IMPORTANT QUESTIONS

BUSINESS ENVIRONMENT
1. MEANINGS [ 2m*5=10 / 12 m]
a. Business environment - Aggregate of all forces, factors and
institutions which are external to and beyond the control of
individual business enterprise but exercise a significant influence on
functioning and growth of individual enterprise. Means all those
internal and external factors that have an impact on business
b. Environment analysis –
Process through which an org monitors and comprehends various
environmental forces so as to determine the opportunities and the
threats that lie ahead.
- Also known as environmental appraisal or environmental scanning
- 2 broad aspects: environmental search or monitoring
environment [leads to identification of various forces influence ent]
and environmental diagnosis or identifying opportunities and threats
[ judges these forces for their positive and negative impact.
c. Managing diversity

Our workforce, our customers, and our markets are increasingly

diverse.
To promote individual and organizational success, you must welcome
diversity and manage it well.
d. Strategic mgt
Strategic mgt is the formulation and implementation of plans and
carrying out of activities relating to matters which are of vital,
pervasive or continuing importance to total org
Involves formulation, implementation , review and control of
strategies for achieving company’s objectives and missions, this
cannot be done w/o thorough knowledge of company’s internal and
external env.
e. Competitive structure of industries
i. Threats of entry – tends to be high when industry profitable, barriers
low and expected retaliation from other is low. Bring new capacity,
desire to gain mkt share and resources
ii. Bargaining power of buyers – powerful customers compete by
forcing firms to reduce prices, improve quality of p&s and by playing
competitors against one another. When powerful grp of buyers ,
buyers mkt and profit of industry suffers
iii. Bargaining power of suppliers – by raising prices of rm and
components.
iv. Threats of substitutes – limit profit potential in industry by placing a
ceiling on price of firms an industry can charge
v. Rivalry among existing firms – most visible form of comp. firms in an
industry are interdependent as competitive actions of a firm affects
others and may be retaliated.
2. ENVIRONMENTAL ANALYSIS AND STRATEGIC MANAGEMENT [ process
of strategic management]
I. DEFINING BIZ MISSIONS AND OBJECTIVES
- Mission – fundamental unique purpose setting an orgs apart. And
identifies scope of its operations in terms of products and markets
- Represents biz philosophy and implies image which the org wants
to project.
- Corporate obj are end results- to be realized to achieve image.
- M&O lay foundation for SM, relate org to society, and state what
org sands for.
- Must seek answers to these, to define clearly M&O: what business
company in, what should co. biz be and who are customers. Can be
found by Env. Analysis.
- With changes in internal and external env., co. objectives to be
modified and redefined from time to time
II. SWOT ANALYSIS
- Corp appraisal – reveals strengths and weaknesses. Env analysis –
reveals O and T.
- Opp. Should be availed and impact of threats neutralized to
capitalize strengths and minimize weaknesses.
III. STRATEGIC ALTERNATIVES AND CHOICE OF STRATEGY
- May be several alt before org [continue, get out or expand]. No
org can choose all.
- Org to consider more promising alt in light of its M&O, SWOT
 - After proper evaluation and comparison, most suitable one is
chosen – becomes company’s strategy.
IV. IMPLEMENTATION OF STRATEGY
- Good strategy cannot lead to success, effective implementation
necessary.
- Detailed plans of action prepared and necessary systems and
resources raised to put strategy into action.
- Sound org structure, effective leadership, functional policies,
effective info system, sound control system, resource allocation
necessary for successful implementation
V. EVALUATION AND CONTROL OF STRATEGY
- TM ascertains whether choice implemented achieve goals.
- May fail due to unforeseen circumstances. Corrective actions
depend on cause of failure.
- More effective implementation, better analysis of internal and
external env & changes in org m & o – some actions
- Ongoing process – continuous monitoring req for suitable action
in time.
- Provides feedback whenever change in factors affecting strategy
3. SCOPE OF BUSINESS ENVIRONMENT/CLASSIFICATION OF BUSINESS
ACTIVITIES

