Business Environment Solved Papers: November' 2017 | Dibrugarh University

a)      Micro environment deals with suppliers/ government/ economic environment.  (Choose the correct answers)

b)      Mention any one of the components of Indian business environment.  Ans: Legal environment, Companies Act, 2013

c)       Write one cause of industrial backwardness in North East region of Indian. Ans: Inadequate Transport facility in north eastern region.

d)      Where is the Head Office of SAFTA situated? Ans: Kathmandu, Nepal

e)      Write the full form of MRTP. Ans: Monopolistic and Restrictive Trade Practices

f)       What is the full form of GATT?  Ans: General Agreement on Tariffs and Trade

g)      Write the full form of MFN?                              Ans: Most Favoured Nation

h)      What is the full form of IBRD?           Ans: International Bank for Reconstruction and Development

2.       Write short notes on the following:                                                                                               4x4=16

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. 

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. 

2)      To provide domestic consumers with good quality goods and services at internationally competitive prices as well as creating a level playing field for the domestic producers.

3)      To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production and providing services.

4)      To enhance the technological strength and efficiency of Indian agriculture, industry and services, thereby improving their competitiveness to meet the requirements of the global markets.

5)      To generate new employment opportunities and to encourage the attainment of internationally accepted standards of quality.

6)      To establish the framework for globalization.

2)         Balanced Growth of International Trade: The one of the main objective of the Fund was to facilities the expansion and balanced growth of international trade and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development productive resources of all members.

3)         Stability of Exchange Rates: Another important objective of IMF was to promote exchange stability, to maintain orderly exchange arrangements among members and to avoid competitive exchange depreciation.

4)         Establishment of Multilateral trade and payment system: Another objective of the establishment of IMF was to assist the establishment of the multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade.

5)         To develop confidence to member: Another objective of IMF was to give confidence to members by making the funds, resources available to them under adequate safeguards, thus providing with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.

6)         Removing Deficit of balance of Payments: Another objective of the establishment of IMF was removal of the deficit of balance of payments also. IMF makes arrangement of necessary loans from foreign exchange reserves for removing the deficit of balance of payments.

2.       Specific and general forces: Business environment includes both specific and general forces. Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working. General forces (such as social, political, legal and technological conditions) have impact on all business enterprises and thus may affect an individual firm only indirectly.

3.       Dynamic nature: Business environment is dynamic and perpetually evolving. It changes frequently due to various external forces i.e. economic, political, social, international, technological and demographic. Such dynamism in the environment brings continuous change in its character. Business enterprises have no alternative but to operate under such dynamic environment. The only remedy is adjusting business as per environmental changes.

4.       Complex: Business environment has now become extremely complex and the government intervention has become more frequent. Business environment is a complex phenomenon and also difficult to grasp and face in its totality. This is because it is governed by external factors. Environment develops by chance and not by choice. In addition, the environment factors vary from country to country. The business environment in India and in USA may not be identical.

2.       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.

3.       Image Building: Environmental understanding helps the business organisations 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.

4.       Ensures Optimum Utilization of Resources: The study of business environment is needed as it ensures optimum use of resources available. For this, the study of economic and technological environment is useful. Such study enables organization to take full benefit of government policies, concessions provided, and technological developments and so on.

5.       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.

OR

b)         Exemption from excise / VAT on domestic sourcing of capital goods for project development 

c)          Freedom to develop township in to the SEZ with residential areas, markets, play grounds, clubs and recreation centers without any restrictions on foreign ownership 

d)         Income tax holidays on business income 

e)         Exemption from import duty, VAT and other Taxes 

f)          10% FDI allowed through the automatic route for all manufacturing activities 

g)         Procedural ease and efficiency for speedy approvals, clearances and customs procedures and dispute resolution 

h)         Simplification of procedures and self-certification in the labor acts

i)           Artificial harbor and handling bulk containers made operational throughout the year

j)           Houses both domestic and international air terminals to facilitate transit, to and fro from major domestic and international destinations 

