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Assignment for Class 12 Business Studies Chapter 3 Business Environment
Class 12 Business Studies students should refer to the following printable assignment in Pdf for Chapter 3 Business Environment in Class 12. This test paper with questions and answers for Class 12 Business Studies will be very useful for exams and help you to score good marks
Chapter 3 Business Environment Class 12 Business Studies Assignment
Business Environment
Important Notes and Questions for NCERT Class Business Studies 12 Business Environment
• Forces = economical, social, political, technological etc
• Institutions = suppliers, customers, competitors etc
1. Totality of external forces: Business environment is the sum total of all the forces/factors external to a business firm.
2. Specific and general forces: Business environment includes both specific and general forces. Specific forces include investors, competitors, customers etc. who influence business firm directly while general forces include social, political, economic, legal and technological conditions which affect a business firm indirectly.
3. Inter-relatedness: All the forces/factors of a business environment are closely interrelated. For example, increased awareness of health care has raised the demand for organic food and roasted snacks.
4. Dynamic: Business environment is dynamic in nature which keeps on changing with the change in technology, consumer’s fashion and tastes etc.
5. Uncertainty: Business environment is uncertain as it is difficult to predict the future environmental changes and their impact with full accuracy.
6. Complexity: Business environment is complex which is easy to understand in parts separately but it is difficult to understand in totality.
7. Relativity: Business environment is a relative concept whose impact differs from country to country, region to region and firm to firm. For example, a shift of preference from soft drinks to juices will be welcomed as an opportunity by juice making companies while a threat to soft drink manufacturers.
IMPORTANCE OF BUSINESS ENVIRONMENT
1. Identification of opportunities to get first mover advantage: Understanding of business environment helps an organization in identifying advantageous opportunities and getting their benefits prior to competitors, thus reaping the benefits of being a pioneer.
2. Identification of threats: Correct knowledge of business environment helps an organization to identify those threats which may adversely affect its operations. For example, Bajaj Auto made considerable improvements in its two wheelers when Honda & other companies entered the auto industry.
4. Coping with Rapid changes: Continuous study/scanning of business environment helps in knowing the changes which are taking place and thus they can be faced effectively.
5. Assistance in planning and policy formulation: Understanding and analysis of business environment helps an organization in planning &policy formulation. For example, ITC Hotels planned new hotels in India after observing boom in tourism sector.
1. Economic Environment: It has immediate and direct economic impact on a business. Rate of interest, inflation rate, change in the income of people, monetary policy, price level etc. are some economic factors which could affect business firms. Economic environment may offer opportunities to a firm or it may put constraints.
2. Social Environment: It includes various social forces such as customs, beliefs, literacy rate, educational levels, lifestyle, values etc. Changes in social environment affect an organization in the long run. Example: Now a days people are paying more attention towards their health, as a result of which demand for mineral water, diet coke etc. has increased while demand of tobacco, fatty food products has decreased.
3. Technological Environment: It provides new and advance ways/techniques of production. A businessman must closely monitor the technological changes taking place in the industry as it helps in facing competition and improving quality of the product. For Example, Digital watches in place of traditional watches, artificial fabrics in place of traditional cotton and silk fabrics, booking of railway tickets on internet etc.
4. Political Environment: Changes in political situation also affect business organizations. Political stability builds confidence among business community while political instability and bad law & order situation may bring uncertainty in business activities. Ideology of the political party, attitude of government towards business, type of government-single party or coalition government affects the business Example: Bangalore and Hyderabad have become the most popular locations for IT due to supportive political climate.
5. Legal Environment: It constitutes the laws and legislations passed by the Government, administrative orders, court judgements, decisions of various commissions and agencies. Businessmen have to act according to various legislations and their knowledge is very necessary. Example: Advertisement of Alcoholic products is prohibited and it is compulsory to give statutory warning on advertisement of cigarettes.
Features of Business Environment :
(1) Totality of external forces : Business environment is the sum total of all the forces/factors external to a business firm.
(2) Specific and General forces : Business environment includes both specific and general forces. Specific forces includes investors, competitors, customers etc who influence business firm directly while general forces includes social, political, economic, legal and technological conditions which affect a business firm indirectly.
