16028 Business Environment!

8/2/2019 16028 Business Environment!

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Business Environment

Business Environment-Text and Cases, Cherunilam Francis, Himalaya Publishing House,Twentieth Revised Edition, 2011


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An overview of Business Environment

Constituents of Business Environment

Business and Society

Industrial Policies

Regulatory Framework

Financial System

Labour Environment

Economic Planning & Development

Global Environment

Latest Changes in Business Environment


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Def: The aggregate of all conditions, events, and

influences that surround and effect it can be

referred to as business environment

Determines the role of the enterprise and the

nature of task.

Determines role of the top management and also

its business policies.


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Components of Business Environment

Different environmental variables exist internally and externally to the

business enterprise

Environmental variables have a positive or negative influence on the

enterprise

Business environment consists of two sub-environments:

Internal environment

External environment consists of :-

Micro/Operating environment

Macro/General environment

Mutual relationships exist between these environments


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Importance

Helps an organization to develop its broad

strategies and long term plans.

Analyze competitors strategies.

Keeps the organization dynamic in approach.

Foresee the impact of socio economic changes at

the national and international level.

Adjust to the prevailing conditions.


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Internal factors

Factors contributing to Strength or weakness :-

Organizational resources

R & D ,and Technological capabilities

Financial capability

Marketing capability

Operations capability


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External Factors

Social Economic

Cultural Geographic

Technological Political

Legal Ecological

Govt. Policies Competitive Market

Condition Locational


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Environmental factors

Social Factorsbusiness is a social institution.

Social responsibility

Satisfy the needs and wants of society goals

Culture, Values, Tastes and Preferences, Social

Integration and Disintegration and so on.are part

of agenda of an organization.


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Economic Factors

Per Capita Income, National Income, Resource

Mobilization

Exploitation of Natural Resources, InfrastructureDevelopment, Capital Formation

Employment Generation, Propensity to Consume

(Luxury or Economic goods), IndustrialDevelopment


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Cultural Factors

Social and religious practices, education, knowledge

and cultural factors

Norms and beliefs

Social stratification (rural parts)


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Geographic Factors

important for global business managers

Geographic Location, Seasonal Variations, Climatic

Conditions

Industrial location policies of Government


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Technological Factors

Rapidly changing

R & D Activity (India must invest)

e.g. Foreign Investment upto 100% in Industries with sophisticated

technology.

Political Factors

Philosophy and approach of political party

Government interventions

Legal Factors

Industrial Licensing, Company formation laws

Laws regarding Industrial disputes, payment of wages, trade unionism,

Monopoly control, Foreign Exchange Regulation


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Ecological Factors

Ecological Imbalance due to change in environment and biotic

factors

Environmental protection and Preservation

Pollution Free Industrial Activity (Carbon Credit)

Legislations

Government Policies

Industrial Policy resolutions and Licensing Policies

Trade Policies, Labor Policies, Location Policies, Export

Import policies, Forex Policies, Taxation policies (Arab

Countries)


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Competitive Market Condition

Socialist centralized authority

Capitalist competitive forcesIndia a Mixed Economy

Location Factors

Taxation Policies

Subsidies


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Political Risk Stability

Government Effectiveness risk hindrance to reforms

Legal & Regulatory Risk slow

Macroeconomic Risk inflation, prices

Foreign Trade and Payment Risk

Export / import duties, tariffbarriers

Tax Policy Risk VAT, GST

Labor Market Risk

Financial Risk

Currency appreciation / depreciation Infrastructure Risk

Country Risk changes in monetary / fiscal policy


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Internal Environment

Within the organization

Factors controlled by the organization

Technology Advancement

Employee Attitude

5Ms Machine, Manpower, Money, Materials,

Management


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Business system/ processa structured, measured set of activities designed to produce a specific

output for a particular customer or market. It implies a strong emphasis on

how work is done within an organization, in contrast to a product focuss

emphasis on what. A process is thus a specific ordering of work activities

across time and space, with a beginning and an end, and clearly defined

inputs and outputs: a structure for action. ... Taking a process approach

implies adopting the customers point of view. Processes are the structure

by which an organization does what is necessary to produce value for its

customers.