k)         Well connected with network of public transport, local railways and cabs 

l)           Pollution free environment with proper drainage and sewage system 

m)       In-house Customs clearance facilities 

n)         Abundant supply of technically skilled manpower 

o)         Abundant supply of semi-skilled labor across all industry vertical 

p)         Easy access to airport and local Railway Station 

q)         10-year tax holiday in a block of the first 20 years 

b)         Promotion of exports of goods and services across all Indian sates according to their indigenous capabilities

c)          Promotion of investment from domestic and foreign sources 

d)         Creation of employment opportunities across India 

e)         Development of world class infrastructural facilities in these units 

f)          Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting such business activities 

g)         Single window clearance cell for the establishment of Special Economic Zone 

h)         Single window clearance cell within each and every Special Economic Zones 

i)           Single window clearance cell relating to formal requirements of Central as well as all State Governments.

j)           Easy and simplified compliance procedures and documentations with stress on self certification.

2)      Recovery

3)      Prosperity or full employment

4)      Boom or overfull employment

2.       Poor transport and communication facilities: This region is lacking a sound transport and communication system. Geographical isolation, difficult terrain and lack of attention are some of the basic factors which are responsible for poor development of transport and communication facilities. Both the railway and road transport facilities in the region are not adequate according to its need. Expansion works like preparation of new railway lines, conversion meter gauge lines into broad gauge lines, extension of national highways, construction of new bridges over Brahmaputra, development of well connected transport facilities and sound communication system etc. are not up to the mark. In the absence of all these above mentioned facilities, a region cannot develop industrially. However, in recent years, steps have been taken to improve the transport and communication system of the State without which the development of the economy is impossible.

3.       Wastage of Natural resources: In spite of having huge amount of natural resources, the economy of this region still remains largely under-developed and involves itself into the wastage of huge quantity of natural resources. Investment in this region is mainly channelized towards exploitation of rich resources viz. tea, jute and oil, which is reflection of the continuation of old colonial pattern of investment. Assam has 28 percent of the total hydro power potential of the country, which remains under-utilized. The vast coal resources have not been fully exploited (except for traditional use of the Railway etc.) despite several possibilities for use as fuel for production of power, for production of coal and as base for several chemical industries. The forest resources in Assam are also under-utilized, particularly in the matter of non-standard species. Thus insufficient exploitation of natural resources in this region is responsible for this poor industrial development of the State.

4.       Lack of skilled personnel: This region is also suffering from an acute shortage of skilled labour. Most of the labours are unskilled. For higher skills, this region has to depend upon other parts of India and foreign countries. Consequently payment of higher wage rates for skilled labour affects cost of production. Besides, one has to import technicians from outside on attractive rates of remuneration for installation of capital goods industries and thus it raises the cost of the development projects besides making the gestation period of these projects lengthy.

5.       Poor credit facilities: Credit facility, which is a part of infrastructure requires for development, is very minimum. The credit deposit ration in Assam stood at 37.3 in 2012 as against 78.1 for all India. Thus the lending policy of the commercial banks is far from generous to this region. Thus in the absence of large scale credit facilities, industries in the private sector cannot grow satisfactorily.

6.       Primitive technology: Technological progress is the root of industrial growth. But North East is suffering from lack of technological development due to poor scientific educational facilities and vocational training. Farmers in North East region are still using Primitive technologies in agricultural sector and thus agricultural production remains stagnant whereas other State Punjab, Haryana, Gujarat, Uttar Pradesh have been able to make sufficient progress in agriculture by applying modern technologies. Small scale and cottage industries of this region are still following old orthodox technologies and cannot stand in the competitive market. Thus the industries of this region are still backward due to absence of technology up gradation.

7.       Power Shortage: Lack of power supply is also effecting the production of the Industrial units in north east. Power breakdown is the regular problem this region. Due to inadequate power supply the industries have to suffer from under utilization, low production and higher costs.

