Business Environment End Semester Examination

Answer 2

b) The BCG Matrix helps businesses examine growth potential by examining market growth
and market share of products and selecting where to spend, discontinue, or develop products.
BCG Model divides enterprises into four categories.

Dogs- A product with a low market share and limited growth should be sold, liquidated, or
repositioned. Low market share and slow growth mean dogs don't earn much cash for the
company. Eg- Diet Coke, a Coca-Cola product. It was launched to give a lower-calorie
beverage choice. This business unit's sales fell since consumers weren't interested in the
brand. The soda sector has matured, thus new product growth is limited.

Cash cows- Cash Cows are business with a substantial market share in a mature, slow-
growing industry. Cash cows necessitate minimal investment and generate funds that can be
invested in other business divisions. Eg- Coca Cola. This beverage is offered in 200
countries. Different bottling partners assist sell finished beverages. This is how the company
makes money from its finished products. In a mature industry, a company should keep sales
volume high because the business unit is a good revenue source.

Stars- Products in high growth markets that make up a large share of that market should be
invested in more. Stars earn a lot yet spend a lot of money. When the market's growth rate
slows, a market leader becomes a cash cow. Eg- Kinley a bottled water by Coca Cola. The
global mineral water market is still growing. Rising population needs more bottled water.
Due to expanding demand for bottled water, industry growth potential have expanded. Kinley
has rivals. Management must realise that bottled water brands will continue to generate
significant sales.

Question Marks- These products frequently require substantial investment to enter the star
quadrant. A return may need a lot of investment. These products should be extensively
studied to determine if they're worth keeping. Eg- Fanta by Coca Cola is an example of a
question mark business unit. It hasn't gained Coke-like popularity. The brand's popularity is
declining. In some locations, it has had strong sales.

c) Porter's Five Forces analyses five competitive forces that define any industry to find its
flaws and strengths. Porter's five forces

Current Competition- It refers to enterprises' war for market share and threatens
profitability. Eg- the fast food business is saturated, therefore McDonald's faces a tough
competition.

Potential competitors- they are firms that aren't now in the industry but may be if given the
chance. New players enhance industry capacity, start market share rivalry, and cut costs. Eg-
New fast food companies can affect McDonald's market share and profits as customers will
have more options.
Substitute products- Substitutes are those items that can efficiently meet customers' needs
and limit an industry's potential returns by limiting the price firms may charge for their
product. Less close substitutes a product has, the more industry firms can raise prices and
increase profits. Eg- McDonalds fast food can easily be substituted therefore they keep their
prices low and competitive.

Power of buyers- It refers to their ability to reduce the prices charged by enterprises in the
industry or increase their costs by demanding better product quality and service. Strong
buyers might profit by decreasing prices and raising costs. They buy bulk. They have product
and market knowledge and quality is emphasised therefore posing a threat. Eg- low switching
costs allow consumers to readily pressure McDonald's.

Power of suppliers- it is the supplier’s ability to raise input prices or industry costs. Strong
suppliers might profit by raising industry costs. Products from suppliers have alternatives.
Strong suppliers make unique products. Switching is expensive. Their product contributes to
the buyer's. They threaten integration. Strong providers ignore buyers. So, they're a menace.
Eg- the large population of suppliers weakens the effect of individual suppliers on
McDonald’s Corporation.

Answer 3

Foreign business and brand should invest in India because-

 India is one of the fastest-growing economies in the world.

 Low operational cost and cheap labour available in India.
 From time to time the Indian government provides incentives to encourage foreign
investment.
 India has the world's largest youth population and the third-largest group of scientists
and technicians.
 There has been an increase in infrastructure spending in India. The nation's
expenditures on infrastructure such as airports, cities, hotels, ports, roads, bridges,
hospitals, and power plants have increased.

Moreover, the following government policies also boost the Foreign Direct Investment in
India-

The Industrial Policy Statement of July 24, 1991, which states that while liberating the Indian
economy from official restraints, chances for increasing foreign investment in India should
also be fully explored, has liberalised India's foreign investment and technology policies. The
new policy has authorised majority foreign ownership in a variety of industries with
automatic permission. The new policy has also made the import of capital goods automatic,
so long as the foreign exchange need for such imports is met by foreign equity. In accordance
with the new policy, the following are notable aspects of initiatives: Foreign investment in
the majority of industries is now available for automatic clearance (no previous
government/RBI permission is necessary).

The Indian stock market was opened to FII participation in 1992-93, and since then, FII
portfolio investments have increased significantly. Portfolio investment, as defined by the
IMF, refers to cross-border transactions and positions involving debt or equity securities that
are not included in direct investment or reserve assets. In the stock brokerage, merchant
banking, asset management, and other nonbank financial services sectors, a number of joint
ventures involving local and international securities firms have been permitted. International
methods and processes have been introduced to the Indian Securities business as a result of
FII investment and financial joint ventures. FIIs are permitted to invest up to a total of 24% of
a company's equity, which may be increased to 40% with the approval of the Board of
Directors and a Special Resolution of the General Body. Companies with a three-year track
record of success are permitted to issue Euro-bonds for approved purposes. Companies
investing in infrastructure projects, such as power, petroleum exploration and refining,
telecommunications, ports, highways, and airports, are excluded from the 'three-year track
record' requirement, according the updated rules announced in November 1995.