1. INDUSTRY
- Concerned with production of goods and services.
- Used to refer to processed by which useful things are extracted
from environment, and transformed, processed, fabricated and
multiplied into other products
A. EXTRACTIVE INDUSTRIES
o Extract / draw out various products from natural sources
like earth, soil, water etc
o Products raised are provided by nature and collected by
human beings
o Agriculture, fishing, oil exploration etc
B. GENETIC INDUSTRIES
o Involve multiplying or reproduction of certain species of
plants and animals.
o Forestry, plant breeding, cattle breeding farms, fish farms,
commercial kernels
C. MANUFACTURING INDUSTRIES
o Conversion or transformation of RM and Semi FGs into FGs.
o Create form utitlity. Supply most of products for daily use.
o Goods supplied by them – factory prodn
TYPES:
i. ANALYTICAL – basic RM analyzed or separated into a
no. of products. Oil refinery – kerosene, gasoline,
petrol, diesel etc
ii. SYNTHETICAL – 2 or more material combined/mix
together to manufacture a new product. Cement
made from concrete, gypsum and coal.
iii. PROCESSING – engaged in processing of raw
materials through diff stages of production. Textiles,
sugar, steel etc.
iv. ASSEMBLING- various components brough together
to produced a FG. Automobiles, TV, watches
 D. CONSTRUCTION
o Engaged on erection of buildings, bridges, dams etc.
o Use products of Extractive industries and manufacturing
industries
o Create basic infra for development by employing process of
fabrication – products made/fabricated at fixed sites. Not
carried to mkt for sale
2. COMMERCE
o Commerce is an organized system for exchange of goods
and services b/w members of biz world. Bridges gap b/w
producers and consumers.
o Covers not only function of buying and selling and handling
goods but also many services w/c must be provided to
finance, insure, store and transport goods.
o Consists of trade and activities w/c facilitate trade.
A. TRADE
o Concerned w/ sale, transfer, or exchange of g&s. involves
buying and selling of g&s.
o Nucleus of commerce – all commercial activities revolve
around trade
o Superstructure of commerce built around trade
a. Internal/ home trade
o Concerned with b&s of goods within boundary of a
country.
o Payment made in cash or banking system.
o Also known as domestic or inland trade.
i. WHOLESALE TRADE – refers to purchase and
sale of goods of a specific variety in bulk.
Constitutes link b/w producers and retailers
 ii. RETAIL TRADE – sale of goods to ultimate
consumers. Serves as last link in chain of
distribution
b. International / Foreign trade
o Exchange of g&s b/w persons or org operating in 2 or
more countries.
o Involves use of foreign currency[forex].
TYPES:
i. IMPORT – purchasing from foreign countries for
use in domestic mkt.
ii. EXPORT – sale of domestic goods to foreign
markets
iii. ENTREPOT / RE-EXPORT TRADE- import of foreign
goods with a view to export them.
B. AUXILIARIES TO TRADE – ancillary services w/c facilitate
exchange of g&s
a. Transportation – carries goods from producers to trader
and to customers. Bridges geographical distances. Provides
wheel of commerce. Creates place utility
4. IMPORTANCE OF BIZ ENV IN MANAGING DIVERSITY [ notebook]
i. Lowers cost
ii. Better staffing
iii. Market advantage
iv. Problem solving
v. Creativity
vi. Flexibility
5. PROCESS OF ENVIRONMENTAL ANALYSIS
a) Environmental scanning
- Scanning – process of analyzing env. For identifying factors
which may influence biz.
- Purpose – identify emerging trends or early warning signals.
Such trends may evolve over time or appear suddenly.
- Alerts org to potentially significant forces in external
environment so suitable strategies can be taken before these
forces become critical.
- Scanning is basically exploratory in nature
- Many env factors influence biz operations, some of these may
not be relevant. Thus, critical and high priority factors must be
identified.
 - Ex – managerial philosophy, age, size, power, geographic
dimensions, types of biz or org influence selection of relevant
env factors.
b) Environmental monitoring
- Info from relevant env collected
- Once these identified, adequate data about these gathered to
ascertain emerging pattern and trends
- Follow up and deeper analysis of relevant env force identified
through scanning.
- Company records, publications, spying and verbal talks with
employees, customers, dealers, suppliers and competitors are
main sources of data
c) Environmental forecasting
- Process of estimating relevant events of future based on
analysis of their past and present behavior.
- Necessary to anticipate future events before any strategic
plans are formulated.
- Focus on future aspects of environment which affects org.
- Made for eco, social, political and technological elements.
- Techniques – time series analysis, econometric model, scenario
building, delphi method etc. used for forecasting
d) Diagnosis or assessment
- eco factors assessed in terms of their impact on org
- Some may entail an opportunity while other may pose threat.
- SWOT, ETOP etc. used for diagnosis.
UNIT 2
I. CAUSES [ 2m ]
A. POVERTY – notebook
B. UNEMPLOYMENT
1. FAULTY EMPLOYMENT PLANNING- 5yr plans not designed for
employ generation. Attack to solve problem missing. Thought eco
growth take care of unemployment problem.
2. EMPHASIS ON CAPITAL INTENSIVE PROJECTS- in labor surplus
eco, use of auto and sophisticated machines resulted in large scale
