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INTERNATIONAL BUSINESS ENVIRONMENT: AN OVERVIEW
XISSMARCH 2011
PRESENTATION SEQUENCE
• BUSINESS BASICS
• ENVIRONMENTAL SCANNING
BUSINESS BASICS
• WHAT IS BUSINESS?• WHAT ARE ITS OBJECTIVES?• WHO STARTS A BUSINESS?• WHAT IS INTERNATIONAL BUSINESS?• WHAT ARE BUSINESS
CLASSIFICATIONS?• HOW ARE BUSINESSES ORGANISED?• ORGANISATIONS AND CHANGE• HIERARCHIES AND NETWORKS• CORPORATE GOVERNANCE
ENVIRONMENTAL SCANNING• INTERNAL ENVIRONMENT
o STRENGTHS AND WEAKNESSES• EXTERNAL ENVIRONMENT
o MICRO (OPPORTUNITIES AND THREATS) SUPPLIERS COMPETITORS CUSTOMERS INTERMEDIARIES
o MACRO (OPPORTUNITIES AND THREATS) THE ECONOMY GOVERNMENT SOCIO-CULTURAL TECHNOLOGY
BUSINESS BASICS
• WHAT IS A BUSINESS?o VAST ARRAY OF ECONOMIC ACTIVITIES IN
WHICH COMMODITIES ARE SUPPLIED IN EXCHANGE FOR SOME PAYMENT, USUALLY MONEY. IT INCLUDES BUYING AND SELLING, MANUFACTURING PRODUCTS, EXTRACTING NATURAL RESOURCES AND FARMING.
• OBJECTIVES OF BUSINESSo PROFITo NOT-FOR-PROFIT
BUSINESS BASICS
• WHO STARTS A BUSINESS?o ENTREPRENEUR:. one who creates a new
business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them. McDONALD STARTED WITH SINGLE HAMBURGER
OUTLET IN THE US IN 1955 AND HAS CURRENTLY THOUSANDS OF OUTLETS IN OVER 120 COUNTRIES, MAINLY THROUGH FRANCHISEES (individual entrepreneurs own the business and operate it under an agreement with McDonald’s).
International CompaniesBartlett-Ghoshal Classfication
• International business refers to business activities that straddle two or more countries. Businesses are increasingly looking beyond the bounds of their home country for new opportunities.
• Book: Managing Across Borders: The Transnational Solution (1989)
• Identified 3 types of Cross-national companies• MNCs: such as Unilever, that are conglomerates (businesses
involved in many areas): responsiveness and flexibility• Global Companies: Centralized decision making and largely
standardized products, like Ford: Efficiency• International Cos: Focusing upon joint development and
worldwide sharing of knowledge, like the IBM. Transfer of learning
BUSINESS BASICS
INTERNATIONALBUSINESS
MNCsLoose federationof enterprises:
National subsidiariessolve all operativeand some strategic
Taskse.g. Unilever
GlobalEnterprises
Tightly centralized,Subsidiaries only
As distribution centerse.g. Toyota
InternationalEnterprises
In between MNCsAnd Global
Enterprises e.g.IBM, Ericsson
BUSINESS BASICS: BUSINESS CLASSIFICATION• OWNERSHIP
o SOLE TRADER: Self-employed, unlimited liability: Franchise a less risky route to starting a business because the business can trade under an established brand name
o PARTNERSHIP: unlimited liabilityo Public Private partnership: Basically Financing arrangement: BOT and BOOT:
B’lore airport PPP, GMR groupo COMPANY: Share capital or equity, limited liability
PRIVATE Companies: Not allowed to offer shares to the public: Virgin group of companies
PUBLIC: allowed to offer shares to the general public, listed in stock exchanges
o STATE OWNED ENTERPRISES: Privatization, disinvestment• SIZE
