Monetary Policy

Monetary policy refers to the measures which the central bank of the country takes in controlling the money and credit supply in the country with a view to achieving certain specific economic objectives.

Objectives of Monetary Policy:
 The objectives of monetary policy differ from country to country according to their economic conditions. In the less developing countries like India or Pakistan its objective may be the maintenance of monetary stability and help in the process of economic development. In the developed countries its objective may be to achieve full employment, without inflation. Following are the main objectives of the monetary policy,

1. Control of Inflation and Deflation:
Inflation and deflation both are not suitable for the economy, If the price level is reasonable and there is an adjustment between the price and cost, rate of out put can increase. Monetary policy is used to coordinate the cost and price. So price stability is achieved through the monetary policy.

2. Exchange Stability:
Monetary policy second objective is to achieve the stable foreign exchange rate. 

Objectives of Industrial Policy

Some of the important objectives can be identified as follows:

1. Correcting Imbalances:
Correct the imbalances in the development of industries and helps in bringing about a desirable balance and diversification in them.

2. Directing Resource Flow:
Direct the flow of scarce resources in the most desirable areas of investment in accordance with national priorities. 

3. Optimum Utilisation of Resource:
Prevent the wasteful use of scarce resources and ensure their conservation and judicious utilisation.

4. Control over Private Industry:
Empower  the government to regulate the establishment and expansion of private industry in accordance with the planned objectives.

5. Demarcating Industrial Areas:
Demarcate areas among  the public, private and joint sectors of the economy, as well as large, ,medium and small-scale industries.

6. Proper Distribution of Wealth:
Prevent the formation of monopolies and concentration of wealth in a few hands through fiscal and monetary policies. So that the evils associated with monopolies can be effectively curbed.

7. Control Over Foreign Capital:
Give guidelines for importing foreign capital and the conditions on which such capital should be permitted to operate. 

8. Other Objectives:
Other objectives or the rationale of industrial policy includes.
i) Achieving a socialistic pattern of society
ii) Preventing undue concentration of economic power. 
iii) Achieving economic growth,
iv) Achieving industrial development.
v) Reducing disparities in regional development.
vi) Developing heavy and capital goods industry.
vii) proving opportunities for gainful employment.

Macro Environment

The Macro general environment consists of factors external to the industry that may have a significant impact on a firm's strategies. Here we will look at six broad dimensions - demographic, socio cultural, political/ legal , technological, economic and global. 

All these dimensions of general environment are interrelated. These dimensions not only influence businesses, but also influence each other. After apolitical change in 1991, when Congress government came to power, major economic change took place in the form of LPG, i.e., Liberalization, Privatization, and Globalization. This led to an enhancement in the technological environment of the country. This technological and economical change has transformed the socio-cultural environment of the country .

Globalization has also enabled India to become the software superpower of the world. All global organization now have a new and vast market, as well as cheap manufacturing hub, which has compelled them to change their global marketing and manufacturing strategies. 

1. Political Environment:
It is the political environment of a country that decides the fortune of businesses in the country. After the 1917 revolution in Russia , a sudden political change transformed the equation of doing business. After the change of regime in the USSR, in late 1980s and early 1990s business equations changed once again in Russia. 

2. Regulatory and legal Environment :
The political environment governs the legal and regulatory environment of a country.The regulatory environment plays a vital role by dictating the dos and don'ts of a business. Every country has a different legal environment. 

In India, we have the companies Act the governs companies, the MRTP Act which restricts monopoly, various laws regarding shares, the Consumer Protection Act environmental laws, etc.

The implementation of GATS has resulted in the implementation of international laws regarding patents. There are also laws for import and export, licensing, etc. the have a drastic impact on the business and future of organizations.

3. Demographic:
It is the demographic environment which decides the marketing mix for an organization. It decides the type of product the organization comes out with. In India , a lot of research and efforts are undertaken to reduce the cost of products and to launch products at the cheapest possible rates. A one rupee sachet of shampoo or a five rupee ice-cream cone are some examples. It is the demography that decides the pricing, promotion and distribution strategies. 70% are youth which is why every business house  is launching new products, specifically for the rural market.For example, ITC launched its unique  and ambitious programme called chaupal, trageted at the rural market.

4. socio-cultural:
Socio-cultural variables like the beliefs, value system, attitudes of people and their demographic composition have a major on the personality of people and their behavior style. The consumers preferences have undergone a drastic change since 1990's. This has led to an increase in the production of cars, refrigerators, air conditioners and other articles that were at one time considered as ostentatious  and luxurious.

