Business Environment CBSE Syllabus = Business Environmen concept and importance | Dimensions of Busines Environment-Economic, Social, Technological, Political and Legal Demonetization - concept and features | Impact of Government policy changes on business with special reference to liberalization, privatization and globalization in India. Content 3.1 Business Environment: Concept and Importance ns of Business Environment y Changes and their Impact on Learning Outcomes After going through this chapter; the students will be able to: Understand the concept of ‘Business Environment’ Desctibe the importance of business environment Describe the various dimensions of ‘Business Environment. Understand the concept of demonetization Examine the impact of government policy changes on business in India with reference to liberalisation, privatization and globalisation since 1991 Discuss the managerial response to changes in businessBU eed CL ‘How a Ricksttaw PULLER BECAME AN ENTREPRENEUR, Tm soaps x is A aman wi is Op what ened ke argue cy at werk Dhara Kab ska puller was ciing dough che arocx sf Dali when he mt with a terable accident. This war fn event that wonld change his ie forse Krawing thar he wouldot be able to go back to hit wok, he rade the dection of meumting to his aatvevilage in the Yamananagar disci of Haryana ta begin Me ane Being school dropout with no tchoal ening of any bind Further retried his cope in terrazof employment The dire to do something out of che erdcary hep sing in bis heart ine and agnin, He was on the Ibokoue forthe sight iesprnion and opporanie Sick sn oppomuniy cromed his path during one of hi vt, f the outhice of Jaipur, Ajmer and Tushlar ejone of Rijathan. whee be ehserel + oumber of women sf hp goupe at work A common sight war women in the proces of making gocrdhery Inddoos. While chis proces appeared to be nther simple the grating of trmecerscs on slabs of stone manclly-with hands war fn excruciatingly psinfl exrie, Thee were machine: ‘lable that could proce the grcesherrps but pone of thera proved co be cart efcive. The indusry ws #0 sellin scale and the owners so racer in means éhat ie ws imponible for chem co buy machines and. put them in we. DharrvesrKarboj gant think of ws of making feuit and egeuble rocesing machioe not Sel affonble but alo foe af cides heh azar ‘Oheerrng thar cutng, gating juicing and puberizing involved scar echoiquee made him come op wih the iden of « muleipurpose procesing emachine thar could ‘werk equally wel forall of thee ade. There war hoorerer a big hualle in the way of Dharuanert His linitad flucation would prow his unk to bean uphill bak Hi homrvcr as not detrred. He know peblams would some his wy, but eo challenge aed overcome them wat bis mote in if “Sega are baa Raab ba “Ager dns bt toh pee mud ar nahin bia Ba.” ‘This i the rm chat Dharamvesr Siagh Kambo) hac aba lal by and was able to somcbuw convince him and obuia a funding of €25.000 far his price. Hie began work immediacy, The fist peottyre of his machine was red in Mich 2005, An unexpected problem of ovthcating however stopped up. Even aie Dharimveers constant trie fr the simination of chs problem, the inte ll perseted in the second promype Bx the hough of sing up never cose Dharamvee?= sind. tn hie tid poowype, he had accel ooked the problem of overheating at lt. This prottype wat bought by GIAN North and sent to Kenya an a plot bois Bad on the fedbark, GIAN akodizn to ccf ie farther incorporating provisions that would emake it parable, including the jacorpraton of Zaldable lege Ie the fourth machine he aks incorporated «seve manage the Dow of juice fiom che machine during the casein proces. The machine thar Dharannet dbedoped i uaique ie away that it has the capacity 0 proces a wide variety of products without damaging the fel ofthe fruit ot vepetabl, ood Business Quote We cannot curect ene wind... But we can adjust the sails “Wher you cannot change the circumstances. change yourself, Introduction ‘The example of Dharamveer Kamboj shows how a machine invented by him made life easier for women workers in unorganised scctor. This innovation resulted in a positive impact on food processing business ie, social, economic and technological in addition to enhancing quality of life, To Enhance Enterprising Skis ‘The term ‘business environment’ means the sum total. of all individuals, institutions and other forces that are outside the control ofa business enterprise but that may affect its performance. As one writer has put it ‘Just tke the universe, subtract from it the subset that repreents the organisttion, ated the remainder is environnoené*. ‘Thus, the economic, social, political, technological and other forces which operate outside a business enterprise are part of its environment: So also, the individual consumers ar competing enterprises as well as the governments, consumer groups, competitors, courts, media and other institutions working outside an enterprise constitute its environment. ‘The important point is thar these individuals, institutions and forces are likely to influence the performance of a business enterprise although they happen to exist outside its boundaries. For ecamgple, changes in government’ economic policics, rapid technological developments, political uncertainty, changes in fashions and. tastes of consumers and