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NTERNAL AND EXTERNAL BUSINESS ENVIRONMENTMade by:Aastha,Harsimran,Harleen,Dhanvir,Banjul and Gaurav Sharma.

2. Introduction to Business EnvironmentBusiness environment consist of all those factors that have a bearing on the business. Theterm 'business environment implies those external forces, factorsand institutionsthat are

beyond the control of individual business organizations and their management and affect thebusiness enterprise.

3. These forces are customer, creditors, competitors, government, socio-culturalorganizations, political parties national and international organizations etc. some of thoseforces affect the business directly which some others have indirect effect on the business.

4. Features of business environmentTotality of external forces: Business environment is the sum total of all things external tobusiness firms and, as such, is aggregative in nature.Specific and general forces: Business environment includes both specific and general forces.Specific forces affect enterprises in their day-to-day working. General forces have impact on

all enterprises and affect an individual firm only indirectly.

5. Dynamic nature: Business environment is dynamic in that it keeps on changing whether interms of technological improvement, shifts in consumer preferences or entry of newcompetition in the market.Uncertainty: Business environment is largely uncertain as it is very difficult to predict futurehappenings, especially when environment changes are taking place too frequently as in thecase of information technology or fashion industries.

6. TYPES OF ENVIRONMENTOn the basis of the extent of intimacy with the firm , the environmental factors may beclassified into different types-internal and external.

7. INTERNAL ENVIRONMENT

The internal environment is the environment that has a direct impact on the business. Herethere are some internal factors which are generally controllable because the company hascontrol over these factors. It can alter or modify such factors as its personnel, physicalfacilities, and organization and functional means, like marketing, to suit the environment.

8. A) VALUE SYSTEMThe value system of the founders and those at the helm of affairs has important bearing on thechoice of business, the mission and the objectives of the organization, business policies andpractices.

9. B) MISSION,VISION AND OBJECTIVESVision means the ability to think about the future with imagination and wisdom. Vision is animportant factor in achieving the objectives of the organization. The mission is the mediumthrough which the objectives are achieved.

10. C) Management structure and natureThe structure of the organization also influences the business decisions. The organizationalstructure like the composition of board of directors , influences the decisions of business asthey are internal factors . The structure and style of the organization may delay a decisionmaking or some other helps in making quick decisions.

11. EXTERNAL ENVIRONMENTIt refers to the environment that has an indirect influence on the business. The factors are

uncontrollable by the business. There are two types of external environment:

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12. Micro EnvironmentThe micro environment is also known as the task environment and operating environmentbecause the micro environmental forces have a direct bearing on the operations of the firm.a)SuppliersAn important force in the micro environment of a company is the suppliers, i.e., those whosupply the inputs like raw materials and components to the company.

13. Customer

The major task of a business is to create and sustain customers. A business existsonly because of its customers.Marketing IntermediariesThe marketing intermediaries include middlemen such as agents and merchants that help thecompany find customers or close sales with them.financersThe financers are also important factors of internal environment.

14. PublicPublic can be said as any group that has an actual or potential interest in or on an

organizations ability to achieve its interest. Public include media and citizens.

15. Macro EnvironmentMacro environment is also known as General environment and remote environment. Macrofactors are generally more uncontrollable than micro environment factors. When the macrofactors become uncontrollable , the success of company depends upon its adaptability to theenvironment.

16. Economic EnvironmentEconomic environment refers to the aggregate of the nature of economic system of thecountry, business cycles, the socio-economic infrastructure etc.Social Environment

The social dimension or environment of a nation determines the value system ofthe society which, in turn affects the functioning of the business. Sociological factors such ascosts structure, customs and conventions, mobility of labor etc. have far-reaching impact onthe business.

17. Political EnvironmentThe political environment of a country is influenced by the political organizationssuch as philosophy of political parties, ideology of government or party in power, nature andextent of bureaucracy influence of primary groups etc.Legal EnvironmentLegal environment includes flexibility and adaptability of law and other legal rules governingthe business. It may include the exact rulings and decision of the courts.

18. Technical EnvironmentThe business in a country is greatly influenced by the technological development. Thetechnology adopted by the industries determines the type and quality of goods and services tobe produced and the type and quality of plant and equipment to be used.

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The cultural environment has influences on some of the other environments:

the cultural environment strongly influences the labour environment and the socio-economic environment and the politics of the populace

o which effects the Political / Regulatory / Legal Environment..

The cultural environment is in turn influenced bysome of the other environments:

the economic evironmento is the standard of living comfortable, or stressed

the technological environmento how people are able to do thingso do they walk to work, driveo can they use a phone, access the internet

the geographic environmento effects weathero growing foodo housing and living conditions

Cultural Awareness

consumer product industrial product

Cultural Awareness

Knowing about the cultural circumstances of your target country can either help you save money, orprevent making mistakes - and no consumer products company can afford to make mistakes in aintensely competitive market.

The degree to which you must be culturally aware in marketing international business products andservices depends, to some extent, on whether the product/service is a consumer product or an

industrial product.WTGR

Consumer Products, by virtue of their marketing process

oMass advertising

oSales Promotion

oPersonal Sellingtend to require a strong degree of Cultural Awareness since this knowledge relates to the human

communication in the selling process.

Industrial Productshave less requirements, for cultural awareness, (in some instances), since thenegotiation is based on a situation of which there is little debate about any required culturaladaptations. For example, the technical specifications for an industrial ceramic automotive componentmight be the same in New York as they are in Tokyo or Moscow. What is important, to make this sale,is the price of the component and how it fits the specifications required by the component.

Other industrial products, which end up being part of a package which is evaluated by consumers, dohave to incorporate Cultural Awareness, eg. components of clothing products and food products.

.

Some textbooks say "the nation provides a workable definition of culture for international

business ..."

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In reality, there are many exceptions to this in 2005.These exceptions are the result of many political boundries breaking down as formerconquered countries leave aggregated nations and identify their own independence.Examples include the break-up of Yugoslavia and the former Soviet Union, the turmoil inthe Middle East between Israel and Palestine, and the recent events inside Afghanistan.

It is the opinion of this world traveller that in the millenium, many nations in the worldcannot be strictly defined by their political boundaries, and the political boundaries of manyplaces are increasingly irrelevant to the mix of cultures contained by that boundary

Language as a Cultural StabilizerA common language can bring people together within a defined boundary

Key PointsforUnderstanding

One of the great strengths of the Roman Empire was the fact that allRoman citizens spoke Latin, or learned to speak it.

