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Managing a Business/business environment

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Question
BUSINESS ENVIRONMENt
1. Discuss how the environment acts does as a stimulant to business.
Analyse why business often does little for the preservation of physical
environment despite the fact that it is significant for business activity.
(10 Marks)
2. Explain the relevance of ecological issues to business environment
(10 Marks)
3. What do you understand by Business Social Responsibility ( B S R ). How
this can be used to improve the Business Environment. (10 Marks)
4. Explain how the business in an organization can be regulated with regard
to the Organization’s Basic Objectives. (10 Marks)
5. Describe in detail the different role played by the Government towards
enriching the business Environment. (10 Marks)
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
6. In the Business Environment context, explain how the Political and legal
Environment of business plays a vital role. Justify by bringing in suitable
examples. (10 Marks)
7. Evaluate the advantages and disadvantages of FDI. What is your opinion
on the role of FDI in the Retail Sector? Justify your views with India's
experience in this sector. (20 Marks

Answer
1.   Discuss how the environment acts does as a stimulant to business.
Analyse why business often does little for the preservation of physical
environment despite the fact that it is significant for business activity.
(10 Marks)

A good environment is a constitutional right of the Indian Citizens. Environmental Protection has been given the constitutional status. Directive Principles of State Policy states that, it is the duty of the state to 'protect and improve the environment and to safeguard the forests and wildlife of the country'. It imposes Fundamental duty on every citizen 'to protect and improve the natural environment including forests, lakes, rivers and wildlife'. In India, the Ministry of Environment and Forests (MoEF) is the apex  administrative body for :- (i) regulating and ensuring environmental protection; (ii) formulating the environmental policy framework in the country; (iii) undertaking conservation & survey of flora, fauna, forests and wildlife; and (iv) planning, promotion, co-ordination and overseeing the implementation of environmental and forestry  programmes. The Ministry is also the Nodal agency in the country for the United Nations Environment Programme  (UNEP). The organizational structure of the Ministry covers number of Divisions, Directorate, Board, Subordinate Offices, Autonomous Institutions, and Public Sector Undertakings to assist it in achieving all these objectives. Besides, the responsibility for prevention and control of industrial pollution is primarily executed by the Central Pollution Control Board (CPCB) at the Central Level, which is a statutory authority, attached to the MoEF. The State Departmentsof Environment and State Pollution Control Boards are the designated agencies toperform this function at the State Level. Because of their impact on the environment, businesses have an obligation to try to mitigate the effects of their activities in an effort to protect the land and water resources. Many businesses act voluntarily to reduce their environmental impact. Industries that use or produce hazardous waste are mandated by law to regulate their businesses. In any case, reducing their environmental impact is a sensible approach to business that can have many benefits.
Regulation
1.The primary federal laws which regulate businesses and individuals are the Clean Water Act of 1972 and the Clean Air Act of 1970. The former sets limits on the amount of discharge that businesses may release into waterways to maintain the chemical and physical integrity of these resources. Likewise, the Clean Air Act addresses the role of business in protecting the environment through regulation of emissions.
Recycling
2.Businesses typically use a great deal of resources in order to carry out their work, from office supplies to energy use to waste production. Some waste seems innocuous. The average business worker, for example, will use approximately500 disposable cups each year. Businesses generate tons of paper waste, generating nearly 400 billion copies each year, according to the Clean Air Council.
It behooves businesses, not just from an environmental perspective but an economic one, to recycle when possible and protect the environment. In some states, such as California, recycling is mandatory.
Environmental Management System
3.An Environmental Management System (EMS) is a document developed bybusinesses in order to assess their environmental impact and improve theefficiency of their organization. While not mandatory, the U.S. Environmental Protection Agency (EPA) encourages businesses to evaluate their practices.Developing an EMS is a good business strategy because it reduces environmentalcosts from fines and other legal actions in the event of environmental contamination.
Benefits
4.First and foremost, businesses benefit by protecting the environment throughcost savings. An efficiently run business that generates minimal waste savesmoney. Second, a business that is conscious of its role in the environmentcreates environmental awareness in its employees, providing additional benefits.Finally, businesses which follow green practices portray a good message toconsumers who may be more likely to support a business that considers its rolein the environment.