(3) Inter-relatedness : All the forces/factors of a business environment are closely interrelated.
(4) Dynamic : Business environment is dynamic in nature which keeps on changing with the change in technology, consumers fashion and tastes etc.
(5) Uncertainty : Business environment is uncertain as it is difficult to predict the future environmental changes and their impact.
(6) Complex ty : Business environment is complex which is easy to understand in parts separately but it is difficult to understand in totality.
(7) Relativity : Business environment is a relative concept whose impact differ from country to country and region to region.
IMPORTANCE OF BUSINESS ENVIRONMENT
1. Ident infixation of opportunities to get first mover advantage : Understanding of business environment help an organisation in identifying advantageous opportunities and getting their benefits prior to competitors.
2. Identification of threats : Correct knowledge of business environment help an organisation to identify those threats which may adversely affect its operations.
3. Tapping useful resources : Business environment made available various resources such as capital, labour, machines, raw material etc to a business firm. In order to know the availability of resources and making them available on time knowledge of business environment is necessary.
4. Coping with Rapid changes : Continuous study/scanning of business environment help in knowing the changes which are taking place and thus they can be faced effectively.
5. Assistance in planning and policy formulation : Under standing and analysis of business environment help an organisation in planning & polic formulation.
6. helps in Improving Performance : Correct and continuous monitoring of business environment help an organisation in improving its performance.
DIMENSIONS / COMPONENTS OF BUSINESS ENVIRONMENT
1. Economic Environment : It has immediate and direct impact on a business. Rate of interest, inflation rate, change in the income of people etc. are some economic factors which could affect business firms.
Economic environment offers opportunities to a firm or it may put constraints.
2. Social Environment : It includes various social forces such as customs, beliefs, literacy rate, educational levels, lifestyle, values etc. Changes in social environment affect an organisation in the long run. Example : now a days people are paying more attention towards their health as a result of which demand for mineral water, diet coke etc has increased while demand of tobacco, fatty food products has decreased.
3. Technological Environment : It provides new and advance ways/ techniques of production. A businessman must closely monitor the technological changes taking place in the industry as it helps in facing competition and improving quality of the product.
4. Political Environment : Changes in political situation also affect business organisations. Political stability builds confidence among business community white political instability and bad law & order situation, may bring uncertainly in business activities. Political environment has immediate and great impact on the business transctions, so the businessman must scan the environment carefully so that necessary changes can be made in the organisation as per requirements.
5. Legal Environment : It constitutes the laws and legislation passed by the Government, administrative orders, court judgements & decisions of various commissions and agencies. Businessman had to act according to various legislations and so their knowledge is very necessary.
Economic Reforms :
As a part of Economic reforms, the Government of India announces new Industrial Policy in 1991, whose main features are as follows :
1. Only six industries were kept under licencing scheme.
2. The role of public sector was limited only to four industries.
3. Disinvestment was carried out in many public sector enterprises.
4. Foreign capital/investment policy was liberalised and in many sectors 100% direct foreign investment was allowed.
5. Automatic permission was given for signing technology agreements with foreign companies.
6. Foreign investment promotion board (FIPB) was setup to promote & bring foreign investment in India.
The main objective of New Industrial Policy was to promote Liberalization, Privatization and Globalization
Liberalization : Abolishing licensing requirements; Freedom in deciding the scale of business: removals of restriction on movements of goods and service; reduction in tax rates; freedom in fixing prices; simplifying procedures; making it easier to attract foreign investment.
Privatization : Giving greater role to private sector in the nation buiding process and reduced role of public sector; Disinvestment in many Public Sector undertaking etc.
Globalization : It means integration of various economies of the world leading to the emergence of cohesive global economy. The measures taken by the Government include trade liberalization which includes import liberalization; Export Promotion though rationalization of tariff structure; Foreign exchange liberalization; increased interaction among global economics under the aegis (protection/support) of World Trade Organization.
IMPACT OF GOVERNMENT POLICY CHANGES ON BUSINESS AND INDUSTRY.
1. Increasing Competition : Delicencing and entry of foreign firms in Indian market has increased the level of competition for Indian firms.
2. More Demanding Customers : Now customers are more aware and they keep maximum information of the market as the result of which now market are customer/buyer oriented. Now products are produced
keeping in mind the demands of the customers.
