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Environmentrefers to sum total of all factors-economic, political, social and cultural; which

are external and beyond the control ofindividual business enterprises and theirmanagement.

Environmentfurnishes the macrocontents,

while businessrm is microunit.

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WHAT IS ENVIRONMENT ?

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A business rm cannot operate in vacuum ; it

has to wor in certain economic and non-economic constraints.

!o it may be divided in two parts" #he micro environment or

$mmediate environment.

#he macro environment orexterior environment

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COMPONENTS OF ENVIRONMENT

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&ustomers !uppliers 'abours

(usiness partner &ompetitors

)

MICRO ENVIRONMENT FACTORS

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E&*+*$& E+$*+E+# /A* 0olitical environment and role of the

government

!ocio-cultural environment +atural environment emographic environment#echnological environment#he international environment

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MACRO ENVIRONMENT FACTORS

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Economic environment is those economicfactors which have their a3ect on theworing of the business.

Economic environment is a3ected by othermicro and macro environmental factors.

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WHAT IS ECONOMICENVIRONMENT?

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Elements of the Economic Environment

GDP: the total value of all final goods and services produced in a country

in a given year.

Inflation: rise in the general level of prices of products over a period of

time. Thus, it is a measure of the increase in the cost of living

Unemploymentis a measure of the number of workers who want to work

but do not have jobs

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Economic system Economic conditions

Economic policies $nternational economic environment

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VARIOUS FACTORS OFECONOMIC ENVIRONMENT

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1. &A0$#A'$!# %.!*&$A'$!# ). $7E E&*+*8

#here are three di3erent types of economic system9

E&*+*$& /A*!- #he most important element of theeconomic environment is economic system.

:

ESCRIPTION OF ECONOMIC FACTORS

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&A0$#A'$!#9- A capitalist system is onewhere resources are allotted through theprice or price mechanism.

!*&$A'$!#9- $n this system resources areallotted not through price mechanism butthrough a central plan.

$7E E&*+*89- #his is the system

between the capitalist and socialist wherefree enterprises and regulated sectors worside by side.

Contin!e""

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1.< $ndustrial 0olicy

%.< onetary *r &redit 0olicy

).< /iscal 0olicy

2.< /oreign #rade 0olicy

Economic Policies

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In#!str$ %olic$

#he $ndustrial policy of the governmentcovers

all those principles, policies, rules andprocedures, which direct and control theindustrial enterprises of the country.

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=p to 11it was characteri>ed by thefollowing-

o ominance of 0ublic !ectoro

Entry and ?rowth estrictionso estrictions on /oreign &apital and#echnology

In#i&n In#!stri&l Polic$

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#he +ew 0olicy introduced the ) features9

-'iberali>ation;

-0rivati>ation,

-?lobali>ation

In#i&n In#!stri&l Polic$'(('

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Fisc&l %olic$

$t includes government policy in respect ofpublic expenditure.

Example9#ax 0ublic ebt.

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Monet&r$ %olic$

$t includes all those activities andinterventions that aim at smooth supply ofcredit to the business and a boost to tradeand industry.

Example9 $nterest rates.

(an reserves. Etc@

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Forei)n investment %olic$

#his policy aims at regulating the inow of

foreign investment in various sectors for arm.

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CHAN*ES IN ECONOMICPO+IC, - *ROWTH RATE !ince independence $ndia followed democratic

socialism-

?rowth rate - 141-4B - ).BC

Dar period - 1B1 -BB - %.4C

Always remains below - 4C 11 onwards liberali>ed economic policy

:thplan 1%-6 - B.6C growth rate

and then afterwards always remains more than 4C. $n %: $ndia was worldFs second fastest growing

maGor economy even in world slowdown-% -growth rate B.1C

And became fastest growning economy in %14 #he$ndian government reported ?0 6.4C in %14, which is morethan the B.C ?0 that china

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Economic Con#itions

Any improvement in the economic conditions such as standard of living,purchasing power of public, demand and supply, distribution of income etc.largely a3ects the si>e of the maret.

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/ollowing are mainly included inEconomic &onditions of a country9-

!tages of (usiness &ycle +ational $ncome, 0er &apita $ncome and

istribution of $ncome ate of &apital /ormation

emand and !upply #rends $nation ate in the Economy $ndustrial ?rowth ate, Exports ?rowth ate $nterest ate prevailing in the Economy ?rowth of 0rimary and !econdary &apital arets

!i>e of aret

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$t includes international economic condition,economic trends in policy and certain otherseconomic-political environment that has agreat impact on business for export-importpolicy, technology transfer and rawmaterial etc.

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ECONOMIC

ENVIROINMENT

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As per ?oldman sachs report that there are4, crorepatis in $ndia and the number arestill increasing.

$ndia will be economic super power by %4. $ndian economy has highest saving rate in the

world. $ndian economy is mostly domestic demand

driven that insulated $ndia up to a large extent

from global economic turmoil. As per recent estimate $ndia will surpass china

by %% as a fastest growing economy.

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FUTURE PROSPECT OF

INIAN ECONOM,.A

FUTURE PROSPECT OF

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$ndian economy is directed towardsinclusive growth that is maGorly driven byaHrmative action lie- /ood security bill,?+E?A, ight to education bill,employment guarantee bill etc.

%%

FUTURE PROSPECT OF

INIAN ECONOM, ./

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FAVORA/I+IT, TOWARS COUNTR,0S/USINESS ENVIRONMENTS

%)

very favorable view of business environmentLowest unfavorable rating

&h $n x 0l (r u &h $n x 0l (r u

!ource9 EdelmanFs $ndia edia Audit, %14

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Politic&l Environment

#his includes the political system, thegovernment policies and attitude towardsthe business community and the unionism.

Eg9 'abour =nion.

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PO+ITICA+ENVIRONMENT

$t refers to9I P!1lic Instit!tions9 ?overnment.

?overnmentAgencies. ?overnment owned

(usiness.

I Non %!1licInstit!tions9 $nterest ?roups.

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PO+ITICA+ S,STEM

A political system integrates the parts of asociety into a viable functioning unit.

&hallenge9 integration of people of di3. ethnic orcultural bacgrounds.

$t is inuenced by forces within J outside thecountry.

K Intern&l Forces2 +ature of population, si>eJ inuence of corporations J governmental

bureaucracies, J the strength of the politicians. K E3tern&l Forces2 $nternational agreements,+?*Fs, ?overnmental organi>ations, etc.

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PO+ITICA+ S,STEM

0olitical process functions9

K $nterest articulation.

K $nterest aggregation Lbringing together

di3erent points of view

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T,PES OF PO+ITICA+ S,STEMS

emocracy#otalitarianism ixed

epresentative epublic

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TOTA+ITARIANISM

'imited rights and freedoms ?overnment Lone or few< maes decisions 0eople have no right to interfere in the laws

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MI4E

&haracteristics of both systems Almost all political systems are mixed

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0olitical environment ininternational (usiness

)1

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)%

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#han you