Professional Documents
Culture Documents
Business Meaning:
All creative human activities relating to the production of goods or services for satisfying
wants are known as Business.
“All the activities included in the production and sale of goods or services may be classified as
business activities”
“Whole complex field of commerce and industry, the basic industries, process and
manufacturing and the network of ancillary services, distribution, banking, insurance, transport, and
so on which serve and interpenetrate the world of business as whole.
Thus, business may be understood as the “Organized efforts of enterprise supply consumers
with goods and services for a profit”
“Business is an activity that carried out for the purpose of supplying goods and services to
consumers to satisfy their felt needs”.
Business is an activity that involves many activities like production finance marketing trade
insurance agency packaging etc. all business carried out to earn a profit by fulfilling the needs of
consumers. In other words business involves people they occupy central place around whom by
whom and for whom a business is run. BUSINESS IS PEOPLE.
Nature of Business:
1. Vary in size
2. To earn a profit
Business Environment:
No business organizations functions in a vacuum. Every business needs to take decisions and
strategies purveying under the many internal and external factors. The sum all those factors and
forces which have a greater impact on the business decisions are collectively called as Environment.
Business Environment Meaning:
Business environment refers to all those internal and external factors which impact the
functioning/performance of a firm and/or its decision making particularly strategies.
According to Gerald Bell:
“An organization external environment consists of those things outside an organization such
as customers, competitors, government units, suppliers, financial firms and labour pools that are
relevant to an organization's operations”
Thus, it can be said environment as “the set of external factors such as the economic factors,
socio-cultural factors, and government factors demographic factors geophysical factors, which are
uncontrollable in nature and affects the business decisions of a firma or company.
Political Environment:
It refers to the influence exerted by the three political institutions viz., legislature, executive
and the judiciary in shaping directing developing and controlling business activities.
Technological environment:
It is the systematic application of scientific or other organized knowledge to practical tasks.
Its is through business technology reaches people.
Economic environment:
It refers to all forces, which have an economic impact on business industrial production,
agriculture, planning, basic economic philosophy, infrastructure, national income, per capita
income, money supply, population savings etc,
Social cultural environment:
Such factors are out of company's gate include peoples attitude to work and wealth, role of
family, relation and education, ethical issues, and social responsibilities of business.
Natural environment:
Business cannot bear the effects of natural hazards for example drought, poverty and
earthquake. Businesses still find himself helpless before mighty nature.
Global environment:
It refers to international trade wherein currency differentiation, language, international
markets etc. The business is reckoned t view as a global perspective.
Types of Business Environment:
The business environment can be divided into two ways.
I. MICRO ENVIRONMENT:
The macro environment of business includes activities which are uncontrollable and need proper
nourishment and attention on the part of a business enterprise.
According to Hill and Jones “The macro environment consists of the broader economic social demographic
political legal and technological setting within which the industry and the company are placed”.
According to Elbing “Macro environment is the indirect action environment as it may not have an immediate
direct effect on the operation but nevertheless have influence”.
GATT:
The general agreements o Tariffs and Trade was born in 1948 to liberlise the trade in international level.
Since 1948 the international trading system was adhered to principles and guidance of GATT. It was an
agreement signed by the contracting nations which were admitted on the basis of their willingness to accept the GATT
disciplines.
The GATT was transformed in to WTO in 1995.
Objectives:
1. Raising standard of living
2. Enhancing full employment and large steadily growing volume of real income and effective demand.
3. Developing full use of the resources of the world.
4. Expansion of production and international trade.
The rules or convention of GATT.
Any proposed change in tariff or commercial policy the members countries should not be undertaken without
consultation of other parties to the agreement.
The member countries should work towards reduction of tariffs and other barriers to international trade which
should be negotiated within the framework of GATT
Principles of GATT:
Non-discrimination
Prohibition of quantitative restrictions
Consultation.