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2. Explain the relevance of ecological issues to business environment
(10 Marks)

Businesses found that care for environment can be good for their bottom lines.
•Caring for the environment enhanced their reputation and brand image
•More sales and greater customer loyalty
•Easier access to capital as even lending banks began to consider environmental issues
•Attracting talented employees who can choose their employers Naturally, the impact on the bottom line was too great to persist with the old ways. Evaluating environment problems and their management became important components of business strategy development. The move for Corporate Social Responsibility (CSR) includes looking at the environment effects of business actions and taking steps to eliminate or minimize adverse impacts
Economy
GDP per capita
economic growth
unemployment rate
inflation rate
consumer and investor confidence
inventory levels
currency exchange rates
merchandise trade balance
financial and political health of trading partners
balance of payments
future trends
Government
political climate - amount of government activity
political stability and risk
government debt
budget deficit or surplus
Legal
minimum wage laws
environmental protection laws
worker safety laws
union laws
copyright and patent laws
anti- monopoly laws
Sunday closing laws
municipal licenses
laws that favour business investment
Technology
efficiency of infrastructure, including: roads, ports, airports, rolling stock,hospitals, education, healthcare, communication, etc.
industrial productivity
new manufacturing processes
new products and services of competitors
new products and services of supply chain partners
any new technology that could impact the company
cost and accessibility of electrical power
Ecology
ecological concerns that affect the firms production processes
ecological concerns that affect customers' buying habits
ecological concerns that affect customers' perception of the company orproduct
Socio-cultural
demographic factors such as:
population size and distribution
age distribution
education levels
income levels
ethnic origins
religious affiliations
attitudes towards:
materialism, capitalism, free enterprise
individualism, role of family, role of government, collectivism
role of church and religion
consumerism
environmentalism
importance of work, pride of accomplishment
cultural structures including:
diet and nutrition
housing conditions
Potential suppliers
Labour supply
quantity of labour available
quality of labour available
stability of labour supply
wage expectations
employee turn-over rate
strikes and labour relations
educational facilities
Material suppliers
quality, quantity, price, and stability of material inputs
delivery delays
proximity of bulky or heavy material inputs
level of competition among suppliers
Service providers
quantity, quality, price, and stability of service facilitators
special requirements

Stakeholders
Lobbyists
Shareholders
Employees
Partners
EmployeesScanning these macro environmental variables for threats and opportunities requiresthat each issue be rated on two dimensions. It must be rated on its potential impacton the company, and rated on its likeliness of occurrence. Multiplying the potentialimpact parameter by the likeliness of occurrence parameter gives a good indicationof its importance to the firm.

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3.What do you understand by Business Social Responsibility ( B S R ). How
this can be used to improve the Business Environment. (10 Marks)

In your daily life, you perform a number of activities. For example, brushing your teeth, listening to your parents, showing respect to elders obeying traffic rules on road etc. Now why do you perform all these activities? It is because you live in a family as well as in a society and the members of your family as well as the society want you to do all of them. They do several things for you and expect something from you, which you must do. The expectations of the family or society become your obligations, which you need to fulfill. For example, taking care of your parents or children, keeping the road clean by not throwing garbage on it, etc. There are also obligations towards yourself, which you need to fulfill. For example, taking food timely, going to sleep early at night, etc. that keep you fit and takes care of your health. Now you fulfill all these obligations by performing certain activities which are called your responsibilities. Any responsibility you have, particularly towards members of the society with whom you interact or towards the society in general,are called your social responsibility.This is true in case of business also. As we know, every business operates within asociety. It uses the resources of the society and depends on the society for its functioning. This creates an obligation on the part of business to look after the welfare of society. So all the activities of the business should be such that they willnot harm, rather they will protect and contribute to the interests of the society. Social responsibility of business refers to all such duties and obligations of business directed towards the welfare of society. These duties can be a part of the routinefunctions of carrying on business activity or they may be an additional function of carrying out welfare activity.Let us take an example. A drug-manufacturing firm undertakes extensive research and thus, produces drugs which are qualitatively superior. It also provides scholarships or fellowships to the family members of its employees for studying abroad. We find, in both the cases, the drug-manufacturing firm is carrying out its social responsibility. In case of the former, it is a part of its routine business functionwhile in the latter case it is a welfare function.After getting some idea about the concept and importance of social responsibility of business let us look into the various responsibilities that a business has towardsdifferent groups with whom it interacts. The business generally interacts withowners, investors, employees, suppliers, customers, competitors, government andsociety. They are called as interest groups because by each and every activity of business, the interest of these groups is affected directly or indirectly.
•Responsibility towards owners
Owners are the persons who own the business. They contribute capital and bear thebusiness risks. The primary responsibilities of business towards its owners are to:
•Run the business efficiently.
•Proper utilisation of capital and other resources.
•Growth and appreciation of capital.
•Regular and fair return on capital invested.
•Responsibility towards investors
Investors are those who provide finance by way of investment in debentures, bonds,deposits etc. Banks, financial institutions, and investing public are all included in this category. The responsibilities of business towards its investors are:
•Ensuring safety of their investment,
•Regular payment of interest,
•Timely repayment of principal amount.
•Responsibility towards employees
Business needs employees or workers to work for it. These employees put their besteffort for the benefit of the business. So it is the prime responsibility of everybusiness to take care of the interest of their employees. If the employees aresatisfied and efficient, then the only business can be successful. The responsibilitiesof business towards its employees include:
•Timely and regular payment of wages and salaries.
•Proper working conditions and welfare amenities.
•Opportunity for better career prospects.
•Job security as well as social security like facilities of provident fund, groupinsurance, pension, retirement benefits, etc.
•Better living conditions like housing, transport, canteen, crèches etc.
•Timely training and development.
•Responsibility towards suppliers
Suppliers are businessmen who supply raw materials and other items required bymanufacturers and traders. Certain suppliers, called distributors, supply finished
products to the consumers. The responsibilities of business towards these suppliersare:

