IGNOU ASSIGNMENT SOLUTIONS
MASTER OF COMMERCE (MCOM - SEMESTER 1)
MCO-04 - Business Environment
MCO - 04 /TMA/2023
Please Note:
These assignments are valid for two admission cycles (January 2023 and July 2023). The validity is given below:
1 Those who are enrolled in January 2023, it is valid upto June 2023.
2 Those who are enrolled in July 2023, it is valid upto December 2023.
In case you are planning to appear in June Term-End Examination, you must submit the assignments to the Coordinator of your Study Centre latest by 15th March, and if you are planning to appear in December Term-End Examination, you must submit them latest by 15th September.
Question 1
What do you understand by business environment? Discuss its importance for the business.
Solution:
The word ‘business environment’ indicates the aggregate total of all people, organisations and other forces that are outside the power of industry but that may affect its production. According to an anonymous writer- “Just like the universe, withhold from it the subset that describes the system and the rest is environment”. Therefore, the financial, cultural, governmental, technological and different forces which work outside an enterprise are part of its environment. The individual customers or facing enterprises as well as the management, customer groups, opponents, media, courts and other establishments working outside an enterprise comprise its environment.
Importance of Business Environment:
Just like us, business operations do not survive in confinement. Every enterprise is not an island to itself; it subsists, endures and develops within the circumstances of the part and forces of its situation. While an individual enterprise is able to do minute to change or manage these forces, it has no choice to reacting or modifying according to them. Good knowledge of the environment by business managers allows them not only to recognise and assess but also to respond to the forces outside to their enterprises. The significance of the business environment and its perception by managers can be understood if we contemplate the below-mentioned following points:
(A) It Helps in Identifying Opportunities and Making First Mover Advantage
The environment provides numerous opportunities, and it is necessary to identify the opportunities to improve the performance of a business.
Early identification gives an opportunity to an enterprise be the first to identify opportunity instead of losing them to competitors. Example: ‘Airtel’ identified the need for fast internet and took first-mover advantage by providing 4G speed to its users followed by Vodafone and Idea.
Asian paints lost market share to Nerolac because it failed to match its technology.
(B) It Helps the Firm Identify Threats and Early Warning Signals
The business environment helps in understanding the threats which are likely to happen in the future.
Environmental awareness can help managers identify various threats on time and serve as an early warning signal. Example: Patanjali products have become a warning signal to the rest of the FMCG
The sector to develop similar products. Similarly, if an Indian firm finds that a foreign multinational is entering the Indian market with new substitutes; it needs to prepare accordingly.
Chinese mobile phones have become a threat for Indian mobile phone manufacturers.
(C) It Helps in Tapping Useful Resources
Business and industry avail the resources (inputs) from the environment and convert them into usable products (outputs) and provide to society.
The environment provides various inputs (resources) the like finance, machines, raw materials, power and water, labour, etc.
The business enterprise provides outputs such as goods and services to the customers, payment of taxes to the government, to investors and so on.
Example: With the demand for the latest technology, manufacturers will tap the resources from the environment to manufacture LED TVs and Smart TVs rather than collecting resources for colour or Black & White TVs.
(D) It Helps in Coping With Rapid Changes
The business environment is changing very rapidly, and the industry is getting affected by changing market conditions.
Turbulent market environment, less brand loyalty, divisions of markets, changes in fashions, more demanding customers, and global competition are some examples of changing the business environment.
Example: Jack Ma started Alibaba as he could see the potential of interest in E-Commerce.
(E) It Helps in Assisting in Planning and Policy Formulation
The business environment brings both threats and opportunities to a business.
Awareness of business environment helps in deciding future planning or decision making.
Example: Multiple entries of Chinese phones like VIVO, Gionee, OPPO, etc. have posed a threat to local players like Micromax, Karbonn, Lava etc. to think afresh how to deal with the situation.
(F) It Helps in Improving Performance
Environmental studies reveal that the success of any enterprise is closely bound with the changes in the environment.
The enterprises which monitor and adopt suitable business practices not only improve their performance but become leaders in the industry also.
Example: Apple has been successful in maintaining its market share due to its proper understanding of the environment and making suitable innovations in its products.
Why It is Important for Business Enterprises to Understand Their Environment?
