Unit 2

Meghe Group of Institutions
Department
for
Technology Enhanced Learning
1

MBA Department
II SEM
BUSINESS ENVIRONMENT
UNIT- II
Globalisation and Business
Environment
2
DTEL

Syllabus : Unit 2
• Globalization-Meaning, Scope, Phases,
Indicators, Economic reforms and competitive
environment; Business Environment and
• Sector wise analysis-Telecom, Information
Technology, Insurance, Banking Finance, FMCG
Textiles, Agriculture, Automobile, Chemical ,
Pharmaceuticals
– ( Market Structure,International Scenario, Recent
Developments and SWOC Analysis)
3

Learning Objective
• To understand Globalisation
• Sectoral Analysis vis-a-vis competitive
environment
4

Globalisation: Meaning
• Process of transition from a closed
economy to an open economy.
• It is a process of global integration of
– Products
– Technology
– Labour
– Investment
– Information
– Culture(many times , not always)
5

• It tends to narrow down International
differences in
– Prices
– Wage Rates
– Interest Rates
6

• Globalisation basically takes place through
– International Trade
– Foreign Investment
– Joint Ventures
– International Licensing
– Franchising and Sub-Contracting
– Strategic Alliances
7

Globalisation Indicators
• Economic
– Exports + imports of goods & services,
– % of world GDP
• Financial
– Daily currency exchange turnover, % of world GDP
– Cross-border bank loan stock, % of world GDP
– Cross-border bank claims stock, % of world GDP
• Internet
– User %, World Population
– Developed Countries, % of Population
– Developing Countries, % of Population
8

• Demographics
– Stock of International Migrants,
– % of World Population
– Refugee Population, % of World Population
9

• Political
– International organizations number
– Intergovernmental and Nongovernmental
• Social and Culture
– International Tourists;% of world population
– International calls ; minutes/capita
10

Sectoral Analysis :Telecom
• The telecom industry is one of the fastest growing
industries in India.
• India has nearly 200 million telephone lines making
it the third largest network in the world after China
and USA.
• With a growth rate of 45%, Indian telecom industry
has the highest growth rate in the world.
• History of Indian Telecommunications started in
1851 when the first operational land lines were laid
by the government near Calcutta (seat of British
power).
11

• Telephone services were introduced in India in
1881.
• In 1883 telephone services were merged with the
postal system.
• Indian Radio Telegraph Company (IRT) was formed
in 1923. After independence in 1947, all the foreign
telecommunication companies were nationalized
to form the Posts, Telephone and Telegraph (PTT), a
monopoly run by the government's Ministry of
Communications. Telecom sector was considered
as a strategic service and the government
considered it best to bring under state's control.
12

• The first wind of reforms in telecommunications
sector began to flow in 1980s when the private
sector was allowed in telecommunications
equipment manufacturing.
• In 1985, Department of Telecommunications
(DOT) was established.
• It was an exclusive provider of domestic and
long-distance service that would be its own
regulator (separate from the postal system).
13

• In 1986, two wholly government-owned
companies were created: the Videsh
Sanchar Nigam Limited (VSNL) for
international telecommunications and
Mahanagar Telephone Nigam Limited
(MTNL) for service in metropolitan areas.
14

• In 1990s, telecommunications sector benefited
from the general opening up of the economy.
Also, examples of telecom revolution in many
other countries, which resulted in better quality
of service and lower tariffs, led Indian policy
makers to initiate a change process finally
resulting in opening up of telecom services
sector for the private sector.
• National Telecom Policy (NTP) 1994 was the first
attempt to give a comprehensive roadmap for
the Indian telecommunications sector.
15

• In 1997, Telecom Regulatory Authority of
India (TRAI) was created. TRAI was formed
to act as a regulator to facilitate the growth
of the telecom sector. New National
Telecom Policy was adopted in 1999 and
cellular services were also launched in the
same year.
16

• Telecommunication sector in India can be
divided into two segments:
– Fixed Service Provider (FSPs)
– Cellular Services.
17

• Fixed line services consist of basic services, national
or domestic long distance and international long
distance services.
• The state operators (BSNL and MTNL), account for
almost 90 per cent of revenues from basic services.
18

• Private sector services are presently available in
selective urban areas, and collectively account for
less than 5 per cent of subscriptions.
• However, private services focus on the
business/corporate sector, and offer reliable, high-
end services, such as leased lines, ISDN, closed user
group and videoconferencing.
19

