Tuesday, February 22, 2011

Rational & Extent of State Intervention

Minimal Functions:-

Providing pure public goods.
Defense.
Law and order.
Property rights.
Public health.
Protecting the poor.
Disaster relief.

Intermediate Functions:-

Addressing externalities.
Basic education.
Environmental protection.
Consumer protection.
Insurance (health, life, pensions)
Unemployment.
Overcoming imperfect information.

Activist Functions:-

Coordinating private activities.
Cluster initiatives.
Assets redistribution.

Directive Principles of State Policy

The Directive Principles of State Policy are guidelines to the central and state governments of India, to be kept in mind while framing laws and policies. These provisions, contained in Part IV of the Constitution of India, are not enforceable by any court, but the principles laid down therein are considered fundamental in the governance of the country, making it the duty of the State to apply these principles in making laws to establish a just society in the country. The principles have been inspired by the Directive Principles given in the Constitution of Ireland and also by the principles of Gandhism; and relate to social justice, economic welfare, foreign policy, and legal and administrative matters.
The concept of Directive Principles of State Policy was borrowed from the Irish Constitution. The makers of the Constitution of India were influenced by the Irish nationalist movement. Hence, the Directive Principles of the Indian constitution have been greatly influenced by the Directive Principles of State Policy. The idea of such policies "can be traced to the Declaration of the Rights of Man proclaimed Revolutionary France and the Declaration of Independence by the American Colonies." The Indian constitution was also influenced by the United Nations Universal Declaration of Human Rights.

Directives:-
The directive principles ensure that the State shall strive to promote the welfare of the people by promoting a social order in which social, economic and political justice is informed in all institutions of life. Also, the State shall work towards reducing economic inequality as well as inequalities in status and opportunities, not only among individuals, but also among groups of people residing in different areas or engaged in different vocations. The State shall aim for securing right to an adequate means of livelihood for all citizens, both men and women as well as equal pay for equal work for both men and women. The State should work to prevent concentration of wealth and means of production in a few hands, and try to ensure that ownership and control of the material resources is distributed to best serve the common good. Child abuse and exploitation of workers should be prevented. Children should be allowed to develop in a healthy manner and should be protected against exploitation and against moral and material abandonment. The State shall provide free legal aid to ensure that equal opportunities for securing justice is ensured to all, and is not denied by reason of economic or other disabilities.The State shall also work for organisation of village panchayats and help enable them to function as units of self-government. The State shall endeavour to provide the right to work, to education and to public assistance in cases of unemployment, old age, sickness and disablement, within the limits of economic capacity, as well as provide for just and humane conditions of work and maternity relief.

The State should also ensure living wage and proper working conditions for workers, with full enjoyment of leisure and social and cultural activities. Also, the promotion of cottage industries in rural areas is one of the obligations of the State.The State shall take steps to promote their participation in management of industrial undertakings.

Also, the State shall endeavour to secure a uniform civil code for all citizens,and provide free and compulsory education to all children till they attain the age of 14 years.This directive regarding education of children was added by the 86th Amendment Act, 2002. It should and work for the economic and educational upliftment of scheduled castes, scheduled tribes and other weaker sections of the society.

The directive principles commit the State to raise the level of nutrition and the standard of living and to improve public health, particularly by prohibiting intoxicating drinks and drugs injurious to health except for medicinal purposes.It should also organise agriculture and animal husbandry on modern and scientific lines by improving breeds and prohibiting slaughter of cows, calves, other milch and draught cattle It should protect and improve the environment and safeguard the forests and wild life of the country. This directive, regarding protection of forests and wildlife was added by the 42nd Amendment Act, 1976.

Protection of monuments, places and objects of historic and artistic interest and national importance against destruction and damage, and separation of judiciary from executive in public services are also the obligations of the State as laid down in the directive principles. Finally, the directive principles, in Article 51 ensure that the State shall strive for the promotion and maintenance of international peace and security, just and honourable relations between nations, respect for international law and treaty obligations, as well as settlement of international disputes by arbitration.