One of the reasons, some say, that the United States became thelargest economy in the world was because it is the only place on the

planet were over 200 million people all speak the same languageacross many times zones.

Aesthetics - a culture's sense of beauty and good tasteAttitudes and Beliefs

attitudes towards time attitudes towards direct speaking and shyness attitudes towards value of silence vs. boldness attitudes towards achievment and work ethic attitudes towards change, and history

Religion

attitudes towards importance of religion and its role Protestant work ethic, Confucian work ethic Religion as a political stabilizer p. 54, text Religion as a disruptive force

o Northern Irelando Israel / Palestine

Class and Castes

India

England

Material Culture / Role of TechnologyEducation

brain drain

adult literacy

Language

language families of the world, map

non-verbal communication, body languageo Silent languageo Kinesics

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Gift giving, bribes, inducements, "considerations"attitudes towards respect for government and authority figure.

Many times in the international business class I ask two students (who read and write a languageother than English) to volunteer to demonstrate "translation" and "back translation" on the

blackboard at the front - invariably the back translation doesn't match the originakl sentance andeverybody has a good laugh.

After we did this in MGTC44 in February 2008 I received a nice email from one student who had someexperience with these challenges of "exactly" translating difficult words and she kindly offered to shareher experience with the rest of the class.

The Effects of Socio-Culture on BusinessBusinesses do not exist in a vacuum, and even the most successful business must be aware of changes in the

cultures and societies in which it does business. As society and culture change, businesses must adapt to stay

ahead of their competitors and stay relevant in the minds of their consumers.

Changing Preferences

A major socio-cultural factor influencing businesses and business decisions is changing consumer preferences.

What was popular and fashionable 20 years ago may not be popular today or 10 years down the road. Different

styles and priorities can undermine long successful products and services. For example, a clothing company

must constantly be aware of changing preferences when creating new products or it will quickly become

outdated.

Demographics

Changes in demographics are also a significant factor in the business world. As populations age, for example,markets for popular music and fashions may shrink while markets for luxury goods and health products may

increase. Additionally, changes in the proportion of genders and different racial, religious and ethnic groups

within a society may also have a significant impact on the way a company does business.

Related Reading:The Impact of Corporate Culture on Business Strategy

Advertising Techniques

Advertising is perhaps the area of business most closely in touch with socio-cultural changes. Advertising often

seeks to be hip and trendsetting, and to do this, advertising agencies and departments cannot lose track of the

pulse of the societies in which they engage in business. Changes in morals, values and fashions must all be

considered when creating outward facing advertising.

Internal Environment

In addition to a company's interactions with the market and its customers, socio-cultural factors also impact a

company's internal decision-making process. For example, changing gender roles and increasing emphasis on

family life have led to increased respect for maternity and even paternity leave with organizations. Additionally,

attitudes towards racial discrimination and sexual harassment have changed drastically over the years as a result

of socio-cultural change.

MONOPOLIES AND RESTRICTIVE TRADE PRACTICES (MRTP):

MONOPOLIES AND RESTRICTIVE TRADE PRACTICES (MRTP)

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What is meant by monopolistic trade practices?PowerPoint Presentation:

MRTP act on 1969 It has power to stop all business that create barrier for the scope of competition. Preventing

economic power concentration Probation of monopolistic , unfair , restrictive trade practice

PowerPoint Presentation:

Control the monopolies and protect consumer interest In market deteriorate the product quality limit technical

development prevent competition adopt unfair trade practices

Unfair trade practice:

Unfair trade practice False representation and misleading advertisement of goods and services. Falsely

representing second-hand goods as new. Misleading representation regarding usefulness, need, quality,

standard, style etc of goods and services. False claims or representation regarding price of goods and services.

Giving false facts regarding sponsorship, affiliation etc. of goods and services. Giving false guarantee or warranty

on goods and services without adequate tests.

Restrictive trade practice:

Restrictive trade practice To maximize their profits and to gain power in the market to block the flow of capital into

production.

Act shall not apply to::

Act shall not apply to: Any undertaking owned or controlled by the Government Company , government itself,

corporation established under any central or state act Any other association of employees formed for their own

reasonable protection as such employees Any undertaking owned by a co-operative society formed and

registered under any Central, Provincial or state Act, Any financial institution.

MRTP Commission and Filing of Complaint:

MRTP Commission and Filing of Complaint This commission shall consist of a Chairman and minimum 2 and

maximum 8 other members, all to be appointed by the Central Government . Every member shall hold the office

for a period specified by the Central Government. This period shall not exceed 5 years. In case of any unfair

trade practice, monopolistic trade practice and/or restrictive trade practice, a complaint can be filed against such

practices to the MRTP commission.

Monopolistic Trade Practices

A monopolistic trade practice is one, which has or is likely to have the effect of:

i. maintainingthe pricesof goods or charges for the services at an unreasonable level bylimiting, reducing or otherwise controlling the production, supply or distribution of goods orservices;

ii. unreasonably preventing or lessening competitionin the production, supply or distributionof any goods or services whether or not by adopting unfair method or fair or deceptive

practices;

iii. limiting technical developmentor capital investmentto the common detriment;

iv. deteriorating the qualityof any goods produced, supplied or distribute; and

v. increasing unreasonably -

a. the cost of production of any good; or

b. charges for the provision, or maintenance, of any services; or

c. the prices for sale or resale of goods; or

d. the profits derived from the production, supply or distribution of any goods or

services.

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

Inquiry into Monopolistic Trade PracticesThe Commission may inquire into

Any monopolistic trade practice, Upon a reference made to it by the Central Government or

Upon an application made to it by the Director General or

Upon it own knowledge or information

Relief Available

a. Where the inquiry by the Commission reveals that the trade practice inquired into operates oris likely to operate against public interest, the Central Government may pass such orders as itthinks fit to remedy or present any mischief resulting from such trade practice.

b. 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 amonopolistic trade practice; or

ii. Prohibit the owner of any class of undertakings or undertakings generally, fromcontinuing to indulge in any monopolistic trade practice in relation to the goods orservices.

c. The Central Government may also make an order:

i. Regulating the production, storage, supply, distribution, or control of any goods orservices by an undertaking and fixing the terms of their sale (including prices) orsupply;

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 thespecified 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 notdeteriorate.

MONOPOLIES AND RESTRICTIVE TRADE PRACTICE COMMISSION

Complaints regarding monopolistic trade practice, unfair trade practice and restrictive trade practicecan be made to the MRTP commission at the following address:

Director General (Investigation & Registration)MRTPC

Bikaner House BaracksShahjahan Road

New Delhi 110011

Procedure of action on complaint: Inquiry may be initiated through a complaint by an individual or registered consumer

organisation.