increased competition in the market — all influence the working of 2 business enterprise in important ways Just like human beings, business enterprises donot exist in isolation. Each business firm is not an island unto itself it exists, survives and grows within the context of the clement and forces of its environment. ‘While an individual firm is able to do little to change or control these forces, it hasno alternative to responding or adapting according to them. ‘A good understanding of environment by business managers enables them not only to identify and evaluate, but also to react to the forces external to their firms. Environment is a source of various resources for inning a busines. Because the enterprise depends on the environment as a source of inputs or resources and as an outlet for ourputs, it only ‘makes sense that the enterprise designs policies that allow it to get the resources thatit needs so thatit can convert those resources into outputs that the environment desires. This can be done bettcr by understanding what the environment has to offer:id Importance Meaning of Business Environment The term ‘business cnvironment’ means the sum total. of all individuals, institutions and other forces that are outside the control of a business caterprisc but that may affect its performance. ® The economic, social, political, legal and technological forces which operate outside a business enterprise arc part of its gencral cnvironment. > The individual consumers or competing enterprises as well as the governments, consumer groups, competitors, courts, media and other institutions working outside an enterpriss constitute its specific environment. Top Tip ‘) In contrast to the specific environment, the general environment which includes economic, social, technological, political and legel conditions, influences many enterprises at the same time. These individuals, institutions and forces are likely to influence the performance of a business enterprise although they happen to cxist outside its boundarics. Increased cost of production, hence things become expensive to buy 2. | Increased competition in the market Reduction in profit margins 3.__| Changes in fashion and tastes of consumers | Shift in market demand from existing products to new ones 4. | Technological improvements and innovations | Render existing products obsolete, eg. LCD TVs become obsolete with introduction of LED TVs 5. | Political uncertainty Creates fear in the minds of investors to invest in long- term projects Features/ Characteristics of Business Environment 1. Totality of external forces Business environment is the sum total ofall things external to business firms and, as such, is aggregative in nature. 2. Specific and general forces Business environment includes both specific and general forces. Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises dircetly and immediately in their day-to-day working, > General forces (such as social, political, legal and technological conditions) have impact on all business enterprises and thus may affect an individual firm only indirectly. 3. Inter-relatedness Different clements or parts of business environment are closchy interrelated. For example, increased life expectancy of people and increased awareness for health care have increased the demand for many health products and services like soft drinks, fat-free cooking oil, and health resorts. New health products and services have, in turn, changed people’ lifestyles. 4, Dynamic nature Business environment is dynamic as it keeps on changing in terms of technological improvement, shifts in consumer preferences, cntry of new competition in the market, ctc.eT CTE ee Ca 5. Uncertainty Business environment is largely uncertain as it is very difficult co predict futuse happenings, especially when environment changes ate taking place too frequently asin the case of information technology or fishion industries. 6. Complexity Since business environment consists of numerous interrelated and dynamic conditions or forces which arise from different sources, it becomes difficult to comprchend at once what exactly constitutes a given cnvironment. In other words, environment is a complex phenomenon that is relatively casier co understand in. parts but difficult to grasp in its totality: For ecample, ic may be difficult to know the cxtent of the relative impact of the social, economic, political, technological or legal factors on change in demand of a product in the market. 7. Relativity Business environment is a reladive concept since it differs from county to country and even region to segion. For example, political conditions in the USA differ from those in China or Pakistan, Similarly, demand for sarees may be fairly high in India whereas it may be almost non-existent in France. Importance of Business Environment A good understanding of environment by business managers enables them not only to identify and evaluate, bue algo to react to the forces external to their firms. The importance of business environment and its understanding by managers can be appreciated if we consider the following facts: 1, It enables the firm to identify opportunities and getting the first mover advantage. Environment provides numerous opportunities for business success. ‘Opportunities’ refer to the positive acternal trend or changes that will help a firm to improve its performance Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors. Example: Maruti Udyog became the leader in the small car market because it was the first to recognise the nocd. for small cars in an environment of rising petroleum prices and a large middle class population in India. 