ASSIGNMENT No: 1

Name two elements of internal environment affecting business.

Internal environmental factors are events that occur within an organization.
Management Structure and Culture are two important elements of internal
environment.

What is multinational enterprise?

A corporation that has its facilities and other assets in at least one country other
than its home country. Such companies have offices and/or factories in different
countries and usually have a centralized head office where they co-ordinate global
management.

Give two suggestions to the problems of small scale industries.

The following measures may be suggested to the problems of small scale industries.
I.
II.

Equitable allocation of raw materials, imported components and equipment.

Improvement in the methods and techniques of production.

Define privatization.
The transfer of ownership, property or business from the government to the private
sector is termed privatization. The government ceases to be the owner of the entity
or business.

What do you understand by fiscal policy?

Fiscal policy involves the decisions that a government makes regarding collection of
revenue through taxation and about spending the revenue.

Q1. Explain Monetary policy & its effect on business

Monetary policy is the regulation of a country's money supply by the central bank of
a country or region. Monetary policy tools are used to help control the economy. The
primary tools used by a central bank are changes to the prime interest rate,
changes to the amount of money in circulation and changes in the reserve
requirements for banks. The Banks monetary policy objective is to deliver price
stability low inflation and, subject to that, to support the Governments economic
objectives, including those for growth and employment. Following are some of the
effects on the business.

Control Inflation
One of the primary impacts of monetary policy is on inflation. The goal of monetary
policy is to control inflation, or the value of currency, through changes in monetary
policy tools. When inflation rises, the central bank typically raises interest rates.

High inflation makes the costs of goods higher. Central banks want to keep inflation
low to keep the prices of goods stable relative to the value of the currency.

Interest Rates
Monetary policy directly impacts interest rates. The central bank raises or lowers
the prime rate, or interest rate the central bank loans money to other banks, as a
tool to impact the economy. These actions have a trickledown effect on the interest
rates charged on loans, credit cards and any other financial vehicle that is tied to
the prime rate.

Business Cycles
Business is cyclic in nature and goes through periods of expansion and contraction.
Monetary policy attempts to minimize the speed and severity of these expansions
and contractions to maintain steady growth or decrease a negative contraction. The
goal is to keep an economy on a slow, but steady growth pattern to prevent
recessions during periods of contraction.

Spending
Monetary policy impacts the amount of money spent in an economy. When a central
bank decreases interest rates, more money is typically spent in an economy. This
increase in spending can equate to better overall health for an economy. Likewise,
when interest rates are increased, spending declines, which could curtail inflation.

Employment
Employment levels relate to the health of an economy. When inflation is low and an
economy is stable or in an expansionary phase, employment levels are higher than
when inflation is high and an economy is in a contraction phase. Changes in
monetary policy that maintain economic stability and minimize inflation, tend to
keep unemployment low.

Q. 2.
business

What is technology? Explain the impact of technology on

Technology is a body of knowledge devoted to creating tools, processing actions and

extracting of materials. The term Technology is wide and everyone has their own
way of understanding the meaning of technology. We use technology to accomplish
various tasks in our daily lives, in brief; we can describe technology as products,
processes or organizations. We use technology to extend our abilities, and that
makes people as the most important part of any technological system.
The explosion of the internet and mobile technology, and the seemingly endless
potential of the ways that they can be used, is outstripping and sometimes
undermining structures of working that have prevailed for more than a century.

While the list of advantages are too long to document, below you will find several
key advantages to how your business will improve as a result of technological
advances.

REDUCING BUSINESS COSTS

Small business owners can use technology to reduce business costs. Business
technology helps automate back office functions, such as record keeping,
accounting and payroll. Business owners can also use technology to create secure
environments for maintaining sensitive business or consumer information.

IMPROVE COMMUNICATION
Business technology can help small businesses improve their communication
processes. Emails, texting, websites and personal digital products applications
(apps), can help companies improve communication with consumers. Using several
types of information technology communication methods allow companies to
saturate the economic market with their message.
Companies may also receive more consumer feedback through these electronic
communication methods. These methods also allow companies to reach consumers
through mobile devices in a real-time format.

