Business Studies Part I
Business Studies Part II

Impact of Government Policy Changes on Business and Industry

Impact of Government Policy Changes on Business and Industry/ Challenges faced by the Indian Corporate Sector:

    1. Increasing competition for Indian firms due to changes in the rules of industrial licensing and entry of foreign firms.
    2. More demanding customers as they are more aware and are offered wider choice in purchasing better quality of goods and services due to high competition.
    3. Rapidly changing technological environment creates tough challenges before smaller firms.
    4. Necessity for change in the way of their operations.
    5. Need for developing human resource as the new market conditions require people with higher competence and greater commitment. Hence the need for developing human resources.
    6. Market orientation as the firms have to study and analyse the market first and produce goods accordingly.
    7. Loss of budgetary support to the public sector has declined over the years

Managerial Response to Changes in Business Environment

    1. Acquisitions and mergers
    2. Diversification
    3. Brand building
    4. Innovative distribution and selling techniques.
    5. Changes in capital structure
    6. Customer-oriented approach
    7. Technological developments
    8. Better labour relations.

Economic changes initiated by the government under the Industrial Policy, 1991

  1. The government reduced the number of industries under compulsory licensing to six.
  2. The role of public sector was reduced. It was now limited only to four industries of strategic importance.
  3. Disinvestment was carried out in case of many public sector industrial enterprises.
  4. Foreign Direct Investment was permitted.
  5. Automatic permission was now granted for technology agreements with foreign companies.
  6. Foreign Investment Promotion Board (FIPB) was set up to promote and channelise foreign investment in India.

The Indian corporate sector has come lace-to-face with several challenges due to government policy changes. Some of them are:

  1. Increasing Competition: The competition has Increased due to entry of new players (pnvausanon and globalisation).
  2. More Demanding Customers: Customers today has become more demanding because they are well-informed. Increased competition in the market gives the customers Wider choice In purchasing better quality of goods and services.
  3. Rapidly Changes Technological Environment: The rapidly changing technological environment creates tough challenges before smaller firms
  4. Necessity for Change After 1991:  The market forces have become turbulent as a result of which the enterprises have to continuously modify their operations.
  5. Need for Developing Human Resources Earlier: Indian enterprises worked with inadequately trained personnel The new market conditions require people with higher competence and greater commitment Hence. the need for developing human resources
  6. Market Orientation Before 1991: All firms worked with production oriented marketing operations. In a fast changing world. there was a shift to markel orientation. The firms had to study and analyse the market first and produce goods accordingly.
  7. Loss of Budgetary Support to the Public Sector: The public sector undertakings have realised that in order to survive and grow, they will have to be more efficient and generate their own resources for the purpose