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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 impugned

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

MRTP ACT

The Monopolies and Restrictive Trade Practices Act, 1969, aims to prevent concentration of economicpower to the common detriment, provide for control of monopolies and probation of monopolistic,restrictive and unfair trade practice, and protect consumer interest.

Monopolistic trade practice:

Monopolistic trade practice is that which represents abuse of market power in the production andmarketing of goods and services by eliminating potential competitors from market and takingadvantage of the control over the market by charging unreasonably high prices, preventing orreducing competition, limiting technical development, deteriorating product quality or by adoptingunfair or deceptive trade practices.

Unfair Trade 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 have 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. 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. Giving false or misleading facts disparaging the goods, services or trade of another person or

concern.Restrictive Trade Practice:

To maximise profits and market power, traders often attempt to indulge in certain trade practiceswhich tend to obstruct the flow of capital into the stream of production. It may also bring manipulationof prices or conditions of delivery or affect the flow of supplies in the market so as to imposeunjustified costs.

How are these practices controlled?

Investigation into restrictive trade practices by Commission

(1) The Commission may inquire into any restrictive trade practice, whether the agreement, if any,relating thereto has been registered under section 35 or not, which may come before it for inquiry it isof opinion that the practice is prejudicial to the public interest, the Commission may, by order, directthat,-

(a) the practice shall be discontinued or shall not be repeated;

(b) the agreement relating thereto shall be void in respect of such restrictive trade practice or

shall stand modified in respect thereof in such manner as may be specified in the order.

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(2) The Commission may, instead of making any order under this section, permit the party to anyrestrictive trade practice, if he so applies, to take such steps within the time specified in this behalf bythe Commission as may be necessary to ensure that the trade practice is no longer prejudicial to thepublic interest, and, in any such case, if the Commission is satisfied that the necessary steps havebeen taken within the time specified, it may decide not to make any order under this section in respectof the trade practice.

(3) No order shall be made under sub-section (1) in respect of -

(a) any agreement between buyers relating to goods which are bought by the buyers forconsumption and not for ultimate resale whether in the same or different form, type or specieor as constituent of some other goods;

(b) a trade practice which is expressly authorized by any law for the time being in force.

(4) Notwithstanding anything contained in this Act, if the Commission, during the course of an inquiryunder sub-section (1), finds that

48[the owner of any undertaking is indulging in monopolistic trade

practices], it may, after passing such orders under sub-section (1) or sub-section (2) with respect to

the restrictive trade practices as it may consider necessary, submit the case along with its findingsthereon to the Central Government

49[* * *] for such action as that Government may take under

section 31.

Presumption as to the public interest

(1) For the purposes of any proceedings before the Commission under section 37, a restrictive tradepractice shall be deemed to be prejudicial to the public interest unless the Commission is satisfied ofany one or more of the following circumstances, that is to say-

(a) that the restriction is reasonably necessary, having regard to the character of the goods towhich it applies, to protect the public against injury (whether to persons or to premises) in

connection with the consumption, installation or use of those goods;

(b) that the removal of the restriction would deny to the public as purchasers, consumers orusers of any goods, other specific and substantial benefits or advantages enjoyed or likely tobe enjoyed by them as such, whether by virtue of the restriction itself or of any arrangementsor operations resulting there from;

(c) that the restriction is reasonable necessary to counteract measures taken by any oneperson not party to the agreement with a view to preventing or restricting competition in or inrelation to the trade or business in which the persons party thereto are engaged;

(d) that the restriction is reasonably necessary to enable the persons party to the agreementto negotiate fair terms for the supply of goods to, or the acquisition of goods from, any oneperson not party thereto who controls a preponderant part of the trade or business ofacquiring or supplying such goods, or for the supply of goods to any person not party to theagreement and not carrying on such a trade or business who, either alone or in combinationwith any other such persons, controls a preponderant part of the market for such goods;

(e) that, having regard to the conditions actually obtaining or reasonably foreseen at the timeof the application, the removal of the restriction would be likely to have a serious andpersistent adverse effect on the general level of unemployment in an area, or in areas takentogether, in which a substantial proportion of the trade, or industry to which the agreementrelates is situated;

(f) that, having regard to the conditions actually obtaining or reasonably foreseen at the time

of the application, the removal of the restriction would be likely to cause a reduction in thevolume or earnings of the export business which is substantial either in relation to the whole

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export business of India or in relation to the whole business (including export business) of thesaid trade or industry;

(g) that the restriction is reasonably required for purposes in connection with the maintenanceof any other restriction accepted by the parties, whether under the same agreement or underany other agreement between them, being a restriction which is found by the Commission not

to be contrary to the public interest upon grounds other than those specified in this paragraphor has been so found in previous proceedings before the Commission;

50[* * *]

(h) that the restriction does not directly or indirectly restrict or discourage competition to anymaterial degree in any relevant trade or industry and is not likely to do so;

10[(i) that such restriction has been expressly authorized and approved by the Central

Government;

(j) that such restriction is necessary to meet the requirements of the defense of India or anypart thereof, or for the security of the State; or

(k) that the restriction is necessary to ensure the maintenance of supply of goods andservices essential to the community,]

and is further satisfied (in any such case) that the restriction is not unreasonable having regard to thebalance between those circumstances and any detriment to the public or to persons not parties to theagreement (being purchases, consumers or users of goods produced or sold by such parties, orpersons engaged or seeking to become engaged in the trade or business of selling such goods or ofproducing or selling similar goods, resulting or likely to result from the operation of the restriction.

(2) In this section "purchasers", "consumers" and "users" include person purchasing, consuming orusing for the purpose or in the course of trade or business or for public purchase; and references inthis section to any one person including references to any two or more persons being inter-connectedundertakings or individuals carrying on business in partnership with each other.

Special conditions for avoidance of conditions for maintaining resale prices

(1) Without prejudice to the provisions of this Act with respect to registration and to any of the powersof the Commission or of the Central Government under this Act, any term or condition of a contract forthe sale of goods by a person to a wholesaler or retailer or any agreement between a person andwholesaler or retailer or any agreement between a person and a wholesaler or retailer relating to suchsale shall be void insofar as it purports to establish or provide for the establishment of minimum pricesto be charged on the resale of goods in India.

(2) After the commencement of this Act, no supplier of goods whether directly or through any personor association of persons acting on his behalf shall notify to dealers or otherwise publish on or inrelation to any goods, a price stated or calculated to be understood as the minimum price which maybe charged on the resale of the goods in India.

