CBSE Class 12 Business Studies Business Environment Worksheet Set A

Meaning of Business Environment

The sum total of individuals, institutions and other forces that are outside the control of a business enterprise but that may affect its performance.

Features of Business Environment

1. Totality of external forces

2. Specific and general forces

3. Inter-relatedness

4. Dynamic Nature

5. Uncertainty

6. Complexity

7. Relativity

Importance of business environment

(1) It enables the firm to identify opportunities and getting the first mover advantage.

(2) It helps the firm to identify threats and early warning signals.

(3) It helps in tapping useful resources.

(4) It helps in coping with rapid changes.

(5) It helps in assisting in planning and policy formulation

(6) It helps in improving performance.

Elements or Dimensions of Business Environment

1. Economic Environment

Interest rates , inflation rates, change in income of the people, stock market and the value of rupee are some of the economic factors that can affect management practices in a business enterprises

2. Social Environment

• The social environment of business includes the social forces like customs and traditions, values, social trends, society’s expectations from business etc. Traditions define social practices that have lasted for centuries.

• For Example:- Diwali, Id, Christmas and Guru Parv in India.

3. 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 have modified

the ways in which companies advertise their product

4. 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.

5. 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 the various commissions and agencies at every level of the government centre, state or local.

Impact of Government Policy changes on Business and Industries

1) Increasing competition

2) More demanding customers

3) Rapidly changing technological environment

4) Necessity for change

5) Need for developing human resource

6) Market orientation

7) Loss of budgetary support to the public sector

Liberalisation: Means freeing the business firms and industry from all unnecessary control and restrictions.

Privatisation: Means giving greater role to the private sector in the nation building process and reducing the role of public sector Globalisation: Means integration of our economy with world economy

Very Short Answer Questions

Question. Which environment prohibits the advertisement of alcoholic beverages?
Answer: Legal Environment

Question. Banking sector reforms have led to easier credit terms and better services. This is an example of a key component of the “Business Environment “name this component?
Answer: Economic Environment

Question. ‘Demand for reservation in jobs for minorities refers to an example of key component of general environment of business. Name this component.
Answer: Social Environment

Question. “The understanding of business environment enables the firm to identify opportunities”.
What is meant by opportunities here?
Answer: Opportunities here refer to the favorable condition in the organization environment.

Question. In the year 2006, Centre for Science and Environment (CSE) claimed to have found pesticides in Pepsi Co and Coco Cola soft drink 50 times more than permissible health limit- These companies sales being adversely affected in that year”. This is the effect of which environment?
Answer: This is the effect of Legal environment

Question. Out of liberalization, privatization and globalization, which one is associated with “Abolition of licensing requirement in most of the industries”?
Answer: Liberalization

Short Answer Questions

Question. What do you understand by legal environment? Give two examples which protect ‘consumer’s 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 ‘consumer’s interests’ are:
(i) Advertisement of alcoholic beverages is prohibited.
(ii) Packets of cigarettes should mention the statutory warning ‘Cigarette smoking is injurious to health’.

Question. With change in the consumption habit of people, Neelesh, who was running a sweet shop shifted to chocolate business. On the eve of diwali he offered chocolate in attractive packages at reasonable price. He anticipated huge demand and created a website chocolove.com for taking order online. He got lot of orders online and earned huge profit by selling chocolates. Identify and explain the dimensions of business environment discussed in the above case.
Answer:
1. Social environment: It includes social forces like custom and tradition, values, social trends and society’s expectation from business.
2. Technological environment: It includes forces relating to scientific improvement and innovation which provide new ways of producing goods & services and new methods and techniques of operating a business.

Question. State the difference between general and specific environment with examples.
Answer: Business environment includes both specific forces (investors, customers, competitors and suppliers) and general forces (economic, social, political, legal and technological conditions). Specific forces affect an individual firm directly and immediately in its dayto- day working while general forces have impact on all business firm and thus may affect an individual firm only indirectly.

Question. The understanding of business environment enables the firm to identify opportunities and threats. What do opportunities and threats means here?
Answer: Opportunities refer to the positive external trends /changes that will help to improve a firm’s performance. On the other hand threats refer to the external environment trends changes that will hinder a firm performance.

Question. Explain dynamic nature and uncertainty as features of business environment.
Answer: Dynamic nature: Business environment is dynamic as it keeps on changing in term of technological improvement, change in fashion and taste, entry of new competitors in the market, etc.
Uncertainty: Business environment is uncertain as it is very difficult to predict future happenings, especially when environment changes are taking place too frequently e.g. in case of IT and fashion industries.

Question. Lately many companies have planned for significant investment in organised retailing in India. Several factors have prompted their decision in this regard- customer income is rising. People have developed a taste for better quality products even though they may have to pay more. The government permitted cent percent foreign direct investment in some sectors of retailing.
Identify the change in business environment under different dimension quoting the line from the above para.
Answer: Dimensions of business environment:
(1) Economic environment: customer income is rising.
(2) Social environment: people have developed a taste for better quality product even though they may have to pay more.
(3) Political environment: the government permitted cent per cent foreign direct investment in some sector of retailing.

Question. Mr. Ajay after completing MBA from USA comes to India to start a new business under the banner Ecom creations Ltd. He launches a new product in e-learning for senior secondary school students in commerce stream, which already has an established market in UK and USA but not in India. His business starts flourishing in India. Now more Indian companies entered into the market with other subject also.
Identify and quote the line from above para which highlight the significance of understanding business environment.
Answer: a) Comes to India to start a new business……. launches a new product in e-learning for senior secondary school student in commerce stream.
(1) It helps in assisting in planning and policy formulation.
(2) It helps the firm to identify opportunities and get the first mover advantage.
(a) His business started flourishing in India.
(3) It helps in improving performance.
(b) Now more Indian companies entered into the market with different subject also.
(4) It helps the firm to identify threats and early warning signals.

Question. Explain “increasing competition” and “more demanding customers” as impact of government policy changes on business and industry?
Answer: Increasing competition: Government policies have enabled co-existence of government sector companies with private companies and compete fairly, leading to increasing competition.
More demanding customers: Government policies leading to economic libralisation allow consumers to become well-informed, increase their purchasing power (through rising incomes) and change their lifestyle, which makes them more demanding about quality and value-driven products/services.

