1i ) Business may be understood as the organized efforts of enterprise to supply

consumers with goods and services for a profit. Businesses vary in size, as measured by

the number of employees or by sales volume. But, all businesses share the same purpose: to

earn profits.

The purpose of business goes beyond earning profit. They are:

 ™ It is an important institution in society.

 ™ Be it for the supply of goods and services.
 ™ Creation of job opportunities.
 ™ Offer of better quality of life.
 ™ Contributing to the economic growth of the country.

Q1.2

Following are main objectives of business environment:

1. Knowledge of Information

By studying the business environment, we can know the changes of business. Every businessman should
aware current environment of business. With this, he can think the future of his business in such
environment.

2. Basis of Decisions

One of main objective of the study of business environment that it can provide all the information which
is needed for taking good decisions. Suppose, you completed your internal business environment study.
With this study, you can take decision relating to purchase, sale, salary and price because you know your
competitor, you know your suppliers and you know your customers.

3. Helpful in making of Policies

For making good business policies, we need to know and scan business through business environment.

4. Technological Planning

Today, technology is changing very fastly. 3 years ago, I have to search software for downloading
business software but today I can use all business software online free of cost. This has become possible
due to changes of web technology. So, you have to study technological environment. With this, you can
make better technological planning of your business.
5. Survive in the Business

Sometime industry may face recession. Production may be unlimited but sales will be limited. Only that
business will survive who estimate all these situation in advance through business environment study.

Q1.3

Political Environment affect the different business units.

A stable and dynamic political environment is very necessary for business growth.

Political environment includes political stability in the country, relation of the government with other
countries, welfare activities of government, centre state relationship, thinking of opposition parties
towards business.

If the political system is stable and efficient then the business grows. In the lack of political stability long
terms plans cannot be formulated. Thus business is adversely affected if the government is not stable.

Similarly relations of government with other countries also affect business. If a country enjoys friendly
relations with other nations, then it has favorable effect on foreign trade.

Q1.4

Economic Environment refers to those economic factors which have impact on the working of business.

Economic environment is very complex in nature. It is very dynamic. It has three elements:-

a) Economic Conditions

Economic conditions of the economy the business. Economic conditions includes income level,
distribution of income, demand and supply trends etc. If the economy is in boom conditions, it positively
affect demand and market share. On the other hand, if the economy is in depression, it will have
negative effect on the business.

b) Economic policies

Economic policies are framed by government. These policies establish relationship between business
and government. The effect of these policies may be favorable or unfavorable.

c) Economic system

Different economic system prevails in different countries. These systems affect the business. The
economic system includes capitalism, socialism and mixed economy.
Q1.6

Social and cultural environment refers to the influence exercised by certain social factors which are
“beyond the company’s gate”. All such factors come under one head that is culture.

Culture : In its narrow sense culture is understood to refer to such activities as dance, drama, music and
festivals. In its true sense culture is understood as that complex whole which includes knowledge,
belief,art, morals, law, customs and other capabilities and habits acquired by individual as a member of
a society.

The culture has two main characteristics :

i) Shared value

ii) Passage of time

Culture of a society is shared by its members. Cultural ethos are passed from one generation to other
generation.

The interface between business and culture can be summarized as follows

a) Culture creates people.

b) Culture determines goods and services.

c) It defines people’s attitude to business and to work.

d) Explains the spirit of collectivism and individualism.

e) Defines whether people are Ambitions or complacent.

f) Education

g) Family

h) Authority

i) Marriage

j) Time Dimension

k) Cultural Resources.

1.10) Explain EXIM policy.

Exim Policy

 Foreign trade of India is guided by the Export-Import policy of the Government of India.
Regulated by The Foreign Trade Development and Act 1992.
 Exim policy contain various policy decisions with respect to import and exports from the
country.
 Exim Policy is prepared and announced by the central government
  Exim Policy of India aims to developing export potential, improving export performance,
encouraging foreign trade and creating favorable balance of payment position.

General Objectives of Exim Policy:

 To establish the framework for globalization.

 To promote the productivity competitiveness of Indian Industry
 To Encourage the attainment of high and internationally accepted standards of quality.
 To augment export by facilitating access to raw material, intermediate, components,
consumables and capital goods from the international market.
 To promote internationally competitive import substitution and self-reliance.

