Karnataka 2nd PUC Business Studies Important Questions Chapter 3 Business Environment
Which environment describes characteristics of the society in which the organization exists?
Which element/dimension of the business environment involves improvement and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business?
Which environment prohibits the advertisement of alcoholic beverages?
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?
‘Demand for reservation in jobs for minorities refers to an example of a key component of the general environment of business. Name this component.
It is the process by which government control over the industry is being loosened. Give the term to which this statement is trying to indicate.
Which process aims at giving a greater role to the private sector role to the public sector?
State the characteristics of a business environment.
- The totality of external forces.
- Specific and general forces
State the economic reforms since 1991 or new Economics policy.
State the factors of Micro Environment
(e) Marketing intermediaries.
State the factors of Macro Environment
(a) Economic Environment
(b) Political Environment
(c) Social Environment
(d) Legal Regulatory Environment
(e) Technological Environment
State the difference between the general and specific environments for example.
Examples of Specific Environment of Business.
Explain any five positive effects of liberalization and globalization on business and industry.
The positive effects of liberalization and globalization on business and industry are
- All-round competition
- Export became a matter of survival.
- World-class technology.
- Buyer’s market increase in production capacity.
Explain any five negative effects of liberalization and globalization on business and industry in India.
The negative effects of liberalization and globalization on business and industry in India are
(a) Destabilization of protected environment.
(b) Threat from MNC’s
(c) Corporate vulnerability
(d) Past Mure M to guide
(e) Acquisitions and mergers
Write the impact of changes in government policy on business and industries.
Impact of changes in govt, policy on business are:
(a) Increasing competition
(b) More demanding
(c) Rapidly changing technology environment
(d) The necessity for change
(e) Need for developing human resources. £ market orientation
(g) Loss of budgetary support to the public sector.
State the component of the Business Environment
Components of Business Environment
- Internal Environment
- External Environment
- Micro Environment
- Macro Environment
State the importance of business. Importance of Business Environment are:
- First mover advantage
- Warning signal
- Taping useful resources
- Coping with rapid changes
- Assisting in planning and policy
- Improving performance.
Short Answer Type Questions
What do you understand by business environment?
The term ‘business environment’ means the sum total of all individuals, institutions, and other forces that are outside the control of a business enterprise but that may affect its performance. The economic social-political, technological, and other forces which operate outside the business enterprise are part of its environment.
Why it is important for business enterprises to understand their environment? Explain briefly.
It is important for business organizations to understand their environment because of the following reasons
1. It enables the Firm to Identify Opportunities and Getting the First Mover Advantage: Environment provides numerous opportunities for business Early identification of opportunities helps an enterprise to use it before instead of losing them to competitors.
2. It helps the Firm to 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. It helps in Tapping Useful Resources, Environment is a source of various resources for running a business To engage In any type of activity, a business enterprise assembles various resources called inputs. This can be done better by understanding what the environment has to offer.
4. It helps in Coping with Rapid Changes All types of enterprises facing, increasingly dynamic environment In order to effectively cope with these significant changes, managers must understand and examine the environment and develop suitable courses of action
5. It helps in Assisting in Planning and Policy Formulation. Since the environment is the source of opportunities and threats, Its understanding and analysis become the base for various policies to be framed and strategies to be made.
6. It helps in Improving Performance: The enterprises that continuously monitor their environment and adopt suitable business practices are the ones. Which not only improves their present performance but also continues to succeed in the market for a longer period.
Mention environment the various dimensions of the business environment.
1. Economic Environment: Interest rates Inflation rates, Value of rupee, and many more are the economic factors that can affect management practices in a business enterprise
2. Social Environment: The social environment of business Includes social forces like customs and traditions values, social trends, etc.
3. Technological Environment: This 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
4. Political Environment: This includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives to hold towards business.
5. legal Environment: This includes various legislations passed by government authorities and court Judgements It is important for the management of every enterprise to obey the law of land and for this, enough knowledge of rules and regulations framed by the government is a pre-requisite for better performance.
Briefly explain the following
The three important features of New Economic Policy, 1991
(a) Liberalisation: Under the new economic policy of 1991. the economic reforms that were introduced aimed at liberalizing the Indian business and industry from all unnecessary controls and restrictions. They signaled the end of the license-permit quota raj.
(b) Privatisation: The new set of economic reforms that aim at giving a greater role to the private sector in the nation-building process and a reduced role to the public sector.