The Directive Principles of State Policy, embodied in Part IV of the Constitution, are directions given to the State to guide the establishment of an economic and social democracy. The Directive Principles may be classified under the following categories:-
1.Ideals that the State must to strive towards achieving.
2.Directions for the exercise of lawmaking and executive power.
4.Rights of the citizens which the State must aim towards securing.
Article 39 lays down certain principles of policy to be followed by the State, including providing an adequate means of source of revenue for all citizens, equal pay for equal work for men and women, proper working conditions.
Articles 41–43 mandate the State to endeavour to secure to all citizens the right to work, a living wage, social security, maternity relief , and a decent standard of living . Article 43 also places upon the State the responsibility of promoting khadi, handlooms etc, in coordination with the state governments.
Article 39A requires the State to provide free legal aid to ensure that opportunities for securing justice are available to all citizens irrespective of economic or other disabilities. Article 43A mandates the State to work towards securing the participation of workers in the management of industries. The State, under Article 46, is also mandated to promote the interests of and work for the economic uplift of the scheduled castes and scheduled tribes.
Article 44 encourages the State to secure a uniform civil code for all citizens, by eliminating discrepancies between various personal laws currently in force in the country. Article 45 originally mandated the State to provide free and compulsory education to children between the ages of six and fourteen years, but after the 86th Amendment in 2002, this has been converted into a Fundamental Right.
Article 47 commits the State to raise the standard of living and improve public health. The State is also mandated by Article 48 to organize agriculture and animal husbandry on modern and scientific lines by improving breeds. Article 48A mandates the State to protect the environment and safeguard the forests and wildlife of the country.
While Article 49 places an obligation upon the State to ensure the preservation of monuments and objects of national importance. Article 50 requires the State to ensure the separation of judiciary from executive in public services. The State, according to Article 51, must also strive for the promotion of international peace and security, and Parliament has been empowered under Article 253 to make laws giving effect to international treaties.

Thursday, February 17, 2011

Fundamental Rights

The Fundamental Rights, Directive Principles of State Policy and Fundamental Duties are sections of the Constitution of India that prescribe the fundamental obligations of the State to its citizens and the duties of the citizens to the State. These sections comprise a constitutional bill of rights for government policy-making and the behaviour and conduct of citizens. These sections are considered vital elements of the constitution, which was developed between 1947 and 1949 by the Constituent Assembly of India.

The Fundamental Rights are defined as the basic human rights of all citizens. These rights, defined in Part III of the Constitution, apply irrespective of race, place of birth, religion, caste, creed or gender. They are enforceable by the courts, subject to specific restrictions.

The Directive Principles of State Policy are guidelines for the framing of laws by the government. These provisions, set out in Part IV of the Constitution, are not enforceable by the courts, but the principles on which they are based are fundamental guidelines for governance that the State is expected to apply in framing and passing laws.

The Fundamental Duties are defined as the moral obligations of all citizens to help promote a spirit of patriotism and to uphold the unity of India. These duties, set out in Part IV–A of the Constitution, concern individuals and the nation. Like the Directive Principles, they are not legally enforceable.

History
The Fundamental Rights and Directive Principles had their origins in the Indian independence movement, which strove to achieve the values of liberty and social welfare as the goals of an independent Indian state. The development of constitutional rights in India was inspired by historical documents such as England's Bill of Rights, the United States Bill of Rights and France's Declaration of the Rights of Man. The demand for civil liberties formed an important part of the Indian independence movement, with one of the objectives of the Indian National Congress (INC) being to end discrimination between the British rulers and their Indian subjects. This demand was explicitly mentioned in resolutions adopted by the INC between 1917 and 1919. The demands articulated in these resolutions included granting to Indians the rights to equality before law, free speech, trial by juries composed at least half of Indian members, political power, and equal terms for bearing arms as British citizens.

The experiences of the First World War, the unsatisfactory Montague-Chelmsford reforms of 1919, and the rise to prominence of M. K. Gandhi in the Indian independence movement marked a change in the attitude of its leaders towards articulating demands for civil rights. The focus shifted from demanding equality of status between Indians and the British to assuring liberty for all Indians. The Commonwealth of India Bill, drafted by Annie Beasant in 1925, specifically included demands for seven fundamental rights – individual liberty, freedom of conscience, free expression of opinion, freedom of assembly, non-discrimination on the ground of sex, free elementary education and free use of public spaces.In 1927, the INC resolved to set up a committee to draft a "Swaraj Constitution" for India based on a declaration of rights that would provide safeguards against oppression. The 11-member committee, led by Motilal Nehru, was constituted in 1928. Its report made a number of recommendations, including proposing guaranteed fundamental rights to all Indians. These rights resembled those of the American Constitution and those adopted by post-war European countries, and several of them were adopted from the 1925 Bill. Several of these provisions were later replicated in various parts of the Indian Constitution, including the Fundamental Rights and Directive Principles.