5. Technological:
Technological forces present a wide range of opportunities and threats that have to be accounted for in the process of business strategy formulation. Technological advancement may dramatically affect an organization's products, services, markets, suppliers, distributors, composition, and competitive position. Some of the important factors that influence the technological environment are;
i, Rate of change in technology, rate of obsolesce.
ii, Communication and infrastructure technology in management. 

6. Global Environment:
The international environment consists of all factors that operate at the transnational , cross-cultural level and across the border. The world is a global village today and it is getting closer and closer as far as business is concerned.

For the sake of business, countries are burying their grievances and forging economic relationships with South Africa and Brazil , and is planning to develop a road network in South East Asia. India is also  a close ally of ASEAN, and is also a signatory of WTO which has a multilateral trade agreement among more than 100 nations.

7. Economic Environment:
The economic environment consists of macro level factors related to the means of production and distribution of wealth, which have an impact on the business of an organization.
The economic structure of a country, whether it is socialist, mixed or capitalist, has a drastic impact on the economy. Economic policies such as foreign trade policy, industrial policy, fiscal policy, GDP growth rate, policy of licensing, monetary policy, development of financial institutions, development of money and stock market, and the extent of globalization are some of the aspects of an economy that reflect on business in an economy.

8. National Competitive Advantage:
Despite globalization, industrialization is clustered in small and specific number of countries. Most successful computer and biotechnology firms are based in Germany, and the cream of the electronics industry is based in Japan.

Composition of Business Environment

Factors Affecting business Environment:

Business Environment refers to all external and internal factors which have a direct or indirect bearing on the activities of business.However some economists use it in a narrow sense and refer business environment only to the external factors which effect business.

Both internal factors and external factors together effect the environment of business. The external environment of business can be further divided into micro environment and macro environment.

There are two broad components of business environment.

a) Internal Factors:

1. Financial Resources 
2. physical and Human Resources 
3. Objectives of Business
4. Managerial Policies
5. Morale and Commitment of Human 
    Resources
6. Work Environment
7. Company Image and Brand Equity 
8. Labour Management Relationship
9. R&D and Technological
10. Promoter's Vision.

b) External Factors:

Micro/Operating                                  Macro/General
 Environment                                           Environment

1. Suppliers                                        1.Socio-cultural Environment
2. Customers                                      2. Legal Environment 
3. Market Intermediaries                   3. International Environment
4. Competitors                                   4. Political Environment
5. Public                                             5. Technological Environment
                                                            6. Economic Environment
                                                            7. Natural Environment

Scope of Business Environment

The scope of business environment is described below:

1. Strategies and Policies:
Strategy describes how a particular business intends to succeed in its chosen marketplace against its competitors, as compared to policies of business, strategy is comparatively short-term. Business processes, industry practices, and the scope and characteristics of a business. Therefore the study of business environment helps an organisation to formulate its broad strategies and long -term policies.

2. Competitors Analysis:
The study of business environment helps an organisation to analyses its competitors strategy and thereby formulate effective competitive strategies. This is usually done by conducting the SWOT analysis of one's own corporate and thereby formulating the effective strategies in order to combat competition.

3. Dynamism.
The study of business environment helps in attaining the knowledge about the continuous changing environment and thus keeping the organisation dynamic in its approach.

4. Impact. 
The study of business environment enables the organisation to foresee the impact of socio-economic changes at the national and international level on its stability. 

5. Adjustment:
As a result of study, business executives are able to adjust to the prevailing conditions and thus influence the environment to make it congenial to do business.

BUSINESS ENVIRONMENT

Business Environment:

Introduction:

Business and society have a symbolic relationship with one another. Each derives from the other some form of benefit. The purpose of business is to earn money (profit). It also helps in the creation of employment which in turn raises the standard of living while, at the same time contributing to the economic growth and development of the country. Society needs business only for its survival. 

Success of a business is dependent upon its interaction with the environment around it environmental factors have a bearing on the business not the other way round. A business therefore should operate its activities as per the environment in which it exists.

Environment refers to the surrounding conditions of any particular object or business environment refers to the external conditions or factors affecting the business.

Business Environment is aggregate of all conditions, events and influences that surround and affect it. External factors or conditions are limitations which may be internal or external depending upon whether they are controllable or not. These environmental factors could be social economic, cultural, geographical, technological or legal factors.

Meaning and Definition:

Business environment means all internal and external factors that affect how the company functions including employees, customers,
management, supply and demand and business regulations. Business environment refers to those aspects of the surroundings of business enterprise, which affect or influence its operations and determine its effectiveness.

Definition: 

According to Kith Davis,"Business environment is the aggregate of all conditions, events and influence that surrounds and affect it "

According to Andrews,"The environment of a company as the pattern of all external influences that affect its life and development"