BB 0034

Business Environment
Contents
Unit 1
Business Environment: An introduction

Unit 2
Economic Environment

23

Unit 3
Socio Cultural Environment

45

Unit 4
Political Environment

63

Unit 5
Economic Systems

83

Unit 6
Financial Environment

100

Unit 7
Legal Environment

120

Unit 8
Economic Role of Government

137

Unit 9
New Economic Policy

156

Edition: Fall 2011

th

BKID B1499 6 July 2011

Unit 10
Privatization

177

Unit 11
Globalization

194

Unit 12
India, WTO and Trading Blocs

210

Unit 13
Corporate Social Responsibility

230

Unit 14
Public, Private, Joint and Co-operative Sectors

247

Unit 15
Indian Economy

266

Dean
Directorate of Distance Education
Sikkim Manipal University (SMU DDE)
Board of Studies
Chairman
HOD Management & Commerce
SMU DDE
Additional Registrar
SMU DDE, Manipal
Addl. Registrar (S.E.)
Office of Student Evaluation
SMU DDE, Manipal
Dr. T.V. Narasimha Rao
Adjunct Faculty & Advisor SMU DDE
Dr. K.V. Varambally
Manipal Inst. of Management, Manipal
Content Preparation Team:
Prof. Dr. Ajeya Jha
HOD, Management, SMIT
Ms. Manjusree Mishra
Assistant Professor I, Sikkim Manipal
Institute of Technology
Majitar, Rangpo, East Sikkim.
Ms. Amrita Sengupta
Assistant Professor
Sikkim Manipal Institute of Technology
Majitar, Rangpo, East Sikkim
Major Raman Nair
Sikkim Manipal Institute of Technology,
Majitar, Rangpo, East Sikkim
Mr. Manjit Singh
Associate Professor, Sikkim Manipal
Institute of Technology
Majitar, Rangpo, East Sikkim.

Mr. Pankaj Khanna

Director, HR
Fidelity Mutual Fund
Mr. Shankar Jagannathan
Former Group Treasurer
Wipro Technologies Limited
Mr. Abraham Mathew
Chief Financial Officer
Infosys BPO, Bangalore
Ms. Sadhna Dash
Ex Senior Manager HR
Microsoft India Corporation (Pvt.) Ltd.
Content Editing and Review:
Prof C. Shanath Kumar
Head of the Department, Management
and Commerce, SMU DDE, First Floor
Manipal Towers, 14, Airport Road
Bangalore 560 008
Ms. Monica Dighe
Senior Lecturer SMU DDE
Department of Management &
Commerce, First Floor, Manipal Towers
14, Airport Road, Bangalore 560 008
Peer Review done by:
Dr. K. V. Varambally
Manipal Institute of Management
Manipal

Edition: Fall 2011

Printed: July 2011
This book is a distance education module comprising a collection of learning
materials for our students. All rights reserved. No part of this work may be
reproduced in any form by any means without permission in writing from Sikkim
Manipal University, Gangtok, Sikkim. Printed and Published on behalf of Sikkim
Manipal University, Gangtok, Sikkim by Mr. Rajkumar Mascreen, GM, Manipal
Universal Learning Pvt. Ltd. Manipal 576 104. Printed at Manipal Press Limited,
Manipal.

SUBJECT INTRODUCTION
Business Environment (BB 0034) is a four credit subject of Semester I of
BBA programme. Business is an economic activity and no business
operates in isolation. It is affected by the environment in which it works and
has to adapt to the environment to operate successfully. The forces that act
on a business organisation are in the form of the Government regulations,
the society, the global environment and so on. Just as these forces affect
the business, there are also the business operations that affect the society
we live in.
This Self-Learning Material (SLM) of the subject is divided into 15 units, the
overview of which is given below:
Unit 1: Business Environment: An introduction
This unit describes the environment in which a business operates and
explains the internal and external factors that affect business.
Unit 2: Economic Environment
The economic framework is the level of income in the country, the external
conditions that affect the economy, the economic policies that affect the
economy. The economic environment affects business.
Unit 3: Socio Cultural Environment
This unit discusses the Socio Cultural Environment of business. Business
operates in the social system and is influenced by the elements of society.
The society in turn is also affected by business. The elements of the social
system define the socio cultural environment.
Unit 4: Political Environment
This unit describes the Political environment that has a direct influence on
business organizations. It describes the framework of governmental
economic ideology, policies, regulations and legislation that affect business.
Unit 5: Economic Systems
The resources of an economy are either owned privately or in public
ownership. This distinguishes the economic system that operates and the

role of the Government. In this unit, the basic economic systems are
described.
Unit 6: Financial Environment
In this unit the various components of a financial system, financial
institutions and their role in sustaining business ventures and the impact of
foreign direct investment on business is explained.
Unit 7: Legal Environment
Within this environment, the organisation has to abide by certain rules, and
regulations. These rules and regulations are laid down by the Government.
This relates to the legal environment of business.
Unit 8: Economic Role of Government
In this unit the role governmental policies play in economic development is
described. You will also read about the economic crisis the Indian economy
faced in 1991 and the onset of subsequent economic reforms that ushered
in an era of more open and liberal economic regime.
Unit 9: New Economic Policy
Industrial policy means rules, regulations, principles, and procedures laid
down by the government for regulating, developing, and controlling industrial
undertakings in the country. These policies have substantially regulated the
business environment in the country till date. It is essential to understand
these Policies before studying the new economic policy of 1991. This unit
sets the background for the New Economic policy of 1991.
Unit 10: Privatization
In this unit we shall discuss the major issues that are involved in the current
phase of the disinvestment programme as a part of privatization.
Unit 11: Globalization
Going global means, becoming a transnational corporation which looks at
the whole world as one market. The company manufactures, conducts
research, raises capital and buys supplies wherever it finds the best
bargain.This unit discusses the impact of globalization.

Unit 12: India, WTO ad Trading Blocs

In this unit, we will study details of trading blocs meant for promotion of
globalisation and we shall study more details about the WTO which provides
the legal ground rules for international commerce.
Unit 13: Corporate Social Responsibility
To operate and grow in the society business organizations have to
undertake certain social responsibility which are termed as corporate social
responsibility. This unit discusses the growing importance of Corporate
Social Responsibility.
Unit 14: Public, Private, Joint and Co-operative sectors
In this unit we will learn about the various forms of enterprises. There are
various types of businesses. e.g. Public sector enterprises, Private sector
enterprises, Joint sector enterprises and co-operative sectors.
Unit 15: Indian Economy
In this unit we will look into the Indian economy and try to analyze both its
strengths and its weaknesses. The trends in the different sectors will show
us the way to a better future by bringing in more innovative strategies that
can overcome all obstacles.