A) It Benefits in Tapping Useful Resources
Business and industry avail the resources (inputs) from the environment and convert them into usable products (output) and provide to society.
The environment provides various inputs (resources) like finance, machines, raw materials, power and water, labour etc.
The business enterprise provides outputs such as goods and services to the customers, payment of taxes to the government, interest/dividend to investors and so on.
Example: With the demand for the latest technology, manufacturers will tap the resources from the environment to manufacture LED TVs and Smart TVs rather than collecting resources for colour or black & white TVs.
(B) It Helps in Coping With Rapid Changes
The business environment is changing very rapidly and the industry is getting affected by changing market conditions.
Turbulent market environment, less brand loyalty, divisions of markets, changes in fashion, more demanding customers, and global competition are some examples of changing the business environment.
Example: Jack Ma started Alibaba as he could see huge potential in E-Commerce.
Question 2
How does socio-cultural environment affects business decision making? Give a brief ketch of the nature of socio-cultural environment prevailing in India.
Solution:
Each society has its own culture which consists of the customs, values, attitudes, beliefs, habits, languages and other forms of interaction between the members of the society. Any business firm which aims at entering any market for its products and services must develop complete understanding of socio-cultural environment of the society involved and adapt its strategies thereto.
The question arises as to what factors constitute social environment? A long list of factors such as social institutions, social systems, social groups, social values, and attitudes are included in it. Successful business managers cannot afford to neglect the importance of these features. No business can survive and grow without social harmony. Different countries, over different time periods, attain social harmony and order of different forms, through different ways and means. Thus socio-cultural environment differs over space, time and methods.
Three aspects may be noted in the current socio-cultural environment
1. Changes in our life-styles and social values : For instance, changing role of women, emphasis on quality of goods instead quantity of goods, greater reliance on government, greater preference for recreation activities.
2. Major social problems : For example, concern for pollution of environment, demand for socially responsible marketing policies, head for safety in occupations and products, etc.
3. Growing consumerism : It is indicating consumer dissatisfaction on a large scale against unfair trade practices. Consumerism is becoming increasingly important to marketing decision process. Social environment in many countries is responsible for emphasising social responsibility of business and customer oriented marketing approach.
The impact of socio-cultural dimensions upon the business could be understood in many ways. In the era of globalisation, the companies are crossing the limits of boundaries and going to the other parts of the world. Now the need for understanding and appreciating cultural differences across various countries is essential. Work motivation, profit motivation, business goals, negotiating styles, attitudes towards the development of business relationships, gift-giving customs, greetings, significance of body gestures, meaning of colours and numbers, and the like vary from country to country.
Likewise, the people of different countries Having different cultural heritage behave differently. When the people from different cultural heritage converge in a work place, management will be required to manage diversity. Reveals the difference in the socio-cultural factors in India.
These elements consist of the values, beliefs, customs, and conduct of humans in a society. The socio-cultural surroundings can have a massive affect on enterprise decision-making, as it influences client behavior, worker attitudes, and the typical enterprise climate.
socio-cultural environment
In India, the socio-cultural surroundings is numerous and complex, with a prosperous records and cultural heritage. Some of the key elements of the socio-cultural surroundings in India that can have an effect on enterprise decision-making are:
Religion
Religion performs a big position in Indian society, and groups want to be conscious of the spiritual beliefs and customs of their clients and employees. For example, positive merchandise or offerings can also no longer be perfect to sure spiritual groups, and companies want to be touchy to these concerns.
Family values
Family values are extraordinarily viewed in Indian culture, and agencies want to be conscious of the significance of household in decision-making. For instance, companies can also want to furnish bendy work preparations to personnel who want to care for their families.
Social hierarchy
Social hierarchy is usual in Indian society, and groups want to be conscious of the fame and hierarchy of their clients and employees. For example, agencies can also want to personalize their advertising and marketing and verbal exchange techniques primarily based on the social popularity of their goal audience.
Festivals and celebrations
India is regarded for its numerous fairs and celebrations, and corporations want to be conscious of these occasions and how they can influence patron behavior. For example, corporations may additionally want to provide extraordinary promotions or reductions for the duration of pageant seasons to entice customers.
