Page 1
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
CBSE
Class XII Business Studies
All India Board Paper Set 1 – 2018
Time: 3 hrs. Max. Marks: 80
Answer 1
Decentralisation refers to delegating authority or decision-making power to the lower
levels of hierarchy.
Answer 2
Method is a type of plan in which the way or manner to perform a task is provided. It differs
from task to task.
Answer 3
Steps followed by Saurabh which are related to planning:
i. Setting objectives
ii. Developing premises
Answer 4
The factor affecting the working capital requirements of this industry is availability of raw
materials.
Answer 5
The investor could not invest in the Treasury Bill as treasury bills can be bought for a minimum
amount of Rs 25,000 and in multiples thereof.
Answer 6
An understanding of ‘Marketing Management Philosophies’ is important as it helps in
determining the weightage to be given to different factors so that organisational objective can
be achieved.
Answer 7
District Consumer Disputes Redressal Forum comprises one President and two other
members, one of whom is a woman.
Answer 8
The labelling function being performed by the given statement is ‘helps in the promotion of
products’.
Answer 9
Basis Formal organisation Informal organisation
Origin It is a result of rules and
policies of a company.
It is a result of social
interactions among
Page 2
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
CBSE
Class XII Business Studies
All India Board Paper Set 1 – 2018
Time: 3 hrs. Max. Marks: 80
Answer 1
Decentralisation refers to delegating authority or decision-making power to the lower
levels of hierarchy.
Answer 2
Method is a type of plan in which the way or manner to perform a task is provided. It differs
from task to task.
Answer 3
Steps followed by Saurabh which are related to planning:
i. Setting objectives
ii. Developing premises
Answer 4
The factor affecting the working capital requirements of this industry is availability of raw
materials.
Answer 5
The investor could not invest in the Treasury Bill as treasury bills can be bought for a minimum
amount of Rs 25,000 and in multiples thereof.
Answer 6
An understanding of ‘Marketing Management Philosophies’ is important as it helps in
determining the weightage to be given to different factors so that organisational objective can
be achieved.
Answer 7
District Consumer Disputes Redressal Forum comprises one President and two other
members, one of whom is a woman.
Answer 8
The labelling function being performed by the given statement is ‘helps in the promotion of
products’.
Answer 9
Basis Formal organisation Informal organisation
Origin It is a result of rules and
policies of a company.
It is a result of social
interactions among
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
employees.
Authority It is based on hierarchical
structure.
It is based on personal
qualities of members.
Flow of communication It takes place through the
scalar chain.
It can take place in any
direction.
Answer 10
Steps in the selection procedure after the employment interview and before the job offer:
i. Background checks: After the individual clears the interview, the organisation may ask
for references such as from previous employers or other known persons. The
references are then used to cross-check the information provided by the candidate.
ii. Selection decision: When the candidate clears the tests and interviews, the final
selection is done.
iii. Medical examination: Some organisations may also conduct a medical examination,
and the job is offered only when they are declared medically fit by a medical
practitioner.
Answer 11
(a) Democratic style of leadership is being followed by Sandhya as she encourages her
teammates to set their own objectives and take decisions.
(b) Two positive aspects of informal communication which are used by Sandhya:
i. Spread of information is faster when it flows through an informal path.
ii. Through informal communication, managers can get to know the true thinking or
mindset of employees which can prove helpful in decision making.
Answer 12
Option A is better than Option B for the company to finance its future fixed capital needs.
Reason: In Option A, Rate of return on investment (10–12%) > Rate of interest on borrowings
(9%)
Concept used: Trading on equity
Answer 13
Consumer protection plays an important role for businesses in the following ways:
i. Long-Term Interest: For any business, consumer satisfaction is essential. In today's
times, with increasing competition, consumer satisfaction has become all the more
important. As the organisation takes care of the interests of consumers, it builds goodwill
and reputation in the market. This in turn helps in increasing the sales and profits of the
business. Thus, protecting consumer's interests benefits the business in the long run.
ii. Use of Resources: Any business survives on the basis of society. It uses the resources of
society for its various production activities. It earns profits with the sale of these goods
and services to society. Thus, the business must take care of the interest of society and
supply goods and services which adhere to the overall interests and well-being of society.