(3) This section shall apply to patented articles (including articles made by a patented process andarticles made under any trade mark) as it applies to other goods and notice of any term of conditionwhich is void by virtue of this section or which would be so void if included in a contract of sale oragreement relating to the sale of such article shall be of no effect for the purpose of limiting the rightof a dealer to dispose of that article without infringement of the patent or trade mark, as the case maybe:

PROVIDED that nothing in this section shall affect the validity as between the parties and theirsuccessors, of any term or condition of a license granted by the proprietor of a patent or

51[trade mark

or by a licensee of patent or trade mark] or of any assignment of a patent or trade mark, so far as it

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regulates the price at which articles produced or processed by the licensee or the assignee may besold by him.

Explanat ion : In this section and in section 40, the term "supplier", in relation to supply of any goods,means a person who supplies goods to any person for the ultimate purpose of resale and includes awholesaler, and the term "dealer" includes a supplier and a retailer

Prohibition of other measures for maintaining resale prices

(1) Without prejudice to the provisions of this Act with respect to registration and to any of the powersof the Commission or of the Central Government under this Act, no supplier shall withhold supplies ofany goods from any wholesaler or retailer seeking to obtain them for resale in India on the ground thatthe wholesaler or retailer-

(a) has sold in India at a price below resale price, goods obtained, either directly or indirectly,from that supplier, or has supplied such goods, either directly or indirectly, to a third party whohad done so; or

(b) is likely if the goods are supplied to him to sell them in India at a price below that price orsupply them, either directly or indirectly, to a third party who would be likely to do so.

(2) Nothing contained in sub-section (1) shall render it unlawful for a supplier to withhold supplies ofgoods from any wholesaler or retailer or to cause or procure another supplier to do so if he hasreasonable cause to believe that the wholesaler or the retailer, as the case may be, has been usingas loss leaders any goods of the same or a similar description whether obtained from that supplier ornot.

(3) A supplier of goods shall be deemed to be with holding supplies of goods from a dealer if he-

(a) refuses or fails to supply those goods to the order of the dealer;

(b) refuses to supply those goods to the dealer except at prices, or on terms or conditions asto credit, discount or other matters which are less favorable than those at or on which henormally supplies those goods to other dealers carrying on business in similar circumstances;or

(c) treats a dealer, in spite of a contract with such dealer for the supply of goods, in a mannerless favorable than that in which he normally treats other dealers in respect of time ormethods of delivery or other matters arising in the performance of the contract.

(4) A supplier shall not be deemed to be withholding supplies of goods on any of the groundsmentioned in sub-section (1), if, in addition to that ground, he has any other ground which alone would

entitle him to withhold such supplies.

Explanation I: "Resale price" in relation to sale of goods of any description, means any price notifiedto the dealer or otherwise published by or on behalf of the supplier of the goods in question (whetherlawfully or not) as the price or minimum price which is to be charged on, or is recommended asappropriate for, a sale of that description or any price prescribed or purporting to be prescribed forthat purpose by any contract or agreement between the wholesaler or retailer and any such supplier.

Explanation II:A wholesaler or retailer is said to use goods as loss leaders when he re-sells themotherwise than in a genuine seasonal or clearance sale not for the purpose of making a profit on theresale but for the purpose of attracting to the establishment at which the goods are sold, customerslikely to purchase other goods or otherwise for the purpose of advertising his business.

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. Power of Commission to exempt particular classes of goods from sections 39 and 40

(1) The Commission may, on a reference made to it by the32

[Director General]or any other personinterested, by order, direct that goods of any class specified in the order shall be exempt from theoperation of sections 39 and 40 if the Commission is satisfied that in default of a system of maintainedminimum resale prices applicable to those goods-

(a) the quality of goods available for sale or the varieties of goods so available would besubstantially reduced to the detriment of the public as consumers or users of those goods, or

(b) the prices at which the goods are sold by retail would, in general and in the long run, beincreased to the detriment of the public as such consumers or users, or

(c) any necessary services actually provided in connection with or after the sale of the goodsby retail would cease to be so provided or would be substantially reduced to the detriment ofthe public as such consumers or users.

2) On a reference under this section in respect of goods of any class which have been the subject of

proceedings before the Commission under section 31, the Commission may treat as conclusive anyevidence of fact made in those proceedings.

Explain the primary and secondary capital markets briefly. Describe the

methods of making capital issues.

.The main components of capital market are: 1. Primary Market 2.

Secondary Market !

1. Primary Market (New Issue Market):

Primary market is also known as new issue market. As in this market securities are sold for

the first time, i.e., new securities are issued from the company. Primary capital market

directly contributes in capital formation because in primary market company goes directly to

investors and utilises these funds for investment in buildings, plants, machinery etc.

The primary market does not include finance in the form of loan from financial institutions

because when loan is issued from financial institution it implies converting private capital into

public capital and this process of converting private capital into public capital is called going

public. The common securities issued in primary market are equity shares, debentures,

bonds, preference shares and other innovative securities.

Method o f Floatat ion o f Securi t ies in Primary Market:

The securities may be issued in primary market by the following methods:

1. Public Issue through Prospectus:

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4. Right Issue (For Existing Companies):

This is the issue of new shares to existing shareholders. It is called right issue because it is

the pre-emptive right of shareholders that company must offer them the new issue before

subscribing to outsiders. Each shareholder has the right to subscribe to the new shares in

the proportion of shares he already holds. A right issue is mandatory for companies under

Companies Act 1956.

The stock exchange does not allow the existing companies to go for new issue without

giving pre-emptive rights to existing shareholders because if new issue is directly issued to

new subscribers then the existing equity shareholders may lose their share in capital and

control of company i.e., it would water their equity. To stop this the pre-emptive or right issue

is compulsory for existing company.

5. e-IPOs, (electronic Initial Public Offer):

It is the new method of issuing securities through on line system of stock exchange. In this

company has to appoint registered brokers for the purpose of accepting applications and

placing orders. The company issuing security has to apply for listing of its securities on any

exchange other than the exchange it has offered its securities earlier. The manager

coordinates the activities through various intermediaries connected with the issue.

2. Secondary Market (Stock Exchange):

The secondary market is the market for the sale and purchase of previously issued or

second hand securities.

In secondary market securities are not directly issued by the company to investors. The

securities are sold by existing investors to other investors. Sometimes the investor is in need

of cash and another investor wants to buy the shares of the company as he could not get

directly from company. Then both the investors can meet in secondary market and exchange

securities for cash through intermediary called broker.