The liberalisation (privatisation, delicensing, relaxation of foreign investment policy, removal

of MRTP limitations on M&A, etc.) and the SEBI Takeover Code have paved the way for
cross-border mergers and acquisitions in India. Foreign MNCs have utilised mergers and
acquisitions as a market entrance and competitive strategy. Multiple multinational
corporations have bought the partner's interest in their joint ventures or increased their stake
in their joint ventures and subsidiaries. Historically, elements like as reinvested earnings were
removed from the calculation of FDI in India. However, in June of 2003, the Government
linked the compilation technique of FDI with worldwide best practises, and India now
adheres to the globally accepted definition of FDI. In accordance with worldwide best
practises, foreign direct investment comprises both equity capital, reinvested earnings
(retained earnings of FDI enterprises), and "other direct capital" (inter-corporate debt
transactions between related entities). In addition to equity of incorporated organisations, data
on equity capital cover equity of unincorporated companies (mostly foreign bank branches in
India and Indian bank branches operating overseas).

Answer 4

McFarlan and McKenney’s IT grid illustrates the link between business strategy, information
technology strategy, and business operations. The grid can be broken down into four distinct
parts-

Support- These are businesses whose use of IT at the moment does not significantly add to
their capability to compete, and for whom IT is not anticipated to effect competitive
performance in the foreseeable future. IT may be valuable to such organisations for support
functions as accounting, word processing, and job scheduling; but, these organisations have
not found IT to be a source of power over their competitors. Companies that fall into this
category can be ones that provide relatively straightforward services or operate
manufacturing operations in low-technology areas of the industry. A company involved in
house painting such as Burger, Asian paints, etc gardening may find a personal computer
useful, but its competitive edge will be primarily down to the painting houses.

Factory- Organizations that McFarlan and McKenney classify as factory currently have a

high reliance on information technology for their competitive performance; however, it is not
anticipated that future advancements in information technology will significantly improve
these organisations' capacity to compete in markets. Companies such as Ola and Uber fall
under the category which is highly dependant on IT system for book taxis but future changes
in IT are not expected to increase their competitive edge. Similarly companies like Swiggy
and Zomato use IT to deliver food but no changes on dependency on IT is expected.

Turnaround- The current level of dependence that other organisations have on their IT
systems is quite minimal; nevertheless, as the environment continues to shift, it is inevitable
that IT will come to play a much more significant role. Companies that fall into the
"turnaround" category of the grid are listed below. Eg- delivery companies such as DHL,
UPS, and Fedex, weren’t dependent on IT now use IT to provided their customers with the
option to go online and monitor the status of their items while they are in the process of being
shipped. In this scenario, the planning of IT requires a significant amount of effort, and it
must be closely tied to the organisational strategy.

Strategic- The importance of IT to certain businesses on a strategic level. When an

organization's dependency on its information systems is already extremely high and when
that organization's future is also anticipated to be significantly and significantly influenced by
advances in information technology, it is considered to be in this state. As a consequence of
this, the individual in charge of information technology could also serve on the board of
directors of the organisation. Eg- NASA is highly dependant on it’s IT. If NASA’s research
(on computers) 'goes down’ it would not be able to operate.

Answer 6

Market segmentation is the process of dividing the market into distinct groups (or segments)
of buyers who are likely to respond positively to different product and service offerings and
market mixes. These segments serve as the basis for product targeting, which is the process
of evaluating and selecting market segments for specific product lines. Market segmentation
is the practise of dividing a market into distinct groups of buyers with similar or identical
attitudes and patterns of behaviour, who may require distinct products or marketing to meet
their needs. By segmenting a market into its broad parts, businesses should be able to
concentrate their marketing efforts more effectively and efficiently by creating product
offerings and marketing programmes that meet the needs of the various market segments.
Consumer products are aimed at the end-user, so the picture is a little more complicated (the
consumer). Consumer buyer behaviour is significantly less rational than industrial buyer
behaviour and is comprised of a wide variety of economic, psychological, and sociological
factors. To enable a business to deploy its resources for maximum impact across its customer
bases, marketing professionals must devise methods of segmenting the total population into
meaningful and relevant subgroups. Utilising demographic variables is a frequent method for
initiating this procedure.
The various types of Segmentations are-

a) Demographic Variable- These segments are determined by age, gender, religion,

ethnicity, family size, and family life cycle phase. For eg- children's products, ethnic
foods, 18–30 holidays, retirement homes, vehicles, etc.

b) Socio economic- It is based on social class, income, and occupation. For example
Luxury products, convenience services, discount goods, etc.

c) Geographic- It is performed based on country, region, urban/suburban/rural,

town/city, climate, and other factors. For eg- country apparel, air conditioning,
regional delicacies, etc.

d) Geo-demographic- House type and location are used to segment the population. Such
as Conservatories, lawnmowers, etc.

e) Psychographi- Segmentation based on values, lifestyle, and personality. For instance,

health/healthier products, cosmetics, tobacco products, etc.

f) Mediagraphic- Segmentation is based on media consumption patterns (e.g. papers

read). For example- specialised periodicals, eco-friendly vacations, etc.

g) Behavioral- Segmentation is based on behavioural characteristics, such as

time/occasion of purchase, loyalty, user status, benefits sought, product attitude, etc.
For example- products for Mother's Day, disposable cameras, toothpaste, etc.