(c) Globalisation: means the integration of the various economies of the world-leading towards the emergence of a cohesive global economy. Till 1991, India had a policy that strictly regulated imports in value and volume terms. After 1991, the reforms aimed at Import liberalization.
Briefly discuss the impact of Government policy changes on business and industry.
Impact of Government policy changes on business and Industry
1. Increasing Competition: As a result of liberalization, privatization, and globalization number of players Increased in all sectors and Increased competition for everyone.
2. More Demanding Customers Increased competition in the market gives the customer wider choices in purchasing better quality of goods and services, which makes them more demanding
3. Rapidly Changing Technological Environment: New technologies help to improve machines, process products, and services. The rapidly changing technological environment creates tough challenges for smaller firms.
4. Necessity for Change: After 1991, the market forces have become turbulent as a result of which the enterprises have to continue modifying their operations.
5. Need for Developing Human Resource: The new market conditions require people with higher competence and greater commitment. Hence the need for developing human resources emerged.
6. Market Orientation: Earlier, production was taken up first, and then selling was done. Now, due to Increasing competition and more demanding customers firms have to study and analyze the market first and produce goods accordingly.
7. Loss of Budgetary Support to the Public Sector: Public sector has less budgetary support from the Central Government. Now, they have to generate their own resources and be more efficient in order to survive and grow.
Long Answer Type Questions
How would you characterize the business environment? Explain with examples, the difference between general and specific environments.
Features of the business environment
1. Totality of External Forces: The business environment is aggregative in nature as It is the sum total of all things external to business firms.
2. Inter-relatedness: Different elements of the business environment are closely related to each other, e.g., increased awareness of health care has increased the demand for many health products.
3. Dynamic Nature: The business environment is highly dynamic. It keeps on changing. Sometimes there is a change In technology, tastes, and preferences of consumers, etc.
4. Uncertainty: The environment cannot be predicted. It is highly uncertain and unpredictable.
5. Complexity: Since there are many elements of the business environment and they are Inter-related and dynamic in nature, Therefore, it becomes very difficult to understand them as a whole. 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 eg, social conditions or political conditions.
How would you argue that the success of a business enterprise is significantly influenced by its environment?
Importance of business environment
1. It enables the firm to Identify Opportunities and Getting the First Mover Advantage Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors, e g., Eureka Forbes introduced Aqua guard and took away the cream of demand.
2. It Helps the Firm to Identify Threats and Early Warning Signals Environment happens to be the source of many threats Environmental awareness can help managers to identify various threats on time and serve as an early warning signal e.g. Lakme took serious steps to improve the quality and types of products as foreign multinational cosmetics companies started coming to India after 1991.
3. It Helps in Tapping Useful Resources Environment offers various resources for running a business in return the business enterprise supplies the environment with its outputs such as goods and services for customers taxes for the government. In order to arrange for the best possible resources, a better understanding of the environment becomes Important
4. It Helps in Coping with Rapid Changes It is not the fact of change itself that is so Important as the pace of change There are many changes taking place in the environment and at a fast speed. In order to effectively cope with these changes, managers must understand and examine the environment and develop Suitable courses of action.
5. It Helps in Assisting in Planning and Policy Formulation Since the environment is a source of both opportunities and threats Its understanding and analysis only help In formulating the best possible policies to handle the future properly. It Helps in Improving Performance Continuous monitoring and adopting changes in an enterprise will help if! Improving not only their present performance but also continue to succeed in the market in the long run
Explain with examples, the various dimensions of the business environment. Dimension of the business environment
1. 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 the 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.
2. Social Environment
The social environment of business Includes social forces like customs and traditions, values social trends, society’s expectations from business, etc. In business terms, these values translate into the freedom of choice in the market.
Major elements of the social environment are
(a) life expectancy
(b) shifts in the presence of women in the workforce
Example: Due to the presence of women in the workforce the demand for readymade ladles formal wear, cosmetics, packed/ processed food, electronic gadgets has gone up.
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.
Example: Because of technological advancement, it has become possible to book railway tickets through the internet from home, office, etc.
4. Political Environment
The political environment includes political conditions such as general stability and peace In the country and specific attitudes that elected government representatives to hold towards business. It is only of use when a business enterprise can predict its business activities under stable political conditions.
Major elements of the 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.
For example: after the NEP of 1991, due to globalization 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 over time.
5. Legal Environment
The legal environment includes 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. 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.
What economic changes were initiated by the Government under the Industrial Policy, 1991? What impact have these changes made on business and industry?