POTENTIAL INCREASE IN BUSINESS

Technology allows small businesses to reach new economic markets. Rather than
just selling consumer goods or services in the local market, small businesses can
reach regional, national and international markets. Retail websites are the most
common way small businesses sell products in several different economic markets.
Websites represent a low-cost option that consumers can access 24/7 when needing
to purchase goods or services. Small business owners can also use internet
advertising to reach new markets and customers through carefully placed web
banners or ads.

CONSIDERATIONS
Business technology allows companies to outsource business function to other
businesses in the national and international business environment. Outsourcing can
help companies lower costs and focus on completing the business function they do
best. Technical support and customer service are two common functions companies
outsource.
Small business owners may consider outsourcing functions if they do not have the
proper facilities or available manpower. Technology allows businesses to outsource
functions to the cheapest areas possible, including foreign countries.
The society as we know it is going through a radical makeover, thanks to constant
connectivity everywhere. This is creating a need for a digital makeover of
everything from retail to our postal system. It is changing our infrastructure needs
and it is also increasing the velocity of business. To stay ahead of the game
business owners must also change the traditional way of operating their day-to-day
business.

It keeps changing every day. These changes have also had a big influence on how
the business world operates. Its influence is felt in practically all aspects of the dayto-day operations of businesses, large and small.
This revolution is removing commercial and technological barriers that have
previously hampered free communication between people. Major advancements in
mobile technology and the advent of mobile web mean we can now shop, advertise,
read, purchase and bank with our mobile device.
By challenging traditional business models, the convergence of readily available
internet services and mass mobile devices has delivered unimaginable benefits to
both consumer and brand.
Mobility delivers choice for the customer and also lowers barriers to entry for third
parties. Integrating old business models with new to provide choice to all
demographics, whether in internet or non-internet ready markets, will continue to
unlock the full potential of mobile technology to all industries.
There is no doubt that business technology has revolutionized the way companies
conduct business, but the question remains: are small business owners ready for
the shift in technology and if so, what resources have they got in place to handle
these rapid changes?
In a survey conducted by Small Business Technology Institute (SBTI) and Small
Business Technology Magazine, managers from more than 3000 companies reported
that after health care, managing the evolving technologies available is proving to be
a major concern.
The report also indicated that small businesses tend to allocate very limited human
and financial resources to support their IT functions; and small businesses approach
IT support on a reactive basis and rely heavily on tactical support by product
lenders.
This type of approach and decision making around an area that is arguably the most
important sector within any business operating under a rapidly evolving
marketplace is a sure fire way to get taken over by competitors or go out of
business.
For the very first time small businesses have the opportunity to implement
business technology and level the playing field with larger organisations a chance
that should not be taken lightly for those looking to remain in business.

ASSIGNMENT No:2
Name two elements of external environment affecting business.

External environmental factors are events that take place outside of the
organization and are harder to predict and control. Some examples of external
environmental factors are noted below:
Changes to the economy, Threats from competition, Political factors, Government
regulations and The industry itself.

What do you understand by globalization?

The tendency of investment funds and businesses to move beyond domestic
and national markets to other markets around the globe, thereby increasing
the interconnectedness of different markets. Globalization has had the effect
of markedly increasing not only international trade, but also cultural exchange.

What is monetary policy?

The actions of a central bank, currency board or other regulatory committee that
determine the size and rate of growth of the money supply, which in turn affects
interest rates. Monetary policy is maintained through actions such as increasing the
interest rate, or changing the amount of money banks need to keep in the vault
(bank reserves).

What is Disinvestment?
1. The action of an organization or government selling or liquidating an asset or
subsidiary. Also known as "divestiture".
2. A reduction in capital expenditure, or the decision of a company not to replenish
depleted capital goods.

What is International Trade?

International trade is the exchange of goods and services between countries. This
type of trade gives rise to a world economy, in which prices, or supply and demand,
affect and are affected by global events.

