What is GLOBALIZATION?

Globalization means several things to several people. For some it is a new paradigm-a set of fresh and new beliefs, working methods and economic, political and sociocultural realities in which the previous assumptions are no longer valid. For developing countries, it means integration with the world economy.

                In simple economic terms, globalization refers to the process of integration of the world into one huge market. Such unification calls for the removal of all trade barriers among countries. Even political and geographical barriers become irrelevant.

                At the company level, globalization means two things:

(a)    The company commits itself heavily with several manufacturing locations around the world and offers products in several diversified industries and

(b)   It also means the ability to compete in domestic markets with foreign competitors. In the popular sense, globalization refers mainly to mulch-plant operations.

MNC (Multi-National Company)— A company which has gone global is called MNC or TNC (Trans-National Company). Thus MNC operates in more than one country and gains through Research and Development (R&D) which leads to substantial production, marketing and financial advantages in its costs and reputation that are not available to purely domestic competitors. The global company sees the world as one market. They do not consider much importance of national boundaries. They raises capital and markets wherever it thinks it can do the job best.

                To be specific, a global company has three important characteristics which are as follows:--

1.       It is a conglomerate of multiple units located in different parts of the globe but all linked by common ownership.

2.       Multiple units draw on a common pool of resources such as money, credit, information, patents,trade names and control systems.

3.       The units respond to some common strategy.

Examples of some MNCs

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What is Personality?

The trend of an interview turns largely on the impression made by the personality of the interviewee. Personality is an evasive quality which is difficult to define and also quite a task to develop it. It is a natural gift but can also be cultivated. It is a very personal quality of mind, reaction, appearance, manner and speech. It is not only the smart appearance. It is perhaps far more deep and impressive. It is the sum total of the inner working of the body, mind and spirit, in concord and accord.

                We often see advertisements that says “How to develop your personality?” It is rather hopeless to expect an improvement through an external source by some mechanical process. But the wording of such advertisements is proof that there must be latent possibilities of improvement of personal qualities, either dormant, depressed or unexpressed. The purpose of all education is to develop these latent qualities.

SOME TYPES

                Generally speaking, there are three chief directions in which personality can be cultivated. There is the ‘Public school type’ of personality; there is also the entirely religious personality; there is the ordinary,everyday type.

1.The Accomplished Gentlemen: this type is found on good manners. A gentleman, in this sense, must, it is believed, possess a fine degree of personality. The type is usually good; the goodness is determined by three qualities—uprightness, reliability and initiative. These three virtues constitute together a perfection in manhood which is worth emulation. The question, however, is to what extent character can be cultivated and initiative be instilled. Character is a compound of so many different factors that it can only be developed. Cultivate character, and the first ingredient of personality has been contributed.

Reliability can only be judged under circumstances of stress. Hence its cultivation calls for hard and honest living.

Initiative is more objective than the former and opportunity can be provided for its proper development as in scouting or military service.

2.The orthodox type: the orthodox or religious type of personality is inclined to be such that to consider it from the point of view of the ordinary Interview Board seems to be unnecessary.

3.The ordinary type: the normal or average type of personality is the kind which is most in demand. Inquiry shows that the qualities of speech, deportment and so forth, as mentioned above, are what interviewing bodies look forward to and assess.

WELL-ROUNDED PERSONALITY

                A hollow mind betrays itself from vacant looks. A full mind is, therefore, the first desideratum for the personality test. Wide reading, aesthetic appreciation and ethical values help to make up a full mind.

SENSIBILITY AND SENSITIVITY

                Reactions in the form of sensibility and sensitivity are the common tests applied by interviewers when putting questions to candidates. It is possible to train oneself to give sensible answers. Too many foolish answers are given when a little foresight could overcome this defect. Therefore, precision is the key-note in this aspect of personality development. Sensitivity is a delicate reaction to outside influences, and is rather like the reaction of a galvanometer to a magnet. The interviewing bodies are magnets and the candidate is the instrument. By making himself sufficiently turned to slightest suggestions, implied or otherwise, in questions, control over the range of interview may be had. The key-note is, therefore ‘cautious anticipation’.

