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BUSINESS POLICY AND ENVIRONMENT

MODULE 1: INTRODUCTION:

MODULE 2: BUSINESS ENVIRONMENT

BUSINESS

MEANING OF BUSINESS:

Business refers to the economic activities concerned with the production and sale

of goods and services for the purpose of earning profit. Trading, manufacturing, mining,

transportation, banking, etc. are the example of business activities related to industry

and commerce.

DEFINITION OF BUSINESS:

According to Prof. R N Owens, “Business is an enterprise engaged in the

production and distribution of goods for sale in a market or rendering of services for a

price.”

From the above definition it is clear that business refers to all those economic

activities which are concerned with the production or purchases of goods and services

for the purpose of sale at a profit.

CHARACTERISTICS OF BUSINESS:

Economic activity

Size of operation is large

Global market leader

Technology oriented

Government control

Quality of goods and services

Possibility of loss

Profit motive

BUSINESS OBJECTIVES:

It is, generally, believed that business is carried on only for profit. It is true to

some extent. But earning profit cannot be the sole objectives of a truly successful

business.

In the words of Urwick, “earning profit cannot be the objectives of a business

any more than eating is the objectives living.”

According to this statement, as man is not living for eating, but is eating for

living, every business must earn profit, but making profit is not the only objectives of a

business.

To conclude, earning of profit is only one of the objectives of business. In fact, a

service to the community is the real objectives of business. It cannot ignore the society

in which it operates.

The objectives of modern business may be broadly classified as:

1. Economic objectives

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2. Social objectives

1. Economic objectives: Business is basically an economic activity. So the main

economic objectives of a modern business are:

a. Earning of adequate profit

b. Creation of customer

c. Optimum utilization of resources

d. Innovation or research and development

a. Earning of adequate profit:

In the words of Peter F. Drucker, “The problem of any business is not the

maximization of profit but the achievement of sufficient profit to cover the

risks of economic activity and thus to avoid the loss”. Thus, the profit of

any business must be reasonable. It must be sufficient to enable the

business to cover its costs and to stay in the business.

b. Creation of customer:

Business activity of an enterprise can be sustained only if there are

enough customers to buy the product and services offered by the

enterprise. Without a body of customers, a business enterprise cannot

survive. Thus, creation of customers is one of the economic objectives of

a business. A business can create customers by supplying the goods and

services which the customers want. Through market research, a business

can understand what the customers want.

c. Optimum utilization of resources:

The resources available with the business are limited. That means, there

should be optimum utilization of resources. Optimum utilization of

resources implies the following:

I. The resources should not remain idle.

II. At the same time, there should not be shortage of resources.

III. The resources should be put to proper uses.

d. Innovation or research and development:

It is quite essential for a growing business. Without innovation, an

enterprise cannot hope to cope with the changes in the society. Through

innovation, a business enterprise can increase its competitive strength and

improve its image in the minds of the customers. Innovation even helps

the customers in getting better and more economic goods and services.

Thus, innovation is an important feature and objectives of modern

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business. Research and development helps a concern to find out a new

market, a new product, a new method of production and distribution, etc.

2. Social objectives: The important social objectives of modern business are:

a. Supply of goods which society wants

b. Production according to national priorities

c. Providing employment

d. Paying fair wages and providing other benefits to the employees

e. Development of human resources

f. Regular and timely payment of taxes

g. Social welfare

h. Prevention of pollution

i. Achieving business Globalization

a. Supply of goods which society wants:

A business can enjoy the goodwill of the community only if it is alive it its

responsibility of supplying goods and services of standard quality which the community

wants. If a business fails to maintain a continuous supply of goods quality goods and

services, it will incur the wrath of the society. So, continuous supply of good quality

goods and services to the society is an important socio-economic objective of every

business.

b. Production according to national priorities:

Every business must produce and supply those goods which are needed for the

development of the country, say, production and supply of agricultural inputs like

seeds, fertilizers and pesticides required for agriculture, production of industrial

machinery required for industrial development, supply of cheaper varieties of essential

goods like cloth, edible oil, etc. for the poorer sections of the nation.

c. Providing employment:

One of the important social objectives of a business is to provide employment to

the people in the society.

d. Paying fair wages and providing other benefits to the employees:

It is also an important social objective of a business to provide to its employees

other benefits, such as housing, medical facilities, education, transport, etc.

Fair wages and other benefits will keep the employees contented, and will help

the enterprise to run the business smoothly and efficiently.

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e. Development of human resources:

One of the important social objectives of a business is the development of

human resources. Human resources can be developed by a business by giving

opportunities to its employees for developing new skill and abilities individual

development.

f. Regular and timely payment of taxes:

One of the social objectives and obligation of every business is to pay the taxes

to the government regularly and in time. This is necessary because the taxes paid by

the business to the government are spent by the government for society.

g. Social welfare:

One of the social objectives of a business unit is to participate actively in the

social welfare activities of the area in which it functions. A business unit can contribute

to the social welfare by running school land colleges, hospitals, maintaining public

gardens, etc.

h. Prevention of pollution:

With growth of industries, pollution has become a serious matter. Pollution

affects the environment and the health of human beings and even animals. So, one of

the social objectives and obligation of every business is to make efforts to prevent the

pollution of air and water.

i. Achieving business globalization:

Businesses want to grow their market share not only within their country’s

border, but also across the globe. You can measure globalization by identifying the

amount or number of export you make. You also can determine your globalization

standing by measuring the market value of your business that is operating in other

countries.

Business in a social system:

An organization of individuals into groups or structures that have different

functions, characteristics, origin or status. For example, a social system might

break a larger population down into family groups, races, religious affiliations,

gender, wealth categories and social classes.

These demographic distinctions can be used by the marketing departments of a

business to better target their promotional and sales efforts.

“Social businesses implement social technologies, strategies and processes that

span across their entire enterprise, creating and optimizing collaborative

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ecosystem of employees, customers, partners, suppliers, communities and

stakeholders in a safe and consistent way.”- Cheryl burgess

Business in a economic system:

The world’s economic system fall into one of four main categories: Traditional

economy, Market economy, Command economy and mixed economy. An economic

system must define what to produce, how to produce it and for whom to produced it.

1. Traditional economy:

A traditional economic system is one in which each new generation retains

the economic position of its parents and grandparents. Traditional decides what

an individual does for his living, so industry, clothing and shelter are the same as

in previous generations.

2. Market economy:

Market economies are based on consumers and their buying decisions

rather than under government control. Market trends and product popularity

generate what businesses produce. The producers choose how to make products

based on the most economically sound decision; that might means machine labor

to save costs or human labor for specific skills. The buyers decide who gets

which products by what they are willing to pay for what they want.

3. Command economy:

In a command economy, the government controls all economic activity.

One example of a command economy is communism. Command economies are

less flexible than market economies and react slower to changes in consumer

purchasing patterns and flection’s in supply and demand.

4. Mixed economy:

A mixed economy combines qualities of market and command systems

into one. In many countries where neither the government nor the business

entities can maintain the economy alone, both sectors are integral to economic

success.

BUSINESS ENVIRONMENT

INTRODUCTION:

ENVIRONMENT:

In the words of Dr. M.S. Swami Nathan (A winner of economics times standard

award) “A good environment is good business.”

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In simple words, environment refers to the surrounding in which man lives and

words. In other words it consists of number of factors, events, conditions and

influences arising from different sources.

BUSINESS ENVIRONMENT:

Business environment is the sum of all external and internal factors that

influence a business.

