OCM 5 Marks Each

• Large scale production
• Increased competition leads to greater consumer protection
• Consumers get improvised, technically upgraded product at an economical price
• Opportunities of employment generation
• Consumers will be able to use quality products and service at a low price
• Speedier generation of infrastructural facilities in the country
• Increased importance of education has led to increase in spread of education
• Easier to set up new industries
• The whole world is becoming a global village
• Freedom from political bureaucracy and red tapism.

• Arrangement for market set-up becomes difficult and costly
• Rise in the production of luxurious goods and services at the cost of necessities
• New problems arises because of the change in human mentality
• Rise in inequalities of income and wealth distribution
• Spread of economic situation of one country or continent to other countries quickly
• Competition is at the cost of ethical values
• Larger units get more profit and small scale units experience difficulty to survive
• When the spread of education is relatively lesser than the spread of development, the competitive ability of employees become weak
• Multinational companies show more loyalty to their home country rather than – to the host country
• Internationally renowned companies influence the monetary policy of the country which is suitable to them by collaborating with the political parties.

• Business environment cover factors such as economic, technological, social, employees, competitors. They all are directly or indirectly connected.
• All there factors sometimes create new avenues for employment along with some obstacles.

• How business opportunities are created by business environment ?

• Free trade policy is adopted in capitalist economic system. It permits manufacturers to take all decisions regarding economic activity.
• As a result many new business opportunities can be seized.
• Government implements various schemes for development of agriculture sector.
• It creates business opportunities in this sector.
• Due to development of transport, banking, tourism, education, hygiene, service sector opportunities of business investment increases along with it increase the development opportunities.
• With the increase of national income, prestige value based product / services are in demand which also create opportunities for business investment.
• Raw material and its supply machinery, financial facilities etc. generate new opportunities.
• Social factors include human being, social organization, social traditions, people’s life-style, people’s living, etc. which include business opportunities.
• Political factors include ideology of the concerned ruling party.
• It covers its economic ideology too.
• Business opportunities emerge from this. E.g. providing cleanliness campaign, related instruments, constructing latrines, manufacturing solar energy producing instruments for which government sanction grant.
• How business environment becomes obstacles ?
• Business entrepreneurs analyze business environment and size business opportunities.
• Factors influencing business are never stable.
• Sometimes changes occurred in business harm individual and community and become obstacles in business.
• In capital economic system there is policy of free trade and all the decisions are taken by manufacturers.
• Probability of exploitation of customers is not avoided.
• So community protests some of the products.
• Due to government’s subsidy to agriculture sector, employment does increase and work force for other sectors is not available which is an obstacle in the progress of other sectors.
• Agriculture, industry and service sectors are inter-related. So problem arise in one sector affects other sectors and finally the investors suffer.
• With the increase of national income, new business opportunities emerge. But as it is unequally distributed, class difference are found in society which result in social conflict.
• Due to the facilities of raw – material and its supply, machinery and financial facilities evils like hoarding of goods, manmade shortage, monopoly, etc. arise.
• Social factors include social traditions, life-style of people, etc. these factors are not stable.
• They sometimes create obstacles in business environment.
• Business opportunities emerge from the ideologies of the concerned political parties.
• When government is changes or rules and regulations of the present government changes and laws are changed then industries have to suffer.

• Conclusion :

• Business opportunities are created from various factors affecting business environment.
• If foresight is not used then these factors are proved obstacles for investors and society.

• Bureaucracy
• Obsolete technology
• Rising corruption and bribery
• Absence of accountability
• Growing influence of labour unions
• Political interference, etc.

• The government gives various subsidies in the agriculture sector. As a result, people tend to remain in agriculture and do not move to other sectors. This hinders the employment rate of other sectors. Moreover, the capital distributed as subsidies could be used for important projects in other sectors.
• As the country develops, the business environment rises and shifts from agriculture to industries and finally to service. Flowever, it is important that the country maintains a fine balance between these three sectors. Many a times, the balance gets disturbed and the other sectors do not get proper attention.
• Rise in national income increases demand for better and luxurious products. But, if the income is unequally divided then it leads to class difference and social conflicts.
• If the political parties are biased and slow in decision making, the decisions taken become obstacle for the growth of the nation.