Giving regular orders for purchase of goods.
•Dealing on fair terms and conditions.
•Availing reasonable credit period.
•Timely payment of dues.
•Responsibility towards customers
No business can survive without the support of customers. As a part of theresponsibility of business towards them the business should provide the followingfacilities:
•Products and services must be able to take care of the needs of the customers.
•Products and services must be qualitative
•There must be regularity in supply of goods and services
•Price of the goods and services should be reasonable and affordable.
•All the advantages and disadvantages of the product as well as procedure to usethe products must be informed do the customers.
•There must be proper after-sales service.
•Grievances of the consumers, if any, must be settled quickly.
•Unfair means like under weighing the product, adulteration, etc. must be avoided.

Responsibility towards competitors
Competitors are the other businessmen or organizations involved in a similar type of business. Existence of competition helps the business in becoming more dynamic andinnovative so as to make itself better than its competitors. It also sometimesencourages the business to indulge in negative activities like resorting to unfair tradepractices. The responsibilities of business towards its competitors are
•not to offer exceptionally high sales commission to distributers, agents etc.
•not to offer to customers heavy discounts and /or free products in every sale.
•not to defame competitors through false or ambiguous advertisements.

Responsibility towards government
Business activities are governed by the rules and regulations framed by thegovernment. The various responsibilities of business towards government are:
•Setting up units as per guidelines of government
•Payment of fees, duties and taxes regularly as well as honestly.
•Not to indulge in monopolistic and restrictive trade practices.
•Conforming to pollution control norms set up by government.
•Not to indulge in corruption through bribing and other unlawful activities.

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4. Explain how the business in an organization can be regulated with regard
to the Organization’s Basic Objectives. (10 Marks)

Business may be understood as the organized efforts of enterprise to supply consumers with goods and services for a profit. Businesses vary in size, as measured by the number of employees or by sales volume. But, all businesses share the same purpose: to earn profits. The purpose of business goes beyond earning profit. There are:
•It is an important institution in society.
•Be it for the supply of goods and services
•Creation of job opportunities
•Offer of better quality of life
•Contributing to the economic growth of the country.Hence, it is understood that the role of business is crucial. Society cannot do withoutbusiness. It needs no emphasis that business needs society as much.

BUSINESS ENVIRONMENT
Environment refers to all external forces, which have a bearing on the functioning of business. Environment factors “are largely if not totally, external and beyond thecontrol of individual industrial enterprises and their managements. The businessenvironment poses threats to a firm or offers immense opportunities for potentialmarket exploitation.

ENVIRONMENT – BUSINESS RELATIONS
Business is the product of the technological, political-legal, economic, social –cultural, global and natural factors amidst which it functions. Three features arecommon to this web of relationship between business and its environment.
•There is symbolic relationship between business and its environment andamong the environmental factors. In other words, business is influenced by itsenvironment and in turn, to certain degree, it will influence the external forces.Similarly, political-legal environment influences economic environment and viceversa. The same relationship between other environment factors too.
•These environmental forces are dynamic. They keep on changing as years rollby, so does business.
•The third feature is that a particular business firm, by itself, may not be in aposition to change its environment. But along with other firms, business will be ina position to mould the environment in its favor.

IMPORTANCE OF ENVIRONMENTAL STUDY
The benefits of environmental study are as follows;
•Development of broad strategies and long-term policies of the firm.
•Development of action plans to deal with technological advancements.
•To foresee the impact of socio-economic changes at the national and internationallevels on the firm’s stability.
•Analysis of competitor’s strategies and formulation of effective counter-measures.
•To keep oneself dynamic.




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5. Describe in detail the different role played by the Government towards
enriching the business Environment. (10 Marks)
Environment of a business means the external forces influencing the businessdecisions. They can be forces of economic, social, political and technological factors.These factors are outside the control of the business. The business can do little tochange them.

Following features:
•Totality of external forces:
Business environment is the sum total of all thingsexternal to business firms and, as such, is aggregative in nature.
•Specific and general forces:
Business environment includes both specific andgeneral forces. Specific forces (such as investors, customers, competitors andsuppliers) affect individual enterprises directly and immediately in their day-to-day working. General forces (such as social, political, legal and technologicalconditions) have impact on all business enterprises and thus may affect anindividual firm only indirectly.
•Dynamic nature:
Business environment is dynamic in that it keeps on changingwhether in terms of technological improvement, shifts in consumer preferencesor entry of new competition in the market.
•Uncertainty:
Business environment is largely uncertain as it is very difficult topredict future happenings, especially when environment changes are taking placetoo frequently as in the case of information technology or fashion industries.
•Relativity:
Business environment is a relative concept since it differs fromcountry to country and even region to region. Political conditions in the USA, forinstance, differ from those in China or Pakistan. Similarly, demand for sareesmay be fairly high in India whereas it may be almost non-existent in France.