Keith Devis - “Business Environment is the aggregate of all conditions, events

and influences that surround and affect it.” All the activities of the business are

motivated by profit.

The definition of business environment means all of the internal and external

factors that affect how the company functions including employees, customers, and

management, supply and demand and business regulations.

Types of environment can be broadly divided into two types they are:-

a. Internal environment

b. External environment

a. Internal environment

The internal environment refers to all the factors within the organization which

the firms can exercise control over it. The can alter and modify such factors as its

personnel, physical, facilities, organizational resources are under its control.

Factors influence the internal environment

Objectives of the firm

Business policy

Management structure and nature

Professional skills

Human resources

Image and brand equity of company

Internal power relationship

Technological capabilities

Marketing resources

Vision, mission

Management control system

Strategy formulation and implementation

b. External environment

The external environment includes all the factors outside the organization. These

factors cannot be control by the firm. It is classified into two factors i.e.

Micro environment

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Macro environment

a. Micro environment:

Micro environment is also called task environment or operating environment. It is

not common for every business, its vary from one organization to another. These

factors which effect business are as follows:

a) Customers

b) Suppliers

c) Marketing intermediaries

d) Competitors

e) Public

a) Customers:

Customer is the king of a market.

A business firm manufactures products or provides services to meet the

needs of customers.

Satisfying the needs of customers is ultimate goal of any business.

Business can exist only when consumers buy its product or its services

b) Suppliers:

Suppliers are those who supply inputs like raw material, spares and

components to the firm.

Business should have sufficient stocks of raw materials for the day to day

functioning.

It is very risky to depend on a single supplier because a strike, lockout, or

other problems with the suppliers may seriously affect the company.

c) Marketing intermediaries:

Marketing intermediaries include middlemen such as agents who help the

company to find the customers.

He acts as bridge between sellers and ultimate customers.

d) Competitors:

Competitors directly or indirectly help in the growth of the companies.

Helps in undertaking research and development activities.

Competition is one of the important factors which influence the operations

and decisions of a firm. Competition may be three types.

Competition among the products manufactured by the same firm.

Competition among the firms manufacturing similar products.

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Competition that exists among firms manufacturing unrelated products.

e) Public:

The word public refers to people in general.

A firm operates in an environment surrounded by several types of public

like media public, financial public and local public.

Media public includes news papers, magazines, television and radio.

Financial public includes financial institution like commercial banks and

development banks

Local public are people living in the surrounding area of the firm.

b. Macro environment:

Macro environment of a company refers to all those economic and non economic

factors which exercise their influence on the business activity. These factors are

common to all the companies they are:

a) Economic environment

b) Socio-cultural environment

c) Political and Legal environment

d) Technological environment

e) Natural environment

f) Demographic environment

a) Economic environment

The economic environment includes those factors that affect consumer

purchasing power and spending patterns. The business sector has

economic relation with government, capital market, household sectors and

global sector. These sectors together influence the trends and structure of

the economy.

It classified in to six areas:

i. Economic condition

ii. Economic system

iii. Economic policies

iv. Economic growth

v. Currency exchange

i. Economic condition: The general economic conditions prevailing

National income

Per capital income

Economic resources

Distribution of income and assets

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Economic developments etc. are important determinants of business

strategies.

ii. The economic system:

Operating in the country also affects the business enterprise to a very

great extent. The economic system of a country may be capitalist, socialist

and communist or mixed.

iii. Economic policies:

The government decides the economic environment of business through

Budget

Industrial policy and regulations

Economic planning

Import and export

Business law

The size of the national income

Demand and supply of various goods etc.

iv. Economic growth:

The stage of economic growth of the economic has direct impact on the

business strategies.

Increased economic growth rate

Increase in consumption expenditure

Industrial performance

Opportunities and threats

v. Currency exchange:

Currency exchange rates have direct impact on the business environment.

b) Socio-cultural environment:

The socio-cultural factor should be analyzed while formulating

business strategies.

The buying and consumption habits of people, language, beliefs

and values, customs and traditions, tastes and preferences

occupation, education are all factors that affect business.

For a business to be successful, the business strategy should be

appropriate in the socio-cultural environment.

The marketing mix will have to be designed in a way that suits the

environmental characteristics of the market.

The different in language sometimes poses serious problems even

necessitating a change in the brand name preeti was a good brand

name in India, but it did not suit for the overseas market and

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hence it was appropriate to adopt “prestige” for the overseas

market.

c) Political and Legal environment

Political and legal environment has a close relationship with the economic system

and economic policy of the government.

Political system prevailing in a country determines the rate and direction of

development of business in that country. It includes

i. Legislature

ii. Executive

iii. Judiciary

Now days every business in nature of legal contract than social contact.

The government has bought out many legislations on matters like wage fixation,

managerial remuneration, safety and health of the workers.

d) Technological environment:

By the technology we understand all the skill, knowledge and producers for

making, using and doing useful things.

According to JK Gal braith “technology is a systematic application of scientific

or other organized knowledge to practical tasks.”

Technological factors also sometimes pose problems. A firm which is unable to

cope with the technological changes may hardly survive.

Further the differing technology environment of different markets or countries

may call for product modifications.

Technological development may increase the demand for some existing

products.

For ex: - the voltage stabilizers help, increase the rate of electrical appliance in

markets characterized by frequent voltage fluctuations in power supply.

e) Natural environment:

Natural environment which include factors like climate, land, water resources,

fisheries, mineral resources, rainfall, forests etc.

The important constituents of natural environment are:

Natural resources

Weather and climate conditions

Topographical factors

Vocational aspects in the global context

Port facilities

For example, in hilly areas jeeps may be in greater demand than cars.

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f) Demographical environment:

Demographical factors like size of the population, population growth rate, age

composition, life expectancy, family size, occupational status, employment

pattern, educational levels, religion etc. are the factors relevant to business.

A fast increase of population indicates growing demand for many products high

population growth rate also indicate enormous increase in labor supply.

The labor shortage and rising wages encourage labor saving technologies

environment of the developing countries are encouraging labor intensive

methods of production the population growth rate is an important environment

factors that affects the business

The occupational and spatial mobility’s of population have implication for

business.

If labor is easily mobile between different occupations and regions, labor supply

will be relatively smooth and this also affects the wage rate.

If the labor is highly heterogeneous in respect of language, caste and religion,

etc personnel management is likely to become a more complex problem.

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MODULE 3: BUSINESS ETHICS

ETHICS

Ethics refer to system of moral principal – a senses of right and wrong and

goodness and badness of actions and their motives and consequences.

Business ethics refers to the application of ethics to business.

To be more specific, business ethics is the study of good and evil, right and

wrong and just and unjust action of businessmen.

BUSINESS ETHICS

Business ethics does not differ from generally accepted norms of good and bad.

If dishonesty considered to be unethical and immoral in society, then any

businessman who is dishonest with employees, customers, shareholders or

competitors is acting unethical and immorally. If protecting others from any harm

is considered to be ethical.

OBJECTIVES OF BUSINESS ETHICS:

To provide a comprehensive framework for ethical decision-making in business.

To examine the intensity of ethical issues as an important element influencing

the ethical decision-making process. To introduce individual factors that may influence ethical decision-making in

business.

To introduce organizational factors that may influence ethical decision-making in business.

To explore the role of opportunity in ethical decision making. To explain how knowledge about the ethical decision-making framework can be

used to improve ethical leadership. To provide leadership styles and habits that promotes an ethical culture.