Language and communication
India has a various linguistic landscape, with several languages spoken throughout the country. Businesses want to be conscious of the language preferences of their clients and personnel and tailor their conversation accordingly.
In conclusion, the socio-cultural surroundings in India is numerous and complex, and it can drastically have an effect on commercial enterprise decision-making. Businesses want to be conscious of the values, beliefs, customs, and conduct of humans in Indian society and adapt their operations as a consequence to be successful.
Question 3
What is an industrial license? Enumerate the circumstances under which it is necessary.
Solution:
The central government is empowered to regulate the establishment and certain activities of the industrial undertaking by means of licensing as per the industries regulation act 1951. An industrial license is a written permission given by the government to an industrial undertaking for manufacturing specified articles included in the schedule. A license contains particulars of the industrial : undertaking, it’s location , the articles to be manufactured , it’s capacity on the basis of the maximum utilization of plant and machinery ,and other appropriate conditions which are enforceable under the act.
The industries requiring compulsory licensing are:
Distillation and brewing of alcoholic drinks
Cigars and cigarettes of tobacco and manufactured tobacco substitutes
Aerospace and defense equipment
Industrial explosives -including detonating fuses, safety fuses, gun powder, nitrocellulose and matches
Hazardous chemicals – including items hazardous to human safety and health and thus fall for mandatory licensing
List Of Industries To Be Reserved For manufacture Of Items Exclusively in the Public Sector included in Schedule I :
Arms and ammunition and allied items of defence equipment
Defence aircraft and warships.
Atomic Energy.
Coal and lignite
Mineral oils.
Mining of iron ore, manganese ore, chrome ore, gypsum, sulphur, gold and diamond.
Mining of copper, lead, zinc, tin, molybdenum and wolfram.
Minerals specified in the Schedule to the Atomic Energy (Control of production and use) Order, 1953.
Railway transport.
However, in April 2015, the government unreserved these items to encourage greater foreign investment, incorporate better technologies, and enhance competition in the Indian and global market for the products.
Large industries are now permitted to manufacture items, including bread, pickles and chutneys, mustard oil, groundnut oil, wooden furniture, firework, steel chairs and tables, padlocks, stainless steel and aluminum utensils, glass bangles, exercise books and registers, wax candles, laundry soap, safety matches, agarbattis, etc. without obtaining an industrial license.
Industries subject to compulsory licensing in India
Businesses planning to establish industries to produce any of the following items in India must obtain a compulsory license:
Tobacco items
Defense aerospace and warships
Hazardous chemicals
Industrial explosives
These industries require compulsory licensing because of environmental, safety, and strategic considerations.
The Industries (Development and Regulation) Amendment Act, 2016 excluded the production of alcohol for potable purposes (domestic consumption) from the ambit of the Act. (The Supreme Court in a 1997 judgment demarcated the regulation of production of alcohol between the central government and the states. Thus, the central government regulates the production of alcohol for industrial use and states regulate the production of alcohol for domestic consumption.)
Location restrictions for industries in India
Under this provision, industries located within 25 kilometers of the periphery of cities having a population of at least one million, must obtain an industrial license from the federal government.
This location restriction does not apply in the following cases:
Industries manufacturing electronics, computer software and printing, or any other industry that may be classified as a ‘non-polluting industry’; or
Industries located in an area designated as an ‘industrial area’ before July 25, 1991.
The location of industrial units is subject to appropriate local zoning, land use regulations, as well as environmental regulations in order to maintain ecological discipline.
Question 4
Why is Indian economy regarded an underdeveloped economy? State its basic characteristics.
Solution:
An underdeveloped country is simply one which has a real per capita income, that is low in relation to the present day per capita income of rich countries like Canada, USA, Western Europe generally. The world today present a picture of applying contrast. Some of the countries though a few in number are fabulously rich. On the other hand, nearly three-forth of the world population inhabiting more of the countries of Asia, Africa, Latin America, Eastern Europe can barely afford a minimum existence. Majority of the people in these countries lives in misery, aqualor and hunger. The contrast seems to be all the more stunning when we find that these poor nations accounting for seventy percent of the world population having a fifteen percent share in world income. Whereas the richer nations with just one sixth of the world population claim over the seventy percent of the global income. Usually an underdeveloped nation is that is regarded as being capable of substantial improvement in its income paper.