Importance of Business Environment
•Firm to identify opportunities and getting the first mover advantage:
Early identification of opportunities helps an enterprise to be the first to exploitthem instead of losing them to competitors. For example, Maruti Udyog becamethe leader in the small car market because it was the first to recognize the needfor small cars in India.
•firm to identify threats and early warning signals:
If an Indian firm findsthat a foreign multinational is entering the Indian market it should gives awarning signal and Indian firms can meet the threat by adopting by improvingthe quality of the product, reducing cost of the production, engaging inaggressive advertising, and so on.
•Coping with rapid changes:
All sizes and all types of enterprises are facingincreasingly dynamic environment. In order to effectively cope with thesesignificant changes, managers must understand and examine the environmentand develop suitable courses of action.
•Improving performance:
the enterprises that continuously monitor theirenvironment and adopt suitable business practices are the ones which not onlyimprove their present performance but also continue to succeed in the market fora longer period.

Dimensions of Business EnvironmentWhat constitutes the general environment of a business?
The following are the key components of general environment of a business.
•Economic environment
economic environment consists of economic factorsthat influence the business in a country. These factors include gross nationalproduct, corporate profits, inflation rate, employment, balance of payments,interest rates consumer income etc.
•Social environment
It describes the characteristics of the society in which theorganization exists. Literacy rate, customs, values, beliefs, lifestyle, demographicfeatures and mobility of population are part o the social environment. It isimportant for managers to notice the direction in which the society is moving andformulate progressive policies according to the changing social scenario.
•Political environment
It comprises political stability and the policies of thegovernment. Ideological inclination of political parties, personal interest onpoliticians, influence of party forums etc. create political environment. Forexample, Bangalore established itself as the most important IT centre of Indiamainly because of political support.
•Legal environment
This consists of legislation that is passed by the parliamentand state legislatures. Examples of such legislation specifically aimed at businessoperations include the Trade mark Act 1969, Essential Commodities Act 1955,Standards of Weights and Measures Act 1969 and Consumer Protection Act 196.
•Technological environment
It includes the level of technology available in acountry. It also indicates the pace of research and development and progressmade in introducing modern technology in production. Technology providescapital intensive but cost effective alternative to traditional labor intensivemethods. In a competitive business environment technology is the key todevelopment.
Economic Environment in India
In order to solve economic problems of our country, the government took severalsteps including control by the State of certain industries, central planning andreduced importance of the private sector.
The main objectives of India’sdevelopment plans were
:
•Initiate rapid economic growth to raise the standard of living, reduceunemployment and poverty;
•Become self-reliant and set up a strong industrial base with emphasis on heavyand basic industries;
•Reduce inequalities of income and wealth;
•Adopt a socialist pattern of development — based on equality and preventexploitation of man by man.
As a part of economic reforms, the Government of India announced a newindustrial policy in July 1991.The broad features of this policy were as follows:
•The Government reduced the number of industries under compulsory licensing tosix.
•Disinvestment was carried out in case of many public sector industrialenterprises.
•Policy towards foreign capital was liberalized. The share of foreign equityparticipation was increased and in many activities 100 per cent Foreign DirectInvestment (FDI) was permitted.
•Automatic permission was now granted for technology agreements with foreigncompanies.
•Foreign Investment Promotion Board (FIPB) was set up to promote andchannelise foreign investment in India.
Liberalization:
•The economic reforms that were introduced were aimed at liberalizing the Indianbusiness and industry from all unnecessary controls and restrictions.
•They indicate the end of the licence-pemit-quota raj.
•Liberalization of the Indian industry has taken place with respect to:
•Abolishing licensing requirement in most of the industries except a short list,
•Freedom in deciding the scale of business activities i.e., no restrictions onexpansion or contraction of business activities,
•Removal of restrictions on the movement of goods and services,
•Freedom in fixing the prices of goods services,
•Reduction in tax rates and lifting of unnecessary controls over the economy,
•Simplifying procedures for imports and experts, and
•Making it easier to attract foreign capital and technology to India.
Privatisation:
•The new set of economic reforms aimed at giving greater role to the privatesector in the nation building process and a reduced role to the public sector.
•To achieve this, the government redefined the role of the public sector in the NewIndustrial Policy of 1991