o MICRO: 0-9 EMPLOYEESo SMALL: 10-49 EMPLOYEESo MEDIUM: 50-249 EMPLOYEESo LARGE: 250+ EMPLOYEESo SME: SMALL TO MEDIUM ENTERPRISES
EXAMPLE: PICSEL TECHNOLOGIES: SMALL SCREEN DEVICES
BUSINESS BASICS: BUSINESS ORGANISATION
• BUSINESS ORGANISATION REFERS TO DESIGN OF ORGANISATION THROUGH WHICH ENTERPRISE IS ADMINISTERED.o FUNCTIONAL APPROACH WHERE
BUSINESS FUNCTIONS DETERMINE ORGANISATIONAL STRUCTURE
o DIVISIONAL STRUCTURE WHERE BUSINESS IS ORGANISED INTO BUSINESS UNITS OR DIVISIONS BASED ON PRODUCT, BRAND OR GEOGRAPHICAL REGION
o HOLDING COMPANIES
MULTIDIVISION APPROACH
BOARD OFDIRECTORS
DIVISIONPRODUCT OR
REGION
DIVISIONPRODUCT OR
REGION
DIVISIONPRODUCT OR
REGION
CEO
GENERAL OFFICE
DEPARTMENTSALES
DEPARTMENTMANUFACTURING
DEPARTMENTPURCHASING
DEPARTMENTFINANCE
FUNCTIONAL APPROACHBOARD OF DIRECTORS
R & D PRODUCTIONPRODUCT
DESIGN
CEO
MARKETING HRM FINANCE
RECRUITMENT TRAINING
EMPLOYEE RELATIONS
HOLDING COMPANY
• The holding company may also be said to be based on divisions, in that a parent company is the owner of a diverse array of subsidiary companies. However, unlike the multidivisional companies described above, the holding company exerts little control over the separate companies and provides few general functions for the group as a whole. The companies within the group operate, in effect, as independent organizations.
BUSINESS BASICSORGANISATION AND CHANGE
• ORGANISATIONAL CULTURE: No two organizations, even two with similar outward
structures, will be run in exactly the same way. Differences in behaviour, values and overall atmosphere are part of a business’s organizational culture
Ingrained ways of doing things• TAKEOVER OR MERGER AS CATALYSTS TO CHANGE IN
CULTURE• STRATEGY: PLAN OF ACTION TO ACHIEVE CERTAIN
OBJECTIVES• DELIBERATE AND EMERGENT STRATEGY:
Strategy is often a combination of ‘deliberate’ strategy, that which has been originally intended, and ‘emergent’ strategy, which has arisen from
events not part of the intended strategy.• STRATEGIC THINKING
BUSINESS BASICS:HIERARCHIES AND NETWORKS• HIERARCHIES AND BUREAUCRACY-
INFLEXIBLE AND UNRESPONSIVE• DELAYERING OR FLAT STRUCTURE:
EMPOWERMENT• EMPOWERMENT TIES IN WITH NETWORK
ORGANISATION.• NETWORK ORGANISATION: IT IS THE
INFORMAL OVERLAY THAT CUTS ACROSS WHATEVER FORMAL STRUCTURE IS CHOOSEN.
• NETWORKS RELY ON SOCIAL CAPITAL, THAT IS, SHARED NORMS AND RELATIONSHIPS OF TRUST, RATHER THAN ANY FORMAL AUTHORITY STRUCTURES.
CORPORATE GOVERNANCE
• IT REFERS TO STRUCTURE AND PROCESSES BY WHICH ULTIMATE CONTROL AND DECISION MAKING IN THE COMPANY ARE EXERCISED
• AGENCY THEORY• SEPARATION OF OWNERSHIP AND
MANAGEMENT
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
REMUNERATION COMMITTEE
SHAREHOLDERS AGM EXECUTIVE ANDNON-EXECUTIVEDIRECTORS
AUDIT COMMITTEE
CEO
ENVIRONMENTAL SCANNING• INTERNAL ENVIRONMENT CHECKLIST FOR
PERFORMING STRENGTHS AND WEAKNESS ANALYSISo MARKETING
REPUTATION MARKET SHARE CUSTOMER SATISFACTION CUSTOMER RETENTION PRODUCT AND SERVICE QUALITY PRICING, DISTRIBUTION, SALES AND INNOVATION
EFFECTIVENESS GEOGRAPHICAL COVERAGE
o FINANCE COST/AVAILABILITY OF CAPITAL CASH FLOW (NET PROFIT + DEPRECIATION)
INTERNAL ENVIRONEMENT CHECKLIST CONTD..