Organisation of factors of production Processing Marketing of output

Logistics


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There are three types of business processes:

Management processes, the processes that govern the operation of a

system. Typical management processes include "Corporate

Governance" and "Strategic Management".

Operational processes, processes that constitute the core business

and create the primary value stream. Typical operational processes are

Purchasing, Manufacturing, Advertising and Marketing, and Sales.

Supporting processes, which support the core processes. Examples

include Accounting, Recruitment, Call center, Technical support.


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The Four Major Process Improvement Areas

Effectiveness

Efficiency

Internal control

Compliance to various policies


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Classification of business, industries

Agriculture and mining

Financial

Information businesses

Manufacturers

Real estate

Retailers and distributors Service businesses

Transportation

Utilities


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Classification of Industries

Based on nature of activity

Extractive Industries

Genetic IndustriesManufacturing Industries

Construction Industries

Service Industries

IT Industries


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Based on Competitive Structure

Monopoly(Monopsony/ bilateral monopoly)

DuopolyOligopoly

Monopolistic Competition (product differentiation)

Perfect Competition

Based on Size


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Based on Use

Basic Industries

Capital Goods Industries

Intermediate Industries

Consumer Goods Industries

Based on Input

Agro Forest

Marine Metal

Chemical


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Based on Proprietary

Public

Private

Joint

Co-operative


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Characteristics and goals of business

Advises on and supports decision making throughout the

organization.

Supports the management of risk and complexity.

Is valued by other parts of the organization for the support it

gives to their activities.

Is usually involved in the development and implementation of

strategy. Always advises managers on the business implications of data

it produces.

Plays an active role in decisions on the business portfolio.


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continued

Originates cost reduction strategies for the whole organization.

Is proactive in generating forward looking information to influence

business strategy.

Directly communicates with external stakeholders concerning business

performance.

Is involved in the organization's environmental, social and governance

performance.

Initiates and leads change.

Leads in the identification and assessment of new business opportunities.


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Characteristics of Business

Exchange of goods and services for Income

Recurring activities

Profit motive

Risks


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Goals of Business

Justify the organization

Provide direction

Basis for management by objectives Help strategic planning

Help coordination

Provide standards for assessment and control

Help decentralisation


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Environmental Analysis


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Techniques for environmental analysis

Scanning (Verbal And written information)

Monitoring (Spying / in-depth study)

Forecasting (anticipating the future )

Assessment


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Steps in Environmental Forecasting

Identification of relevant Environmental Variable

Collection of Information

Selection of forecasting Technique

Monitoring


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Types of Forecasting

Economic Forecast

GDP growth rate distribution of income

Structural changes in GDP per capita income

Investment & output trends price trends

Social Forecasts

population growth/decline age structure

Rural/ urban distribution migration

Factors related to family ethnic composition

Expenditure pattern social attitudes


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Political Forecasts

changes in political power/ political ideologies

Technological Forecast (TIFAC)


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Techniques for Environmental

Forecasting

Econometric Techniques

While extrapolations assumes that everything continues as in

the past, econometric model assume that only the relationshipremains the constant

use casual

relationship

casual relationships

then specified by

using domain

knowledge


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Trend Extrapolation

Simple linear relationship Non linear relationship

Scenario Development

Premising Method System Diagram Method

Critical Site Method The newspaper Headline Method

Logical Possibilities Method


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Judgment Models

Brain Storming

Delphi Method

Strategic Issues Analysis


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Importance of Business

Environmental Analysis Awareness

SWOT

Transformation of Industry

Risk identification

Strategy Formulation

Information


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Limitations of Environmental