unemployment
3. EXCESSIVE USE OF FOREIGN TECHNOLOGY- due to lack of
scientific and technical research at home because of high cost.
4. LACK OF FINANCIAL RESOURCES- Expansion and diversification of
agri and SSIs suffered due to lack of FR. Accompanied by
increasing govt control of eco activities
5. SLOW GROWTH PROCESS- when country grows, prodn and
employ expands. In India, prodn expanded and employ
opportunities increased but not enough to solve problem of
unemployment
6. INCREASE IN LABOUR FORCE- due to population explosion stage
of Indian
C. INCOME INEQUALITIES:
1. Succession and inheritance – tfr of assets under law of
inheritance raises II
2. Ownership of assets – difference in land and property in rural and
financial assets in urban
3. Difference on innate qualities – differ in mental faculties,
intelligence and other abilities of mind and body. More capable
workers earn more than ordinary workers.
4. Difference in education, training and opportunities – people in
rich fams get better education and training, get better facilities
than poor – [semi]- illiterate, get low paid jobs
5. Burden of indirect taxes – adds to mkt price of good. Rich not
affected but poor adversely. Consumption level of poor goes
down, causes further gap
6. Economic development reasons: process of eco dev. Associated
with shift of working population from less productive agri sector
to more productive modern industrial sector [increase in rural-
urban inequalities] and benefits of eco dev in form of green rev in
agri sector gone only to rich farmers
 7. Increase in unemployment – eco dev increased emp
opportunities but it has lagged behind growth of labor force from
population increase. Un/under employed people risen – raised no.
of low-income earners. People on upper end of scale get higher
income
8. Unequal regional growth - some states achieve high rate of
growth rate some experience low growth rate. Thus, many states
continue to be poor and backward. Increased income disparities
9. Inflationary rise in price – as price rise, profit of capitalist and biz
class rise as sell output at higher prices, become rich. Workers get
fixed income. Increase in price lowers their purchasing power.
Come poorer in terms of their consumption level.
10.Credit policy – patronizes need of big industrial houses. Small
producer difficult to obtain loan. Benefit of agri credit enjoyed by
rich land owners at cost of marginal farmers and landless labors.
D. INDUSTRIAL SICKNESS
EXTERNAL
1. Personnel constraints. These are
a. Non-availability of skilled labour/manpower
b. Wage disparity in similar industries
c. General labour unrest
2. Marketing constraints. arises due to
a. Liberal licensing policies
b. Restrain of purchase by bulk buyers
c. Changes in global mkting scenario
d. Excessive tax policies by govt
e. Mkt recession
3. Production constraints. Arises due to
a. Shortage of RM
b. Shortage of power and fuel
c. High prices
d. EX-IM restrictions
4. Financial constraints. Arises due to
a. Credit restrain policy
b. Delay in disbursement of loan by govt
c. Unfavourable investments
d. Fear of nationalisation
 INTERNAL
1. Lack of finance. includes
a. Weak equity base
b. Poor utilisation of assets
c. Inefficient WC mgt
d. Absence of efficient costing and pricing
e. Absence of planning and budgeting
f. Inappropriate utilisation of division of funds
2. Wrong production policies. Includes
a. Wrong selection of site for prodn.
b. Inappropriate and bad maintenance of P&M
c. Lack of quality control
d. Lack of std R&D
3. Inappropriate personnel mgt. Includes
a. Poor wages and salary administration
b. Bad labour relations
c. Lack of behavioural approach causing dissatisfaction among
workers and employees
4. Inappropriate marketing policies. Includes
a. Wrong demand forecasting
b. Selection of inappropriate product mix
c. Absence of product planning
d. Wrong mkt research
e. Bad sales promotions
5. Ineffective corporate management. Includes
a. Improper corp planning
b. Lack of integrity in top mgt
c. Lack of coordination and control
REASONS FOR SICKNESS IN SSIs
1. PRODN RELATED
a. Faulty product mix
b. Backlog of prodn
c. Poor quality of end products
d. Delayed delivery schedule
2. FINANCIAL reasons
a. Low profitability, fund generation, share value
b. Poor liquidity
 c. Lack of credit facility, FR
d. Faulty credit util and steep cost structure
3. MARKETING REASONS
a. Poor mkting strategy
b. Imbalance b/w prodn and mkting
c. Lack of awareness of preferences, specific mkt
segmentation
d. Poor distribution network and mkt performance
E. CAPITAL FORMATION
i. Low level of income –
ability to save depends on level of income. In india, low, large prop of
pop earns sufficient to meet daily req. savings low – low PCI
ii. Demonstration effect –
desire of people to emulate or copy the consumption style of people
they consider superior
iii. Non realisation of saving potential from agri sector-
saving potential untapped, class of rich farmers grown due to GR ,
started indulging in conspicuous consumption
iv. Low saving in corporate sector –
pvt corp sector contributes little to domestic saving, does not
generate much resources for further investment due to low
efficiency, low profitability
v. Low public sector saving
due to increased unproductive expn of govt, financial burden of
subsidies and interest payments and many PSUs earn low profits or
incurring losses