2, It helps the firm to identify threats and early warning signals. Besides opportunities, envisonment happens to be the source of many threats. “Threats' refer to the external environment rends and changes that will hinder a firm’ performance. Environmental awareness can help managers to identify various threats on time and serve as an early warning signal. Example: [f an Indian firm finds thata forcign multinational is entering the Indian market with new substitutes, ie should act as a warning signal. On the basis of this information, the Indian firms can prepare themsclves to mect the threat by adopting such measures as improving the quality of the product, reducing cost of the production, engaging in aggressive advertising, and so-on, 3. It helps in assisting in planning and policy formulation. Since environment isa source of both opportunities and threats for a busines enterprise, its understanding and analysis can be the bass for deciding the furure course of action (planaing} ot taining guidelines for decision making (policy). Example: Entry of new players in the market, which means more competition may make an enterprise thinke affcsh about how to deal with the situation. 4, It helps in coping with rapid changes. Today's business cnvisonment is getting increasingly dynamic where changes are taking place at a Fast pace. Turbulent market conditions, less brand loyalty, divisions and sub-divisions (fragmentation) of markets, more demanding customes, rapid changes in technology and intense global competition are just a few of the images used to describe today’s business environment,japter 3: Business Em cn 7 In order co effectively cope with these significant changes, managers must understand and examine the environment and develop suitable courses of action, 5. It helps in tapping useful resources. ‘A business enterprise assembles various resources called inputs like finance, machines, saw materials, power and water, labour, etc, from it environment including financiers, governmentand suppliers. In return, the business enterprise supplies the environment with its outputs such as goods and services for customers, payment of taxes to government, return on financial investment to investors and so on. ‘Thus, business environment helps in tapping the resources that it needs so that it can convert those resources into ourputs that the environment desires. 6. Ithelps in improving performance. ‘The enterprises that continuously monitor their environment and adopt suitable business practices can not only improve their present performance but also continue wo succeed in the market for a longer period. mo - [ sessing of Basiness Environment Business environment refers to 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 Features/Characteristics of Business Environment Tus CDR 2. Business environment is tatality of all external forces affecting 2 business. therefore, it ic aggressive in nature. 2, Mt includes both specific and general forces. specific forces (2.2, investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working. General forces (@.¢. economic, social, political, legal and technological conditions) have impact on all business enterprises and thus may affect an individual firm only indirectly 3, Ms elements are closely inter-related, 4. ris ynamicas it keeps on changing {in terms of technological improvement, new competition in the market, etc} SS, Mis uncertain 2s itis difficult to predict future happenings (especially when environment changesare taking place frequently as in the case of information technology or fashion industries) ‘6. lis complex and difficult to comprehend as it consists of numerous inter-related and dynamic forces. 7. isa relative concept as it differs from region taregion. Importance of Business Environment cpr Top 1. Ft helps to identify opportunities and getting the first mover advantage instead of losing them to the competitors. For example, Maruti Udyog became the leader in the small car market because it was the fst to recognise the need for small cars in India, where petroloum prices were rising and there was 3 large middle-class population. 2, Mthelps to identify threats on time which serves asan early warning signal. For example, if an indian firm finds that an MNC is entoring the indian market wich new substitutes, it can improve the quality of its praducts, reduce-cost of production, etc. 42. Mthelps in assisting in planning and policy formulation. 4. 1thelps in tapping useful resources so that the enterprise can convert them into output that the environment das 'S. Ithelps in coping with rapid changes in an increasingly dynamic environment. ‘6. It helps in improving performance by continuously monitoring the environment and adopting suitable practices. Cn Cea 1. Which of the following does not characterise the business environment? (a) uncertainty (b) Employees (c) Relativity (6) complexity 2. “tt may be difficult to know the extent of the relative impact of the social, economic, political, technological or legal factors (on change in demand of a product in the market.” Which feature of business environment is highlighted by this point? 