Page 3
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
CBSE
Class XII Business Studies
All India Board Paper Set 1 – 2018
Time: 3 hrs. Max. Marks: 80
Answer 1
Decentralisation refers to delegating authority or decision-making power to the lower
levels of hierarchy.
Answer 2
Method is a type of plan in which the way or manner to perform a task is provided. It differs
from task to task.
Answer 3
Steps followed by Saurabh which are related to planning:
i. Setting objectives
ii. Developing premises
Answer 4
The factor affecting the working capital requirements of this industry is availability of raw
materials.
Answer 5
The investor could not invest in the Treasury Bill as treasury bills can be bought for a minimum
amount of Rs 25,000 and in multiples thereof.
Answer 6
An understanding of ‘Marketing Management Philosophies’ is important as it helps in
determining the weightage to be given to different factors so that organisational objective can
be achieved.
Answer 7
District Consumer Disputes Redressal Forum comprises one President and two other
members, one of whom is a woman.
Answer 8
The labelling function being performed by the given statement is ‘helps in the promotion of
products’.
Answer 9
Basis Formal organisation Informal organisation
Origin It is a result of rules and
policies of a company.
It is a result of social
interactions among
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
employees.
Authority It is based on hierarchical
structure.
It is based on personal
qualities of members.
Flow of communication It takes place through the
scalar chain.
It can take place in any
direction.
Answer 10
Steps in the selection procedure after the employment interview and before the job offer:
i. Background checks: After the individual clears the interview, the organisation may ask
for references such as from previous employers or other known persons. The
references are then used to cross-check the information provided by the candidate.
ii. Selection decision: When the candidate clears the tests and interviews, the final
selection is done.
iii. Medical examination: Some organisations may also conduct a medical examination,
and the job is offered only when they are declared medically fit by a medical
practitioner.
Answer 11
(a) Democratic style of leadership is being followed by Sandhya as she encourages her
teammates to set their own objectives and take decisions.
(b) Two positive aspects of informal communication which are used by Sandhya:
i. Spread of information is faster when it flows through an informal path.
ii. Through informal communication, managers can get to know the true thinking or
mindset of employees which can prove helpful in decision making.
Answer 12
Option A is better than Option B for the company to finance its future fixed capital needs.
Reason: In Option A, Rate of return on investment (10–12%) > Rate of interest on borrowings
(9%)
Concept used: Trading on equity
Answer 13
Consumer protection plays an important role for businesses in the following ways:
i. Long-Term Interest: For any business, consumer satisfaction is essential. In today's
times, with increasing competition, consumer satisfaction has become all the more
important. As the organisation takes care of the interests of consumers, it builds goodwill
and reputation in the market. This in turn helps in increasing the sales and profits of the
business. Thus, protecting consumer's interests benefits the business in the long run.
ii. Use of Resources: Any business survives on the basis of society. It uses the resources of
society for its various production activities. It earns profits with the sale of these goods
and services to society. Thus, the business must take care of the interest of society and
supply goods and services which adhere to the overall interests and well-being of society.
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
Answer 14
Yumco Ltd. has adopted the functional organisational structure. Three advantages of the
functional organisational structure:
i. Occupational specialisation: Activities of a similar nature are grouped together in
departments. Employees perform the same functions repeatedly. Thus, it leads to
occupational specialisation.
ii. Easy training: It is easy to train employees as the focus is on a limited range of skills.
iii. Better control and coordination: There is better control and coordination within a
department as similar tasks are performed within the department.
Answer 15
The given case highlights the planning function of management. The features of planning
discussed in the given case:
i. Planning focuses on achieving objectives: Planning starts when an objective is set
and proper planning gives a boost to a well-organised and goal-oriented management.
Plans ensure that the desired objective is attained economically and quickly, if
possible.
Quote 1: He shifted to Begampur, Chhattisgarh, to fulfil his grandmother's dream of
converting their 25-acre ancestral land into a fertile farm.
ii. Planning is futuristic: Being an intellectual process, planning seeks to bridge the gap
between where we are and where we want to go; it is a trap to capture the future, i.e.
it is futuristic in nature.
Quote 2: He wanted to ensure that the future events meet effectively the best interests of
the company. Through sales forecasting, he prepared an annual plan for production and
sales.
iii. Planning involves decision making: After coming up with all possible alternatives
and its outcome, the managers need to evaluate them. This evaluation is based on the
utility and consequences of the options and the performance study of various actions.