Economic changes initiated by the government under the Industrial Policy, 1991
- The government reduced the number of industries under compulsory licensing to six.
- The role of the public sector was reduced. It was now limited only to four industries of strategic importance.
- Disinvestment was carried out in the case of many public sector industrial enterprises.
- Foreign Direct Investment was permitted.
- Automatic permission was now granted for technology agreements with foreign companies.
- Foreign Investment Promotion Board (FIPB) was set up to promote and channelize foreign investment in India.
The Indian corporate sector has come face-to-face with several challenges due to government policy changes. Some of them are
1. Increasing Competition: The competition has increased due to the entry of new players (privatization and globalization).
2. More Demanding Customers today: Has become more demanding because they are well-informed. Increased competition in the market gives the customers wider choice In purchasing better quality of goods and services.
3. Rapidly Changes Technological Environment: The rapidly changing technological environment creates tough challenges before smaller firms
4. Necessity for Change: After 1991. the market forces have become turbulent as a result of which the enterprises have to continuously modify their operations.
5. Need for Developing Human Resources: Earlier. Indian enterprises worked with inadequately trained personnel The new market conditions require people with higher competence and greater commitment Hence, the need for developing human resources
6. Market Orientation: Before 1991. all firms worked with production-oriented marketing operations. In a fast-changing world, there was a shift to market orientation. The firms had to study and analyze the market first and produce goods accordingly.
7. Loss of Budgetary Support to the Public Sector: The public sector undertakings have realized that in order to survive and grow, they will have to be more efficient and generate their own resources for the purpose.
What are the essential features of
(c) Globalisation Essential features of
- Abolishing licensing requirements In most of the industries a shortlist, except
- No restriction on expansion or contraction of business.
- Free movement of goods and sendees
- Freedom in fixing the prices of goods and services.
- Reduction in tax rates.
- Simplifying procedures for imports and exports. ‘
- Making it easier to attract foreign capital and technology to India.
- The government redefined the role of the public sector.
- The policy of planned disinvestments of the public sector
- Refining of sick enterprises to the Board of Industrial and Financial Reconstruction.
- Import liberalization
- Export promotion
- Foreign exchange reforms
Multiple Choice Questions
Which of the following does not characterize the business environment?
(b) Employees do not characterize the business environment
Which of the following best indicates the importance of the business environment?
(b) Improvement in performance
(c) Coping with rapid changes
(d) All of these
(d) Identification, Improvement In performance, coping with rapid changes all are indicators of the importance of the business environment
Which of the following is an example of a social environment?
(a) Money supply in the economy
(b) Consumer Protection Act
(c) The Constitution of the country
(d) Composition of family
(d) Social environment Includes social forces thus, the composition of families is an example of the social environment
(a) integrating among economies
(b) reduced Government controls and restrictions
(c) the policy of planned disinvestments
(d) None of the above
(b) Liberalisation means the end of license, quota, and reduction of government controls and restrictions
Which of the following does not explain the impact of Government policy changes on business and industry?
(a) More demanding customers
(b) Increasing competition
(c) Change in agricultural prices
(d) Market orientation
(c) Change in agricultural prices does not exotic the impact of Government policy changes on business and industry.
Lately, many companies have planned for significant investment in organized retailing in India. Several factors have prompted their decision in this regard.
Customers’ income is rising. People have developed a taste for better quality products even though they may have to pay more. The aspiration levels have increased. The government has also liberalized its economic policies in this regard and permitted even cent percent foreign direct investment in some sectors of retailing.
Identify changes in the business environment under different heads – economic, social, technological, political, and legal that have facilitated the companies decisions to plan significant investments in organized retailing.
Changes which have taken place In the following areas are as follows
- Economic Availability: Of more money because of employment opportunities increasing.
- Social Tastes: Of customers are changing. As he is getting more exposure to the outside world his tastes are changing.
- Technological advancements: have led to advanced ways of counting, checking.
coding, billing discounts which are convenient for the customer and also retailer.
- Political: Government policies are encouraging developers to go mass construction on real estate. As MNCs are corning to India, they have to be provided an Internationally based infrastructure to operate from
- Legal: As the government is providing more rights to the consumers, an organized retailing outlet would be more particular in taking care as compared to a small retailer.
What has been the impact of these changes with regard to globalization and privatization?
Due to globalization and privatization, more retailers from India and abroad are encouraged to make investments in organized retailing The competition has increased, the consumers are more demanding and an expert working force is required in order to cope up with the changes, which have taken place and are further changing.