Q2: How does understanding of business environment help in improving performance of a business?
Ans: Understanding the business environment helps in:
Q3: Give an example to show that a business firm operates within numerous inter related factors constituting the business environment.(Hint: example highlighting the inter relatedness of dimensions of business environment).
Ans: An example is the rise in consumer awareness for health and fitness, which has increased demand for products like fat-free cooking oil and organic food. This demand shift is influenced by interrelated dimensions of the business environment such as social trends (health awareness), technological advances (production methods), and economic factors (increased disposable income).
Q4: Krishna Furnishers Mart started its operations in the year 1954 and emerged as the market leader in the industry because of their original designs and efficiency in operations. They had a steady demand for their products but over the years, they found their market share declining because of new entrants in the field. The firm decided to review their operations and decided that in order to meet the competition, they need to study and analyze the market trends and then design and develop their products accordingly. List any two impacts of changes in business environment on Krishna Furnishers Mart’s operations. (Hint: increase in competition and Market orientation).
Ans: Two changes are:
Q5: Name any two Specific forces of business environment affecting business.
Ans: Customers & Competitors
Q2: Explain the following terms:
(a) Liberalisation
(b) Privatization
(c) Globalisation
Ans: (a) Liberalisation: Refers to the removal or reduction of restrictions and controls imposed by the government on businesses and industries. This includes deregulation, reduction of trade barriers, and encouraging private investment to foster competition and growth.
(b) Privatization: Involves the transfer of ownership, management, and control of public sector enterprises to private individuals or organizations to increase efficiency and profitability.
(c) Globalisation: Refers to the integration of the domestic economy with the global economy through increased trade, foreign investment, technological advancements, and the free flow of goods, services, capital, and information across borders.
Q3: National Digital Library of India (NDL India) is a pilot project initiated by the HRD ministry. It works towards developing a framework of virtual repository of learning resources with a singlewindow search facility. It provides support to all academic levels including researchers, lifelong learners and differentlyabled learners free of cost. State the dimensions of business environment highlighted above.
Ans: The dimensions of the business environment highlighted are:
Q4: State the impact of demonetization on interest rates, private wealth and real estate.
Ans: Impact of demonetization on interest rates private wealth and real estate
Difference between Specific and General Environment
There are two types of forces operating in business environment specific and general Specific forces affect the individual enterprises directly and Immediately, e.g., customers, suppliers General forces affect the firms and only indirectly e g , social conditions or political conditions.
Q2: How would you argue that the success of a business enterprise is significantly influenced by its environment?
Ans: Importance of business environment
Q3: Explain, with examples, the various dimensions of business environment.
Ans: (i) Economic Environment It includes the changes In the system due to economic policies made by the government. Reserve Bank of India is the key regulator of country’s economic environment since it
(a) influences the Interest rates
(b) controls the flow of money in the economy
(c) regulates the working of banks Example When the banks reduce the interest rates on long term loans. automobiles and construction industries get a boost to the business as more spending is made on the purchase of homes and cars through loans.
(ii) Social Environment: The social environment of business Include the social forces like customs and traditions, values social trends, society’s expectations from business etc. In business terms, these values translate into freedom of choice in the market. Major elements of social environment are
(a) life expectancy
(b) shifts in the presence of women in the workforce
(c) consurnonon habits
Example: Due to the shift in the presence of women in the workforce the demand for readymade ladles formal wear, cosmetics, packed/processed food, electronic gadgets has gone up.
(iii) 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. Example Because of technological advancement, it has become possible to book railway tickets through internet from home, office etc.
(iv) 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. It is only of use when a business enterprise can predict its business activities under stable political conditions. Major elements of political environment are
(a) The constitution of the country
(b) The nature and profile of political leadership and thinking of political personalities
(c) Political ideology and practices of the ruling party. Example After the NEP of 1991, due to globalisation the foreign companies started coming to India, but due to the bureaucratic red tape it became difficult for them to cut through it to do business here. As a result, these companies were discouraged in our country regarding investments. The situation has improved overtime.
(v) Legal Environment: Legal environment includes various legislations passed by the Government administrative orders Issued by government authorities, court judgements as well as the decisions rendered by various commissions and agencies. It is imperative for the management of every enterprise to obey the law of the land. Therefore, an adequate knowledge of rules and regulations framed by the government is a prerequisite for better business performance. Example There is a government regulation to protect consumer’s interest e.g., the advertisements of alcoholic beverages is prohibited.
Q4: The government of India announced Demonetization of ₹ 500 and ₹ 1,000 currency notes with effect from the midnight of November 8, 201Q6: As a result, the existing ₹ 500 and ₹ 1,000 currency notes ceased to be legal tender from that date. New currency notes of the denomination of ₹ 500 and ₹ 2,000 were issued by Reserve Bank of India after the announcement.
This step resulted in a substantial increase in the awareness about and use of Point of Sale machines, ewallets, digital cash and other modes of cashless transactions. Also, increased transparency in monetary transactions and disclosure led to a rise in government revenue in the form of tax collection.
(a) Enumerate the dimensions of business environment highlighted above.
(b) State the features of Demonetization.
Ans: (a) Dimensions of Business Environment Highlighted:
Political Dimension:
Legal Dimension:
Technological Dimension:
(b) Features of Demonetization:
Measure of Tax Administration:
Measure to Avoid Tax Evasion:
Channelizing Savings into the Financial System:
Creating a ‘Cash-less’ or ‘Cash-lite’ Economy:
Q5: What economic changes were initiated by the Government under the Industrial Policy, 1991? What impact have these changes made on business and industry?
Ans: Economic changes initiated by the government under the Industrial Policy, 1991
The Indian corporate sector has come lace-to-face with several challenges due to government policy changes. Some of them are
Q6: What are the essential features of:
(a) Liberalisation,
(b) Privatization and
(c) Globalisation?
Ans: Essential features of
(a) Liberalisation
(b) Privatisation
(c) Globalisation
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1. What is the significance of the business environment in decision-making? |
2. How do economic factors affect business operations? |
3. What role does government policy play in the business environment? |
4. How can businesses adapt to changes in the technological environment? |
5. What are the components of the business environment? |
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