Management Sem-II

UNIT-I (introduction)
a. Introduction to business Environment- meaning, scope & importance.
●INTRODUCTION:
●Business is a collective effort where a firm is engaged in commercial, industrial or professional
activities.
●The success of every business depends on adapting itself to the environment within it
functions. For example, with changes in the government policies, the business needs
to adapt itself with the new policies.
●Business environment includes those external factors and institutions over which it does not
have any direct control. These factors affect the functioning of an organization
directly or indirectly. These include customers, competitors, suppliers, government,
and the social, political, legal and technological factors, etc.
●The set of external factors, such as economic factors, social factors, political and legal factors,
demographic factors, and technical factors, etc., which are uncontrollable in nature
and affect the business decisions of a firm, is called business environment.

●The relationship between business and its environment:

i) Business is affected by its environment and, in turn, to some extent, it will also influence the
external factors. Similarly, economic environment influences socio- cultural environment and
vice versa. Other environmental factors also have same relationship with each other.
ii) The environmental factors are constantly changing. Similarly, business is also dynamic.
iii) One business firm, by itself, may not be able to change its environment. But together with other
businesses, it will be in a position to mould the environment in its favour. E.g.: plastic banned.

●DEFINITIONS:
● According to Keith Davis, Business environment is the aggregate of all
conditions, events and influences that surround and affect it.
● According to Reinecke and Schoell, the environment of business consists
of all those external things to which it is exposed and by which it may be
influenced directly or indirectly.

● SCOPE OF BUSINESS ENVIRONMENT:

●Internal and external environment: internal environment includes all those factors that are
within an organisation and impart strength or cause weakness in business. For example,
inefficient human resource, superior raw material, etc.
External environment includes those factors which are beyond the control of business and are
outside the organisation. They provide opportunities and pose threat to business. For example,
change in political conditions, technological change, etc.
●Specific and general environment: Specific environment includes external forces that directly
impact or influence organisations’ decisions and actions and are directly relevant to the
achievement of organisations’ goals. The main forces that make up the specific
environment are customers, suppliers, competitors and pressure groups.
General environment includes the economic, political/legal, socio-cultural, demographic,
technological and global conditions that affect organisations. External forces do not affect
organisations to a great extent, but organisations must plan, organise, lead and control their
activities taking into account these factors.
●Micro environment and macro environment: Micro environment impacts the working of a
particular business. It has direct impact on business activities. It includes customers,
suppliers, market intermediaries, competitors, etc. These factors are controllable to some
extent.
Macro environment is general environment that impacts the working of all businesses. It is
uncontrollable and influences indirectly. Political conditions, economy, technology, etc., come
under macro environment.
●Controllable and uncontrollable environment: All those factors which are governed by business
 come under controllable environment. Internal factors are treated as controllable factors, like
men, material, machine, money, etc.

● IMPORTANCE OF BUSINESS ENVIRONMENT:

●Identification of business opportunities: Many opportunities are provided by business
environment to the organisation. Scanning business environment would help business get
the first mover advantage. If changes are analysed carefully, then they can be the reason for
business success.
●Optimum utilisation of resources: Resources like raw material, machine, money, labour, etc., are
input for business. All these inputs are provided by environment to the business firms for
carrying out their activities and also expect something in return.
●Identification of threat and early warning signal: Business can recognise the threat by
analysing the change taking place in the environment. For example, if any new multinational
company is entering the Indian market, the manager of an Indian firm dealing with same
product as that of the multinational company should take it as a warning signal. Before the
MNC launches its product, the manager should implement measures, such as improving the
quality of his product and heavy advertisement.
●Coping with the rapid changes: To efficiently cope with these changes, managers must
understand the environment and should adopt appropriate courses of action at the right
time. It helps management become more sensitive to ever-changing needs of customers. As
a result, they are able to respond to such changes effectively.
●Meeting competition: This helps firms analyse competitors’ strategies and formulate their
strategies accordingly.
●Identifying firm’s strength and weakness: Business environment helps identify the individual
strength and weakness in view of the technological and global developments.
●Assisting in planning and policy formulation: Business environment brings both threats and
opportunities to a business. Having a good understanding of the business environment can
immensely help an organisation’s management in their future planning and decision-making
endeavours. For example, competition increases with the entry of new firms in the market.
The management has to draft new plans and policies to deal with new competitors.
Environment awareness provides intellectual stimulation to planners in their decision making.
They can make change in their plans efficiently and effectively.

b. Types of business environment – internal and external.

●VARIOUS COMPONENTS OF BUSINESS ENVIRONMENT ARE AS FOLLOWS:
●Internal environment: These are those factors or conditions that exist within an organisation
and affect its performance. These factors are controllable in nature and organisation
can try to change or modify these factors. Organisation’s resources like men, material,
money, method and machine come under internal environment. Various internal factors
are as follows:
● Value system: The values are the ethical beliefs that guide the organisation in achieving its
mission and objectives. It is framed by top- level managers like board of directors. The extent to
which the value system is shared by all in the organisation is an important factor contributing to
its success.
● Mission and objectives: The objective is the end towards which business activities are directed.
All businesses focus on maximisation of profit. Mission is defined as the overall purpose or
reason for its existence. A mission guides and influences an organisation’s decisions and
economic activities. An organisation can change or modify its mission and objective
accordingly.
● Organisation structure: The organisational structure is the hierarchy in business that define
roles, responsibilities and supervision. The composition of the board of directors, the
professionalism of management, etc., come under organisation structure and are important factors
influencing business decisions. For efficient working of a business organisation and to facilitate
prompt decision making, the organisation structure should be conducive.
●Corporate culture: Shared values and belief in an organisation which determine its internal
environment are called corporate culture. Organisation where there is strict
supervision and control results in lack of flexibility and unsatisfied employees.
The sets of values that help members understand what organisation stands for
how it does work, what it considers, cultural values of business forces of
business, and so on. It helps in direction of activities.
●Human resources: Human quality of a firm is an important factor of internal environment.
Skills, qualities, capabilities, attitude, competencies and commitment of its
employees, etc., could contribute to the strengths and weaknesses of an
organisation. Organisations may find it difficult to carry out modernisation and
redesigning because of resistance by its employees.
●Physical resources and financial capabilities: Physical resources, such as plant and
equipment, facilities and financial capabilities of a firm determine its
competitive strength which is an important factor for determining its efficiency
and unit cost of production. Also research and development capabilities of a
company determine its ability to introduce innovations which enhance the
productivity of workers. Financial capabilities are company’s source of fund
generation.

●External environment: These are those factors and the conditions which are outside the
organisation and affect the performance of business. External factors are further
divided into micro environment and macro environment which are as follows:
● Micro environment: Those factors which have direct impact on business. The various
constituents under micro environment are as follows:
√ Suppliers of inputs: The suppliers of inputs are important factors in the external micro
environment of a firm. Suppliers provide raw material and resources to the firm. A firm
should have more than one supplier for proper inflow of inputs.
√ Customers: They are the buyers of firm’s products and services. Customers are an important
part of external micro environment because sales of a product or service are critical for
a firm’s survival and growth, so it is necessary to keep the customers satisfied.
√ Marketing intermediaries: intermediaries play an essential role of selling and distributing its
products to the final customers. Marketing intermediaries are an important link between
a business firm and its ultimate customers. Retailers and wholesalers buy in bulk and
sell business products and services to the ultimate consumer.
√ Competitors: Competitors are the rivalry in business. Competition can based on pricing of
products or based on competitive advertising. For example, organisations may sponsor
some events to promote the sale of different varieties and models of their products.
Business formulates strategies after analysing their competitor.
√ Public: Public or groups, such as environmentalists, media groups, women’s associations,
consumer protection groups, are important factors in external micro environment.
Public, according to Philip Kotler, is any group that has an actual or potential interest in
or impact on the company’s ability to achieve its objective.

● Macro Environment: These are the factors or conditions which are general to all businesses
and are uncontrollable. Because of the uncontrollable nature of macro forces, a firm needs to
adjust or adapt it to these external forces. These factors are as follows:
√ Economic environment: All those forces which have an economic impact on businesses are
called economic environment. It includes agriculture, industrial production, infrastructure,
and planning, basic economic philosophy, stages of economic development, trade cycles,
national income, per capita income, savings, money, etc., For example, low per capital
income will negatively impact business because people have less money to spend.
√ Political-legal environment: The activities of legislature, executive and judiciary play a vital role
in shaping, directing, developing and controlling business activities. Rules and
regulations, framed by the government, like licensing policy, polythene ban, etc., affect the
business. Business growth can be achieved by using a stable and dynamic political-legal
environment.
√ Technological environment: Systematic application of scientific or other organised knowledge
to practical tasks or activities is called technology. As it is changing fast, businessmen
should keep a close look on those technological changes for its adaptation in their
business activities.
√ Global or international environment: The global environment is also important for shaping
business activity. In the era of globalisation, whole world is a market. Business analyses
international environment to cope up with the changes.
√ Socio-cultural environment: People’s attitude towards work and wealth, lifestyle, ethical issues,
role of family, marriage, religion and education and also social responsiveness of
business affect the business.
√ Demographic environment: population size and growth, life expectancy of the people, rural-
urban distribution of population, the technological skills and educational levels of labour
force come under demographic environment. These features also affect the functioning
of organisations.
√ Natural environment: The natural environment plays an important role as it provides raw
materials and energy for production in a firm. Natural environment consists of
geographical and ecological factors a such as minerals and oil reserves, water and forest
resources, weather and climatic conditions and port facilities. These are very important
for many business activities. For example, in places where temperatures are high, the
demand for coolers and air conditioners is high. Also, demand for clothes and building
materials depends on weather and climatic conditions. Natural calamities like floods,
droughts, earthquakes, etc., immensely affect business activities.
Impact of government policy changes on business and industry:
1. Increasing competition:
2. More demanding customers:
3. Rapidly changing technological environment:
4. Necessity for change:
5. Need for developing human resources:
6. Market orientation:
7. Loss of budgetary support to public sector:

Nature of business environment:

a) Internal and external: internal can be controlled by an organisation e.g.: men, money,
material, machine, and method.
- External is uncontrollable. E.g.: political conditions, technologies, legal regulation etc.
b) Dynamic and ever changing: e.g.: technologies, government rules and regulation, socio-
economic conditions.
- business environment keep on changing frequently, which makes business dynamic.
c) Complexity of the environment: business environment cannot be easily analysed because
of too much complexity involved.
- environment consists of a number of factors, events conditions and influences, generation
from different sources which impact business, thus, making the business complex.
d) Inter- relatedness: factor of business environment is related to each other.
- E.g.: change in political parties will result in changing the government rules, fiscal policies,
market conditions, technology, etc.
- All the factors need to be scanned properly because these factors are inter-related to each other.
e) Uncertainty: these changes are uncontrollable.
- E.g.: in case of fashion industries, changes take place so frequently, economy could collapse
any time. Business come with the risk and so that the business needs to be flexibly.
f) Impact: means the effect of environment on business. It has long-term and short-term
impact.
- E.g.: different firms may get influenced differently from change in monetary policy.
g) Inter-dependence: a business firm and its environment are mutually interdependent.
-the economic status of a country affects the development of technology or it may change the
lifestyle of people.

c. Types of business organizations.