Principles of business ethics:

The following list if principles incorporate the characteristics and values that most

people associate with ethical behavior. Ethical decision making systematically considers

these principles.

1. Honesty.

2. Integrity.

3. Promise-keeping & trustworthiness.

4. Loyalty.

5. Fairness.

6. Concern for others.

7. Respect for others.

8. Law abiding.

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9. Commitment to excellence.

10. Leadership.

11. Reputation and morale.

12. Accountability.

1. HONESTY.

Ethical executives are honest and truthful in all their dealings and they do not

deliberately mislead others by misrepresentations, overstatements, partial truths, or any

other means.

2. INTEGRITY.

Ethical executives demonstrate personal integrity and the courage of their

convictions by doing what they think is right even when there is great pressure to do

otherwise; they are principled, honorable and upright; they will fight for their beliefs.

They will not sacrifice principle for expediency, be hypocritical, or unscrupulous.

3. PROMISE-KEEPING & TRUSTWORTHINESS.

Ethical executives are worthy of trust. They are candid and forthcoming in

supplying relevant information and correcting misapprehensions of fact, and they make

every reasonable effort to fulfill the letter and spirit of their promises and commitments.

They do not interpret agreements in an unreasonably technical or legalistic manner in

order to rationalize non-compliance or create justifications for escaping their

commitments.

4. LOYALTY.

Ethical executives are worthy of trust, demonstrate fidelity and loyalty to persons

and institutions by friendship in adversity, support and devotion to duty; they do not

use or disclose information learned in confidence for personal advantage. They

safeguard the ability to make independent professional judgments by scrupulously

avoiding undue influences and conflicts of interest. They are loyal to their companies

and colleagues and if they decide to accept other employment, they provide reasonable

notice, respect the proprietary information of their former employer, and refuse to

engage in any activities that take undue advantage of their previous positions.

5. FAIRNESS.

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Ethical executives and fair and just in all dealings; they do not exercise power

arbitrarily, and do not use overreaching nor indecent means to gain or maintain any

advantage nor take undue advantage of another’s mistakes or difficulties. Fair persons

manifest a commitment to justice, the equal treatment of individuals, tolerance for and

acceptance of diversity, the they are open-minded; they are willing to admit they are

wrong and, where appropriate, change their positions and beliefs.

6. CONCERN FOR OTHERS.

Ethical executives are caring, compassionate, benevolent and kind; they like

the Golden Rule, help those in needs, and seek to accomplish their business objectives

in a manner that causes the least harm and the greatest positive good.

7. RESPECT FOR OTHERS.

Ethical executives demonstrate respect for the human dignity, autonomy,

privacy, rights, and interests of all those who have a stake in their decisions; they are

courteous and treat all people with equal respect and dignity regardless of sex, race or

national origin.

8. LAW ABIDING.

Ethical executives abide by laws, rules and regulations relating to their business

activities.

9. COMMITMENT TO EXCELLENCE.

Ethical executives pursue excellence in performing their duties, are well informed

and prepared, and constantly endeavor to increase their proficiency in all areas of

responsibility.

10. LEADERSHIP.

Ethical executives are conscious of the responsibilities and opportunities of their

position of leadership and seek to be positive ethical role models by their own conduct

and by helping to create an environment in which principled reasoning and ethical

decision making are highly prized.

11. REPUTATION AND MORALE.

Ethical executives seek to protect and build the company’s good reputation and

the morale of its employees by engaging in no conduct that might undermine respect

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and by taking whatever actions are necessary to correct or prevent inappropriate

conduct of others.

12. ACCOUNTABILITY.

Ethical executives acknowledge and accept personal accountability for the

ethical quality of their decisions and omissions to themselves, their colleagues, their

companies, and their communities.

DIFFERECE BETWEEN MORAL AND ETHICS:

Comparison chart

Ethics Morals

What are they?

The rules of conduct recognized in respect to a particular class of human actions or a particular group or

culture.

Principles or habits with respect to right or wrong conduct. While morals also prescribe dos and

don'ts, morality is ultimately a personal compass of right and wrong.

Where do they

come from?

Social system - External Individual - Internal

Why we do it? Because society says it is the right thing to do.

Because we believe in something being right or wrong.

Flexibility Ethics are dependent on others for definition. They tend to be consistent within a certain context, but can vary

between contexts.

Usually consistent, although can change if an individual’s beliefs change.

The "Gray" A person strictly following Ethical Principles may not have any Morals at

all. Likewise, one could violate Ethical Principles within a given system of rules in order to maintain Moral

integrity.

A Moral Person although perhaps bound by a higher covenant, may

choose to follow a code of ethics as it would apply to a system. "Make it fit"

Origin Greek word "ethos" meaning “character"

Latin word "mos" meaning "custom"

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Ethics Morals

Acceptability Ethics are governed by professional and legal guidelines within a particular time and place

Morality transcends cultural norms

Doctrine of trusteeship: Doctrine is derived from Latin word ”doctrina”which means a codification In law,(codification is the process of collecting and restating the law of

a jurisdiction in certain areas) Of beliefs or a body’s, taught principles or positions, as the essence of teachings in a given branch of knowledge or belief system.

Trusteeship is a socio-economic philosophy that was propounded by Mahatma Gandhi. It provides a means by which the wealthy people would be the trustees of trusts that looked after the welfare of the people in business.

Principles of Trusteeship: Gandhian Principles of Trusteeship are discussed in following main points:-

1. Reduce In equalities:

This concept tries to reduce inequalities. It tries to reduce the gap between the

rich and poor. It tries to reduce exploitation.

2. Change of Attitude of Businessmen:

According to Mahatma Gandhi, businessmen should change their attitude. They

have no morale right to accumulate unlimited wealth while most of their countrymen

live in poverty and misery. Each businessman should take enough wealth to live

honorably. He should distribute the remaining wealth back to the society. Gandhiji

advised the rich businessmen to voluntarily surrender their surplus wealth. If not

done so, the poor masses may revolt (fight) one day and plunder their entire wealth

by force.

3. Social Pressure:

People must put social pressure on businessmen to follow the principle of

trusteeship. They should boycott (not purchase) the products of those who do not

practice trusteeship.

4. Legal Pressure:

If voluntary measures and social pressure do not work, legal pressure must be put on

the businessmen to follow the principle of trusteeship.

5. Socialism:

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This concept gives more importance to socialism. That is, the society is given

much more importance than an individual. So, the wealth of the society should be

distributed equitably to all its members.

6. Consider Social Needs:

Businessmen should produce only those goods and services which are useful for

all members of the society. They should not produce goods and services, which are

used only by few individuals.

7. Equal distribution of wealth:

According to Gandhiji, all the wealth of the society should be distributed

equitably. There should not be concentration of wealth in few hands.

8. Earn money by Hard work:

A person should earn his living by doing hard work. Earning money without doing

hard work is just like stealing.

9. No Right to Private Ownership:

This concept does not give the right to private ownership except when it is

necessary.

10. Government Regulation:

The Government should regulate trusteeship. No Individual should be allowed to

use his wealth for selfish satisfaction or against the interest of society.

Limitations of Principles of Trusteeship: Critical Evaluation / Limitations / Applicability of the Principles of Trusteeship is highlighted in following important points:-

1. This concept is not relevant in today's competitive business world because every

businessman tries to earn maximum profits and accumulate huge wealth.

2. It demotivates the hardworking businessmen. The businessmen will lose their

creativity, and they will become lazy. This will slow down the economic development

of the country.