In 1931, the Indian National Congress, at its Karachi session, adopted a resolution committing itself to the defence of civil rights and economic freedom, with the stated objectives of putting an end to exploitation, providing social security and implementing land reforms. Other new rights proposed by the resolution were the prohibition of State titles, universal adult franchise, abolition of capital punishment and freedom of movement. Drafted by Jawaharlal Nehru, the resolution, which later formed the basis for some of the Directive Principles, placed the primary responsibility of carrying out social reform on the State, and marked the increasing influence of socialism and Gandhian philosophy on the independence movement. The final phase of the Independence movement saw a reiteration of the socialist principles of the 1930s, along with an increased focus on minority rights – which had become an issue of major political concern by then – which were published in the Sapru Report in 1945. The report, apart from stressing on protecting the rights of minorities, also sought to prescribe a "standard of conduct for the legislatures, government and the courts".

During the final stages of the British Raj, the 1946 Cabinet Mission to India proposed a Constituent Assembly to draft a Constitution for India as part of the process of transfer of power. The Constituent Assembly of India, composed of indirectly elected representatives from the British provinces and Princely states, commenced its proceedings in December 1946, and completed drafting the Constitution of India by November 1949.According to the Cabinet Mission plan, the Assembly was to have an Advisory Committee to advise it on the nature and extent of fundamental rights, protection of minorities and administration of tribal areas. Accordingly, the Advisory Committee was constituted in January 1947 with 64 members, and from among these a twelve-member sub-committee on Fundamental Rights was appointed under the chairmanship of J.B. Kripalani in February 1947. The sub-committee drafted the Fundamental Rights and submitted its report to the Committee by April 1947, and later that month the Committee placed it before the Assembly, which debated and discussed the rights over the course of the following year, adopting the drafts of most of them by December 1948. The drafting of the Fundamental Rights was influenced by the adoption of the Universal Declaration of Human Rights by the U.N. General Assembly and the activities of the United Nations Human Rights Commission,as well as decisions of the U.S. Supreme Court in interpreting the Bill of Rights in the American Constitution. The Directive Principles, which were also drafted by the sub-committee on Fundamental Rights, expounded the socialist precepts of the Indian independence movement, and were inspired by similar principles contained in the Irish Constitution.The Fundamental Duties were later added to the Constitution by the 42nd Amendment in 1976.

Fundamental Rights:-
The Fundamental Rights, embodied in Part III of the Constitution, guarantee civil rights to all Indians, and prevent the State from encroaching on individual liberty while simultaneously placing upon it an obligation to protect the citizens' rights from encroachment by society. Seven fundamental rights were originally provided by the Constitution – right to equality, right to freedom, right against exploitation, right to freedom of religion, cultural and educational rights, right to property and right to constitutional remedies. However, the right to property was removed from Part III of the Constitution by the 44th Amendment in 1978.

The purpose of the Fundamental Rights is to preserve individual liberty and democratic principles based on equality of all members of society. They act as limitations on the powers of the legislature and executive, under Article 13,and in case of any violation of these rights the Supreme Court of India and the High Courts of the states have the power to declare such legislative or executive action as unconstitutional and void.These rights are largely enforceable against the State, which as per the wide definition provided in Article 12, includes not only the legislative and executive wings of the federal and state governments, but also local administrative authorities and other agencies and institutions which discharge public functions or are of a governmental character. However, there are certain rights – such as those in Articles 15, 17, 18, 23, 24 – that are also available against private individuals.Further, certain Fundamental Rights – including those under Articles 14, 20, 21, 25 – apply to persons of any nationality upon Indian soil, while others – such as those under Articles 15, 16, 19, 30 – are applicable only to citizens of India.


The Fundamental Rights are not absolute and are subject to reasonable restrictions as necessary for the protection of public interest.[24] In the Kesavananda Bharati v. State of Kerala case in 1973,[note 4] the Supreme Court, overruling a previous decision of 1967, held that the Fundamental Rights could be amended, subject to judicial review in case such an amendment violated the basic structure of the Constitution.[28] The Fundamental Rights can be enhanced, removed or otherwise altered through a constitutional amendment, passed by a two-thirds majority of each House of Parliament. The imposition of a state of emergency may lead to a temporary suspension any of the Fundamental Rights, excluding Articles 20 and 21, by order of the President. The President may, by order, suspend the right to constitutional remedies as well, thereby barring citizens from approaching the Supreme Court for the enforcement of any of the Fundamental Rights, except Articles 20 and 21, during the period of the emergency. Parliament may also restrict the application of the Fundamental Rights to members of the Indian Armed Forces and the police, in order to ensure proper discharge of their duties and the maintenance of discipline, by a law made under Article 33.