● Meaning:
-Each type of business organization offers distinct advantages and disadvantages depending
on factors such as size, ownership structure, liability, taxation, and management flexibility.
Choosing the right type of organization is crucial for achieving the business's objectives and
managing risks effectively.
-The term "business organization" refers to the formal structure and arrangement of people,
resources, and activities within a commercial enterprise. It encompasses the legal, financial, and
operational framework that defines how a business operates, makes decisions, and interacts
with its stakeholders, including owners, employees, customers, and the community. Essentially,
it outlines the systematic arrangement of components that enable a business to function
effectively and achieve its objectives.
There are several types of business organizations, each with its own characteristics,
advantages, and disadvantages. Here are the main types:
1. Sole Proprietorship:
-Description: A business owned and operated by a single individual.
-Characteristics: Simplest form of business organization, owner has full control and receives all
profits, but also bears all risks and liabilities.
-Advantages: Easy and inexpensive to establish, full control over decision-making, all profits go
to the owner.
-Disadvantages: Unlimited liability (personal assets at risk), limited access to capital, potential
for limited growth due to reliance on owner's resources.
2. Partnership:
- Description: A business owned by two or more individuals who agree to share profits and
losses.
- Characteristics: Partners contribute capital, share responsibilities, and jointly manage the
0business.
- Advantages: Shared financial burden and workload, diverse skills and resources, easier
access to capital compared to sole proprietorship.
- Disadvantages: Each partner is personally liable for business debts (unless it's a limited
partnership), potential for disputes and disagreements among partners.
3. Corporation:
- Description: A legal entity separate from its owners (shareholders) that can enter into contracts,
own property, and sue or be sued.
- Characteristics: Ownership is divided into shares of stock, managed by a board of directors
elected by shareholders.
- Advantages: Limited liability for shareholders (personal assets protected), easier access to
capital through sale of stock, potential for growth and expansion.
- Disadvantages: More complex and costly to establish and maintain (legal requirements,
governance), double taxation (profits taxed at corporate level and dividends taxed at personal
level).
4. Limited Liability Company (LLC):
- Description: Combines elements of partnership and corporation, offering limited liability to its
owners (members).
- Characteristics: Members have flexibility in management structure and profit distribution.
- Advantages: Limited liability for members, flexible management structure, pass-through
taxation (profits and losses reported on owners' personal tax returns).
- Disadvantages: Complexity varies by jurisdiction, not all states recognize LLCs, potential for
disputes among members.
5. Cooperative (Co-op):
 - Description: Owned and operated by a group of individuals or businesses (members) for their
mutual benefit.
- Characteristics: Members contribute capital, share ownership and control, and benefit from
products or services provided by the cooperative.
- Advantages: Democratic control (one member, one vote), shared costs and benefits, often
focused on community and social objectives.
- Disadvantages: Decision-making can be slow due to consensus-based governance, potential
for conflicts among members.
6. Nonprofit Organization:
- Description: An organization formed to serve a public or mutual benefit rather than to
generate profit for owners or shareholders.
- Characteristics: Operates under tax-exempt status, governed by a board of directors or
trustees.
- Advantages: Exempt from certain taxes, eligible for grants and donations, focused on social
or charitable missions.
- Disadvantages: Limited ability to generate profits, restricted activities and sources of funding,
compliance with regulatory requirements.

d. Risk assessment and business environment.

● Risk Assessment:
-Risk assessment is the process of identifying, evaluating, and prioritizing risks or potential
threats that could affect a business's objectives, operations, or projects. It involves analyzing
both internal and external factors that may lead to adverse consequences or opportunities. The
goal of risk assessment is to enable businesses to anticipate and mitigate risks effectively,
thereby enhancing decision-making and overall resilience.

● Key Steps in Risk Assessment:

1. Identification of Risks: Recognizing potential risks that could impact the business, such as
financial risks (like market fluctuations), operational risks (such as supply chain disruptions),
legal and regulatory risks, or reputational risks.
2. Risk Analysis: Assessing the likelihood and potential impact of each identified risk. This
involves understanding how likely it is for the risk to occur and estimating the severity of its
consequences if it does.
3. Risk Prioritization: Ranking risks based on their significance and potential impact on the
business. High-priority risks are those with a high likelihood of occurrence and severe
consequences if not managed properly.
4. Risk Mitigation Strategies: Developing and implementing strategies to minimize or eliminate
identified risks. This may involve preventive measures, risk transfer through insurance or
contracts, contingency planning, or diversification of resources.
5. Monitoring and Review: Continuously monitoring risks and reassessing their impact as
business conditions evolve. Regular review ensures that risk management strategies remain
relevant and effective.

● Business Environment:
-The business environment refers to the external factors and conditions that influence how
businesses operate and make decisions. It encompasses various elements, including economic,
social, technological, legal, and political factors, as well as competitive dynamics within the
industry.

● Components of the Business Environment:

1. Economic Environment: Economic conditions such as GDP growth, inflation rates, interest
rates, and employment levels impact consumer spending patterns, market demand, and
business investment decisions.
2. Social Environment: Social factors such as demographic trends, cultural norms, lifestyle
changes, and consumer preferences influence market behavior, product demand, and customer
expectations.
3. Technological Environment: Advances in technology, innovation, and digital transformation
shape industry trends, competitive capabilities, operational efficiencies, and opportunities for
business growth.
4. Legal and Regulatory Environment: Laws, regulations, and government policies at local,
national, and international levels affect business operations, market entry barriers, compliance
requirements, and industry standards.
5. Political Environment: Political stability, government policies, trade regulations, and
geopolitical events impact business confidence, investment decisions, international trade
relationships, and market access.

● Importance of Understanding the Business Environment:

- Strategic Planning: Helps businesses anticipate opportunities and threats, and align strategies
to capitalize on strengths and mitigate weaknesses.
- Risk Management: Enables proactive identification and mitigation of risks arising from
external factors, ensuring resilience and sustainability.
- Market Adaptation: Facilitates adaptation to changing market conditions and evolving
consumer preferences, enhancing competitiveness and market positioning.
- Compliance and Governance: Ensures adherence to legal and regulatory requirements,
minimizing legal risks and fostering ethical business practices.
- Decision Making: Provides a holistic view of the external landscape, supporting informed
decision-making across all levels of the organization.

In conclusion, integrating effective risk assessment with a comprehensive understanding of the

business environment enables businesses to navigate uncertainties, seize opportunities, and
achieve long-term success in a dynamic and competitive marketplace.
e. Environment scanning and monitoring – PESTLE framework.
●Environment Scanning:
-Environment scanning is the process of gathering information about external factors that could
impact an organization's operations, strategies, and decision-making. It involves systematically
analyzing various aspects of the business environment to identify opportunities and threats.
The goal is to stay informed about changes in the external landscape that could affect the
organization's performance and competitiveness.
●Meaning and Imporrance of Environment Scanning:
● The term ‘environment’ means surrounding near you, which includes all components of
environment like physical environment, social and governing environment.
● Physical environment consists of plants, land, water and all natural resources.
● Social environment consists of laboures, staff, management, suppliers, customer or all
other human resources.
● Governing environment are rules, regulations and policies of the government.
● The term ‘screening’ or ‘scanning’ means the process of evaluation or assessment of
anything with the purpose of gathering data on any subject matter and coming to a
conclusion.
● Thus, you can conclude that environment screening is a process in which an
organisation makes assessment or analysis of all the components of the environment
and screens their impact on its functioning, stability, growth and profits.

●For an effective environment screening, an organisation must follow the following steps:
1. Defining the type of business: first, the organisation should assess what type of business it
is dealing in and later on decide how environment will impact it. The same environment
affects the clothing business and food business differently.
2. Defining the scope of project: if screening is done for a particular project, then it is
necessary to define the scope of the project.the scope will decide how environment will
affect the project of the organisation.
3. Defining the type of environment: it is important to define what type of environment an
organisation is working in. it is important to consider all types of components of
environment such as physical, social or governing, and how the business will be affected
due to them.
4. Preparing a report: a detailed report should be made on how the organisation will be
affected by the surrounding environment.
5. Monitoring: environment is not a static thing. It keeps on changing its features and
characteristics. For e.g, employees keep on changing their jobs, customers keep on
changing their choices, government keeps on changing its policies, etc. thus, environment
monitoring is crucial for an organisation.

●PESTLE Framework:
The PESTLE framework is a tool used for environmental scanning. It categorizes external
factors into six broad categories, each represented by a letter in the acronym PESTLE:
1. Political Factors: These include government policies, regulations, political stability, and legal
frameworks that can influence business operations and strategies. Changes in government
policies or regulations may create opportunities (e.g., incentives for renewable energy) or threats
(e.g., new tariffs or trade restrictions).
2. Economic Factors: Economic factors encompass macroeconomic conditions such as GDP
growth rates, inflation, interest rates, exchange rates, and economic stability. These factors
impact consumer purchasing power, demand for goods and services, and overall market
conditions.
3. Social Factors: Social factors refer to demographic trends, cultural norms, lifestyle changes,
attitudes, and societal values. They influence consumer behavior, market preferences, product
demand, and workforce dynamics. For example, shifts in demographics (e.g., aging population)
may create new market opportunities or challenges.
4. Technological Factors: Technological factors include advancements, innovations, research
and development (R&D), automation, digital transformation, and technological infrastructure.
Changes in technology can disrupt industries, create new business opportunities (e.g., AI and
automation), or render existing products/services obsolete.
5. Legal Factors: Legal factors pertain to laws, regulations, and legal frameworks that
businesses must comply with. These include labor laws, environmental regulations, health and
safety standards, consumer protection laws, and intellectual property rights. Non-compliance
can lead to legal liabilities and penalties.
6. Environmental Factors: Environmental factors involve ecological and environmental
considerations, such as climate change, sustainability practices, environmental regulations,
resource scarcity, and ecological footprint. Businesses need to consider their environmental
impact and adapt sustainable practices to meet regulatory requirements and consumer
expectations.

● Importance of PESTLE Framework:

- Strategic Planning: Helps organizations anticipate and respond to changes in the external
environment, aligning strategies with emerging trends and opportunities.
- Risk Management: Identifies potential threats and vulnerabilities, allowing proactive measures
to mitigate risks and uncertainties.
- Opportunity Identification: Identifies new market opportunities, technological advancements,
and emerging consumer trends that can be leveraged for competitive advantage.
- Regulatory Compliance: Ensures compliance with legal and regulatory requirements,
minimizing legal risks and fostering ethical business practices.
- Decision Making: Provides a structured approach to decision-making by considering a
comprehensive range of external factors that impact organizational performance and
sustainability.

In summary, the PESTLE framework facilitates thorough environmental scanning and

monitoring by examining political, economic, social, technological, legal, and environmental
factors. This holistic analysis helps organizations stay proactive, adaptive, and strategically
aligned in a dynamic and evolving business environment.

f.SWOT Analysis.
 ● Meaning: -
- SWOT analyses refers to both the analysis of internal & external environments of an organization.
In this word “SWOT”, S stands for Strengths, W stands for weaknesses. Both these terms are
internal components of an organization. O stands for available Opportunities in the market & T
stands for the possible Threats in the market. These both terms are external components of the
organization.
-SWOT analysis is a strategic planning technique used to identify the Strengths, Weaknesses,
Opportunities, and Threats affecting an organization, project, or business venture. It provides a
structured way to evaluate these internal and external factors, helping to formulate strategies and
make informed decisions.
- By identifying and analyzing these four aspects, organizations can develop strategies that
capitalize on strengths, address weaknesses, exploit opportunities, and mitigate threats, thereby
enhancing their overall strategic planning and decision-making processes.

