CBSE Class 12 Business Studies Management of Business Environment Important Questions

Ques 1: What do you mean by business environment?

Ans: Forces affecting the performance of an organisation but outside its control are called as Business Environment.

Ques 2: Explain in brief the characteristics of business environment?

Ans:  i. Totality of external forces - it comprises of the sum total of all forces that are external to the business firm which it must deal with.

ii.    Specific and general forces - the forces present outside can be divided into two parts Specific- these forces affect the firms of an industry separately

e.g. Customers, suppliers, competitive firms etc. 

General - these forces affect all the firms of an industry eQuesually e.g. Social, political.

iii.  Inter- related - the different factors are co-related

e.g. Change in the import- export policy is a political change that gives rise to economic change as well

iv.  Uncertainty - business environment are susceptible to rapid changes, no one can predict with certainty the changes in the factors.

e.g. change in technology and fashion. 

v.    Dynamic - business environment keeps on changing. 

vi.  Complex - it is difficult to know the extent of impact of the changes that the factors can bring in.

vii. Relative - business environment is a relative concept as it differs from country to country, region to region.

Ques 3: Explain in brief the importance of business environment.

Ans:  IMPORTANCE OF BUSINESS ENVIRONMENT: 

i.     Identify the opportunities and getting the first mover advantage - by being aware of the changes in business environment, enterprises can identify opportunity and strategize ways to capitalise on them.

ii.    Identify threats and early warning signals - environment scanning helps in detecting possible threats in future.

iii.   Basis for planning and policy for formulation - identification of threats and opportunity serves as basis for deciding the future course of action.

iv.  Tapping useful resources - the resources are reQuesuired to carry on a successful business enterprise. These have to be procured from the business environment.

v.    Helps in coping with rapid changes - turbulent markets, less brand loyalty, divisions and  sub-divisions (fragmentation) of markets, more demanding customers, rapid changes in technology and intense global competition combined with complex business environment calls for a flexible planning to cope with the changes.

vi. Improvement in organisation performance - continuous and constant monitoring and adapting suitable business practices result in improved business performance.

Ques 4: Explain in brief the dimensions of business environment.

Ans :- The various dimensions of business environment in terms of general environment are:

Economic Environment :

Refers to all those forces that have economic impact on the business activity.Components of economic environment are GDP, Inflation rate, Interest rate, Rupee value, Stock exchange index, Tax rate.

Political Environment: includes political conditions such as political leadership, political stability, practices of the ruling party and the nature of the government in power and their level of interference.

Components of political environment are Constitution of the country, Political ideology of the ruling party, nature and extent of government interference, international relations.

Legal Environment: refers to the framework of laws and various legislations within which the business activities take place. 

Components of Legal Environment are Government legislations, court judgements, Decisions of various commissions.

Social Environment: represents the customs and traditions, values, culture, social trends, beliefs, norms and ethics of a society in which business enterprises operate. 

Components of Social Environment are customs traditions, social expectations, lifestyles, values, literacy level.

Technological Environment: refers to the influence of the changes in the technology on the business environment.