Forecasting

Errors in selecting variable in the predictive model

Errors in selection of the functional forms for linking

the variables

Time & cost factor


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Economic Environment

Business fortunes and strategies are influenced by the

economic characteristics and economic policy dimensions. The

economic environment includes the structure and nature of

the economy, the stage of development of the economy,

economic resources, the level of income, the distribution ofincome and assets, global economic linkages, economic

policies etc


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Nature of the Economy

On the basis of per capita income

Low income $975

High income $11,906

Middle income $3,856

Developed/ developing economies

High income (oil exporting)Inequalities in distribution of income

Income elasticity of demand


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Transition economies

Liberalization

Macroeconomic stabilizationRestructuring and privatization

Legal and institutional reforms


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Structure of The Economy

Contributing sectors

primary, secondary, large, medium, small

Integration with the

global economies


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Economic policies

Industrial Policy

liberalization in 1991/ MRTP Act

Trade Policyliberalization of import policy

Foreign Exchange Policy

Fiscal Policy

Monetary policy


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Economic Conditions


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POLITICAL AND GOVERNMENT

ENVIRONMENT

The political environment includes factors such as the

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.


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Government consisting of three distinct sets of

powers

Legislature

Executive

Judiciary


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Functions of state

Opportunities for trade

Distributions of powers

Core functions such as Law and order Role of the State in development of industries

environment , financial and monopolies

Expansion in role play not only in the infrastructureand utilities but also in education and healthcare


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Classification of functions of State


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Impact of State


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Economic Role of the Government

Depend upon the type of role the govt. is playing

Capitalist

Communist Regulatory

reservation of the industries (IDR Act 1951)

ceilings on the profit margins, dividend

Indirect controls fiscal n monetary policy

Direct control are discretionary in nature


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Promotional Role

Building up the infrastructure in the developed / developing

countries

Entrepreneurial Role

Redefining role from public to the private sector

SOEs

Putting up capital-intensive projects

e.g. steel, capital goods, petrochemicals, fertilizers

Planning Role

utilization of the resources on the basis of available


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Trends in Political philosophies

Political and economic changes

USSR (Union of Soviet Socialist Republics)

Eastern Europe

Hostilities b/w countries affecting the business of firm in the

3rd countirs e.g Arab with Israel


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Government and Legal Environment

Standards for the products to be marketed

Children in the commercial advertisements

Advertisement of alcoholic liquor

Packaging containing statutory warning

Advertisement of baby foods


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Economic roles of Government of

India The Preamble

The Fundamental Rights

Fundamental duties

Directive principles

Freedom of Trade, Commerce and Intercourse Separation of Powers

Division of Power

Expansion in State Intervention


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Natural and Technological

Environment Natural Environment

resource available

location of business

climatic and weather conditions

Technological Environment

Hard/ Soft Technology

International communication

e- commerce


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Innovation

Radical

Incremental

Next- Generation


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Major reasons for new product failure

The better mousetrap no one wanted

Me- too product

Lack of marketing Environmental ignorance

Technological Dog product

Price crunch


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Product and Process Innovation

To make the product cheaper

It generally varies with the time

Because until the product design has been

standardized manufacturer cannot focus on

improving the production process that producesuch design


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Technology S-Curve

Technology Leadership and Followership

Technology and competitive advantage


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Source of Technological Dynamics

Innovation Drive of the company

Customer need

Demand condition

Suppliers offerings

Competitive Dynamic

Substitutes

Social Factors

Technical Facilities

Government Policy


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Time lags in Technology

Developing and developed

Obsolete technology


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IT revolution in Business Environment

Impact of Technology on Globalization

ICT and Marketing

Transfer of Technology

Promotion and Regulation


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Importance of Demographic

Environment

Age structure Gender

Income Distribution Family SizeFamily Life cycle Occupation

Education Social Class

Religion Race

Nationality Population size

e.g formation of EU


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Falling Birth Rate and Changing Age

Structure

Affecting the growth of the developed/developing markets

Shrinking the various types of markets, e.g. Baby product

Increasing the market for various industries such as Hotels,

airlines and restaurants

Large share of disposable income available

Type of labour homogeneous/ heterogeneous

Implications for the government

Depends upon the amount of population below the poverty

line


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Migration and Ethnic Aspects

