Long Type Questions - Entrepreneurial Opportunity, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download

Q1. Why is scanning of environment is considered as an interface between spotting and product identification? Support your answer with at least one example. (6 marks)
Ans. An entrepreneur spots an opportunity to know the demand for the product and its sustainability and profitability.
For durability, he has to scan an environment by which the entrepreneurs first identifies the key elements and characteristics. In the absence of environment scan, an entrepreneur can bear loss in business because lack of knowledge about the customers and its demand about the product may cause failure to him e.g., in the form of electricity shortage, the entrepreneur spots an opportunity. He, then scans the environment in order to know the need of electricity to customers and produces a substitute of electricity which would be viable or not could only be sensed. After scanning an environment, he can move on to the identification of the product i.e., whether to produce invertors or only candles can be the substitute.

                       Enterprise Process Diagram
The flow chart shows that an opportunity perceived by the entrepreneur should be tested against important environmental parameters to arrive at a sound business choices. Successful scanning catches important changes, and an entrepreneur easily proceed to the next stage of product or service identification. Environment scanning only makes a project viable and sustainable enterprise in the long run.

Q2. “For entrepreneurship to thrive, a conductive political climate is necessary.” Discuss. Or “Sensitivity to environmental factors is essential for an entrepreneur.” Discuss with suitable examples. [CBSE TBQ]
Or
Entrepreneurship does not emerge and grow spontaneously, rather it is dependent upon several environmental factors. Explain them. (CBSE, TBQ) (6 marks)
Ans. Sensitivity to environmental factors is crucial for an entrepreneur. Some environmental factors are:
(i) Political Factor : Political factor is the outcome of a combination of various ideologies advocated by different political parties. The rules and regulations and the laws that monitor and regulate the market forces are framed and promulgated by the Government. This includes the political factor. The policies of the Government in power have to be reckoned with while taking a business decision. A Government which gives priority to growth of trade, industry and commerce will provide a great importance to entrepreneurship. These policies aim at improving infrastructural facilities which encourage new business ventures.
(ii) Social Factor : It involves a close study of the life style, beliefs, essential customs, conventions, practices, etc.
Expectations of individuals, their preferences on the basis of their family background, age group and education will also form a part of this study. This is a crucial process for the simple reason that the product or service that the entrepreneur envisages will have to satisfy the need of these individuals. For example, an entrepreneur wants to open a showroom of branded foot wears. Hence, he will target the youth of urban population.
(iii) Economic Factor : It includes the close study of important variables like supply and demand. Details of consumer trends economic preferences, costing, discounting, etc. are all economic decision. Economic details will also help the entrepreneur in determining the size of the project and the reasons of finance.
(iv) Legal Factors : Legal scanning of the environment demands analyzing the legal requirements in the establishment of a project, managing of the project and also in getting assistance from different sources. For example, welfare of employees, safety simple contracts entered into with suppliers of raw materials, financiers, real estate owners, etc. require legal assistance.
(v) Technological Factors : It is influenced by government spending on research, new discoveries and development, government and industry focus of technological effort, speed for technological transfer and rate of obsolescence.
(vi) Ecological Factors : It considers the ways in which the organization can produce its goods or services with minimum environmental damage.

Q3. Explain the importance of environment. (6 marks)

Ans. The benefits of understanding the relevant environment of business are :
(i) Identification of opportunities to get first mover advantage : By keeping in touch with the changes in the external environment, an enterprise can identify opportunities and find strategies to capitalise on the opportunities at the earliest.
(ii) Formulation of strategies and policies : It helps in identifying threats and opportunities in the market . These can serve as the basis of formulation of strategies to counter threats and capitalise on opportunities in the market.
(iii) Tapping useful resources : If the company has a thorough knowledge of the external environment, it can tap raw materials, technology and even financial resources from the market at economical prices, at the right time.
(iv) Better performance : Proper understanding of the various elements of the external environment is necessary to take timely action to deal with threats and avail opportunities for the purpose of improvement in the performance of the firm.
(v) Sensitisation of entrepreneurs to cope up with rapid changes : A keen watch on the trends in the environment would help sensitise the entrepreneur to changing technology, competition, government policies and changing needs of the customers.
(vi) Image building : If a company is sensitive to the external environment, it will come out with new products and services to meet the requirements of the customers. This would build the image or reputation of the firm in the eyes of general public.