XII Business Studies - CH - 3 Notes and Case Studies

V.V.N.
SIRS COMMERCE CLASSES, JHAJJAR (HR)

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UNIT-3 expectancy, Shifts in the presence of
women in the workforce, Birth and death
Business Environment rates, Educational system and literacy
rates, Consumption habits, Composition of
Meaning of Business Environment family. Social trends present various
Business environment means the sum total of all opportunities and threats to business
individuals, institutions and other forces that are enterprises. For example, the health-and-
outside the control of a business enterprise but fitness trend has created a demand for diet
that may affect its performance. soft drinks, bottled (mineral) water and
Dimensions/Components/Elements of Business food supplements but harmed tobacco and
Environment liquor businesses. Customs and traditions,
1. Economic Environment: It consists of e.g. celebration of Diwali, Eid, Christmas,
o Change in disposable income and Guru Parv in India provides
o Inflation rate significant financial opportunities for
o Value of rupee greetings card companies, sweets or
o Interest rates confectionery manufacturers, tailoring
o Stock market indices. outlets, etc.
 Components of Economic Environment:
Rates of saving and investment, Volume of 3. Political environment: Political
imports and exports, Balance of payments environment includes
and changes in foreign exchange reserves, o Political conditions such as general
Money supply in the economy, etc. stability and peace in the country
Examples of Economic Environment and
affecting the functioning of a business o Specific attitudes that elected
enterprise: government representatives hold
(i) In case of construction companies towards business. Attitudes of the
and automobile manufacturers, low government officials may have
longer-term interest rates are either positive or negative impact
beneficial because they result in upon business.
increased spending by consumers  Components of Political
for buying homes and cars on Environment: The Constitution of the
borrowed money. country, Political practices of the
(ii) High inflation rates generally ruling party, etc. Example: Political
result in constraints on business stability builds up confidence among
enterprises as they increase costs business people to invest in the long
of raw materials or machinery and term projects. Political instability can
payment of wages and salaries. shake that confidence.
2. Social Environment: Social Environment 4. Legal environment: Legal environment
includes social forces like: includes
o Customs and traditions o Various legislations passed by the
o Values Government,
o Social trends and o Administrative orders issued by
o Society’s expectation from government authorities,
business. o Court judgments and
 Components of Social Environment: o The decisions rendered by various
Attitudes towards product innovations, commissions and agencies at every
Concern with quality of life, Life
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V.V.N. SIRS COMMERCE CLASSES, JHAJJAR (HR)
level of the government— Centre,  Business environment is totality of all
state or local. It is imperative for external forces affecting a business.
the management of every Therefore, it is aggressive in nature.
enterprise to obey the law of the  It includes both specific and general
land. Non-Compliance of laws can forces. Specific forces (e.g. investors,
land the business enterprises into customers, competitors and suppliers)
legal problems. For example, affect individual enterprises directly
knowledge of Companies Act 2013; and immediately in their day-to-day
Consumer Protection Act, 1986, working. General forces (e.g.
etc. is important for doing economic, social, political, legal and
business. technological conditions) have impact
Examples of government regulations to protect on all business enterprises and thus
consumer’s interests: may affect an individual firm only
(i) Advertisements for packets of indirectly.
cigarettes must carry the statutory  Its elements are closely inter-related.
warning– ‘Cigarette smoking is For example, increased life expectancy
injurious to health’ of people and increased awareness for
(ii) Advertisement of alcoholic beverages health care have increased the demand
is prohibited on Doordarshan for many health products and services
(iii) (iii) Advertisements of baby food must like diet Coke, fat-free cooking oil.
necessarily inform that mother’s milk  It is dynamic as it keeps on changing
is the best. (in terms of technological
5. Technological Environment: improvement, shifts in consumer
Technological Environment includes preferences or new competition in the
forces relating to: market).
o Scientific improvements and  It is uncertain as it is difficult to
innovations which provide new predict future happenings (especially
ways of producing goods and when environment changes are taking
services and place frequently as in the case of
o New methods and techniques of information technology or fashion
operating a business. industries).
o Examples: Airline companies have  It is complex as it comprises of
internet and www pages where numerous interrelated and dynamic
customers can look for flight times, conditions which arise from different
destinations and fares and book sources. It is relatively easier to
their tickets online. Innovations in understand business environment in
different scientific and engineering parts but difficult to grasp in its
fields such as lasers, robotics, food totality. For example, it may be
preservatives, medicine, difficult to know the extent of the
telecommunication, etc. have relative impact of the social, economic,
provided numerous opportunities political, technological or legal.
and threats for many different  It is a relative concept as it differs
enterprises. from region to region. For example,
political conditions in the USA differ
Features/Characteristics of Business from those in Japan or China.
Environment Similarly, demand for sarees may be
2
fairly high in India whereas it may be procedures for imports and exports,
almost non-existent in France. Making it easier to attract foreign capital,
Importance of Business Environment etc.)
 It helps to identify opportunities and  Privatisation means giving greater role to
getting the first mover advantage instead the private sector in the nation building
of losing them to the competitors. process and a reduced role to the public
‘Opportunities’ refer to the positive sector. (‘Disinvestments’ means
external trends and changes that will help transferring the public sector enterprises
to improve a firm’s performance. For to the private sector.)
example, Maruti Udyog became the leader  Globalisation means integrating the
in the small car market because it was the various economies of the world leading
first to recognise the need for small cars in towards the emergence of a cohesive
India, where petroleum prices were rising global economy. (e.g. Removal of
and there was a large middle class quantitative as well as tariff restrictions,
population. Import liberalisation and export
 It helps to identify threats on time which promotion through rationalisation of the
serves as an early warning tariff structure and foreign exchange
signal.(‘Threats’ refer to the negative reforms, etc.
external trends and changes that will
hinder a firm’s performance. For example, Demonetisation is the act of the government to
if an Indian firm finds that an MNC is cancel the legal tender status of a currency unit in
entering the Indian market with new circulation. The aim of demonetisation was to
substitutes, it can improve the quality of its curb corruption, especially the accumulation of
products, reduce cost of production, etc.) ‘black money’ generated by income that has not
 It helps in assisting in planning and policy been declared to the tax authorities.