The broad features of underdeveloped countries can be summed up as follows:
1.The per capita real income in these countries is very low as compared with the income levels of the advanced countries.
2.These countries have a low capital bare and a lower rate of capital formation, which is one of the main cause of their underdevelopment.
3.They have large amount of actual or potential natural resources which have been not exploited due to the lack of capital and technology.
4.They have substantial manpower resources which have been not fully utilized.
5.They can be put on the road to economic development only if some serious large scale efforts are made in this direction.
India, which for long has been defined as the underdeveloped country, now is called a developing economy. A developing economy is not just a new and a more respectable name of an underdeveloped economy. but it is a recognition of the fact that poor backward country is making Deliberate and conscious efforts to shed its poverty and stagnation and move on the path of economic progress and prosperity. Thus, a developing economy is characterised by a mixture of features of an underdeveloped stagnant economy and those of a steadily progressive economy. Essentially a developing economy is an underdeveloped economy on the march to prosperity and development. It is an economy which has shed off some of its backwardness and making perceptible progress in many socio-economic spheres. Thus a developing economy is one which has many sections that are making rapid progress, but has many activities still stepped in stagnation and backwardness. India is a developing economy. It has features of an underdeveloped economy.
Features of India’s underdeveloped economy:
1.Low per capita income: India’s per capita income is very low as compared to the developed countries of the world. India’s per capita income is about 70 times lower than that of Switzerland,35 times lower than the USA,30 times lower than UK and Germany.
2.Low levels of living: Low level of income in underdeveloped countries result in very much depressed levels of living of their people. Per capita daily calorie supply in India is only 2104 whereas in the USA it is 3666,In Canada It is 3447 and of Switzerland it is 3547.
3. Technological Backwardness: The techniques of production employed in most of the sectors of the underdeveloped economics are obsolete or outdated. In India, agriculture is largely carried on with the techniques which are centuries old. Modernisation in the industrial sector is also very limited, most of the industries still employ techniques which have been long discarded in the west. The transport sector still needs improvements.
4. Low productivity: There are wide differences in the level of productivity in different sectors between the advanced and the backward countries. The average productivity in Indian Agriculture is about one forth of the productivity level in USA and Canada. Not only agriculture but also is agriculture and tertiary sectors productivity is very low.
5. Excessive dependence upon agriculture: In India over half is of the working force directly engaged in agriculture. Contribution of agriculture and allied activities to India’s GDP is now around 15% as against 55% in 1950-51. Though slave of agriculture in the last six decades, it is still very high. But now it has gone down. This shows that the production of non-agriculture in India is much smaller as compared to the advanced countries.
6. Rapid growth of population: The rate of growth of population in underdeveloped countries is generally very high. Increasing population adds to the liability of the society as more and more provisions has to be made for food, shelter, stay, medical care, education etc. This calls for a higher rate of economic progress in order to maintain even the same levels of livings.
7. Existence of unemployment and disguised unemployment:- Unemployment in India has become more widespread in spite o the tremendous efforts that have been made to create more and more job opportunities during five year plans. In the agriculture sector of the economy is disgusised unemployment exists to a considerable degree. All these people share the nation’s income, without making any contribution in the production. This, they are a drain upon the country’s resources and a hindrance in the way of its development.
8.Poor quality of human capital: Yet another feature of the underdeveloped countries is the poor quality of human capita. Expenditure on education, medical care and social services goes a long way to improve the quality of labour. Unfortunately, in India masses still countries to be illiterate and ignorant. According to the census of 20121, the literacy rate had gone up to 74% compared to just around 32% in 1951. Though this is big achievement. Yet still over a quarter of country’s population is illiterate, which needs education to improve their skills and efficiency.
9. Dualistic Economy: The underdeveloped economies including the India are dualistic in nature. The modern sector of the economy and the traditional ones exists side by side, each having own its distinct identity. In India some sectors of the economy are well organised while large areas remains unorganised and backward.
