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Tuesday, September 10, 2019

M.Com Previous Year Solved Papers: Business Environment' 2013 (August - Incomplete))

2013 (August)
Course: 101
(Business Environment)
Full Marks : 80
Time : 3 hours
The figures in the margin indicate full marks for the questions.
1. (a) Discuss the significance of internal business environment with example.                       16
Ans: On the basis of extent of intimacy with the firm, the environmental factors may be classified into different levels or types. There are broadly two types of environment, the internal environment, i.e. factors internal to the firm and the external environment i.e. factors external to the firm which have relevance to it.

The internal factors are generally regarded as controllable factors because the company has control over these factors; it can alter or modify such factors as its personnel, physical facilities, organisation and functional means such as marketing mix to suit the environment.
The external factors on the other hand are, by and large, beyond the control of a company. The external or environmental factors such as the economic factors, socio-cultural factors, government and legal factors, demographic factors etc., are therefore generally regarded as uncontrollable factors.
Some of the external factors have a direct and intimate impact on the firm (like the suppliers and distributors of the firm). These factors are classified as micro environment, also known as task environment and operating environment. There are other external factors which affect an industry very generally (such as industrial policy, demographic factors etc.). They constitute what is called macro environment, general environment or remote environment. We may therefore consider the business environment at three levels:
a)      Internal environment
b)      Micro environment/ task environment/ operating environment
c)       Macro environment/ general environment/ remote environment
Although business environment consists of both internal and external environments, many people often confine the term to the external environment of business.
Internal Environment and Its significance
The factors in internal environment of business are to a certain extent controllable because the firm can change or modify these factors to improve its efficiency. However, the firm may not be able to change all the factors. The various internal factors are:
a)      Value system : The value system of an organisation means the ethical beliefs that guide the organisation in achieving its mission and objectives.  It is a widely acknowledged fact that the extent to which the value system is shared by all in the organisation is an important factor contributing to its success.
b)      Mission and objectives : The business domain of the company, direction of development, business philosophy, business policy etc are guided by the mission and objectives of the company.  The objective of all firms is assumed to be maximisation of profit.  Mission is defined as the overall purpose or reason for its existence which guides and influences its business decision and economic activities.
c)       Organisation structure : The organisational structure, the composition of the board of directors, the professionalism of management etc are important factors influencing business decisions. The nature of the organisational structure has a significant influence over the decision making process in an organisation.  An efficient working of a business organisation requires that the organisation structure should be conducive for quick decision-making. 
d)      Corporate culture : Corporate culture is an important factor for determining the internal environment of any company.  In a closed and threatening type of corporate culture the business decisions are taken by top level managers while the middle level and lower level managers have no say in business decision-making.  This leads to lack of trust and confidence among subordinate officials of the company and secrecy pervades throughout the organisation.  This results in a sense of alienation among the lower level managers and workers of the company. In an open and participating culture, business decisions are taken by the lower level managers and top management has a high degree of confidence in the subordinates. 
e)      Quality of human resources  :  Quality of employees that is of human resources of a firm is an important factor of internal environment of a firm.  The characteristics of the human resources like skill, quality, capabilities, attitude and commitment of its employees etc could contribute to the strength and weaknesses of an organisation.  Some organisations find it difficult to carry out restructuring or modernisation plans because of resistance by its employees. 
f)       Labour unions : Labour unions collectively bargains with the managers for better wages and better working conditions of the different categories of workers. For the smooth working of a business firm good relations between management and labour unions is required.
g)      Physical resources and technological capabilities : Physical resources such as, plant and equipment and technological capabilities of a firm determine its competitive strength which is an important factor for determining its efficiency and unit cost of production.  Research and development capabilities of a company determine its ability to introduce innovations which enhances productivity of workers. It is, however, important to note that the rapid technological growth and the growth of information technology in recent years have increased the relative importance of intellectual capital and human resources as compared to physical resources of a company. 
(b) Discuss the role of economy, technology, competitor and government in business environment with examples. 4x4=16
2. (a) Critically argue the success stories of foreign investments in India during the plan period.                              16
(b) Critically argue the powers of the Commission as provided by the MRTP Act.    16 (THIS ACT IS NOW ABOLISHED SO NO QUESTION EXPECTED)
Ans: Monopolistic and Restrictive Trade Practices Act (MRTP Act)
The monopolies and Restrictive Trade Practices Act, 1969, brought into force from 1st June 1970, was a very controversial piece of legislation. The principal objectives of the MRTP Act which extends to the whole of India except to the state of Jammu and Kashmir, viz.:
a)      Prevention of concentration of economic power to the common detriment.
b)      Control of monopolistic, restrictive and unfair trade practices which are prejudicial to public interest.