●Introduction: -
- SWOT analysis is a widely used strategic planning tool that helps organizations assess their
current position and formulate strategies to achieve their goals. By systematically evaluating
internal strengths and weaknesses alongside external opportunities and threats, SWOT analysis
provides a comprehensive framework for decision-making and strategy development.
- Originally developed for business analysis, SWOT has since been adapted for various
applications, including project planning, product development, and personal career planning. It
offers a structured approach to understanding both the internal capabilities and external factors
that influence an entity's ability to succeed in its endeavors.
- In essence, SWOT analysis serves as a foundational step in strategic management, enabling
organizations to leverage their strengths, mitigate weaknesses, capitalize on opportunities, and
navigate potential threats effectively. This systematic assessment not only aids in identifying key
areas for improvement but also in crafting actionable strategies that align with organizational
objectives.
-Overall, SWOT analysis remains a powerful tool for businesses and individuals alike, fostering
informed decision-making and strategic planning in an increasingly competitive and dynamic
environment.
1. Strengths: Internal attributes and resources that give an organization an advantage over
others. These could include unique skills, patents, strong brand reputation, or a loyal customer
base.
The term ‘strengths’ basically means the things you are good at or your capabilities. it means an
capabilities of an org for which it can gain strategic advantages from its competitors. Strength
is necessary for every org to gain competitive advantages. E.g:- good employees, low cost of
productive.
2. Weaknesses: Internal factors that may hinder an organization's performance or competitive
position. These could be deficiencies in skills, resources, outdated technology, or poor location.
are opposites of strengths. Weakness are competitive disadvantages of an org. are responsible
for downfall of an organisation. E.g. not having better marketing strategies in comparison to the
competors. The term ‘weakness’ also refers to the things in which the organisation is not good.
3. Opportunities: External chances to improve performance or expand. These could include
market trends, changes in consumer behavior, technological advancements, or new partnerships.
the term ‘opportunity’ means a change to grab on in a positive sence. This is a favaurably
condition present in the external environment, which should be grab by the organisation in order
to increase its strength and gaining competitive advantages. E.g. sudden rise in demand of
customers, new government policies in the favour of the organisation, emerging technologies,
etc.
4. Threats: External elements that could potentially harm an organization's performance or even
its existence. Threats could be new competitors entering the market, economic downturns,
changing regulations, or shifts in consumer preferences.
the term ‘threat’ means exposing vulnerability of something which might create an adverse
impact. In an external environment, if suddenly or even gradually some changes occur and these
are not in favour of the org, then these aare called threats to the organisation. E.g. a change in
perferences of customers, change in government policies, which are not in favour of the
organisation.

g. Porter’s five forces model.

●Meaning:
Porter's Five Forces Model is a framework developed by Michael Porter, a renowned economist
and professor at Harvard Business School. It helps businesses analyze the competitive forces in
an industry environment to understand the attractiveness and potential profitability of entering
or staying in a particular market.

●Porter's Five Forces:

1. Threat of New Entrants:
- This force assesses how easy or difficult it is for new companies to enter a market and
compete. Factors like barriers to entry (such as high capital requirements, regulatory approvals,
or strong brand loyalty of existing companies) can make it challenging for new entrants to
establish themselves.
- Example: The airline industry has high barriers to entry due to the need for significant capital
investment in aircraft and infrastructure.
2. Bargaining Power of Suppliers:
- Suppliers provide goods or services that businesses need to operate. The bargaining power
of suppliers refers to their ability to influence factors such as prices, quality, and availability of
inputs.
- Example: In the smartphone manufacturing industry, suppliers of key components like
processors or display panels may have significant bargaining power if they are few in number or
hold proprietary technology.
3. Bargaining Power of Buyers:
- Buyers (customers) have the power to influence factors such as prices, product quality, and
service levels. The bargaining power of buyers increases when they have many choices, low
switching costs between brands, or the ability to negotiate for lower prices.
- Example: Retail customers have high bargaining power in industries with many competing
brands offering similar products, like the fast food industry.
4. Threat of Substitute Products or Services:
- Substitute products or services are alternatives that fulfill the same need as a company's
offerings. The threat of substitutes depends on factors such as price-performance trade-offs,
switching costs for customers, and the availability of comparable alternatives.
- Example: Video streaming services pose a threat to traditional cable TV providers, as
consumers can switch to streaming platforms for entertainment.
5. Industry Rivalry:
- Industry rivalry assesses the intensity of competition among existing firms in a market.
Factors contributing to high rivalry include numerous competitors, similar products or services,
price wars, and aggressive marketing strategies.
- Example: The soft drink industry is highly competitive with major players constantly
launching new products, engaging in promotional campaigns, and competing for shelf space in
stores.

● Importance of Porter's Five Forces:

- Strategic Planning: Helps businesses understand their competitive environment and formulate
strategies to position themselves effectively.
- Risk Assessment: Identifies potential threats and challenges that could impact profitability and
market share.
- Decision Making: Guides decisions on market entry, pricing strategies, supplier relationships,
and customer engagement.
- Competitive Advantage: Provides insights into how businesses can differentiate themselves
and create value in a competitive market landscape.

In essence, Porter's Five Forces Model provides a structured framework for businesses to
analyze industry dynamics, assess competitive pressures, and make informed strategic
decisions to thrive in their respective markets.

UNIT-II (political, Economics, and Legal)

a. Political institutions- legislature, executive, judiciary role of government in business legal
framework in India.

In India, the governance structure revolves around three distinct branches:

The legislature, executive, and judiciary. The legislature, comprising the Parliament at the
national level and state legislatures at the regional level, is responsible for enacting laws that
regulate various aspects of society, including business activities. Through acts and regulations,
the legislature establishes the legal framework within which businesses operate, addressing
issues such as company formation, taxation, labor relations, environmental standards, and
intellectual property rights.

The executive branch, led by the government at both national and state levels, is tasked with
implementing and enforcing these laws. It oversees regulatory agencies and bodies that monitor
compliance with business regulations. Additionally, the executive formulates policies and
initiatives aimed at promoting economic growth, fostering entrepreneurship, and ensuring a
conducive environment for business operations.

The judiciary, as the third branch of government, interprets and adjudicates disputes arising
from business activities. It plays a crucial role in ensuring the enforcement of contracts,
resolving conflicts between businesses and stakeholders, and upholding the rule of law in
commercial matters. Through its decisions, the judiciary provides legal clarity and certainty,
which are essential for maintaining trust and confidence in the business environment.

Overall, the role of the government in the business legal framework in India is multifaceted. It
involves legislative efforts to enact laws, executive actions to implement regulations and
policies, and judicial oversight to uphold the rule of law and resolve disputes. By fulfilling these
functions effectively, the government aims to promote economic development, protect the
interests of businesses and consumers, and maintain a fair and transparent business
environment conducive to investment and growth.

b. Relationship between business and government.

●Abstract:
In a blended economy, the private sector constitutes the largest part of the economy. The
government’s role in such an economy is categorized into two: regulatory and promotional/
developmental roles. The regulatory role involves creating and enforcing measures to monitor
and regulate private sector activities to prevent restrictive practices and economic power
concentration, thus fostering economic growth.

●Introduction:
Government and business organizations are interdependent. In a global economy, businesses
drive economic growth, while governments shape business activities. Governments must create
a conducive environment for businesses, which in turn must comply with government
regulations to operate smoothly and ensure a level playing field. Both aim for economic stability
and growth, influencing each other in various ways for mutual benefit.

●How Business Organizations Influence the Government:

1. Personal Conducts and Lobbying:
- Corporate executives and political leaders often share social connections, creating personal
relationships that influence government policies.
- Businesses form groups to present their issues to government bodies formally.
2. Forming Trade Unions and Chamber of Commerce:
- Trade unions and chambers of commerce are associations of businesses with common
interests.
- They address common issues and engage in dialogue with government bodies.
3. Political Action Committees (PACs):
- PACs are organizations that solicit and distribute money to political candidates whose views
align with business interests.
- Wealthy executives often donate to candidates who support their economic views.
4. Large Investment:
- Large investments by companies can influence government policies, especially in developing
countries.
- Governments may create policies to attract foreign investment.

●How Government Influences Business Organizations:

1. Direct Influence:
- Governments set up rules, laws, and standards that regulate business activities.
- Agencies like the Central Bank, Food and Drug Administration, and Securities and Exchange
Commission monitor compliance.
2. Indirect Influence:
- Governments may provide tax incentives to encourage businesses to adopt certain practices,
such as environmentally friendly waste management.
- Policies may also incentivize businesses to establish operations in underdeveloped regions.

●Responsibilities of Government Towards Business:

1. Political Institutions:
- Prepare and implement laws ensuring smooth business operations.
- Provide a judicial system for resolving disputes.
2. Provision of a Peaceful Atmosphere:
- Maintain law and order to protect persons and property, essential for business success.
3. Provision of a System of Money and Credit:
- Establish a system of money and credit for business transactions.
- Regulate money and credit to maintain currency value.
4. Balanced Development and Growth:
- Ensure balanced regional development, full employment, and a stable economy through
optimal resource utilization.
5. Provision of Basic Infrastructure:
- Provide essential infrastructure like banking, finance, transportation, power, trained personnel,
and civil amenities.
6. Provision of Information:
- Offer valuable information about economic and business activities, scientific and
technological developments to aid business operations.
7. Assistance to Small Scale Industries:
- Support small-scale industries facing finance, marketing, technical, and infrastructure
challenges.
8. Transfer of Technology:
- Ensure discoveries from government research institutions are transferred to private industry
for commercial production.
9. Competition with Private Sector:
- Compete with private firms to ensure healthy competition, quality improvement, and price
regulation.
10. Licensing and Inspections:
- Inspect businesses to ensure quality and prohibit substandard goods.
- Issue licenses to competent businesses for useful activities.
11. Protection from Foreign Competition:
- Use subsidies, incentives, tariffs, and quotas to protect domestic businesses from foreign
competition.

●Conclusion:
 For a healthy economy, a positive relationship between government and business is crucial.
Mutual trust and cooperation are essential, as seen in Japan’s close government-business ties,
which contribute to their economic success. Both entities must work together, fostering a spirit
of partnership rather than hesitant association.