Right to Equality
The Right to Equality is one of the chief guarantees of the Constitution. It is embodied in Articles 14–16, which collectively encompass the general principles of equality before law and non-discrimination, and Articles 17–18 which collectively further the philosophy of social equality. Article 14 guarantees equality before law as well as equal protection of the law to all persons within the territory of India. This includes the equal subjection of all persons to the authority of law, as well as equal treatment of persons in similar circumstances.The latter permits the State to classify persons for legitimate purposes, provided there is a reasonable basis for the same, meaning that the classification is required to be non-arbitrary, based on a method of intelligible differentiation among those sought to be classified, as well as have a rational relation to the object sought to be achieved by the classification.

Article 15 prohibits discrimination on the grounds only of religion, race, caste, sex, place of birth, or any of them. This right can be enforced against the State as well as private individuals, with regard to free access to places of public entertainment or places of public resort maintained partly or wholly out of State funds.However, the State is not precluded from making special provisions for women and children or any socially and educationally backward classes of citizens, including the Scheduled Castes and Scheduled Tribes. This exception has been provided since the classes of people mentioned therein are considered deprived and in need of special protection. Article 16 guarantees equality of opportunity in matters of public employment and prevents the State from discriminating against anyone in matters of employment on the grounds only of religion, race, caste, sex, descent, place of birth, place of residence or any of them. It creates exceptions for the implementation of measures of affirmative action for the benefit of any backward class of citizens in order to ensure adequate representation in public service, as well as reservation of an office of any religious institution for a person professing that particular religion.

The practice of untouchability has been declared an offence punishable by law under Article 17, and the Protection of Civil Rights Act, 1955 has been enacted by the Parliament to further this objective. Article 18 prohibits the State from conferring any titles other than military or academic distinctions, and the citizens of India cannot accept titles from a foreign state. Thus, Indian aristocratic titles and titles of nobility conferred by the British have been abolished. However, awards such as the Bharat Ratna have been held to be valid by the Supreme Court on the ground that they are merely decorations and cannot be used by the recipient as a title.

Right to Freedom
The Right to Freedom is covered in Articles 19–22, with the view of guaranteeing individual rights that were considered vital by the framers of the Constitution, and these Articles also include certain restrictions that may be imposed by the State on individual liberty under specified conditions. Article 19 guarantees six freedoms in the nature of civil rights, which are available only to citizens of India. These include the freedom of speech and expression, freedom of assembly, freedom of association without arms, freedom of movement throughout the territory of India,freedom to reside and settle in any part of the country of India and the freedom to practice any profession. All these freedoms are subject to reasonable restrictions that may imposed on them by the State, listed under Article 19 itself. The grounds for imposing these restrictions vary according to the freedom sought to be restricted, and include national security, public order, decency and morality, contempt of court, incitement to offences, and defamation. The State is also empowered, in the interests of the general public to nationalise any trade, industry or service to the exclusion of the citizens.

The freedoms guaranteed by Article 19 are further sought to be protected by Articles 20–22.The scope of these articles, particularly with respect to the doctrine of due process, was heavily debated by the Constituent Assembly. It was argued, especially by Benegal Narsing Rau, that the incorporation of such a clause would hamper social legislation and cause procedural difficulties in maintaining order, and therefore it ought to be excluded from the Constitution altogether. The Constituent Assembly in 1948 eventually omitted the phrase "due process" in favour of "procedure established by law".As a result, Article 21, which prevents the encroachment of life or personal liberty by the State except in accordance with the procedure established by law until 1978, construed narrowly as being restricted to executive action. However, in 1978, the Supreme Court in the case of Maneka Gandhi v. Union of India extended the protection of Article 21 to legislative action, holding that any law laying down a procedure must be just, fair and reasonable, and effectively reading due process into Article 21. In the same case, the Supreme Court also ruled that "life" under Article 21 meant more than a mere "animal existence"; it would include the right to live with human dignity and all other aspects which made life "meaningful, complete and worth living". Subsequent judicial interpretation has broadened the scope of Article 21 to include within it a number of rights including those to livelihood, clean environment, good health, speedy trial and humanitarian treatment while imprisoned. The right to education at elementary level has been made one of the Fundamental Rights under Article 21A by the 86th Constitutional amendment of 2002.

