Page 11 - DMGT401Business Environment

Business Environment

Notes
Did u know? After 1917 revolution in USSR suddenly a political change transform the
whole equation of business. In India in 1977 Janta government came in power and because
of this Coca Cola and IBM have to leave the country. Because of Janta government all
liquor company have to close their operations. After the change in the regime in the USSR
in late 1980s and early 1990s the whole equation of business changed in Russia.
Recently when Dr. Manmohan Singh led UPA government came in power and new
economic policy changed the whole definition of business in India on the one hand it gave
a bulk of new opportunities for business on the other hand it also brought threat for
inefficient organizations. Not only political philosophy but also political stability has a
significance importance. More stable will be the political environment of country the
more conducive will be the environment for business. The consensus among various
political parties on key issues are also relevant in this case.
2. Regulatory and Legal Environment: The political environment governs the legal and
regulatory environment of country. The regulatory environment plays a vital role by
dictating the do's and don'ts of a business. Every country has a different legal environment.
In India we have the Companies Act that governs companies, the MRTP Act which restricts
monopoly, various laws regarding shares, the Consumer Protection Act, environmental
laws, and the implementation of GATS. GATS has resulted in the implementation of
international laws regarding patents. There are also laws for import and export, licensing
etc. that have a drastic impact on business and the future of organizations.
When an NRI Lord Swaraj Paul, a British citizen, tried to take over Escorts, its owners, the
Nandas approached the government to save their company. A law restricting any NRI
from purchasing shares of an Indian company came into force, and Escorts was saved.

Figure 1.1: Dimensions in External Environment

Demographic Socio-Cultural

Political/ Business Technological

Legal

Economic Global

3. Demographic: It is the demographic environment which decides the marketing mix for an
organization. It decides the type of product the organization comes out with. In India a lot
of research and efforts are undertaken to reduce the cost of products and to launch products
at the cheapest possible rates.

Example: A one rupee sachet of shampoo or a five rupee ice-cream cone.

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