Q1: Explain Fiscal policy & its effect on business

Fiscal policy is the means by which a government adjusts its spending levels and tax
rates to monitor and influence a nation's economy. It is the sister strategy
to monetary policy through which a central bank influences a nation's money
supply. These two policies are used in various combinations to direct a country's
economic goals. Here we look at how fiscal policy works, how it must be monitored
and how its implementation may affect different people in an economy.
Before the Great Depression, which lasted from Sept. 4, 1929 to the late 1930s or
early 1940s, the government's approach to the economy was laissez-faire. Following
World War II, it was determined that the government had to take a proactive role in
the economy to regulate unemployment, business cycles, inflation and the cost of
money. By using a mix of monetary and fiscal policies (depending on the political
orientations and the philosophies of those in power at a particular time, one policy

may dominate over another), governments are able to control economic

phenomena.

How Fiscal Policy Works

Fiscal policy is based on the theories of British economist John Maynard Keynes. Also
known as Keynesian economics, this theory basically states that governments can
influence macroeconomic productivity levels by increasing or decreasing tax levels
and public spending. This influence, in turn, curbs inflation (generally considered to
be healthy when between 2-3%), increases employment and maintains a healthy
value of money. Fiscal policy is very important to the economy. For example, in 2012
many worried that the fiscal cliff, a simultaneous increase in tax rates and cuts in
government spending set to occur in January 2013, would send the U.S. economy
back to recession. The U.S. Congress avoided this problem by passing the American
Taxpayer Relief Act of 2012 on Jan. 1, 2013.

Balancing Act
The idea, however, is to find a balance between changing tax rates and public
spending. For example, stimulating a stagnant economy by increasing spending or
lowering taxes runs the risk of causing inflation to rise. This is because an increase
in the amount of money in the economy, followed by an increase in consumer
demand, can result in a decrease in the value of money - meaning that it would take
more money to buy something that has not changed in value.
Let's say that an economy has slowed down. Unemployment levels are up,
consumer spending is down and businesses are not making substantial profits. A
government thus decides to fuel the economy's engine by decreasing taxation,
which gives consumers more spending money, while increasing government
spending in the form of buying services from the market (such as building roads or
schools). By paying for such services, the government creates jobs and wages that
are in turn pumped into the economy. Pumping money into the economy by
decreasing taxation and increasing government spending is also known as "pump
priming." In the meantime, overall unemployment levels will fall.
With more money in the economy and fewer taxes to pay, consumer demand for
goods and services increases. This, in turn, rekindles businesses and turns the cycle
around from stagnant to active.
If, however, there are no reins on this process, the increase in economic productivity
can cross over a very fine line and lead to too much money in the market. This
excess in supply decreases the value of money while pushing up prices (because of
the increase in demand for consumer products). Hence, inflation exceeds the
reasonable level.
For this reason, fine tuning the economy through fiscal policy alone can be a
difficult, if not improbable, means to reach economic goals. If not closely monitored,
the line between a productive economy and one that is infected by inflation can be
easily blurred.

And When the Economy Needs to Be Curbed

When inflation is too strong, the economy may need a slowdown. In such a
situation, a government can use fiscal policy to increase taxes to suck money out of
the economy. Fiscal policy could also dictate a decrease in government spending
and thereby decrease the money in circulation. Of course, the possible negative
effects of such a policy in the long run could be a sluggish economy and high
unemployment levels. Nonetheless, the process continues as the government uses
its fiscal policy to fine-tune spending and taxation levels, with the goal of evening
out the business cycles.

Who Does Fiscal Policy Affect?

Unfortunately, the effects of any fiscal policy are not the same for everyone.
Depending on the political orientations and goals of the policymakers, a tax
cut could affect only the middle class, which is typically the largest economic group.
In times of economic decline and rising taxation, it is this same group that may
have to pay more taxes than the wealthier upper class.
Similarly, when a government decides to adjust its spending, its policy may affect
only a specific group of people. A decision to build a new bridge, for example, will
give work and more income to hundreds of construction workers. A decision to
spend money on building a new space shuttle, on the other hand, benefits only a
small, specialized pool of experts, which would not do much to increase aggregate
employment levels.

The Bottom Line

One of the biggest obstacles facing policymakers is deciding how much involvement
the government should have in the economy. Indeed, there have been various
degrees of interference by the government over the years. But for the most part, it
is accepted that a degree of government involvement is necessary to sustain a
vibrant economy, on which the economic well-being of the population depends.