• Cellular services can be further divided into two
categories:
– Global System for Mobile Communications (GSM)
– Code Division Multiple Access (CDMA).
• The GSM sector is dominated by Airtel,
Vodafone, and Idea Cellular, while the CDMA
sector is dominated by Reliance and Tata
Indicom.
• Opening up of international and domestic long
distance telephony services are the major
growth drivers for cellular industry.
20

• Cellular operators get substantial revenue
from these services, and compensate them
for reduction in tariffs on airtime, which
along with rental was the main source of
revenue. The reduction in tariffs for
airtime, national long
distance, international long distance, and
handset prices has driven demand.
21

Telecom Sector :Restraints
• Sluggish pace of reform process.
• Lack of infrastructure in semi-rural and rural
areas, which makes it difficult to make
inroads into this market segment as service
providers have to incur a huge initial fixed
cost.
• Limited spectrum availability.
22

Telecom Sector : SWOC Analysis
• S(strengths):
– Huge customer base
• W(weaknesses)
– Lack of infrastructure in semi-urban and rural areas
• O(opportunities)
– Value added Services
• C(challenges)
– Limited spectrum availability
23

Sectoral Analysis :IT
• Information Technology (IT) industry in India is
one of the fastest growing industries.
• Indian IT industry has built up valuable brand
equity for itself in the global markets.
• IT industry in India comprises of
– Software industry
– Information technology enabled services (ITES)
– Business Process Outsourcing (BPO) industry.
India is considered as a pioneer in software
development and a favorite destination for IT-enabled
services.
24

• The origin of IT industry in India can be traced
to 1974, when the mainframe manufacturer,
Burroughs, asked its India sales agent, Tata
Consultancy Services (TCS), to export
programmers for installing system software for
a U.S. client.
• The IT industry originated under unfavorable
conditions.
• Local markets were absent and government
policy toward private enterprise was hostile.
25

• The industry was begun by Bombay-based
conglomerates which entered the business
by supplying programmers to global IT
firms located overseas.
26

• During that time Indian economy was state-
controlled and the state remained hostile to
the software industry through the 1970s.
• Import tariffs were high
– 135% on hardware
– 100% on software
• Software was not considered an "industry",
so that exporters were ineligible for bank
finance.
27

• Government policy towards IT sector changed
when Rajiv Gandhi became Prime Minister in 1984.
• New Computer Policy (NCP-1984) consisted of
– a package of reduced import tariffs on hardware and
software (reduced to 60%),
– recognition of software exports as a "delicensed
industry", i.e., henceforth eligible for bank finance and
freed from license-permit raj
– permission for foreign firms to set up wholly-
owned, export-dedicated units and a project to set up a
chain of software parks that would offer infrastructure at
below-market costs.
28

• These policies laid the foundation for the
development of a world class IT industry in
India.
• Today, Indian IT companies such as
– Tata Consultancy Services (TCS),
– Wipro,
– Infosys,
– HCL
et al are renowned in the global market for their IT
prowess.
29

IT: SWOC Analysis
• S:
– Indian Education System
– High number of English speaking people
• W:
– Clustered growth
• O:
– G2G and G2C services
• C:
– Absence of Generic Software
30

Sectoral Analysis :Insurance
• Insurance sector in India is one of the booming
sectors of the economy and is growing at the rate
of 15-20 per cent annum.
• Together with banking services, it contributes to
about 7 per cent to the country's GDP.
• Insurance is a federal subject in India and Insurance
industry in India is governed by Insurance Act,
1938, the Life Insurance Corporation Act, 1956 and
General Insurance Business (Nationalisation) Act,
1972, Insurance Regulatory and Development
Authority (IRDA) Act, 1999 and other related Acts.
31

• The origin of life insurance in India can be
traced back to 1818 with the establishment
of the Oriental Life Insurance Company in
Calcutta. It was conceived as a means to
provide for English Widows.
• In those days a higher premium was
charged for Indian lives than the non-Indian
lives as Indian lives were considered riskier
for coverage.
32

• The Bombay Mutual Life Insurance Society
that started its business in 1870 was the
first company to charge same premium for
both Indian and non-Indian lives.
• In 1912, insurance regulation formally
began with the passing of Life Insurance
Companies Act and the Provident Fund Act.
33

• By 1938, there were 176 insurance
companies in India. But a number of frauds
during 1920s and 1930s tainted the image
of insurance industry in India. In 1938, the
first comprehensive legislation regarding
insurance was introduced with the passing
of Insurance Act of 1938 that provided
strict State Control over insurance business.
34