c. Business and economy- types of economic: capitalist, socialist and Mixed economy.
● Introduction:
-Economic environment of a country encompasses external factors which have a significant effect
on the creation and dissemination of wealth. The demand and supply of a firm are directly
influenced by such economic factors. From the financial point of view, it also justifies the viability
of a country regarding the carrying out of business practices.
-The economic environment of a firm comprises various external factors like economic conditions,
economic system and economic policies. A country’s economic condition can be explained in the
form of the income distribution, per capita income, economic nature, economic resources, and so
on.
-Demand is a very important element of the economic environment. The demand for products of a
firm is influenced by the confidence or insecurities of consumers and their buying ability. Hence,
the economic environment has a crucial role to play in the decision making of a business.
-The economic system acts as the basis for determining the degree of private business. There are
several types of economic system followed across nations. Some nations have free market
economies or capitalist economies whereas some have centrally planned economy or socialist
economy. There are also some countries which follow the mixed economy, i.e., carrying
characteristics of both capitalist and socialist economies.
● Kinds of economic system:
- system that encompasses the methods of production, distribution and exchange of goods and
services (excluding their consumption). The different economic systems differ on the basis of
means of establishment of ownership.
● Capitalist economy:
-Capitalism is an economic system in which the industries, trade and production means are
completely owned by private bodies. This type of economy is also known as a capitalist economy
or a free-market economy. This type of economy involves no governmental interference. There are
many developing as well as developed nations which follow the capitalist economy system such
as Germany, U.S., etc.
-The production task of a capitalist economy is completely controlled by firms and industries. The
market mechanism, decision-making process, the means of production carried out for the supply
of products in the market are owned by private organisations.
-In the words of Karl Marx, “capitalism is a particular mode of organisation of production which is
characterised by wage slavery, production of profit, and creation of surplus value”.
-as per Louks and Hoots, ‘capitalism is a system of theeconomic organisation featuresd by the
private ownership and the use for private profitof man-made and nature made capital.”
- In a free-market economy, there is no ownership of government as all the activities of production
are owned by private bodies. The productive activities are not controlled or planned by anyone
instead they are decided by the demand and supply of products and the price mechanism. In this
type of economy, the consumers are sovereign. If the demand for products exceeds the supply,
then prices increase and producers raise their level of production. On the other hand, if the supply
of products exceeds the demand, then the prices of products decrease and producers reduce their
level of production.
● Features of Capitalism:
Capitalism can be explained as the economy which utilises its capital optimally in the process of
production. Technically, in capitalism, capital and goods are privately owned by businesses or
individuals. Capitalism has the following features:
Private property: The setting up of private property acts as the basis of economic life in the
modern world. Therefore, private property is regarded as the terra ferma of capitalism. In
capitalism, it is a fundamental right of all the individuals to be the owner of private property.
 Large scale production: Industrial revolution gave a boost to capitalism along with the
commencement of large-scale production. The installation of large plants and the division of
labour resulted in increased levels of production. As a result, high production led to proper capital
utilisation and a huge amount of profits.
Profit institution: Profit institution is a significant characteristic of capitalism. Here, capitalists
earn profits by making investments. Therefore, the process of production is oriented towards
profit.
Competition: A capitalist economy has to face strong competition in the market. This results
from the artificial rise in the demand and reduction in the supply. Therefore, competition is
regarded as an indivisible constituent of a capitalist economy.
Price mechanism: In capitalism, the prices of goods and services are decided by their demand
and supply. Production cost is not taken into consideration while setting the prices of goods and
services.
Wage institution: Workers are exploited under the system of capitalism. The rates of wages of
workers are largely bargained. Here, the capitalist tries to extract maximum possible output from
the workers and pays very less wages in return.
Money and credit: Credit institutions sanction loan to capitalists for the purposes of investment.
Capitalists establish their business and generate profit on the basis of credit. It further assists the
capitalists in the expansion of their property.
Business organisation: Presence of large business organisations with widespread business
structures is another characteristic of a capitalist economy. Therefore, an enormous industrial
infrastructure can be set up by combining a huge amount of funds from them and similarly from
other shareholders too.
Market Economy: The process of production, distribution and exchange under a capitalist
economy is governed by the market forces. There is interference of government over such
activities. The economy of the market is greatly dependent on the law of demand and supply.
Hence, it is also referred to as a free or liberalised economy.
● Socialist Economy:
-Socialism is an economic system where ownership and regulation are under the government.
All the activities of production and other functions like allocation of resources, consumption,
distribution of income, investment pattern, etc., are under the direction and control of the
government. It is also referred to as the socialist or command economy. In contrast to
capitalism, socialism ensures public welfare and equality among people.
-The communist countries are the origin of socialist economies. In these nations, the common
interest of the entire community was preferred over the interest of the individuals. After the 1980s,
the number of communist nations started to reduce. But there are still some democratic nations
which are presently run by governments which are socialist-inclined. They have adopted some
components of a command economy. For example, India and France both function under the
planning system of the government.
-In socialism, enterprises which are owned by the government have limited access to incentives
for cost control since they cannot go past their policies of the business. This is against the
socialist economy’s objective which makes sure resource mobilisation for the society’s welfare.
Under socialism, private firms are restricted and no incentives are offered for their efforts to cater
to the needs of the consumers. Therefore, command economies are not innovative and dynamic
which may bring the economy to a standstill.
-In the words of Leftwitch, “In socialism the role of the state is central. It owns the means of
production and directs economic activity.”
As per H.D. Dickinson, “Socialism is an economic organisation of society in which the material
means of production are owned by the whole community and operated by the organs
representative of and responsible to the community according to a general economic plan, all
members of the community being entitled to benefit from the results of such socialised
production on the basis of equal right.
● Features of Socialism:
The salient features of a socialist economy are as follows:
Social ownership: In socialism, there is no private ownership since all the production means
such as banks, railways, mines, factories, farms, etc., belong to the society. A person can only
possess a private property by way of consumer goods, furniture, residence, and so on.
Social welfare: Social welfare is one of the crucial objectives of socialism. This is achieved
through proper resource utilisation and catering to the society’s needs and wants. It takes care of
the economy’s benefits as a whole instead of the needs of some individuals. Unlike a capitalist
economy, where means of production is profit oriented, in socialism, productive resources are
utilised in order to produce goods and services for the purpose of attaining social welfare. Here,
the production of necessary goods is given more significance instead of the luxury goods.
Central planning: Under socialism, all the activities of production and their associated goals and
plans are designed by the Central Planning Authority. As per these plans, various programmes
and objectives are implemented by the government.
Equality of income and opportunity: Socialism strives to remove or reduce disparities in income
and wealth and offers equal opportunity to every individual. Social ownership and production for
the welfare of the society and community abolish unequal distribution of wealth and income. It
also offers equal opportunity to every person by way of professional training, free education, and
so on. However, it is not possible to have absolute equality since capabilities differ from person to
person.
Classless society: Contrary to capitalism, socialism is a classless society, where there is no
division of society into classes like labour class or elite class, etc. Here, all the activities of
production are carried out by the community as a whole and, therefore class-conflict is very less
likely to happen.
● Mixed Economy:
-Mixed economy combines the characteristics of both capitalism and socialism. It is the
aggregate of both public and private ownership. A mixed economy offers private enterprises the
freedom to function and develop but also permits government interference in matters for
maintaining economic objectives. The combination of government interference and private sector
varies from one nation to another. India is a mixed economy and comprises all the relevant
characteristics of capitalism and socialism for the regulation and control of the economy.
-The decisions pertaining to economic planning and resources allocation is undertaken by the
Central Government. The economy’s overall growth and development depend upon the
achievement of its goals through collaborative efforts of both the private and public firms. In a
mixed economy, some areas are operated by private firms, whereas some areas are reserved for
the public firms. Also, there are few areas, where both private and public sectors work in a
collaborative way.
-As per Samuelson, “Mixed economy is that economy in which both public and private institutions
exercise economic control.”
- In the words of Pickersgill, “The primary difference between the mixed economy and market
socialism is the relatively greater importance of individual decision making, private property and
the reliance on market-determined prices to guide the allocation of resources. The mixed economy
differs from competitive capitalism with respect to the share of collective decision making in the
economy.”
● Features of Mixed Economy:
The main features of a mixed economy are as follows:
Co-existence of the public and private sector: In a mixed economy, both public and private
sectors operate independently but strive to achieve a single objective. Public sectors operate for
the society’s welfare while the private sector is oriented towards earning profits. Therefore, the
government has devised several economic policies in order to regulate and govern the economic
activities of the private sector. Such policies include monetary policy, fiscal policy, taxation policy,
etc.
Individual freedom: Government imposes restrictions for ensuring the welfare of the society.
Hence, manufacturers have to abide by these rules and regulations. For example, the government
might put restrictions on the production of harmful and hazardous goods. However, individuals
are free to buy any product. Therefore, despite all sorts of government control, people have the
freedom to purchase and choose the occupation or profession of their own choice.
Economic welfare: The primary purpose of a mixed economy is to ensure economic welfare.
This can be brought about by reducing regional imbalances and by offering opportunities for
employment. The government has taken several steps towards society’s upliftment. The
monetary and fiscal policies are designed to govern and control the economic activities of the
private sector.
Economic planning: The Central Government devises economic plans and direct the functions of
both the public and private firms in view of that. The public sector activities are directly regulated
by the government whereas different incentives and subsidies are offered to the private sector for
functioning as per the economic objectives.
Price mechanism: Price system of the economy is regulated by the price policy framed by the
government. For offering commodities at economical rates to the weaker sections of the society,
the government provides financial and economic aid to the producers. It offers subsidies to the
target groups and also provides material inputs below the market price or free of cost to various
firms. Therefore, under a mixed economy, people avail an enormous amount of benefits and
support from the government.
Free and controlled economic development: Mixed economy is regarded as the best alternative
to the socialist and capitalist economies. It attempts to eliminate all the issues and drawbacks
associated with the sustainable growth and development of the economy. It gives freedom of
occupation and choice as well as controls and governs the economic activities.
Government intervention: Under the mixed economy, the government can interfere in order to
stabilise the economy, particularly during a crisis. For example, during the global crisis of 2008,
the governments of the United States and other nations intervened into the affairs of the
economy for controlling and managing the effect of the crisis.

d. Economic growth and economic development- meaning, measures and factors affecting
growth and development.
●Introduction:
Economic growth and economic development are crucial concepts in understanding a country's
progress. While economic growth focuses on the increase in real national and per capita income
over time, economic development encompasses a broader spectrum of social, cultural, and
political changes that contribute to overall human well-being.

●Economic Growth:
Meaning:
- Economic growth is the process by which a country's real national and per capita income
increase over a long period of time.
- It signifies a quantitative increase in the output of goods and services within an economy.

Measures:
1. National Income: The total value of goods and services produced within a country.
2. Per Capita Income: Average income per person, a better indicator of living standards.
3. Real GDP: Measures the value of economic output adjusted for price changes (inflation or
deflation).

Factors Affecting Economic Growth:

1. Natural Resources: Availability and quality of natural resources like land, minerals, and water.
2. Capital Formation: Investment in physical assets like machinery, infrastructure, and
technology.
3. Technological Progress: Innovations and improvements in production methods.
4. Human Resources Development: Education, health, and skill development of the workforce.
5. Population Growth: Can provide labor supply but must be balanced to avoid overpopulation.
6. Social Overheads: Infrastructure such as schools, hospitals, and transportation systems.
7. Political Stability: A stable and transparent government that fosters investor confidence.
8. Social and Psychological Factors: Attitudes towards work, entrepreneurship, and cultural
values.

●Economic Development:
Meaning:
- Economic development is a sustained improvement in the material well-being of society,
encompassing economic growth as well as social, cultural, and political changes.
- It includes equitable income distribution, poverty alleviation, and improvement in living
standards.

Measures:
1. Human Development Index (HDI): Combines life expectancy, education level, and per capita
income indicators.
2. Gender-Related Development Index (GDI): Measures gender equality in terms of life
expectancy, education, and income.
3. Human Poverty Index (HPI): Assesses deprivation in terms of life expectancy, literacy, and
living standards.
4. Literacy Rate: Percentage of the population that can read and write.
5. Infant Mortality Rate: Number of infant deaths per 1,000 live births.

Factors Affecting Economic Development:

1. Income Distribution: Ensuring equitable distribution of wealth and resources.
2. Employment: Creating job opportunities to reduce poverty and improve living standards.
3. Political and Institutional Framework: Effective governance, legal systems, and policies.
4. Cultural and Social Changes: Shifts in societal values, norms, and attitudes towards progress.
5. Technological and Institutional Change: Adoption of new technologies and improved
institutional structures.
6. Education and Health: Investment in human capital through better education and healthcare
facilities.
7. Environmental Sustainability: Ensuring development does not compromise the ability of
future generations to meet their needs.
8. Social Integration: Promoting social cohesion and reducing inequalities.