Article 20 provides protection from conviction for offences in certain respects, including the rights against ex post facto laws, double jeopardy and freedom from self-incrimination. Article 22 provides specific rights to arrested and detained persons, in particular the rights to be informed of the grounds of arrest, consult a lawyer of one's own choice, be produced before a magistrate within 24 hours of the arrest, and the freedom not to be detained beyond that period without an order of the magistrate. The Constitution also authorises the State to make laws providing for preventive detention, subject to certain other safeguards present in Article 22.The provisions pertaining to preventive detention were discussed with skepticism and misgivings by the Constituent Assembly, and were reluctantly approved after a few amendments in 1949.Article 22 provides that when a person is detained under any law of preventive detention, the State can detain such person without trial for only three months, and any detention for a longer period must be authorised by an Advisory Board. The person being detained also has the right to be informed about the grounds of detention, and be permitted to make a representation against it, at the earliest opportunity.

Right against Exploitation
The Right against Exploitation, contained in Articles 23–24, lays down certain provisions to prevent exploitation of the weaker sections of the society by individuals or the State. Article 23 provides prohibits human trafficking, making it an offence punishable by law, and also prohibits forced labour or any act of compelling a person to work without wages where he was legally entitled not to work or to receive remuneration for it. However, it permits the State to impose compulsory service for public purposes, including conscription and community service. The Bonded Labour system (Abolition) Act, 1976, has been enacted by Parliament to give effect to this Article. Article 24 prohibits the employment of children below the age of 14 years in factories, mines and other hazardous jobs. Parliament has enacted the Child Labour (Prohibition and Regulation) Act, 1986, providing regulations for the abolition of, and penalties for employing, child labour, as well as provisions for rehabilitation of former child labourers.

Right to Freedom of Religion
The Right to Freedom of Religion, covered in Articles 25–28, provides religious freedom to all citizens and ensures a secular State in India. According to the Constitution, there is no official State religion, and the State is required to treat all religions impartially and neutrally. Article 25 guarantees all persons the freedom of conscience and the right to preach, practice and propagate any religion of their choice. This right is, however, subject to public order, morality and health, and the power of the State to take measures for social welfare and reform.The right to propagate, however, does not include the right to convert another individual, since it would amount to an infringement of the other's right to freedom of conscience.Article 26 guarantees all religious denominations and sects, subject to public order, morality and health, to manage their own affairs in matters of religion, set up institutions of their own for charitable or religious purposes, and own, acquire and manage property in accordance with law. These provisions do not derogate from the State's power to acquire property belonging to a religious denomination. The State is also empowered to regulate any economic, political or other secular activity associated with religious practice.Article 27 guarantees that no person can be compelled to pay taxes for the promotion of any particular religion or religious institution. Article 28 prohibits religious instruction in a wholly State-funded educational institution, and educational institutions receiving aid from the State cannot compel any of their members to receive religious instruction or attend religious worship without their (or their guardian's) consent.

Cultural and Educational Rights
The Cultural and Educational rights, given in Articles 29 and 30, are measures to protect the rights of cultural, linguistic and religious minorities, by enabling them to conserve their heritage and protecting them against discrimination. Article 29 grants any section of citizens having a distinct language, script culture of its own, the right to conserve and develop the same, and thus safeguards the rights of minorities by preventing the State from imposing any external culture on them.It also prohibits discrimination against any citizen for admission into any educational institutions maintained or aided by the State, on the grounds only of religion, race, caste, language or any of them. However, this is subject to reservation of a reasonable number of seats by the State for socially and educationally backward classes, as well as reservation of up to 50 percent of seats in any educational institution run by a minority community for citizens belonging to that community.

Article 30 confers upon all religious and linguistic minorities the right to set up and administer educational institutions of their choice in order to preserve and develop their own culture, and prohibits the State, while granting aid, from discriminating against any institution on the basis of the fact that it is administered by a religious or cultural minority. The term "minority", while not defined in the Constitution, has been interpreted by the Supreme Court to mean any community which numerically forms less than 50% of the population of the state in which it seeks to avail the right under Article 30. In order to claim the right, it is essential that the educational institution must have been established as well as administered by a religious or linguistic minority. Further, the right under Article 30 can be availed of even if the educational institution established does not confine itself to the teaching of the religion or language of the minority concerned, or a majority of students in that institution do not belong to such minority.This right is subject to the power of the State to impose reasonable regulations regarding educational standards, conditions of service of employees, fee structure, and the utilisation of any aid granted by it.

