Impact of Government Policy Changes on Business and Industry

 1)- Increasing Competition: 

• As a result of changes in the rules of industrial licensing and entry of foreign firms, competition for Indian firms has increased especially in service industries.
• For example; Prior to 1991, Banking sector, Insurance telecommunication, etc. was only with public sector enjoying the monopoly whereas now so many private banks, airlines and telecommunication companies have entered in the race of competition.
• The companies which could adopt the latest technology and which were having large numbers of resources could only survive and face the competition. Many companies could not face the competition and had to leave the market.

2)- More demanding customers:

• Customers today have 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.
• Prior to new economic policy there were very few industries  or production units. As a result there was shortage of product in every sector. 
• Because of this shortage the market was producer-oriented, i.e., producers became key persons in the market.
• But after the new economic policy many more businessmen joined the production line and various foreign companies also established their production units in India. 
• As a result there was a surplus of products in every sector.
• This shift from shortage to surplus brought another shift in the market, i.e., producer market to buyer market. 
• The market became customer oriented and many new schemes were made by companies to attract the customer. 
• Nowadays products are produced/manufactured keeping in mind the demands of the customer.

3)- Rapidly changing technological environment:

• Increased competition forces the firms to develop new ways to survive and grow in the market. 
• New technologies make it possible to improve machines, processes, products and services. 
• The rapidly changing technological environment creates tough challenges before smaller firms.
• Before or prior to new economic policy there was a small internal competition only
• But after the new economic policy the world class competition started and to stand this global competition the companies need to adopt world class technology. 
• To adopt and implement the world class technology the investment in research and development department has to increase.

4)- Necessity for change:

• Prior to 1991 business enterprises could follow stable policies for a long period of time but after 1991 the business enterprises have to modify their policies and operations from time to time.
• 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 resource:

• Indian enterprises have suffered for a long time with inadequately trained personnel. 
• The new market conditions require people with higher competence and greater commitment.
• Before 1991 Indian enterprises were managed by inadequately trained personnel.
• New market conditions require people with higher competence skills and training. Hence Indian companies felt the need to develop their human skills.

6)- Market orientation:

• Earlier firms used to produce first and go to the market for sale later. 
• That is, firms were following selling concept, i.e., produce first and  then go to market. 
• But now companies follow marketing concepts, i.e., planning production on the basis of market research, need and want of customers.
• In other words, they had production oriented marketing operations. 
• In a fast changing world, there is a shift to 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: 

• The central government’s budgetary support for financing the public sector outlays has declined over the years. 
• The public sector undertakings have realized that, in order to survive and grow, they will have to be more efficient and generate their own resources for the purpose.
• Prior to 1991 all the losses of Public sector were used to be made good by government by sanctioning special funds from budgets.
• But today the public sectors have to survive and grow by utilizing their resources efficiently otherwise these enterprises have to face disinvestment.

8)- Export a Matter of Survival:

• The Indian businessman was facing global competition and the new trade policy made the external trade very liberal.
• As a result, to earn more foreign exchange many Indian companies joined the export business and got a lot of success in that. 
• Many companies increased their turnover more than double by starting an export division. For example, the Reliance company, Videocon, MRF, Ceat Tyres, etc. got a great hold in the export market. 
• On the whole, the impact of Government policy changes particularly in respect of liberalization, privatization and globalization has been positive as the Indian business and industry has shown great resilience in dealing with the new economic order.
• Indian enterprises have developed strategies and adopted business processes and procedures to meet the challenge of competition. 
• They have become more customer-focused and adopted measures to improve customer relationship and satisfaction.