●Conclusion:
While economic growth focuses on quantitative aspects like income and output, economic
development encompasses broader qualitative changes that improve human well-being. Both
concepts are interrelated, with growth often serving as a means to achieve development.
Sustainable and inclusive policies are crucial for fostering long-term economic growth and
development.

e. Emerging sectors of Indian economy – SHES, MSHES, Start Ups.

●Emerging Sectors in Indian Economy:
●SHES (Small and Home-based Enterprises):
Importance:
1. Economic Contribution: Significant part of the GDP and employment generation.
2. Flexibility: Adaptable to market changes and consumer preferences.
3. Inclusivity: Provides opportunities for women and marginalized communities.

Limitations:
 1. Resource Constraints: Limited access to capital and advanced technology.
2. Market Reach: Challenges in accessing larger markets due to scale.
3. Regulatory Hurdles: Complex compliance requirements can be burdensome.

●MSHEs (Micro, Small, and Home-based Enterprises):

Importance:
1. Innovation: Drive innovation and creativity in products and services.
2. Employment: Generate a substantial number of jobs, especially in rural areas.
3. Export Potential: Contribute to exports, enhancing foreign exchange reserves.

Limitations:
1. Financial Access: Difficulty in obtaining credit from formal financial institutions.
2. Technological Advancements: Lag in adopting modern technology.
3. Skill Gaps: Often face a shortage of skilled labor.

●Start-ups:
Importance:
1. Innovation Hub: Drive technological advancement and innovation.
2. Investment Magnet: Attract domestic and foreign investments.
3. Economic Growth: Contribute significantly to economic dynamism and job creation.

Limitations:
1. High Failure Rate: Many start-ups fail within the first few years.
2. Regulatory Challenges: Navigating the regulatory environment can be tough.
3. Funding Issues: Securing sustained funding is often a challenge.

f.Impact of Business on Private Sector, Public sector and Joint Sector.

● Introduction:
Businesses play a crucial role in the economy, affecting various sectors differently.
Understanding the impact on the private, public, and joint sectors helps to appreciate their
distinct contributions and challenges.

● Private Sector:
Meaning and Definition:
- Meaning: The private sector consists of businesses and enterprises owned by private
individuals or groups.
- Definition: It encompasses companies, partnerships, and sole proprietorships that operate for
profit and are not controlled by the government.
Importance:
- Drives innovation and competition.
- Generates employment opportunities.
- Contributes significantly to GDP and economic growth.
Benefits:
- Encourages efficiency and productivity.
- Attracts foreign investment.
- Offers diverse goods and services to consumers.
Advantages:
- Flexibility in operations.
- Quick decision-making processes.
- High potential for profitability.
Disadvantages:
- Can prioritize profit over social welfare.
- Risk of monopolies and unfair practices.
- Susceptible to economic fluctuations.

● Public Sector:
 Meaning and Definition:
- Meaning: The public sector includes government-owned organizations and services.
- Definition: It comprises entities funded by the government to provide public goods and services.
Importance:
- Ensures essential services like healthcare, education, and infrastructure.
- Promotes social welfare and equitable distribution of resources.
- Stabilizes the economy through regulatory measures.
Benefits:
- Provides services regardless of profit.
- Can address market failures.
- Ensures national security and public safety.
Advantages:
- Focus on long-term societal goals.
- Protection against economic shocks.
- Supports economic stability and growth.
Disadvantages:
- Potential for inefficiency and bureaucracy.
- Limited scope for innovation and competition.
- Dependent on government funding and policies.

● Joint Sector:
Meaning and Definition:
- Meaning: The joint sector involves collaboration between the private sector and the
government.
- Definition: It consists of enterprises where both private investors and the government share
ownership and control.
Importance:
- Combines the strengths of both sectors.
- Facilitates large-scale projects that require substantial investment.
- Balances profit motives with social objectives.
Benefits:
- Shared risks and resources.
- Enhanced public-private cooperation.
- Potential for efficient service delivery.
Advantages:
- Access to government support and subsidies.
- Improved infrastructure development.
- Innovation through private sector involvement.
Disadvantages:
- Complex management structures.
- Conflicting interests between public and private stakeholders.
- Potential for political interference.

● Conclusion:
Understanding the impact of business on different sectors highlights their unique contributions
and challenges. Each sector plays a vital role in the overall economic landscape, balancing profit
motives with social welfare to drive sustainable development.

g. Sun-Rise sectors of Indian Economy, Challenges of Indian economy.

●Sunrise Sectors of the Indian Economy:
●Introduction:
The term "sunrise sectors" refers to emerging industries that demonstrate strong potential for
growth and are likely to become significant contributors to the economy. In the context of India,
the government has identified several key sectors that are expected to drive economic progress
and innovation.
 ● Key Sectors:
1. Millets:
- India is the largest producer and the second-largest exporter of millets. The government aims
to transform the country into a global hub for millets through supportive policies and
international collaborations.
- The Indian Institute of Millet Research in Hyderabad has been designated as the Centre of
Excellence for promoting best practices, research, and technology transfer.

2. Tourism:
- Recognizing India's vast geographic and cultural diversity, the government plans to develop
50 destinations as complete tourism packages to boost this sector.
- Initiatives like the 'Dekho Apna Desh' and the establishment of Unity Malls in state capitals
will promote local products and tourism.

3. Green Economy:
- Multiple programs are being implemented to promote green fuel, green energy, green farming,
and green buildings. These initiatives aim to reduce carbon intensity and create green job
opportunities.
- The National Green Hydrogen Mission, with a budget of Rs 19,700 crore, targets an annual
production of 5 million metric tonnes of green hydrogen by 2030.

4. Skill Development:
- Addressing the mismatch between job opportunities and available skills, the government has
announced the establishment of 30 Skill India International Centres and the launch of Pradhan
Mantri Kaushal Vikas Yojana 4.0.
- This program will focus on new-age skills like AI, robotics, and mechatronics, aligning training
with industry needs to enhance employability and support entrepreneurship.

5. Electronics:
- The Phased Manufacturing Programme has significantly boosted mobile phone production
in India, with customs duty reliefs on critical components to further encourage local
manufacturing.
- Initiatives to promote value addition in electronics, such as reduced duties on TV panel parts,
are aimed at fostering growth in this sector.

●Challenges of the Indian Economy:

● Introduction:
India's economy faces multiple challenges that need to be addressed to sustain growth and
development. These challenges span across various sectors and require comprehensive
strategies and policies to overcome.

● Key Challenges:
1. Skill Mismatch and Unemployment:
- Despite high unemployment rates, many job positions remain vacant due to a lack of skilled
personnel. This indicates a significant skill mismatch that needs addressing through targeted
skill development programs.

2. Infrastructure Deficit:
- Inadequate infrastructure, especially in rural areas, hampers economic development.
Improvements in transportation, power supply, and digital connectivity are crucial for balanced
growth.

3. Regulatory and Policy Issues:

- Complex regulations and policy uncertainties can deter investment and hinder business
operations. Streamlining processes and ensuring policy stability are essential for fostering a
conducive business environment.
 4. Environmental Sustainability:
- Balancing economic growth with environmental sustainability is a major challenge. Initiatives
like the National Green Hydrogen Mission and waste-to-wealth programs are steps in the right
direction, but more comprehensive measures are needed.

5. Inclusive Growth:
- Ensuring that economic benefits reach all sections of society, particularly the marginalized
and rural populations, is critical. Policies must focus on inclusive growth to reduce income
disparities and improve living standards for all citizens.

By addressing these challenges and leveraging the potential of sunrise sectors, India can pave
the way for a robust and sustainable economic future.

h. Women and Business: National policy for the empowerment of women, 2001.
● Introduction:
The National Policy for the Empowerment of Women, 2001, was formulated to address the
various challenges faced by women in India and to promote their overall development and
empowerment. This policy outlines various measures and initiatives aimed at ensuring gender
equality and enhancing women's status in the country.

● Key Points:
1. Equality and Legal Rights:
- The Constitution of India provides equality to women and empowers the state to adopt
measures for positive discrimination in favor of women. This includes legal safeguards through
the National Commission for Women and reservations in local bodies like Panchayats and
Municipalities.

2. International Commitments:
- India has ratified several international conventions, including the Convention on Elimination
of All Forms of Discrimination Against Women (CEDAW) in 1993. This commitment is further
supported by various global declarations like the Beijing Declaration and the Platform for Action
(1995).

3. Development Policies and Programs:

- From the Fifth Five Year Plan (1974-78) onwards, there has been a shift from welfare to
development in addressing women's issues. The Ninth Five Year Plan and other sectoral policies
have incorporated measures for women's empowerment. The women's movement and NGOs
play a crucial role in advocating and implementing these initiatives.

4. Goals and Objectives:

- The policy aims for the advancement, development, and empowerment of women. Key
objectives include creating an environment for the full development of women, ensuring equal
rights and participation in all spheres, and providing access to health, education, and
employment. It also emphasizes the need for changing societal attitudes and mainstreaming a
gender perspective in development processes.

5. Economic Empowerment:
- Addressing poverty among women, especially those below the poverty line, through targeted
economic policies and poverty eradication programs. This includes improving access to credit
through micro-credit mechanisms and enhancing women's capabilities through mobilization
and support services.

6. Legal and Social Reforms:

- Promoting changes in personal laws related to marriage, divorce, and property rights to
eliminate discrimination against women. The policy also stresses the need for gender-sensitive
 training of personnel in executive, legislative, and judicial wings of the state.

7. International Cooperation:
- The policy advocates for the implementation of international commitments related to
women's empowerment, encouraging cooperation through sharing experiences, exchanging
ideas, and networking with institutions globally.

This comprehensive approach aims to bridge the gap between constitutional provisions and the
actual status of women, ensuring their full participation in the economic, social, and political life
of the nation.

i. Bill to make the workplace safer for the Indian women, Nirbhaya Act.
●Introduction:
- The Criminal Law (Amendment) Act of 2013, known as the Nirbhaya Act, was enacted in
response to the 2012 Delhi gang-rape incident.
- This incident led to nationwide outrage, demanding stronger laws against violence towards
women in India.
- The Act has increased awareness about sexual violence, empowering victims to report crimes
and leading to higher conviction rates and quicker case disposals in special courts.

●Background:
- Named after the 23-year-old victim of the 2012 Delhi gang rape, "Nirbhaya" meaning fearless.
- The victim and her male companion were brutally attacked by six men on a moving bus,
leading to her death two weeks later.
- This tragedy highlighted the need for significant legal reforms to protect women.

●Response to the Nirbhaya Incident:

- Swift governmental action resulted in the introduction and passage of the Nirbhaya Act by the
Indian Parliament.
- Aimed to amend existing sexual offense laws and introduce new provisions for a stronger legal
framework.
- Sparked public discourse and efforts for legal and social reforms to protect women's rights and
ensure justice.

●Objectives of the Nirbhaya Act:

1. Enhance Legal Protection: Strengthen laws protecting women.
2. Stronger Punishments: Introduce severe penalties for sexual offenses.
3. Improve Reporting and Investigation: Facilitate better crime reporting and investigation.
4. Faster Trials and Justice: Ensure swift trial processes.
5. Victim Support and Rehabilitation: Provide comprehensive support and rehabilitation for
victims.
6. Change Social Attitudes: Foster a responsible social attitude towards victims and crimes.