MANNERS

                Manners can also be judged by interviewers and the little lapses may sometimes betray a candidate. Politeness, in all circumstances, always pays. Punctuality is the prime expression of politeness.

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What is a bank? What are the different types of bank?

The term ‘bank’ is derived from the greek word ‘banque’ that refers to some kind of banking. Casa De San Giorgio was the first bank to be established in 1148.The first public bank was the Bank of Venice, established in 1157.In simple words, bank refers to institution that deals in money and money related matters. They accept deposits from the public and gives loans to those who need it. They also perform various other functions such as credit creation, agency job and general service.

Types of bank: Banks may be classified on various basis as under:-

1.        On the basis of ownership: (i) public sector banks, e.g. State Bank of India

     (ii) private sector banks, e.g. Vijaya Bank

     (iii) co-operative banks, e.g. State co-operative bank.

2.        On the basis of law: (i) scheduled banks- these banks must have a paid up capital of least Rs.5 lacs.

                                    (ii) non-scheduled banks- these banks are not mentioned in the Second Schedule of Reserve Bank and may have a paid up capital of less than Rs.5 lacs. There are only 3 such banks in India at present.

3.        On the basis of their functions:

(i) commercial banks: these are the most important constituents of banking system. E.g. SBI, Canara       Bank, PNB etc, etc.

(ii) foreign banks: such banks are incorporated in a foreign country and set up their branches in India. E.g.Bank of America, Chartered Bank, Hong Kong Bank etc.

(iii) industrial banks: they offer long term and medium term loans to the industries and also work for their development. E.g.IDBI,IFC,SFCs etc.

 (iv) agricultural banks : such banks give credit to agricultural sector of the economy.e.g.NABARD

(v) saving banks: their principal function is to collect small savings across the country and put them to productive use. In India, a dept. Of Post Offices functions as savings banks.

 (vi) indigenous banks : These banks found their origins in India.

(vii) central banks: it is the apex bank of the banking system of the country. RBI, Bank of England, Federal Reserve System are central banks of India, England and USA respectively.

Commercial banks, may , again be classified as follows on the basis of their organisation:-

a) Unit Banking: In this banking system, a particular bank functions in a limited area. Such banks are of small size and generally has no branch. They deposit money in some big bank called correspondent bank. The control and ownership of these banks is generally in the hands of local individuals. This banking system is popular in USA.

b) Branch Banking: Branch banking is a system in which:-

   (i) a bank renders its banking services at two or more places

  (ii) head office has the overall control over the working of various branches

 (iii) branches can be opened in the same town, state or the country in which the concerned head office is located or at different places

  (iv)overall control of all the branches is done by one central authority, viz.Board of Directors.

c) Chain Banking: This system of banking became popular in USA in 1920. In this system every bank in the banking chain has its own identity as well as independent board of management. However, it is possible that one individual is the member of various management boards.

d) Group Banking: Group banking is that banking system in which two or more banks operate  under the control of a holding company. In the words of Goldfield and Chandler,”Group Banking refers to the system in which a corporation or a holding company operates two or more banks simultaneously. These banks are known as subsidiaries of the corporation or the holding company. These banks may be unit banks or branch banks.”

e) Correspondent Banking: Correspondent banking is an arrangement  that exists among banks throughout the country based on the practice of smaller banks carrying deposits with larger banks in exchange for the performance of various services.

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Demographic Environment and Its Importance to Business

The demographic environment differs from country to country and from place to place within the same country or region. Further it may change significantly over time. Peter Drucker, who emphasizes the tremendous economic and business implications of demographic changes, suggests that any strategy, that is any commitment of present resources to the future expectations, has to start out with demographics.