• MANUFACTURINGo FACILITIESo ECONOMIES OF SCALEo CAPACITYo ABILITY TO PRODUCE ON TIMEo TECHNICAL AND MANUFACTURING SKILLS
• ORGANISATIONo VISIONARY AND CAPABLE LEAERSHIPo ENTERPRENEURIAL ORIENTATIONo FLEXIBLE AND RESPONSIVE ORGANISATIONo DEDICATED WORKFORCE
EXTERNAL ENVIRONMENT
• MICRO ENVIRONMENTo SUPPLIERS
VERTICAL VIS-S-VIS HORIZONTAL (MERGERS AND TAKEOVERS) INTEGRATION: outsourcing or in-house? High Inventory costs
o COMPETITORS: Competitor Array: Discretionary Income: brand competition and desire competition STRATEGY TO TAKE THEM ON: Case of Bharti and
Relianceo CUSTOMERS: Institutional or retail: Few or Many clients: IT
industry: Case of Tech Mahindra CREATE AND SUSTAIN
o INTERMEDIARIES: Those that help businesses in its activities: Vital links between company and final consumers MARKETING AND FINANCIAL: M&A: IPO: Rights Issue:
SUPPLIER
• Vertical integration is the degree to which a firm owns its upstream suppliers and its downstream buyers (growing raw materials, manufacturing, transporting, marketing, and/or retailing )
• BACKWARD INTEGRATION: Control of raw material suppliers• FORWARD INTEGRATION: Control of distribution centers and
retailers• HORIZONTAL INTEGRATION: Consolidation of many firms
engaged in manufacturing of same product.• Issue: In-house or outsourcing• High cost of inventory if supplier is unreliable
COMPETITOR ANALYSIS: Competitor Array
Success factors
Weighting Competitor 1 rating
Competitor 1 weighted
Competitor 2 rating
Competitor 2 weighted
Extensive distribution
.4 6 2.4 3 1.2
Customer Focus
.3 4 1.2 5 1.5
Economies of scale
.2 3 .6 3 .6
Product Innovation
.1 7 .7 4 .4
Total 1.0 20 4.9 15 3.7
Competitor Profiling
• Background o location of offices, plants, and online presences o history - key personalities, dates, events, and trends o ownership, corporate governance, and organizational structure
• Financials o P-E ratios, dividend policy, and profitability o various financial ratios, liquidity, and cash flow o Profit growth profile; method of growth (organic or acquisitive)
• Products. o products offered, depth and breadth of product line, and product portfolio
balance o new products developed, new product success rate, and R&D strengths o brands, strength of brand portfolio, brand loyalty and brand awareness o patents and licenses o quality control conformance o reverse engineering
Competitor Profiling
• Marketing o segments served, market shares, customer base, growth rate, and customer
loyalty o promotional mix, promotional budgets, advertising themes, ad agency used, sales
force success rate, online promotional strategy o distribution channels used (direct & indirect), exclusivity agreements, alliances,
and geographical coverage o pricing, discounts, and allowances
• Facilities o plant capacity, capacity utilization rate, age of plant, plant efficiency, capital
investment o location, shipping logistics, and product mix by plant
• Personnel o number of employees, key employees, and skill sets o strength of management, and management style o compensation, benefits, and employee morale & retention rates
• Corporate and marketing strategies o objectives, mission statement, growth plans, acquisitions, and divestitures o marketing strategies
Customer Analysis
• Create and Sustain• Types of customers
o Retail or Institutionalo Few or More
• Customer Focus Groupso Mechanism for gathering the voice of the customer through
a structured group interview Exploratory focus groups are used to discuss customer
needs, develop concepts for new products and/or evaluate new concepts/products
Experiential focus groups are used to observe customers using products (and learn from those observations) or to hear motivations for the purchase of a product.
Intermediaries
• Financial and Marketingo Those that help businesses in its activities: Vital
links between company and final consumerso A financial intermediary is an entity that
connects surplus and deficit agents. The classic example of a financial intermediary is a bank that transforms bank deposits into bank loans.