The MRTP Act was significantly amended in 1982, 1984, 1985 and 1991. After the amendments the first objective has become irrelevant as the relevant provisions to achieve the objective have been deleted. The objectives now are:
a)      Controlling monopolistic trade practices.
b)      Regulating restrictive and unfair trade practices.
Monopolistic Trade Practices (MTP’S):
A monopolistic trade practice is essentially a trade practice which represents the abuse of the market power in the production or marketing of goods, or in the provision of services, by charging unreasonably high prices, preventing or reducing competition, limiting technical development, deteriorating product quality, or by adopting unfair or deceptive practices. Two tests will determine whether a trade practice is an MTP or not:
i)        abuse of market power, and
ii)       Unreasonableness in any practice.
Thus, the following are MTPs:
1.       Maintaining the prices of goods or charges for any services at an unreasonable level.
2.       Limiting technical development or capital investment to the common detriment.
3.       Unreasonably preventing or lessening competition.
4.       Allowing quality of goods produced, supplied or distributed or any service rendered to deteriorate.
5.       Increasing unreasonably the cost of production of any goods or charges for provision or maintenance of services.
6.       Increasing unreasonably the selling price of goods, or charges at which the services may be provided.
7.       Increasing unreasonably the profits that are derived from the production, supply or distribution of any goods or the provision of any services.
8.       Preventing or lessening competition in the production, supply or distribution of any goods or in the provision or maintenance of any services by adopting unfair methods of unfair practices.
Restrictive Trade Practices (RTP):
A trade practice which restricts or reduces competition may be termed as restrictive trade practice. The following are the RTPs as described by section 33(1) of the MRTP Act:
(a) Refusal to deal with persons or classes of persons: Any agreement which restricts or it likely to restrict by any methods, the persons or classes of persons to whom goods are sold or from whom goods are bought.
(b) Tie-in sales or full line forcing: Any agreement requiring purchaser of goods, as a condition of such purchase, to purchase some other goods.
(c) Exclusive dealing agreement: Any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of seller or any other goods.
(d) Collective price fixation and tendering: Any agreement to purchase or sell goods or to tender for the sale or purchase of goods only at prices or terms and conditions agreed upon between the sellers or purchaser.
(e) Discriminatory Dealings : Any agreement to grant or allow concession or benefits, including allowances, discounts, rebate or credit, in connection with or by reason of dealings.
(f) Re-sale price maintenance: Any agreement to sell goods on condition that the prices to be charged on resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.
(g) Restriction on output or supply of goods: Exclusive distributorship, territorial restriction and market sharing.
(h) Control of manufacturing process.
(i) Price control arrangements.
(j) Governmental recognition of practice as restriction.
(k) Residual restriction trade practices: Any agreement to enforce the carrying out of any such agreement as is referred to in the foregoing classes.
The MRTP Commission has the following powers:
a)      Power of Civil Court under the Code of Civil Procedure, with respect to:
i)        Summoning and enforcing the attendance of any witness and examining him on oath;
ii)       Discovery and production of any document or other material object producible as evidence;
iii)     Reception of evidence on affidavits;
iv)     Requisition of any public record from any court or office.
v)      Issuing any commission for examination of witness; and
vi)     Appearance of parties and consequence of non-appearance.
Proceedings before the commission are deemed as judicial proceedings with in the meaning of sections 193 and 228 of the Indian Penal Code.
b)      To require any person to produce before it and to examine and keep any books of accounts or other documents relating to the trade practice, in its custody.
c)       To require any person to furnish such information as respects the trade practice as may be required or such other information as may be in his possession in relation to the trade carried on by any other person.
d)      To authorise any of its officers to enter and search any undertaking or seize any books or papers, relating to an undertaking, in relation to which the inquiry is being made, if the commission suspects tat such books or papers are being or may be destroyed, mutilated, altered, falsified or secreted.
3. (a) Write a detail note of the pricing policy of India                                                                           16
Ans: Monetary Policy/Pricing Policy: Monetary policy refers to policy formulated and implemented for achieving the following objectives:
a)      Regulating the supply of money including credit money and adjusting it to the needs of the economy
b)      To control the cost of money by regulating the rates of interest.
c)       Directing the supply of money to the required channels in accordance with the plan of priorities prepared by the planning authority.
According to A.G. Hart "A policy which influences the public stock of money substitute of public demand for such assets of both that is policy which influences public liquidity position is known as a monetary policy."
From the above discussion, it is clear that a monetary policy is related to the availability and cost of money supply in the economy in order to attain certain broad objectives.
