-Business Environment) (2)

8/13/2019 -Business Environment) (2)

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WELCOME


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What is Business ?


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TRADITIONAL APPROACH:

Businessrefers to buying / selling of goods / services.OR

The activity of making money by producing / buying andselling of goods / providing services. (GENERATEPROFIT)

MODERN APPROACH:

Businessas practiced today, spans a vast and complexfield of activity involving industry, trade and commerce

they relate to production, distribution and exchange ofgoods and services.

Two fold purpose: GENERATE PROFIT & CATER TONEEDS OF THE SOCIETY.


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General Characteristics of Business:

Element of Enterprise: Anticipates visualizes organizes supervises undertakes risk and

uncertainty

Dealings in exchange of goods & services: Producers

goods, consumers goods, services invisible /intangible, etc.

Element of risk and Uncertainty: business forecast

demand forecast other parameters in technology,

mismanagement in the use of technology/products,shortage of raw materials, labor trouble, competition in

market, etc.


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Element of creation of Utilities: Business is engaged

in creation of utilities want satisfying capacity

form, place, service utility (carpenter).

Element of continuity of transactions: This element isimportant If a transaction is single, it is an

exchange. Regular & Continuous / recurrences of

transactions is the hall mark of business.

Profit Motive: Incentive for business.


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Characteristics of Modern Business:

Characteristics ofModern Business

Large Size

GlobalReach

Oligopolistic

Structure

TechnologyBased

Diversification

Governmentcontrol

& ethicalconsciousness


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Characteristics of Modern Business:

Radical changes have bought the changes in characteristics: Larger in size: Business that matters today is larger in size.

Most businesses today organize themselves on massive

scale so as to enjoy economies of large scale production

and be competitive in the market place. MNCs spread across continents.

For Instance: In a world survey in recent past, it is observed that the worlds

largest 500 companies earned a nearly total revenue of approximately 14873.00

dollars billion which was more than 30 times IndiasGDP.

Fortune (500) companies are located in USA (189), Japan (82) and different

parts of Europe.


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Global Reach: Big Companies in the world is no longerconfined their business to domestic markets.

Globalization and emergence of international

organizations including WTO.

For Instance: World trade through multilateral negotiations to promote free trade

and reduce import tariffs, companies have set their sights on international

markets.

Several MNCs which originated in small countries such as Switzerland, Belgium

and Sweden had to move in search of greener pastures.(vast market potential

and production for economies of scale).

Nestle (Swiss company), Unilever (Dutch-English MNC), Philips Electronics

(Dutch business conglomerate) widened-global reach.


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MNCs must stay with current trends and events the

various countries where they operate.

Accountability (responsibility) is an issue MNCs face.

For Instance:

Exploitation of once the colonial regions exploiters of the wealth of the

developing countries.

Political reforms in South Africa, economic liberalization in India are

examples of matters that are important to corporations operating in

these countries.


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Oligopolistic Structure: Modern Business are

invariably oligopolistic in nature, characterized by a

small number of business firms selling either ahomogeneous or a differentiated product.

Producers of Iron and steel & marketing of petroleum

products Homogeneous products.

Soaps, detergents, color televisions, - differentiatedproducts.

Reasons for ol igo poly: absolute cost advantage, favorable circumstances such

as economies of large scale production.

(Maruti Udyog / Tata Steel corner substantial supply of the product Huge

capital investments, long gestation periods)

Mergers and Acqu is i t ions - enable some firms to enjoy tremendous cost

advantage over others Arcelor Mittal and Tata corus.


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Diversification: Modern Business are organized on

a multi-product basis. Not only core areas, but also

non-core areas.

Risk spreading is a greatest asset for diversified

product companies. Produce multiple products in a single factory and

helps them to spread risks over products, time and

geographies.

For Example: Companies like Unilever, Procter & Gamble, Tata &

Reliance are classic examples.


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Large companies grow establishing new companies

/ acquiring other companies within the country / abroad.

For Instance: WIPRO has grown into a huge software giant by acquiring

a number of small, but value adding companies. (diverse portfolios).

WIPRO went on to acquisition spree string of pearls acquisitions

have helped boost the companysscale record.

TATA STEEL did the same and increased the targets.

ARCELOR MITTAL (steel tycoon of India) largest producer of steel

through acquisition of loss-making steel plants in Russia, Poland,

England and elsewhere.

INFOSYS grown big by adding services in their portfolio.


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Government Control: Laissez Faire policy no longer valid.

Business are regulated in business interest moral

responsibility to control inflation, against terrorism

(Huge petrol prices, money laundering, narcotic trade, terror-related

investments in banking and stock involved government managing the

economic matters).

Production of public goods- no private enterprises (building on

highways, education and public health no profit motives).


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Ethical Consciousness:

Corporations in USA, Europe and others grave crisesof accounting irregularities, fraudulent practices,

mismanagement of company resources, dishonest

practices and scams etc.

Outcome (regulators):

Business Ethics & Corporate Governance (CG), CSR international

business concerns.

CSR (social welfare programs), ethical business and good governance

are interlinked.

Corporate Governance is not just corporate

management.


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It is something much boarder to include a fair,

efficient and transparent administration to meet

certain well-defined objectives. Definition of CG: A system of structuring, operating and controlling a

company with a view to achieving long-term strategic goals to satisfy

shareholders, creditors, employees, customers, and suppliers and to

comply with the legal and regulatory requirements, apart formenvironmental and local community needs.

It includes:

Improving management accountability;

Adequate investments to management;

Enhancing corporate performance; Increasing transparency;

Audit practices, efficient and committed Board of Directors;

Improving access to capital markets and promoting long term

investments;

Encouraging Innovations.


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To be Continued

(BUSINESS ENVIRONMENT)

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-Business Environment) (2)