3. Rapid Changing Technological Environment : Rapid Technological advancement has changed/improved the production process as a result of which maximum production is possible at minimum cost but it leads
to tough challenges in front of small firms.
4. Necessity for change : After new industrial policy the market forces (demand & supply) are changing at a very fast rate. Changes in the various components of business environment has made it necessary for the business firms to modify their policies & operations from time to time.
5. Need for Developing Human resources : The changing market corditions of today require people with higher competence and greater commitment, hence the need for developing human resources arise, which could increase their effectiveness and efficiency.
6. Market orientation : Earlier selling concept was famous in the market but now its place is taken by the marketing concept. Today firms produces those goods & services which are required by the customers.
7. Reduction in budgetary Support to Public Sector : The budgetary support given by the government to the public sector is going on reducing and thus the public sector have to survive and grow by utilising their own resources efficiently.
MCQs for NCERT Class 12 Business Studies Business Environment....
(a) Totality of external forces
Answer: The various dimensions of business environment being referred to in the above case are as follows:
Question. The study of environment makes available ________ resources.
(a) Costly
(b) Cheap
(c) Inferior
(d) Useful
Answer : D
Question. Which component of business environment resulted in the relaxation of ban imposed on the Foreign Direct Investment?
(a) Economic Environment
(b) Political Environment
(c) Social Environment
(d) Legal Regulatory Environment
Answer : D
Question. Which of the following is not included in special powers of the business environment.
(a) Technical Situations
(b) Customers
(c) Suppliers
(d) Investors
Answer : A
Question. Which factor is not included in Micro Environment?
(a) Customer
(b) Public
(c) Supplier
(d) Production Capacity
Answer : D
Question. Which of the following is undergoing quick changes?
(a) Competition
(b) Fashion
(c) Technique
(d) All the above
Answer : D
Question. With the help of the study of business environment an organization can improve its ________ .
(a) Present
(b) Future
(c) Present and Future
(d) Past
Answer : C
1 Mark Questions (To be answered in 1 word or 1 sentence)
Question. Govt. of India is seriously thinking to allow oil marketing public sector undertaking to fix their own price for diesel. Which economic reform is the reason of this change in government s policy
Answer: Liberalization
Question. Just after declaration of Lok Sabha Elections 2009 results, the Bombay stock exchange s price index (Sensex) rose by 2100 points in a day. Identify the environmental factor which led to this rise.
Answer: Political Environment
Question. The understanding of business environment helps the managers to identify threats . What is meant by threats here?
Answer: Threats refer to the external environment trends and changes that will hinder a firm s performance
Question. Business environment includes both specific and general forces. List any four specific forces.
Answer: Suppliers, investors, customers and competions.
Question. The understanding of business environment helps the managers to identify Opportunities . What is meant by Opportunities here?
Answer: Opportunities refer to positive changes and trends that will help the business to improve its performance.
Question. Business Environment includes both specific and general forces . List any four general forces.
Answer: Social, Economic, Political Legal and Technological.
Question. Identify the type of dimension of environment to which the following are related :
i) Banks reducing interest rate on housing loans.
ii) An increasing number of working women.
iii) Booking of air tickets through internet.
iv) Alcohol beverages are prohibited to be advertised on Door Darshan
Answer :
i) Economic Environment,
ii) Social Environment
iii) Technological Environment
iv) Legal Environment
2. Explain the various dimensions of business environment
Business environment can be defined as those forces, individuals and institutions who have the ability to influence the working of an organisation.