o Business organizations that expedite the distribution of goods and services from the producer to consumers
EXTERNAL MACRO ENVIRONMENT
• THE ECONOMYo GNP OR GDP PER CAPITA o GNP OR GDP GROWTHo UNEMPLOYMENT AND INFLATION
RATEo CONSUMER AND INVESTOR
CONFIDENCEo CURRENCY EXCHANGE RATESo TRADE BALANCEo BALANCE OF PAYMENTS
Components of Economic Environment• Existing structure of the economy in terms of relative role of
private and public sectors.• The rates of growth of GNP and per capita income at current
and constant prices• Rates of saving and investment• Volume of imports and exports of different items• Balance of payments and changes in foreign exchange
reserves• Agricultural and industrial production trends• Expansion of transportation and communication facilities• Money supply in the economy• Public debt (internal and external)• Planned outlay in private and public sectors
CURRENCY EXCHANGE RATE• NOMINAL EXCHANGE RATE
o PRICE OF ONE CURRENCY IN EXCHANE FOR OTHER DEVALUATION AND REVALUATION DEPRECIATION AND APPRECIATION SPOT RATES, FORWARD RATES AND FUTURES WHAT DETERMINES EXCHANGE RATES
PPP PORTFOLIO BALANCE
WHO DETERMINES EXCHANGE RATES MONETARY POLICY AND INTERVENTION EFFECTS OF EXCHANGE RATE MOVEMENTS
• EFFECTIVE EXCHANGE RATEo AVERAGE EXCHANGE RATE AGAINST A BASKET OF CURRENCIES LIKE THE
USD INDEX (EUR, JPY,GBP, CAD, CHF, SEK)• REAL EXCHANGE RATE
o IT MEASURES INTERNATIONAL COMPETITIVENESS IF PRICE GOES UP BY 4% IN GERMANY AND 6% IN US, THE US COMPETITIVENESS
FALLS BY 2%. HOWEVER IF OVER THE SAME PERIOD THE DOLLAR FELL 3%, OVERALL US COMPETITIVENESS HAS ACTUALLY IMPROVED BY 1%.
BALANCE OF PAYMENTS
• EXPORTS LESS IMPORTS OF PHYSICAL GOODS= MERCHANDISE BALANCE
• MERCHANDISE BALANCE+NET EXPORTS AND IMPORTS OF SERVICES=TRADE BALANCE
• TRADE BALANCE + NET CURRENT TRANSFER (WAGES+PROFITS+INTEREST+INTERNATIONAL AID)=CURRENT ACCOUNT BALANCE
• CURRENT A/C BALANCE +CAPITAL A/C BALANCE(NET PORTFOLIO INVESTMENT+FDI+EXTERNAL BORROWING) = BALANCE OF PAYMENTS
Balance of Payments
• IMPORTSo COMPARATIVE ADVANTAGEo VALUE AND VOLUMEo IMPORT PENETRATIONo IMPORT COMPOSITIONo COMPRESSIBILITYo IMPORT SOURCES
• EXPORTSo VALUE AND VOLUMEo EXPORT PENETRATIONo COMPOSITION AND DESTINATIONS
• TRADE BALANCE, MERCHANDISE TRADE BALANCEo ELIMINATING A TRADE DEFICIT
A CHANGE IN THE VOLUME OF TRADE A CHANGE IN RELATIVE PRICES THROUGH A CHANGE IN THE EXCHANGE RATE OR A
CHANGE IN DOMESTIC PRICES • CURRENT ACCOUNT BALANCE
o ACQUISITION OF NET FOREIGN ASSETS OR EXTERNAL DEBT GROWS TO TUNE OF CURRENT ACCOUNT DEFICIT
BALANCE OF PAYMENTS
• OFFICIAL RESERVESo GOLD AND FOREIGN CURRENCIES HELD BY THE
GOVERNMENTo INTERVENTION TO SMOOTHEN TEMPORARY BLIPS IN
EXCHANGE RATESo STERILISATION
• EXTERNAL DEBT, NET FOREIGN ASSETS o EXTERNAL DEBT AS % OF GDPo DEBT SERVICE RATIO
PAYMENT OF INTEREST PLUS PRINCIPAL AS % OF EXPORTS OF GOODS AND SERVICES
o NET FOREIGN ASSETS EXTERNAL DEBT ACQUISITION OF STOCKS OF ASSETS IN OTHER COUNTRIES,
LIKE INDUSTRIAL COUNTRIES AND OIL EXPORTERS
Consumer Confidence
• Degree of optimism on the state of the economy that consumers express through their activities of savings and spending .
• Started in 1967 and is benchmarked to 1985=100 • Monthly: Leading Indicator of economic trends.• survey consists of five questions to be answered in positive,
negative or neutral:o Current business conditions o Business conditions for the next six months o Current employment conditions o Employment conditions for the next six months o Total family income for the next six months
Investor Confidence Index
• It measures the attitude of investors to risk.• Index uses the principles of modern financial
theory to model the underlying behavior of global investors.
