Business Environment in Bangladesh
Business Environment in Bangladesh
Business Environment in Bangladesh
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Report
On
Business Environment In Bangladesh
Prepared For:
Asma Ahmed
Lecturer
Department of Finance & Banking
Prepared By:
Ariana Haque – 2027
Ruhul Amin Raad – 1663
Suhana Ismail Srity – 1627
MD.Sajjad Shoaib Chowdhury – 1643
Noshin Anjum Eka – 1635
Student of BBA Programme (7th Batch)
i
23 July, 2016
Asma Ahmed
Course Teacher
Department of Finance & Banking
Jahangirnagar University
Savar, Dhaka-1342.
Dear Madam:
We are thankful to you, as you allowed us to perform the study and to submit the report. We
hope that the Report will meet the standard and will serve its purpose.
Sincerely yours,
……………………………………………... ……………..................
MD. Sajjad Shoaib Chowdhury Noshin Anjum Eka
ID:1643 ID:1635
ii
Acknowledgement
This is our pleasure to prepare and submit the report on “Business Environment of Bangladesh.”
we went through many websites, newspapers, journals and articles to complete our report and
it’s really a great opportunity for us to acquire valuable knowledge for this interesting subject.
At the very beginning, we want to express our profound gratitude to our respected course
teacher Asma Ahmed, to provide us with such a nice opportunity to prepare this kind of report.
We would also like to take this opportunity to express our wholehearted gratitude to our fellow
friends who offered encouragement, information, inspiration and assistance during the course of
preparing this report.
This report suffers from many shortcomings; nevertheless we have exerted our best efforts in
preparing this report. We seek excuse for the errors that might have occurred in spite of our best
effort.
At last special thanks to Almighty Allah to whom we are grateful forever for giving us all the
opportunities in doing each and everything.
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Table of Contents
1.3 Limitations 1
7.0 Conclusion 10
8.0 Recommendations 11
Reference
iv
Executive Summary
Business environment is the sum total of all internal and external factors that influence a business.
An analysis of business environment tells the entrepreneurs of opportunities and threats (through
external environment), and strengths and weaknesses (through internal environment), a precursor
to designing right kind of strategies. Business environment focuses mostly on the economic,
political, socio-cultural, legal and technological environment of an area. To succeed, marketers
must know the customer in a context including the competition, government and regulation, and
the broader micro and macro forces that shape the evolutions of markets. The micro and macro
environment also gives a fine understanding on the business environment of Bangladesh.
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1.0 Introduction
This report originates to show the business environment of Bangladesh. It is to explain the factors and types
of business environment and to show the effects of environmental changes on business in Bangladesh.
The object of the report is to make a clear and thorough analysis on the business environment of Bangladesh
by showing all the important elements of business environment and to explain all the environmental facts that
helps or hinders the growth of a business.
1.3 Limitations:
Most of the information was taken from various internet websites. So, there is a slight possibility that
some of the information may not be accurate. We tried our best to fulfill the purpose of the report but there
were some specific topics on which we couldn’t collect any valid data.
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2.0 An overview on Business environment
The success of every business depends on adapting itself to the environment within which it functions. For
example, when there is a change in the government polices, the business has to make the necessary changes to
adapt itself to the new policies. Similarly, a change in the technology may render the existing products
obsolete, as we have seen that the introduction of computer has replaced the typewriters; the color television
has made the black and white television out of fashion. Again a change in the fashion or customers’ taste may
shift the demand in the market for a particular product, e.g., the demand for jeans reduced the sale of other
traditional wear. All these aspects are external factors that are beyond the control of the business. So the
business units must have to adapt themselves to these changes in order to survive and succeed in business.
Hence, it is very necessary to have a clear understanding of the concept of business environment and the nature
of its various components.
The term ‘business environment’ connotes external forces, factors and institutions that are beyond the control
of the business and they affect the functioning of a business enterprise. These include customers, competitors,
suppliers, government, and the social, political, legal and technological factors etc. While some of these factors
or forces may have direct influence over the business firm, others may operate indirectly.