Right to Constitutional Remedies
The Right to Constitutional Remedies empowers citizens to approach the Supreme Court of India to seek enforcement, or protection against infringement, of their Fundamental Rights. Article 32 provides a guaranteed remedy, in the form of a Fundamental Right itself, for enforcement of all the other Fundamental Rights, and the Supreme Court is designated as the protector of these rights by the Constitution. The Supreme Court has been empowered to issue writs, namely habeas corpus, mandamus, prohibition, certiorari and quo warranto, for the enforcement of the Fundamental Rights, while the High Courts have been empowered under Article 226 – which is not a Fundamental Right in itself – to issue these prerogative writs even in cases not involving the violation of Fundamental Rights. The Supreme Court has the jurisdiction to enforce the Fundamental Rights even against private bodies, and in case of any violation, award compensation as well to the affected individual. Exercise of jurisdiction by the Supreme Court can also be on the basis of a public interest itigation. This right cannot be suspended, except under the provisions of Article 359 when a state of emergency is declared.

Political Institutions

Legislature:-
Parliament is the most powerful institution. Every aspect of business from its birth till death is covered under the laws to ensure that not only profit is earned in a justified and fair way but also to ensure that in the accomplishment of business interests the interest of each person is fully protected and the profits of business are distributed in a manner beneficial to the society.
1.Policy making.
2.Law making.
3.Approval of budgets.
4.Executive control.
5.To act as a mirror of public opinion.

Executive:-
Government is the executory body of the laws which are framed by the legislature. The role of the government is to shape, direct and control the business activities. The translations of the objective of any laws to the reality depends as much upon the law itself as on its implementation.

Judiciary:-
It is the power of the Judiciary to settle legal disputes that affect business considerably.

Disputes between employers and employees.
Disputes between employer and employer.
Disputes between employee and employee.
Disputes between employers and the public.
Disputes between employers and the government.

Environmental Scanning & Monitoring- Techniques

SWOT (Strength-Weakness-Opportunity-Threat)

Identification of threats and Opportunities in the environment (External) and strengths and Weaknesses of the firm (Internal) is the cornerstone of business policy formulation; it is these factors which determine the course of action to ensure the survival and growth of the firm.

PEST Analysis

A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

Political
Economic
Social
Technological

1.Political Factors:-

tax policy
employment laws
environmental regulations
trade restrictions and tariffs
political stability

2.Economic Factors:-

economic growth
interest rates
exchange rates
inflation rate

3.Social Factors:-

health awareness
population growth rate
age distribution
career attitudes
emphasis on safety

4.Technological Factors:-

R&D activity
rate of technological change


Porter’s Approach to Industry Analysis:-

*A corporation is most concerned with the intensity of competition within its industry.
*The level of this intensity is determined by basic competitive forces.
*In scanning its industry, the corporation must assess the importance to its success of each of the six forces.

Competitive Structure of Industries:
*Threat of substitutes.
*Threat of new entrants.
*Rivalry among existing firms.
*Bargaining power of suppliers.
*Bargaining power of buyers.


QUEST
The Quick Environmental Scanning Technique, is a scanning procedure designed to assist executives and planners to keep side by side of change and its implications for the organizational strategies and policies.
QUEST produces a broad and comprehensive analysis of the external environment.

Environmental Analysis

1.Scanning: -
Scanning is a process of analyzing the environment for the identification of the factors, which impact on or have implications for the business. Prospective mode scanning focuses on identifying precursors or indicators of potential environmental changes and issues.
2. Monitoring:-
Monitoring brings about perspective follow up and a more in depth analysis of the relevant environmental trends identified at the scanning stage.
3. Forecasting:-
Anticipating the future is essential for identifying the future threats and opportunities and for formulating strategic plans.
4. Assessment:-
The purpose of environmental analysis is to assess the impact of the environmental factors on the organization’s business or their implications for the organization.

Business cycle

What are the four phases of a business cycle?

1.Peak
2.Recession
3.Trough
4.Recovery

What is a peak?
The phase of the business cycle during which real GDP reaches its maximum after rising during a recovery.

What is a recession?
A downturn in the business cycle during which real GDP declines.

What is a trough?
The phase of the business cycle in which real GDP reaches its minimum after falling during a recession.

What is a recovery?
An upturn in the business cycle during which real GDP rises.

Wednesday, February 16, 2011

NON-ECONOMIC ENVIRONMENT

The various elements of non-economic environment are as follow:
(a) Social Environment:-
The social environment of business includes social factors like customs,traditions, values,beliefs, poverty, literacy, life expectancy rate etc. The social structure and the values that a society cherishes have a considerable influence on the functioning of business firms. For example, during festive seasons there is an increase in the demand for new clothes, sweets,fruits, flower, etc. Due to increase in literacy rate the consumers are becoming more conscious of the quality of the products. Due to change in family composition, more nuclear families with single child concepts have come up. This increases the demand for the different types of household goods. It may be noted that the consumption patterns, the dressing
and living styles of people belonging to different social structures and culture vary significantly.