formulation. (An understanding of
business environment can be the basis for Features of Demonetisation:
deciding the future course of action  Demonetization is a tax administration
(planning) or training guidelines for measures. People with black money had to
decision-making (policy).) declare their unaccounted wealth and pay
 It helps in tapping useful resources so tax at a penalty rate.
that it can convert them into output that the  Demonetization is a measure to improve
environment desires. tax compliance as tax collection increased
 It helps in coping with rapid changes in because of increased disclosure.
an increasingly dynamic environment.  Demonetisation led to channelizing more
 It helps in improving performance by savings through the formal financial
continuously monitoring the environment system. Bank deposits increased.
and adopting suitable practices.  Demonetisation aimed to create a less-cash
Government Policy Changes and their Impact or cash-lite economy. Cash transactions
on Business Government Policy Changes declined. Digital transactions using Rupay
 Liberalization means removal of cards and Debit Cards, etc. increased.
unnecessary controls and restrictions on
business. (e.g. Abolishing licensing Impact on Business and Industry
requirement, Freedom in deciding the  Increasing competition: Competition has
scale of business, Freedom in fixing the increased for Indian firms due to the entry
prices, Reduction in tax rates, Simplifying of foreign firms especially in service
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industries like telecommunications,
airlines, banking, insurance, etc.
 More demanding customers: Customers
have become more demanding as they
have a wider choice.
 Rapidly changing technological
environment: Technological environment
is rapidly changing creating tough
challenges for smaller firms.
 Necessity for change: It has become
necessary for enterprises to change and
modify their operations to cope with the
turbulent market forces.
 Need for developing human resource:
There is a need for developing human
resource as the new market conditions
require people with higher competence and
greater commitment.
 Market orientation: Enterprises are
forced to adopt a market orientation so that
they could study the market and produce
goods accordingly.
 Loss of budgetary support to the public
sector: There is loss of budgetary support
to the public sector as the government felt
that the public sector needs to be more
efficient in order to survive and grow.
Managerial Responses to Business
Environment:
1. (i) Use of latest technology (ii) Customer focus
(iii) Diversification (iv) Brand building (v)
Sharply improved compensation levels
2. It helps to identify threats on time which
serves as an early warning signal.(‘Threats’ refer
to the negative external trends and changes that
will hinder a firm’s performance. For example, if
an Indian firm finds that an MNC is entering the
Indian market with new substitutes, it can improve
the quality of its products, reduce cost of
production, etc.)
3. It helps in assisting in planning and policy
formulation. (An understanding of business
environment
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Application, HOTS, Evaluation and Multi with different subjects also.” (iv) It helps the firm
Disciplinary Questions to identify threats and early warning signals.
1. Lately many companies have planned for
significant investment in organised retailing in 3. Naman and Govind after finishing their
India. Several factors have prompted their graduation under vocational stream decided to
decisions in this regard. Customer income is start their own travel agency which will book Rail
rising. People have developed a taste for better Tickets and Air Tickets on commission basis.
quality products even though they may have to They also thought of providing tickets within ten
pay more. The aspiration levels have increased. minutes through the use of internet. They
The government has also liberalized its economic discussed the idea with their Professor Mr. Mehta
policies in this regard and permitted even cent who liked the idea and suggested them to first
percent foreign direct investment in some sectors analyse the business environment which consists
of retailing. of investors, competitors and other forces like
Identify changes in business environment under social, political etc. that may affect their business
different heads that have facilitated the directly or indirectly. He further told them about
companies’ decisions to plan significant the technological improvements and shifts in
investments in organised retailing. (NCERT) consumer preferences that were taking place and
Ans. (i) Economic environment (”Customer hence they should be aware of the environmental
income is rising.”) trends and changes which may hinder their
(ii) Social environment (”People have developed business performance. He emphasised on making
a taste for better quality products...”) (iii) plans keeping in mind the threat posed by the
Political environment (”The government ... competitors, so that they can deal with the
permitted even cent percent foreign direct situation effectively. This alignment of business
investment in some sectors of retailing.”) operations with the business environment will
2. Mr. Ajay after completing MBA from USA result in better performance.
comes to India to start a new business under the (i) Identify the component of business
banner Ecom Creations Ltd. He launches a new environment highlighted in the above Para.
product in e-learning for Senior Secondary School (ii) State any two features of business
students in Commerce stream, which already has environment as discussed by Professor Mehta
an established market in UK and USA but not in with Naman and Govind.
India. His business starts flourishing in India. (iii) Also state two points of importance of
Now more Indian companies entered into the business environment as stated by Professor
market with other subjects also. Identify and quote Mehta in the above situation. (CBSE SQP 2017)
the lines from above para which highlight the Ans. (i) Technological Environment
significance of understanding business (ii) (a) Specific and general forces (b) Dynamic
environment. (CBSE SQP 2015) nature
Ans: (a) “Comes to India to start a new business (iii) (a) It helps the firm to identify threats and
... launches a new product in e-learning for Senior early warning
secondary school students in Commerce stream.” signals. (b) It helps in planning and policy
(i) It helps in assisting in planning and policy formulation.
formulation. (ii) It helps the firm to identify 4. Phillips, a company manufacturing light bulbs
opportunities and get the first mover advantage. incurred heavy expenditure on scientific Research
(b) “His business starts flourishing in India.” (iii) and Development and discovered a technology
It helps in improving performance. (c) “Now that made it possible to produce an energy
more Indian companies entered into the market efficient light bulb that lasts at least twenty times
as long as a standard bulb. It resulted in growth
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V . V . N . S I R S C O M M E R C E C L A S S E S , J H A J J A R ( H R )

and profitability of the company. (a) Identify the (d) Composition of family
dimension of business environment mentioned Ans. (d) Composition of family
above. (b) State the point of importance of
business environment mentioned above by 8. The Reserve Bank of India (RBI) increased the
quoting the lines. Cash Reserve Ratio (CRR) by 0.25 Basis Points to
Ans. (a) Technological environment (b) Business overcome the inflationary trends in the economy.
environment helps a firm to improve its Identify the dimension of business environment
performance. ‘It resulted in growth and highlighted int the given statement.
profitability of the company.’ Ans. Economic environment.
