What is Business Environment ? What are its characteristics?

 Q. What is Business Environment ? What are its characteristics?

Ans. MEANING OF BUSINESS ENVIRONMENT: Business Environment (means)  is the sum total of all those factors which influence the business has no control. It has both threats and opportunities for the business. Threats refers to the negative changes that occurs in business environment and hinders the performance of the business organisation. Opportunities refers to the positive changes that occurs in the business environment and helps the organisation to improve its performance. The study of business environment enables the managers to identify threats and opportunities. 

Thus, Business Environment refers to the all the external factors which have a bearing on the functioning of the business. It refers to all forces which are external to business and beyond its control. 

Definition:

According to Prof. Keith Davis, “Business Environment is the aggregate of all conditions, events and influences that surround and affect the business.” 

In the words of V.P. Michael, “Business Environment is the sum total of the environmental factors which provide an atmosphere for the business. It has a direct relation with business organisation which operates in it.” 

CHARACTERISTICS OF BUSINESS ENVIRONMENT: 

(1) Totality of external forces: Business environment is the total of all those forces/factors which are available outside the business and over which the business has no control. That’s why its nature is of totality. 

Or

Aggregation of external forces:  A business environment is the aggregate of all the external forces such as individuals, consumers, government and legal matters that affect the performance of an organisation either positively or negatively. 

(2) Specific and general forces: Forces outside the business can be divided into two parts:

a) Specific: These forces affect the firms of an industry separately. e.g. customers, suppliers, investors, competitive firms etc. 

b) general: These forces affect the firms of an industry equally. e.g. social, political, legal and technical situations. 

Specific forces affect the business directly and immediately in its day-to-day working whereas general forces have an indirect effect on the business. 

(3) Interrelatedness: Different factors or components of business environment are related to each other and affect each other.

(4) Dynamic nature: Components of business environment changes continuously. So, the business environment is dynamic in nature which means it keeps on changing from time to time, reigon to reigon and country to country. 

(5) Uncertain: Business environment creates uncertainty for business firms as it is very difficult to predict environment and changes of future. Because of its uncertain nature, its study and analysis is difficult.

(6) Complex in nature: Business environment is a combination of many factors that have an Inter relation with business in many ways. These factors affect each other also. It is very difficult to know how these factors will influence the business. Thus, business environment is complex in nature. 

(7) Relativity (Relation): Business environment is a relative concept. It means business environment is related to local conditions. That’s why business environment is different in different countries and even different at different places in the same country. For eg. political conditions, religion, beliefs etc are different in different reigons. 

(8) Multi-faceted: Environment is multi-faceted. The same environment trend can have different effects on different industries. The same (one) can be threat for one company and opportunity for another company. 

(9) Far reaching impact: Environment has far reaching impact on business. Business and its environment are interdependent to each other. So any change in an environment has a direct impact on organisation in different ways. 

OR 

CHARACTERISTICS OF BUSINESS ENVIRONMENT: 

(1) Complex in Nature: Environment is a combination of many factors like political, economic, legal, social, cultural, technological, etc. These factors affect the business in many ways. Therefore, the influence that they exercise on business cannot be recognised independently.

(2) Dynamic: It is obvious that environment is a mixture of many factors and there are constant changes in some of them. It is only because of these changes in the factors of environment that make environment dynamic. The environmental factors change with passage of time. The plans and policies of business too have to be changed to keep pace with changing environment.

(3) Business Environment Affects Different Firms Differently: It is not necessary that any 

particular change in environment should affect all business units in a similar manner. One business unit may welcome a change in environment, while some other business unit may feel adverse effect of the same change. Therefore, environment may affect different business units in different manner.

(4) Business Environment has both Short-term and Long-term Impact: Every change in environment has both short-term and long-term impact on business. The changed environment affects the profitability, productivity and development of business in both short term and long term.

(5) Unlimited Effect of External Environmental Factors: External factors of business environment are uncontrollable. These factors have very deep effect on business. Sometimes the effect of these factors is so deep that it may take the business unit to closure. For example, decision of government to ban wine, whisky will compel wine shops to wind-up their business.

(6) Uncertain: The external business environment is very uncertain. There can be sudden change in it at any time. Because of its uncertain nature, its study and analysis is difficult.

(7) Interdependent Components: Various components of business environment are interdependent of each other. Different components of environment affect each other. For example, economic environment affects social environment and is also affected by it.

(8) Includes both Internal and External Environment: Business environment includes both internal and external environment. Internal environment means environment within the organisation; this environment is within the control of business unit. External environment is outside the organisation and is beyond the control of business unit. Business unit will have to change its activities along with changes in external environment.

What is Business Environment ? What are its characteristics?

Holding Company: What It Is, Advantages and Disadvantages

 Q. What is meant by Holding Company? Explain the advantages and disadvantages of Holding Companies. 

Ans. MEANING OF HOLDING COMPANY: A holding company is a company which controls another which controls another company by acquiring all or majority of its shares carrying voting rights or controlling the composition of board of directors. The company whose shares have been acquired is known as subsidiary company. The subsidiary company continues to operate as before because acquisition of controlling interest by another company does not result in its liquidation. 

