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Legal factors affecting business environment:

• Acts approved by the Parliament and/or the Assembly which then become laws become the legal factors that affect the economy of the nation. Every business unit need to follow these acts.
• In order to boost business as well as maintain social welfare, the government passes various laws.
• Industrial Development and Regulation Act 1951, Essential Commodities Act 1955, Trade Mark Act 1969, Standard of Weights and Measures Act 1969, Consumer Protection Act 1986, etc. are few examples of trade related laws passed by the government.
• As per the need of the hour, the government also amends the laws and at times removes the unnecessary laws. For example, when the government amended Monopolies and Restrictive Trade Practices (MRTP) Act 1951, several Indian companies could grow and make themselves at par with international companies.

Effect of technological factors on business environment:

• Technological factors affect the production decision and hence the business environment of a region.
• Based on the technological factors, the producer needs to decide as to what technology should he adopt to produce goods so that he can deliver the best possible products and increase profit.
• Research and Development (R & D) takes place at a very fast rate across the world. This leads to constant improvement in technology of production and processing methods. The country has to adopt these changes else it will not be able to compete the international market and the businesses will start making losses. For example, there was a time when India believed that use of machines should be kept at its lowest to enable employment generation. But India had to adopt fast mechanization owing to liberalization of industrial policy.
• Many industries have started using robotic machines. Using such machines products can be produced much faster that too with very high precision.
• In banking sector, internet banking and mobile banking have become quite common now. People use these technologies to save time and effort. These technologies have given rise to a new level of business environment where in the need for development of banking software, mobile applications, etc. have increased tremendously.

(i) External business environment

(ii) Social environment

(iii) Privatization

(iv) Globalization

Correct option is (C) ₹

Internal environment

When any country permits foreign companies to do business in their domestic economy and allows domestic companies to do business globally, it is known as globalization.

In previous time every country used to form a policy to protect its trade and industry from foreign competition; In the beginning the companies of developed countries started doing business in other countries and developed countries granted permission to other countries’ companies to do business in their country. Hence, globalization started.

To develop business and industry of the entire world, formation of World Trade Organization was formed. As a part of policy of globalization India has accepted GATT -General Agreement for Trade and Tariff. The entire world turned to a global village.

Correct option is (B) 1991

Correct option is (a) Public

Correct option is (B) July 1991

Negative Effects of Globalization:

• Arrangement for market set up becomes difficult and costly
• Rise in the production of luxurious goods and services
• New problems caused by change in human mentality
• Rise in inequality of distribution of income and wealth
• Effect of economic condition of one country transferring to other countries
• Breach of ethical values
• Large scale units are at an advantage
• Spread of education is lesser than the spread of development
• Lower loyalty of multinational companies to their host country as compared to their home country and
• Subtle arrangement with political parties for suitable monetary policy by internationally renowned companies.

Positive Effects of Globalization:

• Large Scale Production
• Increased Competition
• Availability of improvised, economical technology
• Reduction in price of the product 202 or service
• Opportunity for employment generation
• Creation of infrastructural facility in the country
• Increase in spread of education
• Setting up of new industry becoming easy
• The whole world has become global village and
• Freedom from political bureaucracy and red tapism

Features of globalization are as follows:

1. Purchase and sale of goods and services from one country to another.

2. Opportunity to start and do business in any part of the world. 

3. Reduction in gap between domestic and international market. 

4. Possibility of quick and rapid economic development. 

5. Enhances the opportunity to exchange new ideas and technology across the nations.

There is need for privatisation because of the following reasons:

1. To bring more efficiency in the working of business firms. 

2. To reduce political interference in the working of the firms and companies. 

3. To improve the quality of products

4. To bring efficiency in management of the organization. 

5. To create discipline in capital market.

The new economic policy was introduced by the Government on 24th July, 1991, on the failure of the earlier Industrial policy prevailing in India. 

The new policy was known as LPG i.e. Liberalisation, Privatisation and Globalisation. This was the brain child of the Prime Minister P. V. Narasimha Rao and the finance minister Dr. Manmohan Singh.

(i) Liberalisation: It means to liberate the industry, trade and commerce from the unnecessary restrictions and regulations that curtailed the freedom of enterprise.

Liberalisation has helped the Indian economy to open up and allowed the entry of foreign business in India. The interaction with the world has happened after the 1991 policy.

Liberalisation policy has brought about the following measures:

1. Encouraging Direct Foreign Investment. 

2. Wide Choice of products and services enjoyed by the customers.

3. Reduction in control of Foreign Exchange. 

4. Cost of products, price and quality in tune to the global markets. 

5. Changing the approach towards industrial sickness. 

6. Production of quality products to meet the competitive markets. 

7. Freedom to choose the Scale of business. 

8. Reduction in tax rates, tax holidays, etc. 

9. Encouraging new technology, technological upgradation and foreign collaboration. 

10. I mport of machinery, goods and other services on easy terms. 

11. Abolishing licensing system for most of the industries. 

12. Opening telecommunication sector.

Liberalisation has thus made the country achieve high growth rate, made the rupee stronger and helped good industrial relations. 

(ii) Privatisation: 

Privatisation is a process of transferring ownership of business, enterprise agency or public service from the public sector (government) to the private sector. Features of Privatisation are:

1. To provide variety of business units to consumers. 

2. To ensure less political interference in running the business. 

3. To bring about more accountability. 

4. To reduce labour problem. 

5. To bring about a market oriented approach. 

6. To make competition more intense. 

7. To bring about more efficiency. 

8. To maintain capital market discipline.

The government of the country has followed a disinvestment policy.

Disinvestment means:

1. When there is a sale of a public undertaking in full or part of private sector without transferring the ownership to private sector. 

2. The management and control is transfered to public undertaking e.g. Maruti Udyog Ltd., SAIL, ONGC, etc. 

3. Improvement in the performance of the industries through Memorandum of Understanding (MoU). Privatisation helps the private sector to be efficient result oriented, productive and active. Capitalist countries like America and Japan have followed privatisation.

(iii) Globalisation: 

When the operation and organization of business activities are on a global scale, it is called as Globalisation. It is integration of business activities by considering the entire world is one market.

In short globalisation means a boundary less world, where there would be a free flow of goods, services, information, capital and people across nations. Globalisation has effect on socio-economic and political sphere of life.

Features of Globalisation:

1. Buying and selling goods from/to any country is possible due to globalisation. 

2. Establishing manufacturing, production and distribution facilities in any part of the world. 

3. Freedom to set up’ and operate business in any part of the world. 

4. Render faster economic development of any country. 

5. Exchange of new ideas and technology across nations. 

6. Narrowing differences between domestic and international market. 

7. Direct Foreign private participation in the industrial development of any country. 

Thus it could be seen that globalisation is an evolutionary concept. Through the policy of 1991 the government moved the country to this globalisation pattern.

liberalization