5. ‘Konark Ltd.’ is an electronic goods 9. It is the process by which government control

manufacturing enterprise situated in Shivpuri, over the industry is being loosened. Give the term
Madhya Pradesh. It is earning a very low revenue to which this statement is trying to indicate.
in comparison to a competing electronic goods Ans. Liberalisation
manufacturing enterprise, ‘Nova Ltd.’ situated in
Mumbai.Both Konark’s and Nova’s operations are 10. Identify the following major concepts related
affected directly by the investors, customers, to government policy changes:
competitors and suppliers, which are unique to (a) Ceasing the legal tender status of large
their respective locations. In addition to this, denomination currency notes.
individual firms of this field are affected indi (b) The end of the licence-permit-quota raj.
rectly by the factors like the money supply in the (c) Transfer of ownership and management of the
economy, composition of the families, the enterprise to the private sector.
technological changes, etc. Identify the feature of (d) Import liberalisation and export promotion
the concept discussed in the above paragraph. through rationalisation of the tariff structure and
Ans. Specific and General Forces foreign exchange reform.
Ans. (a) Demonetisation (b) Liberalisation (c)
6. The Government of India has recently come up Privatisation (d) Globalisation
with an amendment to Section 6 of the Payment of 11. Identify the following major concepts related
Wages Act 1936, to allow employers of certain to government policy changes and one impact of
industries to make payment through various each on business and industry: (a) Removal
electronics modes of payments. The amendment ofquantitative as well as tariff restrictions (b )
will be applicable to all the public sector Diluation of stake of the government in the p ublic
undertakings for wages disbursement using e sector enterprises through ‘disinvestment’.
payment options. This is another milestone in the Ans. (a) Globalisation, Impact: Increasing
direction to further push to cashless economy. competition (b) Privatisation, Impact: Loss
Identify the dimensions of business environment ofbudgetary support to the Public sector
which relate to the above mentioned case. (CBSE
SQP 2018-19) 12. Identify the impact of the government policy
Ans. (a) Political Environment (b) Legal changes of liberalisation and globalisation from
Environment (c) Technological Environment the following statements: (a) Earlier firms used to
produce first and go to the market for Sale later. In
7. Which of the following is an example of social a fast changing world, the firms have to study and
environment? analyse the market first and produce goods
(a) Money supply in the economy accordingly. (b) In a regulated environment of
(b) Consumer Protection Act pre-1991 era, the firms could have relatively
(c) The Constitution of the country stable policies and practices. After 1991, the
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V .V .N . S I R S C O M M E R C E C L A S S E S , J H A J J A R ( H R )
market forces have become turbulent as a result of senior Secondary School students in
which the enterprises have to continuously modify Commerce stream, which already has n
their operations. (c) Increased competition in the established market in UK and USA but not in
market gives the customers wider choice in India. H is business starts flourishing in
purchasing better quality of goo ds and services. India. Now more Indian companies entered
Ans. (a) Market orientation (b) Necessity for into the market with other subjects also.
change (c) More demanding customers Identify and quote the lines from above para
which highlight the significance of
13. It is heartening that the implementation of understanding business environment.
compliance requirements of the Companies Act, Ans.
2013 has progressed substantially with NIFTY
500 companies. Data shows a significant increase 1. “Comes to India to start a new business …
in women’s participation in the top management launches a new product in e-learning for senior
of Indian Companies from 5% few years ago to secondary school students in Commerce
13% now. Even companies which are not in stream.”
NIFTY 500 have undertaken drives to increase It helps in assisting in planning and
women’s participation across different areas of policy formulation.
work. The government had also announced that it It helps the firm to identify
would support such companies. Identify and opportunities and get the first
explain the dimensions of business environment mover advantage.
discussed above which brought about the change.
(CBSE SQP 2018) 2. “His business starts flourishing in India.”
Ans. (a) Legal environment (b) Political It helps in improving performance.
environment
14. The Government of India announced 3. “Now more Indian companies entered into the
‘demonetisation’ of ` 500 and ` 1,000 currency market with different subjects also.”
notes with effect from the midnight of November It helps the firm to identify threats
8, 2016. As a result, the existing ` 500 and ` 1000 and early warning signals.
currency notes ceased to be legal tender from that
date. New currency notes of the denomination of ` Q. 2. Just after declaration of Lok Sabha
500 and ` 2000 issued by Reserve Bank of India Elections 2014 results, the Bombay stock
after the announcement. Discuss ‘demonetisation’ exchange’s price
in the light of the changes in business index (Sensex) rose by 1000 points in a day.
environment under various heads. (NCERT) Identify the environmental factor which led to
Ans.(a) Legal environment “ Government of India this rise giving reason. Also explain any two
announced ‘demonetisation’ of `500 and `1000 other dimensions of business
currency notes...” (b) Economic environment: environment.
“ New currency notes of the denomination of `500
and `2000 issued by Reserve Bank of India after Ans. Rise in stock market index (Sensex) is
the announcement.” economic environment. But Political
environment (declaration of Lok Sabha Elections
2014 results)) led to this rise.
C a s e S tu d i e s
Two other dimensions of business environment:
Q. 1. M r. Ajay after completing M BA from
1. Legal Environment:
USA comes to India to start a new business
2. Technological environment:
under the banner Ecom Creations Ltd. He
launches a new product in an e-learning for
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Q. 3. The court passed an order that all Q. 7. Due to entry of foreign firms,
schools must have water purifier for the competition for Indian firms has increased,
school children as especially in service industries. Name such
1. Society in general is more concerned service industries.
about quality of life. Ans. Telecommunications, airlines, banking,
2. Innovative techniques are being insurance, etc.
developed to manufacture water
purifier at competitive rates. Q. 8. The Court passed an order to ban
3. Incomes are rising and children at home polythene bags as
are also drinking purified water. 1. The bags are creating many
The government is also showing positive environmental problems which affect
attitude towards the water purifier the life of people in general.
business. 2. Society in general is more concerned
Identify the different dimensions of about quality of life.
business environment by quoting from the 3. The G overnment decided to give
above details. subsidy to jute industry to promote this
business.