(b) Political Environment:-
This includes the political system, the government policies and attitude towards the business community and the unionism. All these aspects have a bearing on the strategies adopted by the business firms. The stability of the government also influences business and related activities to a great extent. It sends a signal of strength, confidence to various interest groups and investors. Further, ideology of the political party also influences the business organization and its operations. You may be aware that Coca-Cola, a cold drink widely used even now, had to wind up operations in India in late seventies. Again the trade union activities also influence the operation of business enterprises. Most of the labour unions in
India are affiliated to various political parties. Strikes, lockouts and labour disputes etc. also adversely affect the business operations. However, with the competitive business environment, trade unions are now showing great maturity and started contributing positively to the success of the business organization and its operations through workers participation in management.

(c) Legal Environment:-
This refers to set of laws, regulations, which influence the business organizations and their operations. Every business organization has to obey, and work within the framework of the law. The important legislations that concern the business enterprises include:
(i) Companies Act, 1956
(ii) Foreign Exchange Management Act, 1999
(iii) The Factories Act, 1948
(iv) Industrial Disputes Act, 1972
(v) Payment of Gratuity Act, 1972
(vi) Industries (Development and Regulation) Act, 1951
(vii) Prevention of Food Adulteration Act, 1954
(viii) Essential Commodities Act, 2002
(ix) The Standards of Weights and Measures Act, 1956
(x) Monopolies and Restrictive Trade Practices Act, 1969
(xi) Trade Marks Act, 1999
(xii) Bureau of Indian Standards Act, 1986
(xiii) Consumer Protection Act, 1986
(xiv) Environment Protection Act
(xv) Competition Act, 2002
Besides, the above legislations, the following are also form part of the legal environment of business.
(i) Provisions of the Constitution: The provisions of the Articles of the Indian
Constitution, particularly directive principles, rights and duties of citizens, legislative powers of the central and state government also influence the operation of business enterprises.
(ii) Judicial Decisions: The judiciary has to ensure that the legislature and the government function in the interest of the public and act within the boundaries of the constitution.The various judgments given by the court in different matters relating to trade and industry also influence the business activities.

(d) Technological Environment:-
Technological environment include the methods, techniques and approaches adopted for
production of goods and services and its distribution. The varying technological environments of different countries affect the designing of products. For example, in USA and many other countries electrical appliances are designed for 110 volts. But when these are made for India, they have to be of 220 volts. In the modern competitive age, the pace of technological changes is very fast. Hence, in order to survive and grow in the market, a business has to adopt the technological changes from time to time. It may be noted that scientific research for improvement and innovation in products and services is a regular activity in most of the big industrial organisations. Now a days infact, no firm can afford to persist with the outdated technologies.

(e) Demographic Environment:-
This refers to the size, density, distribution and growth rate of population. All these factors have a direct bearing on the demand for various goods and services. For example a country where population rate is high and children constitute a large section of population, then there is more demand for baby products. Similarly the demand of the people of cities and towns are different than the people of rural areas. The high rise of population indicates the easy availability of labour. These encourage the business enterprises to use labour intensive techniques of production. Moreover, availability of skill labour in certain areas motivates the firms to set up their units in such area. For example, the business units from
America, Canada, Australia, Germany, UK, are coming to India due to easy availability of skilled manpower. Thus, a firm that keeps a watch on the changes on the demographic front and reads them accurately will find opportunities knocking at its doorsteps.

(f) Natural Environment:-
The natural environment includes geographical and ecological factors that influence the business operations. These factors include the availability of natural resources, weather and climatic condition, location aspect, topographical factors, etc. Business is greatly influenced by the nature of natural environment. For example, sugar factories are set up only at those places where sugarcane can be grown. It is always considered better to establish manufacturing unit near the sources of input. Further, government’s policies to maintain ecological balance, conservation of natural resources etc. put additional responsibility on the business sector.

