Latest and Simplified version of Business Environment

CMA SIVAKUMAR A,ACMA 
on 16 September 2019


Following concepts will be fruitful to Students who write examination based on Business Environment. The important concepts explained are the following-

Business Environment and International Business

Concepts and elements of business environment: Economic environment- Economic systems, Economic policies(Monetary and fiscal policies); Political environment-Role of government in business; Legal environment- Consumer Protection Act, FEMA; Socio-cultural factors and their influence on business; Corporate Social Responsibility (CSR).

Scope and importance of international business: Globalization and its drivers; Modes of entry into international business
Theories of international trade; Government intervention in international trade; Tariff and non-tariff barriers; India's foreign Trade policy

Foreign direct investment (FDI) and Foreign portfolio investment (FPI); Types of FDI, Costs and benefits of FDI to home and host countries; Trends in FDI; India's FDI policy

Balance of payments (BOP): Importance and components of BOP.

Regional Economic Integration: Levels of Regional Economic Integration; Trade creation and diversion effects; Regional Trade Agreements: EuropeanUnion (EU), ASEAN, SAARC, NAFTA

International Economic Institutions: IMF, World Bank, UNCTAD WorldTrade Organization (WTO): Functions and objectives of WTO; Agriculture Agreement; GATS; TRIPS; TRIMS

Definition of Business Environment

It is an environment that encompasses all those factors (internal and external that affect a company's operations and include strengths, weaknesses, internal power relationships, orientations of the organization ,nature of economy and economic conditions ,social cultural factors ,demographic trends ,natural factors ,global trends and cross border development ,clients and suppliers,technological developments ,laws and government activities .

Scope of Business Environment

1.Internal Environment.

It refers to the factors internal to the firm. It includes the following

a. Organization culture
b. Organizational strength
c. Organizational values
d. Organizational structure
e. HR
f. Financial resources
g. Marketing Mix
h. Operations Management
i. Company Image and Brand Equity
j. Promotional mix
k. Organizational climate.
l. Business ethics and moral standards
m. Business and managerial policies
n. Prospects of business development
o. Industrial relations
p. Payment of fair wages
q. Value System
i. Personal capability

l. Marketing capability

Internal factors of business environment are controllable factors. The company can alter or modify such factors to suit the environment

II. External Environment

i. Micro Environment.

a. Suppliers
b. Customers
c. Competitors

Non price competition and price competition .Example of non price competition is sponsoring of events like sports.
Rival firms will be come under this

d. Middle man
e. Public

ii. Macro Environment

a. Economic Environment.
It is related with economic progress made by a country. For example:-There is acute shortage of electricity in some of the states in India. This reflects an economic problem.

1. First generation Reforms.---Liberalization, privatization and Globalization .

After 1991,following can be attributed as an important feature of the industrial policy

Public sector has been withdrawing partially or fully from several of the enterprises by divestment

Now Second Generation-it means the following

Exploiting the knowledge based global economy
Growing Indian multinational corporations
lean Environment

2. Types of Economic systems

i. Capitalism
ii. Socialism: The country's major means of production are either owned by the government or their use is controlled by the Government
iii. Mixed Economy.

3. Planning commission is abolished and Set up of NITI AAYOG on 1/1/2014

Five year planning approach has ended
It is a think-tank and does not have the power to impose policies .

4. Two policies
i. Fiscal policy- taxation and expenditure decision of the government .

Latest finance act on July 5,2019.

Tools of fiscal policy may be as follows.

a. Public expenditure
b. Deficit financing
c. Taxation

Objectives of Fiscal Policy may be

a. To promote price stability
b. To minimize the inequality in income and wealth
c. To promote employment opportunities
d. Fiscal federalism

Income tax Act -1961 And Annual Finance acts

HIGHIGHTS OF BUDGET 2019 July 5
RELATED WITH INCOME TAX

Current Previous Year ----2019-2020
Current Assessment Year ----2020-2021

Income

I. Income from Salaries
II. Income from House Property
III. Income from Business or Profession
IV. Income from Capital Gains
V. Income from others.

1. Pre-filled Return for filing
2. Project insight scheme-Data Analysis method to book tax evaders
3. Observation over expenditures by persons
4. Following persons are to be compulsorily file income tax returns
a. Current bills amounting above one lakhs
b. Foreign trip costing 200,000
c. Deposit in current account over 1 crore
d. Those who get long-term capital gain exemption
5. Aadhaar card can be used as instead of pan card for filing returns
6. To discourage practice of making business payments in cash, I propose to levy TDS of 2% on cash withdrawal exceeding Rs 1 crore a year from a bank account
7. Rates are the same as those specified in Part III of the First Schedule to the Finance Act2018

  • Upto Rs. 250,000 Nil
  • Rs. 250,001 to Rs. 500,000 5 percent
  • Rs. 500,001 to Rs. 10,00,000 20 percent
  • Above Rs. 10,00,000 30 percent