4. Innovative techniques are being
Ans. developed to manufacture jute bags at
Legal environment: low rates.
Social environment: 5. Incomes are rising and people can
Technological environment: afford to buy these bags.
Economic environment: Identify the different dimensions of
Political environment: Business Environment by quoting the
lines from the above particulars.
Q. 4. ‘It is common now to see CD-ROM ’s,
computerized information kiosks, and Ans.
Internet/W ord W ide W eb multimedia pages 1. Legal environment:
highlighting the virtues of products.’ Name 2. Social environment:
the dimension of the business environment 3. Political environment:
highlighted by this statement. 4. Technological environment:
Ans. Technological environment 5. Economic environment:
Q. 5. W hich component of business Q. 9. The government of India is seriously

environment requires that advertisements of thinking of allowing the oil-marketing public
baby food must necessarily inform the sector undertaking to fix their own prices for
potential buyers that mother’s milk is the petrol and diesel. Name the economic reform
best? related to this decision of government.
Ans. Legal environment Ans. Privatization/Liberalization.
Q. 6. It is the process by which government Q. 10. K apil Sharma is working as the

control over the industry is being loosened. Country H ead of a company which owns a
Give the term to which this statement is trying chain of malls under the name of ‘Virtuoso’ in
to indicate. the various parts of India. Through an
Ans. Liberalization analysis report of the business environment, it
has been brought to his notice that in the
8
coming years, shopping at a mall will not be a
necessity for the buyers as purchases can be Q. 11. “Zero Defect Zero Effect” (ZED) is a
made online from anywhere and at any time slogan coined by the Prime M inister of India,
with ease and at the consumer’s convenience. Narendra M odi with reference to the M ake in
Hence, malls will have to provide much more India initiative launched by the government.
than shopping to be able to attract customers. The slogan reflects the efficiency of
So, he recommends that ‘Virtuoso’ malls production processes, i.e. the products have no
should to be restructured into recreation defects and the process through which the
centers, offering more spaces to socialize, host product is made has zero adverse
events and concerts, and provide ample Food environmental and ecological effects. The Zed
and Beverages options. model aims to make India the manufacturing
Consequently the share of entertainment hub of the world and prevent the products
segment and Beverages segment in the overall developed in India from being rejected by the
mall space is increased by 20%. As a result, global market. M oreover, before the initiative
the company gains enormously by getting the was launched, the limits of foreign direct
first mover advantage. investment in various sectors had been
In context of the above case: relaxed. The application for licenses was
1. Define the term ‘Business made available online and the validity of
Environment’. licenses was increased to three years. Various
2. Explain the terms ‘Threats’ and other norms and procedures were also relaxed
‘Opportunities’ by quoting lines from by the government.
the paragraph. In the light of the above paragraph, identify
Ans. and explain the major component of New
1. The term ‘Business Environment’ means Economic Policy of 1991 that are being
the sum total of all individuals, institutions referred to by quoting lines from the
and other forces that are outside the paragraph.
control of a business enterprise but that Ans. The major components of New Economic
may affect its performance. Policy of 1991 that are being referred to are as
2. The term ‘threats’ refers to the external fo llows:
environment, trends and changes that will Liberalization: The economic
hinder a firm’s performance.“Through an reforms signaled the end of the
analysis report of the business license-permit-quota raj and were
environment, it has been brought to his aimed at liberalizing the Indian
notice that in the coming years, shopping business and industry from all
at a mall w ill not be a necessity for the unnecessary controls and
buyers as purchases can be made online restrictions.“Moreover, before the
from anywhere and at any time with ease initiative was launched, the limits
and at the consumer’s convenience. of foreign direct investment in
Hence, malls w ill have to provide much various sectors have been relaxed.
more than shopping to be able to attract The application for licenses was
customers.” made available online and the
The term ‘opportunities’ refers to the validity of licenses was increased
positive external or changes that will help to three years. Various other
a firm to improve its performance. “As a norms and procedures were also
result, the company gains enormously by relaxed by the government.”
getting the first mover advantage.”
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Globalization: Globalization 2. Technological Environment:
means the integration of the 3. Social Environment:
various economies of the world
leading towards the emergence of a Q. 13. Beni, after completing her M BA, took
cohesive global economy. “The up a job a multinational company named
ZED model aims to make India ‘Fortio’. The company was paying good
the manufacturing hub of the salary and perks to its employees. The wages
world and prevent the products were within the paying capacity of the
developed in India from being company that provided the employees a
rejected by the global market.” reasonable standard of living. The company
also had a good work-culture and the
Q. 12. O ver the years, e-business in our behaviours of superiors were very good
country has witnessed tremendous growth due towards their subordinates. Beni was very
to several reasons. There is significant happy in this organization, but due to long
improvement in the Information Technology working hours she did not have time to cook
infrastructure over the last decade as the her meals. She had to depend on outside
Government has taken important steps in found, which was deteriorating her health.
high-speed Internet connectivity. As a result, She observed that this problem was faced by
the broadband networks have not only many of her colleagues, not only in her
become better but also more affordable. company but also in many other companies.
Additionally, Government is trying to make This was because of increase in the number of
rural India connected through broadband – a working women and non-availability of
great possibility for e-business to expand the hygienic home-cooked food. She identified
retail market by reaching out to the most this as a great opportunity and decided to give
remote rural customer. Another catalyst up her job to supply packaged home-cooked
strengthening the e-business segment is the food to office goers at a reasonable price. At
country’s favourable demography. It has the end of the day she also distributes the left-
more than 50% of its population below the age over food in the nearby night-shelters.
of 25 and more than 65% below the age of 35. 1. State the dimension of business
It is expected that, in the year 2020, the environment being discussed above.
average age of an Indian will be 29 years, 2. State the principle of management being
compared to 37 for China and 48 for Japan, followed by ‘Fortio’.
this promises for phenomenal increase in e- 3. Identify any two values being
business. M oreover, the penetration of the communicated by the company to the
Smartphone in a large section of the society in the above case.
population has aptly addressed the problem of Ans.
compute illiteracy. Notwithstanding the fact 1. Social environment which includes social
that consumers also prefer e-business due to forces like customs and traditions, values
multiple factors like convenience, time etc. trends etc.