1.8) Explain industrial policy.

Ans.: Industrial development of a country call for an appropriate and progressive industrial policy.
Industrial policy is “Those principles and activities which are pursued and performed to help industrialize
a country”

It is therefore aptly said, “Industrial policy an instrument, with the help of which the state participates in
growth process.”

Thus, industrial policy is a comprehensive concept which provides guidance and outlines of the policy for
establishment and working of industries.

The main objectives of new industrial policy are :

(1) Deployment of Natural Resources

(2) To augment Industrial Production

(3) Modernization

(4) Balanced Industrial Development

(5) Co-ordination between Small and Large Scale Industry

(6) Coordinal Industrial Relations

(7) Proper utilization of Foreign Investment.

1.7 ) What do you understand by Industrial sickness?

A sick unit is one which is not healthy. To an industrialist, it is a unit which is making losses. To an
investor it is one which skips dividends. To a banker, it is one which is not repaying its loan or interest.

Acc. to Reserve Bank of India,

“A sick unit is that which has incurred cash loss for previous year and is likely to incur losses for the
current year as well as in following year and the unit has an imbalance in its financial structure such
as current ratio is even less than 1:1 and there is a worsening trend in debt equity ratio.

Sickness are two types, namely:-

1. Born Sickness
Industrial units born sick are those which are destined for disaster right from their conception
due to various causes.
e.g Lack of experience of promoters, Lack of funds, Lack of good location, Wrong plant layout.

2. Achieved Sickness

Industries which achieve sickness are those which fail after becoming operational due to internal causes.

e.g Bad Management, Poor inventory management, Poor labor management.

The main reasons of Industrial sickness is explained are as follows :–

i) Management Problems

ii) Financial Problems

iii) Labor Problems

iv) Technological Factors

v) Personal Wasteful Expenditure

vi) Faulty Demand Forecasting

vii) Government Policy

Q7

Globalization

Globalization refers to the process of integration of the world into one huge market. In other words
Globalization means integration with the world economy. Now a days every company want to enter to
global market.

Globalization manifests itself in many ways.

The more important of them are :-

i) Configuring Anywhere in the World: An MNC can locate its different operations in different countries
on the basis of raw material availability, consumer markets and low cost labor.

ii) Lowering of Trade and Tariff Barriers : An MNC locate their business where trade tariffs and custom
barriers are getting lowered, resulting in cheaper and abundant supply of goods.

iii) Increasing Trend Towards Privatization : Government are everywhere withdrawing from owning and
running business enterprises. Private entrepreneurs are given greater access and freedom to run
business units.
iv) Mobility of Skilled Resources : Skilled labour was considered to the decisive factor in plant location.
Modern factories use highly skilled labour which is freely mobile. Where labour is unskilled
managements are spending vast sums of money to train workers become skilled in their jobs.

v) Entrepreneur and his Unit have a Central Economic Role: in the process of economic growth and
development of a nation. Given the right environment he is able to innovate, bring in new products and

contribute the nation’s wealth.

Privatization

Privatization of industries means opening the gates of public sector to private sector. Private sector
comes to play significant role in the economic development of the country. Thus transferring of public

sector industries to private sector is called privatization.

The main causes of privatization is explained are as follows:-

1. Inefficient Public Sector

2. Burden on the Government

3. For promoting Industrial Growth

4. For promoting Globalization

5. To solve Financial crisis of Government

Advantages of Privatization:

1. Increase the efficiency

2. Increase in competition

3. Increase in financial resources of Government.

4. Increase in foreign investment

5. Encouragement of New inventions.

6. Reduction in Economic Burden of Government

7. Increase in Industrial Growth Rate

8. Reduction in Political interferences.

Q3 Write short note on corporate social responsibility

Today the business’s responsibility is not limited to earning profit its owner but it has to look to the
interest of other parties like shareholders, employees, competitors, consumers, suppliers, government,
community and world etc.
The responsibility of business which includes the satisfaction of these parties along with the owner is
called the social responsibility of business.