5.       (a) Discuss, in detail, the main objectives and benefits of privatization in the context of Indian Economy. 7+7=14

Ans: Privatisation: The new set of economic reforms aimed at giving greater role to the private sector in the nation building process and a reduced role to the public sector. To achieve this, the government redefined the role of the public sector in the New Industrial Policy of 1991. The purpose of the sale, according to the government, was mainly to improve financial discipline and facilitate modernization. It was also observe that private capital and managerial capabilities could be effectively utilized to improve the performance of the PSUs. The government has also made attempts to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions.

b)   Become self-reliant and set up a strong industrial base with emphasis on heavy and basic industries;

c)    Reduce inequalities of income and wealth;

b)      Policy towards foreign capital was liberalized. The share of foreign equity participation was increased to 51% and in many activities 100 per cent Foreign Direct Investment (FDI) was permitted.

c)       Government will encourage foreign trad­ing companies to assist Indian exporters in export activities.

d)      Foreign Investment Promotion Board (FIPB) was set up to promote and channelise foreign investment in India.

e)      Automatic permission was now granted for technology agreements with foreign companies.

f)       Relaxation of MRTP Act (Monopolies and Restrictive Practices Act) which has almost been rendered non-functional.

g)      Dilution of foreign exchange regulation act (FERA) making rupee fully convertible on trade account.

h)      Disinvestment was carried out in case of many public sector industrial enterprises incurring heavy losses.

i)        Abolition of wealth tax on shares.

j)        General reduction in customs duties.

k)      Provide strength to those public sector enterprises which fall in reserved areas of operation or in high priority areas.

2.    More demanding customers: Customers today have become more demanding because they are well-informed. Increased competition in the market gives the customers wider choice in purchasing better quality of goods and services.

3.    Rapidly changing technological environment: Increased competition forces the firms to develop new ways to survive and grow in the market. New technologies make it possible to improve machines, process, products and services. The rapidly changing technological environment creates tough challenges before smaller firms.

4.    Necessity for change: In a regulated environment of pre-1991 era, the firms could have relatively stable policies and practices. After 1991, the market forces have become turbulent as a result of which the enterprises have to continuously modify their operations.

5.    Threat from MNC Massive entry of multi nationals in Indian marker constitutes new challenge. The Indian subsidiaries of multi-nationals gained strategic advantage. Many of these companies could get limited support in technology from their foreign partners due to restrictions in ownerships. Once these restrictions have been limited to reasonable levels, there is increased technology transfer from the foreign partners

b)      Integration of economies: International business integration (combines) the economies of many countries. This is because it uses finance from one country, labour from another country, and infrastructure from another country. It designs the product in one country, produces its part in many different countries and assembles the product in another country. It sells the product in many countries, i.e. in the international market.

c)       Dominated by developed countries and MNCs: International business is dominated by developed countries and Japan dominated (fully control) foreign trade. This is because they have large financial and other resources. They also have the best technology and research and development (R & D). They have highly skilled employees and managers because they give very high salaries and other benefits. Therefore, they produce good quality goods and services at low prices. This helps them to capture and dominate the world market.

d)      Benefits to participating countries: International business gives benefits to all participating countries. However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get benefits. They get foreign capital and technology. They get rapid industrial development of the developing countries. Therefore, developing countries open up their economies through liberal economic policies.

e)      Keen competition: International business has to face keen (too much) competition in the world market. The competition is between unequal partners i.e. developed and developing countries. In this keen competition, developed countries and their MNC s are in a favourable position because they produce superior quality goods and services at very low prices. Developed countries also have many contacts in the world market. So, developing countries find it very difficult to face competition from developed countries.

f)       Special role of science and technology: International business gives a lot of importance to science and technology. Science and Technology (S & T) help the business to have large-scale production. Developed countries use high technologies. Therefore, they dominate global business. International business helps them to transfer such top high-end technologies to the developing countries.

g)      International restrictions: International business faces many restrictions on the inflow and outflow of capital, technology and goods. Many governments do not allow international businesses to enter their countries. They have many trade block, tariff barriers, foreign exchange restrictions, etc. All this is harmful to international business.

h)      Sensitive nature: The international business is very sensitive in nature. Any changes in the economic policies, technology, political environment, has a huge impact on it. Therefore, international business must conduct marketing research to find out and study these changes. They must adjust their business activities and adapt accordingly to survive changes.