Thus, business environment may be defined as the total surroundings, which have a direct or indirect bearing
on the functioning of business. It may also be defined as the set of external factors, such as economic factors,
social factors, political and legal factors, demographic factors, technical factors, etc which are uncontrollable
in nature and affects the business decisions of a firm.
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3.0 Environmental Factors
There are events or situations that occur that affect the way a business operates, in a positive or negative way.
These events or situations can have either a positive or a negative impact on a business and are called
'environmental factors.'
Management changes
Employee morale
Culture changes
Financial changes and/or issues
Value system: The value system of the founders and those at the helm of affairs has important bearing
on the choice of business, the mission and the objectives of the organization, business politics and
practices.
Culture: It is widely acknowledged fact that any business organization is normally undertaken for
profit maximization. Nonetheless, persons holding top positions in certain modern corporate
enterprises have some values which influence their policies, norms, working language, systems,
symbols practices and overall internal environment. This may be referred as culture of the organization
which is the collective behavior of humans that are part of an organization.
Mission vision and objectives: Vision means the ability to think about the future with imagination
and wisdom. Vision is an important factor in achieving the objective of the organization.
Management structure and nature: The structure of the organization also influences the business
decision the organizational structure like the composition of board of directors, influences the decision
of business as their internal factors.
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Top management structure: The composition of the board of directors is very critical factor for the
development and performance of company as they are highest decision-maker authorities, extend of
professionalism of management as it may be professionally managed or family controlled, nominee of
financial institutions having large holdings in companies, the shareholding pattern could have
important managerial implications.
Power structure: The internal power relationship between the board of directors and senior executive officers
highly effect the decision making process of the organization.
Human and other resources: The quality of human resources of a company depends largely on
competence, commitment, attitude and motivation plays an important role in the success of the
organization.
Physical Resources and the Technology: The production capacity, technology, R & D work,
distribute logistics etc are the factors that influence functioning and competitiveness of the firm.
Company image and brand equity: The image and brand equity of the company matters a lot in
raising finance forming joint ventures and other alliance, choosing dealers and suppliers etc.
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4.0 Types of Environment
1. Micro environment
2. Macro environment
Suppliers: Business enterprises require a number of suppliers, who supply raw materials and
components to the company. It is an important force of the micro environment of a company.
Customers: They are highly influential as they are the central point of every business. Success of
business largely depends on identifying the need, desire, tastes liking etc of a customers.
Market intermediaries: Every business enterprise is assisted market intermediaries, which include
agents, brokers, who help the company to find customers. These acts as a link between company and
final consumer.
Competitors: Activity of a business adjusts according to the actions and reactions of a competitor.
This factor should be known to a company as the upcoming profit or revenue will only be driven when
this factor is in control.
Public: Any group that has actual or potential interest in business, have its impact on the business.
e.g., growth of consumer groups may affect the working of a newly developed business.
Macro environment is also known as general environment and remote environment. Macro factors are
generally more uncontrollable than micro environment factors. When the macro factors become
uncontrollable, the success of a company depends upon its adoptability to the environment. These factors
include
Cultural
Technological
Legal
Political
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5.0 Business environment in Bangladesh
For business, Bangladesh should represent a golden opportunity. It’s one of the most populous countries on
earth, located in one of the fastest growing trade regions and has abundance of low-cost labor. It offers huge
potential to develop into a hive of business activity and prosperity. Yet while Bangladesh has grown
impressively over the past decade, despite the global financial crisis and food price shocks, many would say
that it is still not business-friendly.
A welcoming environment for businesses has to be driven from government. There are some encouraging
signs. The government’s pro-market stance has led to the private sector accounting for most of the investment
in Bangladesh. The private sector is also a driving force behind the growth of sectors which have traditionally
been dominated by the government including education, power generation, airlines, healthcare and
infrastructure, among others.
The best recognized measurements of the business environment are produced by the World Bank, through
their Enterprise Surveys and the Doing Business report. The Enterprise Surveys cover 11 aspects of the
business environment including regulation, corruption, crime, informality, finance, infrastructure, and trade.