The above features point out that India is an underdeveloped country. The other underdeveloped countries of the world also possesses similar features. In the year after independence the government of India has awakened to the need for economic development of the country and has made an organised efforts and initiated the process of development in the country. As a result of these efforts the pace of development has gathered momentum and the country is making a steady, though somewhat a slow process. The role of the government in India’s economic development has thus indeed been pioneering and paternal. It has not only directly participated in the economy to ensure its faster growth, but has helped and guided the private sector to become an effective agent of development. With the recent changes in government’s economic policies which incorporates a far greater degree of liberalisation, privatisation and computation. The private sector is being given a greater responsibility for country’s development, but the government would not shrink formats responsibility of helping and guiding the private sector. Even now the government has taken upon itself the vital role of providing and developing economic and social infrastructure services. The private sector will not be able to contribute its maximum potential to the development process. Hence while the private sector has now been asked to assume greater role in directly productive activities, the government would act as a guide and a facilitator of development by providing adequate essential development infrastructural services.
Question 5
Explain the concept of globalization as a national policy with particular references to the policy initiative taken by the Government of India since 1991.
Solution:
The term globalisation refers to the integration of the economy of the nation with the world economy. It is a multifaceted aspect. It is a result of the collection of multiple strategies that are directed at transforming the world towards a greater interdependence and integration.
It includes the creation of networks and pursuits transforming social, economical, and geographical barriers. Globalisation tries to build links in such a way that the events in India can be determined by the events happening distances away.
To put it in other words, globalisation is the method of interaction and union among people, corporations, and governments universally.
Effect of Globalisation in India
India is one of the countries that succeeded significantly after the initiation and implementation of globalisation. The growth of foreign investment in the field of corporate, retail, and the scientific sector is enormous in the country.
It also had a tremendous impact on the social, monetary, cultural, and political areas. In recent years, globalisation has increased due to improvements in transportation and information technology. With the improved global synergies, comes the growth of global trade, doctrines, and culture.
Advantages of Globalisation in India
Increase in employment: With the opportunity of special economic zones (SEZ), there is an increase in the number of new jobs available. Including the export processing zones (EPZ) centre in India is very useful in employing thousands of people.
Another additional factor in India is cheap labour. This feature motivates the big companies in the west to outsource employees from other regions and cause more employment.
Increase in compensation: After globalisation, the level of compensation has increased as compared to the domestic companies due to the skill and knowledge a foreign company offers. This opportunity also emerged as an alteration of the management structure.
High standard of living: With the outbreak of globalisation, the Indian economy and the standard of living of an individual has increased. This change is notified with the purchasing behaviour of a person, especially with those who are associated with foreign companies. Hence, many cities are undergoing a better standard of living along with business development.
Globalization as a national policy
In India, the coverage of globalization used to be initiated in 1991 beneath the management of then-Prime Minister P.V. Narasimha Rao. The coverage aimed to spoil the shackles of the License Raj, which was once a gadget of authorities manage and law that constrained personal enterprise, stifled innovation, and hindered monetary growth.
The policy of globalization in India concerned quite a few initiatives, including:
Liberalization of trade
The authorities decreased import tariffs and lifted restrictions on imports to promote global exchange and make Indian agencies extra competitive.
Privatization of public quarter enterprises
The authorities bought off its stake in public region enterprises, permitting the personal region to take a larger function in the financial system and encouraging competition.
Deregulation of industries
The authorities decreased policies in key industries, such as telecommunications and aviation, to inspire non-public funding and innovation.
Foreign investment
The authorities allowed overseas groups to make investments in India, opening up the financial system to world capital flows and science transfers.
Fiscal reforms
The authorities applied fiscal reforms, such as decreasing subsidies and introducing a items and offerings tax, to promote fiscal self-discipline and enhance income collection.
The coverage of globalization in India has had combined results. On the one hand, it has contributed to widespread monetary growth, job creation, and poverty reduction. On the different hand, it has additionally resulted in rising profits inequality, environmental degradation, and social tensions.
In conclusion, globalization as a countrywide coverage includes a government’s efforts to promote and integrate their financial system into the international economy. The coverage initiative taken by way of the Government of India due to the fact that 1991 concerned liberalization of trade, privatization of public zone enterprises, deregulation of industries, overseas investment, and fiscal reforms. While the coverage has had some high-quality results, it has additionally had its share of challenges and controversies.
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