In secondary market companies get no additional capital as securities are bought and sold

between investors only so directly there is no capital formation but secondary market

indirectly contributes in capital formation by providing liquidity to securities of the company.

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If there is no secondary market then investors could get back their investment only after

redemption period is over or when company gets dissolved which means investment will be

blocked for a long period of time but with the presence of secondary market, the investors

can convert their securities into cash whenever they want and it also gives chance to

investors to make profit as securities are bought and sold at market price which is generally

more than the original price of the securities.

This liquidity offered by secondary market encourages even those investors to invest in

securities who want to invest for small period of time as there is option of selling securities at

their convenience.

Capital Marketis the market, which provides the fund for which provides the fund

for long term. It is the market, which deals in shares which deals in shares,

debentures and bonds.

PRIMARY MARKET PRIMARY MARKET: It is a type of capital market from

whichthe business undertakings collect their business undertakings collect their long

term and medium term funds through the new issue of shares. through the new issue

of shares.

Secondary market: It is a type of capital market which helps to purchase And sell

shares helps to purchase And sell shares and debentures already issued.

2. CAPITAL MARKETThe market where investment instruments like bonds, equities and

mortgages are traded is known as the capital market.The primal role of this market is tomake investment from investors who have surplus funds to the ones who are running a deficit.

3. The capital market offers both long term and overnight funds.The different types offinancial instruments that are traded in the capital markets are: > equity instruments > creditmarket instruments, > insurance instruments, > foreign exchange instruments, > hybridinstruments and > derivative instruments.

4. Nature of capital marketThe nature of capital market is brought out by the following facts:

It Has Two SegmentsIt Deals In Long-Term SecuritiesIt Performs Trade-off FunctionIt

Creates Dispersion In Business OwnershipIt Helps In Capital FormationIt Helps InCreating Liquidity

5. Types of capital marketThere are two types of capital market:Primary market,

Secondary market

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6. Primary MarketIt is that market in which shares, debentures and other securities are sold

for the first time for collecting long-term capital.This market is concerned with new issues.Therefore, the primary market is also called NEW ISSUE MARKET.

7. In this market, the flow of funds is from savers to borrowers (industries), hence, it helps

directly in the capital formation of the country.The money collected from this market isgenerally used by the companies to modernize the plant, machinery and buildings, forextending business, and for setting up new business unit.

8. Features of Primary MarketIt Is Related With New IssuesIt Has No Particular PlaceItHas Various Methods Of Float Capital: Following are the methods of raising capital in theprimary market: i) Public Issue ii) Offer For Sale iii) Private Placement iv) Right Issue v)

Electronic-Initial Public OfferIt comes before Secondary Market

9. Secondary MarketThe secondary market is that market in which the buying and selling of

the previously issued securities is done.The transactions of the secondary market are

generally done through the medium of stock exchange.The chief purpose of the secondarymarket is to create liquidity in securities.

10. If an individual has bought some security and he now wants to sell it, he can do sothrough the medium of stock exchange to sell or purchase through . the medium of stockexchange requires the services of the broker presently, their are 24 stock exchange in India.

11. Features of Secondary MarketIt Creates LiquidityIt Comes After Primary MarketItHas A Particular PlaceIt Encourages New Investments

Three Primary Methods Used to Make Capital BudgetingDecisions

Related Articles What Are Capital Budgeting and Capital Structure?

Limitations of Capital Budgeting

The Difference Between a Capital Budget Screening Decision & Preference Budget

Sensitivity Analysis for Capital Budgeting

Techniques in Capital Budgeting Decisions

Why Is the Time Value of Money So Important in Capital Budgeting Decisions?

Capital budgeting is the process of determining whether or not an investment is worthwhile. Often

companies will have several opportunities and must measure each one's potential in order to make a

comparison and choose just one or a few. For example, a company might be trying to determinewhether to buy new equipment to expand production capacity on an existing product, or to invest in

research and development for a new product. The three main methods of taking this measurement

are Net Present Value (NPV), Internal Rate of Return (IRR) and Payback Period.

IRR

Internal Rate of Return is a percentage very similar to an interest rate, and is used to compare a

capital investment against other kinds of investment. Divide the expected profit by the expected

expenditure, and you'll arrive at a percentage of returns. Then look at the company's other projects

and determine the minimum acceptable percentage of return; this is called the hurdle rate. If the IRR

is higher than the hurdle rate, the project is worth pursuing. The IRR is easy to understand, and is

thus the most commonly used technique, though the NPV is more accurate.

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NPV

Net Present Value, or NPV, combines two concepts of value. First, it determines how much cash will

flow in as a result of the investment, and compares that against the cash that will flow out in order to

make the investment. Since these flows take place over time, and often the investment will pay off

much later, we also take into account the present and future value of money. Because of inflation,

money earned in the future is worth less in today's dollars than the same amount would be today.

Therefore, NPV calculates all of those inflows and outflows over time, takes inflation and foreign

exchange rates into account, and expresses the final benefit to the company in terms of today's

dollars.

Related Reading:The Difference Between a Capital Budget Screening Decision & Preference

Budget

Payback Period

Very simply, the payback period tells you how long it will take to recover your investment in a project.

If it will take one year to make back the investment from revenues from a new product, the payback

period is 1. The payback period method is antiquated and falling into disuse, because it has somesignificant drawbacks. It doesn't take into account the time value of money, and it tends to favor very

cyclical products that make the bulk of their money up front, rather than those that build momentum

and can produce cash inflows over a long period.

Multiple Techniques

Most companies use multiple techniques for all of their capital budgeting decisions. There are a

number of minor methods, such as profitability index and sensitivity analysis, which can also be

employed in making decisions. Since each method looks at the investment from a different

perspective, it is best to employ multiple analyses and take the opportunities with the best return

according to all techniques.

METHODS OF GROWTH

Small businesses can expand their operations by pursuing any number of avenues.

The most commonplace methods by which small companies increase their business

are incremental in character, i.e., increasing product inventory or services rendered

without making wholesale changes to facilities or other operational components. But

usually, after some period of time, businesses that have the capacity and desire to

grow will find that other options should be studied. Common routes of small

business expansion include:

Growth through acquisition of another existing business (almost always smaller in

size)

Offering franchise ownership to other entrepreneurs

Licensing of intellectual property to third parties

Establishment of business agreements with distributorships and/or dealerships

Pursuing new marketing routes (such as catalogs)

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companies spend all their energy on marketing and production plans and ignore

developing similar roadmaps for their personnel needs."