Long Answer Questions

Question. Ultra paint co. which is manufacturing paints had been enjoying a prominent market position as it is manufacturing best quality paints made timely payment of taxes to government. It assembled various inputs like finance, machines, raw materials, etc. form its environment but since last year it has been dumping its untreated poisonous waste on the river bank which has created many health problems for the people. As a result, the court passed an order to seal the manufacturing unit of the company.
(a) State the importance of business environment highlighted quoting the line form the above case.
(b) Identify any two dimension of business environment mentioned in above case by quoting line from it.
(c) State any two values which have been overlooked by the company?
Answer: (a) business environment helps in tapping useful resources.
‘it assembled various inputs like finance, machines, etc. from its environment’.
(b) (1) Social environment
‘….it has been dumping its untreated poisonous waste on the river bank which created many health problems for the people’.
(2) Legal environment
‘….the court passed an order to seal the manufacturing unit of the company’.
(c) Values overlooked:
* Environment protection
* Concern for human life
* Respect for law and order
* Social responsibility

Question. Karodimal ltd. manufactures fashionable and designer clothes. Recently it finds that the demand for its product been declining. After market research it was discovered that fashion and tastes of the consumers is changing a pace. Consumers demand is increasing. New competitors have entered the market with new design. It is difficult for the company to predict future happening. Also it is difficult to know the extent of the relative impact of the social, economic, political, technological or legal factors on decrease in demand of its product in the market. A meeting was held in which managers from different functional level heading production, marketing, financial etc. for example, chief operating officer, chief finance officer, vice president (marketing) were present to discuss how to deal with the situation. After a long discussion, it was decided that they would study and analyze the market first to identify customers taste and fashion and then manufacture garments accordingly. It was also decided to increase expenditure on advertising, after sale service, etc.Identify any two features a business environment by quoting the lines from the above case.
(a) At which level of management the meeting of managers in Karodimal Ltd. was held.
(b) Identify any two impacts of government policy changes on business, quoting lines from the above case.
(c) State the importance of understanding of environment by business managers in the light of the above para.
Answer: (a) Features of business environment :-
(1) Dynamic nature – Fashion and taste of the consumer is changing at a fast pace.
(2) Uncertainty- It is very difficult for the company to predict future happening.
(3) Complexity – It is difficult to know the extent of the relative impact of the social, economic, political, technological or legal factor on decreasing in demand of its products in the market.
(b) Top level management
(c) Impact of government policy change in business
(1) Increasing competition – New competitors have entered the market with new design.
(2) More demanding customer- Customer demand is increasing.
(3) Market orientation – It was decided that they would study and analyse the market first to identify customer taste and fashion and then manufacture garments accordingly. It was also decided to increase expenditure on advertising after sale service etc.
(d) Business environment helps the manger in coping with rapid changes.

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 firm. 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: Importance of business environment:
1. Identify opportunities and get first mover advantage: Early identification of opportunities help the firm to be the first to exploit them instead of losing them to competitors.
2. Identify threats and early warning signals: Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.
3. Tap useful resources: A business firm assembles various resources called inputs like finance, machines, raw materials, power and water, labour, etc. from its environment.
4. 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.
5. Helps in coping with rapid changes: Managers must understand and examine the environment and develop suitable courses of action to cope with rapid change in business environment.

Question. The court passed an order that all school must have water purifier for the school children as society in general is more concerned about quality of life.
Innovative techniques are being developed to manufacture water purifier at competitive rates.
Incomes are rising and children at home are also drinking purified water.
The government is also showing positive attitude towards the water purifier business.
Identify the different dimensions of business environment by quoting lines from the above details.
Answer: (1) legal environment: The court passed an order that all schools must have water purifier for the school children.
(2) Social environment: Society in general is more concerned about quality of life.
(3) Technological environment: Innovative techniques are being developed to manufacture water purifier at competitive rate.
(4) Economic environment: Income is rising and children at home are also drinking purified water.
(5) Political environment: The government is also showing positives attitude towards the water purifier.

Question. The court passed an order to ban polythene bags as
(i) The bags are creating many environment problems which affect the life of people in general.
(ii) Society in general is more concerned about quality of life.
The government decided to give subsidy to jute industry to promote this business.
Innovative techniques are being developed to manufacture jute bags at low rates. Incomes are rising and people can afford to buy these bags.
Identify the different dimensions of business environment by quoting the lines form the above particulars.
Answer: (1) Legal environment: The court passed an order to ban polythene bags.
(2) Social environment: The bags are creating many environmental problems which affect the life of people in general. Social in general is more concerned about quality of life.
(3) Political environment: The government decided to give subsidy to jute industry to promote this business.
(4) Technological environment: Innovative techniques are being developed to manufacture jute bags at low rates.
(5) Economic environment: Incomes are rising and people can afford to buy these bags.

MCQs for NCERT Class 12 Business Studies Business Environment

Question. A firm should make efforts that it has ________ type of customers?
(a) One
(b) Two
(c) Three
(d) Many

Answer : D

Question. Which of the following is an example of social environment?
(a) Money supply in the economy
(b) Consumer Protection Act
(c) The Constitution of the country
(d) Composition of family

Answer : D

Question. Trade Policy brings under control the ________ .
(a) Import Trade
(b) Export Trade
(c) Foreign Trade
(d) Local Trade

Answer : C

Question. ITC Hotels made a study of the business environment and planned to open ________ in India and abroad.
(a) Factories
(b) Hotels
(c) Shops
(d) Offices

Answer : B

Question. Which of the following is included under the Macro Environment (or General Environment)?
(a) Economic Environment
(b) Political Environment
(c) Social and Legal Environment
(d) All the above

Answer : D

Question. Business environment is a group of ________ powers.
(a) Special
(b) General
(c) Internal
(d) Special and General

Answer : D

Question. XYZ Ltd. a book publishing house published books on coding language for kids before any other publishing house could print it.What advantage will this publishing house get?
Answer: Benefits of first mover advantage will be enjoyed by XYZ Ltd.

