Page 90 - DMGT302_FUNDAMENTALS_OF_PROJECT_MANAGEMENT

Unit 5: Environmental Appraisal of Projects

Opportunities and Threats– analysis. Strategic management needs environmental analysis and Notes
appraisal. Environment may be broadly classified into two types viz., (1) Internal Environment
and (2) External environment or both may be called as ‘Environment in General’. This General
environment is having different dimensions, as mentioned below:

Dimensions of General Environment

1. Social and cultural environment: Social and cultural environment refers to the influenced
exercised by certain factors which are beyond the company’s gate. Such factors include
people’s attitude to work and wealth, role of family, marriage, religion and education,
ethical issues and social responsiveness of business. Social and cultural environment is
highly relevant for a business unit as the variety of goods its produces, the type of employees
it gets, and its obligation to society depend on the cultural milieu in which the business
operates. Social and cultural environment is man-made. Man has created the social and
cultural environment by using the natural environment with skill and culture. He has
exploited natural resources in some regions of the world and developed a cultural
environment, while in some other regions natural resources have not been exploited.

2. Competitive environment: Competitive markets exist in every economy, so long as two
or more individuals are willing to undertake exchange transactions. Further, an economy,
particularly, the capitalist economy cannot function without markets. Truly, speaking, the
whole rationality of the capitalist economy is deeply rooted in the price or market
mechanism. The consumers exercise their free choice in the market and the producers take
decisions about the allocation of resources including time among competing ends in
response to market demand. Decision making by the producers will become irrational.
3. Economic environment: Economic environment refers to all those economic factors which
have a bearing on the functioning of business, like: economic policies, economic systems
and economic reforms. Economic environment mostly influences business sector. Indian
economic environment is influenced by several factors, which are mentioned below:
(a) Industrial policy
(b) Public sector

(c) Private sector
(d) Liberalisation, privatisation and globalisation
(e) Foreign Trade policies

(f) Per capita income levels of consumers
(g) Financial sectors
4. Political environment: Ruling party makes the policies of the government. Agenda of
political party is most influencing factor for the business development. The political
system prevailing in a country directs polices and controls business and industries. Political
system under democratic comprises three vital institutions i.e. legislature, executive or
government.
5. Legal environment: In India Legislature creates legal environment. It has more influence
on business. The Government of India is now implementing several law for the monitoring
and regulating business and industries. For example: Acts: (a) Monopolies and Restrict
Trade Practices Act, (b) Companies Act, (c) Industrial Regulation Act, (d) Income tax Act ,
(e) Sales Tax Act, etc.,

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