Identify and explain the various dimensions of ‘This was because of increase in the
business environment being referred to in the number of working women and non-
above case. availability of hygienic home-cooked
Ans. The various dimensions of business food.’
environment being referred to in the above case 2. Remuneration of employees, which states
are as follows: that the overall pay and compensation
1. Political Environment:
10
should be fair to both employees and the a. It helps in assisting in planning and
organization. policy formulation. - ‘… Takes
‘The company was paying good salary into account the changes taking
and perks to its employees. The wages place in business environment
were within the paying while determining plans.’
capacity…standard of living.’ b. It helps in improving performance.
3. Values being communicated by the - ‘He accepts changes readily and
company to the society are: (Any two) gives useful suggestions to his
a. Good work culture superior, which results in
b. Good behavior inhuman interaction reduction of costs. As a result,
c. Concern for the employees company’s profits increase.’
d. Respect for law 4. Value:
a. Team work
Q. 14. Nakul, a manager of Zyco Ltd. always b. Adaptability
takes into account the changes taking place in
business environment while determining Q. 15. It is interesting to know that the menu
plans. H e accepts changes readily and gives items of the multinational food chains are
useful suggestions to his superior, which customized to suit the general palates of the
results in reduction of costs. As a result, local people in the region. W hen M cDonald’s
company’s profits increase. Nakul enjoys started its business in India in the year 1996,
cordial relations with his co-workers and the company went through a complete
makes plans in consultation with his team to localization strategy. M cDonald’s changed its
achieve organizational goals. product menu to accommodate the vegetable
1. W hich characteristic of management is burger given the large vegetarian population.
highlighted in the above lines? It also altered its store design and even
2. Identify and state any two principles of reduced the product price by close to fifteen
management followed by Zyco Ltd. per cent. Also, the “M cAloo Tikki burger” is
3. Give any two benefits which Zyco Ltd. not available anywhere but in the Indian
get by taking into account the changes outlets of M cDonalds.
taking place in business environment, Identify the relevant feature of business
quoting the lines from the above para. environment being discussed above.
4. State any one value which Nakul wants Ans. Relativity is the relevant feature of
to communicate to the society. business environment which is being discussed
Ans. above.
1. Management is a dynamic function.
2. Principles of Management Q. 16. Eco-friendly products are gaining
a. Initiative: This principle indicates power as the consumers’ awareness about
that the subordinates should be environmental issues has increased over the
encouraged to give suggestions years and they are conscious about choosing
and make and execute plans w ithin products that do not have adverse effects on
the prescribed limits of authority. the environment. They are now more
b. Spirit de corps: This principle conscious about the carbon emission and
suggests that management should climate change effects, and want themselves to
promote a team spirit of unity and be ‘seen’ as a green advocate among their
harmony among the employees. peers. In such a scenario, it has become a
3. Benefits of business environment: challenge for the companies as they have to
11
not only meet the needs of the consumers but those resources into outputs that
also ensure that their products are safe and the environment desires.
environment friendly. As a result, there is
growing need for better and advanced Q. 17. Ultra Paint Co. which is manufacturing
technologies to works as a catalyst in this paints has been enjoying a prominent market
regard. position as it manufactured best quality
1. Identify the relevant feature of business paints, made timely payment of taxes to
environment being discussed above. government. It assembled various inputs like
2. Describe briefly any three points which finance, machines, raw materials, etc. from its
highlight the importance of business environment. But since last year it has been
environment and its understanding by dumping its untreated poisonous waste on the
managers. river bank which has created many health
Ans. problems for the people. As a result, the court
1. Inter-relatedness is the relevant feature of passed an order to seal the manufacturing unit
business environment which is being of the company.
discussed above. 1. State the importance of business
2. The three points which highlighted the environment highlighted quoting the
importance of business environment and line from the above case.
its understanding by managers are 2. Identify any two dimensions of business
described below: environment mentioned in the above
a. It enables the firm to identify case by quoting lines from it.
opportunities and getting the first 3. State any two values which have been
mover advantage: The dynamic overlooked by the company?
business environment provides Ans.
numerous opportunities for a 1. Business environment helps in tapping
business to evolve as per the useful resources. ‘It assembled various
changing needs. Therefore, early inputs like finance, machines, raw
identification of the forthcoming materials, etc. from its environment.’
opportunities helps an enterprise to 2. Dimensions of Business Environment
be the first to exploit them instead a. Social environment - ‘… it has
of losing them to the competitors. been dumping its untreated
b. It helps the firm to identify threats poisonous waste on the river bank
and early warning which has created many health
signals: sometimes the changes in problems for the people.’
the external environment may pose b. Legal environment - ‘… the court
as a threat and hinder a firm’s passed an order to seal the
performance. Awareness about the manufacturing unit of the
business environment helps the company.’
managers to identify such threats 3. Value overlooked.
on time and take necessary a. Environment protection
decisions and action. b. Concern for human life
c. It helps in tapping useful resources c. Respect for law and order
as the enterprise designs policies d. Social responsibility
that allow it to get the resources
that it needs so that it can convert Q. 18. Philips, a company manufacturing light
bulbs incurred heavy expenditure on scientific
12
Research and Development and discovered a study and analyze the market first to identify
technology that made it possible to produce an customer tastes and fashion and then
energy efficient light bulb that lasts at least manufacture garments accordingly. It was
twenty times as long as a standard bulb. It also decided to increase expenditure on
resulted in growth and profitability of the advertising, after-sales services, etc.
company. 1. Identify any two features of business
1. Identify and state the dimension of environment by quoting the lines from
business environment mentioned above. the above case.
2. State the importance of business 2. At which level of management the
environment mentioned above by meeting of managers of Disco Ltd. was
quoting the lines. held?
3. State any one value which the company 3. Identify any two impacts of government
wants to communicate to the society. policy changes on business, quoting lines
Ans. from the above case.