The concept of geo-demographic segmentation is a good example of combining different

variables, as it focuses on the relationship between a person's geographical location and their
demographic characteristics, as there are frequently close ties between a person's place and
type of residence and factors such as income, family size, and attitudes. ACORN (A
Classification of Residential Neighbourhoods), which uses 40 variables derived from
population census data to differentiate residential areas, is a well-known scheme of this type.
Another is Experian's MOSAIC, which utilises multiple data sources (such as census data,
financial data, property characteristics, and demographic information) and a variety of
sophisticated analytical techniques to generate household profiles at the full postcode level.

Factors such as social class and lifestyles are typically grouped under the concept of
psychographic segmentation, an approach that has garnered considerable attention in recent
years due to the aforementioned reciprocal relationship between lifestyles and consumption.
Lifestyle segments can either be developed as "off-the-shelf" products by marketing agencies
or management consultancies, or they can be customised for/by individual companies,
although the latter tend to be more complex and costly to design. VALS (Values and
Lifestyles) was developed by SRI International and is a well-known example of the former.
Answer 7

Corporate governance is the system of rules, practices, and processes by which a firm is
directed and controlled. A company's shareholders, top management executives, customers,
suppliers, financiers, the government, and the community are all examples of the various
stakeholders that must have their interests taken into consideration in order to ensure good
corporate governance. Corporate governance can be carried out in two ways: either by a two-
tiered board - one supervisory and one management - as in the European style, or by a single
board composed of both executive and non-executive directors, as in the English style. The
board of directors of Reliance is responsible for the company's governance, hence Reliance's
form of governance is considerably more similar to the British system. The private sector has
a stakeholder-based approach to corporate governance, and Reliance's board of directors is
directly elected by the shareholders, while the board itself has a significant role in the
selection of candidates for shareholder approval. In consideration of numerous external and
internal matters, the board determines management directives and promotes accountability by
assigning positions. Since shareholders must approve the board of directors, there is also not
too much authority concentrated in one individual. Therefore, Reliance’s board of directors
and corporate governance is closely liked together and the board of directors is the axis
around which corporate governance in Reliance revolves.

Suggestions for improvement of corporate governance in India are-

 Companies that are listed on a stock exchange and have a paid-up share capital of 3
crore or more are required to follow the necessary recommendations.

 The composition of the board of directors ought to consist of the best possible balance
of executive and non-executive directors.

 The audit committee shall consist of three independent directors, at least one of whom
should have experience of financial and accounting matters.

 At least four meetings should be held by the Board per year, with a maximum delay
of four months allowed between each meeting. These meetings should be used to go
through operational plans, capital budgets, quarterly outcomes, and minutes from
committee meetings.

 A director may not serve as the chairman of more than five committees total across all
firms for which they are responsible, and may not serve on more than ten committees
overall.

 The management discussion and analysis report addressing industry structure,

opportunities, threats, risks, outlook, and internal control system should be prepared
for external assessment.
 Work Cited

1) Worthington, Ian and Chris Brittion. “The Business Environment A Global

Perspective” Pearson Education, 2018

2) Cherunilam, Francis. “Business Environments Text and Cases” Himalaya Publishing

House, 2008

3) Campbell, David “Organizations And The Business Environment” Elsevier, 2005

4) Rahi, Ashmita “Key Advantages of Doing Business in India” Lexology, 1 Nov. 2021
https://www.lexology.com/library/detail.aspx?g=fd25e2ba-3143-4656-ac95-
700b818be35a#:~:text=Benefits%20of%20Doing%20Business%20in,business
%2Dfriendly%20policies%20and%20others.

5) Gregory, Lawrence. “McDonald’s Five Forces Analysis” Panmore Institute, 1 Sep.

2018 http://panmore.com/mcdonalds-five-forces-analysis-porters-model

6) “Porter’s Five Forces Model of Competition” Management Study Guide

https://www.managementstudyguide.com/porters-model-of-competetion.htm

7) “BCG Matrix (Growth Share Matrix): Definition, Examples” StudiousGuy. 2022

https://studiousguy.com/bcg-matrix-growth-share-matrix-definition-examples/

8) Chen, James “Corporate Governance” Investopedia, 4 July 2021

https://www.investopedia.com/terms/c/corporategovernance.asp