• If the country follows capitalistic type economic system, it means that the country will adopt a policy of free trade. In this system, the government allows
  the producer to take all the major decisions with respect to production and distribution. The business unit can take advantage of this policy.
• Government implements several schemes for the growth of the three major sectors such as agriculture, industries and service. These schemes open new doors of growth and opportunities.
• As the developing country grows, industries such as transport, communication, banking and insurance, etc. also get boosted. New employment is generated and national income increases.
• When the national income increases, demand for luxurious and prestigious products increase. This creates opportunities for market of such products.
• With the advancement of society, people’s preference, taste and adaptability towards new goods increase. This gives rise to new markets and hence opportunities.
• If changes in the monetary policy are positive, the demand for capital for new businesses, new house, etc. increases. Also, opportunities for steel, cement, banking and insurance, etc, industries increase.
• Ruling parties can pass certain acts favourable to the society and industry. These acts create business opportunities. For example, development of public infrastructure, cleanliness drive, moving to eco-friendly products, etc. all create new opportunities.

• Maximum utilization of resources and factors
• Distribution of resources in the best possible manner to achieve fast economic development
• Bring about equal distribution of resources in the best possible way
• Stabilize prices of goods and services

• All the three sectors of an economy are dependent on each other and so development of one sector will lead to the development of the other. For example, to boost agriculture sector, people will have to adopt mechanization i.e. have to move towards industrial sector. Once the production rises, the country will require a strong infrastructure of services such as warehousing, transportation, communication, insurance, etc.
• So, sectorial changes bring about a favourable business environment.

• Any business activity is practically meant for the development of the entire society. Business activities are designed with the objective of attaining speedy economic development and increasing the welfare activities.
• There is a direct relationship between development of business and welfare of society. The government sees to it that businesses grow ethically. It frames various policies and regulations to nullify the long term negative impacts if any from the business to society.
• Hence, the government is alert that although business development should be fast, it should not have adverse impact on the society.

• The organized way in which a country allocates resources and distributes ‘ goods and services is known as the economic system of that nation.
• How the country functions and in which direction is its economy moving is ascertained by the economic system that the country follows.

• In West Bengal, there was a large opposition for Nano car project of Tata group. This opposition was so fierce that Tata group had to leave West Bengal. Gujarat government took this as opportunity and provided various incentives to the Tata group to establish their Nano car production plant at Sanand near Ahmedabad.
• Tata agreed and as a result, several ancillary industries also came up at Sanand along with Tata. This is a fine example of active role of the political party to grab the opportunity and establish positive business environment.

• Factors related to government and financial ideologies of the ruling party are known as political factors.
• The ruling parties frame various laws in the nation. They also establish several policies to expand trade and commerce in the nation. How well the party does all these tasks decide the business environment of the nation.

Example:

• In West Bengal, there was a large opposition for Nano car project of Tata group. This opposition was so fierce that Tata group had to leave West Bengal. Gujarat government took this as opportunity and provided various incentives to the Tata group to establish their Nano car production plant at Sanand near Ahmedabad.
• Tata agreed and as a result, several ancillary industries also came up at Sanand along with Tata. This is a fine example of active role of the political party to grab the opportunity and establish positive business environment.

• If the business management ignores the cultural factors prevailing in a society, there are high chances for the business to fail.
• History has recorded several examples where in companies having strong management have failed by neglecting cultural factors. And at the same, time various products which are not economically acceptable have become acceptable because of cultural factors and they have become successful.
• Cultural factors are constantly changing and these changes are constant and periodical.

• All the business activities originate, grow and end in the society. So naturally, society plays a major role in the environment it gives for the business activities.
• A business activity can never be separated from society. Society represents groups of people, social institutions, social traditions, etc.
• The society of a nation constantly evolves and hence is dynamic in nature. As a result, the lifestyle, preferences and practices also keep on changing. All these factors change the business environment too.
• Beliefs and ideologies of people cannot remain same throughout. So, with time people give importance to their decisions, ideologies and rituals to achieve their development.
• Before producing several type of products the producer needs to consider religion, caste, sect, social norms, ideologies, etc. that exists in a particular society. The decision for the economic activity will be largely affected by these parameters.
• For example, if the society is quite conservative with respect to clothing, then the producer should not produce very bold clothes else he will face loss.
• The society or a section of society which does not restrict itself to all these social constraint develops much faster. People of such societies are open to new ideas and are ready to accept new products. As a result, business activities have a higher chance to innovate and expand.

• The factors which cannot be controlled by the managerial personnel of the organization are called external factors of business environment.
• In order to survive in the market and keep going with the competition, the business has to make necessary changes with regard to external factors.