. It is conventionally said that Management is Men, Material, Machinery and Money. Even if all the other Ms are excellent, it would not be of use unless the Men is the right one in terms of quality,potential,motivation and commitment etc.

Market is people in the sense that the demand depends on the people and their characteristics such as – the number,income levels, tastes and preferences, beliefs, attitudes and sentiments and a host of other demographic factors. No wonder, demography is an important basis of market segmentation.

The important demographic bases of market segmentation include the following:

1.        Age structure

2.        Gender

3.        Income distribution

4.        Family size

5.        Family life cycle (e.g.young,single: young, married, no children; young married with children.......)

6.        Occupation

7.        Education

8.        Social class

9.        Religion

10.     Race

11.     Nationality 

The importance of demographic factors to business is clear from the facts that ‘management is men’ and ‘market is people’. Demographic diversity between and within nations is very conspicuous.

Demographic factors such as size of the population, population growth rates, age composition, ethnic composition, density of population, rural-urban distribution, family size, nature of the family, income levels etc.have very significant implications for business.

Population Size: Nations with large and growing population and rising income are the future markets. Poor countries with small population are generally not attractive for business. However, even such countries may hold out opportunities for some companies. As these markets may not be of interest for large companies, small firms may find promising niches in these markets.

                        Advanced countries, particularly with large population, are generally attractive markets. The major part of the international trade and foreign investments naturally take place between these nations. Because of the large potential of these markets, competition is generally strong in them.

                        The size of the population is, thus, an important determinant of demand for many products. One of the important objectives of the formation of the European Union(EU) was to bring about a single market that compares, in terms of the number of consumers, to that of USA and Japan.

Falling Birth Rate and Changing Age Structure: The falling birth rate, declining population and changing age structure have important implications for business and governments. Although, there has been an explosive growth of the global population particularly in developing countries, the universal trend now is fall in birth rates. Because of the declining birth rate,population is already peaking in a number of countries. The collapse of population size has serious implications for business.

                        The declining birth rate poses a problem for many businesses. Because of the decline in birth rates and consequent fall in the size of the baby population, the market for baby product has shrunk. This has prompted some companies, such as Johnson and Johnson, to reposition their products (originally introduced as baby products) and to pay more importance to international business.

                        On the other hand, the declining birth rate has been a boon to certain industries. For example, industries such as hotels, airlines and restaurants have benefitted from the fact that young childless couples have more time and income for travel and dining out.

                        It is obvious that business should necessarily ponder over whether the falling birth rate and the shrinkage in the number of young people-and especially of people under eighteen, that is,babies, children and teenagers- is a threat or an opportunity.

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NON-ECONOMIC ENVIRONMENT OF BUSINESS

The identification of the non-economic environment is particularly essential because of the fact that it influences and gets influenced byt he economic environment.

                The following factors constitute the non-economic environment of business:-

1.Sociological, 2.Educational-cultural, 3.Historical, 4.physical.

1.Sociological: the sociological factors give content and form to the system of values and culture. Among these factors, we can list (i)view towards management-social attitude towards business and managers;business-moral or immoral thing?
 (ii) view towards authority,responsibility,delegation-authority,respectable or condemnable? Workers’ participation-myth or reality?
 (iii) view towards achievement and work-achievement recognized or not? Good work leading to a promotion or transfer?

2.Educational-cultural: (i)Attitude towards education and acquisition of knowledge.
 (ii) Types of education-formal or informal. Liberal arts or technical. Quantity and quality of higher education (iii) literacy level-correlation between formal literacy and the level of culture. 
(iv) educational match with the skill requirements of industry and manpower utilization. In the context of non-economic environment, we can consider the political-legal factors: Laissez faire is no longer an order and the role of the govt, which is the apex institution of the State to regulate business activities, is no longer debatable.

