An established pharmaceutical company from the United States has done scanning of its business environment and realises the following factors of potential growth in India.

(i) Government in India is encouraging NRIs and foreign investors to invest in Indian companies.

(ii) There would be an improvement in the quality of life of people in India.

(iii) The ruling party is encouraging the foreign companies in India.

(iv) A law has been passed in the parliament relating to delicensing policy on industries.

(v) Procedure for import and export of technology has been simplified.

What are the various dimensions of the business environment? Give an example of each.

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Solution

(i) Government encouraging foreign investment is a factor related to stable political environment by maintaining international relations. This also facilitates a positive economic environment as it will lead to efficient allocation of resources and distribution of goods and services in the country.

(ii) Improvement of quality of life of Indians is a factor related to encouraging sociocultural environment towards improved quality of life and healthy lifestyles.

(iii) Ruling party encouragement involvement is related to maintaining political stability and making a feasible political environment. This ensures possible investment and opportunities for growth, employment, etc.

(iv) Delicensing policy is a factor related to a feasible legal environment that focuses on controlling production, consumer protection and encouraging industrialization.

(v) Import and export of technology can create a favorable technological environment which allows the transfer of technical know-how, knowledge, skills, product development and improvement in production or processes.

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Q. Recently many companies have planned for significant investment in organised retailing in India. Various factors which have encouraged companies to take these decisions are customer income is increasing, rise in standard of living of people. People are ready to pay high price for quality goods, government policy of liberalisation regarding MNC entry and FM, etc.
(a) Explain briefly changes in business environment under different heads that have facilitated the companies decision to plan significant investment in retailing.
(b) What has been the impact of these changes with regards to globalisation and privatisation?

Lately, many companies have planned for significant investments in organised retailing in India. Several factors have prompted their decision in this regard. Customers income is rising. People have developed a taste for better quality products even though they may have to pay more. The aspiration levels have increased. The government has also liberalised its economic policies in this regard and permitted even cent-percent foreign direct investment in some sectors of retailing.

(a) Identify changes in the business environment under different heads: economic, social, technology, political and legal that have facilitated the companies decisions to plan significant investments in organised retailing.

(b) What has been the impact of these changes with regard to globalisation and privatisation?

Recently, many companies have planned for major investment in retail business. Increasing incomes, rise in living standards, government policy of liberalisation and its favourable attitude towards modernisation has favoured their decision.

Identify the various dimensions of business environment and explain their effect on business.

Q. However, it is possible that the non -resident entity may have a business connection with the resident Indian entity. In such a case, the resident Indian entity could be treated as Permanent Establishment of the non-resident entity. ___ During the last decade or so, India has seen a steady growth of outsourcing of business processes by non-residents or foreign companies to IT-enabled entities in India. Such entities are either branches or associated enterprises of the foreign enterprise or an independent India enterprise. The nonresident entity or foreign company will be liable to tax in India only if the IT-enabled BPO unit in India constitutes its Permanent Establishment.

Q. What special step has been taken by the central and state goverenments to attract foreign companies in India?

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