Question. The positive external trend that will enable a firm to improve its performance, in the context of business is called-
Answer: Opportunities

Question. Business environment differs from country to country and even region to region. Which characteristics of business environment are highlighted here?
Answer: Relativity

Question. Business environment is the sum total of a number of specific and general forces. Which of the following is not a general force?
a) Economic b) Suppliers c) Legal d) Political
Answer: Suppliers

Question. List two examples of change in social environment which affects business organisation.
Answer: Customs and belief of people; education system

Question. Teaching learning process through Google meet and Google classroom is related to which dimension of business environment?
Answer: Technological

Question. Parents are focussing on girl education; number of working women has increased in all fields. State the dimension of business environment with which it is related.
Answer: Social

Key points to remember for Chapter 03 Business Environment

• Business Environment : Business environment is the sum total of all external forces which affect the organisation and operation of business.

• Features of Business Environment
(i) Totality of external forces : It is aggregate of all things external to the business firms.
(ii) Specific and general forces : Specific forces affect individual firm directly (customers, competitors, etc.), general forces affects indirectly (social, political, etc.).
(iii) Inter-relatedness : Different elements of business environment are closely inter-related.
(iv) Dynamic nature : It keeps on changing due to changes in its various components.
(v) Uncertainty : It is very difficult to predict future happenings in business environment with accuracy.
(vi) Complexity : It is relatively easier to understand in parts but difficult to grasp in totality.
(vii) Relativity : It differs from country to country and region to region.

• Importance of Business Environment
(i) Enables the firm to identify opportunities and getting the first mover advantage.
(ii) Helps the firm to identify threats and early warning signals.
(iii) Helps in tapping useful resources.
(iv) Helps in coping with rapid changes.
(v) Helps in assisting in planning and policy formulation.
(vi) Helps in improving performance.

• Dimensions of Business Environment
(i) Social Environment : It includes forces such as customs, traditions, social expectations, literacy rate, etc.
(ii) Economic Environment : It includes factors such as inflation rates, interest rates, stock market indices, etc.
(iii) Technological Environment : It includes forces related to scientific improvements and innovations in the methods of production and techniques of operating a business.
(iv) Political Environment : It includes political conditions such as general stability of the ruling party, government ideologies, values and practices of the ruling party, etc.
(v) Legal Environment : It includes various legislations passed by the Government, administrative orders, court judgments, etc.

• Demonetisation : It is the process of detaching a currency unit from its status as legal tender in the country.
(i) Demonetisation results in change in national currency.
(ii) The present currency in circulation is pulled off and new currency is circulated.

• Types of Demonetisation
(i) Total Demonetisation – in this the entire range of present currency is replaced by a new range of currency.
(ii) Partial Demonetisation –in this some currency units are replaced and some are continued. Ø Purposes sought by Demonetisation
(i) Combating corruption
(ii) Combating crime
(iii) Combating inflation
(iv) Combating counterfeit currency
(v) Combating tax evasion
(vi) Encourage cashless economy
(vii) Facilitate trade (sometimes)

• Demonetisation across the world
(i) In 1873, USA – silver coins demonetised resulted in 5 years economic depression. As a result, silver remonetised in 1878.
(ii) In 2002, Europe –German Marc, French Franc, and Italian Lira demonetised in favour of Euro issued by European Union to facilitate trade.
(iii) In 2015, Zimbabwe - Zimbabwean Dollar demonetised in favour of US Dollar, Botswana Pula and South African Rand.

• History of Demonetisation in India. l On 12/01/1946 – all notes of denominations of ₹ 500 and ₹ 1000 were demonetised with a time limit of 10 days to exchange demonetised notes. Its purpose was to catch tax evaders. l On 16/01/1978 – all notes of denominations of ₹ 1000, ₹ 5000 and ₹ 10000 were demonetised with a time limit of 3 days to exchange demonetised notes. Its purpose was to catch corrupt leaders and officials in predecessor governments. l On 08/11/2016 – all notes of denominations of ₹ 500 and ₹ 1000 were demonetised with a time limit of 50 days to exchange demonetised notes from banks and some essential service stores.

• Demonetisation of 2016
(i) ₹ 500 and ₹ 1000 denomination notes were demonetised.
(ii) ₹ 500 (new series) and ₹ 2000 notes were introduced.
(iii) 50 days’ time limit given for exchange of demonetised notes.
(iv) Limits were put on exchange per day and withdrawal per day (and week) during this time.
(v) Public announcement made live by Prime Minister of India at 8.00 pm on 08/11/2016 that the demonetised currency can be used till 12 midnight the same day. (vi) Mixed reaction by public but strongly criticized by opposition.

• Effects of 2016 Demonetisation
(i) Estimated curb on black money
(ii) Estimated curb on human trafficking
(iii) Adverse effect on radical groups like Naxalists and Maoists.
(iv) Cash shortage among public (v) Deaths of people standing in bank queues reported
(vi) Decline in stock market (vii) Disruption in public transport system
(viii) Rise in cashless transactions
(ix) Move towards digital economy
(x) Growth in tax collection and number of assesses
(xi) Decline in GDP growth

• Attempts at evasion
(i) Rise in purchase of gold
(ii) Rise in donations at temples
(iii) Rise in initial booking and subsequent cancellation of railway tickets
(iv) Multiple bank transactions at different branches
(v) Backdating of accounting records and entries

• Economic Environment in India The main aim of the New Industrial Policy was to create a more competitive spirit in the economy and the removal of barriers on entry and growth of firms. As a part of economic reforms, the Indian government announced a “New Industrial Policy” in 1991. The focus of this policy was on liberalisation, privatisation and globalisation.

• The broad features of this policy :
(i) De licensing
(ii) Decrease in role of public sector
(iii) Disinvestment
(iv) Liberalisation of Foreign Capital
(v) Liberal policy for technical collaboration
(vi) Setting up or Foreign Investment Promotion Board
(vii) De-reservation under small-Scale industries.