Objectives of Monetary Policy: The objectives of a monetary policy in India are similar to the objectives of its five year plans. In a nutshell planning in India aims at growth, stability and social justice. After the Keynesian revolution in economics, many people accepted significance of monetary policy in attaining following objectives.
a)      Rapid Economic Growth: It is the most important objective of a monetary policy. The monetary policy can influence economic growth by controlling real interest rate and its resultant impact on the investment. If the RBI opts for a cheap or easy credit policy by reducing interest rates, the investment level in the economy can be encouraged. This increased investment can speed up economic growth.
b)      Price Stability: All the economics suffer from inflation and deflation. It can also be called as Price Instability. Both inflation and deflation are harmful to the economy. Thus, the monetary policy having an objective of price stability tries to keep the value of money stable. It helps in reducing the income and wealth inequalities.
c)       Exchange Rate Stability: Exchange rate is the price of a home currency expressed in terms of any foreign currency. If this exchange rate is very volatile leading to frequent ups and downs in the exchange rate, the international community might lose confidence in our economy. The monetary policy aims at maintaining the relative stability in the exchange rate.
d)      Balance of Payments (BOP) Equilibrium: Many developing countries like India suffer from the Disequilibrium in the BOP. The Reserve Bank of India through its monetary policy tries to maintain equilibrium in the balance of payments. The BOP has two aspects i.e. the 'BOP Surplus' and the 'BOP Deficit'. The former reflects an excess money supply in the domestic economy, while the later stands for stringency of money. If the monetary policy succeeds in maintaining monetary equilibrium, then the BOP equilibrium can be achieved.
e)      Full Employment: Full Employment refers to absence of involuntary unemployment. In simple words 'Full Employment' stands for a situation in which everybody who wants jobs get jobs. However it does not mean that there is Zero unemployment. In that senses the full employment is never full. Monetary policy can be used for achieving full employment.
f)       Equal Income Distribution: Many economists used to justify the role of the fiscal policy are maintaining economic equality. However in recent years economists have given the opinion that the monetary policy can help and play a supplementary role in attainting an economic equality.
Importance of monetary policy
 A modern economy is a money economy. All transactions are effected with the help of and through the medium of money. The prices of goods, services and factors are fixed in terms of money. People earn their income in the form of money and spend it in the form of money. So the supply of money creates money income in the hands of the community and expenditure of money generates the demand for different goods and services.
The monetary authority has to maintain a perfect balance between increase in the production of goods and services and increase in the supply of money. If increase in the supply of money exceeds increase in the production of goods and services the result is inflation. On the other hand, if the production of goods and services increases at a fast rate and the supply of money increases at a slow rate the result is recession and maybe depression. Hence the monetary authority has to monitor the growth in production very closely and adjust the money supply to it.
In India the monetary policy is formulated and implemented by the Reserve Bank of India which is an autonomous financial institution. It is expected that the RBI would use professional expertise to control the supply of money to the benefit of the community.
Obstacles in Implementation of Monetary Policy
Through the monetary policy is useful in attaining many goals of economic policy, it is not free from certain limitations. Its scope is limited by certain peculiarities, in developing countries such as India. Some of the important limitations of the monetary policy are given below.
a)      There exists a Non-Monetized Sector: In many developing countries, there is an existence of non-monetized economy in large extent. People live in rural areas where many of the transactions are of the barter type and not monetary type. Similarly, due to non-monetized sector the progress of commercial banks is not up to the mark. This creates a major bottleneck in the implementation of the monetary policy.
b)      Excess Non-Banking Financial Institutions (NBFI): As the economy launch itself into a higher orbit of economic growth and development, the financial sector comes up with great speed. As a result many Non-Banking Financial Institutions (NBFIs) come up. These NBFIs also provide credit in the economy. However, the NBFIs do not come under the purview of a monetary policy and thus nullify the effect of a monetary policy.
c)       Existence of Unorganized Financial Markets:  The financial markets help in implementing the monetary policy. In many developing countries the financial markets especially the money markets are of an unorganized nature and in backward conditions. In many places people like money lenders, traders, and businessman actively take part in money lending. But unfortunately they do not come under the purview of a monetary policy and creates hurdle in the success of a monetary policy.
d)      Time Lag Affects Success of Monetary Policy: The success of the monetary policy depends on timely implementation of it. However, in many cases unnecessary delay is found in implementation of the monetary policy. Or many times timely directives are not issued by the central bank, then the impact of the monetary policy is wiped out.
e)      Monetary & Fiscal Policy Lacks Coordination: In order to attain a maximum of the above objectives it is unnecessary that both the fiscal and monetary policies should go hand in hand. As both these policies are prepared and implemented by two different authorities, there is a possibility of non-coordination between these two policies. This can harm the interest of the overall economic policy.