1. Technological environment it includes 4. State the importance of understanding
forces relating to scientific improvements of environment by business managers in
and innovations which provide new ways the light of the above
of producing goods and services, and new para.
methods and techniques of operating a
business. Ans.
2. Business environment helps a firm to 1. Features of business environment:
improve its performance. ‘It resulted in a. Dynamic nature: ‘fashion and taste
growth and profitability of the company.’ of the consumers is changing at a
3. Value conservation of energy fast pace.’
b. Uncertainty: ‘It is very difficult for
Q. 19. Disco Ltd. manufactures fashionable the company to predict future
and designer clothes. Recently it finds that happening.’
the demand for its products has been c. Complexity: ‘It is difficult to know
declining. After market research it was the extent of the relative impact of
discovered that fashion and tastes of the the social, economic, political,
consumers is changing at a fast pace. technological or legal factors on
Customers’ demand is increasing. New decrease in demand of its products
competitors have entered the market with new in the market.
designs. It is very difficult for the company to 2. Top level management
predict future happenings. Also, it is difficult 3. Impact of government policy changes on
to know the extent of the relative impact of the business:
social, economic, political, technological or a. Increasing competition: ‘New
legal factors on decrease in demand of its competitors have entered the
products in the market. market with new designs.’
A meeting was held in which managers from b. More demanding
different functional levels heading Production, customers: ‘Customers’ demand is
M arketing, Finance, etc., for example, Chief increasing.’
Operating O fficer, Chief Finance O fficer, Vice c. Market orientation: ‘it was decided
President (M arketing) were present to discuss that they would study and analyze
how to deal with the situation. After a long the market first to identify
discussion, it was decided that they would customer tastes and fashion and
13
then manufacture garments b. Economic: “increase in disposable
accordingly. It was also decided to income”
increase expenditure on c. Technological: “growing
advertising, after-sales services, availability of organic food
etc.’ products in shopping malls, retail
4. Business environment helps the manager outlets and on line.”
in coping with rapid changes.
Q. 21. Anurag aspires to work with a socially
Q. 20. The organic food market in India is and environmentally committed company as
growing at 25-30 per cent which reflects a clear he does not want to work just for monetary
shift in consumer tastes and preferences. The benefits but also the brand value of the
current growth in the organic food market is company he works for in the society matters a
driven by multiplicity of factors like rising health lot to him. Therefore, he has joined Cerebra
consciousness, changing lifestyles, increase in Integrated Technologies a Bengaluru-based
disposable income and growing availability of InfoTech company. The company has built
organic food products in shopping malls, retail India’s largest e-waste recycling plant. The
outlets and online. company strives to be one of the leading
In context of the above case: players in this business which has huge
1. Identify and explain the features of potential not only in terms of generating huge
business environment being referred to revenues and profits but also wants to
here. contribute to the environment issues that have
2. By quoting phrases from the paragraph become crucial worldwide. The company sees
identify the various components of general big business in the mountains of e-waste in
forces which have led to a growth in the Bengaluru which produces 2, 00,000 tones of
organic food market. e-waste a year. The company plans to make
Ans. its millions by extracting metals such as gold
1. The features of business environment and platinum from the e-waste piling up in the
being referred to in the above case are as city. As a mobile phone, for example, is made
follows: up of a combination of rare earth and
a. Dynamic nature: It is dynamic in precious metals: it contains 250 mg of silver,
nature and keeps on changing due 24 mg of gold and nine mg of palladium while
to technological up gradations, a laptop has 1,000 mg of silver, 220 mg of gold
shifts in consumer preferences or and 500 grams of copper.
increase in competition in the To start the business, the company has
market. obtained a license from K SPCB (K arnataka
b. Inter-relatedness: All the elements State Pollution Control Board).
of business environment are In context of the above case:
closely interrelated. Therefore, any 1. Identify the various dimensions of
change is one element may business environment being referred to
necessitate corresponding changes by quoting lines form the paragraph.
in the other elements as well. 2. List any two values which the company
2. The various components of general forces wants to convey to the society.
which have led to a growth in the organic Ans.
food market are as fo llows:
a. Social: “rising health
consciousness, changing lifestyles”
14
1. The various dimensions of business pans that provide a healthy cooking surface,
environment being referred to the in the as they are manufactured with all ceramic or
above case are as follows: silicon coating and are considered safer than
a. Technological the traditional petroleum based nonstick
environment: Technological surfaces which may contain toxic substances.
environment includes forces Although, the new cookware range is highly
relating to scientific improvements prices, he expects a ready market for it as
and innovations which provide new both the purchasing power of people and their
ways of producing goods and preference for better quality products have
services and new methods and increased over the years.
techniques of operating a business. In context of the above case:
b. Legal environment: Legal 1. Identify the nature of management
environment includes various which is being reflected in the different
legislations passed by the styles of management in practice
Government administrative orders adopted by Arun and his father.
issued by government authorities, 2. Name and explain the related principle
court judgments as well as the of scientific management.
decisions rendered by various 3. State the related dimensions of business
commissions and agencies at every environment.
level of the government – centre, Ans.
state or local. 1. The different styles of management in
c. Social Environment: Social practice adopted by Arun and his father
environment includes the social reflect that management is an art.
forces like customs and traditions, 2. ‘Harmony, Not Discord’ is the related
values, social trends, society’s principle of scientific management.
expectations from business, etc. 3. The related dimensions of the business
2. The two values which the Cerebra environment are:
Integrated Technologies wants to convey a. Economic Environment:
through this initiative are: b. Social Environment:
a. Sustainable development c. Technological Environment:
b. Concern for environment.