Important Questions for NCERT Class 12 Business Studies Business Environment
Question. Business environment includes
(a) Surroundings of Business
(b) Forces, Factors, Institutions which directly or indirectly effect business
(c) Customers and Employees
(d) None of the above
Answer : B
Question. The forces in Business Environment that effect all the business houses are known as
(a) General
(b) Specific
(c) Particular
(d) Influential
Answer : A
Question. Creating a website and selling online is related to
(a) Social Environment
(b) Political Environment
(c) Economic Environment
(d) Technologic
Answer : D
Question. Attitude of customers towards innovation, lifestyle, etc. is part of
(a) Technological Environment
(b) Social Environment
(c) Political Environment
(d) Legal Environment
Answer : B
Question. Change in sensex and Nifty during election is part of
(a) Political Environment
(b) Social Environment
(c) Legal Environment
(d) Economic Environment
Answer : A
Question. The conditions in Business Environment keep changing as it is
(a) External Environment
(b) Complex
(c) Dynamic
(d) None of the above
Answer : C
Question. The environment scanning helps to identify
(a) Opportunities
(b) Threats
(c) Both (a) and (b)
(d) None of the above
Answer : C
Question The importance of business environment which helps to know in advance forthcoming constraints and threats of business is
(a) Helpful in getting first mover advantage
(b) Early warning signals
(c) Assist in planning and policy making
(d) All of the above
Answer : D
ASSERTION – REASON BASED MCQ’S
Read the following statement -Assertion {A} and Reason {R}. choose one of the correct alternatives given below :
[a] Both Assertion [A] and reason [R] are true and Reason [R] is correct explanation of Assertion [A].
[b] Both Assertion [A] and Reason [R] are true and Reason [R] is not the correct explanation of Assertion [A].
[c] Assertion [A] is true but Reason [R] is false.
[d] Assertion [A] is false but Reason [R] is true.
Question. Assertion [A]: Different elements of the business environment are closely interrelated.
Reason [R]: Business environment is a relative concept since it differs from country to country and even region to region.
Answer : B
Question. Assertion [A]: Totality of external forces is an important feature of the business environment.
Reason [R]: Business environment is the sum total of all things external to business organizations and ,as such, is aggregative in nature.
Answer : A
Question. Match the various “Dimensions of Business Environment” in Column - I with their respective component in Column- II :
(a) (ii) , (iii), (i)
(b) (i), (ii) , (iii)
(c) (iii), (ii), (i)
(d) (iii) , (i), (ii)
Answer : A
SOURCE BASED/ CASE STUDY BASED QUESTIONS
Question. On 8th November, 2016 the Government of India announced the demonetisation making all Rs.500 and Rs. 1,000 banknotes of the Mahatma Gandhi Series invalid past midnight. The government claimed that the action would curtail the use of illicit and counterfeit cash to fund illegal activity and terrorism. The BSE SENSEX and NIFTY 50 stock indices fell over 6% on the day after the announcement. The decision was heavily criticised by members of the opposition parties, leading to debates in both houses of parliament and triggering organised protests against the government in several places across India. People seeking to exchange their bank notes had to stand in lengthy queues, and several deaths were linked to the inconveniences caused due to the rush to exchange cash. After demonetisation the demand for point of sales (POS) or card swipe machines has increased. E-payment options like Paytm has also seen a rise. In context of the above case:
Identify & explain the various dimensions of business environment which relate to the above mentioned case.
Answer : The various dimensions of business mentioned case are outlined below:
(a) Political Environment: Political Environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business.
(b) Technological environment: Technological Environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
(c) Legal environment: Legal Environment includes various legislations passed by the Government administrative orders issued by government authorities, court judgments as well as the decisions rendered by various commissions and agencies at every level of the government— centre, state or local.
(d) Social environment: Social Environment includes the social forces like customs and traditions, values, social trends, society‘s expectations from business, etc.
(e) Economic Environment: Economic Environment comprises of factors that can affect management practices in a business enterprise includes interest rates, inflation rates, changes in disposable income of people, stock market indices and the value of rupee etc.
Question. Understanding of environment by business managers enables them not only to identify and evaluate, but also to react to the forces external to their firms.’ In light of the statement, explain by giving any five points why in the present day competitive market, it is essential for a business enterprise to remain alert and aware of its environment.
Answer : (i) Identify Opportunities and get First Mover Advantage : Early identification of opportunities helps the firm to be the first to exploit them instead of losing them to competitors.
(ii) Identify Threats and Early Warning Signals : Environmental awareness can help managers to identify various threats on time and serve as an early warning signals.
(iii) Tap Useful Resources : A business firm assembles various resources called inputs like finance, machines, raw materials, power and water, labour, etc. from its environment.
