BUSINESS ENVIRONMENT
Q.1 What do you understand by the term ‘Business Environment’?
A.1 The term ‘business environment’ means the sum total of all individuals, institutions and other forces that are outside the control of a business enterprise but that may affect its performance.
Thus, the economic, social, political, technological and other forces which operate outside a business enterprise are part of its environment.
So also, the individual consumers or competing enterprises as well as the governments, consumer groups, competitors, courts, media and other institutions working outside an enterprise constitute its environment.
Q.2 Describe the features/characteristics of ‘Business Environment’.
A.2 The following are the features/characteristics of Business Environment-
1) Totality of external forces: Business environment is the sum total of all things external to business firms and, as such, is aggregative in nature.
2) Specific and general forces: Business environment includes both specific and general forces. Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working. General forces (such as social, political, legal and technological conditions) have impact on all business enterprises and thus may affect an individual firm only indirectly.
3) Inter-relatedness: Different elements or parts of business environment are closely inter-related.
4) Dynamic nature: Business environment is dynamic in that it keeps on changing whether in terms of technological improvement, shifts in consumer preferences or entry of new competition in the market.
5) Uncertainty: Business environment is largely uncertain as it is very difficult to predict future happenings, especially when environment changes are taking place too frequently as in the case of information technology or fashion industries.
6) Complexity: The environment is a complex phenomenon that is relatively easier to understand in parts but difficult to grasp in its totality.
7) Relativity: Business environment is a relative concept since it differs from country to country and even region to region.
Q.3 “The study of Business Environment is very important for all businesses’. Why? OR How would you argue that the success of a business enterprise is significantly influenced by its environment?
The importance of studying ‘Business Environment is as follows-
1) It enables the firm to identify opportunities and getting the first mover advantage: Opportunities refer to the positive external trends or changes that will help a firm to improve its performance. Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors.
2) It helps the firm to identify threats and early warning signals: Threats refer to the external environment trends and changes that will hinder a firm’s performance. Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.
3) It helps in tapping useful resources: Environment is a source of various resources/inputs for running a business like finance, machines, raw materials, power and water, labour, etc., from its environment including financiers, government and suppliers. the enterprise designs policies that allow it to get the resources that it needs so that it can convert those resources into outputs that the environment desires.
4) It helps in coping with rapid changes: All sizes and all types of enterprises are facing increasingly dynamic environment. In order to effectively cope with these significant changes, managers must understand and examine the environment and develop suitable courses of action.
5) It helps in assisting in planning and policy formulation: The environment’s understanding and analysis can be the basis for deciding the future course of action (planning) or training guidelines for decision making (policy).
6) It helps in improving performance: The enterprises that continuously monitor their environment and adopt suitable business practices are the ones which not only improve their present performance but also continue to succeed in the market for a longer period.
Q4 What are the various dimensions of business environment?
A4 Dimensions of, or the factors constituting the business environment include economic, social, technological, political and legal conditions which are considered relevant for decision-making and improving the performance of an enterprise.
Q5 How would you characterise business environment? Explain, with examples, the difference between general and specific environment.
A5 Business environment includes both specific and general forces. Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working. General forces (such as social, political, legal and technological conditions) have impact on all business enterprises and thus may affect an individual firm only indirectly.
Q6 Explain, with examples, the various dimensions/elements of business environment. OR
Discuss in detail the various components of the following elements/dimensions of the business environment-
1) Economic environment 2) Social environment 3) Political environment.
A6 The following are the various elements/dimensions of business environment-
1) Economic environment- The economic environment includes the following components-
• Existing structure of the Economy in terms of relative role of private and public sectors.
• The rates of growth of GNP and per capita income at current and constant prices
• Rates of saving and investment
• Volume of imports and exports of different items
• Balance of payments and changes in foreign exchange reserves
• Agricultural and industrial production trends
• Expansion of transportation and communication facilities
• Money supply in the economy
• Public debt (internal and external)
• Planned outlay in private and public sectors
2) Social Environment- The social environment includes the following-
• Attitudes towards product innovations, lifestyles, occupational distribution and consumer preferences
• Concern with quality of life
• Life expectancy
• Expectations from the workforce
• Shifts in the presence of women in the workforce
• Birth and death rates
•Population shifts
• Educational system and literacy rates
• Consumption habits
• Composition of family
3) Political Environment- It includes the following components-
• The Constitution of the country
• Prevailing political system
• The degree of politicisation of business and economic issues
• Dominant ideologies and values of major political parties
• The nature and profile of political leadership and thinking of political personalities
• The level of political morality
• Political institutions like the government and allied agencies
• Political ideology and practices of the ruling party
• The extent and nature of government intervention in business
• The nature of relationship of our country with foreign countries
4) Legal Environment- An adequate knowledge of rules and regulations framed by the Government is a must for better business performance. Non-compliance of laws can land the business enterprise into legal problems. In India, a working knowledge of Companies Act 1956; Industries (Development and Regulations) Act 1951; Foreign Exchange Management Act and the Imports and Exports (Control) Act 1947; Factories Act, 1948; Trade Union Act;
1926; Workmen’s Compensation Act, 1923; Industrial Disputes Act, 1947, Consumer Protection Act, 1986, Competition Act, 2002 etc. are a few acts meant to regulate the conduct of business in India.
5) 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. For example, recent technological, advances in computers and electronics like DVD players and cd ROMs etc.
Please click on below link to download CBSE Class 12 Business Studies Business Environment Worksheet Set F