• The New Industrial Policy laid stress on replacing the license, quota and permit by:
(i) Liberalisation
(ii) Privatisation
(iii) Globalisation

• Impact of Government Policy Changes on Business and Industry
(i) Increasing Competition : Indian firms are facing more competition due to entry of foreign firms.
(ii) More Demanding Customers : Customers today are well informed about wider choices available in the market.
(iii) Rapidly Changing Technological Environment : New technologies are used to improve machines, process, products and services.
(iv) Necessity for Change : Market forces have become turbulent after 1991 necessitating modification in operations.
(v) Development of Human Resource : Firms need people with higher competence and greater commitment.
(vi) Market Orientation : There is a shift from production orientation to market orientation.

• Managerial responses to change in Business Environment :
(i) Diversification spree
(ii) Consolidation and Joint ventures of Multinationals
(iii) Brand Building
(iv) Use of latest technology
(v) Qualified workforce
(vi) Market Orientation

Important Questions for NCERT Class 12 Business Studies Business Environment

Question. It is compulsory that advertisement on baby food must inform that mother’s milk is the best is related to
(a) Social Environment
(b) Economic Environment
(c) Political Environment
(d) Legal Environment

Answer  : D

Question. Relaxation or removal of strict rules and regulations is part of
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) All of the above

Answer  : A

Question. Opening doors for private sector in the area reserved for public sector is known as
(a) Privatisation
(b) Liberalisation
(c) Globalisation
(d) None of the above

Answer  : A

Question. Swachha Bharat Abhiyaan started by BJP government is part of
(a) Legal Environment
(b) Social Environment
(c) Political Environment
(d) Economic Environment

Answer  : C

Question. Change in taxes is part of
(a) Economic Environment
(b) Political Environment
(c) Legal Environment
(d) Social Environment

Answer  : A

Question. Demonetisation had direct impact on
(a) Social Environment
(b) Political Environment
(c) Economic Environment
(d) None of the above

Answer  : C

Question. Shift of youth in India towards packed food, online buying is part of
(a) Political Environment
(b) Social Environment
(c) Legal Environment
(d) Technological Environment

Answer  : B

Read the following text and answer question.

Care Ltd. is a company which deals in hair products. It has its branches in all the parts of the world. However, the requirements of hair products are different in different parts of the world. This is due to the change in climate and lifestyles of people in the different countries. The market in which it is dealing is known for awareness of health. The more the awareness the more is the demand for such products . Company knows that the demand for these products is unpredictable as new products keep on coming and the industry keeps on changing frequently. There is a research and development department which keeps on updating the latest changes . However the outside business environment is characterized by changing customer preferences, entry of new competitors making it change. A meeting was organized recently to understand the external business environment. However, after the meeting it was realised that business environment can’t be understood in totality it can only be understood by breaking it into its dimensions. The result of a successful meeting could be seen later in the performance of the company which created record sales in the coming year.

Question. This is due to the change in climate and lifestyles of people in the different countries.” Which feature of business environment is being highlighted here?
(a) Relativity
(b) Dynamic Nature
(c) Uncertainity
(d) None of these
Answer. A

Question. Company knows that the demand for these products is unpredictable as new products keep on coming and the industry keeps on changing frequently. Identify the feature of business environment, which is being highlighted here?
(a) Complexity
(b) Relativity
(c) Interrelatedness
(d) Uncertainity
Answer. D

Question. “the outside business environment is characterized by changing customer preferences, entry of new competitors making it change.”
Which feature of business environment is being highlighted here?
(a) Dynamic Nature
(b) Complexity
(c) Interrelatedness
(d) None of these
Answer. A

Question. “After meeting, it was realised that business environment can’t be understood in totality it can only be understood by breaking it into its dimensions”. Identify the feature of business environment is being highlighted here?
(a) Complexity
(b) Interrelatedness
(c) Both (a) and (b)
(d) None of these.
Answer. A

Read the following text and answer question.

Shobhit, aspires to work with a socially and environmentally committed company as he does not want to work just for monetary benefits but also the brand value of the company he works for in the society matters a lot to him. Therefore, he has joined Friendly Technologies a Noida-based Infotech company. The company has built India’s largest e-waste recycling plant. The company strives to be one of the leading players in this business which has huge potential not only in terms of generating huge revenues and profits but also wants to contribute to the environment issues that have become crucial worldwide. The company sees big business in the mountains of e-waste in Noida which produces 1,00,000 tonnes of e-waste a year. The company plans to make its millions by extracting metals such as gold and platinum from the e-waste piling up in the city. To start the business, the company has obtained a licence from U. P. Pollution Control Board.

Question. “The company has built India’s largest e-waste recycling plant”. Identify the dimension of business environment.
(a) Social environment
(b) Technological environment
(c) Legal environment
(d) None of these
Answer. B

Question. “The company strives to be one of the leading players in this business which has huge potential not only in terms of generating huge revenues and profits but also wants to contribute to the environment issues that have become crucial worldwide”. Which dimension of business environment is being referred here?
(a) Political environment
(b) Legal environment
(c) Social environment
(d) Economical environment
Answer. C

Question. “To start the business, the company has obtained a licence from U. P. Pollution Control Board.”Which dimension of business environment is being talked about.
(a) Economical environment
(b) Legal environment
(c) Both (a) are (b)
(d) Political environment
Answer. B

Question. “The company plans to make its millions by extracting metals such as gold and platinum from the e-waste piling up in the city.” Which objective of business is being fulfilled?
(a) Organizational objective
(b) Social objective
(c) Personal objective
(d) All of these
Answer. A

Question. Praveen started a wrist watch showroom in Mumbai India. He wants to sell wrist watch in France but he understands that conditions are different in different countries.The features of business environment highlighted here is___________
(a) Relativity
(b) Uncertainty
(c) Dynamic nature
(d) Complexity
Answer. A

Question. ‘HUNGER’ began its business by offering the classic combo of hamburgers and fries. But over time, their customers wanted healthier foods, so ‘HUNGER’ responded and began offering healthy alternatives such as salads, fruits, wraps and oatmeal. If ‘HUNGER’ hadn’t responded, they may have lost customers that wanted to eat healthier foods. The above case highlights one of the points related to the importance of business environment and its understanding by managers as___________
(a) it helps in coping with rapid changes.
(b) it helps in improving performance.
(c) it helps the firm to identify threats and early warning signals.
(d) it enables the firm to identify opportunities and getting the first mover advantage.
Answer. A