• Insurance sector in India grew at a faster
pace after independence. In 1956,
Government of India brought together 245
Indian and foreign insurers and provident
societies under one nationalised monopoly
corporation and formed Life Insurance
Corporation (LIC) by an Act of Parliament,
viz. LIC Act, 1956, with a capital
contribution of Rs.5 crore.
35

• The (non-life) insurance business/general
insurance remained with the private sector till
1972.
• There were 107 private companies involved in
the business of general operations and their
operations were restricted to organized trade
and industry in large cities.
• The General Insurance Business
(Nationalisation) Act, 1972 nationalised the
general insurance business in India with effect
from January 1, 1973.
36

• The 107 private insurance companies were
amalgamated and grouped into four
companies:
– National Insurance Company,
– New India Assurance Company,
– Oriental Insurance Company and
– United India Insurance Company.
• These were subsidiaries of the General
Insurance Company (GIC).
37

RN Malhotra Committee
• In 1993, the first step towards insurance
sector reforms was initiated with the
formation of Malhotra Committee, headed
by former Finance Secretary and RBI
Governor R.N. Malhotra. The committee
was formed to evaluate the Indian
insurance industry and recommend its
future direction with the objective of
complementing the reforms initiated in the
financial sector. 38

Key Recommendations
• Structure
– Government stake in the insurance Companies to
be brought down to 50%.
– Government should take over the holdings of GIC
and its subsidiaries so that these subsidiaries can
act as independent corporations.
– All the insurance companies should be given
greater freedom to operate.
39

Key Recommendations
• Competition
– Private Companies with a minimum paid up capital of
Rs.1billion should be allowed to enter the industry.
– No Company should deal in both Life and General
Insurance through a single Entity.
– Foreign companies may be allowed to enter the
industry in collaboration with the domestic
companies.
– Postal Life Insurance should be allowed to operate in
the rural market.
40

Key Recommendations
• Regulatory Body
– The Insurance Act should be changed.
– An Insurance Regulatory body should be set up.
– Controller of Insurance should be made
independent.
41

Key Recommendations
• Investments
– Mandatory Investments of LIC Life Fund in government
securities to be reduced from 75% to 50%.
– GIC and its subsidiaries are not to hold more than 5% in
any company.
• Insurance sector in India was liberalized in March
2000 with the passage of the Insurance Regulatory
and Development Authority (IRDA) Bill, lifting all
entry restrictions for private players and allowing
foreign players to enter the market with some
limits on direct foreign ownership.
42

Insurance: SWOC Analysis
• S:
• W:
• O:
• C:
•Assignment.
• Visit http://www.irda.gov.in
43

Sectoral Analysis :Textiles
• Textile Industry in India is the second largest
employment generator after agriculture.
• It holds significant status in India as it provides
one of the most fundamental necessities of the
people.
• Textile industry was one of the earliest
industries to come into existence in India and it
accounts for more than 30% of the total
exports. In fact Indian textile industry is the
second largest in the world, second only to
China.
44

• Textile Industry is unique in the terms that it is
an independent industry, from the basic
requirement of raw materials to the final
products, with huge value-addition at every
stage of processing.
• Textile industry in India has vast potential for
creation of employment opportunities in the
agricultural, industrial, organised and
decentralised sectors & rural and urban areas,
particularly for women and the disadvantaged.
45

• Indian textile industry is constituted of the
following segments:
– Readymade Garments
– Cotton Textiles including Handlooms
– Man-made Textiles
– Silk Textiles
– Woolen Textiles
– Handicrafts
– Coir
– Jute
46

• Till the year 1985, development of textile
sector in India took place in terms of
general policies.
• In 1985, for the first time the importance of
textile sector was recognized and a
separate policy statement was announced
with regard to development of textile
sector.
47

• In the year 2000, National Textile Policy was announced.
• Its main objective was:
– to provide cloth of acceptable quality at reasonable prices for
the vast majority of the population of the country, to
increasingly contribute to the provision of sustainable
employment and the economic growth of the nation; and to
compete with confidence for an increasing share of the global
market.
• The policy also aimed at achieving the target of textile
and apparel exports of US $ 50 billion by 2010 of which
the share of garments will be US $ 25 billion.
48