Situation of different countries e.g. USA and Japan

Detroit, Miami, Silicon Valley

Changing economic shapes from Melting Pot to

Salad Bowl


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Societal Environment


Professionalization

Business Ethics

Business and Culture

Technological Developments and Social Changes


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Social Institution, performing a social mission and

having a broad influence on the way people live and

work together

Values

Viability

Public Visibility

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Professionalization

Acquiring specialized knowledge and skill for

management

Acquiring authority and freedom to take the right

decision

No ideological bias in the discharge of the functions

Decisions and actions guided by certain ethical

consideration

h


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Business Ethics

Not deceiving the customers

No Black-marketing

Not distorting or destroying the competition

Sincerity and accuracy in advertising, labeling and packaging

No unfair practices

Making accurate business records

Pay taxes and discharge other obligations

Ensure payment of fair wages

Refrain from secret payoffs to customers, suppliers,

administrators, politicians


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Role of Trade Associations in

Maintaining Business Ethics

Education and persuasion

Forming code of Ethics

Moral Sanctions


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Business and Culture

Cultural differences are the most significant and

troublesome variables encountered by the

multinational company

Meaning of culture

human product of social interaction

acceptable patterns for meeting biological and social needs

cumulative learning patterns

symbolic quality, and basic determinant of personality

El f l


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Elements of culture

Knowledge and beliefs

Ideals

Preferences

Organization of culture Social structure and integration of traits, complexes

and patterns

Stratification

Common institutes of Modern Culture

economic system, political administrative system, education

system, religion, family,

C l l Ad i


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Cultural AdaptationManner in which a social system or an individual fits

into the physical or social environment

adaptation to the oil prices

adaptation to the diseases

adaptation of a worker to the organization

Cultural Shock

Cultural Transmissiondropping some ideas and acquiring new traits

transmission is horizontal as well as vertical

i h b i


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Importance in the business

The role of advertising in the transmission

Media communication

Formulating promotional strategy

Identifying the reference group and their influence

Cultural Conformity

Either conform or deviate

Required knowledge and appropriate skill

Blind conformity

Cultural Lag

C lt l T it


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Cultural Traits

Low- Context and High- Context Cultures

importance of facts and figures

importance of relationships, atmosphere and

attitude

Masculine and Feminine Cultures

Monochronic and Polychronic Society

trends of the changing society


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Universalism vs. Particularism

Cultures with high universalism, focus on rules than

relationship

Deal is deal, no relationship

Individualism vs. Communitarianism

Neutral vs. Emotional

Specific vs. Diffuse

Achievement vs. Ascription


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Religion

Marketing of Beef products, type of food (slaughteredanimal/ bird for Muslims, Christians rituals)

Religion influencing the attitude towards work and

wealth Religion deciding the working hours and the

holidays and finding some days to be religious to

launch a new products

Introduction of promotional schemes

Handing of different industries in specific countries

e.g. Banking Industry in Islamic regions

Eth d i ti


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Ethnodomination

Domination of certain type of ethnic groups in some

particular trade

Languages

Problems of having different languages in one

country, e.g. three languages in Switzerland

40 languages in South America

200 languages in Zaire

40 ethnic groups in Kenya

Some of the same words having different meanings

or connotation in the different places

Fiera by Ford, Nova by Chervorlet


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Cultural and Organizational Behavior

Centralized vs. Decentralized Decision making

Safety vs. Risk

Individual vs. Group Reward

Informal vs. Formal Procedure

High vs. Low Organizational Loyalty

Cooperation vs. Competition Short-term vs. Long-Term Horizon

Stability vs. Innovation


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Other Social/Cultural Factors

Consumer preferences, habits and beliefs

share ofNescafe and Bru

use of bicycle

eating habits, preferences b/w countries

nature of use, occasion of use

values and beliefs associated with colour


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Etiquettes

hugging and kissing while embracing

laughter

handshake

properly responding to a guests invitation/treat

gift giving/ the way of giving it


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Some Social Trends

number of working women

number of double income households

unmarried couples living together

high divorce rate/ remarry

person living alone


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Technological Development and Social