Question. Business environment is ___________because the changes in the environment takes place very rapidly due to changes in the taste of customers, technology, government policies, etc.
(a) uncertain
(b) flexible
(c) rigid
(d) None of these
Answer. A

Question. Standards should be_____________so that they can be modified as per changes taking place in the business environment.
(a) static
(b) flexible
(c) rigid
(d) stagnant
Answer. B

Question. Match Column-I (Types of business environment features) with Column- II (respective meaning) then select the correct answers from the option given below:

    (A) (B) (C) (D)
(a) (ii) (i) (iii) (iv)
(b) (iii) (i) (iv) (ii)
(c) (ii) (iii) (iv) (i)
(d) (iv) (iii) (ii) (i)
Answer. D

Question. Match Column-I (factors constituting the general environment of business) with Column-II (respective meaning), then select the correct answers from the option given below:

    (A) (B) (C) (D)
(a) (ii) (i) (iii) (iv)
(b) (i) (iii) (iv) (ii)
(c) (i) (ii) (iii) (iv)
(d) (iv) (iii) (ii) (i)
Answer. C

Question. Match Column-I (Indian Company Acts) with Column-II (Respective Year) , then select the correct answers from the option given below :

(A) (B) (C) (D)
(a) (iii) (i) (ii) (iv)
(b) (i) (iii) (iv) (ii)
(c) (iv) (iii) (ii) (i)
(d) (i) (ii) (iii) (iv)
Answer. C

Question. Match Column A (Different Company Acts) with Column B (Year of passing) then select the correct answers from the option given below :

    (A) (B) (C) (D)
(a) (ii) (i) (iv) (iii)
(b) (i) (iii) (iv) (ii)
(c) (iv) (iii) (ii) (i)
(d) (i) (ii) (iii) (iv)
Answer. D

Question. Match Column-I (Impact of Demonetisation) with Column- II (Result/Efeect) then select the correct answers from the option given below :

    (A) (B) (C) (D)
(a) (ii) (iii) (iv) (i)
(b) (i) (iii) (iv) (ii)
(c) (iii) (i) (iv) (ii)
(d) (i) (ii) (iiii) (iv)
Answer. A

Directions: In the following questions, a statement of assertion is followed by a statement of reason.Mark the correct choice as:
(a) If both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).
(b) If both assertion (A) and reason (R) are true, but reason (R) is not the correct explanation of assertion (A).
(c) If assertion (A) is true, but reason (R) is false.
(d) If assertion (A) is false but reason (R) is true.

Question. Assertion: Business environment is a relative concept
Reason: It does not differ business in same country but differ from country to country.
Answer. C

Question. Assertion: Business environment enables firms to identify threats and warning signals.
Reason: Environmental awareness helps an organization to identify threats to its business interest.
Answer. B

Question. Assertion: Enterprise design policies to arrange the required resources.
Reason: it can convert them into output they desires.
Answer. A

Question. Assertion: Political environment is related with governments responsibility towards business.
Reason: Government stability directly affects business scenario in a country.
Answer. A

Question. Assertion: New industrial policy decrease in role of public sector undertaking.
Reason: Economic reforms required government investments.
Answer. C

Question. Assertion: Liberalization involves removal of restriction on movement of goods.
Reason: It increases liquidity in market.
Answer. D

Question. Assertion: Aim of demonetization was to remove corruption, black Money, indirect Funding etc.
Reason: Rise in Public sector wealth.
Answer. C

Question. Assertion: Economic reforms includes LPG policy.
Reason: It includes mergers and acquisitions of business enterprises.
Answer. B

Question. Assertion: Increase in social awareness is part of business development.
Reason: it increases social values and ethics.
Answer. A

Question. Assertion: In India business is surrounded by various factors which directly or indirectly affect it.
Reason: President election in India affects directly Indian share market.
Answer. B

Question. With change in consumption habits of people, Neelesh who was running a sweets shop shifted to chocolate business. On the eve of Diwali he offered chocolates in attractive packages at reasonable prices. He anticipated huge demand and created a website chocolove.com for taking online orders. Identify the dimensions of business environment discussed above.
Answer. Social environment, Technological environment, Economic environment.

Question. Why is understanding the business environment so important?
Answer. 1) It helps to identify opportunities
 2) I thelps to identify threats
3) It helps to tap useful resources
4) It helps to cope with changes
 5) It helps to improve performance

Question. Why is business environment called uncertain?
Answer. Because it is difficult to predict future specially when environmental changes are taking place frequently.

Question. Why is environment called dynamic?
Answer.  Business environment is called dynamic as it keeps on changing.

Question. Increase in the use of mobile phones and i-pods in place of paper and radio is an example of which component of business environment?
Answer. Technological environment

Question. Give two examples each of specific forces and general forces.
Answer. Specific forces-Competitors,customers
General forces-Political forces, social forces.

Question. Identify the dimension of business environment in the following-

a) Replacing old machiney with new one to meet the requirements of pollution control regulations.
Answer.  Legal environment

b) Availability of e-books
Answer. Technological environment.

c) During Christmas the sale of cakes,clothes,gift items increases.
Answer. Social environment

MCQs for NCERT Class 12 Business Studies Business Environment

Question. Which of the following is not a part of the business environment of business?
(a) Customers
(b) Suppliers
(c) Competitors
(d) None of the above
Answer : D

Question. Which of the following is not a component of specific forces of business environment?
(a) Technological conditions
(b) Customers
(c) Employees
(d) Investors
Answer : A

Question. The growing awareness about healthcare has led to an increase in the demand for healthcare products and services in the country. Identify the feature of business environment being described in the above case.
(a) Dynamic nature
(b) Uncertainty
(c) Relativity
(d) Interrelatedness
Answer : D

Question. Since more number of people have become more beauty and health conscious, our economy has witnessed an unprecedented surge in the number of health and beauty spas and wellness clinics. Related feature of business environment being described in the above lines is:
(a) Totality of external forces
(b) Dynamic nature
(c) Interrelatedness
(d) Relativity
Answer : C

Question. In order to boost and double India’s export of goods and services to over USD 1,000 billion by 2025, it is important to lower effective corporate tax rate, bring down cost of capital and simplify regulatory and tax framework. Identify the related dimension of business environment.
(a) Social dimension and legal dimension
(b) Technological dimension and political dimension
(c) Political dimension and social dimension
(d) Economic dimension and legal dimension
Answer : A