• It measures confidence by assessing the changes in investor holdings of equities.
• The more of their portfolio that institutional investors are willing to hold, the greater their risk appetite or confidence.
INFLATION
• Persistent rise in prices• Fall in value of money• Rise in money supply• Adaptive expectations:
EXTERNAL MACRO ENVIRONMENT
• GOVERNMENTo FORM OF GOVERNMENTo POLITICAL STABILITYo GOVERNMENT DEBTo BUDGET DEFICIT/SURPLUSo CORPORATE AND PERSONAL TAX
RATESo IMPORT TARIFFS AND QUOTASo RESTRICTIONS ON INTERNATIONAL
FINANCIAL FLOWSo MONETARY POLICY
PUBLIC DEBT
• India's public debt includes market borrowings, external debt and other liabilities like small savings and provident funds.
• Estimated public debt= Rs 34 lakh crore ( or Rs 11.5 trillion) as on end 2008-09.
• Total P D= $723.86 billion• Internal Debt=$225billion (31%)• OF THE RS 34 LAKH CRORE, 22.7 LAKH
CRORE ARE INTERNAL AND THE REST EXTERNAL DEBT.
• PER PERSON DEBT = Rs 30000/=
MONETARY POLICY
• REGULATION OF MONEY SUPPLY• Various measures of money supply like, M1 and M3,
o M1: CURRENCY (Notes and coins) + demand deposits or current a/c deposits) +commercial banks reserves with RBI: also called monetary base
o M3: M1+Time Deposits with Banks: Also called Broad Money• IMPACT ON COST AND AVAILABILITY OF CREDIT THROUGH
o REPO RATE: THE RATE AT WHICH THE CENTRAL BANK PROVIDES A SHORT-TERM LOAN (OVERNIGHT LOAN OR LOAN FOR A WEEK), IN RETURN FOR WHICH BANKS PLEDGE SECURITIES AS COLLATERAL (6% in oct 2010).
o REVERSE REPO RATE: THE RATE AT WHICH THE CENTRAL BANK BORROWS MONEY FROM THE MARKET FOR SHORT PERIODS.( 5%)
o CRR (6%)o SLR (25%)o BANK RATE OR DISCOUNT RATE: RATES AT WHICH THE CENTRAL
BANK PROVIDE MONEY TO COMMERCIAL BANKS TO HELP SMOOTH LONGER (SAY, WEEKLY) FINANCING NEEDS. (6 %)
• BOND YIELDS AND BOND PRICES:o Yield calculationso Yields and priceo Yield and economic cycle
INTERNATIONAL ENVIRONMENT• GLOBAL GROWTH• WTO
o PRINCIPLESo CASE FOR OPEN TRADE
THEORY OF ABSOLUTE AND COMPARATIVE ADVANTAGEo GATT TRADE ROUNDSo FARM SUBSIDIESo TARIFF BARRIERSo NON-TARIFF BARRIERSo TRADING BLOCKS
FTA CUSTOMS UNION COMMON MARKET ECONOMIC UNION
POLITICAL ENVIRONMENT
• The Constitution of the country• Prevailing political system• The degree of politicisation of business and economic issues• Dominant ideologies and values of major political parties• The nature and profile of political leadership and thinking of• political personalities• The level of political morality• Political institutions like the government and allied agencies• Political ideology and practices of the ruling party• The extent and nature of government intervention in business• The nature of relationship of our country with foreign countries
EXTERNAL MACRO ENVIRONMENT
• LEGALo MINIMUM WAGES LAWo ENVIRONMENTAL PROTECTION LAWSo WORKER SAFETY LAWSo COPYRIGHT AND PATENT LAWSo ANTI-MONOPOLY LAWo COMPETITION LAW
ENVIRONMENT PROTECTION LAWS• WATER (PREVENTION AND CONTROL OF POLLUTION) ACT 1974• AIR (PREVENTION AND CONTROL OF POLLUTION) ACT 1981• ENVIRONMENT PROTECTION ACT 1986• CENTRAL POLLUTION CONTROL BOARD MONITORS AIR
QUALITY AND WATER QUALITY UNDER NATIONAL AIR MONITORING PROGRAMME AND WATER MONITORNG PROGRAMME.