Quote 3: He not only identified but evaluated various alternatives through which the
farms could be utilised for the remaining months of the year.
iv. Planning is a mental exercise: Planning is a mental activity, in which the manager
uses his mind for logical and systematic thinking.
Quote 4: Through correct foresight and logical and systematic thinking based on analysis
of all facts, all alternatives were examined and evaluated.
Answer 16
Points highlighting the importance of controlling in an organisation:
i. Achieving goals: Controlling ensures that various activities are carried out correctly
according to the plans. It ensures that deviations if any are identified and appropriate
corrective action is taken.
Page 4
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
CBSE
Class XII Business Studies
All India Board Paper Set 1 – 2018
Time: 3 hrs. Max. Marks: 80
Answer 1
Decentralisation refers to delegating authority or decision-making power to the lower
levels of hierarchy.
Answer 2
Method is a type of plan in which the way or manner to perform a task is provided. It differs
from task to task.
Answer 3
Steps followed by Saurabh which are related to planning:
i. Setting objectives
ii. Developing premises
Answer 4
The factor affecting the working capital requirements of this industry is availability of raw
materials.
Answer 5
The investor could not invest in the Treasury Bill as treasury bills can be bought for a minimum
amount of Rs 25,000 and in multiples thereof.
Answer 6
An understanding of ‘Marketing Management Philosophies’ is important as it helps in
determining the weightage to be given to different factors so that organisational objective can
be achieved.
Answer 7
District Consumer Disputes Redressal Forum comprises one President and two other
members, one of whom is a woman.
Answer 8
The labelling function being performed by the given statement is ‘helps in the promotion of
products’.
Answer 9
Basis Formal organisation Informal organisation
Origin It is a result of rules and
policies of a company.
It is a result of social
interactions among
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
employees.
Authority It is based on hierarchical
structure.
It is based on personal
qualities of members.
Flow of communication It takes place through the
scalar chain.
It can take place in any
direction.
Answer 10
Steps in the selection procedure after the employment interview and before the job offer:
i. Background checks: After the individual clears the interview, the organisation may ask
for references such as from previous employers or other known persons. The
references are then used to cross-check the information provided by the candidate.
ii. Selection decision: When the candidate clears the tests and interviews, the final
selection is done.
iii. Medical examination: Some organisations may also conduct a medical examination,
and the job is offered only when they are declared medically fit by a medical
practitioner.
Answer 11
(a) Democratic style of leadership is being followed by Sandhya as she encourages her
teammates to set their own objectives and take decisions.
(b) Two positive aspects of informal communication which are used by Sandhya:
i. Spread of information is faster when it flows through an informal path.
ii. Through informal communication, managers can get to know the true thinking or
mindset of employees which can prove helpful in decision making.
Answer 12
Option A is better than Option B for the company to finance its future fixed capital needs.
Reason: In Option A, Rate of return on investment (10–12%) > Rate of interest on borrowings
(9%)
Concept used: Trading on equity
Answer 13
Consumer protection plays an important role for businesses in the following ways:
i. Long-Term Interest: For any business, consumer satisfaction is essential. In today's
times, with increasing competition, consumer satisfaction has become all the more
important. As the organisation takes care of the interests of consumers, it builds goodwill
and reputation in the market. This in turn helps in increasing the sales and profits of the
business. Thus, protecting consumer's interests benefits the business in the long run.
ii. Use of Resources: Any business survives on the basis of society. It uses the resources of
society for its various production activities. It earns profits with the sale of these goods
and services to society. Thus, the business must take care of the interest of society and
supply goods and services which adhere to the overall interests and well-being of society.
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
Answer 14
Yumco Ltd. has adopted the functional organisational structure. Three advantages of the
functional organisational structure:
i. Occupational specialisation: Activities of a similar nature are grouped together in
departments. Employees perform the same functions repeatedly. Thus, it leads to
occupational specialisation.
ii. Easy training: It is easy to train employees as the focus is on a limited range of skills.
iii. Better control and coordination: There is better control and coordination within a
department as similar tasks are performed within the department.
Answer 15
The given case highlights the planning function of management. The features of planning
discussed in the given case:
i. Planning focuses on achieving objectives: Planning starts when an objective is set
and proper planning gives a boost to a well-organised and goal-oriented management.