3. This concept is based on the concept of Socialism. However, today socialism is

outdated.

4. Businessmen feel that the welfare of the society is not their responsibility. It is the

responsibility of the Government.

5. This concept is not accepted by shareholders who invest their money to earn the

highest dividend.

6. This concept is against capitalism. Today, capitalism is proving very successful all

over the world. Poverty levels are very low in capitalist countries when compared to

the poverty statistics of socialist nations.

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ETHICAL PRACTICES IN BUSINESS:

Here are a few ethical business practices that should be followed to build an honest

reputation and ensure smooth running of any organization.

1. Investors:

Ensuring safety of their money and timely payment of interest.

2. Employees:

Provision of fair opportunities in promotions and training, good working

environment and timely payment of salaries.

3. Customer:

Complete information of the service and product should be made available.

Personal information of the customers should not be used for personal gain.

4. Competition:

Unscrupulous tactics, competitor bashing and wrong methods should be avoided

while handling competitors.

5. Government:

Rules and regulations regarding taxes, duties, restrictive and monopolistic trade

practices and unlawful activities like corruption and bribing should be adhered to.

6. Environment:

Polluting industries should ensure compliance with the government norms

regarding air, water and noise pollution.

UNETHICAL BUSINESS PRACTICES

You might find many companies who blatantly thrive on unethical behavior and

practices. A free environment is present or promoted where acts of violation of norms

to amass wealth in an unethical manner is followed.

Following are some of the activities that come under the ambit of unethical practice.

1. Political donations and gifts.

2. Neglect of social interest.

3. Creation of cut throat competition with other business institutions.

4. Spreading of corruption.

5. Presentation of false returns of income and statement.

6. Production and distribution of illegal opposed to public policy.

7. Accumulation of profit by illegal means.

8. Trading with enemy countries.

9. Exploitation of society.

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10. Encouraging smuggling activities.

11. Avoiding penalty or compensation for unlawful act.

12. Lack of transparency and resistance to investigation.

13. Harming the environment by exceeding the government prescribed norms for

pollution.

GOOD ETHICS AND GOOD BUSINESS:

The specifics for business include providing leadership in building the business,

but also in contributing to the greater good:

Communicate your values and business goals.

Doing the right thing for the business starts with defining core values. Then

create business goals to tackle the few critical issues and opportunities for the

business. To be effective, communication has to be two-way and continuous, to

keep the “right thing” as “top of mind” for all team members.

Align the organization to your values and goals.

Ensure everyone is in alignment to live the values and focus on and execute the

goals. Make the tough decisions to ensure the success and profitability of the

business, and make the tough personnel decisions to put the right people in the

right positions, giving them the training they need.

Manage priorities for the short-term as well as the long-term.

Just as people must manage their personal and work responsibilities.

Endeavor to beat, not meet, industry standards.

Doing the right thing is not just “getting by”, or squeezing within the letter of the

law. It means knowing and living by the spirit of the law, as well as not waiting

for new laws and regulations to fix problems. The same is true of employee

standards, and social responsibilities.

Create winning teamwork.

Leading people to do the right thing as a team is one of the most challenging

things to teach and coach. Making a team work well requires constant

communication, demonstrating accountability, ensuring motivation, recognition

and continual learning.

Look at yourself from your customer’s perspective.

The right thing is for every business leader to value every customer and realize

the important of each in building the business. Your appreciation of your every

customers focus on delivering value to them is a pre-requisite to customer

satisfaction, growth, and success.

Balance work and life.

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We are all in business to be successful, but we are all people too. Another way to

send a strong message about doing the right thing is to step up to the thorny

“quality of life” issues, including balancing one’s work and personal life, work at

home, and providing the right health, social, and spiritual needs.

SOCIAL RESPONSIBILITY OF BUSINESS

Introduction:

Business depends on the society for the needed inputs like money, men

and skills.

Business also depends on the society for market where products may be

sold their buyers.

Thus, business depends on society for existence, sustenance and

encouragement.

Dependence of business on society is so complete that as long as the

latter wants the former, business has reason to exist.

Once society ceases to have any use for business, it has no place and

reason to live.

Being so much dependent, business has definite responsibility towards

society. Popularly called the social responsibility of business, or corporate

social responsibility(CSR)

Social responsibility of business refers to what the business does, over

and above statutory requirement, for the benefit of the society.

Corporate social responsibility (CSR) refers to the moral responsibility of

business to the society by the virtue of being a part of the society.

Definition of social responsibility

According to Keith devis, “Social responsibility is the obligation of the decision

makers to take decisions which protect and improve the welfare of the society as

a whole along with their own interests.

In the words of Andrews, “By social responsibility, we mean the intelligent and

objective concerned for the welfare of the society that restrains individual and

corporate behavior from ultimate destructive activities, no matter how

immediately profitable and leads in the direction of positive contribution to

human betterment.

FORCES PRESSURING SOCIAL RESPOSIVENESS:

I. Government programmes

II. Community interest and Demands

III. Environmental Concerns

IV. Shareholders/Investors Pressures

V. Competitive advantage

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Government Programmes:

Governments are the most significant forces pressuring firms for social actions.

Most government pressures concern compliance with existing regulations. But

governments are also major sources of potential rules, a fact which businesses need to

take note of. Governments ask businesses to volunteer to help them solve their

problems.

Community interest and demands:

Firms undertake many programmes that benefit society in general, not

necessarily favoring stakeholders. Programmes can range widely, from helping rebuild

disadvantaged sections to providing executive talents to run government undertakings.

Environmental concerns:

Environmental programmes of firms mainly result from standards established by

government agencies. The government of India, for example, enacted the environment

Protection act 1986. The main objective of the act is to protect and improve the

environment and the prevention of hazards to human beings, other living creatures,

plant and property.

Shareholder/Investors Pressures:

Large shareholders such as pension funds have long-range interests in the

financial success of their investments. Some of them, obviously, exert pressure on firms

to respond appropriately to community social interest. For example, shareholders of

Pepsi Co. launched a campaign to force the company to pull out of Myanmar because of

the human right violation of the military regime in that country. Pepsi Co. did oblige the

shareholders.

Competitive advantage:

Comprise four interdependent factors: -

Factors conditions, demand conditions, related and support industries, and context for

strategy and rivalry.

Social responsibilities towards different section of the society:

Responsibility towards owners:

The foremost responsibility of business towards owners in the case of non

corporate organizations. It implies responsibility to owners but in the case of corporate

organization it implies responsibility to shareholders.

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Social responsibility of business to its owners or shareholders includes the following:

It should give a fair and regular return on their investment in the form of

dividends.

It should use the resources provided by them effectively and for the purpose as

mentioned in the memorandum.

It should make every effort for appreciation of their capital so that the enterprise

can attract new capital from the market very easily.

It should give full regular and accurate information on the progress and financial

position of the company.

Responsibility towards consumers or customers:

Customer’s satisfaction is the ultimate aim of all economic activities. A customer

is once who has got a favorable options about the company and its products and

services. The business owes a great responsibility towards the consumers and this

responsibility can be discharge in the following ways.

It should supply product/service at right quality, at right time, at right place and

at reasonable prices.

The products or services supplied should meet the needs and tastes of

consumers of different clauses and with different purchasing powers.

It should inform educate and guide the consumer about the arrival and use of

new products released to the market.

It should be honest & truthful in the matter of advertising and warranty. It

should not mislead the consumer by false advertise.