The Doing Business ranking shows how easy or difficult it is for small to medium-sized enterprises to start and
run a business across a range of indicators.
These measurements highlight some of the underlying issues for investment in Bangladesh. Doing Business
2014 ranks Bangladesh at only 130 (out of 189 economies) for ‘Ease of Doing Business’. The most recent
Enterprise Surveys (2007) showed the top three obstacles to running a business in Bangladesh are electricity,
access to finance, and political instability.
Indicators of ‘ease of doing business’ reveal issues in key areas such as construction permits, getting credit,
registering property, enforcing contracts. Entrepreneurs, small and large, frequently complain about prevailing
unethical practices, bribery, lacking of law enforcement, hurdles due to political events; all of which are
highlighted and well-documented in the media.
The political party in power frequently changes laws to suit their political purposes and, as a result, businesses
continually have to respond to changes in the legal framework. Moreover, the Center for Policy Dialogue – a
leading think-tank in Bangladesh - has highlighted two major limitations: government reforms are rarely
implemented efficiently; and the scope for better public service delivery.
It is not that the government hasn’t taken any steps to remove the bottlenecks. There are various initiatives
including strengthening of government institutions, improvement of service delivery, and automation of
various government service delivery systems such as the online tax identification number registration. In
addition, new Acts, policies and necessary amendments have also been made to better facilitate businesses,
and identification of agribusiness as thrust sector in industrial policy.
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However despite these government efforts, Bangladesh still lacks a vibrant and conducive business
environment. It’s a situation that hurts the small and medium enterprises most since they are already resource-
constrained.
The private sector is an important force for economic growth in developing countries like Bangladesh, which
will ultimately lead to poverty reduction. More needs to be done to create the right environment for businesses
to grow.
Till now we have low entry cost, land access cost, formal costs, and labor cost but we are facing a higher
amount of informal costs like bribe, extortions, and poor infrastructure, higher transportation cost, law and
order and dispute settlement cost. To ensure a pro-private sector development, business friendly environment,
government has no alternative but to control these informal costs of doing business in Bangladesh.
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6.2 Political Environment in Bangladesh:
Political Environment is very crucial for an economy to attract foreign investor or to increase Foreign Direct
Investment (FDI). Political situation of Bangladesh are not sound enough to attract investor in a high
speed. The first and most difficult barrier to investment in Bangladesh is political instability. Absence of
dialogue and compromising tendency among the parties has made the situation more complex. Without a
stable and truly democratic situation, the investment climate will not improve. At the same time, local
investors will go for investment of their money abroad. Political situation is important because the investors
are not feeling secure to invest in such country where the country’s political situations are unstable.
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society live. Socio-cultural Environment
refers that what is occurring socially in the
markets,
cultural norms and expectations, health
consciousness, population growth rate, age
distribution,
career attitudes, emphasis on safety, global
warming, language, education levels etc.
www.cipd.co.uk/subjects/corpstrategy/general/
pestle-analysis.htm
In Bangladesh have a huge population. It
is a very good for business, especially
food sector.
Because more population, more consumer.
There, education level is not bad. English
is the
second language of Bangladesh. It is a
good for foreign investor. In Bangladesh
most of the
people are Muslims. They are strictly avoiding
the “Haram” food.
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very society has different social norms and
characteristics that explain the way people in
that
society live. Socio-cultural Environment
refers that what is occurring socially in the
markets,
cultural norms and expectations, health
consciousness, population growth rate, age
distribution,
career attitudes, emphasis on safety, global
warming, language, education levels etc.
www.cipd.co.uk/subjects/corpstrategy/general/
pestle-analysis.htm
In Bangladesh have a huge population. It
is a very good for business, especially
food sector.
Because more population, more consumer.