ECONOMIC ENVIRONMENT

The survival and success of each and every business enterprise depend fully on its economic environment. The main factors that affect the economic environment are:
(a) Economic Conditions: The economic conditions of a nation refer to a set of economic factors that have great influence on business organizations and their operations. These include gross domestic product, per capita income, markets for goods and services, availability of capital, foreign exchange reserve, growth of foreign trade, strength of capital market etc. All these help in improving the pace of economic growth.
(b) Economic Policies: All business activities and operations are directly influenced by the economic policies framed by the government from time to time. Some of the important economic policies are:
(i) Industrial policy
(ii) Fiscal policy
(iii) Monetary policy
(iv) Foreign investment policy
(v) Export –Import policy (Exim policy)
The government keeps on changing these policies from time to time in view of the
developments taking place in the economic scenario, political expediency and the
changing requirement. Every business firm has to function strictly within the policy
framework and respond to the changes therein.
c) Economic System: The world economy is primarily governed by three types of
economic systems, viz., (i) Capitalist economy; (ii) Socialist economy; and (iii) Mixed economy. India has adopted the mixed economy system which implies co-existence
of public sector and private sector.

TYPES OF BUSINESS ENVIRONMENT

Confining business environment to uncontrollable external factors, it may be classified as(a) Economic environment; and (b) Non-economic environment. The economic environment includes economic conditions, economic policies and economic system of the country.
Non-economic environment comprises social, political, legal, technological, demographic and natural environment. All these have a bearing on the strategies adopted by the firms and any change in these areas is likely to have a far-reaching impact on their operations. Let us have a brief idea about each of these areas of business environment.

COMPONENTS OF THE BUSINESS ENVIRONMENT

Business environment consists of two sub-environments:
1.Internal (micro) environment
2.External environment:
Market environment
Macro environment

IMPORTANCE OF BUSINESS ENVIRONMENT

There is a close and continuous interaction between the business and its environment. This interaction helps in strengthening the business firm and using its resources more effectively.
As stated above, the business environment is multifaceted, complex, and dynamic in nature and has a far-reaching impact on the survival and growth of the business. To be more specific, proper understanding of the social, political, legal and economic environment helps the business in the following ways:
(a) Determining Opportunities and Threats: The interaction between the business
and its environment would identify opportunities for and threats to the business. It
helps the business enterprises for meeting the challenges successfully.
(b) Giving Direction for Growth: The interaction with the environment leads to opening up new frontiers of growth for the business firms. It enables the business to identify the areas for growth and expansion of their activities.
(c) Continuous Learning: Environmental analysis makes the task of managers easier in
dealing with business challenges. The managers are motivated to continuously update
their knowledge, understanding and skills to meet the predicted changes in realm of
business.
(d) Image Building: Environmental understanding helps the business organizations in
improving their image by showing their sensitivity to the environment within which they are working. For example, in view of the shortage of power, many companies have
set up Captive Power Plants (CPP) in their factories to meet their own requirement of power.
(e) Meeting Competition: It helps the firms to analysis the competitors’ strategies and formulate their own strategies accordingly.
(f) Identifying Firm’s Strength and Weakness: Business environment helps to identify
the individual strengths and weaknesses in view of the technological and global
developments.

FEATURES OF BUSINESS ENVIRONMENT

On the basis of the above discussion the features of business environment can be
summarized as follows.
(a) Business environment is the sum total of all factors external to the business firm and that greatly influence their functioning.
(b) It covers factors and forces like customers, competitors, suppliers, government, and the social, cultural, political, technological and legal conditions.
(c) The business environment is dynamic in nature, that means, it keeps on changing.
(d) The changes in business environment are unpredictable. It is very difficult to predict the exact nature of future happenings and the changes in economic and social
environment.
(e) Business Environment differs from place to place, region to region and country to
country. Political conditions in India differ from those in Pakistan. Taste and values
cherished by people in India and China vary considerably.

MEANING OF BUSINESS ENVIRONMENT

As stated earlier, 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 colour 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.

BUSINESS ENVIRONMENT

Understanding the environment within which the business has to operate is very important for running a business unit successfully at any place. Because, the environmental factors influence almost every aspect of business, be it its nature, its location, the prices of products, the distribution system, or the personnel policies. Hence it is important to learn about the various components of the business environment, which consists of the economic aspect, the socio-cultural aspects, the political framework, the legal aspects and thetechnological aspects etc. In this chapter, we shall learn about the concept of business environment, its nature and significance and the various components of the environment.In addition, we shall also acquaint ourselves with the concept of social responsibility of business and business ethics.

OBJECTIVES
After studying this lesson, you will be able to:
• explain the meaning of business environment;
• identify the features of business environment;
• describe the importance and types of business environment;
• describe the recent developments in Indian Economy that have greatly influenced the working of business units in India;
• explain the concept of social responsibility of business;
• state the social responsibility of business towards different interest groups; and
• explain the concept of business ethics.