3. “The understanding of business environment enables the firm to identify opportunities and threats” What does ‘opportunities’ mean here? (case 2011) [choose the carrect alternative)Cr es Ue et eed 4, Match the column | with the features of business environment in column It: (2) increased lfe expectancy of people and increased awareness for health care have increased | i) inter-relateciness | ‘the demand for many health products and services ike diet Coke, fat-free cooking oil, and health resorts. Mew health products and services have, in turn, changed people's ife styles. | {b) ttmay be diffcult to know the extentof the relative impact ofthe social, economic, political, | (i) Relativity ‘technological or legal factors on change in demand of a praduct in the market. (c) Political conditions in the usa, for instance, differ from those in china or Pakistan. similarly, | (ii) complexity demand for sarees may be fairly high in india wheress it may be almost non-existent in France. ‘5. Which of the following best indicates the importance of busines: environment? [Choose the correct alternative) (2) Identification of opportunities and threats {b) Improvement in performance (c}_ coping with rapid changes (d) allof these [iCese Studies Analysing, Evaluating & Creating Type Questions 1. Mr. Ajay after completing MBA from USA comes to India to start a new business under the banner Ecom Creations Led. He launches a new product in e-learning for Senior Secondary School students in ‘Commerce stream, which already has an established market in UK and USA but not in India. His business starts flourishing in India. Now more Indian companies entered into the market with other subjects also, Identify and quote the lines from above para which highlight the significance of understanding business environment. (CBSE SQP 2015) (4 marks) Ans. (a) “Comes to India to start a new business . launches a new product in e-learning for Senior secondary shoot seuderts in Commerce streaen.” @_Iwhelps in assisting in planning and policy fommulation, (Gi) Tchelps the firm to identify opportunities and get the first mover advantage (b) “His business starts flourishing in dedi,” (iii) Ithelps in improving performance, (c} Now more Indian companies entered into vhe mearker with diffrent subjects ake.” (iv) Ithelps the frm to identify threats and early warning signals. 2. Identify and state the importance of business environment from the following: (6 marks) @) Maruti Udyog became the leader in the small car market because it was the First to recognise the need for small cars in. an environment of rising petroleum prices and a large middle class population in India, ‘An Indian firm finds that a foreign multinational is entering the Indian market with new substitutes. ‘On the basis of this information, the Indian Firm can prepare itself to meet the threat by adopting such measures as improving the quality of the product, reducing cost of the production, engaging in aggressive advertising, and so on, ‘To engagein any type of activity,a business enterprise assembles various inputs lise finance, machines, raw materials, power and water, labous, etc., from its environment including financiors, government and suppliers. In return,the business enterprise supplies the environment with its outputs such as goods and services for customers, payment of taxes to goverment, return on financial investment to investors and so on. iv) Today's business environment is getting increasingly dynamic where changes are taking place at a fast pace. Information technology and intense global competition are just a few of the images used to describe today’s business environment. All sizes and.all typos of enterprises are facing increasingly dynamic cnvironment. Therofore, managers must understand and cxamine tho environment and develop suitable courses of action. (*) Entry of new players in the market, which means more competition may make an enterprise think: afresh about how to deal with the situation. (vi) Many studies rovoal that the future of an entosprise is closely bound up with what is happening in the environment. It really makes a difference in the performance of an enterprise,Ans, Importance of business environment: ()) It enables the firm to identify opportunities and gerting the first mover advantage. “at wes the fiat recogize the need for smal cari.” (i) Ithelps the firm to identify chreats and early warning signals, “ffs shar a foreign mutsinarional sr euering che Inaian manker wich sew sxbetiures* (i Ithelps in tapping useful resources. “a Business enterprise asenables verious inputs like finance, machines, rawo meverialy fom iss environment. (iv) Ithelps in coping with rapid changes “changes are taking plc at a fst price.” “amuanagers mast underscind aad ccamine the envirorment ard develap suitable coures of action.” (8) It helps in assisting in planning, and policy Formulation. “x think afer about bow ta deal wth vhe situation.” (vi) Iehelps in improving performance. “lure of am emerprise is cosdy Bound up with wwhar is happening in she euviroument. Ir really makes a Aifference in the performace of am enterprise.” Dimensions of