MS-3

MANAGEMENT PROGRAMME

Term-End Examination

December, 2009

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T-1N- MS-3 : ECONOMIC AND SOCIAL

ENVIRONMENT

Time : 3 hours Maximum Marks : 100

(Weightage 70%)

Note :

There are two Sections, A and B.

Attempt any three questions from Section A. All questions

carry 20 marks.

(iii) Section B is compulsory and carries 40 marks.

SECTION - A

(a) Explain the critical elements of social 10environment of business.

(b) Discuss the business implications of social 10developments, industrialisation process andmanagement culture.

(a) What are the factors responsible for 10industrial sickness ? Discuss with referenceto both SSI and non SSI sectors.

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(b) How can the problem of industrial sickness 10be tackled ? Discuss with reference to bothSSI and non SSI sectors.

Critically examine the Industrial Licensing policy. 20Discuss its relevance in the current scenario.

Briefly discuss the foreign investment policy in 20India in the post reform period i.e. 1991 onwards.What impact did liberalisation have on thequantum of FDI inflows into India ?

5. Write short notes on any four of the following : 4x5=20

Globalisation

Inflation

(c) Social responsibility of business

Public sector

Debt servicing burden

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SECTION - B

Read the following case situations and answer the

questions given at the end.

6. FISCAL CRISIS IN INDIA (1990s)

India's problem is not lack of resources; it isthe inability and or unwillingness to mobiliseresources into the public sector. The Indianeconomy is not facing a resources crisis, it isconfronting a fiscal crisis.

The reasons for this are the steady declineover the years in the share of direct taxes in spiteof the fact that both incomes and savings of thetop 10 per cent of the households in the countryhave been steadily increasing. The governmentdoes not appear committed to placing greaterreliance on direct taxes to mobilise resources. It isunwilling to tax the rich and therefore has nooption except to fall back on indirect taxes andrely more than ever on borrowing from those whoexpect interest and tax concessions fromtemporarily parting with their resources to enablethe government to continue its "developmentprogrammes". Grave inter-sectoral imbalancesalso exist in India's tax structure becauseagricultural incomes are virtually tax free. TheRaj Committee had recommended theintroduction of an agricultural tax to remove thisinequity, but the State governments did nothing

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to implement the recommendation. The long-term fiscal policy also did nothing to eliminate thisinter-sectoral inequity.

Public sector enterprises failed to generatethe contemplated reinvestible surplus and thesmall surplus that became available from theseenterprises was not attributable to improvedefficiency.

The fiscal deficit reflects the total resourcegap, which equals the excess of total governmentexpenditure over government revenue and grants.The fiscal deficit thus fully indicates theindebtedness of the government.Questions :

Suggest some remedies for the fiscal policy 10

to combat fiscal crisis in the situationdescribed above.Are fiscal deficits good for developing 10countries like India ? Discuss.

7. ECONOMIC ENVIRONMENT : A CASE OFMAHINDRA AND MAHINDRA

Mahindra and Mahindra manufactures andmarkets jeeps, and had a hold over a considerableportion of the jeep market in India in the past. Itwas ranked sixth in the automobile sector of Indiain 2004, up from the tenth rank in 2003. Thefollowing are the prominent jeeps which operatein the Indian market currently—Mahindra-

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Voyager, Mahindra-Armada, and Mahindra-Commander.

Mahindra and Mahindra is now facingproblems like cut-throat competition, price rise,and sluggish market for jeeps. In terms of pricecompetition, Mahindra and Mahindra has anupper hand compared to Tata jeeps while TempoTrax has a comparatively low price.

Realising the need to grow fast, the companyformulated an export policy. It paid off well. Theyformulated plans to develop and grow in foreignmarket. The first step was participation in tradefairs abroad, particularly in Hanover (Germany)and Paris (France). This has helped populariseits vehicle in those countries.

Mahindra jeeps started selling in France andjeep export became an important marketingactivity of the company. The company startedmanufacturing diesel engines in collaboration withPeugeot of France.

As soon as the company came to know thatAustralia, Denmark, Italy, Norway, and Swedencould prove to be potential markets, plans began

to be made accordingly. The company estimatedthat it would be able to export about 2,500 jeepsannually to Australia. In order to cater to thelower segment of the market, the Mahindra jeepsin Australia faced competition from Japanesecompanies. Stringent design rules and

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requirements also needed to be met in Australia.The company is confident of meeting all

such requirements. The government'sliberalisation policy will also be helpful.

The company's new policy has to take intoaccount environmental factors. The export policywith special reference to export market alsodeserves considerable evaluation and analysisbecause environmental factors such astechnology, economics, social and politicalinfluences relevant to strategic decisions operatein an industry.

Mahindra and Mahindra assessed all theopportunities in the market as well as the impactof external environment on their strategicplanning before expanding production.

In 2004, Mahindra and Mahindra showedsignificant improvement compared to MarutiUdyog, ranked as the number one automobilecompany, as is evident from the table below.S.No. Factors Environmental Dynamism Belief in

Consciousness innovation Maruti Udyog 176.0 points 72.9 174.0

Mahindra and Mahindra 118.1 point 119.0 123.0

Question : 20

In the situation discussed above, which are thedifferent environmental factors that lead toopportunities and threats to Mahindra andMahindra ?

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