There, education level is not bad. English
is the
second language of Bangladesh. It is a
good for foreign investor. In Bangladesh
most of the
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people are Muslims. They are strictly avoiding
the “Haram” food.
social norms and characteristics that
Every society has different
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6.4 Technological Environment in Bangladesh:
Since internet connectivity reached Bangladesh in 1997, people in Bangladesh have been able to open their
doors to the outside world more than before. Slowly, companies were able to post messages on web sites from
hosts outside of Bangladesh. Then companies within Bangladesh became ISPs, thus paving the way for
companies with in Bangladesh to eventually have a web site of their own. This means greater market
penetration for Bengali business people. Since the infrastructure in Bangladesh was so lousy, companies
couldn't reach rural areas via tradition means such as telephone. Then cellular came along, unregulated and
aimed at growing. Now businesses can set up shop in small towns, and be able to be within a phones reach for
emergencies or even day to day updates on business activities. This again means more market expansion for
Bangladesh's business women.
Legal environment refers to what is happening with changes to legislation. This may impact
employment, access to materials, quotas, resources, imports/ exports, taxation etc. Legal environment
includes a consideration in the following factors:
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Employment Law:
Minimum Wages only $27 per month in Bangladesh. This rate is very cheap than the other country of the
world.
Investment Law:
This law is very flexible in Bangladesh. Any foreign company/firm can start business in Bangladesh without
joining the any local company/firm or individuals. Whereas, In India, without joining a local individual or
firm, a foreign investor or firm cannot start the business. Therefore, Bangladesh gives the opportunity to
foreign investor or firm to enter in Bangladesh for Business.
6.8 Risks
Both global market moves, particularly of export commodities, and the domestic political situation could
counteract the attractive investment incentives offered by Bangladesh. This would limit the potential for
economic growth, with negative implications for consumer spending growth.
Low literacy levels and an underdeveloped infrastructure have it remain a very poor country.
An as of yet high cost of credit discourages entrepreneurship, holds back industrialization and stifles small and
medium sized businesses.
Bangladesh still faces many bottlenecks in its trade and investment climate. Goldman Sachs, besides a Next-
Eleven country, also categorized Bangladesh as a country with broad-based weaknesses.
Indicators that helped decrease Bangladesh's ranking in the Global Competitiveness Index include the
inadequate state of infrastructure, inadequate access to finance, widespread corruption and political instability.
The government's lack of capacity to handle major challenges, due to politics of confrontation, do not bode
well for improving the investment climate in Bangladesh. Despite this Bangladesh has seen an average of 6%
growth annually, making it an investment destination with huge potential as government policy is gradually
geared towards improving the business environment.
Specific to Bangladesh are high trade barriers, high credit costs (central bank) and inadequate rule of law.
One of the biggest short term challenges for Bangladesh will be to improve the supply of electricity. The main
obstacles are a shortage of gas (the main fuel used by generating plants) and the large number of old and
inefficient power stations.
7.0 Conclusion
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Starting a new business or investing on one mainly depends on the business environment of the
perspective area. The objective is to find out the elements of business and which of them will be
profitable for that certain area and conditions. Understanding the environment gives privilege over no
matter how harsh the business environment is. It helps to make better future plans for the possible
outcomes and hindrances. It is possible to thrive in business amidst a war zone only the proper
understanding of the environment. Throughout the report on the business environment of Bangladesh,
we have tried to find out the opportunities and adversities. As resourceful country as Bangladesh
most of the stones remain unturned just because of not having right information. In past few years,
Bangladesh has undergone through rather unbalanced political environment for business but we are
putting our best and things are getting better day by day.
8.0 Recommendations
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Business and the environment go hand-in-hand. Business has a responsibility to the environment – to
ensure that their practices are not wasteful or harmful to the environment. In addition, there are
growing opportunities for businesses to work within an environmental paradigm, in ways that can be
more efficient, profitable, and better for consumers and the community.
Businesses need to recognize the role the play in creating environmental problems. Many businesses
are directly responsible for green house gas emissions. Banks and investment institutions invest in
mining and shipping. Factories and mines can be responsible for producing and dumping
environmental waste. In Dhaka, our waterways are suffering from the waste produced by the leather
industry, and brick kilns pollute the air. In recognizing these impacts, businesses have a responsibility
to ensure that their business operates in a way that is sustainable. This could include using renewable
energy, creating flexible travel options for staff to cut down on car usage, recycling, dealing with
waste responsibly and sourcing green materials.
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Reference