It should not indulge in black marketing, hoarding, profiteering or in restrictive or

unfair trade practices.

Responsibility towards employees:

The responsibility towards its employees includes the following:

It should recognize human values in the business and treat the employees as

responsible human being and not merely in the machine.

Ti should raise the employee morale through financial and non-financial

motivations. Where the morale is high, the output is bound to be high.

It should recognize the density of labor and provide proper opportunities to the

employees for utilizing their talent and aspirations.

Is should reward them with fair wages and offer them material incentives to

improve their productive capacity.

Responsibility towards government:

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The business in order to strengthen the hand of government has the following

responsibilities towards the government.

The management of the business should strictly follow the rules and regulations

and the laws passed by the government.

It should pay taxes and dues to the government honestly and regularly.

It should not indulge incorrupt practices such as corrupting the public servants

through bribery and donations.

It should maintain fair trade practices and policies.

It should help in tacking problems like unemployment, poverty, price raising,

import substitutions etc.

Responsibility towards society:

The responsibility of the business to these people of the society includes the

following:

It should avoid the exploitation of minorities and weaker sections of the

community and provide all the kind of help in their development.

It should avoid unnecessary and wasteful expenditure.

As a good citizen should strengthen the culture and cohesion of the society.

It should utilized the national resources efficiency and effectively.

It should avoid all types of environmental pollutions since environment

purification is so essential for human welfare.

Doctrine of social responsibility:

The doctrine of social responsibility holds that individuals and organizations

should advance the interests of society at large.

Social responsibility is behavior by business over and above legal requirements,

voluntarily adopted because businesses deem it to be in their long interest.

They can do this by abstaining from harmful actions and by performing socially

beneficial acts.

Although the doctrine of social responsibility applies to people and organizations,

much of the discussion focuses on business and the extent to which social

responsibility should influence business decisions.

Social responsibility is intrinsically linked to the concept of sustainable

development. Business need to integrate the economic, social and environmental

impact in their operations.

Social responsibility is not an optional “add-on” to business core activities but

about the way in which businesses are managed.

Rationale of social responsibility:

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i. It protects and promotes stakeholders interest

ii. Boots up brand image and reputation

iii. It contributes to social concern and promotion of common welfare programmes

iv. It increases sales and customers loyalty

v. Ensures ecological balance

vi. It focuses on human elements

vii. Social responsibility of corporate lies in abiding by rules and regulations

viii. It contributes to profits and wealth maximization

ix. It reduces business risk

INTRODUCTION The Monopolistic and Restrictive Trade Practices MRTP Act, 1969,was enacted

To ensure that the operation of the economic system does not result in the concentration of economic power in hands of few,

To provide for the control of monopolies, and

To prohibit monopolistic and restrictive trade practices.

The MRTP Act extends to the whole of India except Jammu and Kashmir. Unless the Central Government otherwise directs, this act shall not apply to:

Any undertaking owned or controlled by the Government,

Any undertaking owned or controlled by a corporation (not being a company established by or under any Central, Provincial or State Act,

Any trade union or other association of workmen or employees formed for their

own reasonable protection as such workmen or employees, Any undertaking engaged in an industry, the management of which has been

taken over by any person or body of persons under powers by the Central

Government, Any undertaking owned by a co-operative society formed and registered under

any Central, Provincial or state Act,

Any financial institution.

Restrictive Trade Practice

Section 2(o) defines restrictive trade practices

To maximize profits and market power, traders often attempt to indulge in certain trade practices which tend to obstruct the flow of capital into the stream of production.

It may also bring manipulation of prices or conditions of delivery or affect the flow of supplies in the market so as to impose unjustified costs.

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INQUIRY INTO RESTRICTIVE PRACTICES

The Commission may inquire into any restrictive trade practice

1. Upon receiving a complaint from any trade association, consumer or a

registered consumer association, or 2. Upon a reference made to it by the Central or State Government or 3. Upon its own knowledge or information

RELIEF AVAILABLE The commission shall if after making an inquiry it is of the opinion that the practice is prejudicial to the public interest, or to the interest of any consumer it may direct that–

1. The practice shall be discontinued or shall not be repeated;

2. The agreement relating thereto shall be void in respect of such restrictive trade practice or shall stand modified.

3. The Commission may permit the party to any restrictive trade practice to take steps so that it is no longer prejudicial to the public interest

However no order shall be made in respect of

1. any agreement between buyers relating to goods which are bought by the

buyers for consumption and not for ultimate resale; 2. A trade practice which is expressly authorized by any law in force.

Unfair Trade Practice

WHAT IS UNFAIR TRADE PRACTICE? An unfair trade practice means a trade practice, which, for the purpose of promoting

any sale, use or supply of any goods or services, adopts unfair method, or unfair or deceptive practice.

Misleading advertisement and False Representation

Falsely representing that goods and services are of a particular standard, quality, grade, composition or style.

Falsely representing any second hand renovated or old goods as new. Representing that goods or services, seller or supplier has a sponsorship,

approval or affiliation which they do not have.

Making a false or misleading representation concerning need for, or usefulness of goods or services.

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Giving to public any warranty, guarantee of performance that is not based on an adequate test or making to public a representation which purports to be

such a guarantee or warranty. False and misleading claims with respect to the price of goods or services.

Unfair practices may be categorized as under:

1. FALSE REPRESENTATION

2. FALSE OFFER OF BARGAIN PRICE-

3. FREE GIFTS OFFER AND PRIZE SCHEMES

4. NON-COMPLIANCE OF PRESCRIBED STANDARDS

5. HOARDING, DESTRUCTION, ETC.

6. INQUIRY INTO UNFAIR TRADE PRACTICES

The Commission may inquire into

Any unfair trade practice

i. Upon receiving a complaint from any trade association, consumer or a

registered consumer association, or ii. Upon reference made to it by the Central Government or State

Government

iii. Upon an application to it by the Director General or iv. Upon its own knowledge or information.

7. RELIEF AVAILABLE

After making an inquiry into the unfair trade practice if the Commission is of the opinion that the practice is prejudicial to the public interest, or to the interest of any

consumer it may direct that–

i. The practice shall be discontinued or shall not be repeated;

ii. The agreement relating thereto shall be void in respect of such unfair trade practice or shall stand modified.

iii. Any information, statement or advertisement relating to such unfair trade practice shall be disclosed, issued or published as may be specified

iv. The Commission may permit the party to carry on any trade practice to

take steps to ensure that it is no longer prejudicial to the public interest or to the interest of the consumer.

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However no order shall be made in respect a trade practice which is expressly authorized by any law in force.

The Commission is empowered to direct publication of corrective advertisement and disclosure of additional information while passing orders relating to unfair trade practices.

Monopolistic Trade Practices

Section 2 (i) of the Act defines MTP while section 31 provides for investigation into such practices by MRTP commission

Monopolistic trade practice is that which represents abuse of market power in

the production and marketing of goods and services by eliminating potential competitors from market

And taking advantage of the control over the market by charging unreasonably

high prices, Preventing or reducing competition,

Limiting technical development, Deteriorating product quality Or by adopting unfair or deceptive trade practices.

A monopolistic trade practice is deemed to be prejudicial to the public interest, unless it is expressly authorized under any law or the Central Government permits to carry on any such practice.