Q. 23. Continuous and comprehensive
Q. 22. After completing his education, Arun evaluation is a process of assessment,
joins his father in their family business of mandated by the right to Education Act, of
manufacturing cookware. As a businessman, India. This approach to assessment has been
his father is rigid in his approach and has introduced by state governments in India, as
fixed ideas about various issues. He tends to well as by the Central Board of Secondary
maintain a distance from the factory workers. Education in India. W ith the introduction of
However, Arun is more receptive to the needs (CCE) system in education there is greater
of the workers and doesn’t seem to believe in focus on project based learning. As a result,
any class-differences. H e believes that the besides time and effort the students are willing
prosperity of their business greatly depends to invest money to enhance the visual appeal
upon the prosperity of their workers and vice of their project files so as to score higher
versa. At the same time, he has a good marks. In order to cash on the opportunity
understanding of the business environment. Rishabh has started a small business unit to
Therefore, he introduces a new range of green manufacture different kinds of decorative
15
V . V . N . S I R S C O M M E R C E C L A S S E S , J H A J J A R ( H R )

materials for the project files. He has Q. 25. Recently many companies have planned
employed a team of four creative designers for for significant investment in organizes
developing the innovative material with the retailing in India. Various factors which have
help of latest technology. However, he has a encouraged companies to take these decisions
prejudice against women and therefore pays are customer income is increasing, rise in
less salary to them as compared to the male standard of living of people. People are ready
staff for equal work. to pay high price for quality goods,
In the context of the above case: government policy of liberalization regarding
1. Name any two functions of management MNC entry and FDI, etc.
that Rishabh will have to perform in 1. Explain briefly changes in business
order to manage his business environment under different heads that
successfully. have facilitated the companies’ decision
2. Name and explain the principle of to plan significant investment in
management which is being violated by retailing.
Rishabh. 2. What has been the impact of these
3. Identify the related dimensions of the changes with regards to globalization
business environment. and privatization?
Ans. Ans.
1. The two functions of management that 1. Explain recent changes in various
Rishabh will have to perform in order to environment heads, i.e., economic, social,
manage his business successfully political, legal and technological.
are planning and organizing. 2. Explain the topic, impact of change in
2. The principle of management which is government policy/economic policy.
being violated by Rishabh is Equity.
3. The related dimensions of the business Q. 26. Two big banner movies were scheduled
environment are: to be released on the same date. On the last
a. Legal Environment movement release of one of the movies has to
b. Political Environment be postponed due to opposition of a group of
c. Economic Environment people due to some unethical contents related
d. Social Environment to their religion was shown in the that movie.
e. Technological Environment The other movie released on time and made
huge profit as there was no competition and
Q. 24. Government of India is seriously movie which was postponed suffered loss.
thinking to allow oil marketing public sector, 1. Which feature of business environment
undertaking to fix their own price for petrol is highlighted here?
and diesel. 2. Identify the dimension of business
1. Name the economic reform related to environment, which delayed the release
this decision of government. of movie.
2. Name other two reforms recommended Ans.
in new economic policy. 1. Feature highlighted is ………’relativity’.
Ans. 2. The dimension is ……..’Social
1. Liberalization environment’.
2. Other two reforms: Privatization and
Globalization. Q. 27. After winning the election, Prime
Minister Mr. Narender Modi launched a
Campaign of ‘Swachh Brarat’ and invited
16
various celebrities to be a part of this find out the solution of this problem he made
Abhiyaan. This spread awareness among the a team to find but the reasons for downfall of
people in society and in general, people started sales. The team conducted the survey and
becoming more careful and aware about the gave following four reasons for the downfall of
cleanliness around their area. To continue its company’s sale.
impact, a new service tax for Swachh Bharat 1. On account of increase in export duty
was also started. The government is planning made by the government, the foreign
to import new and better technology to adopt demand has gone down.
new methods of treating the garbage and 2. Due to availability of other eatable
waste. substitute the taste of people is diverted
State the various dimension of business from rice.
environment mentioned in the above para 3. The competitor’s imported new
quoting the lines from the above para. technology machine and are producing
better quality rice.
Ans. 4. Due to strain with neighbouring
1. “After winning election … .. Campaign of country’s government and our
Swachh Bharat.” - Political Environment country’s government export is affected.
2. “People in society … .. Around their area.” Identify the dimension of Business
- Social Environment Environment discussed in the above case.
3. “A new service tax … .. Started.” - Ans.
Economic Environment 1. Economic Environment
4. “Import new technology … . Garbage.”- 2. Social Environment
Techno logical Environment 3. Technological Environment
4. Political Environment.
Q. 28. Even after opening up of Indian
Economy, foreign companies found it Q. 31. W ith changes in the consumption habits
extremely difficult to cut through the of people, Neelesh, who was running a sweet
bureaucratic and red tapism in government shop, shifted to the chocolate business. On the
offices. This discourages them from investing eve of Diwali, he offered chocolates in
in India. attractive packages at reasonable prices. He
Identify the dimension of environment anticipated huge demand and created a
mention in above para. website chocolove.com for taking orders
Ans. Political Environment online. He got a lot of orders online and
earned huge profits by selling the chocolate.
Q. 29. Just after the declaration of Lok Sabha Identify and explain the dimensions of
Elections in 2014, the B ombay Stock Exchange business environment discussed in the above
Index rose by 1000 points. case.
Identify the dimension of business Ans. The various dimensions of business
environment. environment being referred to in the above cased
Ans. Political Environment are as follows:
1. Social environment:
Q. 30. ‘M amta Rice Food Ltd’ is a well know 2. Technological environment:
rice producing company. The sales have been
falling down from the beginning of the year. Q. 32. A recent rate cut in the interest on loans
The managing director M R. Bhuvan is announced by the banks encouraged Amit, a
worried about this situation. W ith a view to science student of Progressive School, to take
17
a loan from State Bank of India to experiment Ans. The various dimensions of business
and develop cars to be powered by fuel environment being referred to the in the above
produced form garbage. H e developed such a case are as follows:
car and exhibited it in the Science fair 1. Legal Environment:”As per the directions
organized by the Directorate of Education. issued by the Supreme Court.’
He was awarded the first prize for his 2. Political Environment: “The government
invention. passed an order to ban the sale of tobacco
Identify and explain the dimensions of products within the area of 200 meters of
business environment discussed in the above all educational institutions.”
case. 3. Social Environment: “Its consumption is
Ans. The various dimensions of business injurious to health and people are
environment being referred to in the above case becoming more conscious about health and
are as follows: fitness.”