B. In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than the age of eighty years at any time during previous year

Up to Rs. 300,000 Nil
Rs.300,001 to Rs. 500,000 5 percent
Rs. 500,001 to Rs. 10,00,000 20 percent
Above Rs. 10,00,000 30 percent

ii. RBI policy to deals with the supply of money in the economy---Monetary policy.
Methods of monetary policy are -i.Quantitative ii.Qualitative

The main objective of monetary policy is to control inflation

5. Role of Government as a regulator.

6. It includes National income and pattern of income distribution .

7. Macro-economic policy to control Balance of payment

CSR is mandatory as per Companies Act 2013.The constitution of CSR
Committee is mandatory in company having
i.Net Worth of Rs.500 crore
ii. Turnover of Rs.1,000crore.
iii. Net Profit of Rs.5 crore

But, now it is not mandatory as per finance minister's recent remarks.

Following are the important ways to implement CSR by an Organization
i. Environmental sustainability
ii. Energy conservation
iii. Ethical marketing process

b. Political and government environment

Following are the three factors
i. Legislature
ii. Executive
iii. judiciary

Judiciary powers are related with this.
It also include public interest groups

c. Social-cultural environment.
Demographic environment is included in the social-cultural environment. Occupational and spatial mobilities of population having implications for business is related with demographic Environment.

Besides, Demographic Environment includes the following

i. Age
ii. Income
iii. Gender
Economic stratification of population can be related with this environment

Consumer attitudes and beliefs about diet,h ealth and nutrition are influenced by cultural Environment.
Sources of ethics are the following

i. Religion
ii. Culture
iii. Family system

The culture has following features

i. Shared value
ii. Passage of culture
iii. Cultural resources
iv .marriage
v. Authority
vi. Family
vii. Education
viii. Authority
ix. Time Dimension

d. Technological Environment

It includes the technology policy of India
The objective of Technology policy is to mitigate national hazards

e. Legal Environment.

Consumerism-Consumer's movements to protect their right. Consumerism evolution is not a setback for marketing but rather points to the next stage in the evolution of enlightened marketing

Consumer protection Act-1986

Consumer protection councils and consumer Redressal Agencies.

The apex consumer court in India is referred to as national consumer disputes Redressal commission

If service is provided free of cost, one cannot file a complaint under this act.

Service of teachers is not covered under this Act

The Consumer Protection Act, 1986, applies to all goods and services, excluding goods for resale or for commercial purpose and services rendered free of charge and under a contract for personal service. The provisions of the Act are compensatory in nature. It covers public, private, joint and cooperative sectors.

The newspaper industry is not covered under the above act.
Time limit for complaint under District forum is 20 years
Consumer Disputes Redressal Agencies are the following

i. A District Forum in each district of every state
ii. A State Commission in each state
iii. A National Commission
it is believed that the Contempt of Courts Act is not applicable to consumer courts

FEMA instead of FERA-in 1999.
Civil case in FEMA .Whereas criminal case in FEMA.
Under FEMA, the receiver of laundered money is to be made culpable, instead of sender/distributor

Competition Act, 2002 has passed instead of MRTP Act. Following are the important objectives of Competition Act
i. Prohibition of dominant position
ii. Prohibition of anti-competitive agreements
iii. Regulation of combinations

There is a competition commission under this act. State monopolies, government business policies and functioning of regulatory Authorities cannot be scrutinized under this law.

  • Indian Contract Act -1872
  • Indian Partnership Act -1932
  • Negotiable instruments Act 1881

Now following acts are not in force

i. MRTP Act
The objectives of Competition Act 2002 are the following-

To regulate

i. Anti-competitive agreements
ii. Megers and amalgamations

Important Acts and years

i. Industries Development Regulation Act- 1951
ii. Import and export control Act-1947
iii. Factories Act-1948
iv. The Essential Commodities Act-1955
v. Agricultural products Grading and Marketing Act-1937
vi. The prevention of Food Adulteration Act-1954
vii. Trade Marks and Merchandise Marks Act-1958

f. Natural Environment

It is also known as Geographical and ecological environment. It is related to natural resources. Environmental degeneration is one of the important problem faced by every society. It may be in the following forms

i. Land degeneration and soil erosion
ii. Problem of overgrazing and ecological degeneration
iii. Floods

it includes increase cost of energy

g. Financial Environment

It is concerned with Business Finance
It includes the following

i. Stock markets
ii.bond markets
iii. Capital markets
iv.derivative markets
v.real estate markets
vi. Commodity markets

h. Global Environment

It includes the following

i.WTO
ii.IMF
iii.World bank
iv.SAARC
v.G-20

Improving Quality can be resorted to keep market share in international business.

i. Labour Environment

It includes the following

a. Labour laws
b. Trade unions
c. Quality circles


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