Multinational corporations:
A corporation that controls production facilities in more than one country, such facilities having been
acquired through the process of foreign direct investment. Features:
1. Produce abroad as well as in the headquarters country.
2. Operate in a certain minimum number of nations
3. Getting some income foreign operations
4. Having certain minimum number of employees in host country.
5. Possess a management team with geocentric orientations
6. Directly control foreign investments.
Merits:
1. It helps to increase the investment level and employment in host country
2. Transformation of technology is possible to one country to another country.
3. They transform the management techniques to the host countries.
4. There is increase in export in the host countries can be possible.
5. They work equalize the cost of factors of production around the world.
6. MNC's provide the efficient means of integrating the national economies.
7. They enable innovations and inventions in host countries
8. They stimulate, encourage, and assist the domestic enterprise.
9. MNC's help in increase competition and break domestic monopolies.
Demerits:
The main demerits of MNC's are:
1. MNC's are profit oriented rather than development in host countries.
2. Through their power and flexibility, they weaken the national economic autonomy and control.
3. The tremendous power of MNCs may cause to support bribes, terrorist , and political influence etc.
this causes to get dominate on domestic industries.
4. These corporations consume natural resources from that depletion of resources may happen.
5. Sometimes transfer pricing may cause to avoid the taxes.
6. The MNC's have criticized for their business strategies and practices in the host countr
Y.
Liberalization privatization and globalization:
Privatization:
It means transfer of ownership and/or management of an enterprise from the public sector to the
private sector. It also means the withdrawal of the state from an industry or sector partially of fully. Another
dimension of privatization is opening up of an industry that has been reserved for the public sector to the
private sector. The process of moving from a government-controlled system to a privately run, for-profit
system. he repurchasing of all of a company's stock by employees or a private investor. As a result of such an
initiative, the company stops being publicly traded. Sometimes, the company might have to take on
significant debt to finance the change in ownership structure. Companies might want to go private in order to
restructure their businesses (when they feel that the process might affect their stock prices poorly in the short
run). They might also want to go private to avoid the expense and regulations associated with remaining
listed on a stock exchange. Also called going private. opposite of going public.
Ways of privatization:
The government takes following ways to privatize a public sector
Joint public-private venture
Leasing
Franchising
Benefits of privatization:
It reduces the fiscal burden of the state by relieving it of the losses.
It enables to mop up the funds
It helps to make out the fair size of administrative machinery.
It enables the government to concentrate more on the essential state functions
It helps to the economic development
It may result in better management of the enterprises
It encourages the entrepreneurship
It may increase the number of workers and common man who are shareholders.
Arguments against privatization:
It discards the public sector units
It may encourage of economic power to common detriment.
It may support monopoly
It may lose the profitable units belong to the government.
Sins of pitfalls of privatization:
Lack of proper strategy
Ambiguity of objectives
Connivance
Wrong time
Lack of political consensus
Wrong labour strategies
Lack of political will
Poor financial strategies
Wrong environment
Prevalence of monopoly elements
Problem of cultural change.
Liberalization:
liberalization means the removal or relaxation of statutory barriers against the development of market
competition and does not include the pursuit of liberal trade policy with other nations, the abolition of
protective tariff rates, or the decontrol of foreign exchange rates in line with international market
forces.
Globalization:
According to the international monetory fund, “the growing economic interdependence of
countries worldwide through valume and variety of cross border transactions in goods and services
and of international capial flows, and also through the more rapid and widespread diffusion of
technology.
Globalization is attitude of mind it is a mind set which views of entire world as a single market
so that the corporate strategy is based on the dynamics of the global business environment.
Globalization encompasses the following
Doing, or planning to expand business globally.
Giving ujp the distinction between the domestic marker and foreign market and developing a
global outlook of the business
Locating the production an other physical facilities on a consideration of the global business
dynamics, irrespective of national considerations.
Basing product development and production planning on the global market consideration.
Global sourcing of factors of production, raw materials, components machinery technology
finance etc, are obtained from the best source anywhere in the world.
Global orientation of organization structure and management culture.