●Offenses Covered Under the Nirbhaya Act:

1. Rape and Gang Rape
2. Sexual Harassment
3. Voyeurism
4. Stalking
5. Acid Attacks
6. Trafficking of Women and Children
7. Disrobing a Woman

●Punishments Under the Nirbhaya Act:

- Rape: Minimum 10 years to life imprisonment.
- Gang Rape: Minimum 20 years to life imprisonment.
- Voyeurism: 1-3 years imprisonment for first conviction; up to 7 years for subsequent
convictions.
- Acid Attacks: 10 years to life imprisonment plus fine.
- Sexual Harassment: Up to 3 years imprisonment and/or fine.
- Repeat Offenders: Death penalty.
- Stalking: Up to 3 years imprisonment for first conviction; up to 5 years for subsequent
convictions.
- Trafficking: 7 years to life imprisonment.

●Impact and Success:

- Increased Awareness and Reporting: More victims are reporting sexual offenses.
- Stricter Enforcement and Quicker Trials: Enhanced law enforcement and faster judicial
processes.
- Enhanced Victim Support: Improved support and rehabilitation services for victims.
- Greater Public Discourse: Increased discussion on women's safety and gender-based violence.
- Strengthened Legal Framework: Robust laws protecting women.

●Conclusion:
- The Nirbhaya Act marks a pivotal moment in India's fight against sexual violence.
- Significant legal and societal impacts since its enactment.
- The Act has catalyzed reforms, enhanced victim support, and promoted gender equality and
justice.
- It stands as a symbol of resilience, solidarity, and hope in the ongoing battle against violence
towards women.

UNIT-III (social and cultural Environment, Technological environment and Competitive

Environment)
a. Social and cultural environment: Nature, Impact of foreign cultural on business, Traditional
Values and its Impact.
●Introduction:
-The social and cultural environment refers to the collective beliefs, values, attitudes, and
behaviors that characterize a society or community. It shapes how people interact, make
decisions, and perceive the world around them.

●Nature of Social and Cultural Environment:

1. Beliefs and Values: These are fundamental principles or standards that guide individuals and
communities. They influence preferences, behaviors, and perceptions of what is right or wrong,
important, or unimportant.
2. Norms: These are unwritten rules or expectations governing behavior within a society. Norms
dictate appropriate conduct in different situations, such as communication styles, dress codes,
or social interactions.
3. Customs and Traditions: These are established practices or rituals passed down through
generations. They reflect cultural heritage and can include ceremonies, holidays, or rituals that
hold significant social meaning.
4. Social Institutions: These are structures within society that fulfill essential functions, such as
family, education, religion, government, and the economy. They shape individuals' roles and
behaviors and provide frameworks for social interaction and organization.

●Impact of Foreign Culture on Business:

1. Adaptation: Businesses entering new markets must adapt to local cultural norms and
practices. Understanding and respecting cultural differences can build trust and facilitate
business relationships.
2. Consumer Behavior: Cultural values and preferences influence consumer decisions.
Businesses must tailor products, services, and marketing strategies to align with local tastes
and expectations.
3. Workplace Culture: In multinational companies, diverse cultural backgrounds among
 employees can enrich innovation and creativity. However, it also requires managing cultural
differences to foster a cohesive and productive work environment.
4. Legal and Ethical Considerations: Foreign cultures may have different legal frameworks and
ethical standards. Businesses must navigate these differences to ensure compliance and
uphold ethical practices.

● Impact of Traditional Values:

1. Business Practices: Traditional values often shape business practices, such as hierarchical
structures, decision-making processes, and communication styles. Understanding these values
helps businesses operate effectively in diverse cultural contexts.
2. Consumer Trust: Traditional values influence consumer trust and brand loyalty. Businesses
that align with local values and demonstrate cultural sensitivity can build stronger relationships
with customers.
3. Corporate Social Responsibility (CSR): Embracing traditional values can enhance CSR
initiatives. Supporting local communities and respecting cultural heritage can improve public
perception and contribute to sustainable business practices.
4. Challenges and Opportunities: Traditional values may pose challenges, such as resistance to
change or conservative attitudes towards innovation. However, they also present opportunities
for businesses to differentiate themselves by respecting and integrating local cultural values
into their operations.

In conclusion, the social and cultural environment profoundly influences business operations
and strategies. Successful businesses recognize the importance of cultural sensitivity,
adaptability, and alignment with local values to foster positive relationships, enhance consumer
trust, and achieve sustainable growth in diverse global markets.

b. Social Audit: meaning and Importance of Corporate Governance and CSR.

●Social Audit: Meaning.
-Social audit is a set process of reviewing the organisation performances, code of conduct, and its
CSR work report and initiatives. Social audits making transparencies in work-culture of the
organisation and its performances. Social audits reduce
wrong practices, wastages, and improves the way of working of the organisation.
-The term governance has been derived from the word gubernare, which means to rule or steer. It
is a relatively new discipline of management that focuses on the regulation and control of an
organisation. Corporate governance deals with looking after complete governance of various
organisations with respect to financial disclosures, transparency, legal practices, organisational
structure and social welfare.
-The discipline of corporate governance is worth exploring because it includes various
organisational aspects such as executive compensation, financial scandals, and shareholder
activism.
-According to OECD, “Corporate Governance is the system by which business corporations are
directed and controlled. The Corporate Governance structure specifies the distribution of rights
and responsibilities among different participants in the corporation, such as, the board,
managers, shareholders and other stakeholders, and spells out the rules and procedures for
making decisions on corporate affairs. By doing this, it also provides the structure through
which the company objectives are set, and the means of attaining those objectives and
monitoring performance.”
-Corporate governance can be defined as systematic process, practice and guidelines which
make sure that an organisation is governed in best interest of its stakeholders and the social
groups. Also, it brings clarity, fairness and accountability in operation of the organisation.
Corporate governance helps in achieving various organisational objectives as well as social
goals as follows:
Prompt decision making and releasing useful and relevant information
Full discloser and clarity in operations
Adherence to the laws
Promoting shareholders interest
 ● Need for corporate governance:
It helps in giving complete independence to the management and board so that they can take
major business decision without any pressure and biasness.
It also helps in bringing new ideas into business and operation.
It helps in attracting sources of fund by taking domestic and foreign investor into confidence.
Corporate governance focuses on building a long-term shareholders’ value.
It is needed to gain the trust and confidence of domestic and foreign investors.
It helps in operational performance of an organisation by the following ways:
● Improving strategic thinking at the top through induction of independent directors who
bring in experience and new ideas
● Rationalising the management and constant monitoring of risk that a firm faces
globally
● Improving the decision-making process of the organisation
● Assuring the integrity of financial reports, etc.
It reduces perceived risks, consequently reduces cost of capital and enables board of directors
to take quick and better decisions which ultimately improves bottom line of the corporate.
It minimises the probable risks, as a result cost of capital decreases and enables board of
directors to take prompt and better decisions which consequently improves the bottom line of
the corporate.
It ensures long-term survival and build up stakeholders’ relationship.
It attracts investors because of it the credential of an organisation are good.
It ensures commitment to values and ethical conduct of business.

● Corporate social responsibility of business and its importance:

All the activities a business does over and above the statutory requirement comes
under Corporate Social Responsibility (CSR). CSR depicts that the business has moral
responsibilities towards the society. According to Archie B. Caroll, “Corporate Social
Responsibility is the entire range of obligations business has to society.” He has derived four
models of CSR. They are as follows:
Economic: Since the firm is primarily an economic entity, its activities should contribute to the
prosperity of the economy.
Legal: A company is legally bound in many aspects and it is ought to obey the law of the land.
Ethical: These are certain standards which the society expects the business to do though they
are not demanded by the law. Example Avoiding corruption and unfair trade practices.
Discretionary: These are the voluntary contributions of the business to the social affluence like
participation in the community development programmes.

● Components of CSR:
The social responsibility of an organisation refers to such decisions and activities
which provide for the welfare of the society as a whole along with the earning of profit for the
organisation. Following are the components of social responsibility:
Towards owners of enterprise: The responsibilities of business enterprises towards their
owners are:
● Payment should be at regular basis at fair rate of dividend
● Increase the present net value of the organisation with the help of a productive
management system
● Making the full participation of the owners in the operation of the organisation
● Establishing the effective communication system to send a detailed and
indiscriminate reports on operation of the organisation.
● Financial doubts should be clarified in a manner so that there is no room for doubt.
● Owners/chairman of the organisation available for the directors or top management
for discussing or getting information relating to the operation of the organisation.
Towards workers: Some of the responsibilities of a business enterprise towards its workers
are:
● Fair salary process, security for job, medical facility with family of workers, bonus, etc.
 are to maintained
● Appraisal process is done in trustworthy manner.
● A fair-minded opportunity process should be set up within the organisation. This helps
workers and employee to enhance their skills and quality.
● Participative in management, decision making, etc., are to be promoted in the
organisation.
● Facilitating better work environment and social security
● Implementing occupational hazards policy in an effective manner
● Trade union leadership policy should be encouraged
● Management manages human resources so attitude towards employee/ workers
should be professional as well as humane
Towards consumers: The responsibilities of business enterprise towards consumers of its
products are:
● Ensuring availability of products in the right quantity, at the right place and at the right
time
● Supplying products of high quality
● Charging reasonable prices for its products
● Using correct measures
● Providing good after sales services
● Avoiding restrictive trade practices and other undesirable methods to exploit the
consumers
● Encouraging the formation of associations of consumers and consumers’ advisory
councils and maintaining close links with them
● Developing appropriate products and services for satisfying the needs of the
consumers
● Taking such measures which would promote consumer satisfaction and welfare
Towards the society: The obligations of a business to the society are:
● Adopting a set of methods to use resources in optimised manner.
● Providing sustainability and economic growth for the society.
● Facilitating opportunity and amenities such as sports event, eco-friendly goods and
water sanitation program for the society.
● Maintaining natural resources through initiatives like waste management, air pollution
control system, renewable energy system, etc.
● Contributing in social welfare programmes by conducting sanitation programs in
villages and urban slums, facilitating medical care for senior citizens, women and
children, making awareness for skill development, etc.
● Improving quality of life of the people at large by capacity building, creating
employment and providing opportunity to making wealth.
Towards the government: The obligations of business enterprise to the government are:
● Strictly observing the provisions of the various laws and enactments
● Paying taxes and other dues to the government regularly and honestly
● Extending full support to the government in its efforts to solve national problems such
as unemployment, food, inflation, regional imbalance in economic development, etc.
Towards the weaker section of society: The obligations of business enterprise to the weaker
section of the society are:
● Providing vocational training like cookery, tailoring, selling techniques for their
economic growth
● Donating funds to various voluntary agencies and NGOs, which are participated in
population and family welfare, literacy and education, development of women and
children of the schedule cast and schedule tribes.
●Importance of CSR:
Optimum utilisation of resources: Resources are limited in nature. By following social
responsibilities, an organisation is expected to use resources in a justified way. Resources are to
be used for the productions of those goods and services which are not detrimental to the
interest of the society. Organisation is not expected to produce unnecessary and unwanted
goods. Production of such goods not only reduces national resources, but also encourages
people to spend on unnecessary consumption.
Producing goods and services efficiently and contributing to the economic well- being of
society: Organisations are expected to produce goods without wastage. Organisations are
expected to practice business process reengineering. This helps the organisation to identify new
and improved ways of doing improvement in the product. Product safety is also taken care of.
All these factors contribute to the economic well-being of the society.
Providing public amenities and avoiding the conditions of slums and congestion:
Organisations are expected to protect the surrounding environment. It cannot handover this
responsibility to the government. If healthy environment exists, the organisation takes initiative
to avoid slums and congestion and pollution of surroundings.
Maintain environmental ecology and adopting anti-pollution measures.

c. Technological environment: Features, Impact of technology on Business.