Business Environment Dimensions of or the factors constituting the business environment include economic, social, technological, paliical and lcgal conditions which are considered relevant for decision and improving the performance of an enterprise. A brief discusion of the various facton constituting the general environment of business is given below: 1. Economic Environment Some of the cconomic factors that can affect management practices in a business enterprise are: © Interest rates * Inflation rates © Stocle marketindices —* Value of rupee © Changes in disposable income of people Examples of cconemic cnvitonment affecting the functioning of a business enterprise: () High inflation rates gencrally result in constraints on business enterprises as they increase the various costs of business such as the purchase of raw materials ‘or machinery and payment of wages and salarics to employees. (ii) A rise in the disposable income of people due to increase in the gross domestic product of a country creates increasing demand for products. Shor and long term interest rarcs significandy aflece the demand for product and services. For exemple, in casc of construction companics and automobile ‘manufscturers, low longer-term rates arc beneficial because they result in increased spending by consumers for buying homes and ears on borrowed money. tol | a) cod eer ceneery Naan 7) Dimensions of General Environment of Business Cee ed ‘The cates of gremth of GNP and per capita acon at current constast pices [Rates of saving and investnent Volarae of rxparts aed exgacts of diferent eres ‘Money supply i the ecotany [Baanee of payments and changes le frelge exehz09e ‘Pubic debt Gaternal aed eterna) ‘Arcaltual and indostral preducten frends Expansion of aesportation and corunication facies nls ting structure of the econaray ie terras of relative rele of veirate and abi sectors Planned oxttay i pivate and pub sectorsct) eee ee Cet 2. Social Environment ‘The social environment of business include the social forces lilee: * Customs and traditions Cores wan cua of te * Values Conse tabs © Social trends Corapast faray * Sociery’s expectations from business Beh aed eat ate Examples of social environment affecting the functioning |" "sla tite ' neta yor nd Bera rates ofa business enterprise: ection: tre the workforce (i) Social tends present various opportunities and Shes w abe pester ooo the workforce: threats to business enterprises. For cumple, the | Atituestevards oreductnasfen, Hexbles occnafon! heald+and-fitness trend has become popular among |___ Stor 4 comeener preferences lange numberof urban dwellers This has ead a demand for products lke organic food, gyms, bowled (mincral) watcr and food supplements. Customs and traditions define social practices that have lasted for decades or even centutics. Fer example, the celebration of Diwali, Eid, Christmas, and Guru Parv in India provides significant financial opportunities for grectings card companics, sweets or confcetioncry manuficturen, tailoring outlees and many other related business. (iii) Valucs refer to concepts that a socicty holds in high estocm. In India, individual freedom, social justice, equality of opportunity and national integration are cxamples of major values cherished by all of us. In busines terms, these valucs translate inte freedom of choice in the market, business) responsibility towards the society and non-discriminatory employment practices. i 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, Examples of technological environment affecting the functioning of a business enterprise: (i) Aidline companies have Internet and World Wide Web pages where customers can look for flight times, destinations and fares and book their tickets online, (i) Recent technological, advances in computers and clectronics have modified the ways in which companies advertise their products. It is common now to sce computerised information kiosks, and Word Wide Web mulimedia pages highlighting the vires of products, (iii) Retailers have direct links with suppliers who replenish stocks when needed. Manufacturers have flexible manufacturing systems. 4, Political Environment Political environment includes politcal conditions such ast, © General stability and peace in the country and © Specific amirudes that elected government representatives hold towards business. Examples of political environment affecting the functioning of a business enterprise: (i) Political stability builds up confidence among busines: poople to invest in the long term projectsee ee na’ cC for the growth of the cconomy. On the other hand, there may be uncertainty of business activities due to political unrest and chveats ta law and order. (i) The aminides of government officials towards business may have either positive or negative impact upon business. For example, even after opening up of our cconomy in 1991, forcign companics found ‘it extremely difficult to cut through the bureaucratic ved tape to get permits for doing business in India. Sometimes, it took months to proces even their application far the purpose. Asa result, chese companies ‘were discouraged from investing in our country. However, the situation has improved over time, 5. Legal Environment Legal environment includes vatious: © Legislations passed by the Government © Administrative onders issued by government authorities ‘Court judgments © Decisions rendcred by various commissions and agencies at every level of the government— centre, state or local. 