(iv) Assist in Planning and Policy Formulation : Since business environment provides both opportunities and threats for the firm, its understanding and analysis can be the basis for planning and policy formulation
(v) Help in Coping with Rapid Changes : Managers must understand and examine the environment and develop suitable courses of action to cope with rapid changes in business environmen t
Question. Two big Bollywood movies were scheduled to be released on the same date. But, at the last moment, release of one movie had to be postponed due to opposition by a group of people because of some unethical content in the movie. The loss suffered by the postponed movie provided opportunity for the released movie to earn maximum profits. (3)
(a) Which characteristic of Business Environment is highlighted in the given case?
(b) Identify and explain the dimension of Business Environment which led to the postponement of movie.
Answer : (a) Relative concept. (b) Social environment.
Question. The government of India announced Demonetization of ` 500 and ` 1,000 currency notes with effect from the midnight of November 8, 2016. As a result, the existing ` 500 and ` 1,000 currency notes ceased to be legal tender from that date. New currency notes of the denomination of ` 500 and ` 2,000 were issued by Reserve Bank of India after the announcement. This step resulted in a substantial increase in the awareness about and use of Point of Sale machines, e-wallets, digital cash and other modes of cashless transactions. Also, increased transparency in monetary transactions and disclosure led to a rise in government revenue in the form of tax collection.
(a) Enumerate the dimensions of business environment highlighted above.
(b) State the features of Demonetization
Answer : a) Political environment, Legal environment, Technological environment and Economic environment.
b) Demonetisation as a tax administration measure, Non tolerance of tax evasion, Demonetisation also led to tax administration channelizing savings into the formal financial system, Demonetization is to create a less-cash or cash-lite economy.
The Government is considering a pioneer proposal to launch a single debit-cum-credit card to increase the ease and usage for the consumers. The card which will be called the “National Mobility Card” will have unique advantages for making payments in metro, buses, parking and making transactions during visits abroad.
After hearing this news, Mega decided to launch a “Mega Mobility Card” on similar lines, so that they could be the first to exploit the opportunity, arising due to the increasing trend of digitization. In order to improve their performance, they laid down a plan to hire more people in their marketing department and prepared guidelines to train their sales force to market the new card facility being launched by the bank.
Question. “Government is considering a pioneer proposal to launch a single debit-cum-credit card to increase the ease and usage for the consumers.” Identify the dimension of business environment highlighted above.
(a) Economic Environment
(b) Social Environment
(c)Technological Environment
(d) Political Environment
Answer : C
Question. After hearing this news, Mega Bank decided to launch a “ Mega Mobility Card” on similar lines, so that they could be the first to exploit the opportunity, arising due to the increasing trend of digitization. Identify the point of importance of business environment in the given lines.
(a) It enables the firm to identify opportunities and getting the first mover advantage
(b) It helps the firm to identify threats and early warning signals.
(c) It helps in tapping useful resources
(d) It helps in coping with rapid changes
Answer : A
Question. “….they laid down a plan to hire more people in their marketing department and prepared guidelines to train their sales force to market the new card facility being launched by the bank.” Identify the point of importance of business environment in the given lines.
(a) It enables the firm to identify opportunities and getting the first mover advantage.
(b) It helps the firm to identify threats and early warning signals
(c) It helps in tapping useful resources
(d) It helps in assisting in planning and policy formulation
Answer : D
Question. What characteristics of business environment has been discussed in the given case?
(a) Relativity
(b) Dynamic Nature
(c) Complexity
(d) Uncertainty
Answer : B
VERY SHORT TYPE QUESTION
Question. ABC Pvt. Ltd., a book publishing house, identifies CCE as an opportunity early and publishes its books as per the changed CBSE pattern before its competitors could do the same. Which environment awareness is being identified by ABC Pvt. Lt.?
Answer: First mover advantage
Question. What is Business Environment?
Answer: Forces affecting the performance of an organisation but outside its control are called as Business Environment.
Question. How have customers benefited by increased competition after liberalisation and globalisation?
Answer: While purchasing they get a better quality and wider choice of goods and services.
Question. What do you mean by disinvestment?
Answer: When the private sector takes over public sector, it is called disinvestment.
Question. Give one measure taken by Indian Government to introduce liberalisation.
Answer: Abolishing licensing requirements.
Question. Which two factors are included in Technological Environment?