Plans ensure that the desired objective is attained economically and quickly, if
possible.
Quote 1: He shifted to Begampur, Chhattisgarh, to fulfil his grandmother's dream of
converting their 25-acre ancestral land into a fertile farm.
ii. Planning is futuristic: Being an intellectual process, planning seeks to bridge the gap
between where we are and where we want to go; it is a trap to capture the future, i.e.
it is futuristic in nature.
Quote 2: He wanted to ensure that the future events meet effectively the best interests of
the company. Through sales forecasting, he prepared an annual plan for production and
sales.
iii. Planning involves decision making: After coming up with all possible alternatives
and its outcome, the managers need to evaluate them. This evaluation is based on the
utility and consequences of the options and the performance study of various actions.
Quote 3: He not only identified but evaluated various alternatives through which the
farms could be utilised for the remaining months of the year.
iv. Planning is a mental exercise: Planning is a mental activity, in which the manager
uses his mind for logical and systematic thinking.
Quote 4: Through correct foresight and logical and systematic thinking based on analysis
of all facts, all alternatives were examined and evaluated.
Answer 16
Points highlighting the importance of controlling in an organisation:
i. Achieving goals: Controlling ensures that various activities are carried out correctly
according to the plans. It ensures that deviations if any are identified and appropriate
corrective action is taken.
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
ii. Reviewing standards: An effective control system ensures that standards are set
accurately. As the business environment changes, it ensures that the standards are also
reviewed so as to adapt to the changes taking place.
iii. Enables efficiency in resource utilisation: An effective control system ensures that there
is minimum wastage of resources. In other words, it ensures that the resources are utilised
optimally and in the most efficient manner.
iv. Better motivation: With controlling, employees know what is expected from them and
how their performance would be evaluated. This clarity motivates employees to perform
better.
Answer 17
(a) The incentive provided by ‘Goodcare Hospitals’ to its doctors through running trophies is
Employee Recognition Programme.
(b) Esteem needs of the doctors will be fulfilled through the employee recognition programme.
(c) The values that the CEO of ‘Goodcare Hospitals’ is trying to communicate to the society:
i. Healthcare to rural people
ii. Upliftment of poor in rural areas
Answer 18
Protective functions of Securities and Exchange Board of India:
i. One of the major objectives of SEBI is to check malpractices such as insider trading,
violation of rules and non-adherence to the Companies Act.
ii. SEBI provides investors with information about companies as required by them.
iii. SEBI provides guidelines related to investment in securities. In this way, it enables
investors to take well-informed decisions.
iv. SEBI provides a code of conduct for the trade practices of various intermediaries such as
brokers and merchant bankers. It keeps a check on the activities of these intermediaries
and provides them a competitive environment.
Answer 19
(a) The responsibility which Sumit had to fulfil as an aware consumer to get the services of
the company is to learn the risks associated with the products and services, follow
manufacturer’s instructions and use the products safely.
(b) Two rights which Sumit could have exercised had he fulfilled his responsibility:
i. Right to be Heard: It is the right of consumers to be heard in an appropriate legal
forum in case of any grievance or dissatisfaction faced by them. In other words, a
consumer has the right to file a complaint in case of any grievance.
ii. Right to Seek Redressal: It is the right of consumers to seek redressal in case of a
grievance and, if required, demand a suitable compensation. The Consumer
Protection Act provides for compensation in the form of replacement of product,
cash compensation and repair/removal of defects.
Page 5
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
CBSE
Class XII Business Studies
All India Board Paper Set 1 – 2018
Time: 3 hrs. Max. Marks: 80
Answer 1
Decentralisation refers to delegating authority or decision-making power to the lower
levels of hierarchy.
Answer 2
Method is a type of plan in which the way or manner to perform a task is provided. It differs
from task to task.
Answer 3
Steps followed by Saurabh which are related to planning:
i. Setting objectives
ii. Developing premises
Answer 4
The factor affecting the working capital requirements of this industry is availability of raw
materials.
Answer 5
The investor could not invest in the Treasury Bill as treasury bills can be bought for a minimum
amount of Rs 25,000 and in multiples thereof.