Question. The Economic Survey, 2019 suggests that the psychological biases can be used for the tax compliance.It is in favour of using religious slogan such as “dying in debt is a sin” to improve tax compliance. Identify the related dimensions of business environment.
(a) Legal dimension and social dimension
(b) Social dimension and economic dimension
(c) Technological dimension and political dimension
(d) Political dimension and economic dimension
Answer : B

Question. Electric vehicles with zero emission are emerging as a good alternative to ‘problems like climate change, surging pollution, crude import bill and energy security. Identify the related dimensions of business environment.
(a) Economic dimension, legal dimension and social dimension
(b) Social dimension, political dimension and economic dimension
(c) Economic dimension, technological dimension and social dimension
(d) Social dimension, political dimension and legal dimension
Answer : C

Question. India’s population is expected to grow under 0.5 per cent during 2031-41 due to decline in fertility rate and increase in life expectancy. These changes in India’s demography will also have implications such as the proportion of elementary school-going children will witness significant declines, lack of hospital beds and increase in retirement age. The related feature of business environment being described in the above lines is:
(a) Totality of external forces
(b) Dynamic nature
(c) Interrelatedness
(d) Relativity
Answer : C

Question. India continues to be a lower-middle-income country along with 46 others, while Sri Lanka has climbed to the upper-middle-income group for the fiscal year (FY) 2020, according to the World Bank’s classification of countries by income levels, released on July 1, 2019. Identify the related dimensions of business environment.
(a) Social dimension
(b) Technological dimension
(c) Economic dimension
(d) Political dimension
Answer : C

Question. Even though the political conditions vary from country to country, they impact the sentiment of an investor in the business, if the instability of the political conditions cause uncertainty and make it difficult for him to predict the future. Which feature of the business environment is being highlighted in the above statement?
(a) Specific and general forces
(b) Dynamic nature
(c) Relativity
(d) All of these
Answer : D

Question. Which of the following is not an element of social environment?
(a) Birth and death rate
(b) Constitution of the country
(c) Population Shifts
(d) Life expectancy
Answer : B

Question. “The increase in the demand for many Ayurvedic medicines, Health products and services in the past few months, is related to the need for building immunity and an increased awareness for health care due to the spread of Corona Virus.” Identify the feature of business environment being described above.
(a) Specific and general forces
(b) Inter-relatedness
(c) Relativity
(d) None of these
Answer : B

Question. Which of the following does not characterize the business environment?
(a) Uncertainty
(b) Employees
(c) Complexity
(d) Relativity
Answer : B

Question. Which of the following is not the component of Specific Forces of business environment ?
(a) Technology
(b) Customers
(c) Investors
(d) Employees
Answer : A

Question. The Prime Minister has given a relief package of ` 5 crore. This is related to which dimension of business environment
(a) Political environment
(b) Economic environment
(c) Legal environment
(d) None of these
Answer : B

Question. Arora limited is a large firm which sells mobile phones. The company has decided to make itself adaptable to all different changes like social, economic, political etc. with continuously changing circumstances. Identify the features of business environment highlighted here :
(a) Relative concept
(b) Uncertainty
(c) Dynamic nature
(d) Complexity
Answer : C

Question. Which of the following is an example of social environment?
(a) Money supply in the economy
(b) Consumer Protection Act
(c) The constitution of the country
(d) Composition of family
Answer : D

Question. “Business environment includes which of the following forces?
(a) Socio-cultural
(b) Political
(c) Legal
(d) All of these
Answer : D

Question. Identify the dimension of business environment, which focuses on laws and regulations on industrial development.
(a) Economic environment
(b) Legal environment
(c) Political environment
(d) All of these
Answer : D

Question. Anju works in a law firm. She observed that numerous interrelated and dynamic conditions or forces arise from different sources. Identify the features of business environment highlighted here.
(a) Relativity
(b) Uncertainty
(c) Dynamic nature
(d) Interrelatedness
Answer : C

Question. In urban areas people are becoming diet conscious.They go to gym and avoid eating junk food. Due to which there is less sale of fast food chain stores.Identify the dimension of business environment.
(a) Political
(b) Economic
(c) Social
(d) None of these
Answer : B

Question. Which of the following does not characterize the business environment?
(a) Uncertainty
(b) Employees
(c) Complexity
(d) Relativity
Answer : B

Question. Identify the dimension of business environment,which focuses on laws and regulations on industrial development.
(a) Political environment
(b) Economic environment
(c) Legal environment
(d) All of these
Answer : C

Question. As per the directions issued by the Supreme Court,the government passed an order to ban the sale of tobacco products within the area of 200 meters of all educational institutions. Identify the dimension of business environment highlighted in this statement.
(a) Legal environment
(b) Social environment
(c) Political environment
(d) None of these
Answer : A

Question. “Business environment includes which of the following forces?
(a) Socio-cultural
(b) Political
(c) Legal
(d) All of these
Answer : D

Question. ‘Sohan village’ is a well-known resort for organising parties, especially for children. However, in past 6 months its popularity has reduced considerably as a new resort with better ambience and facilities has opened within its vicinity. Name the related feature of business environment which has influenced the business of ‘Sohan village’ adversely.
(a) Totality of external forces
(b) Dynamic nature
(c) Interrelatedness
(d) Uncertainty
Answer : B

Question. Any kind of external devices, like compact discs (CD’s) for computer, have become obsolete. Google, with its Google Drive service, Apple with its iCloud offering, enables the users store documents, photos, music and movies on web-based servers. Identify the feature of business environment being described in the above lines.
(a) Relativity
(b) Dynamic nature
(c) Uncertainty
(d) Interrelatedness
Answer : C

Question. According to the United Nations Environmental Agency, the world produces around 300 million tons of plastic each year, half of which constitutes singleuse items. Ford is recycling over one billion plastic bottles every year to develop elements of the car’s interior, reducing the amount of plastic ending up in a landfill. The American car maker has revealed that their Romanian-built EcoSport SUVs’ carpets are made using 470 recycled single-use plastic bottles. The process for making Ford EcoSport carpets involves shredding bottles and their caps into tiny flakes and then heating them to 260°C. Identify the related dimension of business environment.
(a) Economic dimension
(b) Social dimension
(c) Technological dimension
(d) Political dimension
Answer : C

