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Pakistan’s automobile industry is playing a leading role as large scale manufacturing sector of Pakistan that serves as backbone of the economy and has immense potential for growth.
Last year, federal government has announced relaxation in the import policy for import of used cars under Transfer of Residence, Gift Scheme and Personal Baggage Scheme. Under this scheme, five years old models can be imported at less custom duties. Moreover, depreciation allowance on these imported used vehicles is also available up to four years.
Such policies of the government strongly affect the businesses so being the student of business education; you are required to evaluate the effects of relaxed import policy regarding import of used cars on local automobile industry (identify at least three (03) effects) and then on economy (identify at least two (02) effects).
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MGT211 GDB # 2 FALL2012 Idea solution
Political-legal Environment is a collection of factors, such as the general state of politics, the degree of politicalisation of business and economic issues, the level of political morality, the law and order situation, political stability, the political ideology and practices of the ruling party, the purposefulness and efficiency of governmental agencies, the extent and nature of governmental intervention in the economy and the industry, Government policies (fiscal, monetary, industrial, labour and export-import policies), specific legal enactments and framework in which the enterprise has to function and the degree of effectiveness with which they are implemented, public attitude towards business in general and the enterprise in particular, and so on.
There are three important elements in political-legal environment. These elements are as follows:
A business is highly guided and controlled by government policy. Hence the type of government running a country is a powerful influence on any business; a strategist has to consider the changes in the regulatory framework and their impact on the business.
Taxes and duties are other critical areas that may be levied and that affect the business. For example, introduction of FBT (Fringe Benefits Tax) has a major impact on the business.
Business organisations prefer to operate in a country where there is a sound legal system. However, in any country, businesses must have a good working knowledge of the major laws protecting consumers, competitions and organisations. Businesses must understand the relevant laws relating to companies, competition, intellectual property, foreign exchange, labour, and so on.
Apart from Govt, and Legal factors there are several other political pressures that influence and limit organisations. Political uncertainty, political movements against certain products, service and organisations, politicalisation of trade unions, etc., put a lot of pressure on business organisations.
Solution Answer: :
thinking losses impact other industries as the demand for consumer products decreases because of the reduced employment level. Foreign tariffs, along with other forms of market restrictions, cause a decline in the economic health of a nation.
3 EFFECT ON LOCAL AUTOMOBILE COMPANY:
In general: If import duty reduce then economy will destroy. Because menufacturing unit will close. People purchase imported items on low price and pakistanani goods are not sold mean company closed.
Explanation: The levying of tariffs is often highly politicized. The possibility of increased competition from imported goods can threaten domestic industries. These domestic companies may fire workers or shift production abroad to cut costs, which means higher unemployment and a less happy electorate.
2). A government may levy a tariff on products that it feels could endanger its population. For example, South Korea may place a tariff on imported beef from the United States if it thinks that the goods could be tainted with disease.
3). The use of tariffs to protect infant industries can be seen by the Import Substitution Industrialization (ISI) strategy employed by many developing nations. The government of a developing economy will levy tariffs on imported goods in industries in which it wants to foster growth.
2 EFFECT ON ECONOMY:
Import duty is a income of Pakistan Govt. When relaxation is made on the import duty. Its mean income of the govt. will automatically decrease.
Purchasing power of the economy will automatically increase. Because cast will decrease. For example: If imort duty will 20% then cost will be 1,000 but after relation like 10% in import duty. Cost will autiomaticaly decrease like 800.
MGT211 GDB # 2 FALL2012 Idea solution
GDB #2: SOLUTION
Effect of Relaxed import policy on Automobile Industry in Pakistan:
1-If the Govt. reduces the import duty on automobile then it will have a bad impact on the local production that will be reduced which leads towards closure of local automobile industry.
2-The automobile industry means car assemblers and the spare parts manufacturers will also be effected negatively because they didn’t have spars for the imported cars in results they again have to import that spars from international market it will lead some middle class manufacturer toward closure or it will take a lot of time to compete with the international industry.
3- If the customer will have an opportunity to avail good cars in cheaper prices then definitely they will switch or shifted to that imported cars which impact the industry towards lesser sales which reduces the production and ultimately lesser profit margins. The manufacturer will ultimately shift to some other country or close the Unit here in Pakistan. It’s also not good for economic health.
Effect of Relaxed import policy on Economy of Pakistan:
1-Due to Lesser import duty the car dealers will go for that used cars to sell in the market which will reduces our local production and in results it will increase the massive Unemployment. Due to unemployment living standard of our overall economy will go down.
2- According to my point of view, due to relaxed import policy Govt. will generate lesser revenues as compared to local Tax collectables and Govt. will also have to widen the infrastructure due to huge number of imported cars on the roads. It will also increase the demand of fuel and alternatives. Ultimately it will have to import from international market which will increase our import bills as well.
MGT211 Idea solution
1) You are required to evaluate the effects of relaxed import policy regarding import of used cars on local Automobile industry (identify at least three (03) effects
2) You are required to evaluate the effects of relaxed import policy regarding import of used cars on economy (identify at least two (02) effects)?
Understand the question, we have to write some points which effecting baldy our local cars industry,
1) Auto parts manufactures units shutting down due to less demand in the market
2) Unemployment will increase thousand of auto engineer and skill worker remain devalue
3) Reduction in revenue as less demand of local manufactured cars in market
4) Local car industries stopping their production process and foreign investment will close
5) Slow flow of economy badly impact on fiscal policy
6) Inflation rate increase/ devalue of currency
7) Less target tax collection/revenue collecting limits will slow down
8) Our economy using in different country as a result Gov assert will reduce
9) After sale services/vendor business/dealer business slowing down
10) Internationally currency strength will fall down
Kindly don’t copy past it, u can write lot of factors just think and discus with each others…… J
See the attached file please
A. In general: If import duty reduces then economy will destroy. Because manufacturing
unit will close. People purchase imported items on low price and Pakistani goods are
not sold mean company closed.
Explanation: The levying of tariffs is often highly politicized. The possibility of
increased competition from imported goods can threaten domestic industries. These
domestic companies may fire workers or shift production abroad to cut costs, which
means higher unemployment and a less happy electorate.
B. A government may levy a tariff on products that it feels could endanger its
population. For example, South Korea may place a tariff on imported beef from the
United States if it thinks that the goods could be tainted with disease.
C. The use of tariffs to protect infant industries can be seen by the Import Substitution
Industrialization (ISI) strategy employed by many developing nations. The
government of a developing economy will levy tariffs on imported goods in industries
in which it wants to foster growth.
Solved and submitted.