                The political-legal environment of business depends on
 (i)legal rules of the game of business- its formulation and implementation., its efficiency and effectiveness
.(ii) defense and military policy-impact of defense policy on industrial enterprise in terms of trading  with potential enemies, purchasing policies, strategic industrial development etc.
(iii)political stability-impact of factors like civil war, the declaration of President’s rule and emergency changes in the form and structure of govt.administration.
(iv)political organization-ideology of the ruling govt, philosophy of the political parties, degree and extent of bureaucratic delays,red tape, the influence of premier groups, the question of donation of business houses to the political parties.

3.Historical: the historical heritage of the country also influences the current environment of business. The role of historical factors in the context of non-economic environment may not, therefore, be minimized. Here we have to look at the sociological, cultural, educational and related factors which influence business in their historical perspective. For example, the business environment in a number of newly independent nation-states has been largely determined by the colonial status which those countries enjoyed earlier. The French Revolution has much to do with the emergence of capitalist spirit of business and investment. World war I and the Soviet Revolution provided a perspective to realize the ambition of a state-owned/controlled business system. The declaration of Emergency induced a set of business ethics and practices in India.

4.Physical: lastly, though not the least important one, reference must be made to the physical environment,i.e., the role of physical and geographical factors in the realm of non-economic environment. The application of modern technology in industry,it is now argued, leads to rapid economic growth at a huge social cost-deterioration of the physical environment around us like air pollution,noise pollution, so on and so forth. The nature of such costs is being assessed by biologists,ecologists,sociologists,consumers and conservationists. In the light of this, much talk is there about the social responsibilities of business. Business now has to calculate the social net profitability(social benefir-social cost) of its ventures. In this calculation business must consider the physical environmental factors such as the quantity and quality of existing forest wealth, possibility of artificial rain, the exploitation of sea products like fish, the health hazards out of pollution, social costs of rapid urbanization and industrialization, etc.

                To sum up, the non-economic environment, which we wanted to identify in this section, implies a host of environmental factors:sociological, educational-cultural,political-legal, historical and physical.

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Economic Environment Of Business

Firms are considered as an economic institution in a market system. The market behavior of the firm reflects the nature of economic decisions taken by the manager of the firm. Micro-economic decision-making by the firm has nevertheless to be made within the broader micro-economic environment. Economic environment of business has reference to the broad characteristics of the economic system in which the business operates.

                        The economic environment of business is comprised of the economic conditions, economic policies and the economic system.

                        The economic conditions of a country-e.g.,the nature of the economy, the stage development of the economy, economic resources, the level of income, the distribution of income and assets,etc.are among the very important determinants of business strategies.

                        In a developing country, the low income may be the reason for the very few demand of a product. The sale of a product for which the demand is income-elastic naturally increases with an increase in income. But a firm is unable to increase the purchasing power of the people to generate a higher demand for its product. Hence, it may have to reduce the price of the product to increase the sales.

                        In countries where the investment and the income are steadily and rapidly rising, business prospects are generally bright and further investments are encouraged.

                        In developed economies, replacement demand accounts for a considerable part of the total demand for many consumer durables whereas the replacement demand is negligible in the developing economies.

                        The economic policy of the government has a very great impact on business. Some types of business are favourably affected by govt.policy, some adversely affected, while its neutral in respect of others. For example, an industry that falls within the priority sector in terms of the govt.policy may get a number of incentives and other positive support  from the govt., whereas those industries which are regarded as inessential may have the odds against them.

                        The monetary and fiscal policies also affect the business in different ways according to the incentives and disincentives they offer and by their neutrality. According to the industrial policy of the Govt.of India until July 1991, the development of 17 of the most important industries were reserved for the state. In the development of another 12 major industries, the state was to play a dominant role. In the remaining industries, co-operative enterprises, joint sector enterprises and small-scale units were to get preferential treatment over large entrepreneurs in the private sector. The govt.policy thus limited the scope of private business. However, the new policy ushered in since July 1991 has widely opened many of the industries for the private sector.