INQUIRY INTO MONOPOLISTIC TRADE PRACTICES

The Commission may inquire into

Any monopolistic trade practice,

1. Upon a reference made to it by the Central Government or

2. Upon an application made to it by the Director General or 3. Upon it own knowledge or information

RELIEF AVAILABLE

1. Where the inquiry by the Commission reveals that the trade practice inquired

into operates or is likely to operate against public interest, the Central Government may pass such orders as it thinks fit to remedy or present any mischief resulting from such trade practice.

2. On an inquiry report of the Commission, the Central Government may- i. Prohibit the owner(s) of the concerned undertaking(s) from continuing to

indulge in a monopolistic trade practice; or ii. Prohibit the owner of any class of undertakings or undertakings

generally, from continuing to indulge in any monopolistic trade practice in relation to the goods or services.

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3. The Central Government may also make an order: i. Regulating the production, storage, supply, distribution, or control of any

goods or services by an undertaking and fixing the terms of their sale (including prices) or supply;

ii. Prohibit any act or practice or commercial policy which prevents or

lessens competition in the production, storage, supply or distribution of any goods or services;

iii. Fixing standards for the goods used or produced by an undertaking;

iv. Declaring unlawful the making or carrying out of the specified agreement;

v. Requiring any party to the specified agreement to determine the agreement within the specified time, either wholly or to specified extent;

vi. Regulating the profits which may be derived from the production, storage, supply, distribution or control of any goods or services; or

vii. Regulating the quality of any goods or services so that their standard does not deteriorate.

POWERS OF THE COMMISSION

MONOPOLIES AND RESTRICTIVE TRADE PRACTICE COMMISSION: Complaints regarding monopolistic trade practice, unfair trade practice and

restrictive trade practice can be made to the MRTP commission at the following address: Director General (Investigation & Registration)

MRTPC Bikaner House Baracks Shahjahan Road New Delhi 110011.

The MRTP Commission has the following powers:

1. Power of Civil Court under the Code of Civil Procedure, with respect to:

i. Summoning and enforcing the attendance of any witness and examining

him on oath; ii. Discovery and production of any document or other material object

producible as evidence;

iii. Reception of evidence on affidavits; iv. Requisition of any public record from any court or office. v. Issuing any commission for examination of witness; and vi. Appearance of parties and consequence of non-appearance.

2. Proceedings before the commission are deemed as judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code.

3. To require any person to produce before it and to examine and keep any books

of accounts or other documents relating to the trade practice, in its custody.

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4. To require any person to furnish such information as respects the trade practice as may be required or such other information as may be in his possession in

relation to the trade carried on by any other person. 5. To authorize any of its officers to enter and search any undertaking or seize any

books or papers, relating to an undertaking, in relation to which the inquiry is

being made, if the commission suspects that such books or papers are being or may be destroyed, mutilated, altered, falsified or secreted.

MRTP AND THE NEW INDUSTRIAL POLICY MRTP Act became effective in June 1970

Emphasis was placed on increasing productivity Major amendments to the Act were carried on in 1982 and 1984. MRTPC was set up

PROCEDURE OF ACTION ON COMPLAINT: Inquiry may be initiated through a complaint by an individual or registered

consumer organization. Fact finding investigation is carried on by the Director General. If no prima facie case is made, the complaint is dismissed; else an order is

passed to that effect. The commission may restrain the party concerned from carrying on the trade

practices by granting temporary injunction. Final order is passed. Compensation may be granted to the complainant.

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MODULE 4: BUSINESS POLICY:

INTRODUCTION:

Policies are standing plans which provide a board frame work within which

decisions are to be taken. They are guide to action.

Business policy basically deals with decisions regarding the future of an ongoing

enterprise. Such policy decisions are taken at the top level after carefully evaluating the

organizational strengths and weakness in terms of product, price, quality, leadership

position, resources etc., in relation to its environment.

In other words, business policy is the study of the roles and responsibilities of

top- level management, the significant issues affecting organizational success and the

decisions affecting organizational in the long run.

DEFINITIONS OF BUSINESS POLICY:

According to Jerry “A business policy is an implied overall guide, setting up

boundaries that supply the general limits and direction in which managerial action will

take place.”

According to this definition, policy reveals the management’s intentions for the

future. They spell out clearly the sanctioned general direction and areas within which

work has to be done.

FEATURES OF BUSINESS POLCY:

An effective business policy must have following features:

1. Specific: Policy should be specific. If it is uncertain, then the implication will

become difficult.

2. Clear: Policy must be unambiguous. It should avoid use of jargons and

connotations. There should be no misunderstandings in the following the policy.

3. Reliable/Uniform: policy must be uniform enough so that it can be efficiently

followed by the subordinates.

4. Appropriate: policy should be appropriate to the present organizational goals.

5. Simple: a policy should be simple and easily understood by all in the

organization.

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6. Inclusive/Comprehensive: in order to have a wide scope, a policy must be

comprehensive.

7. Flexible: policy should be flexible in operation/application. This does not imply

that a policy should be altered always, but it should be wide in scope so as to

ensure that the line managers use them in repetitive/routine scenarios.

8. Stable: policy should be stable else it will lead to indecisiveness and uncertainty

in minds of those who look into it for guidance.

IMPORTANCE OF BUSINESS POLICY:

1. Policies bring in uniformity in decision making

2. They serve as precedents and thus reduce repetitive thinking and analysis.

3. Policies help in decentralizing the decisions making process.

4. As all policies aim at accomplishing objectives, activities at various levels are

coordinated.

5. They form the basis for measuring performance of managers.

6. Decision making becomes faster because of the policies.

7. Employees at various levels will have freedom to take decisions within the

boundaries of the policies.

8. Policies provide basis for delegation of authority.

9. Top management would be free routine decision making process.

Essentials of business policy:

1) They should lead to achievement of objectives.

2) They should be simple and understandable.

3) They should support other policies at different levels.

4) They should be capable of relating objectives to functions and physical and

human resources.

5) They should not be ambiguity in policies.

6) They should be in writing.

7) They should be stable and flexible.

8) They should be progressive and positive in their approach.

9) They should be in consistent with public policy.

10)They should be fair and reasonable to all concerned.

11)They should be in consistent with ethical standards of business.

Purpose of business policy:

The purpose of business policy is three fold:

To integrate the knowledge gained in various functional areas of management;

To adopt a generalist approach to problem solving; and

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To understand the complex inter linkages operating within an organization

through the use of systems approach to decision making and relating them to

changes taking place in the external environment.

CLASSIFICATIONS OF BUSINESS POLICIES:

There are six types of business policies.

I. Classification of business policies based on Management levels:

1. Top level management policies

2. Middle level management policies

3. Lower level management policies

II. Classification of business policies based on functional areas:

1. Production policies

2. Marketing policies

3. Financial policies

4. Personnel policies

c. Classification of business policies based on Expression:

1. Oral policies

2. Written policies

d. Classification of business policies based on Nature of origin:

1. Original policies

2. Appealed policies

3. Imposed policies

4. Derivative policies

e. Classification of business policies based on Scope of organization:

1. Basic policies

2. General policies

f. Classification of business policies based on Managerial functions:

1. Planning policies

2. Organizing polices

3. Directing polices

4. Controlling polices

I. Classification of business policies based on Management levels:

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1. Top level management policies

These policies are derived from the top management planning.

The top management comprises of the Board of Directors,

Chairmen/President, Managing Directors, etc.

The top level management frame policies by themselves and responsible

for these.

The Top level management policies are concerned with the decision

regarding investment, determination of site and location, machine

selection, long range product selection, sales forecasting, sizing of

enterprises, acquisition and merger of two or more units, settlement of

problems of executives regarding their promotion, transfer, retirement,

etc. and accomplishment of the organization objectives/goals.