Business expansion also brings with it increased opportunities for staff members

who were a part of the business in its early days. The entrepreneur who recognizes

these opportunities and delegates responsibilities appropriately can go far toward

satisfying the desires of employees who want to grow in both personal and

professional capacities. But small business owners also need to recognize that

business growth often triggers the departure of workers who are either unable or

unwilling to adjust to the changing business environment. Indeed, some employees

prefer the more relaxed, family-type atmosphere that is prevalent at many small

business establishments to the more business-like environment that oftenaccompanies periods of growth. Entrepreneurs who pursue a course of ambitious

expansion may find that some of their most valuable and well-liked employees decide

to instead take a different path with their lives. In addition, Nelton pointed out that

"some employees may not be able to grow with the company. You may have to let

them go, despite their intense loyalty and the fact that they have been with the

company since its inception. This will be painful."

CUSTOMER SERVICE Good customer service is often a significant factor in small

business success, but ironically it is also one of the first things that tends to fall by the

wayside when business growth takes on a hectic flavor. "When the workload

increases tremendously, there's a feeling of being overwhelmed," one small business

owner admitted to Menninger. "And sometimes you have a hard time getting back to

clients in a timely fashion. So the very customer service that caused your growth in

the first place becomes difficult to sustain." Under such scenarios, businesses not

only have greater difficulty retaining existing clients, but also become less effective atsecuring new business. A key to minimizing such developments is to maintain

adequate staffing levels to ensure that customers receive the attention and service

they demand (and deserve).

DISAGREEMENTS AMONG OWNERSHIP On many occasions, ownership

arrangements that functioned fairly effectively during the early stages of a company's

life can become increasingly problematic as business issues become more complex

and divergent philosophies emerge. For example, Sherman noted that in manygrowing enterprises that were founded by two or more people, "one or more of the

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cofounders are unable to keep pace with the level of sophistication or business

acumen that the company now requires. Such a cofounder is no longer making a

significant contribution to the business and in essence has become 'obsolete.' It's

even harder when the obsolete partner is a close friend or family member: In thiscase, you need to ask: Will the obsolete cofounder's ego allow for a position of

diminished responsibility? Can our overhead continue to keep him or her on staff?"

Another common scenario that unfolds during times of business growth is that the

owners realize that they have profoundly different visions of the company's future

direction. One founder may want to devote resources to exploring new marketing

niches, while the other may be convinced thatconsolidationof the company's

presence in existing markets is the way to go. In such instances, the departure of one

or more partners may be necessary to establish a unified direction for the growing

company.

FAMILY ISSUES Embarking on a strategy of aggressive business expansion

typicallyentailsan extensive sacrifice of timeand often of moneyon the part of

the owner (or owners). But as Sherman noted, "many growing companies, especially

those founded by younger entrepreneurs, are established at a time when all of the

cofounders are either unmarried or in the early stages of a marriage. As the size of

the company grows, so does the size of the cofounders family. Cofounders with young

children may feel pressure to spend more time at home, but their absence will

significantly cut their ability to make a continuous, valuable contribution to the

company's growth." Entrepreneurs pondering a strategy of business growth, then,

need to decide whether they are willing to make the sacrifices that such initiatives

often require.

METAMORPHOSIS OF COMPANY CULTUREAs companies grow, entrepreneurs often

find it increasingly difficult for them to keep the business grounded on

thebedrockvalues that were instituted in its early days. Owners are ultimately the

people that are most responsible for communicating those values to employees. But

as staff size increases, markets grow, and deadlines proliferate, that responsibility

gradually falls by the wayside and the company culture becomes one that is far

different from the one that was in placeand enjoyedjust a few short years ago.

Entrepreneurs need to make sure that they stay attentive to their obligations and role

in shaping company culture.

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The external business environments include factors: political, technological,

economical, legal, demographic and socio-cultural. These factors may not have an

immediate direct effect on your business, but they will play a role in shaping your

business with time. For instance, if your country faces economic hardships, your

business may not do so well. Your markets spending habits will change accordingly,

your raw materials costs will also change, and you may end up reducing your

production and letting go of some of your employees. Retrenchment is one of the

biggest negative impacts of economic problems.

Technology can have negative or positive impacts on a business. Technological

developments can help make your work easier and increase your productivity; it can

also allow for the expansion of your business. However, it can lead to the reduction

of your workforce due machines which, therefore, means loss of jobs for some

people. For instance, a job that was previously done by ten people may now be done

by one person who will be operating the machines.

External environments may also affect your ability to acquire loans from banks or

other financial institutions. For instance, when the economy goes down, financial

institutions dont lend money easily. This is because they are also affected by the

economy; they may, therefore, have inadequate funds. Most institutions also

consider these times very risky for lending out money.

Many people and businesses may not be in a position to pay back the loans that they

get. Economic crisis will also affect the internal operations of a business. For

instance, the business will not have a lot of financial resources due to the loss of a

ready market. Some businesses also end up retrenching some of their clients due to

the reduction of work and inability of the company to maintain the employees

payment packages.

Sometimes external and internal environments are intertwined. For instance,

political and economic issues will affect the availability of a workforce and other

resources. They will also affect the availability of finances to the business. During

political unrests, most businesses are not able to operate normally and some end up

shutting down all together.

Other external environments that can affect the internal environment include legal

restrictions. Sometimes, laws are passed that affect some businesses. For instance,

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some of the laws like the increase of taxes on some goods and services affect the

business. When tanning taxes were increased in America, a lot of Americans stopped

going to tanning salons. The business operations were reduced and the clients

decreased in numbers.

Other factors that can be described as part of the external environment include

natural disasters or calamities, such as tornados, hurricanes and tsunamis. These

calamities affect the operations of the business. They affect the workforce, the

market, and all other resources and, in most cases, they lead to the closure of the

business due to property destruction.

The central difference between internal and external business environments is that,one can be controlled while the other one cant. However, you have some control over

your internal business environment. You can control your management and

resources to ensure that you realize good production levels at your company.

External environments, on the other hand, arent easy to control or manage. In fact,

some of these factors can lead to the closure of your business.

The main reason why the external environments are hard to control is because, at

times, they can be unpredictable. For instance, it may be hard to plan ahead for theoccurrence of a natural disaster. Furthermore, you may not be in a position to do

anything about them when they occur, unlike internal environments that you may

be able to control and manage effectively. If you maintain a corporate risk

assessment, you can put up measures to deal with any problems that may occur as a

result of issues with the internal environment. However, its hard to prepare for

external environments since some of the issues that occur arent predictable.