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 pre-requisite forbetter business performance. Non-compliance of laws can land the business enterprise into Icgal problems. In India, a working knowledge of the following is important for doing busincss: (@) The Companies Act, 2013 (ii) ‘The Consumer Protection Act, 2019 Factories Act, 1948 (iv) Trade Union Act. 1926 (0) Workmen's Compensation Act, 1923 (vi) Industrial Dispures Act, 1947 (vit) Competition Act, 2002 (viii) Industries (Development and Regulations) Act, 1951. (ix) Foreign Exchange Management Act and the Imports and Exports (Contral) Act, 1947 Impact of legal environment can be illustrated with the help of the following government regulations to protect consumer's interests: (®) The advertisement of alcoholic beverages is prohibited. Gi) Advertisements, including packets of cigarcttes carry the statutory warning ‘Cigarette smoking is injurious +o health’, “Advertisements of baby food must necessarily inform the potential buycr tha mothers milk is the best. (Ne eee ed Tie cert and aot of arrears The level a patel rseaty 1 Pella institutions Ike the yovereent ard alied apezcies The natace and alc The dese of peltichation of basiness a scarorsic notes All these regulations are required to be followed by advertisers. oa ia “Management of every entecprite ean benefit from being amare of these dimensions instead of being disiaerested ia theca. For instance, soleatifc rezzarch has discovered a techasiogy thot make: it possibis to produce au eassay efficient light hull that lasts at Soast menty times as loag 25a standard bulb. Senor managers in the lshtiag divisions at General Eleccic and Philips recogaizod that this discovery had the potmutia to significantly affect cheix unit growth and profitability, So they have earefutly followed the fpeoprens on this coscarch and rroBiahy ured its findings.St See og |: [pimension/cement of Busines Environment 11, Economic Environment: It refers to factors like interest rates, inflation rates and changes in disposable income of people tc. which have an impact on business enterprise. Exomple: High inflation rates generally result in constraints on business enterprises as they increase costs of raw materials or machinery and payment of wages and salaries. Components of economic Enviconment: * Rates of saving and investment * Volume of imports and exports * Balance cof payments and changes in foreign exchange reserves * agricuftural and industrial production trends * Expansion of transportation and communication facilities + Money supply in the economy + Public debt (internal and external) « Planned coutiayin private and public sectors » Existing structure of the economy in terms of relative role of private and public sectors. 2, Social Environment: It includes social forces like custom and traditions, values, social trends and society's expectation from business. Sacial trends present variaus opportunities and threats to business enterprises. For example, the health- and-fitness trend has created a demand for diet soft drinks, bottied (mineral) water and food supplements but harmed tobacco and liquor businesses. Components of Social Environment: Attitudes towards product innovations, lifestyles and consumer preferences Concern with quality of life ~ Life expectancy + Expectations fram the workforce Shifts in the presence of women in the workforce + Birth and death rates » Population shifts « educational system and literacy rates © ‘Consumption habits * Composition of family 3. Political environment: tinciudes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business. Example: Political stability builds up confidence among business people ta invest in the long term projects. Political instability can shake that confidence. components of Political Environment: + The Constitution of the country * Dominant ideologies and values af major political parties * The extent and nature of government intervention in business. * The nature of relationship of our country with foreign countries 4. Legal environment: it includes various legisistions passed by the Government, administrative orders issued by government authorities, court judgments and the decisions rendered by various commissions and agencies at every level of the government— Centre, stat2 or local. tis imperative for the management of every enterprise to obey the lav of the land. Non-Compliance of aves can land the business enterprises into legal problems. For example, knowledge of Companies Act 2013; Consumer Protection Act, 2019 etc. is important for doing business. Examples of government regulations to protect consumer's interests: (i] Advertisements for packets of cigarettes must carry the statutory warning ‘Cigarette smoking is injurious to heelth’ (i) Advertisement of alcoholic beverages is prohibited on Doordarshan ‘5. Technological environment: It includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating 2 business, £xcmple: airline companies have Loe ‘www pages where customers can look for fight times, destinations and fares and book their tickets online ee ec ee 2. Which component of general environment of business prohibits the adverticament of alcoholic beverages? 