Question. DigiLocker is the country’s first secured cloud-based platform for the storage, issuance and verification of documents with the Driving Licence & Vehicle Registration System of the Road Transport Ministry. The integration of a government department with DigiLocker since its launch last year is one of the biggest of its kind. It will spare 1 people the trouble of carrying licences & vehicle papers, which can be accessed on phones using the DigiLocker app. Identify the related dimension of business environment.
(a) Economic dimension
(b) Technological dimension
(c) Social dimension
(d) Political dimension
Answer : B

Question. The Jharkhand government has developed surveillance network using latest satellite technology. Under this system, the state’s mining department would be in a position to check illegal mining activities across the state. The state government is also considering the use of drones in its proposed campaign against illegal mining. Identify the related dimensions of business environment.
(a) Economic dimension and legal dimension
(b) Social dimension and economic dimension
(c) Technological dimension and political dimension
(d) Political dimension and economic dimension
Answer : C

Question. ‘Yochina’ began its business by offering the classic combo of noodles and fries. But over time, their customers wanted healthier foods, so ‘Yochina’ responded and began offering healthy alternatives such as salads, fruits, wraps and oatmeal. If ‘Yo china’ hadn’t responded, they may have lost customers that wanted to eat healthier foods. The above case highlights one of the points related to the importance of business environment and its understanding by managers. Identify it.
(a) It helps in coping with rapid changes.
(b) It helps in improving performance.
(c) It helps the firm to identify threats and early warning signals.
(d) It enables the firm to identify opportunities and getting the first mover advantage.
Answer : A

Question. As a result of major government initiatives, more and more people are going ‘green’. In order to keep in line with the trend, ‘Rose carpet’ a carpet cleaning company has advertised that they only use natural cleaners that come from renewable resources and that all their service vehicles are hybrid vehicles that use both gas and electricity. Identify one of the points related to the importance of business environment and its understanding by managers which is being highlighted in the above case.
(a) It helps in assisting in planning and policy formulation.
(b) It helps in coping with rapid changes.
(c) It helps in improving performance.
(d) It enables the firm to identify opportunities and getting the first mover advantage.
Answer : C

Question. According to the a health survey, 39% of adults are overweight. Over the last 40 years, the prevalence of obesity has tripled around the world. With over half of consumers drinking at least one sugary drink on a given day, regulations towards the beverage sector are likely to become increasingly strict. In Germany, for example, a sugar tax was introduced in 2018 on beverages containing more than 5% sugar. Identify the related dimensions of business environment.
(a) Legal dimension and social dimension
(b) Social dimension and technological dimension
(c) Technological dimension and legal dimension
(d) Political dimension and technological dimension
Answer : A

Question. According to a report by the India Staffing Federation (ISF), India has emerged as the fifth largest market worldwide in flexi-staffing in 2018 and the country would have 6.1 million flexi-workforce by 2021. It showed that Haryana, Gujarat, Karnataka, Madhya Pradesh and Telangana are the states with high growth potential for flexi- staffing but Andhra Pradesh tops the list of states with favourable business environment. Identify the feature of business environment being discussed above,
(a) Relativity
(b) Dynamic nature
(c) Uncertainty
(d) Interrelatedness
Answer : A

Question. “Even after opening up of the Indian economy in 1991 foreign companies found it extremely difficult to cut through the bureaucratic red tape to get permits for doing business in India, which created a negative impact on business.”
(a) Social environment
(b) Technological environment
(c) Political environment
(d) Legal environment
Answer : C

Question. Delhi sports is a sports equipment company. It has different branches in different parts of the world. However, the requirements of the sports equipment’s are different in different branches. This is due to the change in cultures and lifestyles of people in the different countries. Company knows that the demand for these products is unpredictable as new designs keep on coming and the industry keeps on changing frequently.
Identify the features of business environment highlighted here:
(a) Relativity
(b) Uncertainty
(c) Dynamic nature
(d) Complexity
Answer : B

Question. Arora limited is a large firm which sells mobile phones.The company has decided to make it adaptable to all different changes like social, economic, political, etc. with continuously changing circumstances. Identify the features of business environment highlighted here.
(a) Relativity
(b) Uncertainty
(c) Dynamic nature
(d) Complexity
Answer : C

Question. Naveen started a saree showroom in Mumbai, India.He wants to sell sarees in France but he understands that conditions are different in different countries.
Identify the features of business environment highlighted here.
(a) Relativity
(b) Uncertainty
(c) Dynamic nature
(d) Complexity
Answer : A

Question. Which among the following is a part of micro environment?
(a) Customers
(b) Competitors
(c) Suppliers
(d) All of the above
Answer : D

Question. With changes in the consumption habits of people, Neelesh, who was running a sweet shop, shifted to the chocolate business. On the eve of Diwali, he offered chocolates in attractive packages at reasonable prices. He anticipated huge demand and created a website chocolove. com for taking orders online. He got a lot of orders online and earned huge profits by selling the chocolate. Identify the two dimensions of business environment discussed in the above case.
(a) Economic and political environment
(b) Social and political environment
(c) Social and technological environment
(d) Legal and political environment
Answer : C

Question. The market is flooded with better quality toys of foreign origin. The result is fall in revenue of the indigenous or local companies as their products are much inferior and are also costlier in less demand in the market. Which dimension of business environment can be seen here affecting the local companies’ revenue?
(a) Social environment
(b) Technological environment
(c) Political environment
(d) Legal environment
Answer : B

Question. ‘Twinkle Stars’ is a well-known resort for organising parties, especially for children. However, in past 6 months its popularity has reduced considerably as a new resort with better ambience and facilities has opened within its vicinity. Name the related feature of business environment which has influenced the business of ‘Twinkle Stars’ adversely.
(a) Totality of external forces
(b) Dynamic nature
(c) Interrelatedness
(d) Uncertainty
Answer : B