Answer 6
An understanding of ‘Marketing Management Philosophies’ is important as it helps in
determining the weightage to be given to different factors so that organisational objective can
be achieved.
Answer 7
District Consumer Disputes Redressal Forum comprises one President and two other
members, one of whom is a woman.
Answer 8
The labelling function being performed by the given statement is ‘helps in the promotion of
products’.
Answer 9
Basis Formal organisation Informal organisation
Origin It is a result of rules and
policies of a company.
It is a result of social
interactions among
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
employees.
Authority It is based on hierarchical
structure.
It is based on personal
qualities of members.
Flow of communication It takes place through the
scalar chain.
It can take place in any
direction.
Answer 10
Steps in the selection procedure after the employment interview and before the job offer:
i. Background checks: After the individual clears the interview, the organisation may ask
for references such as from previous employers or other known persons. The
references are then used to cross-check the information provided by the candidate.
ii. Selection decision: When the candidate clears the tests and interviews, the final
selection is done.
iii. Medical examination: Some organisations may also conduct a medical examination,
and the job is offered only when they are declared medically fit by a medical
practitioner.
Answer 11
(a) Democratic style of leadership is being followed by Sandhya as she encourages her
teammates to set their own objectives and take decisions.
(b) Two positive aspects of informal communication which are used by Sandhya:
i. Spread of information is faster when it flows through an informal path.
ii. Through informal communication, managers can get to know the true thinking or
mindset of employees which can prove helpful in decision making.
Answer 12
Option A is better than Option B for the company to finance its future fixed capital needs.
Reason: In Option A, Rate of return on investment (10–12%) > Rate of interest on borrowings
(9%)
Concept used: Trading on equity
Answer 13
Consumer protection plays an important role for businesses in the following ways:
i. Long-Term Interest: For any business, consumer satisfaction is essential. In today's
times, with increasing competition, consumer satisfaction has become all the more
important. As the organisation takes care of the interests of consumers, it builds goodwill
and reputation in the market. This in turn helps in increasing the sales and profits of the
business. Thus, protecting consumer's interests benefits the business in the long run.
ii. Use of Resources: Any business survives on the basis of society. It uses the resources of
society for its various production activities. It earns profits with the sale of these goods
and services to society. Thus, the business must take care of the interest of society and
supply goods and services which adhere to the overall interests and well-being of society.
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
Answer 14
Yumco Ltd. has adopted the functional organisational structure. Three advantages of the
functional organisational structure:
i. Occupational specialisation: Activities of a similar nature are grouped together in
departments. Employees perform the same functions repeatedly. Thus, it leads to
occupational specialisation.
ii. Easy training: It is easy to train employees as the focus is on a limited range of skills.
iii. Better control and coordination: There is better control and coordination within a
department as similar tasks are performed within the department.
Answer 15
The given case highlights the planning function of management. The features of planning
discussed in the given case:
i. Planning focuses on achieving objectives: Planning starts when an objective is set
and proper planning gives a boost to a well-organised and goal-oriented management.
Plans ensure that the desired objective is attained economically and quickly, if
possible.
Quote 1: He shifted to Begampur, Chhattisgarh, to fulfil his grandmother's dream of
converting their 25-acre ancestral land into a fertile farm.
ii. Planning is futuristic: Being an intellectual process, planning seeks to bridge the gap
between where we are and where we want to go; it is a trap to capture the future, i.e.
it is futuristic in nature.
Quote 2: He wanted to ensure that the future events meet effectively the best interests of
the company. Through sales forecasting, he prepared an annual plan for production and
sales.
iii. Planning involves decision making: After coming up with all possible alternatives
and its outcome, the managers need to evaluate them. This evaluation is based on the
utility and consequences of the options and the performance study of various actions.
Quote 3: He not only identified but evaluated various alternatives through which the
farms could be utilised for the remaining months of the year.
iv. Planning is a mental exercise: Planning is a mental activity, in which the manager
uses his mind for logical and systematic thinking.
Quote 4: Through correct foresight and logical and systematic thinking based on analysis
of all facts, all alternatives were examined and evaluated.
Answer 16
Points highlighting the importance of controlling in an organisation:
i. Achieving goals: Controlling ensures that various activities are carried out correctly
according to the plans. It ensures that deviations if any are identified and appropriate
corrective action is taken.
