Changing business environment

Changing business environment

Today’s Changing business environment is characterized by different kinds of environment. Then there is a question arise that how to adapt to change. There is no second opinion on the issue that there are winds of change in the total business environment in India. The period from 1991 onwards stands from the history of Indian economy. Before 1991 Indian economy was a closed economy characterized by strict control of the government over all the economic activities characterized by a dominance of public sector, lack of competition, central planning and closed economy.

Changing business environment

Changing business environment

During the nineties, the economy witnessed worst international financial crises and as a last resort strategy, the government of India declared the liberalization and globalization of Indian economy to strategically deal with the crisis. As part of its broader strategy, the government of India introduced economic reforms in the economy. These reforms were introduced in mainly two domains that are, the macroeconomic stabilization and structural adjustments. The reform process has shifted the economy from a closed economy to a free market economy that requires a totally new mechanism for its economic management. Thus, the economic reforms led to significant changes in almost all domains of the economy. These changes may be titled as changing Profile of the business environment in India. For convenience, these changes are broadly classified as changes in economic, political, legal, social, cultural, technological and other fronts. All these changes are explained as follows:


Changing business environment is also affected by a change in the economic environment. During the process of economic reforms, the most significant changes have occurred in the economic domain of the country. The whole economic system and economic management of the country have changed. The industry is witnessing a totally new parameter to perform their economic activities. The role of the government to control the economic affairs of the country has also changed leading to significant changes in economic policy formulations and decision making. All the important changes introduced on the economic front of the economy are stated as follows:
(i) Shifting the economy from a closed economy to a free market
(ii) Liberalization of various provisions and policies leading to reducing
(iii) Shifting from a socialist philosophy to a capitalistic philosophy.
(iv) Shifting from a protectionist business environment to a competitive business environment
(v) Free entry and exit of MNCs and foreign brands in India
(vi) An increased flow of FDI through incentives and policy liberalizations
(vii) Shifting from ISI to ISO quality standards.
(viii) Shifting from public sector-led economic growth to private sector-led economic growth.
(ix)More emphases on the development and promotion of the service sector of the economy.
(x) Significant changes in economic policies (such as fiscal policy, monetary policy, industrial policy, EXIM policy, EXIT policy, Policy regarding FDI etc.
(xi) Guidelines from WTO, IMF, and IBRD in the formulation of domestic and foreign economic policies.
(xii) Determination of prices through demand and supply forces
(xiii) Growth and development of the country


Changing business environment is also affected by a change in the legal environment.
Since independence, the legal system followed in India was based on the socialist philosophy of strict government control over all the economic affairs of the economy. The various legislation enacted during that period had served as a measure to exercise strict control of the government over the industry. The important laws enacted for the purpose includes mainly the MRTP act, IRDA, FERA etc. In 1991 the government of India announced the Liberalization and globalization of Indian economy when the country was engulfed with problems of the ever worst international financial crisis. This announcement paved a way for shifting of an economy form a closed economy to a free market economy Now after liberalization and globalization these laws are not suitable for the new economic order adopted by India, consequently all these laws have either to be abolished or amended according to changed conditions and the requirements. This may be called the changing Profile of legal environment in India. The various elements of changing Profile of legal environment in India are newly stated as follows:
(i) Abolition of all strict provisions of MRTP Act
(ii) Replacing FERA by FEMA
(iii)Abolition of IRDA
(iv) Enactment of Consumer Protection Ac (v) Enactment of Environment Protection Act
(vi) Enactment of new Competition Act
(vii) Replacement of Company’s Act 1956 with a new legislation.
(viii) Formation of new Copy Right and Related Rights Act.
(ix) Enactment of SEBI Act.
(x) Formation of Anti Dumping Laws


Changing business environment is also affected by the change in the political environment.

The political environment of the country has the most significant impact on the business environment of the country. India is à multi-ethnic, multi-religious federal republic of 28 states and 7 union territories. India is having a multi-party political system comprising a large number of national and regional political parties. The major national parties include the Congress, BJP, BSP, AIDMK DMK, UF. CPI, CPM etc. The Indian political environment has become highly uncertain from the last two decades, from 1947 to 1990 the country hold eight elections (Eight prime ministers) in a period of around forty years. While from 1990 till date India hold six elections und Eight Prime Ministers in just a period of around twenty years only. This is the major evidence of the prevalence of political uncertainty in India. In such kind of political environment, it is very difficult for a business firm to make a long-term planning and frame out corporate strategies. The important aspects of changing Profile of political environment in India are given as follows:

