prices are unreasonably hiked; adulteration is unabashedly practiced; under-measurement and under-weighing are rampant; money is accepted in advance, promising delivery of product in question within a specified time but seldom honoured and after-sales services are mostly an unkept promise. Businessmen should realise their moral responsibility and avoid indulging in practices that are harmful to consumers. Such enlightened self-realisation is unfortunately lacking. Government regulation becomes necessary to protect consumer interest. The government has appropriately passed several legislations and issued notifications and orders to restrain businessmen from indulging in felonies. Consequently, we have around fifty laws which have been enacted to protect their interest. The Consumer Protection Act, 1986, is the latest to be enacted by the Central Government. This is the most powerful piece of legislation which provides effective protection against unfair trade practices, unsatisfactory services and defective goods. The Act provides for setting up of special forums at district, state and Central levels to deal exclusively with consumer complaints and issues. It provides for awarding compensation to the aggrieved consumer. The Act brings in its fold even public undertakings which were excluded by previous legislations.

The apex court, called the National Commission, functions in Delhi. Every state government has a State Commission. There are 543 (January 1999) district fara. All these courts have handled nearly 13 lakh cases of which about 10 lakh cases have bee disposed off. The Consumer Protection Act has been regarded as the most progressive, comprehensive and unique piece of legislation. In the last

BUSINESS ENVIRONMENT 6.35international conference on consumer protection held in Malaysia in 1997, the Act was hailed as one “which has set in motion a revolution in the field of consumer rights, the parallel of which has not been seen anywhere else in the world”.

Besides enacting legislations, the government has taken other measurement to protect consumer interest. The government has included consumer protection as an item of the 20 Point Programme. A Consumer Advisory Council has been set up by agencies, including state governments, the Textile Committee and the Department of Science and Technology. The media is giving coverage to the subject and AIR and Doordarshan have been organizing programmes like Lok Samasyani Sansad and Janavani. Apart from what the government does, the consumer should himself assert his rights and protect himself against business malpractices. This is the genesis of consumerism. Various consumer movements have come up in different parts of the country and as of today, there are 237 and odd consumer organizations working towards consumer protection.

44. What are the major provisions of Consumer Protection Act- (COPRA) 1986?

Ans : Consumer protection Act (COPRA) – 1986 :

Main provisions:

Rights of Consumers:

Right of protection to life & property

Right to be informed

Right to choose

Right to be heard

Right to Redress

Right to Education

Unfair Trade Practices (UTPs):

Misleading Advertisement and False Representation

Sale at Bargain Price

Schemes offering Gift prizes (with the intention of not providing them)

Non-compliance of prescribed standards

Hoarding/destruction of or refusal to sell goods

Grievance Redressal Forum:

District Forum: Comprises members and president. Entertains complaints upto Rs. 20 lakhs.

State Forum: Comprises members and president, Entertains complaints from Rs. 20 kakhs to Rs. 50 Lakhs, and appeals against District Forum orders.

National Forum: Comprises 4 members and president, entertains complaints above Rs. 50 lakhs, and appeal against State Forum orders.

BUSINESS ENVIRONMENT 6.36Findings of – District/State/National Forum:

Remove defect in product

Replace goods

Refund price of Goods & charges

Award compensation

Remove deficiencies in service.

Direct the firms to discontinue UTPs/RTPs

Order not to offer hazardous goods

Order to withdraw hazardous goods

Provide for adequate cost to parties.

Consumer protection councils (CPCs) :

The act provides for establishment of central consumer protection council by Central Governments and State Consumer Protection Council in each State.

To promote the rights of consumers such as

Right to be protected against marketing of hazardous goods

Right to be informed about quality, quantity prints of goods etc.

Right to access to variety of goods at reasonable prices

Right to be heard and

Right to seek redressal against unfair trade practices

CPC: Central CPC consists of Minister in charge of Consumer affairs in the central govts., who acts as its chairman, and other members as may be prescribed. It meets minimum once in an year, and as and when necessary.