OR

b)      To provide the funds at the lowest possible cost to the borrowers through appropriate currency mix of its borrowing and opting to borrow when interest rates are expected to rise.

c)       To control volatility in net income and overall loan changes.

b)      To promote private foreign investment by means of guarantee of participation in loans and other investments made by private investors and, when private capital is not available on reasonable terms, to make loans for productive purposes out of its own resources or from funds borrowed by it.

c)       To promote the long term balanced growth of international trade and the maintenance of equilibrium in balance of payments by encouraging international investment for the development of the productive resources of members.

b)      Aid India Club was founded in 1950 by the efforts of the World Bank with a view to help India. This club is now called India Development Forum. This Forum had decided to give loans amounting to $ 600 crore to India for implementing its structural adjustment.

c)       The bank’s role in solving the Indus water dispute between India and Pakistan has been invaluable.

d)      General loans have also been granted by the World Bank to India, to be utilised as per its own discretion.

e)      As a member of the World Bank, India has become the members of International Finance Corporation, International Development Association and Multilateral Investment Guarantee Agency also.

f)       India has received technical assistance from time to time from the World Bank for its various projects. The Expert Team of the Bank has visited India and given valuable suggestions also.

g)      The massive population of India has always created problems in the economic development of the country. World Bank has been helping India in the population control programmes and urban development. For this purpose loans amounting to $ 495 crore have also been given to India.

h)      World Bank has been giving financial assistance to NGOs operating in India e.g. Leprosy Elimination, Education Projects, Child development service projects etc.

(Old course)

Full marks: 80

Pass marks: 32

1.       Answer as directed:                                                               1x8=8

a)      Mention one component of internal business environment.  Ans: Quality of Human Resources

b)      SEZ stands for what?              Ans: Special Economic Zone

c)       Write one cause of industrial sickness of India.           Ans: Lack of specialised labour

d)      There is no difference between economic growth and economic development. (Write True and False)

e)      What is EXIM policy?            

Ans: EXIM Policy or Foreign Trade Policy is a set of guidelines and instructions established by the Directorate General of Foreign Trade in matters related to the import and export of goods in India. The Foreign Trade Policy of India is guided by the Export Import in known as in short EXIM Policy of the Indian Government and is regulated by the Foreign Trade Development and Regulation Act, 1992.

f)       Capital market deals in short term/ long term Loanable funds.  (Choose the correct answer)

g)      In which year was the International Monetary Fund (IMF) established?         Ans: 1945

h)      Write the full form of SAFTA.              Ans: South Asian Free Trade Area

2.       Write short notes on the following:                                                                                                 4x4=16

a)      SWOT analysis

b)      Economic growth

c)       WTO

d)      MRTP Act

3.       (a) What is business environment? Discuss the various components of business environment.           2+10=12

OR

(b) Discuss the external factors of business environment                                                              12

4.       (a) What is industrial sickness? Explain in detail, the main causes of industrial sickness2+9=11

OR

(b) What is meant by the concept of business cycle? Explain the different phases of business cycle          2+9=11

5.       (a) Discuss the salient features of Government of India’s Industrial Policy for the North-Eastern region of India. 11

OR

(b) Discuss the salient features of New Industrial Policy, 1991 of India.                    11

6.       (a) What is meant by Monetary Policy? Discuss the role of monetary policy in developing economy.                4+7=11

OR

(b) What is money market? Explain the functions of money market.        4+7=11

7.       (a) What is meant by international business? Discuss the main features of international business.     4+7=11