Also Read  14 Principles of Business Management by Henry Fayol
(i) Continuous political uncertainty 
(ii)Increasing role of regional and state-level political parties in national politics of the country
(iii) Increasing limitations of the multi-party political system.
(iv) Shifting in the economic system from the mixed economy to a free market
(v) Increasing trends of criminalization of politics.
(vi) Reduced role of the government in the economic affairs of the country economy
(vii) People have become highly educated and have become more politically
(viii) Increased role of politics in economic decision making and policy
(ix) Increasing trend of vote bank politics. conscious and have developed an interest in political and political affairs. formulation.
(x) Increasing pressure of international politics.

Changing in the social and cultural environment:

Changing business environment is also affected by a change in social and cultural environment. Therefore, The social and cultural environment is the most important element of the business environment of a country. The socio and cultural environment provide broad guidelines to the industry to produce products and services needed by the society. The significant changes in the socio-cultural environment of India are stated as follows :
(i) Inter-cast marriages are on the rise
(ii) Increasing emphasis on gender equality
(iii) Reduction in rigidity, the people are becoming more flexible and open in their thoughts, perceptions, and sensations.
(iv) Movement from an orthodox culture to modern culture.
(v) Change in eating habits, tastes, and preferences of the people.
(vi) Shifting from the joint family system to nuclear families
(vii) Emergence of strong middle class.

(viii) Improvement in standard of living of the people.

(ix) Improvement in the status of women in the society because of economic independence.
(x) Change in occupational opportunities
(xi) Intra familiar relations has diluted.
(xii) Birth rate and death rate are on decrease
(xiii) Commercialization of education
(xvi) Social values are on the decrease
(xv) Decreasing proportion of child population


Changing business environment is also affected by the change in the technological environment. The most astonishing changes in the twentieth century are in the field of technology. The systems are becoming more dynamic and complex in nature bringing about drastic changes in the society. More and more industrial and technological growth has led to an improvement of both quality and efficiency of products and services. Even the jobs are becoming more scientific and technical requiring only specialized and skilled personnel’s. Technological and scientific developments and mass productions have created several new opportunities and avenues of employment and new occupations come into being. The significant changes in this direction are given as follows:

(i) Complex division of labor
(ii) Specialization in every field of life, whether business, Housekeeping
(iii) Individual achievements have an upper hand. Education or Sports.
(iv) Impersonal social relationships.
(v) New values are coming into being due to technological growth that dominates the importance of customs and traditions.
(vi) Competition increases.
(vii)More emphases on domestic research and developments.
(viii)Life has become faster leading to increased social mobility
(x) Systems have become more complex and compact
(xi) Industry is offering multi-utility products and services
(xii) Biological engineering is on the rise and is creating wonders.
(xiii) Genetic engineering is also gaining importance. 


Changing business environment is also affected by the change in the physical and natural environment. 

The physical and natural environment of the country is also under consistent change since industry. The enactment of the Environment Protection Act and the increasing role of non-government organizations (NGO) and society, in general, has created many problems for the industry to act in a socially responsible way. every day increasing pollution in the air, water and soil have created markets for certain new products such as Mineral waters, Frozen foods, Oxygen masks and a new range of cosmetics specially designed to protect the human skin from increasing environmental ill effects. The significant changes in this direction are explained as follows: the last few decades leading to some significant implications for the
(i) Ecological imbalance
(ii) Increasing pollution of air, water, soil, and noise.
(iii) Deforestation
(iv) Depletion of ozone layer causing Global warming, acid rain etc
(v) A decrease in wildlife species
(vi) Fast depletion of natural resources
(vii) Major climatic changes
(viii) Unhealthy and uncongenial living conditions.
(ix) Urbanization leading to falling in the area under agriculture
(x) Increasing awareness among masses regarding the social responsibilities of business and the negative implications of corporates activities on the natural environment.

Changing Business Environment

In addition to the given factors, the industry is facing tough challenges due to changing conditions of business environment at the international level also The importance of non-state bodies such as WTO, IMF, IBRD, UNO etc. is increasing day by day in managing the world economy. The countries are not even free to frame their domestic economic policies as per their own choice and preferences. All the member countries have to follow the broad guidelines issued by these world bodies while framing their policies and programmes for their economic growth and development. Being a rational entrepreneur there must be continues watch on all the environmental factors to frame policies and strategies for economic success.
Also Read  Privileges and Exemptions available to a Private Company

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.