II. MEASURES [ 5m each]

 POVERTY REMOVAL PROGRAMS
1. RAISE RATE OF ECO GROWTH
 2. RAPID INCREASE IN PER CAPITA INCOME
3. REDUCTION ON GROWTH RATE OF POPULATION
4. REDUCTION INEQUALITIES IN INCOME [ MRTP ACT]
 UNEMPLOYMENT – GOVT MEASURES [ notebook ]
1. AAJEEVIKA
2. BHARAT NIRMAN
3. MNREGA
4. SGRY – sampoorna grameen rozgar yojana
 INCOME INEQUALITIES
1. Effective implementation of land reforms
Govt intro various land reforms measures after independence.
Brought abt equal distribution of land holdings
Still more sincere and determined efforts – effectively implement land
reforms
2. Progressive taxation
People with higher income and wealth bear larger burden and those
with lesser income bear smaller burden of taxes
3. Expansion of public sector
Necessary to achieve socialist pattern of society.
Encouraged to stimulate eco dev and prevent concentration of
eco power and wealth. Expected to promote equitable
distribution of income and wealth
4. Policy of controlling concentration of industrial wealth –
major form of wealth in urban areas is industrial and
commercial wealth. Govt taken steps to prevent concentration
of such wealth:
 GOI passed MRTP act in 1969 – control concentration
of eco power and growth of large biz houses
 Intro of industrial licensing policy – prevent
concentration of ownership of industries and
commercial wealth
5. Policy of subsidies
to help poor and reduce income inequalities
govt provide some goods and services at a price lesser than
cost of production
 6. Social security schemes like Employee provident schemes,
employee insurance schemes, family pension schemes,
maturity benefit etc.
7. Special schemes for backward classes and areas – in field of
medical care, maternity, child health, family planning, mid-day
meals for school children etc. – to improve living conditions
and std of living
8. Setting up small scale and village industries – provide
employment to poor workers, artisans etc. and provide
livelihood to poor people.
9. Generation of employment opportunities- like Integrated rural
development programme, rural landless employment
guarantee programme, Jawahar rozgar yojana etc.
 INDUSTRIAL SICKNESS
PREVENTIVE

REMEDIAL
 CAPITAL FORMATION