Economic reforms/environment affects the business and industry directly. Business plans and programmers are directly influenced by economic factors, such as, interest rates, money supply, price level, consumers credit etc. Economic conditions leading to inflation or deflation affect the business activities. Inflation leads to rise in general price-level, whereas deflation leads to fall in price level. Higher petrol prices in the country reacted a trend in favour of small like Maruti car. State of industrial trade and business booms and slumps constitute the economics of market environment.
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Recently Government initiated various economic policies. As such the impact of these reforms changes on business and industry in the following manner:
- Buyer’s market
- Export is required for survival
- Corporate vulnerability
- Threat fro multinational companies
- Overall competition
- World class technology
- Future not guided by past failures
Buyer’s market
In the liberalized policy regime shortages of goods are no more, but there are surplus of goods. This arise due to competition, reduction in cost, up-gradation of technology, improvement in quality and customer convenience. Removal of government restrictions on capacity creation and capacity utilization has also helped increase in the supply of goods. Industry has been given total freedom to expand and diversify. Price control has been removed. Investment now takes place in the areas of demand. All these changes have been made the buyer, the sovereign of the market.
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Export is required for survival
Implementation of new trade policy has linked imports to exports. The enterprises should earn foreign exchange by exports and use the same foreign exchange for importing raw material spares and equipments. For example: Reliance Group, Essar World Trade, Ceat, Videocon, Eicher, MRF etc, are being benefited by the new policy.
Corporate vulnerability
Due to pressure from multinationals Indian companies are facing takeover, subordinate position in joint venture, unequal battle among the competitors and financial weakness. For instance, DCM Daewoo had to change only 6 crores as investment in the joint venture, whereas Daewoo pumped 468 crores equity which is about 92% of the total investment.
Threat from multinational companies
Due to the present policy of liberalization of our government, massive entry of multinationals in the country has started. The vast resources and the modern technology of the present multi-national company have enabled their subsidiary Indian companies to boost sales and enjoy strategic advantage over their competitors. The presence of multinational companies has been rendering valuable services to our economy. It is supplying superior quality of goods, generating more employment opportunities, promoting modern technology and awakening our business community.
Overall competition
The new competitive environment has thrown the economy open. There is tough competition between multinationals and there is also competitions between Indian enterprises and foreign enterprises. Competition has now become global. It is not confined to national boundaries. For instance, Weston Electronics company which held about 18% of the television market has been virtually thrown out of the market due to cut throat competition and technological backwardness.
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World class technology
Changes in government policy regarding business and industry has provided us with world class technology. Indian companies have also started making investment in research and development. Pharmaceutical industries made 2% investment in R & D. In developed countries investment in research and development goes to about 12%. Multinationals are also bringing world class technology in the country. This has enabled faster growth of industries.
Future not guided by past failures
It is rightly said that future starts afresh for Indian companies. Future, now needs new strategies, high technologies, determined efforts, enthusiasm, organisation and leadership. New approaches, systems structures and new leadership must emerge to compete with the multinationals. We must forget the past, bury its failures and start working with new endeavor, approaches and leadership.