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
ii. Reviewing standards: An effective control system ensures that standards are set
accurately. As the business environment changes, it ensures that the standards are also
reviewed so as to adapt to the changes taking place.
iii. Enables efficiency in resource utilisation: An effective control system ensures that there
is minimum wastage of resources. In other words, it ensures that the resources are utilised
optimally and in the most efficient manner.
iv. Better motivation: With controlling, employees know what is expected from them and
how their performance would be evaluated. This clarity motivates employees to perform
better.
Answer 17
(a) The incentive provided by ‘Goodcare Hospitals’ to its doctors through running trophies is
Employee Recognition Programme.
(b) Esteem needs of the doctors will be fulfilled through the employee recognition programme.
(c) The values that the CEO of ‘Goodcare Hospitals’ is trying to communicate to the society:
i. Healthcare to rural people
ii. Upliftment of poor in rural areas
Answer 18
Protective functions of Securities and Exchange Board of India:
i. One of the major objectives of SEBI is to check malpractices such as insider trading,
violation of rules and non-adherence to the Companies Act.
ii. SEBI provides investors with information about companies as required by them.
iii. SEBI provides guidelines related to investment in securities. In this way, it enables
investors to take well-informed decisions.
iv. SEBI provides a code of conduct for the trade practices of various intermediaries such as
brokers and merchant bankers. It keeps a check on the activities of these intermediaries
and provides them a competitive environment.
Answer 19
(a) The responsibility which Sumit had to fulfil as an aware consumer to get the services of
the company is to learn the risks associated with the products and services, follow
manufacturer’s instructions and use the products safely.
(b) Two rights which Sumit could have exercised had he fulfilled his responsibility:
i. Right to be Heard: It is the right of consumers to be heard in an appropriate legal
forum in case of any grievance or dissatisfaction faced by them. In other words, a
consumer has the right to file a complaint in case of any grievance.
ii. Right to Seek Redressal: It is the right of consumers to seek redressal in case of a
grievance and, if required, demand a suitable compensation. The Consumer
Protection Act provides for compensation in the form of replacement of product,
cash compensation and repair/removal of defects.
CBSE XII | BUSINESS STUDIES
All India Board Paper Set 1 ? 2018
Answer 20
Coordination refers to the process through which the various functions of management are
synchronised towards the common goals and objectives of the organisation.
Features of Coordination:
i. Integrates group efforts: Coordination acts as a binding force in the organisation in the
sense that it unifies the efforts of various individuals in the organisation towards the
achievement of common goals and objectives of the organisation.
ii. Team activity: Coordination is essentially a team activity as it synchronises the
contribution of all individuals for the accomplishment of organisational goals. That is, it
combines the performance of individual workers for achieving the goals set.
iii. Collective enforcement: The primary aim of coordination is to combine the
contribution of all employees. It is a function which unifies the different functions of
management. It makes sure that employees of an organisation work synchronously
towards achieving organisational goals.
iv. Recurring process: Coordination is a recurring process. It develops a medium among
the functions of management. Coordination initiates in the beginning, i.e. from planning,
and repeats till the end, i.e. till controlling. It ensures that goals are accomplished in
accordance to the predetermined targets.
Answer 21
(a) The feature of the business environment discussed in the above paragraph is specific
and general forces. Specific forces refer to the external forces or institutions which exist
outside an organisation and with which an organisation has to interact during its working
course. General forces refers to those external forces which exhibit broad trends and
conditions affecting all organisations.
(b) Points highlighting the importance of business environment for business enterprises:
i. Accumulating useful resources: Environment offers itself as a source of inputs such
as raw material, machinery and labour for the running of an organisation. In return,
the business supplies the environment with its output. This is possible only if the
enterprises have an understanding of what the environment desires and what it can
offer.
ii. Adjusting to changes: Business environment is dynamic in nature and is prone to
numerous socio-economic changes. A careful analysis and understanding of the
environment helps an enterprise to adapt with these changes and to take timely
action.
iii. Formulating plans and policies: Understanding and analysing opportunities and
threats help a business frame suitable plans and policies in view of the current
scenario.
iv. Improving performance: The main aim of analysing and understanding the
environment is to improve a firm's performance and efficiency. The future of an
organisation depends on how closely it bonds with the environment and thrives to
survive its ever changing policies.
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