Changes Impact of development and the industrial age

Changing social life and status of women

Changing the way we communicate and transport

Change in the cast system because of

industrialization

Use of the natural resources

Adverse effects on society


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Social Responsibility of Business

Classical and Contemporary Views

Social Orientation of Business

Factors Affecting Social Orientation

Responsibilities to Different Sections

The Indian Situation

Arguments for and Against Social Involvement

Social Audits


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Classical and Contemporary Views

Contemporary view of business is an ecologicalone

Meeting stakeholders expectations

Business is an economic entity and cannot jeopardize itsprofitability meeting social needs

Long term benefit for the society

Social power of the business to influence outcomes

Related to the size of the company and to the industry it is in

Tackle only those social problems in which it has competence

Willingness to absorb the burden and the cost


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Social Orientations of Business

Social Responsibility Models

A firm has the following four categories of obligations of

corporate performance

Economic LegalEthical Discretionary

Extent of Social Orientation and Involvement

Anti- Social Indifferent

Peripheral Socially Oriented

Committed and Very Active


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Factors affecting Social Orientation

Promoters and Top Management

Board of Directors

Stakeholders and Internal Power Relationship Societal Factors

Industry and Trade Association

Government and Laws

Political Influences

contined


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contined.

Competitors

Resources

Ethical Influences

The Golden Rule

The Utilitarian Principle

Kants Categorical Imperative

The Professional Ethic

The TV Test


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Responsibilities to Different Sectors

Responsibilities to Shareholders

develop and improve business

providing dividendsinnovation and growth

brand image

Responsibilities to Employees

fair wages best possible working condition

welfare facilities training and education


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Proper system for accomplishment and promotions

Proper recognition, appreciation and encouragementof special skills

Efficient grievance handling system

Opportunity for participating in managerial decisions

Responsibility to Consumers

to be efficient to do R & D

remove the imperfections in distribution

continued


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continued

stability in Price and after sale services

the product supplied with no adverse effects

to provide sufficient information

to avoid misleading the customers

redress genuine grievances

understand customer needs and to take necessary

measures

continued


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continued

Responsibility to the community

to prevent environmental pollution

to maintain ecological balance

rehabilitating the population displaced by the

operation of the business

overall development of the locality

to conserve scarce resources and developing

alternatives

continued


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continued.

to improve the efficiency of the business operation

contribution to research and developments

development of backward areas

promotion of ancillarization and small scale

industries

furthering social causes

contribution to the national effort to build up a

better society


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Arguments For and Against Social

EnvironmentFor

To use of the resources of the society, need to be

responsible for the society To become an integral part of social system, need

to care for the need of the society

Social involvement maintain healthy relationship Have favorable financial effects e.g. recycling

Sometime discourage additional govt. regulation

Public image

continued


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continued

Against

Business should confine to its own business

Involvement of social activities could affect the

economic health

High cost ultimately passed on to the consumer

Affecting the competitiveness of the company

Avoiding tax brackets

Dominance of business over the society

Social Audit


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Social Audit

Identification of the firms activities having

potential social impact

Assessment and evaluation of the social cost and

social benefits of such activities

Measurement of the social costs and benefits

Reporting


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Objectives and Benefits of Social Audit

Evaluate the social the social dimensions of the

performance of the company

Accurate identification of requirements Prioritization of developmental activities as per

requirements

To take measures to improve the socialperformance of the company

Public Visibility

Boost the public image

M th d f S i l A dit


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Methods of Social Audit

Social Process Audit

Financial Statement Format Audit

Macro-Micro Social Indicator Audit

Constituency Group Audit

Partial Audit

Comprehensive Audits Corporate Rate approach


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Obstacles to Social Audits

Yet to gain wide acceptance and appreciation

Non availability of well accepted methodology

available

No agreement as to the items to be included

Impossible to quantify the social costs and benefits

of different activities

May be resistance within the company

Fear of dismal or unsatisfactory picture that may be

presented by the social audits



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Responsibility of the corporate sectors