The purpose of the sale, according to the government, was mainly to improvefinancial discipline and facilitate modernization.
•It was also observe that private capital and managerial capabilities could beeffectively utilized to improve the performance of the PSUs.
•The government has also made attempts to improve the efficiency of PSUs bygiving them autonomy in taking managerial decisions.
Globalisation:
•Globalizations are the outcome of the policies of liberalisation and privatisation.
•Globalisation is generally understood to mean integration of the economy of thecountry with the world economy, it is a complex phenomenon.
•It is an outcome of the set of various policies that are aimed at transforming theworld towards greater interdependence and integration.
•It involves creation of networks and activities transcending economic, social andgeographical boundaries.
•Globalisation involves an increased level of interaction and interdependenceamong the various nations of the global economy.
•Physical geographical gap or political boundaries no longer remain barriers for abusiness enterprise to serve a customer in a distant geographical market.
Impact of Government Policy Changes on Business and Industry
•Increasing competition:
As a result of changes in the rules of industriallicensing and entry of foreign firms, competition for Indian firms has increasedespecially in service industries like telecommunications, airlines, banking,insurance, etc. which were earlier in the public sector.
•More demanding customers:
Customers today have become more demandingbecause they are well-informed. Increased competition in the market gives thecustomers wider choice in purchasing better quality of goods and services.
•Rapidly changing technological environment:
Increased competition forcesthe firms to develop new ways to survive and grow in the market. Newtechnologies make it possible to improve machines, process, products andservices. The rapidly changing technological environment creates toughchallenges before smaller firms.
•Necessity for change:
In a regulated environment of pre-1991 era, the firmscould have relatively stable policies and practices. After 1991, the market forceshave become turbulent as a result of which the enterprises have to continuouslymodify their operations.
Threat from MNC
Massive entry of multi nationals in Indian marker constitutes newchallenge. The Indian subsidiaries of multi-nationals gained strategic advantage.Many of these companies could get limited support in technology from their foreignpartners due to restrictions in ownerships. Once these restrictions have been limitedto reasonable levels, there is increased technology transfer from the foreign partners




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AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL


6. In the Business Environment context, explain how the Political and legal
Environment of business plays a vital role. Justify by bringing in suitable
examples. (10 Marks)

The Political / Legal / Regulatory Environment can be simply described as the lawsand regulations that business has to follow in order to make sure the businessowners do not get arrested, or have the business fined for noncompliance of someregulation.Laws are made by politicians - who enact these laws based on the likelihood they willget re-elected. The political environment is affected and effected by politicians whoin turn are influenced by changes and challenges in the social - culturalenvironment (languages, ethnicity, immigration etc.), challenges in the economicenvironment (currency exchange rates, corporate activity, unemployment rates) andalso to some extent the geographic environment in terms of how the region is laidout, rivers, mountains, proximity to other countries, weather, seasons etc.PurposeBusiness and corporations have gained the centre stage of economic activity almostall over the world. Even political life and cultural practices of increasingly largernumbers are influenced by the actions of corporations and business practices ingeneral. Hence, there is a need to look beyond the immediate, to understand thedeeper structures involved in the conduct of business. The purpose of this course isto situate business in its larger context and develop an appreciation for theinterrelationship of business and society. It also aims to situate institutions throughwhich business is conducted, like corporations, nation state and markets. Further,values like morality of profit, private property, free trade, etc. are of relatively recentorigin and their significance have varied over different period in world commercialhistory. Therefore there is a need to understand the historical context in which theseinstitutions and these values have originated and evolved.ClassesThe class discussions will primarily be based on real life cases or discussions withguest faculty. This will require that the student analyses the assigned readings,preferably in small groups, and comes prepared with his/ her analysis forpresentation in the class. Group/s should volunteer to initiate class discussion andmake a presentation of their analysis for a particular class.Learning in the class will primarily happen through discussions amongst theparticipants and NOT through ‘lecture’ by the instructor. Thus, it becomeseverybody’s responsibility to get into a constructive dialogue and not just look at anindividual as ‘provider’ of answers. A constructive dialogue means not only to speak,but also listen carefully and draw out some of the relatively quieter colleagues. Thisis not a course on oratory and hence what matters is QUALITY of your participation –in speaking, listening, explaining and critiquing.If you are coming to a class it is expected that you have prepared assigned readingand are ready with your case-analysis; some times you may be expected to doreadings after a guest has discussed an issue. Hence in normal circumstances I
expect you to be present in all the classes. If for special reasons you are not able toattend a particular class, I expect you to explain it in writing as it is not only that youare not attending the class as an individual but you are also depriving the rest of theclass from your views and analyses.I expect you to do whole lot of activities and preparations in groups. So please makegroups of 4 rights after the first class as per your choice.
Evaluation
Class Participation & Presentations (30%)As already explained class participation is a fundamental part of learning in thecourse. The purpose of class presentations is to initiate the discussion on thereading/ case. The presentation may be done by a group. Please come prepared withyour presentation and only present your analysis in not more than 10 minutes. Iwould prefer if you inform me in advance in case you want to make a presentation ina particular session.Project (50% - 10% presentation, 40% report)The purpose of the project is to work on any real life business issue which brings theinterconnections between business and society. The issue should be such that youcan examine its various facets and bring out the complexities involved at the sametime it must have a focus. Submit the project proposal by 18
th
Jan. I expect you tointeract with me regularly regarding your project.Take Home assignment (10%)It will be a group assignment.Reflective Note (10%)Take up any class discussion and reflect on it and develop the arguments/ debatefurther. Here I am looking for your views and analysis