ADVANTAGES OF HOLDING COMPANIES: 

(i) Easy Method of Acquiring Control: A company needs to invest comparatively a small amount in order to acquire control over other company through this method. 

(ii) Possibility of Maintaining Separate Goodwill: By maintaining the separate identities of holding and subsidiary companies, it would be possible to naintain their separate goodwill. 

(iii) Ascertainment of Separate Profitability and Financial Position: Since each subsidiary company has to prepare its own accounts, the profitability and financial position of each company is known.

(iv) Availing Income-Tax Benefits: By maintaining separate identities of holding and subsidiary companies, it would be possible to avail income tax benefits by carrying forward the losses of each company to the next year. This is not possible in case of amalgamation.

(v) Easy to Get Rid of Subsidiary: Whenever it is desired to get rid of the subsidiary company, it can be easily done by disposing off the shares of such company in the market.

(vi) Easy to Wind-up the Subsidiary: In case the subsidiary company is continuously running into losses, it can be easily wound-up.

(vii) Efficiency in Management: Since both the companies maintain their separate identity, the size of the holding company remains the same. It is easier to manage both the companies separately.

(viii) Elimination of Competition: Since both the companies are managed by the same group, competition between them is completely eliminated.

(ix) Benefit of Internal and External Economies: Both the companies can avail of the technical know-how and financial resources of each other. Hence, they are able to avail the internal and external economies.

(x) Other Advantages: Other advantages are:

I. Increase in goodwill and credit worthiness of both the companies,

II. Smooth supply of raw material,

III. Getting on assured market, and

IV. Pooling of resources whenever needed.

DISADVANTAGES OF HOLDING COMPANIES:

(i) Fraud in Inter-Company Transactions: Inter-Company transaction between holding and subsidiary are often entered at too high or too low priss in order to suit the holding company.

(ii) Fear of Oppression of Minority Shareholders: Subsidiaries company is run in a manner that suits the interest of holding company. Financial and other resources of the subsidiary are used to the benefit of holding company. As such there is always the danger of oppression of minority shareholder’s interests. 

(iii) Forced Appointment of Directors: Subsidiary companies are forced to appoint the directors or other officers chosen by the holding company. Their remuneration is also fixed by the holding company which may be too high.

(iv) Difficulty in Ascertaining the True Financial Position: Shareholders in the holding company may not be aware of the true profitability and the financial position of subsidiary companies. Likewise, creditors and the outside shareholders in the subsidiary Company also may not be aware of the true picture of the company.

(v) Fear of Mismanagement: Where the group has a good number of constituents and managerial ability is limited, there must be mismanagement resulting into ruin of the group as a whole.

(vi) Difficulties in Valuing the Inventory: Difficulties may be experienced while valuing the Inventory containing huge quantities of inter-company goods.

(vii) Speculation in Shares: By manipulation of profits, reserves, inter-company sales etc. directors may speculate in the shares of the subsidiary companies, when such shares are quoted in the stock exchange.

(viii) Creation of Secret Reserves: Secret reserves may be easily created by the unscrupulous directors to the detriment of the minority interest.

What is meant by Holding Company? Explain the advantages and disadvantages of Holding Companies. 

salient features of Right to Information Act, 2005

 Q. Discuss the salient features of Right to Information Act, 2005. 

Ans. The salient features of Right to Information Act, 2005 are as under:

1. This Act may be called Right to Information Act, 2005.

2. This Act defines ‘Appropriate Government’ which may be termed as Public Authority.

3. The Public Authority is established, constituted, owned, controlled or substantially financed by funds provided directly or indirectly by the Central Government or the Union Territory or State Government.

4. This Act is applicable to all public authorities such as all central and state government ministries, departments, organisations, undertakings, autonomous bodies, municipalities, Panchayat, etc. enacted by law and also covers the Union Territories, Election Commission, Auditor General, Public Service Commission and the judiciary and the legislature are covered under its purview. Interal and Foreign private institutions situated (working) within the country have been kept out of its purview. 

5. The Act requires the public authority and its officers to maintain and keep ready its records and machinery so as to facilitate the right to Information.

6. The Act provides that if the Information sought for relates to another office or another public Information officer, then the Public Information Officer receiving the application for Information can transfer the application to the Public Information Officer of the concerned office. 

7. In general cases, normally the request for information shall be disposed by the concerned Information officer within 30 days of the receipt of request. Where the information sought relates (pertains) to third party, the same shall be provided within 40 days of the receipt of request. But if the information sought for concerns the life or liberty of a person, the same shall be provided within 48 hours of the receipt of request. 

8. The fee for seeking information shall be reasonable. There shall be no fee for citizens below poverty line.

9. The Act provides for Constitution of a Central Information Commission at the highest level and State Information Commission at state level. There shall be Chief Information Commissioner and Information Commissioner in both the Commissions. 

10. The Act provides for two-level forum for making appeal, i.e. appeal shall be filed at two levels.

– One within the organisation to the senior officer to the Public Information officer known as First Appellate Authority.