Question. The organic food market in India is growing at 25-30 per cent which reflects a clear shift in consumer tastes and preferences. The current growth in the organic food market is driven by multiplicity of factors like rising health consciousness, changing lifestyles, increase in disposable income and growing availability of organic food products in shopping malls, retail outlets and online. In context of the above case identify the features of business environment.
(a) Dynamic nature
(b) Inter-relatedness
(c) Both (a) and (b)
(d) Export orientation
Answer : C

Question. Macro environment consists of which of the following:
(a) Political system
(b) Culture of the society
(c) Demographic factors
(d) All of the above
Answer : D

Question. Which one is not an element of internal environment?
(a) Money and capital market
(b) Marketing capabilities
(c) Operational Capabilities
(d) Personal Capabilities
Answer : A

Question. With this introduction of Photostate Machines in the market, the carbon paper industry was adversely affected. Which component of environment was responsible for it?
(a) Economic
(b) Political
(c) Technical
(d) All the above
Answer : C

Read the following text and answer question.

Over the years, e-business is growing as there is significant improvement in the Information Technology infrastructure over the last decade. For that Government has taken important steps in highspeed internet connectivity. As a result, the broadband networks have not only become better but also more affordable. Additionally, Government is trying to make rural India connected through broadband – a great possibility for e-business to expand the retail market by reaching out to the most remote rural customer. Another catalyst strengthening the e-business segment is the country’s favourable demography. It has more than 50% of its population below the age of 25 and more than 65% below the age of 35. It is expected that, in the year 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan, this promises for phenomenal increase in e-business. Moreover, the penetration of the smartphone in a large section of the population has aptly addressed the problem of compute illiteracy. Not withstanding the fact that consumers also prefer e-business due to multiple factors like convenience, time etc.

Question. “Over the years, e-business is growing as there is significant improvement in the InformationTechnology infrastructure over the last decade.”
Identify the dimension of business environment:
(a) Technological environment
(b) Political environment
(c) Economical environment
(d) None of these
Answer : A

Question. “For that Government has taken important steps in high-speed internet connectivity.” Identify the dimension of business environment:
(a) Political environment
(b) Legal environment
(c) Both (a) and (b)
(d) None of these
Answer : A

Question. “Another catalyst strengthening the e-business segment is the country’s favourable demography.It has more than 50% of its population below the age of 25 and more than 65% below the age of 35.”
Identify the dimension of business environment:
(a) Demographic environment
(b) Social Environment
(c) Economical environment
(d) None of these
Answer : A

Question. The 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— center, state or local comes under which dimension of business environment:
(a) Political environment
(b) Legal environment
(c) Both (a) and (b)
(d) None of these
Answer : B

Question. Which of the following does not characterise the business environment?
(a) Uncertainty
(b) Employees
(c) Relativity
(d) Complexity

Answer : B

Question. These days companies cannot avoid investing in ________ .
(a) Research
(b) Development
(c) Research and Development
(d) Employees

Answer : C

Question. The income and expenditure policy of the government is called ________ .
(a) Fiscal Policy
(b) Industrial Policy
(c) Trade Policy
(d) Monetary Reforms

Answer : A

Question. With the introduction of Photostat Machines in the market, the carbon paper industry was adversely affected. Which component of environment was responsible for it?
(a) Economic
(b) Political
(c) Technical
(d) All the above

Answer : C

Question. Liberalisation means
(a) Integration among economies
(b) Reduced government controls and restrictions
(c) Policy of planned disinvestments
(d) None of them

Answer : B

Question. In all the countries there is a free-flow of goods and services under which of the following does it come?
(a) Liberalisation
(b) Privatisation
(c) Liberalisation and Privatisation
(d) Globalisation

Answer : D

Question. Booking of railway tickets through internet from home or office is an example of_____. C
A. Political Environment
B. Economic Environment
C. Technological Environment
D. Social Environment

Answer : C

Question "free flow of goods and services between different countries of the world is an example of.
A.Gobalisation
B.privatisation
C.liberalisation
D.demonetisation

Answer : A

Question. Giving freedom to Indian business and industries from all unnecessary government controls and restrictions is an example of_______.: C
A. Privatization
B. Globalization
C. Liberalization
D. Demonetization

Answer : C

Question. Packets of cigarettes carry the statutory warning ‘Cigarette smoking is injurious to health’ is an example of________. C
A. Political Environment
B. Technological Environment
C. legal Environment
D.Social Environment 

Answer : C

Question. External environment trends and changes will provide________. A
A. Threats
C. Goodwill
B. Less competition
D. Profits 

Answer : A

Question With the introduction of mineral water bottle in India Bisleri was the was able to capture the big market share in India Which importance of business environment is highlight in above case
A. Helps in tapping resources
B. Help in policy making
C. Improve performance
D. Help to identify opportunity E and getting first mover advantage 

Answer : D

Question. Through environmental scanning business firms can enjoy _____.
A. Competition
B. First mover advantages
C. Benefit of Tax
D. Tapping useful resources 

Answer : B

Question. Face book, Twitter and Whatsapp is the result of ___________.
A. Political Environment 
B. Economic Environment
C. Social Environment
D. Technological Environment

Answer : D

Q1) Looking at the severe pandemic situation of Covid-19,the entire education system has adjusted itself with online teaching, online examination, developing creative way of teaching etc. Which point of importance of business environment does it reflect? Identify.
Answer : Coping with rapid changes

Q2) Give the meaning of business environment.
Answer : It is the sum total of all individuals, institutions and other forces that lies outside a business enterprise but which may influence the functioning and performance of a business.

Q3) What are the features of business environment?
Answer : 1) All forces are external to the business.
2) Environment comprises of specific and general forces
3) Forces and factors of environment are inter-related.
4) Environment is dynamic
5) Changes likely to take place in environment are unpredictable.

Q4) What are the dimension of business environment?
Answer : Economic environment, Social environment, Legal environment, Technological environment and political environment

Q5) Name some aspects of social environment.
Answer : Change in quality of life, Place of women in workforce, education and literacy rate, birth and death rates and population etc.

Q6) Mention some aspects of political environment.
Answer : Present political system, constitution of the country, foreign policy of the government,skill India movement, Swachh Bharat Abhiyaan etc.