Changing Dimensions of Indian Business
Business Environment is the world around a company over which it has no direct control. It covers many dimensions impacting a company's activities & performance. It is an aggregate of all forces & factors external to the business enterprise, but which influence it's functioning. There is a mutual inter-dependence between business and its environment. A business enterprise is an open system and it continously interacts with its environment. Businesses take inputs like raw material, capital, labour, energy, etc. from the environment, and transform them into goods & services, and then send them back into the environment. Interaction between business and environment is in various ways such as: exchange of information, resources, influence & power. There are several layers of influences surrounding a business. The outermost layer, called the macro-environment, consists of dimensions that impact almost all companies in an economy. These factors are the six aspects of business environment Political, Economical, Social, Technological, Environmental, & Legal. Political environment includes factors like a country's political system, type of goverment, centre-state relations, public opinion, law & order, nature of government policies towards business - particularly those related to taxation, industrial relations, regulation of business & industry, and foreign trade regulations. It also relates to the stability of the government in power, the risk of major political disturbances, or threats from anti-social elements, terrorists or other countries. In the period prior to liberalisation, India's annual growth rate was low at around 3.5%, only a few licenses were given out for important sectors like steel, electrical power, energy and communication, and these licence owners built up powerful corporate empires. India at that time was a socialistic economy with excessive govt. control. Core industries were directly managed by the govt. as public sector enterprises, and banking and airline industries were nationalised. A huge public sector emerged and state-owned enterprises made large losses. There was public sector monopoly and investment in infrastructure was poor. Licence Raj established the self-perpetuating bureaucracy that still exists in India and corruption flourished under this system. GOI began the process of privatisation in 1991. Privatisation means having private ownership, management and control into public sector undertakings. The purpose of privatisation is to improve the efficiency of public undertakings and to raise funds for public investment. As a result financial institutions have become more active, working culture is improving and management is being professionalised, there is improvement in technology, better investment behaviour of Indian entrepreneurs and companies are aware of the significance of human capital. The banking, financial services & insurance (BFSI) and airline sectors have become extremely competitive, but are in need of reforms. There have been some negative effects like curtailed growth in some industries, reduced employment opportunities due to adoption of capital intensive technology, sell-outs & takeovers by foreign companies, losing markets and declining capacity utilisation.
Auto Industry A few decades ago, the markets were not opened up. Due to lack of competition, Bajaj scooters had 13 year waiting lists. Consumers had no choice but to wait for delivery and they were even willing to pay premiums equal to the original cost. Strings were pulled and quotas were invoked to speed up allotment as these scooters were much sought after as wedding gifts. Those were the heydays of 'hamara Bajaj'. Buying a car meant choosing between a Premier Padmini (which was a Fiat 1100 assembled in India), the Ambassador by Hindustan Motors (a replica of the Morris Oxford - an old British car) and the Standard Automobiles' Gazelle, as they were the only cars available in...
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