Public vs. Private sector

Consumer Rights


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Consumer Rights

The increase in the consumer awareness leads to

growth of consumerism and growing demand of

consumer protection

Right against exploitation by unfair trade practices

Right to protection of health and safety from the

goods and services the consumer received

Right to be heard if there is any grievance or

suggestion

Right to get the genuine grievances redressed


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Right to be informed about

quality and performance standard

ingredients of the products

operational requirements

possible adverse effects

other relevant facts concerning the product

right to choose the best from a variety of offers Right to a physical environment that will protect

and enhance the quality of life


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Exploitation of Consumer


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Exploitation of Consumer

By stimulating the weak points and the soft corners

of their mind

Misleading, false or deceptive advertisements

Deliberately giving the half truths

Projecting the potency of the drug, without

elaborating the risks

Consumerism


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Consumerism

The dedication of those activities of both public and

private organizations which are designed to protect

individuals from practices that impinge upon their

rights as consumershas the following important role to play

Consumer Education

Product Rating

Liaison with Government and with Producers

Utility of Consumerism


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Utility of Consumerism

Producers and the sellers will not take the

consumer for granted

Provide feedback for the business

Minimize the imperfections on the distribution

front

Make the government more responsive

Consumer Protection


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Consumer Protection

The Business

The Government

UN Guidelines

Different Government ActsSherman Act and the Clayton Act of the USA

Federal Act of Switzerland

Act Against Restraint of Competition of SpainFederal Trade Commission (FTP)

The consumer

Non-Governmental Organizations


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UN Guidelines for the Consumer

Protection Objective

to assist countries in protecting the consumers

to facilitate production and distribution

to encourage high level of ethical conduct

to assist countries in curbing abusive business practices

to facilitate the development of independent consumer groups

to further international cooperation

to encourage the development of market conditions

continued..


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General Principles & Guidelines

Physical safety

Promotion and protection of consumers economic

interest

Standards for safety and quality of consumer goods

and services

Distribution facilities for essential consumer goods

and services

Consumer redresses

Education and information Programs

Consumer Protection and


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Consumer Protection and

Consumerism in India

Plight of the Indian Consumer

Short supply of many goods and services

Lac of effective competition

Unfamiliarity of the consumer with product features

Low literacy and unsatisfactory information

Legal system in India Consumerism not well organized and developed

Poor performance of Public Sector monopolies

Implementation of standards

continued.


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Government Measures

Statutory regulations

Competition Act Industries Act

Essential commodities Act Prevention of food Adulteration Act

Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act

Trade Marks and Merchandise Marks Act Sale of Goods Act

Indian Patents and Design Act Agricultural Products Grading and Marketing Act

Indian Standard Institutes Certification Act Standard Weights and Measures Act

Import and Export Control Act Packaged Commodities Order

Price and Stock Display Order Consumer Protection Act

Growth of Public Sectors

Consumerism

Continued..


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Opportunity for Industry

Importance of Marketing

Sharing of information with the consumers

Testing the safety of the products Dealing with the consumers complaints

Overplaying the claims

Investments in R & D


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Corporate Governance


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p

Governance is the process whereby people inpower makes decisions that create, destroy or

maintain social system, structures and processes

To make the balance between economic and socialgoals and between individual and communal goal

To align as nearly as possible the interest of

individuals, corporations and society Corporate Governance is concerned with the value,

vision and the visibility


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Reasons for the Growing demand of

Corporate Governance While companies grew phenomenally, accounting

standards went haywire

Investors suffers on account of unscrupulousmanagement of the companies

To pay adequate attention to redress investors

grievances Timely dissemination of information

Securities market regulations

Necessitatin Facilitatin set of factors


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Importance of Corporate Governance Prerequisite

Regulatory and Voluntary Actions

Organization for Economic Cooperation and Development(OECD)

Fairness,

Transparency,Accountability and

Responsibility

d f l


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Recommendation of Birla Committee

Mandatory recommendations

Applicability

Board of Directors

combination of executive and non-executive

non-executive at least 30% (if one of them is chairman)

non-executive at least 50% (if one of them is MD and chairman)

Independent Directors


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Audit Committee and Remuneration Committee