For example: – LG company fulfill their responsibility towards various parties of the society. LG company
provide different variety of product to consumer at low cost and also provide quality product to the
customer. On the other hand the company fulfill the responsibility towards employees. It provide
incentives to the employees as well as various facilities. The company pay tax to the government at time
and follow the rules and regulations of the government.

The main responsibility of various parties in the society is explained are as follows :–

i) Towards Owners: If the management and the owner happen to be different ,the managers have the
following responsibility towards the shareholders:-

a) To ensure safety of the capital.

b) To ensure proper dividend.

c) To ensure proper utilization of invested capital.

d) To ensure timely payment of dividend.

e) To inform about the progress of the organization.

ii) Towards Employees:. Employees are the key to success. If employees are satisfied the enterprise can
achieve their goals.

a) Giving the appropriate Remuneration.

b) Giving participation in Management.

c) Provide good work atmosphere.

d) Giving them a share of profit.

e) Provide education and training.

f) Provide opportunities for promotion.

g) Solve labour problem in time.

iii) Towards Consumers : Consumers are so important for running the business.

a) To provide good quality products at cheap rates.

b) To provide after sale services.

c) Polite to consumers.

d) To solve their problems politely.

e) To make available goods according to the taste of the consumer.

iv) Towards Suppliers: A manager also has a responsibility towards the supplier. If the supplier do not
supply the raw material in time so the production will be hindered and the reputation of the
organization will suffer.

a) To make timely payments.

b) Informing about the taste of consumers.

c) Give appropriate price of the material.

v) Towards Competitors: – A managers has the following responsibility towards the competing
organization :–

a) To encourage mutual cooperation.

b) To encourage market research.

c) To work jointly for the development of business.

vi) Towards Self :A manager’s towards his own self may also considered.

a) To earn sufficient profit.

b) To earn reputation.

c) To enter new market.

d) To take interest in research.

vii) Towards Community :– The people of society have the following expectations from business :–

a) To provide opportunities for employment.

b) To contributing to the raising of the standard of living.

c) To avoid indecent advertisement.

d) To avoid polluting the environment.

viii) Towards World :– A manager has also responsibility towards the world.

a) To do business honestly

Q.5 Explain monetary policy in detail.

Monetary policy regulates the supply of money and availability of credit in the economy. It deals with
both the lending and borrowing rates of interest of commercial banks. It aims to maintain price stability,
full employment and economic growth.

Reserve Bank of India (RBI) is responsible for formulating and implementing monetary policy of India.

The efforts of monetary authorities to increase the benefits of existing monetary system and to reduce
the disabilities in the process of economic development and growth can be called the monetary policy of
the country.
Objectives of Monetary Policy of India:

1. To achieve Price stability

2. To attain Exchange rate stability

3. To avoid the negative impacts of business cycle

4. To experience full employment position

Instruments: The major instruments used to achieve objectives are

Bank rate: The rate of interest charged by the RBI against the commercial bank borrowings. If RBI
increases the bank rate from 2% to 3% then the commercial banks rate of interests will go up from for
example 7% to 10% which in turn reduce the public borrowings due to higher interests and minimize the
money circulation in the country.

Reserve ratio: CRR (Cash Reserve Ratio), SLR (statutory Liquidity Ratio) the RBI insist on commercial
banks to keep a certain percentage as reserve in their hands for ensuring liquidity and regulating credit.
In case when the RBI increases CRR from 10% to 12% then the availability of money in the hands of
banks will come down. Thus, the credit creating capacity of the commercial banks will be reduced and
money supply in the market also will be regulated.

Open market operation: RBI selling the government securities to the public. In that case instead of
having money in the hands the public will receive certificates for a fixed time period and they will
receive interest against the same. But the money circulation among the public will be reduced.

Margin requirements: Margin requirement for mortgaging against the loans will be increased to reduce
to credit and it will be reduced to increase the credit flow.

Credit rationing: The loans and advances are provided only for production purpose and for essential
activities to cut down the money in circulation.

Moral suasion: RBI controls the commercial banks for creating loans and advances by persuasion
through issue of circular.

Direct actions: Sometimes RBI takes direct action against the credit created by the banks in
contravention of the RBI guide line to overcome the inflationary situation.