Political (incl. Legal)   [ [Poltical] EST[Environment][Legal] ]

==========================================
-Tax policies
what tax  hinder the business and what  taxes  incentives  are available]

[ if  the  tax  policies are  liberal / incentivated,  businesses  will  add
expansion ]
========================================

-International trade regulations and restrictions
[ does  the  government    encourage  exports / with  high tariffs  on  imports]

[ if  the  exports  policies  are  liberal / incentivated,  businesses  will  add
expansion ]
------------------------------------------------------------------------------------------
[ if  the import  policies  are  liberal / incentivated,  local  mfg. businesses  will  
contract ]
======================================================
-Employment laws]
[ is the  government    encouraging  skilled  immigrants  with  temp. permits]

[if the government  relaxes the  rules on  skilled  migrants]

=======================================================
===================================================
-Interest rates & monetary policies
[ are  the  interest  rates    under control /  is there   a  sound  monetary  policies]

[ if  the  interest  rate  goes down/ the monetary  policies  are liberal,  
as the  demand  goes  up, businesses  will  add
expansion ]
----------------------------------------------------------------------------
[ if  the  interest  rate  goes  up ,  the demand  will  go  down
 businesses   will  downsize / cut cost  ]
===================================================
-Government spending
[is  government  spending  is  significant   and  is it   under control ]

[ if  the  government  increases  the  spending  on  infrastructures etc,
the  demand  goes  up  , businesses  will  add
expansion ]
==================================================
-Unemployment policy
[what  is  the  employment / unemployment  policies  of the government ]
=====================================================
-Taxation
[  has  the  taxation    encouraged  the  industry ]

[ if  the  taxation policies encouraged  the  industry,  businesses  will  add
expansion ]
=======================================================
-Income distribution
[is there   balanced   income  distribution   policy ]

[ as  the  income level  goes  up and  income  distribution  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ]
==================================================
-Education
[ what  are  the  education  policies /  is  it  successful ]

[ as  the  education level  goes  up and  income  distribution  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ]
=======================================================
Rate of technology transfer
[ is  the  rate  of  technology  transfer  is  speeding  up ]

[ as  the  rate of  technology  transfer  speeds up, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ]
=======================================================
(Changes in) Information Technology
[ is  the   information  technology    rapidly  moving  and  is  there  government  support]

[ as  the  IT  usage  increases, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ]

I  HAVE  TAKEN  ONE  OF  THESE  --HUMAN  RESOURCE  
AS AN  EXAMPLE.


Political (incl. Legal)  

==========================================
-Tax policies
what tax  hinder the business and what  taxes  incentives  are available]

[ if  the  tax  policies are  liberal / incentivated,  businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
========================================

-International trade regulations and restrictions
[ does  the  government    encourage  exports / with  high tariffs  on  imports]

[ if  the  exports  policies  are  liberal / incentivated,  businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
------------------------------------------------------------------------------------------
[ if  the import  policies  are  liberal / incentivated,  local  mfg. businesses  will  
contract ,  which means  the  impact  on   HR  

-less  RECRUITMENT/ SELECTION
-MORE TRAINING  to improve  efficiency / productivity  

======================================================
-Employment laws]
[ is the  government    encouraging  skilled  immigrants  with  temp. permits]

[if the government  relaxes the  rules on  skilled  migrants,
which  means  the impact  on  HR

-EMPHASIS  WILL  BE   ON FOREIGN   RECRUITMENTS.
-DEVELOPMENT  OF  OVERSEAS  CONTRACTS
-TRAINING  FOR THE  INCOMING  STAFF  ON   LOCAL CULTURE.
-TRAINING  FOR  MANAGERS   TO  MANAGE  DIVERSITY

=======================================================
Economic     

-Economic growth
[  what  is  the economic growth rate  /  what  are  the  reasons ]

[ if  the  economy  is on growth path,  businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
-COMPENSATION  NEEDS  REVISION
--------------------------------------------------------------------------------
[ if  the  economy  contracts/demand  drops,  businesses  will  reduce
volume ,  which means  the  impact  on   HR  

-less  RECRUITMENT/ SELECTION
-MORE TRAINING   TO  IMPROVE  EFFICIENCY/PRODUCTIVITY
-MORE INCENTIVATES   FOR   PRODUCTIVITY  GAIN

===================================================
-Interest rates & monetary policies
[ are  the  interest  rates    under control /  is there   a  sound  monetary  policies]

[ if  the  interest  rate  goes down/ the monetary  policies  are liberal,  
as the  demand  goes  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
----------------------------------------------------------------------------
[ if  the  interest  rate  goes  up ,  the demand  will  go  down
 businesses   will  downsize / cut cost  
 which means  the  impact  on   HR  

-less  RECRUITMENT/ SELECTION
-MORE TRAINING  for   efficiency / productivity  improvements
-EMPHASIS   WILL  BE  FOR  ''PAY  FOR  PERFORMANCE''.