– The second appeal shall be filed with the Central or State Information Commission, as the case may be. 

11. The Act provides that if the concerned Public Information Officer does not furnish the required information within specified period or refuses to provide information, the applicant making request for information shall file an appeal within 30 days of the date of such refusal. An appeal shall be disposed of within a 30 days of the receipt of the appeal or within such extended period not exceeding a total of 45 days from the date of filling.

12. The provisions of this Act are of overriding nature and these provisions cannot be made ineffective by proceedings of the lower courts. 

13. The Central and State Information Commissions shall, after the end of each year, prepare a report on the implementation of this Act during that year and forward a copy to the appropriate Government which shall be laid down before each House of Parliament or State Legislature as the case may be. 

14. The Central Government, by using power vested (मिली हुई है) under this Act, shall check out programmes to advance the understanding of the public and develop (promote) the information machinery. 

15. If any Public Information Officer neither furnishes the information nor refuses to furnish the information within specified time, he shall be penalised with ₹ 250 per day for the delay period subject to the total amount of such penalty not exceeding ₹ 25,000.

16. The amount of fee deposited by the applicant for seeking information shall have to be returned, if information is not furnished within specified period.

17. If any person, with one reason or the other, is unable to give written application for seeking information, he can tell it orally to the concerned Public Information Officer and it will be taken as his oral request for seeking information. In such cases, the concerned Public Information Officer shall render all reasonable assistance to the person making the request orally to reduce the same in writing.

The salient features of Right to Information Act, 2005

Buyer Behaviour & nature of Indian Consumers buying behaviour

 Q. What is buyer behaviour? What is the nature of Indian Consumers buying behaviour? 

Ans. MEANING OF BUYER BEHAVIOUR: Buyer behaviour is known as consumer behaviour. The whole behaviour of a person while making purchases may be termed as consumer behaviour. It is an attempt and prediction of human action in the buying role. Understanding the consumer behaviour of the target market is the essential task of marketing management under the modern marketing concept. 

Consumer behaviour consists of both physical as well as mental activities. The study of consumer behaviour provides a sound basis for identifying and Understanding consumer needs. The study of consumer behaviour is concerned with consumer's buying behaviour rather than actual consumption. 

According to Schiffman and Kanuk, The study of consumer behaviour is the study of how individuals make decisions to spend their available resources (I.e. time, money and efforts) on consumption-related items. It includes the study of what they buy, why they buy, when they buy, where they buy, how often they buy it and how often they use it. 

Thus, consumer behaviour includes the acts of individuals directly involved in obtaining and using goods and services including sequence of decision decision processes that precede and determine these acts. Also, it is necessary to study the consumer behaviour for sound marketing planning. 

NATURE OF INDIAN CONSUMERS BUYING BEHAVIOUR: Due to diversity in social system, customs, religion, language, food habits, cultures, sub-cultures, etc. the behaviour of Indian consumers is not uniform. Following characteristics are found in their behaviour.

1. Bargaining: Indian customers are very fond of bargaining. They prefer buying goods by reducing the price as told by the seller. Indian sellers too don’t frame a uniform price policy. In rural markets, the trend of bargaining still persists, but in urban areas now, customers prefers one price policy of the seller. They prefer to visit stores where there is no bargaining.

2. Price consciousness: Because of less income in the agriculture occupation, Indian consumer focus on price instead of the quality of the product. But now, consumers are quality conscious. They purchase quality products even at high price.

What is buyer behaviour? What is the nature of Indian Consumers buying behaviour?

3. Brand consciousness: Because of less education facilities, rural population are still unaware about the standard brand names of the product. They are concerned with the product and not with its brand name. But with the expansion of education and means of communication, the behaviour of Indian consumers is going on changing. Now they like branded products and they have brand loyalty of some reputed manufactures.

4. Complaining: Indian consumers are less complaining people. They believe that if a seller cheats on them, God will punish him. They are innocent and illiterate people. They do not kmow the laws and rights as a consumer. But now with the expansion of consumerism, consumers are more aware about their rights. They have started exhibiting their complaints through media and representation before 'Consumer Forums' under Consumer Protection Act, 1986. 

5. Role of women: The role of women is increasing day by day particularly in buying decisions and buying from the market. Women are generally interested in varieties and good looking products.

6. Changing consumption pattern: Because of increase in education, increase in income, increase in standard of living and also desires of more comforts, the pattern of consumption is now being changed. Indian consumers are more desirous of comforts and luxury products. 

7. Guarantee: Indian consumers are more interested in guarantee and warrantee. They prefer to purchase those commodities which are guaranteed by the manufacturers, regarding quality, durability, efficiency and effectiveness. 

8. Credit: Credit facilitates the consumers to buy those products which they cannot buy with their current cash resources. Indian consumers like to buy the products on credit, because their disposable income falls short to fulfill the demand for consumer durables. 

So, the proper understanding of consumer behaviour is essential for the marketers as it serves as the foundation of the marketing.

What is buyer behaviour? What is the nature of Indian Consumers buying behaviour?