Answer: Scientific Improvement and Innovations.
Question. Name the economic reforms introduced to free Indian business from unnecessary controls and restrictions.
Answer: Liberalisation.
SHORT ANSWER TYPE QUESTIONS
Question. Define Business Environment. State two important concerns of business environment.
Answer: The sum total of all external factors which are outside the control of business enterprises is termed as Business Environment. Factors may be social, political, economic etc.
Question. Explain the specific and general forces of business environment?
Answer: Business environment comprises of both specific and general forces.
Specific forces refer to those forces that are having direct effect on the day to day working of the business viz. customers, competitors, investors etc. General forces refer to social, political, legal and other forces which are having an indirect effect on the operations of a business.
Question. What are the main dimensions of business environment? What does environment consist of?
Answer: The main dimensions of business environment are
(i) Economic, (ii) Social, (iii) Technological, (iv) Political, (v) Legal Economic environment consists of the factors having economic dimensions such as fiscal policy, monetary policy, industrial policy etc.
Question. Explain the role of political environment in shaping the business?
Answer:Business functions within the framework of political environment.
Generally, government's policies change with the change of guard in power.
Business is required to understand and follow such changes and also respect the orders that judiciary gives from time to time.
For example, after globalization, Government of India allowed many companies to enter the Indian market for giving boost to the different industries like food processing industry etc. That paved the way for entry of multinationals in India on a large scale.
Question. What do you understand by legal environment? Give two examples which protect consumers' interests.
Answer: Legal environment consists of rules and regulations, framed by the Parliament, under which business must operate. To exist and grow, business is required to follow all the rules and regulations that constitute this environment.
Two examples protecting consumers' interests:
(i) Advertisement of alcoholic beverages is prohibited.
(ii)Packets of cigarettes should mention the statutory warning 'Cigarette smoking is Injurious to health'.
LONG ANSWER TYPE QUESTIONS
Question. What do you mean by business environment? Explain the key components of business environment.
Answer: Business environment is the sum total of all external factors that influence the functioning of a business enterprise.
The components of general environment are:
(i) Economic environment:
Economic environment consists of factors having economic dimensions such as fiscal policy, monetary policy, industrial policy etc.
Impact: Banking sector reforms have led to attractive deposit avenues and easier credit policy. Likewise reforms in leasing & financial institutions are also catalysing company's economic growth.
(ii) Social environment:
It discriminates characteristics of the society in which an enterprise exists. It consists of literary rates, educational levels, customs and demographic distribution etc.
Impact : Equal pay for equal work for both male and female workers, reservation of jobs for minorities etc.
(iii) Political environment
It consists of the political forces responsible for the management of public affairs and their influence on business.
Impact : Government allowed Pepsi to enter Indian market again for giving boost to the food processing industry.
(iv) Technological environment
It comprises of the various processes, techniques, approaches etc. by which an organization transforms inputs into output.
Impact : Digital watches have pushed out traditional watches.
(v) Legal Environment : It characterises various governmental rules, regulations and legislations etc. that all members of business community must follow.
Impact : Removal of control on foreign exchange and liberalization of foreign direct investments.
Question. Enumerate any five Positive impacts of liberalization and globalization.
Answer: The positive impacts of liberalization and globalization are as follow:
(i) Opportunities for new entrepreneurs.
(ii)Latest technology becoming available.
(iii) Opening up of foreign markets.
(iv) Easy imports of capital goods.
(v) Direct investment by Indian companies abroad.
Question. 'Environment provides both constraints and opportunities." Comment.
Answer: Business environment provides both constraints and opportunities. Some of the constraints are economic conditions, customs, government regulations, availability of natural resources etc. Inspite of many initiatives, FDI is not picking up in India due to political and bureaucratic hurdles.
On the other hand, environment also offers various opportunities which include changing needs of customers, technological advances etc. For example, the growing demand for A.C. has attracted many new players, domestic (Godrej, Kirloskar) as well as multinationals (LG Electronics) to this industry.
Question. Explain the changes initiated by the Government of India since 1991.
Answer: Following changes have been observed since 1991:
•New Industrial Policy:
New Trade Policy:
Fiscal Reforms
Monetary Reforms
Capital Market Reforms
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