===================================================
-Government spending
[is  government  spending  is  significant   and  is it   under control ]

[ if  the  government  increases  the  spending  on  infrastructures etc,
the  demand  goes  up  , businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
==================================================
-Unemployment policy
[what  is  the  employment / unemployment  policies  of the government ]
=====================================================
-Taxation
[  has  the  taxation    encouraged  the  industry ]

[ if  the  taxation policies encouraged  the  industry,  businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
=======================================================
-Consumer confidence
[ is  the  consumer  confidence   is   high/ strong and  if  not, why ]

[ as  the  consumer  confidence  goes up, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
==================================================
Social  

-Income distribution
[is there   balanced   income  distribution   policy ]

[ as  the  income level  goes  up and  income  distribution  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
==================================================

-Demographics, Population growth rates, Age distribution
[ what  is   population   growth  and  why ]

[ as  the  population  level  goes  up and  age  distribution  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
====================================================

-Lifestyle changes
[ are  there  significant  lifestyle   changes     taking  place--more  modernization/ why  ]

[ as  the  life style   goes  up and  more modernization   improvements,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
=========================================================

-Work/career and leisure attitudes
[ are  the  population      career  minded  and  are  seeking  better  lifestyle]

[ as  the  income level  goes  up and   workers  attitudes  changes,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
==================================================
-Education
[ what  are  the  education  policies /  is  it  successful ]

[ as  the  education level  goes  up and  income  distribution  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
=======================================================

-Living conditions
[ is the  living  conditions   improving  fast  and  spreading  rapidly]

[ as  the  income level  goes  up and  living  conditions  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
=========================================================
Technological  

==================================================
New inventions and development
[ are  new  inventions     being   encouraged  for  developments]

[ as  more  inventions are brought  out, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
======================================================
Rate of technology transfer
[ is  the  rate  of  technology  transfer  is  speeding  up ]

[ as  the  rate of  technology  transfer  speeds up, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
=========================================================
############################
7. Evaluate the advantages and disadvantages of FDI. What is your opinion
on the role of FDI in the Retail Sector? Justify your views with India's
experience in this sector. (20 Marks
What is FDI?
FDI stands for Foreign Direct Investment. When a foreign investor wants to incorporate a company in India or wants to invest in an existing company then such a transaction is known as a Foreign Direct Investment.
What is the principle of the law governing FDI in India?
One of the first questions which needs to be answered is what is the principle underlying the law of FDI in India. In other words, is the approach towards FDI an 'exclusive' one wherein the law prescribes the sectors/industries in which FDI is allowed and the ones in which it is not allowed?
Or is it an 'inclusive' one wherein FDI is allowed in general but only certain specified sectors/industries/types of entities are not allowed to have FDI? As FEMA is an enabling Act, it is the latter scheme of legislation which it follows i.e. there is a general permission for all types of entities to invest in most sectors in India and if the Government wants to put some restrictions / conditions on such investments, then the onus is on them to put such restrictions / conditions in the Act, Rules, Notifications, Circulars, Clarifications, Press Notes etc.
How should one look at FDI law in India?
Understanding this approach to the framing of the law, facilitates our study of the subject to the great extent.Now we can focus only on two aspects from the point of view of advising our clients viz .
i) What is possible / Can be made possible - Study the restrictions / conditions which the Government has imposed on FDI to suitably structure the investment
ii) How to do things - Study the important procedural requirements to understand how and where to file applications, the documentation required including certificates from CAs etc.
To summarise, the rule of the thumb is 'FDI is allowed unless stated otherwise'.
What are the three categories of FDI?
The three categories for the purpose of FDI are (a) Cases in which FDI is not at all allowed (b) Cases in which FDI is allowed with Government approval (c) Cases in which FDI is allowed without Government approval i.e. Auotmatic Route.
For category (a), we cannot do anything and the knowledge only helps us to confirm that the industry in which proposed investment is to take place is not in the Prohibited category.

If it is in categories (b) and (c) one has to look at various aspects, in terms of structuring the deal, especially from those angles which have a direct monetary impact on the business i.e. FEMA, Direct and Indirect Taxes, Stamp Duty etc.
Which are the rules and regulations governing FDI?
The law governing FDI is contained in Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000. The Regulations have been notified vide Notification No.FEMA 20/2000-RB dated May 3,2000. I will refer to these as the ‘Original Regulations’.
However these has been amended from time to time. One has to understand here that unlike Income Tax Act or Rules, wherein the amendments are incorporated in the Act/Rules itself, the RBI does not issue the amended Regulations every year. It issued notifications, circulars etc. which contain only the details of the amendments made and one has to thus read the Original Regulations along with ALL the notifications, circulars etc. in order to understand the current position.
What is the list of activities in which FDI is not allowed (Category 'a')?
Investments into India is not permissible in the following cases
1. Retail Trading
2. Atomic Energy
3. Lottery Business
4. Gambling and Betting
5. Housing and Real Estate business
6. Agriculture (excluding Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture and Cultivation of Vegetables, Mushrooms etc. under controlled conditions and services related to agro and allied sectors) and Plantations (Other than Tea plantations).