• 14 MAJOR RIVERS, 44 MEDIUM RIVERS AND 55 MINOR RIVERS: MAINLY RAINFED DURING MONSOONS, DRY FOR REST OF THE YEAR OFTEN CARRYING WASTEWATER DISCHARGES FROM INDUSTRIES AND CITIES ENDANGERING THE QUALITY OF SCARCE WATER RESOURCES
• AIR QUALITY MONITORING AS ASCERTAINED BY SUSPENDED PARTICULATE MATTER (SPM), CARBON MONOXIDE (CO), OZONE (O3), SULPHUR DIOXIDE (SO2), NITROGEN DIOXIDE (NO2)
OCCUPATIONAL HEALTH AND SAFETY (OH&S)
• CONSTITUTIONAL PROVISIONS UNDER ARTICLES 24, 39(e AND f) and 42• BIS APPROVED IS 18001:2000 OH&S MANAGEMENT SYSTEMS (OH&SMS)• THREE TYPES OF LAWS FOR OH&S
o STATUTES FOR SAFETY AT WORKPLACESo STATUTES FOR SAFETY OF SUBSTANCESo STATUTES FOR SAFETY OF ACTIVITIES
• AT PRESENT, SAFETY AND HEALTH STATUTES FOR REGULATING OH&S OF PERSONS AT WORK EXIST IN THE FOLLOWING FOUR SECTORSo MINESo FACTORIESo PORTSo CONSTRUCTION
• THE MAJOR LEGSLATIONS AREo THE FACTORIES ACT 1948o MINES ACT, 1952o DOCK WORKERS (SAFETY, HEALTH AND WELFARE) ACT, 1986o PLANTATION LABOUR ACT, 1951o EXPLOSIVES ACT 1884o PETROLEUM ACT 1954o INDIAN ELECTRICITY ACT 1910o INDIAN ATOMIC ENERGY ACT 1962
COPYRIGHT AND PATENT LAWS understanding WTO.pdf page 37
• COPYRIGHT IS THE LEGAL RIGHT OF CREATIVE ARTISTS OR PUBLISHERS TO CONTROL THE USE AND REPRODUCTION OF THEIR ORIGINAL WORKS LIKE COMPUTER PROGRAMS
• PATENT IS AN EXCLUSIVE RIGHT OFFICIALLY GRANTED BY A GOVERNMENT TO AN INVENTOR TO MAKE OR SELL AN INVENTION.
• TRIPS: TYPES OF INTELLECTUAL PROPERTYo COPYRIGHT AND RELATED RIGHTSo TRADEMARKS: Types of signso GEOGRAPHICAL INDICATIONS: A place name identifies
the product like Champagne, Scotch.o INDUSTRIAL DESIGNSo PATENTS for both products and processeso LAY-OUT DESIGNS OF INTEGRATED CIRCUITSo UNDISCLOSED INFORMATION INCLUDING TRADE
SECRETS
ANTI-MONOPOLY LAW
• MRTPC IS AN IMPORTANT ORGAN OF THE DEPARTMENT OF COMPANY AFFAIRS
• MRTPC ESTABLISHED U/S 5 OF THE MRTPA, 1969
• FUNCTION: ENQUIRE INTO AND TAKE APPROPRIATE ACTION AGAINST UNFAIR TRADE PRACTICES AND RESTRICTIVE TRADE PRACTICES.
• IN REGARD TO MONOPOLISTIC TRADE PRACTICES, THE COMMISSION CAN ENQUIRE INTO SUCH PRACTICES UPON A REFERENCE MADE TO IT BY THE CENTRAL GOVERNMENT OR UPON ITS OWN KNOWLEDGE AND SUBMIT THE FINDINGS TO THE CENTRAL GOVERNMENT FOR FURTHER ACTION. EXAMPLES: JET ARWAIYS AND KINGFISHER AIRLINES
COMPETITION LAWS
• CCI• PROHIBITION OF ANTI-COMPETITIVE AGREEMENTS:
HORIZONTAL AND VERTICAL INTEGRATION. HORIZONTAL AGREMMENT AMONG EXPORTERS EXEMPTED
• PROHIBITION OF DOMINANCE: Acquisition of significant market power, which enables the enterprise to increase the price or limit production independently of competitors as well as customers. Dominance is not treated bad per se; it is the abuse of dominant position which is prohibited. Predatory pricing is one of the abuses which can be established against a dominant player if the selling price is below cost and there is intent to oust competitors.