These factors can be broadly classified as:

• Economic factors
• Social factors
• Cultural factors
• Technological factors
• Political factors
• Legal factors

Example:
Two types of insurance exist in India namely,

1. Life insurance and
2. General insurance.

• Initially, the government companies used to take care of insurance business, but in 1991, the government changed its policy and allowed private companies to enter into insurance business.
• Government saw that the business was expanding in India and it became quite important to expand insurance services so that people could do business with ease.
• Later, the government also allowed foreign direct investment in private Indian
  insurance companies. This further allowed various new business houses to enter in the field of insurance.
• These policy decisions have expanded the insurance business in India as a result of which today even a very common man is able to avail insurance.

• Each and every business is related to several factors of the society. These factors could be economic, social, cultural, technological, political and legal. These factors include many groups like consumers, competitors, suppliers of raw materials, employees, etc. The environment created by the group of all such factors that directly or indirectly affect the business is called business environment.
• No business can operate on its own aloof from the society i.e. the factors of the society affect the business environment and hence the business.

• Each and every business is related to several factors of the society. These factors could be economic, social, cultural, technological, political and legal. These factors include many groups like consumers, competitors, suppliers of raw materials, employees, etc. The environment created by the group of all such factors that directly or indirectly affect the business is called business environment.
• No business can operate on its own aloof from the society i.e. the factors of the society affect the business environment and hence the business.
• Business environment is highly dynamic and also quite uncertain.

The businesses can be classified into three types on the basis of business environment. They are:

1. Business units that anticipate the environmental aspects well in advance and make necessary changes to the business.
2. Business units that bring necessary changes based on the existing environmental situation.
3. Business units that are not in a position to adjust to the existing environment easily.

• All the business activities originate, grow and end in the society. So naturally, society plays a major role in the environment it gives for the business activities.
• A business activity can never be separated from society. Society represents groups of people, social institutions, social traditions, etc.
• The society of a nation constantly evolves and hence is dynamic in nature. As a result, the lifestyle, preferences and practices also keep on changing. All these factors change the business environment too.
• Beliefs and ideologies of people cannot remain same throughout. So, with time people give importance to their decisions, ideologies and rituals to achieve their development.
• Before producing several type of products the producer needs to consider religion, caste, sect, social norms, ideologies, etc. that exists in a particular society. The decision for the economic activity will be largely affected by these parameters.
• For example, if the society is quite conservative with respect to clothing, then the producer should not produce very bold clothes else he will face loss.
• The society or a section of society which does not restrict itself to all these social constraint develops much faster. People of such societies are open to new ideas and are ready to accept new products. As a result, business activities have a higher chance to innovate and expand.

• Internal factors in business environment are the factors which are controlled by the managers.
• Managers can change them as per their requirement.eg. Objectives of business, employees, managerial structure, method of production, training program etc.
• External factors :
• External factors in business environment are the factors on which there is no control of managers.
• According to these factors managers have to make certain changes in business.
• It includes economic, social cultural, technological, political and legal factors.

• Community means a group of people, social institutions, social traditions etc.
• Ant business unit emerges, develops and ends in society.
• Life style of people can remain the same for ever but social change affect business.
• If effects belief, customs religion, sect, friend circle, relatives and their economic decisions.
• All these factors should be considered in the country where social institutions dominates.
• In our country certain special business are related to caste and social groups.
• These classes of societies which are aloof from social restrictions have been able to achieve much faster development.
• Such societies are open to new ideas, and encourage business activities.
• Cultural factors affecting business environment :
• Cultural factors include traditions, customs, habits etc.
• Which affect decision making process of a business unit.
• If cultural factor is ignored, strategies of business unit fail or chances of failing increase.
• Many products have failed due to ignoring cultural aspect, through the product was manufactured by efficient managers.
• There are many products which are not acceptable monetarily yet have captured market due to acceptance of cultural aspects.
• Cultural factors are constantly changing.
• Changes are periodical and constant.

• Among all external factors affecting business environment, economic factors is considered of great importance.
• Economic factors are considered in formulating policies for development and to maintain continuity of daily activities of business.
• It is highly required for development of business to evaluate.

• Economic factors affecting business environment :

• Economic specialties and limitations of the nation or society affect business decisions.
• The level and form of the development of business depend on the following economic factors.

• Economic system :

• Economic system plays vital role in determining economic activities of the nation.
• If capitalist economic system is adopted, it means ‘free trade’ policy is adopted.
• Under this system manufacturers are at liberty to take all decisions related to economic activity.
• In this type of economy government interference is less.
• Most of the decisions are taken by the government in socialist economy.
• Individual motivation or encouragement is not found in such type of economy.
• As India has adopted ‘mixed’ economy, business freedom is observed in some sectors and in other sectors government dominance is observed