What is the list of activities in which FDI is allowed, but with prior approval of the Government (category 'b')?
1. Petroleum Sector (except for private sector oil refining), Natural Gas/LNG Pipelines
2. Investing companies in Infrastructure and Services Sector
3. Defence and Strategic Industries
4. Atomic Minerals
5. Print Media
6. Broadcasting
7. Postal Services
8. Courier Services
9. Establishment and Operation of Satellite
10. Development of Integrated Township
11. Tea Sector
For which industries / activities is FDI freely allowed i.e. where no permission of the Government required?
The list in this category contains three types of details:
a) Sector
b) Investment Cap
c) Description of Activity/Items/Conditions
The investment cap refers to the maximum percentage of shares that can be bought by the foreign investor. This is also known as the sectoral cap. If the investment fits within this limit then no permission is required. If the foreign investor wants to exceed this limit, then he will have to take the permission of the Government.
The list contains 23 entries. 22 of these entries are the names of Sectors whereas the 21st entry is the General entry that says that for any other activity other than the 20 mentioned above and other than those that are covered in categories A and B, FDI upto 100% is allowed under the Automatic Route. The list below gives the industries in which FDI is freely allowed. The figures in brackets are the sectoral caps.
Sometimes there are differential sectoral caps for the same industry but for different types of investors. For instance, In domestic airlines, NRIs can invest upto 100% and any other category of investor can only invest upto 49%. It should also be noted that there are various conditions which are also mentioned in the Regulations for each industry. Thus the automatic route under this category is allowed if the conditions are met.
1) Private Sector Banking (49%)
2) Non-Banking Financial Company (100%)
3) Insurance (26%)
4) Telecommunications (49%)
5) Petroleum Refining, Marketing, Pipelines (100%)
6) Housing & Real Estate (100%)
7) Coal & Lignite (100%)
8) Venture Capital Fund / Venture Capital Undertaking (100%)
9) Trading (51%/100% )
10) Power (100%)
11) Drugs & Pharmaceuticals (100%)
12) Roads and Highways, Ports & Harbors (100%)
13) Hotel & Tourism (100%)
14) Mining (51% / 74%)
15) Advertising (100%)
16) Films (100%)
17) Airports (74%)
18) Mass Rapid Transit System (100%)
19) Pollution Control (100%)
20) Special Economic Zones (100%)
21) Air Transport Services (49% / 100%)
22) Townships (100%)
23) Any other activity other than the ones mentioned above or not following in categories 'a' and 'b' above. (100%)
•   2 types of FDI:
  -GREENFIELD INVESTMENT
  -MERGERS AND ACQUISITIONS
  GREENFIELD INVESTMENT
•   direct investment in new facilities or the expansion of existing facilities
•   Increase competition in the market.
EX: Hyundai Motor Company goes ahead with a major greenfield investment in Nošovice in the Moravia-Silesia region of the Czech Republic.
MERGER AND ACQUISITIONS
•   Transfer of existing assets from local firms to foreign firms.
•   Assets and operation of firms from different countries are combined to establish a new legal entity.
EX: AIR INDIA AND INDIAN AIRLINES,
GTL- REDINGTON




THE BIG QUESTION-
GREENFIELD OR M&As
•   Both differ in level of control, resource commitment and risk.
•   High level entry mode preferred if firms possess global strategies and sound know-how.
•   Large & diversified companies prefer acquisitions.
•   R&D will prefer Greenfield.
•   Greenfield investment contributes to local capacity & intensifies competition.
•   Acquisition entry promotes monopoly.
•   Greenfield investment optimal only if large technological gap is there between competitors
BENEFITS OF INWARD FDI
•   Stimulation of National Economy
  Capital inflow and increase in GDP
  Stimulate domestic investment
•   Stability of FDI’s as compared to investment portfolio’s and loans
•   Infrastructural Development
Technology transfer
Technology diffusion
In particular Greenfield investment can stimulate
new infrastructure development and technology.
•   Increase in productivity
•   Stimulate competition
•   Stimulate domestic exports
•   Raise Wages , stimulate employment
-ETHICAL
-TRANSPARENT
ETC ETC


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Managing a Business

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Leo Lingham

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In Managing a business, I can cover all aspects of running a business--business planning, business development, business auditing, business communication, operation management, human resources management , training, etc.

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18 years of working management experience covering such areas
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24 years of management consulting which includes business planning, strategic planning, marketing, product management, training, business coaching etc.

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