                        The scope of private business depends, to a large extent, on the economic system. At one end, there are free market economies or capitalist economies and at the other end are the centrally planned economies or communist countries. In between these two are the mixed economies. Within the mixed economy itself, there are wide variations.

                         The freedom of private enterprise is the greatest in a free market economy and is characterized by the following assumptions:

1.        The factors of production(land,labor,capital) are privately owned and production occurs at the initiative of the private enterprise.

2.        Income is received in monetary form by the sale of services of factors of production and from the profits of the private enterprise.

3.        Members of the free market economy have freedom of choice

4.        The free market economy is not planned,controlled or regulated by the govt. The govt.satisfies collective wants but does not compete with private firms.

The completely free market economy is however an abstract system rather than a real one. Today,even the so-called market economies are subject to a number of Govt.regulations. Countries like the USA, Japan, Australia, Canada and member

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BUSINESS ENVIRONMENT

Business Environment

Meaning: The term environment refers to the totality of all the factors which are external and out of control of individual business enterprise and their management. The business firm is a micro-economic unit. The environment furnishes the macro-economic context within which the firm operates. The firm, individually, does not have much influence on the environment. Of course, the collective behavior of different firms may affect the business environment.

                        Business environment may be classified on different criteria, such as time, space, forces and factors. Based on ‘time’, it refers to the past, present and future environment of business. Based on ‘space’, it refers to the local, regional, national and international environment of business. Based on ‘forces’ of market such as supply, price etc., or non-market institution like government, we may distinguish between market and non-market environment of business.  Also, environment can be assessed in quantitative terms based on data or qualitative terms based on systems of policy as proceower. Finally based on the relevance of economic or non-economic factors, we may classify as economic and non-economic environment of business. Such classification of environmental variables is mainly for reasons of analytical convenience to understand their pull and/or push. In real world situation, the environmental variables interact with each other. Such interaction can be conceptualised through the formal presentation of ‘Interaction Matrix’. Because of the involved nature of these interactions, the environment often appears very complex, dynamic and sometimes beyond any theoretical comprehension. But for an efficient operation of the firm, there is no alternative to identification, description and explanation of its business environment, immediate and remote.

                        The business environment poses threats to a firm or offers immense opportunities for potential market exploitation. Stressing this aspect, William F.Glueck and Lawrence R.Jauch wrote thus:”The environment includes factors outside the firm which can lead to opportunities for or threats to the firm. although there are many factors, the most important of the sectors are socio-economic, technological, supplier, competitors and government.”

From the standpoint of analysis and scanning, perhaps the most useful distinction is between ‘economic’ and ‘non-economic’ environment.

ECONOMIC ENVIRONMENT OF BUSINESS

                        Economic conditions, economic policies and the economic system are the important external factors that constitute the economic environment of business

                        The economic conditions of a country-for example, the nature of the economy, the stage development of the economy, economic resources, the level of income, the distribution of income and assets etc.,are among the very important determinants of business strategies.

                        The economic policy of the government has a very great impact on business. Some types or categories of business are favorably affected by government policy, some adversely affected, while it is neutral in respect of others. For example, a restrictive import policy, or a policy of protecting the home industries, may greatly help the import-competing industries, while a liberalization of the import policy may create difficulties for such industries.

                        In India, the govt.’s concern about the concentration of economic power restricted the role of the large scale industries and foreign concerns to the core sector, the heavy investment sector, the export sector and backward regions.

                        The monetary and fiscal policies, by the incentives and disincentives they offer and by their neutrality, also affect the business in different ways.

                        The present day economic environment of business is very complex.

NON-ECONOMIC ENVIRONMENT OF BUSINESS

                        The identification of non-economic environment is particularly essential in view of the fact that it influences and gets influenced by the economic environment. The non-economic environment of business includes the sociological factors, educational-cultural factors, historical factors, and the physical factors.

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