Page 107 - DMGT401Business Environment

Business Environment

Notes of the government. And to do business one didn't have to be an expert in strategy but had to be
good at liaisoning with the government.
In 1991 after the failure of socialism the govt. was forced to ushere in a policy of liberalisation
which brought innumerable opportunities but also many threat so. While some companies
expanded manifold after liberalisation, quite a few had to close or sell their operations. Various
Mergers and Acquisitions have taken place in the last 15 years in India.

Example: HLL acquired Lakme, TOMCO, Kissan, Modern Foods, etc. UB Group acquired
Herbenston and Shaw Wallace and became the second largest liquor player in the world. TATA
launched its small cars, which they couldn't launch in the 1980s because of the government
policy. India became the battleground for multinational automobile companies. In the FMCG
sector, Coca Cola purchased Parle and Pepsi purchased Uncle Chips. Soon, India may also see
the advent of the multinational retail giant Wal-Mart.

4.2 Role of Government in Business

We have seen how the slightest change in government policy can change the whole scenario of
business. Governments can influence business in the following manner:
Figure 4.2: Role of Govt. in Business

Regulatory Role

Legal Role Entrepreneurial

STATE

Planning Role
HRD

Infrastructure

1. Regulatory Role: Governments regulate the business. They not only decide the rules of
the game but also looks after the implementation of those rules.
(a) Reservation: The govt. limits the spheres of investment by reserving the industry for
small scale, public and the co-operative sector. For instance, before liberalisation,
petroleum, telecommunication, coal, power, etc., were the monopoly of the public
sector. But liberalisation brought new investment opportunities for the private
sector. Now only two sectors, i.e., railways and atomic energy are reserved for the
public sector.

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