They set the objectives, define the goals, establish the policies these

policies are put into effect and judge the results.

2. Middle level management policies:

The Middle level management consists of the head of the personnel

administration department, production manager, sales manager,

marketing manager, financial manager, etc

They lay down the policies regarding the establishment of organization,

installation of proper departments, method and techniques of productions,

deciding about the sources of manpower, selection of the best suited

executives, staff and employees, assigning of duties to each departments

and to each individual, deciding about wages salaries, incentives plans for

them, exploration of new market and market decisions about the channel

of distributions, obtaining necessary finances, costs, solving problems of

actual sales activities etc.

They frame policies on these matters and these policies are known as

middle level management policies.

3. Lower level management policies:

The lower level management policies are men who have direct supervision

over the working force in office, factory, sales field, and other areas of

activity of the concern.

They are directly related to the accomplishment of the task for the small

sub-division of the whole enterprise.

They check out the policies for the assignment of the jobs to the best

suited persons, the provision of adequate tools, raw materials, training the

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workers, issuing of orders, maintaining of quality, improving working

conditions, and moral maintaining discipline etc.

II. Classification of business policies based on functional areas:

1. Production policies:

These policies are framed and concerned with:

i. The product to be produced(product line, type of product)

ii. The type of technology, processes, equipments and tools, to be used

iii. The selection of factory/office/plant site, location and layout

iv. The decision regarding the scale of production

v. Making of production budget, manufacturing costs and deciding about

total cost and cost of installation and its maintenance

vi. The selection of junior executives

vii. The organization and co-ordination of their activities

viii. Inventory control

ix. Collective bargaining and labor relations

x. Selection of system of quality, cost and production control

Production policies are the basic determination of the total policy making

procedure.

Key issues of production policy.

The following are the key issues of production policy:

1. Involvement of the firm in production processes

2. Choice of production processes

3. Estimates of production capacity

4. Maintenance/replacement of the existing production facilities

1. Involvement of the firm in production processes

The relevant questions to be asked in this connection are:

a. Should the firm manufacture the product that it intends to sell or buy it?

b. If it is to be manufactured, should the activity consist of assembling purchased

components or making the components as well?

c. Should the firm make or buy the raw materials for the components

The only justification for investment in production can be that the same money

cannot be deployed more profitably elsewhere is business. But even with such a

decision, it remains to be decided what is to be the extent of commitment to

production. I.e. vertical integration

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Factors governing integration of production:

i. Coordination of activities

ii. Saving of costs

iii. Safeguard against uncertainty or restricted supply

iv. Limited flexibility

v. Optimum scale and economy of production

vi. Financial strength and capability

vii. Limitations of management capabilities

i. Coordination of activities

Manufacture of raw material and components for the product to be sold ensures

supplies in accordance with their required quality, quantity and timely availability. It

also provides for flexibility and adjustment to changes in needs.

ii. Saving of costs

The selling costs of the suppliers of materials and components are saved if the

user company produces rather than buy the items.

iii. Safeguard against uncertainty or restricted supply

If a company has to depend on a few suppliers with limited capacity or there is

uncertainty of ready availability of suppliers, it is desirable that the company should

have a captive source of supply of vital plant and machinery and ingredients.

iv. Limited flexibility

With integrated production activities, it may be difficult to introduce changes in

product design. Once heavy investments are made in developing manufacturing

facilities, introducing new products or changing product design with consequential shifts

in the plant facilities are likely to be too costly to bear.

v. Optimum scale and economy of production

Production to be commercial must be so planned as to conform to the volume

required for deriving the economy of scale. If the requirement of any components is too

small, it may be uneconomical to set up plant with large capacity and make full use of

the same. If the requirement is irregular, the plant may be idle at intervals.

On the other hand, a large capacity may be installed and the balance of output

in excess of internal requirements may be sold to other user firms. This implies,

deploying resources for a subsidiary activity and diverting managerial attention from the

primary activity.

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vi. Financial strength and capability

A company with strong financial positions may be able to expand through vertical

integration of activities and these by make substantial improvements in the

manufacturing of components or raw materials.

vii. Limitations of management capabilities

Managerial competence based on specification in and familiarity with the primary

activity is not always capable of undertaking new activities with equal efficiency. In

adequate attention to the new activities may lead to sub optimal performance in those

areas.

2. Choice of production processes

There are different aspects of choice of production process.

a. Technology to be used

b. Division of labor

c. Mechanization of operations

d. Size and location of production units

a. Technology to be used

The technology to be used is uniquely given in case of certain industries.

Example: manufacturing of paper, cotton and woolen textiles etc. but it may not be so

with respect to many other products on the choice of technology, depends the decisions

regarding equipments, personnel, methods of operational and organization so, the

organization must adopt a suitable technology as required by the production process.

b. Division of labor

Division of labor has been the characteristics feature of large scale

manufacturing units job enlargement is recognized as a superior means of securing

higher productivity and efficiency. Thus, in deciding how much emphasis to give to

division of labor, management has to take into account the policies bearing on

standardization of products, mechanization, and type of labor to be employed and style

of motivation.

c. Mechanization of operations

Technological advances have enlarged the scope of mechanization and

automation in many industries. Automatic electrical appliances are fast replacing

electrical equipment’s. The recent policy of government of India to allow import of

foreign technology in certain industries to improve the competitive ability of Indian

enterprise is a factor which is likely to influence management decision.

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d. Size and location of production units

For large enterprises, the decision with respect to size of plant needs to be

examined with two alternatives in view,

Large size with centralized location

Dispersal of operating units with small size of plant capacity.

Centralized location of a large size plant has both positive and negative implications

large size offers advantages of large scale production, economics of scale centralized

location also facilitates top management control from the corporate headquarters. But

there are limiting factors which do not permit large size and centralized location one

limiting factors is the cost of transportation of raw material of finished products which

may reduce the economies of large-scale production the high cost location in urban and

metropolitan centers is another constraint industrial concentration is regulated by

government.

Smaller plants have distinct advantages if located in suburban area employees do

not have to face the urban problems of community to and from the workplace. There is

greater scope for face to face interaction among the executives and operatives and the

managers have firsthand knowledge of operations.

3. Estimates of production capacity

One of the determinants of the plant size is the desired production capacity.

There are several aspects of this policy issue, such as,

i. Normal requirements and peak demand for the product.

ii. Backward vertical integration with lower capacity

iii. Provision for growth

iv. Balanced facilities

The choice of production capacity centers round two extreme alternatives:

a. Installing capacity to meet maximum demand at all times with idle capacity as a

necessary concomitant

b. Installing smaller capacity and allowing excess demand to go unsatisfied

provided, it does not have unbearable consequences.

4. Maintenance/replacement of the existing production facilities

If the existing plant capacity and services facilities are well maintained, there are

distinct advantages, and management can according decide on plant capacity to be

initially created. Depending on personal preferences of the executives and the

philosophy of management, determining the altitude towards upkeep and maintenance,

the policy may be one of high level conditioning of work environment, or a

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discriminating policy with deliberate decisions to provide for proper maintenance of only

those facilities which are of critical importance like production, stores etc.

The important of preventive maintenance is recognized in al work places for

several reasons. It helps to reduce repairs, particularly those caused by breakdown of

machines in use preventive maintenance costs may be fairly high but the corresponding

pay-off may justify the same operations research techniques may be useful to balance

the need for maintenance staff and maintenance work involved.