1. Economic Environment:
2. Technological Environment: Q. 35. M ake in India is an initiative launched
by the G overnment of India to encourage
Q. 33. ‘Accent electronics Ltd.’ was operating national and multinational companies to
its business in M alaysia. The company started manufacture their products in India. It
exporting its products to India when the focuses on job creation and skill enhancement
Prime M inister announced relaxation in and is in twenty five sectors of the economy.
import duties on electronic items. The Under the initiative, brochures on these
company appointed retailers in India who had sectors and a web portal were released. The
direct online links with the suppliers to initiative aims at high quality standards and
replenish stocks when needed. minimizing the impact on the environment. It
Identify and explain the dimensions of also seeks to attract foreign capital investment
business environment discussed in the above in India.
case. In context of the above case:
Ans. The various dimensions of business 1. Identify the various dimensions of
environment being referred to in the above case business environment being referred to
are as follows: by quoting lines from the paragraph.
1. Political Environment: 2. List any two values which the
2. Technological Environment: Government of India wants to convey
through this initiative.
Q. 34. As per the directions issued by the Ans.
Supreme Court, the government passed an 1. The various dimensions of business
order to ban the sale of tobacco products environment being referred to in the above
within the area of 200 meters of all case are as follows:
educational institutions as: a. Political Environment:
1. Its consumptions injurious to health. b. Technological Environment:
2. People are becoming more conscious c. Economic Environment:
about health and fitness. This indicates 2. The two values which the Government of
the government’s attitude towards this India wants to convey through this
business. initiative are:
Identify the business environment under three a. High quality standards
different dimensions by quoting from above b. Concern for environment
paragraph.
18
Q. 36. India’s retail sector has been Ans. The various dimensions of business
undergoing structural changes for the last two environment being referred to in the above case
decades. On one hand, the ‘mall culture’ has are as follows:
gradually become a way of life, especially in 1. Technological environment:
the metros and mini-metros. O n the other 2. Social environment:
hand, there is accelerated growth in e-business Q. 38. In the year 2016, the State Government
as customers also prefer to buy products and of K erala had made it mandatory for
services via the Interest, telephone and anganwadis hostels and canteens in educational
television. However, operating in either of the institutions to secure the Food Safety and
segments is marked by the presence of strong standards Authority of India (FSSAI) license to
competitors. ensure food safety. As the educational
Identify the components of specific forces and institutions also get categorized as food
general forces being discussed in the above business operators in the event of the annual
paragraph. turnover of the hostels, they run exceeding Rs.
Ans. The components of specific forces 12 lakh per annum. In context of the above
discussed in the above paragraph are the case:
customers and competitors. 1. Identify and explain the various
The components of general forces discussed in dimensions of business environment
the above paragraph are the social and being referred to here.
technological conditions. 2. List any two values which the State
Government of K erala wants to convey
Q. 37. To mark the celebrations of through this initiative.
th
International Family Day on 16 may 2016,
K urkure flagged off India’s first family food Ans.
train – K urkure Family Express at New
Delhi. The train took forty families on fun 1. The various dimensions of business
culinary experience of a lifetime through an environment being referred to in the above
eight-day journey across fourteen states in case are as follows:
India. A whole lot of fun activities were a. Political Environment:
hosted on the train by the travel and food b. Legal environment:
anchors Rocky and mayor. 2. The two values which the State
The families were selected through an online Government of Kerala wants to convey
campaign, ‘Chatpata family photos’. The through this initiative are:
contest attracted approximately 1,000 entries, a. High quality standards
of which 40 entries that gelled with the b. Good health
brand’s image were selected.
The core idea of the campaign was to bring Q. 39. Postage stamps have been unveiled to
families from across India together over a commemorate 140 years of existence of the
journey like this. As in today’s time, everyone country’s first stock exchange the Bombay
is busy with their life the family members may Stock Exchange (BSE). The setting up of BSE
feel disconnected with each other. is considered to be the greatest revolution that
Identify and explain the various dimensions of took place in the financial markets in India as
business environment being referred to the in it acts as a key driver for economic growth of
the above case by quoting lines from the a country. This is due to the fact that there
paragraph. exists a strong correlation between economic
growth and capital accumulation.
19
In the context of the above case: b. Technological Environment:
1. Identify the dimension of business c. Legal Environment:
environment of India being referred d. Social Environment:
here. e. Economic Environment:
2. State any three factors which broadly
affected the dimension of business Q. 41. Bharat is running an ice cream parlour
environment of India as identified in in a local market. K eeping in mind the
part (a) of the question. changing perceptions about health among the
Ans. people, one of his employees Abhiraj suggests
1. Economic environment is the dimension of to him that they should introduce a range a
business environment of India being flavoured yogurt. Bharat accepts his
referred here. suggestion as a result both the im age and the
2. The three factors which broadly affect the profitability of his business increases.
economic environment of India are stated In the context of the above case:
below: 1. Identify the feature of management
a. Stage of economic development of which is being highlighted.
the country. 2. State the related dimension of the
b. The economic structure in the form business environment.
of mixed economy which 3. Name and explain the related principle
recognizes the role of both public of general management.
and private sectors. Ans.
c. Economic planning, including five 1. The feature of management which is being
year plans, annual budgets, and so highlighted is Dynamic.
on 2. The related dimension of the business
environment is Social.
Q. 40. In M ay 2016, the government had The related principle of general management
launched a web-based application which will is Initiative. Initiative means taking the first step
provide as opportunity to all the industries with self-motivation. The workers should be
dealing in hazardous waste to apply online encouraged to develop and carry out their plans
and get online permissions for import and for improvement. Suggestion system should be
export of certain categories of waste, which is adopted in the organization.
for reuse, recycling or recovery while it will
also help authorities in web-based processing,
generation and grant of various types of
permissions to the entrepreneurs and
industries. It is also aimed at implementing
the concept of paperless and green office and
provide information regarding number
authorizations or consent order granted by
the State Pollution control Boards (SPCBs).
Identify the various dimensions of business
environment being referred in the above case.
Ans.The various dimensions of business
environment being referred to the in the above
case are as follows:
a. Political Environment:
20

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5. ‘Konark Ltd.’ is an electronic goods 9. It is the process by which government control

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