● Introduction:
The technological environment encompasses the collection of techniques, skills, methods, and
processes used in the production of goods and services or the accomplishment of objectives,
such as scientific investigation. It acts as a bridge between science and new products,
influencing various aspects of business operations and strategies.

● Features of Technological Environment:

1. Scientific Knowledge and Tools:
- Definition by J.K. Galbraith: "Technology is a scientific application of systematic or other
organized knowledge to practical tasks."
- Encompasses a broad array of techniques, crafts, systems, and methods of organization.

2. Continuous Evolution:
- Constant development and refinement of tools and methods.
- Companies must keep up with technological advancements to stay competitive.

3. Interdisciplinary Nature:
- Involves multiple fields like engineering, IT, biotechnology, etc.
- Requires integration of various scientific and technical disciplines.

●Impact of Technology on Business:

1. Customer Relations:
- Enhances communication and interaction with clients.
- Tools like CRM systems help in maintaining customer loyalty and trust.

2. Business Operations:
- Technological innovations improve cash flow management and storage cost efficiency.
- Automation of tasks saves time and reduces operational costs.

3. Corporate Culture:
- Facilitates communication across global teams.
- Helps in building a cohesive organizational culture and prevents social tensions.

4. Security:
- Modern security technologies protect financial data and confidential information.
- Enhances overall business security infrastructure.

5. Research Opportunities:
- Provides avenues for conducting studies to stay ahead of competitors.
- Allows virtual exploration of new markets and business opportunities.

6. Corporate Reports:
- Improves the effectiveness of communication within the organization.
 - Ensures accurate and timely financial and operational reporting.

7. Industrial Productivity:
- Business software programs automate manufacturing processes.
- Reduces labor costs and increases production output and efficiency.

8. Business Mobility:
- Innovations in technology improve sales and service delivery.
- Shortens lead times and allows penetration into multiple markets at lower costs.

9. Reducing Business Costs:

- Automation of back-office functions like recordkeeping, accounting, and payroll.
- Helps small businesses reduce overall operational costs.

10. Improving Communication:

- Enhances communication processes through emails, texting, websites, and apps.
- Improves interaction with consumers and internal stakeholders.

●Management of Technology:

1. Reduced Costs of Operations:

- Example: Dell uses technology to lower manufacturing and administrative costs.

2. New Product and Market Creation:

- Example: Sony's miniaturization technology for portable electronics.

3. Adaptation to Changes in Scale and Format:

- Companies address how small devices can become and their multifunctional capabilities.

4. Improved Customer Service:

- Example: FedEx's package-tracking system improves service efficiency.

5. Continuous Development of Technology:

- Investing in technology development must be balanced with customer value.

● Interface between Technology and Business:

1. Social Implementation:
- Technology reaches people through business.
- High consumer expectations and system complexity drive social change.

2. Economic Implications:
- Increases productivity and necessitates R&D spending.
- Intellectual nature of jobs and the rise and decline of products and organizations.

3. Plant Level Implications:

- Impact on organizational structure, risk, and resistance to change.
- Involves TQM, business process re-engineering, e-commerce, and flexible manufacturing
systems.

● Conclusion:
The technological environment significantly impacts business operations, customer relations,
security, and productivity. Effective management of technology and adaptation to its continuous
evolution are crucial for business success in the modern competitive landscape.

d. Lates trends in Business- Big data, data analysis, introduction to industry 4.0, VUCA.
●Latest Trends in Business:
●Big Data
Introduction:
Big Data refers to the vast volumes of data generated by businesses daily. This data can be
structured or unstructured and requires advanced tools to analyze and extract meaningful
insights.

Key Points:
- Volume: Big Data involves handling massive amounts of data.
- Variety: Data comes from various sources like social media, sensors, and transaction records.
- Velocity: Data is generated at a high speed and needs to be processed quickly.
- Value: Extracting valuable insights from data can lead to better decision-making.
- Example: Retailers use Big Data to understand customer preferences and improve inventory
management.

●2. Data Analysis

Introduction:
Data Analysis involves examining raw data to draw conclusions and support decision-making. It
uses statistical and computational techniques to analyze and interpret data.

Key Points:
- Descriptive Analysis: Summarizes past data to understand what happened.
- Predictive Analysis: Uses historical data to predict future outcomes.
- Prescriptive Analysis: Recommends actions based on data analysis.
- Tools: Common tools include Excel, Python, R, and specialized software like Tableau.
- Example: Healthcare providers use data analysis to predict patient readmission rates and
improve care quality.

●3. Introduction to Industry 4.0

Introduction:
Industry 4.0, also known as the Fourth Industrial Revolution, refers to the integration of digital
technologies into manufacturing and production processes. It emphasizes automation, data
exchange, and the Internet of Things (IoT).

Key Points:
- Smart Factories: Use connected machines to improve efficiency and flexibility.
- IoT: Devices communicate and share data in real-time.
- Artificial Intelligence (AI): Enhances decision-making and predictive maintenance.
- Cyber-Physical Systems: Integration of physical processes with digital control.
- Example: Automotive companies use Industry 4.0 technologies to streamline production and
reduce downtime.

●4. V-U-C-A
Introduction:
V-U-C-A stands for Volatility, Uncertainty, Complexity, and Ambiguity. It describes the challenging
conditions in which businesses operate today.

Key Points:
- Volatility: Rapid and unpredictable changes in the business environment.
- Uncertainty: Lack of predictability and information about future events.
- Complexity: Interconnected and multifaceted business issues.
- Ambiguity: Lack of clarity about the meaning of events and situations.
- Strategies: Companies use agile methodologies and robust risk management to navigate V-U-C-
A.
- Example: The COVID-19 pandemic created a V-U-C-A environment, forcing businesses to adapt
quickly to survive.
UNIT-IV (International Environment).
a. Foreign Investment- Importance and Limitations.
●Introduction:
Foreign investment refers to the investment by an individual or a company based in one country
into businesses or assets in another country. It is critical for the economic development of a
country, offering various advantages and challenges.

●Importance of Foreign Investment:

1. Economic Growth: Foreign investment injects capital into the host country's economy, leading
to increased economic activities and growth.
2. Job Creation: It generates employment opportunities as new industries and businesses are
established.
3. Technological Advancements: Foreign investors often bring new technologies and
innovations to the host country, improving productivity and competitiveness.
4. Infrastructure Development: Investment in sectors such as construction, telecommunications,
and energy leads to the development of critical infrastructure.
5. Access to International Markets: Companies benefit from foreign investors' global networks,
facilitating easier access to international markets.

●Limitations of Foreign Investment:

1. Economic Dependence: Over-reliance on foreign investment can lead to economic instability if
foreign investors withdraw their investments.
2. Loss of Control: Excessive foreign ownership in key industries may result in loss of control
over national resources and strategic sectors.
3. Profit Repatriation: A significant portion of profits earned by foreign investors is often
repatriated to their home countries, reducing the economic benefits to the host country.
4. Market Dominance: Large foreign companies may dominate the market, making it difficult for
local businesses to compete.
5. Cultural Impact: Foreign businesses may bring cultural changes that can impact local
traditions and social norms.

b. Foreign Direct Investment: importance & limitations, FDI operations in India.

●Introduction:
Foreign Direct Investment (FDI) involves direct investment by a company or individual from one
country into business interests in another country. FDI plays a crucial role in the globalization
and economic development of host countries.

●Importance of FDI:
1. Capital Inflow: FDI brings substantial capital into the host country, boosting its economic
growth.
2. Employment Opportunities: It creates jobs and improves the skill levels of the local workforce.
3. Technological Transfer: FDI facilitates the transfer of technology, knowledge, and expertise
from foreign investors to the host country.
4. Enhancement of Competitiveness: FDI increases competition in the domestic market, leading
to better products and services.
5. Development of Infrastructure: It often involves the development of infrastructure, such as
roads, ports, and communication systems, which benefits the host country's economy.

●Limitations of FDI:
1. Economic Control: Excessive FDI in critical sectors can lead to loss of economic control by the
host country.
2. Profit Repatriation: Profits generated by foreign investors are often repatriated, reducing the
host country's share of economic benefits.
3. Market Distortion: Large foreign companies can distort the market by outcompeting local
firms, leading to monopolies or oligopolies.
4. Regulatory Challenges: Host countries may face challenges in regulating and monitoring the
activities of foreign investors.
5. Social and Environmental Impact: FDI can lead to social changes and environmental
degradation if not managed properly.

●FDI Operations in India:

1. Historical Context: Since the economic liberalization in 1991, India has been an attractive
destination for FDI, offering a large market and favorable investment policies.
2. Key Sectors: Major sectors attracting FDI in India include telecommunications, information
technology, pharmaceuticals, automotive, and construction.
3. Government Policies: The Indian government has implemented various policies to facilitate
FDI, including the Make in India initiative, liberalized FDI norms, and the establishment of
Special Economic Zones (SEZs).
4. Economic Impact: FDI has significantly contributed to India's GDP, employment, and
technological advancements, transforming various sectors of the economy.
5. Challenges: Despite its benefits, FDI in India faces challenges such as bureaucratic hurdles,
regulatory complexities, and infrastructural deficiencies.

In summary, foreign investment and FDI are vital for economic growth, technological
advancements, and job creation in host countries. However, they also bring challenges such as
economic dependence, loss of control, and regulatory issues. Understanding the importance,
limitations, and operations of FDI in India provides a comprehensive view of its impact on the
country's development.

c. GATT/WTO: overview on GATT.

●Introduction
The General Agreement on Tariffs and Trade (GATT) was a legal agreement established in 1947
to promote international trade by reducing or eliminating trade barriers such as tariffs and
quotas.

●Key Points
1. Historical Background
- Established in 1947 as part of the post-World War II efforts to rebuild and stabilize the global
economy.
- Originally signed by 23 countries in Geneva.

2. Objectives
- To promote international trade by reducing or eliminating trade barriers.
- To provide a platform for negotiating trade agreements and settling trade disputes.

3. Principles
- Non-discrimination: Most-Favored-Nation (MFN) principle, ensuring equal trading terms
among all member countries.
- Transparency: Requirement for members to publish their trade regulations.
- Reciprocity: Mutual reduction of trade barriers.

4. Rounds of Negotiations
- Conducted through various rounds, each focusing on different trade issues.
- Notable rounds include the Kennedy Round (1964-67) focusing on tariff cuts and the Tokyo
Round (1973-79) addressing non-tariff barriers.

5. Successes and Challenges

- Successfully reduced tariffs and trade barriers, leading to significant growth in global trade.
- Faced challenges with addressing non-tariff barriers and incorporating new areas like
services and intellectual property.

6. Transition to WTO
 - In 1995, GATT was replaced by the World Trade Organization (WTO), which expanded its
scope to cover services, intellectual property, and investment.
- The WTO provided a stronger institutional framework and dispute resolution mechanism.

●Conclusion
GATT played a crucial role in shaping the post-war global trading system, setting the stage for
the creation of the WTO and continued efforts to promote free and fair international trade.

d. Functions of WTO, Pros & Cons of WTO, TRIPS & TRIMS and other agreements.
● Introduction:
The World Trade Organization (WTO) was established in 1995, succeeding GATT, to oversee and
facilitate
international trade agreements and ensure smooth trade flows globally.

●Functions of WTO:
1. Trade Negotiations
- Facilitates negotiations among member countries to create new trade agreements and revise
existing ones.
- Conducts rounds of negotiations like the Doha Development Round.