Instruments of Monetary Policy or Credit Control tools:  
The instruments used by the central Bank for controlling the supply of bank money are classified into two categories namely
a)      General Instruments and
b)      Selective Instruments.
The General Instruments of Credit Control:  These instruments are called general because they are uniformly applicable to all commercial banks and in respect of loans given for all purposes. The general instruments are as follows:
a)      The Bank rate policy:
b)      Open Market Operations
c)       Variable Reserve Ratio
d)      Statutory Liquidity Ratio (SLR)
e)      Repo Rate
Selective Instruments of Credit Control: These instruments of monetary policy can be used in respect of any particular bank or in respect of a loan given against a particular security. Hence they are called selective instruments. The prominent amongst them are as follows:
a)      Regulation of credit margin
b)      Direct Action
c)       Moral suasion
d)      Consumer credit
e)      Publicity
(b) Write a detail note on the household saving pattern in India.                                                     16
4. (a) Explain the important provisions related to redressal machineries as prescribed under the Consumer Protection Act.                16
Ans: ESTABLISHMENT OF CONSUMER DISPUTES REDRESSAL AGENCIES: The following agencies established under the Consumer Protection Act for the redressal of consumers disputes:
a)      A District Consumer Disputes Redressal Forum to be known as the "District Forum" established by the State Government   in each district of the State by notification. The State Government may, if it deems fit, establish more than one District Forum in a district;
b)      A State Consumer Disputes Redressal Commission to be known as the "State Commission" established by the State Government in the State by notification; and
c)       A National Consumer Disputes Redressal Commission established by the Central Government by notification.
1. The District Consumer Protection Council At the lowest level are the District Forums and these are established in each District and have jurisdiction to entertain complaints where the value of goods or services and the compensation if any, claimed does not exceed Rs.20,00,000 (TWENTY LAKHS), and a complaint can be filed in a District Forum within the local limits of which
a)      The opposite party resides or
b)      Carries on his business or works for gain or
c)       Where the cause of action arises.
Membership: The District Consumer Protection Council (hereinafter referred to as the District Council) shall consist of the following members:
a)      The collector of the district (by whatever name called) who shall be its Chairman; and
b)      Such number of other official and non-official members representing such interest as maybe described by the state government.
Objects of the District Council: The Objects of every District Council shall be to promote and protect within the district the rights of consumers laid down in the clause (a) to (f) of Section 6 (National Consumer Protection Council)
2. The State Consumer Protection Councils: The State Consumer Disputes Redress Commission is established in each state and these have jurisdiction to entertain complaints where the value of goods or services and the compensation if any, claimed exceeds Rs.20,00,000 (TWENTY LAKHS) but does not exceed Rs.1,00,00,000 (ONE CRORE).
a)      The Minister in-charge of consumer affairs in the State Government who shall be its Chairman;
b)      Such number of other official or non-official members representing such interests as may be prescribed by the State Government.
Objects of state council: The objects of every State Council shall be to promote and protect within the State the rights of the consumers laid down in clauses (a) to (f) of section 6. (Objects of National Council)
3. The Central Consumer Protection Council: The Central Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Central Consumer Protection Council (hereinafter referred to as the Central Council). The National Consumer Disputes Redressal Commission has jurisdiction to entertain complaints where the value of the goods or services and compensation if any claimed exceeds Rs.1,00,00,000 (ONE CRORE)
a)      The Minister in charge of consumer affairs in the Central Government, who shall be its Chairman, and
b)      Such number of other official or non-official members representing such interests as may be prescribed.
Objects of the Central Council
The objects of the Central Council shall be to promote and protect the rights of the consumers such as-
a)      The right to be protected against the marketing of goods 2[and services] which are hazardous to life and property;
b)      The right to be informed about the quality, quantity, potency, purity, standard and price of goods 1[or services, as the case may be], so as to protect  the consumer against unfair trade practices;
c)       The right to be assured, wherever possible, access to a variety of goods and services at competitive prices;
d)      The right to be heard and to be assured that consumers'  interests will receive due consideration at appropriate forums;
e)      The right to seek redressal against unfair trade practices 1[or restrictive trade practices] or unscrupulous exploitation of consumers; and
f)       The right to consumer education.
(b) Explain the growth trends of Indian capital market.                                                         16
5. (a) Discuss the impact of India’s foreign policy on trade promotion after liberalization.                                  16
(b) Discuss the impact of IT revolution on Indian business enterprises.                         16

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