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According to Micheal P. Todaro.

Development must be conceived (considered) for as a multi-dimensional process

involving major change in social structures, popular attitudes and national institutions as

well as the acceleration of eco-growth, the eradication (end) of poverty and reduction of

inequality of wealth.

Structural Changes of Economic Development:

Economic development represents following structural changes in various sectors of

the country:

There is a change in the occupational structure. In economic development there

is decrease in the share of labour force in primary sector (farming, fishing and mining

etc.) and increase in the share of labour force in secondary sector (industry etc).

i. There is a change in the structure of national output. The contribution of primarysector in the national output falls and the share of secondary and tertiary (3 rd) sectorslowly go up.

ii. There is a change in the structure of industrial production.There is an increase inthe production of capital goods and decrease in the production of consumer goods.

iii. There is a change in the structure of foreign trade. The share of primary goods inexports decreases and the share of capital goods in imports increase. Accordingly, ineconomic development there is an increase in exports of manufactured and final goods.Similarly, there is decrease in the imports of consumer items.

iv. There is a change in the structure of technology.In the economic development

modern and advanced techniques are used in all the sectors of economy.v. There is a change in the social and institutional sector.Due to economicdevelopment there is an increase in the self-esteem and living standard of thepopulation. Conclusion:

We conclude that, normally the terms economic growth and economic development

are used for the explanation of encouraging changes in the economic achievements of a

country.

Economic Growth =Annual increase in per capita income

Economic Development = Economic Growth + Structural Changes

DIFFERENCES BETWEEN ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT:

Both the terms seem similar, but there are various following points, which create

difference between these two:

1- Definition

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Economic Growth Economic Development

The term economic growth is only

concerned with raising income level and

volume of productionof goods and

services.

The basic feature of economic

development is to raise income level and

improve the human being.

2- Nature in Economic LiteratureEconomic Growth Economic DevelopmentEconomic growth is the key issue

undertraditional economics.According to

this approach take care of growth and

poverty would eliminate automatically.

Economic development is the main issue

under modern economicsliterature.

Accordingly, take care of poverty and

growth would take care of itself.

3- Scope

Economic Growth

Economic Development

Scope of economic growth is

narrowbecause it is concerned with

changes in income level only.

Scope of economic development is

wideand comprehensive than economic

growth. Its link is not only with income but

also with the prosperity of the society and

economy.

4- Institutional changesEconomic Growth Economic Development

In case of economic growth strong and

effective institutional set-up is not

necessary.

Efficient institutional set-up is

necessary.Effective and strong

institutional revolution is the sign of

economic development.

5- Type of ApproachEconomic Growth Economic Development

According to various economists,

economic growth is said to be quantitative

approach.

Economic development refers to

thequalitative approach.

6- ImportanceEconomic Growth Economic DevelopmentEconomic growth is less important due to

the attachment with income level only.

The Concept of economic development

ismore importantbecause it discusses an

economy in wider sense.

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7- Time SpanEconomic Growth Economic Development

Economic growth is a short-term

process.We can measure income changes

yearly. So, its time span may be of oneyear.

Economic development is a long-term

process about 20 to 25 years. Because it

takes years to change social, economic andinstitutional set-up.

8- National ProblemEconomic Growth Economic Development

Economic growth is the problem

ofdeveloped countriesof the world.

Economic development is the problem

ofdeveloping countries.

9- Political ChangesEconomic Growth Economic Development

Economic growth is not concernedwith

the political stability.

The concept of economic development

isincompletewithout political stability.

10- Dependence and Self-SufficiencyEconomic Growth Economic Development

Economic growth does not ensure the

freedom from the dependence of foreign

countries.

In case of economic development our

dependence on other countries reduces

and country adopts the self-reliance

policy.

11- Economic Application

Economic Growth Economic DevelopmentEconomic growth first checks thestatistical

upwardmovement in the economy.

Economic development basically

emphasizes on the balanced growthof

economy.

12- Social ImpactEconomic Growth Economic Development

There may or may notbe any socialchanges in case of economic growth. It

ignores the human beings and it is only

concerned with income level etc.

Social changes, in case of economicdevelopment, are compulsory. It refers to

the better jobs, availability of food, better

health and education etc.

13- Economic WelfareEconomic Growth Economic Development

Economic growth is not much

attachedwith the human beings. It has no

link with the good or bad.

In economic development, more

importanceis given to the mankind as

compare to the economic growth.

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14- Practical SignificanceEconomic Growth Economic Development

In Pakistan, in 1960s, growth rate washigherthan the growth rate in 1990s.

Now, Pakistan is more developed

countryas compare to 1960s and 1990s.

Today in Pakistan there is more industries,universities and other infrastructure etc.

15- MeasurementA. Economic Growth Economic Development

Economic growth is measured only by

comparing income levels of different years.

It also can be measured numerically.

Measurement of economic development is

based on the reduction in poverty,

development of human being and living

standard etc.

16- Quantity and Quality

Economic Growth Economic Development

Economic growth is concerned

withquantityof goods and services only.

Economic development is concerned with

not only quantity but also with the quality.

17- Problem of AssessmentEconomic Growth

B. Economic DevelopmentIt is very difficultto estimate exactly the

level of economic growth in developing

countries like Pakistan.

Computation of economic development

isnot a difficult task in developed nations

of the world.

18- Use of TechnologyEconomic Growth Economic DevelopmentIn economic growth, use of advanced

technology is not appreciated.

For the economic development use of

modern technology is compulsory.

Conclusion:

From all above points of difference, we conclude that economic growth is

attached to the increase in production and income etc. while in economic development

more importance is given to man and it tries to remove poverty.

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Difference Between Monetary and FiscalPolicybyTejvan Pettingeron September 16, 2011 ineconomics

Readers Question: What is the difference Between Monetary and Fiscal Policy? Monetary policy involves changing the interest rate and influencing the money supply.

Fiscal policy involves the government changing tax rates and levels of government spending to

influence aggregate demand in the economy.

They are both used to pursue policies of higher economic growth or controlling inflation.

Monetary Policy

Monetary policy is usually carried out by the Central Bank / Monetary authorities and

involves:

Setting base interest rates (e.g. Bank of England in UK and Federal Reserve in US)

Influencing the supply of money. E.g.Policy of quantitative easingto increase the supply of

money.

How Monetary Policy Works

The Central Bank may have an inflation target of 2%. If they feel inflation is going to go above

the inflation target, due to economic growth being too quick, then they will increase interest

rates.