Strengths of Indian Textile Industry
• India has rich resources of raw materials of textile industry. It
is one of the largest producers of cotton in the world and is
also rich in resources of fibers like polyester, silk, viscose etc.
• India is rich in highly trained manpower. The country has a
huge advantage due to lower wage rates. Because of low
labor rates the manufacturing cost in textile automatically
comes down to very reasonable rates.
• India is highly competitive in spinning sector and has presence
in almost all processes of the value chain.
• Indian garment industry is very diverse in size, manufacturing
facility, type of apparel produced, quantity and quality of
output, cost, requirement for fabric etc. It comprises suppliers
of ready-made garments for both, domestic or export
markets.
49

Weaknesses of Indian Textile Industry
• Indian textile industry is highly fragmented
in industry structure, and is led by small
scale companies.
• The reservation of production for very small
companies that was imposed with the
intention to help out small scale companies
across the country, led substantial
fragmentation that distorted the
competitiveness of industry.
50

Weaknesses of Indian Textile Industry
• Smaller companies do not have the fiscal
resources to enhance technology or invest in
the high-end engineering of processes. Hence
they lose in productivity.
• Indian labour laws are relatively unfavorable to
the trades and there is an urgent need for
labour reforms in India.
• India seriously lacks in trade pact memberships,
which leads to restricted access to the other
major markets.
51

Opportunities and Challenges
for Indian Textile Industry
• The outlook for textile industry in India is very
optimistic.
• It is expected that Indian textile industry would
continue to grow at an impressive rate.
• Textile industry is being modernized by an
exclusive scheme, which has set aside $5bn for
investment in improvisation of machinery.
• India can also grab opportunities in the export
market. The textile industry is anticipated to
generate 12mn new jobs in various sectors.
52

Sectoral Analysis :Agriculture
• Agriculture in India is one of the most
important sectors of its economy.
• It is the means of livelihood of almost two
thirds of the work force in the country and
according to the economic data for the
financial year 2006-07, agriculture accounts
for 18% of India's GDP.
• About 43 % of India's geographical area is
used for agricultural activity.
53

• Though the share of Indian agriculture in
the GDP has steadily declined, it is still the
single largest contributor to the GDP and
plays a vital role in the overall socio-
economic development of India.
54

• One of the biggest success stories of independent India is
the rapid strides made in the field of agriculture.
• From a nation dependent on food imports to feed its
population, India today is not only self-sufficient in grain
production but also has substantial reserves.
• Dependence of India on agricultural imports and the
crises of food shortage encountered in 1960s convinced
planners that India's growing population, as well as
concerns about national independence, security, and
political stability, required self-sufficiency in food
production.
55

• This perception led to a program of agricultural
improvement called the Green Revolution.
• It involved
– bringing additional area under cultivation
– extension of irrigation facilities
– use of improved high-yielding variety of seeds
– better techniques evolved through agricultural
research
– water management
– plant protection through judicious use of fertilizers,
pesticides and cropping practices.
56

• All these measures had a salutary effect and
the production of wheat and rice witnessed
quantum leap.
57

• To carry improved technologies to farmers and to
replicate the success achieved in the production of wheat
and rice a National Pulse Development Programme,
covering 13 states, was launched in 1986.
• Similarly, a Technology Mission on Oilseeds was launched
in 1986 to increase production of oilseeds in the country
and attain self-sufficiency.
• Pulses were brought under the Technology Mission in
1990.
• After the setting up of the Technology Mission, there has
been consistent improvement in the production of
oilseeds.
58

• A new seeds policy has been adopted to
provide access to high-quality seeds and plant
material for vegetables, fruit, flowers, oilseeds
and pulses, without in any way compromising
quarantine conditions.
• To give fillip to the agriculture and make it more
profitable, Ministry of Food Processing
Industries was set up in July 1988.
• Government has also taken initiatives to
encourage private sector investment in the food
processing industry.
59

Agriculture: SWOC Analysis
• S:
– Growing rate of irrigated area
– HYV seeds
– Increasing access to institutional finances
• W:
– Heavy dependence on monsoons
– Unbalanced fertilizer use
60

Agriculture: SWOC Analysis
• O:
– water management, rain water harvesting and
watershed development
– Diversifying into high value outputs fruits, vegetables,
flowers, herbs and spices, medicinal plants, bamboo,
bio-diesel, but with adequate measures to ensure
food security
• C:
– Reclaiming degraded land and focusing on soil quality
– Bridging the knowledge gap through effective
extension services
61