Q2: What is Foreign Direct Investment? Explain its

importance. Explain government policies regarding FDI.
An investment made by a company or entity based in one country, into a company
or entity based in another country. Foreign direct investments differ substantially
from indirect investments such as portfolio flows, wherein overseas institutions
invest in equities listed on a nation's stock exchange. Entities making direct
investments typically have a significant degree of influence and control over the
company into which the investment is made. Open economies with skilled
workforces and good growth prospects tend to attract larger amounts of foreign
direct investment than closed, highly regulated economies.

The investing company may make its overseas investment in a number of ways either by setting up a subsidiary or associate company in the foreign country, by
acquiring shares of an overseas company, or through a merger or joint venture.
The accepted threshold for a foreign direct investment relationship, as defined by
the OECD, is 10%. That is, the foreign investor must own at least 10% or more of
the voting stock or ordinary shares of the investee company.
An example of foreign direct investment would be an American company taking a
majority stake in a company in China. Another example would be a Canadian
company setting up a joint venture to develop a mineral deposit in Chile.

Advantages of Foreign Direct Investment

Foreign direct investment has many advantages for both the investor and the
recipient. One of the primary benefits is that it allows money to freely go to
whatever business has the best prospects for growth anywhere in the world. That's
because investors aggressively seek the best return for their money with the least
risk. This profit motive is color-blind, doesn't care about religion or form of
government.
This gives well-run businesses -- regardless of race, color or creed -- a competitive
advantage. It reduces (but, of course, doesn't eliminate) the effects of politics,
cronyism and bribery. As a result, the smartest money goes to the best businesses
all over the world, bringing these goods and services to market faster than if
unrestricted FDI weren't available.
Individual investors receive additional benefits. Their risk is reduced because they
can diversify their holdings outside of a specific country, industry or political
system. Diversification always increases return without increasing risk.
Recipient businesses benefit by receiving management, accounting or legal
guidance in keeping with the best practices used by their lenders. They can also
incorporate the latest technology, innovations in operational practices, and new
financing tools that they might not otherwise be aware of. By adopting these
practices, they enhance their employees' lifestyles. This raises the standard of living
for more people in the recipient country. FDI rewards the best companies in any
country. This reduces the influence of local governments over them, making them
less able to pursue poor economic policies.
The standard of living in the recipient country is also improved by higher tax
revenue from the company that received the foreign direct investment. However,
sometimes countries neutralize that increased revenue by offering tax incentives to
attract the FDI in the first place.
Another advantage of FDI is that it can offset the volatility created by "hot money."
Short-term lenders and currency traders can create an asset bubble in a country by
investing lots of money in a short period of time, then selling their investments just
as quickly. This can create a boom-bust cycle that can ruin economies and political
regimes. Foreign direct investment takes longer to set up, and has a more
permanent footprint in a country. For more, see LTCM Fund crisis.

Government policies regarding FDI

The Government has amended the FDI policy regarding Construction Development
Sector. The amended policy includes easing of area restriction norms, reduction of
minimum capitalisation and easy exit from project. Further, in order to give boost to
low cost affordable housing, it has been provided that conditions of area restriction
and minimum capitalisation will not apply to cases committing 30 per cent of the
project cost towards affordable housing.
Relaxation of FDI norms are expected to result in enhanced inflows into the
Construction Development sector consequent to easing of sectoral conditions and
clarification of terms used in the Policy. It is likely to attract investments in new
areas and encourage development of plots for serviced housing given the shortage
of land in and around urban agglomerations as well as the high cost of land. The
measure is also expected to result in creation of much needed low cost affordable
housing in the country and development of smart cities.
The government has also raised FDI cap in insurance to 49 per cent from 26 per
cent through a notification issued by the DIPP. The limit is composite in nature as it
includes foreign investment in forms of foreign portfolio investment, foreign
institutional investment, qualified foreign investment, foreign venture capital
investment and non-resident investment.
Also, Indias cabinet has cleared a proposal which allows 100 per cent FDI in railway
infrastructure, excluding operations. Though the initiative does not allow foreign
firms to operate trains, it allows them to do other things such as create the network
and supply trains for bullet trains etc.