Higher interest rates increase borrowing costs and reduce consumer spending and investment,

leading to lower aggregate demand and lower inflation. If the economy went into recession, the Central Bank would cut interest rates. See:Cutting

interest rates

Fiscal Policy

Fiscal Policy is carried out by the government and involves changing:

Level of government spending

Levels of taxation

1. To increase demand and economic growth, the government will cut tax and increase spending

(leading to a higher budget deficit)

2. To reduce demand and reduce inflation, the government can increase tax rates and cut

spending (leading to a smaller budget deficit)

Example of Expansionary Fiscal Policy

In a recession, the government may decide to increase borrowing and spend more on

infrastructure spending. The idea is that this increase in government spending creates

an injection of money into the economy and helps to create jobs. There may also

be amultiplier effect,where the initial injection into the economy causes a further round

of higher spending. This increase in aggregate demand can help the economy to get out

of recession.See more at:Expansionary fiscal policy

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If the government felt inflation was a problem, they could pursue deflationary fiscal policy

(higher tax and lower spending) to reduce the rate of economic growth.

Which is More Effective Monetary or Fiscal Policy?

In recent decades, monetary policy has become more popular because:

Monetary policy is set by the Central Bank, and therefore reduces political influence (e.g.

politicians may cut interest rates in desire to have a booming economy before a general

election)

Fiscal Policy can have more supply side effects on the wider economy. E.g. to reduce inflation

higher tax and lower spending would not be popular and the government may be reluctant to

purse this. Also lower spending could lead to reduced public services and the higher income tax

could create disincentives to work.

Monetarists argue expansionary fiscal policy (larger budget deficit) is likely to causecrowding

outhigher government spending reduces private sector spending, and higher government

borrowing pushes up interest rates. (However, this analysis is disputed)

Expansionary fiscal policy (e.g. more government spending) may lead to special interest groups

pushing for spending which isnt really helpful and then proves difficult to reduce when

recession is over.

Monetary policy is quicker to implement. Interest rates can be set every month. A decision to

increase government spending may take time to decide where to spend the money.

However, the recent recession shows that Monetary Policy too can have many

limitations.

Targeting inflation is too narrow. This meant Central banks ignored an unsustainable boom in

housing market and bank lending.

Liquidity Trap. In a recession, cutting interest rates may prove insufficient to boost demand

because banks dont want to lend and consumers are too nervous to spend. Interest rates were

cut from 5% to 0.5% in March 2009, but this didnt solve recession in UK.

Even quantitative easingcreating money may be ineffective if banks just want to keep the

extra money in their balance sheets.

Government spending directly creates demand in the economy and can provide a kick-start to

get the economy out of recession. Thus in a deep recession, relying on monetary policy alone,

may be insufficient to restore equilibrium in the economy.

In a liquidity trap, expansionary fiscal policy will not cause crowding out because thegovernment is making use of surplus saving to inject demand into the economy.

In a deep recession, expansionary fiscal policy may be important for confidenceif monetary

policy has proved to be a failure.

Economic policy-makers are said to have two kinds of tools to influence

a country's economy: fiscaland monetary.

Fiscal policyrelates to government spending and revenue collection.

For example, when demand is low in the economy, the government can

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Fiscal Policy Monetary Policy

What is Corporate Governance?

Corporate Governance refers to the way a corporation is governed. Itis the technique by which companies are directed and managed. Itmeans carrying the business as per the stakeholders desires. It isactually conducted by the board of Directors and the concernedcommittees for the companys stakeholders benefit. It is all aboutbalancing individual and societal goals, as well as, economic andsocial goals.

Corporate Governance is the interaction between variousparticipants (shareholders, board of directors, and companys

management) in shaping corporations performance and the way it isproceeding towards. The relationship between the owners and themanagers in an organization must be healthy and there should be noconflict between the two. The owners must see that individualsactual performance is according to the standard performance. Thesedimensions of corporate governance should not be overlooked.

Corporate Governance deals with the manner the providers of finance guarantee themselves of getting a fairreturn on their investment. Corporate Governance clearly distinguishes between the owners and the managers.The managers are the deciding authority. In modern corporations, the functions/ tasks of owners and managersshould be clearly defined, rather, harmonizing.

Corporate Governance deals with determining ways to take effective strategic decisions. It gives ultimateauthority and complete responsibility to the Board of Directors. In todays market - oriented economy, the need for

corporate governance arises. Also, efficiency as well as globalization are significant factors urging corporategovernance. Corporate Governance is essential to develop added value to the stakeholders.

Corporate Governance ensures transparency which ensures strong and balanced economic development. Thisalso ensures that the interests of all shareholders (majority as well as minority shareholders) are safeguarded. Itensures that all shareholders fully exercise their rights and that the organization fully recognizes their rights.

Corporate Governance has a broad scope. It includes both social and institutional aspects. CorporateGovernance encourages a trustworthy, moral, as well as ethical environment.

Benefits of Corporate Governance

1. Good corporate governance ensures corporate success and economic growth.

2. Strong corporate governance maintains investors confidence, as a result of which, company can raisecapital efficiently and effectively.

3. It lowers the capital cost.4. There is a positive impact on the share price.5. It provides proper inducement to the owners as well as managers to achieve objectives that are in

interests of the shareholders and the organization.6. Good corporate governance also minimizes wastages, corruption, risks and mismanagement.7. It helps in brand formation and development.8. It ensures organization in managed in a manner that fits the best interests of all.

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Technology transfer, also called transfer of technology (TOT), is the process of transferring

skills, knowledge, technologies, methods of manufacturing, samples of manufacturing and

facilities amonggovernmentsoruniversitiesand other institutions to ensure that scientific and

technological developments are accessible to a wider range of users who can then further

develop and exploit the technology into new products, processes, applications, materials or

services. It is closely related to (and may arguably be considered a subset of)knowledge

transfer.Horizontal transfer is the movement of technologies from one area to another. At

present[when?]transfer of technology (TOT) is primarily horizontal. Vertical transfer occurs when

technologies are moved from applied research centers to research and development

departments.[1]

Technology brokersare people who discovered how to bridge the emergent worlds and apply

scientific concepts or processes to new situations or circumstances.[2]A related term, used

almost synonymously, is "technologyvalorisation". While conceptually the practice has been

utilized for many years (in ancient times,Archimedeswas notable for applying science to

practical problems), the present-day volume of research, combined with high-profile failures

atXerox PARCand elsewhere[citation needed], has led to a focus on