Impact of government policy changes and managerial responses to changes in business environment

APRIL 27, 2020
DAY 5

Thank you for logging in. Good morning boys! Now, we will move to our next topic of chapter-3 which is Impact of government policy changes to business and industry and managerial responses to changes in business environment.

LEARNING OUTCOMES- At the end of the topic today, students will be able to:
a) Discuss the impact of government policy changes to business and industry.
b) Comprehend the managerial responses to changes in business environment.
c) State the components of business environment.

Watch a short video first to understand the impact of government policy changes to changes in business environment, after 1991 i.e Liberalisation, Privatisation and Globalisation.

NOW TAKE DOWN THE NOTES:


Q.10 Explain the impact of government policy changes on business and industry. (6)
Ans- The policy of LPG of the government has made  significant impact on the working of enterprises in the business and industry. This can be explained as follows:
1)Increasing competition- 
a) As a  result of liberalisation of industrial licensing and entry of the foreign firms, competition for Indian firms has increased especially in the service industries like telecommunications ,airlines ,banking insurance,etc.
2)More demanding customers-
a) Customers today have become more demanding because they are well informed.
b) Increased competition in the market gives the customers wider choice in the purchase of better quality of goods and services.
3) Market orientation- 
a) Earlier, firms used to produce first and go to the market for sale later that is production oriented marketing operation in today's scenario marketing operations.
b)In today's scenario, there is a shift to market orientation in as much as the firms have to study and analyse the market first and produce goods accordingly.
4.Rapidly changing technological environment-
a) Increased competition forces the firms  to develop new ways to survive and grow in the market .
b) This is required to improve the machines ,process ,products and services. The rapidly changing technological environment creates tough challenges before the smaller forms .
5. Necessity for change-
a) Before 1991,  the firms could have relatively stable policies and practices.
b) After 1991, the market forces have become very turbulent as a result of which the enterprises have to continuously modify their operations.
6. Need for developing human resources-
a)  The new market conditions requires people with higher competence and with greater commitment .
b) Hence, there is a need to develop the human resources which plays a  very important role in the success of a business enterprise.
7)Loss of budgetary support to the public sector -
a) The Central Government's budgetary support for financing the public sector undertakings  has declined over the years.
b) The public sector undertalings have realised that in order to survive and grow, they will have to be more efficient and generate their own resources for this purpose.

Q.11 Explain the managerial response to the changes in business environment. (6)
Ans-1. Diversification Spree-
a) The corporate sector has now witnessed a spate of diversification.
b) For example-  Reliance has diversified into textiles,  petrochemicals,  IT Communication, etc.
2. Joint Venture- 
a) Many MNCs enter India afresh through new joint ventures.
b) For example-  Ford enters with Mahindra and Mahindra , Honda enters with SIEL, General Motors with with Hindustan Motors , etc.
3. Brand Building-
a) Expenditures  were  enhanced by companies in building their brands.
b) MNCs  have invested huge amounts on building brands such as LG, Samsung, Hyundai, etc.
4. Use of latest technology-
a) Use of latest technology has become the slogan of the successful companies  these days .
b)The best example is that of cellular phone companies like Apple, Samsung, etc.
5. Sharply improved compensation levels-
a) Sharply  improved compensation levels for special managerial and technical services .
b) The starting salaries for engineering and management graduates have significantly risen and incentive schemes  of various kinds related to performance are becoming common.
6. Customer Focus-
a) These days there has been increasing attention to customer needs and their satisfaction.
b) There is a tremendous difference in the nature and quality of the products offered to the customers today. Marketing research,  advertisement,  sales promotion techniques like buy one get one free, public relations programmes, etc  have become more significant these days.

Q.12 Explain  the components of business environment.(4)
Ans- The components of business environment are explained  as follows-
1) Internal environment -The factors which exist within the business  imparting strength or causing weakness to the organisation comes under internal environment.It includes the following-
 Value system, Vision and Mission, objectives ,corporate culture, human resources and Labour Union.
2)External environment- It consists of those factors which provides an opportunity or pose threats to the business. It consists of the following:
a) Micro Environment- It has a continuous and  direct impact on the business. It includes customers, suppliers, competitors, market, intermediaries, etc which are specific to the business.
b) Macro Environment- It influences the functioning and performance of every business performance. It includes socio- cultural, legal, political, technological and global environment.

God bless you all!