Accounting Standards and Financial Reporting

Management

assisting in the decision making process

implementation of policies and code of conduct

day to day affairs

Information System

compliance to all regulation

Services to shareholders

Effective internal control


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Shareholder

General Body Meetings

Rights of the shareholders

Conclusion

various steps taken by SEBI

Disclosure of the IPO

Information in directors reports

Declaration of quarterly results

Mandatory appointment of compliance Officer

Copy of complete balance sheet

Guidelines for preferential allotment

Providin fare and trans arent framework

Industrial Policies and Regulations


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Industrial Policies and Regulations

Indicate the restrictive role of the public, private,

joint and cooperative sectors and underlined the

national priorities and the economic development

Industrial development and thereby the economic

development to a very significant extent

Industrial policy upto 1991


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Reservation of industries

Dominance of public sector

Industrial Policy Resolution of 1956

Entry and growth restrictions

Restrictions on foreign capital and technology

The new industrial policy


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Objectives

Redefinition of public sector

Liberalization of foreign investment

Related measures

Evaluation of the New Policy


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Government stand on the privatization is not clear

Policy and the procedural systems in India are very

complex for foreign businesses

Process of deregulation and decontrol by the

governments

Industries Development and


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Industries Development and

Regulation Act (IDRA) Objectives

to take necessary steps for the development of industries

to regulate the pattern and direction of development

control of the activities, performance and results of industrial

undertakings

continued..


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Main Provisions

Development Measures

Regulation of Entry and Growth

Supervision and Control

Take over of Management

Price and Distribution ControlExemptions

Industrial Licensing


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Issuance of letter / letter of intent

Level of investments

The New Policy - Industries for which the licensing iscompulsory

Distillation and brewing of alcoholic drinks

Industries using Tobacco/ Tobacco substitute

Electronic Aerospace and defense equipment

Industrial explosives including detonating fuses, safety fuses,gun powder, nitrocellulose and matches

certain specified hazardous chemicals

Locational Policy

Public Private Joint and


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Public, Private, Joint and

Co-operative Sectors

Public Sectors


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Objectives

To help in rapid growth and industrialization

To earn ROI and thus generate resources for

development

To promote distribution of income and growth

To create employment opportunities

To promote balance regional development To assist development of small scale and ancillary

To promote import substitute

continued..


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Growth and performance of Public Enterprises

Industrial Policy Resolution

Major of the Central public Sector investment wasin steel, coal, minerals & metals, power and

petroleum sectors

Comparison of Investment vs. Profit in PSEs Factors involved in the unsatisfactory growth of

Public sector

New Public Sector Policy


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New Public Sector Policy

Many public enterprises becoming a burden

Withdrawal of public sector from

industries based on low technology

small scale and non- strategic area

inefficient and unproductive areas

areas with low social responsibility

areas where private sector has developed sufficient

enterprise and purpose

continued


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The main element of current Government Policy

Bringing down the government equity in PSU to 26%

Restructure and revive potentially viable PSUs

Close down PSUs which cannot be revivedFully protect the interest of workers

Set up of the new department for Disinvestments

Better utilization of national resources

Public Sectors Rathnas


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O i ti f P bli E t i


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Organization of Public Enterprises

Ministry

Departmental Undertaking

financing from treasury

governmental control on budget, accounting and

audit

civil servants as staffing

suit against the government

continued


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Government Company

51% ownership

directors appointed by the government

a body corporate created under a general law

can sue and can be sued, enter into contract

created by executive decision of government

funding by the government

exempt from the personnel, budget, accounting and audit

employees are not civil servants

continued..


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Principal defects attributed to a governmentcompany

evading state owned enterprise responsibilities

regulating laws are reserved to government

declaration of profits and appointments reserved

extent of autonomy can be materially affected by

government agencies

Public Corporation


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Created by special laws defining its objectives,powers and privileges and its relationship with

government

Is a body corporate and can cue and can be sued,

enter into contracts and acquire property in its ownname

Usually independently financed

Not subject to the budget, accounting and auditlaws and procedures applicable to government

16028 Business Environment!

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Transcript of 16028 Business Environment!