BUSINESS ENVIRONMENT
1 What do you mean by business environment:
The term business environment means the totality of all individuals, institutions and other forces that are outside a business but that potentially affect its performance.
2 Characteristics of Business environment :
(a) totality of external forces - Business environment is the sum total of all things external to business firms.
(b) 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 indirvectly.
(c) inter-relatedness - Different elements or parts of business environment are closely interrelated.
(d) dynamic nature- Business environment is dynamic in that it keeps on changing.
(e) uncertainty -Business environment is largely uncertain as it is very difficult to predict future happenings,
(f) complexity- environment is a complex phenomenon that is relatively easier to understand in parts but difficult to grasp in its totality.
(g) relativity- Business environment is a relative concept since it differs from country to country and even region to region.
3 Importance of business environment:
(i) enabling the identification of opportunities and getting the first mover advantage- Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors.
(ii) helping in the identification of threats and early warning signals,
(iii) coping with the rapid changes- Besides opportunities, environment happens to be the source of many threats. Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.
(iv) It helps in tapping useful resources- 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.
(v) assisting in planning and policy and
(vi) improving the performance- Since environment is a source of both opportunities and threats for a business enterprise, its understanding and analysis can be the basis for deciding the future course of action.
4 Elements /dimensions of business environment:
Business environment consists of five important dimensions including economic, social,technological, political and legal.
Economic environment includes such factors as interest rates, inflation rates, changes in disposable income of people, stock market indexes and the value of rupee. Social environment includes social forces like traditions, values, social trends, society’s expectations of business, and so on. 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.
Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold toward business. Legal environment includes various legislations passed by the government, administrative orders issued by government authorities, court judgments as well as decisions rendered by various commissions and agencies at every level of the government— center, state or local.
5 What is Liberalisation, privatisation and globalisation?
Liberalisation refers to removal of controls and restrictions by the government over business. Privatization is the process of transferring an enterprise or industry from the public sector to the private sector. Globalisation refers to the interaction of domestic economy with the rest of the world economy.
6 Impact of Government policy changes on business and industry:
(a) increasing competition-
(b) more demanding customers (c) rapidly changing technological environment (d) necessity for change (e) need for developing human resource (f) market orientation (g) loss of budgetary support to the public sector.
7 Define Demonetisation.
Demonetisation is the process of detaching a currency unit from its status as legal tender in the country.
8 Name the types of demonetization.
Total demonetization and Partial demonetization.
9 List any two reasons for which a country sought demonetization.
Combating corruption
Combating inflation. (take action to reduce or prevent)
10 As per the directions issued by Supreme Court; The Government passed an order to ban the sale of tobacco products within the area of 200 metre all educational institutions as:
(i) Its consumption is injurious to health.
(ii) People are becoming more conscious about health and fitness.
(iii) It is indicating the government's attitude towards the business. Identify the 'Business Environment' under four different dimensions quoting the lines from the above para.
Ans. As per the direction issued by Supreme Court the government passed an order to ban the sale of tobacco products: Legal Environment.
(i) Its consumption is injurious to health: Social Environment.
(ii) People are becoming more conscious about health and fitness: Social Environment.
(iii) It is indicating government attitude towards business: Political Environment.
Please click on below link to download CBSE Class 12 Business Studies Business Environment Worksheet Set C