2. Marketing policies

As a critical functional area, marketing has received increasingly greater

attention in the completive business words since the early modern era. The old concept

of marketing focused on the firms existing products or services and considered

marketing to consider of selling and promotion to maximize sales at a profit the new

concept in control focuses on the firms existing and potential customers and seeks to

earn profit through customer satisfaction with an integrated marketing programmers.

Meaning:

Marketing policies relate to policies in market analysis, business laws, display,

salesmanship, advertising etc. they are concerned with the technical process of

marketing carrying both product mix and market mix.

The product mix includes decisions regarding the type, quality and quantity of product,

product design, contents, shape, methods and techniques of production etc.

Marketing mix covers the issues of channels of distribution, advertising policies,

packaging and branding decisions, consumer psychology and behavior, pricing of

product etc.

Since, the modem concept of market treat “consumer as king”, every product is brought

to satisfy his needs. Hence this concept is very vast.

The policy in this field deals with:

1. Spotting out of the present and potential markets, the size and natural of

consumers

2. The degree of competition in the market and how best could it be met.

3. The location prospects and persuading them to persuading them to purchase

4. Fixing price of a product, offering rebates, discounts and other concessions.

5. Compensating salesmen adequately and providing them with training and

development opportunities.

6. Selecting channels of distribution or employing representatives and agents

7. Dividing the total market into branch or dealer areas

8. Establishing advertising policies

9. Setting up sales control policies

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10. Establishing sales volume and expense budgets

Marketing is a social and managerial process by which individual and groups obtain

what they need through creating, offering and exchanging products of value in the

market.

Marketing management is the process of planning and executing the conception,

pricing, promotion and distribution of goods, services and ideas to create exchange with

target groups that satisfy customer and organizational objectives.

Customers are values maximizes, a customer satisfaction is a function of the

products perceived performance and the budget expectation and strong companies

management.

Four core business processes are:

a. The new product realization process

b. The inventory management process

c. The order to remittance process and

d. The customer service process

Customer influence the company’s profitability significantly therefore, companies

cannot afford to lose a customer, it is estimated that the cost of attracting a new

customer is five times the cost of keeping a current customer satisfied therefore, the

marketers wants to retain the customer by adding financial and social benefits to the

product, quality of the product plays a vital role in retaining the customer.

Elements of marketing policy:

1. Market-oriented strategic planning:

2. Differentiating and positioning the market offering

3. Developing new product

4. Choosing a general attack strategy

5. Managing product lines brands and packing

6. Designing and pricing strategies and programmers

7. Market channels

8. Promotion or marketing communications

9. Electronic markets

10. On-line marketing

1. Market-oriented strategic planning:

It refers to the managerial process of devolving and maintaining a viable relationship

with organization’s objectives, skill, resources and changing market opportunities. The

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purpose of strategic planning is to shape the company’s business and its products so

that they yield target profit and growth.

2. Differentiating and positioning the market offering:

The key to competitive advantage and competitive industry is product

differentiating. A market offering can be differentiated along with five dimensions.

i. Product

ii. Service

iii. Personnel

iv. Channel

v. Image

3. Developing new product:

Successful new product development requires the firm to establish an effective

organization for managing and development process. The stages of new product

development process include,

i. Idea generation

ii. Idea screening

iii. Concept development and testing

iv. Marketing strategy development

v. Business analysis

vi. Product development

vii. Market testing and commercialization

New product idea should be evaluated in terms of the product meeting the needs,

products ability to meet superior profitability etc.

4. Choosing a general attack strategy:

Five options are available to attack an enemy after knowing their objectives.

i. Frontal attack

ii. Flank attack

iii. Encirclement attack

iv. By-pass attack

v. Guerrilla attack

5. Managing product lines brands and packing:

Product is the vital element of the marketing mix. Product strategy requires for

making coordinated decisions on product mix, product lines, brands, packaging and

labeling. A product mix is the set of all products and items that a particular seller offers

to customers for sale. The decisional areas of product mix include the width (refers to

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numbers of product lines), the length (refers to number of items), the depth(refers to

number of variants offered) and the consistency (refers to how products remain stable

in the market).

Branding is a major issues in product strategy, companies must decides whether or

not to brand, whether to produce producer brands or distributor brands and whether to

use line extensions, brand extensions, multiband, new brands or co-brand.

Well-designed packages can create convenience value for producers and thus they

act as fair second commercial for the product marketer’s should develop packaging

concept and test it functionally.

6. Designing and pricing strategies and programmers:

Price plays a phenomenal role in marketing mix. Out of ‘4ps’, the only revenue

earning ‘p’ is price, whereas, the other three ps are cost.

The price and quality of the product compete with each other in setting the price

companies follows six step procedures in setting its pricing policy. The company should

formulate the pricing objectives like survival, maximum current profit, maximum current

revenue, highest sales growth and highest setting pricing policy, market skimming

product quality leadership the above diagram represents the procedure of price setting

policy.

Then the company estimates the demand for the product, estimates the costs

behavior at different levels of output. Then it examines the competitor’s price, costs and

offers and selects a pricing method. The pricing method include, costs plus or markup

pricing, target return pricing, perceived value pricing, value pricing, going pricing and

sealed pricing. Then the company selects the final price, taking into account the

psychological factors, the influence of other three ps and the influence of non-price

factors.

Companies normally set more than one price taking into consideration the

geographical demand, costs, market segment requirements, purchase timing, order

levels etc. the price adoption strategies include:

a. Geographical pricing

Selecting the pricing

policy

Determining demand Estimating costs

Selecting the final price Selecting a pricing

method

Analysis of costs, competitors, prices and

others

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b. Price discounts and allowances

c. Promotional pricing

d. Discriminating pricing

e. Product mix pricing

7. Market channels/place:

Most of the firms sell the product through middlemen, agents, dealers etc. rather

than selling the product directly to the end users. The host market intermediaries

perform a variety of functions and help the manufacturers. The company’s decision of

selecting channels affected other decision.

Channels decision is based on analyzing customers need, establishing channel

objectives and identifying and evaluating the benefits of major channels should be

developing long term relationship with the market intermediaries.

8. Promotion or marketing communications:

Modern marketing requires the companies should communicate with their present

and potential customers, intermediates and other stake holders. The marketing

communication mix consists of advertising, sales promotion, personnel selling, public

relations, publicity and direct marketing, developing effective communication objectives,

designing the massage, selecting the communication channels, establishes the total

promotional budget, decide on the promotion mix, measure the promotion’s results and

manage and coordinating the integrated communication process.

9. Electronic markets:

Electronic marketing are sponsored information utilities that describe the product

and services offered by marketers and allow customer to get information, identify their

needs and place order. Then the product is delivered to the customer electronic

markets permit fast price changes based on yield management and change the role of

place in market mix.

10. On-line marketing:

The interested customer can order for product all 24 hours just through computers.

Customers can have information about the different competitive products. Companies

can quickly changes the prices of products the cost of marketing is less to the online

marketers. Online marketers build and develop relationships directly with the

customers.

Marketer can conduct their marketing online by creating an electronic storefront,

participating in groups: building relationship, placing advertisements online by using

emails.

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Conclusion:

Use of these methods often has a vital role in sales promotion during the

introductory and maturity stages of the product life cycle another feature of the use of

promotional tools is that their effects are immediately known and benefits can be

measured easily and these tools have the quality of drawing immediate attention of the

buyers.

3. Financial policies