2. Implementation and Monitoring

- Ensures that member countries adhere to WTO agreements.
- Provides a platform for monitoring national trade policies.

3. Dispute Resolution
- Offers a structured process for resolving trade disputes between member countries.
- Maintains the Dispute Settlement Body (DSB) for this purpose.

4. Capacity Building
- Provides technical assistance and training for developing countries to enhance their trade
capabilities.
- Promotes inclusive trade participation.

5. Research and Analysis

- Conducts research on global trade issues and publishes reports to inform policy decisions.
- Analyzes trends and the impact of trade policies.

●Pros & Cons of WTO:

Pros:
1. Promotes Free Trade
- Reduces trade barriers and tariffs, facilitating increased global trade.
- Encourages economic growth and development.

2. Fair Trade Practices

- Ensures a level playing field by implementing and enforcing trade rules.
- Addresses unfair trade practices like dumping and subsidies.

3. Dispute Resolution
- Provides a formal mechanism for resolving trade disputes.
- Reduces trade conflicts and maintains global trade stability.

Cons:
1. Sovereignty Concerns
- Member countries may feel constrained by WTO rules and regulations.
- Limits national policy-making freedom in certain areas.
2. Developing Country Challenges
- Developing nations often struggle to compete with developed countries.
- Implementation of agreements can be resource-intensive for poorer nations.

3. Inequality
- Benefits of free trade are not equally distributed, leading to widening economic disparities.

●TRIPS & TRIMS and Other Agreements

1. TRIPS (Trade-Related Aspects of Intellectual Property Rights)
- Sets minimum standards for intellectual property protection.
- Encourages innovation but raises concerns over access to essential medicines in developing
countries.

2. TRIMS (Trade-Related Investment Measures)

- Addresses regulations related to investment that can affect trade.
- Prohibits measures like local content requirements and trade balancing requirements.

3. Other Agreements
- GATS (General Agreement on Trade in Services): Covers international trade in services.
- AoA (Agreement on Agriculture): Focuses on agricultural trade and subsidies.
- SPS (Sanitary and Phytosanitary Measures): Ensures food safety and animal and plant
health standards.

●Conclusion
The WTO plays a pivotal role in regulating and promoting international trade, balancing the
interests of diverse member countries while addressing complex issues related to trade,
investment, and intellectual property.

e. Foreign Market entry Strategies, LPG model.

●Foreign Market Entry Strategies - Introduction:
Foreign market entry strategies involve the various methods that businesses can use to enter
international markets. These strategies range from exporting to establishing fully owned
subsidiaries and are chosen based on factors such as market conditions, company resources,
and government policies.

●Key Points:
1. Exporting:
- Simplest and most traditional method.
- Suitable when foreign market volume is low or when production costs abroad are high.
- Example: Indian companies exporting textiles to Europe.

2. Licensing and Franchising:

- Involves minimal resource commitment.
- Ideal for companies with valuable intellectual property.
- Example: McDonald's franchising its brand globally.

3. Joint Ventures:
- Partnership with a local firm to share resources and risks.
- Helps in gaining local market knowledge and navigating regulatory landscapes.
- Example: Suzuki partnering with Maruti in India.

4. Wholly Owned Subsidiaries:

- Full control over operations by setting up a new entity or acquiring an existing firm.
- High resource commitment but greater control and profit potential.
- Example: Toyota manufacturing plants in the USA.
5. Strategic Alliances:
- Collaborations between companies to leverage mutual strengths without forming a new
entity.
- Often used for research and development or market entry.
- Example: Starbucks partnering with Tata Global Beverages in India.

6. Mergers and Acquisitions:

- Acquiring or merging with an existing firm in the foreign market.
- Provides immediate market access and established customer base.
- Example: Vodafone's acquisition of Hutchison Essar in India.

7. Third Country Location:

- Setting up operations in a third country to circumvent political or trade barriers.
- Example: Taiwanese firms entering China through Hong Kong.

● LPG Model - Introduction:

The LPG (Liberalization, Privatization, and Globalization) model was introduced in India in 1991
to reform the economic landscape. It aimed to integrate India into the global economy, reduce
government control, and encourage private enterprise.

●Key Points:
1. Liberalization:
- Removal of trade barriers and restrictions to encourage economic activities.
- Facilitated foreign direct investment and technology transfer.
- Example: Abolishment of industrial licensing in most sectors.

2. Privatization:
- Transfer of ownership from public to private sector to enhance efficiency and
competitiveness.
- Encouraged private sector investment in previously state-controlled industries.
- Example: Privatization of Indian Airlines.

3. Globalization:
- Integration of the Indian economy with the global market.
- Increased competition, access to global markets, and exposure to international best practices.
- Example: Entry of multinational companies like Coca-Cola and Pepsi into India.

4. Impact on Economic Growth:

- Significant GDP growth and rise in foreign exchange reserves.
- Diversification of the economy and increase in service sector contributions.
- Example: IT and software services boom in Bangalore.

5. Effect on Employment and Income Distribution:

- Creation of new job opportunities, especially in urban areas and technology sectors.
- Widening income inequality and regional disparities.
- Example: Rise of new middle-class consumers and increased demand for goods and services.

6. Challenges and Criticisms:

- Industrial sector growth lagging behind the service sector.
- Concerns over loss of sovereignty and exploitation by foreign corporations.
- Example: Resistance to retail FDI in India due to fears of small business displacement.

f.MNCS: definition, meaning, merits, demerits, MNCS in India.

●Introduction:
Multinational Corporations (MNCs) are companies that operate in multiple countries beyond
their home base. They play a significant role in the global economy by transferring technology,
capital, and expertise across borders.

● Definition and Meaning:

1. Definition: An MNC is a corporate organization that owns or controls production or services
facilities in one or more countries other than its home country.
2. Meaning: MNCs operate on a global scale, managing production or delivering services in
various countries. They leverage global markets to optimize production and distribution.

●Merits of MNCs:
1.Economic Growth: MNCs contribute to the economic growth of host countries by creating jobs
and investing in local economies.
2. Technology Transfer: They bring advanced technology and management practices to host
countries, enhancing productivity and efficiency.
3.Infrastructure Development: Investments by MNCs often lead to improvements in
infrastructure such as roads, telecommunications, and power supply.
4. Market Expansion: MNCs help in opening new markets for goods and services, benefiting
consumers with a wider range of products.
5. Skill Development: Local employees receive training and skill development opportunities,
improving the workforce's overall quality.

●Demerits of MNCs:
1. Exploitation of Resources: MNCs may exploit the natural resources of host countries without
adequate compensation or sustainability measures.
2. Market Dominance: They can dominate local markets, making it difficult for small and
medium-sized enterprises (SMEs) to compete.
3. Cultural Erosion: The influence of foreign corporate culture can erode local traditions and
values.
4. Profit Repatriation: Profits are often repatriated to the home country, leading to a net outflow
of capital from the host country.
5. Labor Exploitation: There can be instances of labor exploitation, where workers are paid low
wages and work under poor conditions.

●MNCs in India:
1. Economic Impact: MNCs have significantly contributed to India's economic development by
bringing in FDI, creating jobs, and increasing GDP.
2. Technological Advancements: They have introduced advanced technologies and innovative
practices, particularly in sectors like IT, pharmaceuticals, and manufacturing.
3. Consumer Benefits: Indian consumers enjoy a variety of high-quality products and services
due to the presence of MNCs like Apple, Samsung, and Unilever.
4. Challenges: Despite the benefits, challenges such as regulatory hurdles, cultural differences,
and infrastructure limitations persist for MNCs operating in India.

5. Future Prospects: With ongoing economic reforms and improvements in ease of doing
business, India continues to be an attractive destination for MNCs looking to expand.

g. Modern Business Case Studies.

Case 1: IOC and the Balal Oil Field Acquisition:
1. Internal, Domestic, and Global Environments of Business:
- Internal: IOC's strategic decision to expand into foreign markets, leveraging low oil prices, and
acquiring assets.
- Domestic: Government regulations, slow bureaucratic processes, and the need for
permissions from multiple bodies like RBI and ministries.
- Global: Volatile oil prices, competition from global firms like Elf of France, and geopolitical
dynamics affecting oil markets.
2. Hindrances to Globalization of Indian Business:
- Domestic bureaucratic delays and regulatory hurdles.
 - Global competition and market volatility that can quickly change the attractiveness of deals.
- The domestic environment (regulatory delays) played a more significant role in hindering
IOC's global venture.
3. Impact of Delay in Clearance on IOC:
- Missed opportunity due to the significant increase in oil prices.
- Competitive disadvantage as rivals (Elf) capitalized on the delay.
- Potential financial losses and missed strategic gains in the oil sector.
4. Significance of the Foreign Acquisition to IOC:
- Securing a stable supply of oil reserves to enhance self-sufficiency.
- Expanding its footprint in the global market.
- Diversifying risk and stabilizing revenues through international assets.
5. Lessons from the Case:
- Importance of swift decision-making and regulatory processes.
- Need for streamlined procedures for Indian companies to invest abroad.
- Strategic timing and market analysis are crucial for successful international ventures.

Case 2: Balsara Hygiene Products Ltd.

1. Environmental Factors Used to Advantage:
- Cultural: Leveraging traditional Indian ingredients like clove oil and miswak.
- Market Trends: Tapping into the growing preference for natural and herbal products.
- Religious: Using religious references to appeal to specific markets (e.g., Miswak in Muslim-
majority Malaysia).

2. Strength of Marketing Ayurvedic Toothpaste in the USA:

- Growing consumer preference for natural and holistic health products.
- Effective use of partnerships with local entities (Auromere Imports Inc.) to penetrate the
market.
- Innovation in product development (e.g., herbal ingredients) aligning with health-conscious
trends.

Case 3: Reliance Industries Swap Deal

1. Internal and External Factors Behind Swap Deal:
- Internal: Need for specific grades of naphtha for different facilities.
- External: International oil market dynamics, cost advantages, and strategic partnerships with
Japanese traders.

2. Potential Environmental Changes Making Swap Deal Unattractive:

- Fluctuations in international oil prices.
- Changes in tax regulations or duties.
- Shifts in demand and supply dynamics in the petrochemical market.

3. Strategic Reasons for Import and Export of Naphtha:

- Avoiding local sales tax.
- Securing necessary petrochemical grades for production.
- Establishing a presence in the Japanese market.

4. Should Reliance Continue Swap Deals Without Profit Advantage?

- Yes, if strategic benefits outweigh short-term financial gains.
- Long-term market presence and supply chain security could justify the deals.

Case 4: Basmati Patent Case

1. Patentability of Turmeric, Neem, and Basmati:
- Turmeric and Neem: Cannot be patented as they are traditional knowledge and not novel
inventions.
- Basmati: Protected under geographical indications, cannot be patented, but can be protected
against misuse.
2. Role of Government of India:
- Initially slow in protecting geographical indications and biodiversity.
- Improved vigilance and legal actions against misuse of traditional names and products
internationally.

Case 5: Reebok’s Human Rights Standards

1. Human Rights Protection Endeavors of Reebok:
- Non-discrimination in employment.
- Regulation of working hours and overtime.
- Prohibition of forced, compulsory, and child labor.
- Commitment to fair wages and safe working conditions.
- Freedom of association and collective bargaining.

2. Implications for Developing Country Suppliers:

- Challenges: May require significant changes in labor practices, increased costs to comply
with standards.
- Benefits: Improved working conditions, enhanced reputation, and potential for better worker
retention and productivity.
- Long-Term: Developing country industrial sectors may see overall improvements in labor
standards and global competitiveness.