Indian Business Environment: Ibs B

INDIAN BUSINESS
ENVIRONMENT
IBS B
Business environment
Today's business environment is that of a buyers' market. This trend
is the result of international transitions and macroeconomic trends.
Characterized by
 Globalization of the world economy
 Fierce competition among organizations within and across countries
 Global excess capacities in production, services, and in some areas of
development
 Using new managerial approaches
 Availability and accessibility of data and knowledge
 Timely availability of materials and services
 Ease of global travel and conveyance
Micro environment
Those players whose decisions and actions have a
direct impact on the company.
Macro environment
Macro environment includes all economic and non-
economic factors, which can have both positive or
negative impact.
Macro environment
Features of business environment
 Co-existence of public and private sector
Indian business environment is characterized by the co-existence of both public
and private sector in respect of its participation in various economic activities in
the country.
The various economic policies of the country can promote the development of
both the sectors in different spheres of activities.
 Low income level
Indian business environment is that it has to face low income level of the people
in general as an important economic parameter for determining its economic
activities.
 Poor rate of capital formation
Capital deficiency – representing both the amount of capital available per head
and the present rate of capital formation in India is very low.
This is due to weakness of the inducement to invest and also due to low
propensity and capacity to save.
 Low Level of technology
Business environment of the country is suffering from technological
backwardness. Obsolete techniques of production are largely being applied in
both agriculture and industrial sector of the country.
Sophisticated modern technology is being applied in production units at a
very limited scale as it is very much expensive.
Huge unskilled and untrained labour force is also an important impediment
towards technological modernization of the country.
 Under-utilization of capacity
Under-utilization of productive capacity of Indian industries results in under

utilization, as the industries are suffering from higher unit costs and low
profitability syndrome.
 Lack of diversification
The problem of lack of diversification in industry, trade and other related

activities.
 Financial market
Financial market is suffering from lack of buoyancy and there is also the
problem of lack of adequate and free uninterrupted flow of institutional
credit towards industrial and other business units.
 Industrial dispute and slow pace of labour reforms
The growing industrial dispute leading to strikes and lock-outs in growing

number of units as a result of irrational trade union activities. Moreover, the
slow pace of labour reforms introduced by the Government has affected the
business environment of the country.
 Government interference
Unwanted government interference in various spheres of business and

industrial activities, lack of single window clearance and lack of
administration efficiency in respect of industrial licensing.
The business enterprises have to face the problem of red-tapism,
harassment, corruption, undue delay etc. which ultimately interrupts the
promotion of smooth business environment in the country.
Extent of market
Another feature of business environment of India is the poor extent of market in the
after math of globalization and international competition faced by the country. The
business enterprises of the country is also suffering from lack of diversification of its
export market.
Considering the natural advantage available in the country, the country would be able
to diversify its export market particularly in respect of its agro-processed industries,
services sector, information technology sectors etc.
Transportation bottle neck
The country has developed a wide network of transportation system throughout but its
frequent interruption as a result of natural calamities like flood, landslides etc. and
insurgency has been resulting a serious blow to the business environment of the
country.
Trade flow of foreign investment
Promotion of business environment also depends on the smooth flow of foreign

investment in various sectors. But the country is suffering from trade flow of foreign
investment, which goes against the promotion of business environment in the country.
Disturbed law and order conditions
PPP
 A contractual arrangement between, public (national,
state/provincial or local) and private entities through which the
skills, assets and/or financial resources of each of the public and
private sector are allocated in a complementary manner, thereby
sharing the risks and rewards, to seek to provide optimal service
delivery and good value to citizens.
Public Private partnership – 4 pillars
 Capacity development
 Enable environment
 Project development
 Project financing
7 major steps of reforms
 New industrial policy
 New trade policy
 Fiscal reform
 Monetary reform
 Capital market reform
 Phases out subsidies
 Dismantling price control
 https://www.ibef.org/economy/indian-economy-ove
rview
 https://www.economy.com/india/indicators
 https://santandertrade.com/en/portal/analyse-marke
ts/india/economic-political-outline
 https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/0
HBS202024D4CA0CC03F4674B040F7DEDE7E5
360.PDF
Why study business environment?
 The success of every business depends upon adapting itself to the
environment within which it functions.
 When there is a change in government policies, the business has to
make the necessary changes to adapt itself to the new policies.

 Change in technology may render the existing products obsolete,
introduction of colour T.V television replaced the black and white T.V
or introduction of computers replaced type writers.
 Introduction of Jeans affected traditional wear. Etc.
 All these aspects are external factors that are beyond the control of
business.
 It is very important to have a clear understanding of concepts of business
environment in order for business units to adapt themselves to the BE.

Importance of business
environment
 Firm to identify Opportunities and getting the first mover
advantage. E.g. Maruti for small cars.
 Firms to identify threats and early warning signals. E.g..
Multinational entering Indian market.
 Continuous learning: Environmental analysis makes the tasks of
managers easier in dealing with business challenges.
 Image Building: By showing their sensitivity towards the
environment. E.g. Captive power plants in factories.
 Meeting competition: It helps the firms to analyse the competitors
strategies and formulate their own strategies accordingly.
 Identifying firms strengths and weaknesses.
Features of business environment
 Business environment is the sum of all factors external to the
business firm and that greatly influence their functioning.
 It covers factors and forces like customers, competitors, suppliers,
government and the social, cultural, political, technological and legal
conditions.
 The business environment is dynamic in nature and it keeps on
changing.
 The changes of business environment are unpredictable. It is very
difficult to predict the exact nature of future happenings and the
changes in economic and social environment.
 Business environment differs from place to place, country to country.
Like political conditions in India will differ from those in Pakistan.
Thank you

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INDIAN BUSINESS

Under-utilization of productive capacity of Indian industries results in under

The problem of lack of diversification in industry, trade and other related

The growing industrial dispute leading to strikes and lock-outs in growing

Unwanted government interference in various spheres of business and

Promotion of business environment also depends on the smooth flow of foreign

make the necessary changes to adapt itself to the new policies.

environment in order for business units to adapt themselves to the BE.

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