• REGULATION OF COMBINATIONS: Combinations include mergers, amalgamations and acquisition of control, shares, voting rights or assets. Combinations are classified into horizontal, vertical and conglomerate combinations (Merger of unrelated business activities for synergy, cross selling and increasing market share). If a proposed combination causes or is likely to cause appreciable adverse effect on competition, it cannot be permitted to take effect.
EXTERNAL MACRO ENVIRONMENT
• TECHNOLOGYo EFFICIENCY OF INFRASTRUCTURE INCLUING ROADS,
PORTS, AIRPORTS, ROLLING STOCK (railroad and road vehicles, wagons, locomotives) HOSPITALS,EDUCATION, HEALTHCARE, COMMUNICATION
o INDUSTRIAL PRODUCTIVITYo COST AND AVAILABILITY OF
ELECTRICAL POWERo STATE OF INFORMATION
TECHNOLOGY
SOCIAL ENVIRONMENT
• Attitudes towards product innovations, lifestyles, occupational• distribution and consumer preferences• Concern with quality of life• Life expectancy• Expectations from the workforce• Shifts in the presence of women in the workforce• Birth and death rates• Population shifts• Educational system and literacy rates• Consumption habits• Composition of family
EXTERNAL MACRO ENVIRONMENT• SOCIO-CULTURAL
o ATTITUDE TOWARDS MATERIALISM, CAPITALISM, FREE ENTERPRISE,
INIVIDUALISM, CONSUMERISM, IMPORTANCE OF WORK.
o DEMOGRAPHIC FACTORS SUCH AS POPULATION SIZE AND DISTRIBUTION EDUCATION AND INCOME LEVELS RELIGIOUS AFFILIATIONS ETHNIC ORIGINS CULTURAL STRUCTURES INCLUDING DIET AND
NUTRITION AND HOUSING CONDITIONS
SOCIO-CULTURAL FACTORS• MATERIALISM: Devotion to material wealth and
possessions at the expense of spiritual or intellectual values: Focus on possessions.
• CAPITALISM: An economic system based on the private ownership of the means of production and distribution of goods, characterized by a free competitive market and motivation by profit.
• FREE ENTERPRISE: the doctrine or practice of giving companies the freedom to trade and make a profit without government control.
SOCIO-CULTURAL FACTORS• CONSUMERISM: An attitude that values the
acquisition of material goods: The belief that the buying and selling of large quantities of consumer goods is beneficial to an economy or a sign of economic strength.
• INDIVIDUALISM: The pursuit of personal happiness and independence rather than collective goals or interests: The belief that society exists for the benefit of individual people, who must not be constrained by government interventions or made subordinate to collective interests.
• DIGNITY OF LABOUR: Respect for all kinds of labor
DEMOGRAPHIC FACTORS
• Population size and distribution: Birth Rate, Death Rate, Infant Mortality Rate, Child Mortality Rate, Female Fertility rate, Distribution by age, residence, occupation, Dependency ratio
• Education and Income Levels: Middle Class: Companies that fail to understand the unique desires and tastes of the new Indian consumer will miss out on a half-billion-strong market that along with China ranks as one of the most important growth opportunities of the next two decades.
• INCOME GROUPS• DEPRIVED: INCOME<RS 90000/PER ANNUM/PER FAMILY (CONSISTING
OF 5 MEMBERS) (54% OF THE POPULATION)• ASPIRERS: RS 90000-200000/PER ANNUM/PER FAMILY (CONSISTING
OF 5 MEMBERS) (CURRENTLY FORMS 40 PERCENT OF THE POPULATION)
• SEEKERS: Rs 200000-500000 /PER ANNUM/PER FAMILY (CONSISTING OF 5 MEMBERS)
• STRIVERS: Rs 500000-1000000 /PER ANNUM/PER FAMILY (CONSISTING OF 5 MEMBERS)
• MIDDLE CLASS ARE SEEKERS AND STRIVERS: PURCHASING POWER PARITY WOULD PUT THEM INTO MORE LIKE $23000-$118000 WHICH IS MIDDLE CLASS BY MOST DEVELOPED COUNTRY STANDARDS. Currently number 50 million (4.5 % of population) AND ARE LIKELY TO INCREASE TO 583 MILLON BY 2025.
• GLOBAL INDIANS: INCOME>1000000 (NUMBERS ABOUT 1.2 MILLION