Sectoral Analysis : Automobile
• The automobile industry comprises of:
– Heavy vehicles
• (trucks, buses, tempos, tractors)
– Passenger cars
– Two-wheelers
– Ancillary industries
62

Major Characteristics
• Second largest two-wheeler market in the
world.
• Fourth largest commercial vehicle market in the
world.
• 11th largest passenger car market in the world
• Expected to become the world's third largest
automobile market by 2030, behind only China
and the US.
63

Automobile : SWOC Analysis
• S:
– Rapid economic growth
– Higher disposable income of population
• W:
– Acute competition
– Innovation ; R & D
• O:
– Become a outsourcing hub for worldwide automobile
companies
• C:
– Rising prices of steel
– Labour problems
64

Sectoral Analysis :Chemical
• A key constituent of the Indian economy that
accounts for about five percent of the GDP.
• The Indian chemical industry has vital associations
with several other industries such as
– Automotives
– Consumer durables
– Food processing
– Iron and steel
– Textiles
– Paper
– Engineering
65

• The industry is a multi-product and multi-
faceted one that comprises
– basic chemicals
– pharmaceuticals
– Petrochemicals
– specialty chemicals
– agrochemicals
– biotechnology
66

• Within the sub segments, the
petrochemicals industry is growing the
fastest, with a rate of around 15 percent
annually.
67

• http://planningcommission.nic.in/aboutus/
committee/wrkgrp12/wg_chem0203.pdf
• Please refer above mentioned URL for
detailed information and make a SWOC
analysis.
68

Sectoral Analysis :Pharmaceutical
• Indian Pharma Industry is playing a key role in
promoting and sustaining development in the
vital field of medicines.
• Around 70% of the country's demand for
– bulk drugs
– drug intermediates
– pharmaceutical formulations
– Chemicals
– tablets, capsules,
– orals and vaccines
is met by Indian pharmaceutical industry.
69

• Indian Pharmaceutical sector is highly
fragmented with more than 20,000
registered units and is very top heavy.
• The leading 250 pharmaceutical companies
control 70% of the market with market
leader holding nearly 7% of the market
share.
• There are also 5 Central Public Sector Units
that manufacture drugs.
70

• These units produce complete range of
pharmaceuticals, which include medicines
ready for consumption by patients and about
350 bulk drugs, i.e., chemicals having
therapeutic value and used for production of
pharmaceutical formulations.
• India is largely self-sufficient in case of
formulations. More than 85% of the
formulations produced in the country are sold
in the domestic market.
71

• Some life saving, new generation under-
patent formulations are imported, by
MNCs, which they market in India.
• Over 60% of India's bulk drug production is
exported. The balance is sold locally to
other formulators.
72

• Pharmaceutical Industry in India has been
de-licensed and industrial licensing for most
of the drugs and pharmaceutical products
has been done away with.
• Manufacturers are now free to produce any
drug duly approved by the Drug Control
Authority.
73

• Indian pharmaceutical industry got a major
boost with the signing of General
Agreement on Tariffs and Trade in January
2005 with which India began recognising
global patents.
• After recognizing the global patent regime
the Indian pharma market became a sought
after destination for foreign players.
74

Pharmaceutical: SWOC Analysis
• S:
– Holds major share in worlds contract research
business
– Huge cost advantage over clinical trials
• W:
– Less emphasis on development of cost effective
and generic drugs
75

Pharmaceutical: SWOC Analysis
• O:
– Acquiring global footprint by way of mergers and
acquisitions.
• Recently Ranbaxy acquired Romania’s Terapia
• Dr.Reddy’s Lab acquired German drug maker
Betapharm
• C:
– Obtaining patents
– Successfully defending pending legislations in
different courts of world.
76

SUMMARY
We have taken a birds eye review for
understanding the process of globalisation.
We also saw different sectors and nuances
their nitty gritty.
Also we learnt the process of SWOC
analysis and difference between SWOC and
SWOT analysis.
77

Citations/References
• Business Environment.
• AC Fernando (1st Ed; Pearson Publishers)
• www.indiabudget.nic.in
• www.planningcommission.nic.in
• www.irda.gov.in
• www.trai.gov.in
UNIT I 78

ASSIGNMENT
• Banking and Finance
• FMCG
Why these two as assignment?
– Because two are most diversified sectors and
touches our daily life ;also easy to gather
information
– You may form suitable groups and the information
can be shared and synergy of understanding be
achieved.
79

Unit 2

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Similar a Unit 2

Similar a Unit 2 (20)

Último

Último (20)

Unit 2