2. “Itis common now to-see CD-ROM's, comauterised information kiosks, and internet/World Wide Web multimedia pages highlighting the virtues of products’ Name the dimension of the business environment highlighted by this statement. 3. Which component ef business environment requires that advertisements of baby food must necessarily inform the [potential buyers that mother's milk is the best? 4, Justafter dectaration of Lok Sabha Elections 2014 results, the Bombay Stock Exchange's price index (Sensex) rose by 1000 points in a day. Identify the environmental factor which led to this rise 5. Which of the following is an example of social environment? {choose the correct alternative) {a} Money supply in the economy {b) consumer Protection Act {¢) The Constitution of the country [@) Composition of family 6 Match the following: (i) Banks reducing interest rates on housing loans (a) Economic environment (i)_ An increasing number of warking wemen (0) Political enviconmant (ii)_alcoholic beverages are prohibited to be advertised on ‘Doordarshan’ (c)_vegal environment (iv) stable government has built up confidence among the firms to investin bigprojects | (@) Social arwironmentced SUES a. ‘many businesses are using social media like facebook and twitter to promote themselves. The is an example of which imension of Business environment: (Choose the correct alternative) {a) Social {b) Economic (c) Legal {d) Technological Even after opening up of the indian Economy in 1994, foreign companies found it extremely difficult to-cut through the bureaucratic red tape to get permits for doing business in india, which discouraged them from investing in our country. identify the dimension of business environment. “The celebration of Diveall, Eid, Christmas and Guru Parv in india provides significantfinancial opportunities for greeting cards companies, sweets ar confectionary manufacturers, tailoring cutiets and many other related business’ Name the dimension of the business environment highlighted by this statement. ‘The Reserve Bank of india {Ret} increased the cach Reserve Ratio (CRR) by 0.25 Basis Points to overcome the inflationary trends in the economy: Identify the dimension af business environment highlighted in the given statement. ‘According to Consumer Protection Act, 1586, manufacturers are under an obligation to provide all the relevant information (rane, ingredients, date of manufacturing, expiry date, etc.) about the praduct. which dimension of businass environment is highlighted in the given statement? Studies Analysing, Evaluating & Creating Type Questions 1. The Court passed an order to ban polythene bags as, (0) The bags are creating many environmental problems which affect the life of people in general. (Hl) Soctety in general is more concerned about quality of life. ‘The Government decided to give subsidy to jute industry to promote this business. Innevative techniques are being developed to manufacture jute bags at low rates Incomes are rising and people can afford to buy these bags. Identify the difforent dimensions of Business Environment by quoting the lines from the above particulars. (CBSE 2013) (5 marks) Ans. (i) Legal environment: ‘The Courrpased an onder w bam polythene bags’ Gi) Social environment: “The Gags are creating many euviroumensal problems suhich affect she dif of people in general Soctery in genewal is mare concerned about quatity of lif.” (ui) Political environment: ‘The Gevernomewe decided t give subsidy to jute industry w promote this business.” (iv) Technological environment: ‘hononaeive wcbnigues are being developed ro manuficrure jue bags ar low wars’ (¥) Economic environment: Fnaes are risiug aud people ctx ajfird ro buy chee Bus.’ 2. Beni, after completing her MBA, took up a job with a multinational company named ‘Fortio’. The company was paying good salary and perks to its employees. The wages were withia the paying capacity of the company that provided. the employees 2 reasonable standard of living, The company also had a ‘good work-culture and the behaviour of superiors was very good towards their subordinates. Beni was very happy in this organization, but due to long working hours she did not have time to cools her meals, She had co depend on outside food, which was detertorating her health. She observed that this problem was faced by many of her colleagues, aot only in her company but also in many other companies. This was because of incroase in the number of working women and non- availability of hygienic home-cooked food. She identified this as a great opportunity and. decided to give up hor job to supply packaged home-cooked food to office goors at a reasonable price. At the cad of the day sho was also distributing the left-over food in the nearby night shelters. State the dimension of business euviroameat being discussed above, (1 mark) Ans. Social environment which includes social Forces like customs and traditions, values, social trends ete. 3. The Government of Ladia has recently como up with 2n amendment to Section Gof the Payment of Wages: Act 1936, to allow employers of certain industries to make payment through various electronics modes of payments. The amendment will be applicable to all the public sector undertakings for wages disbursementcry Cee es te ee oe ad Ans, Ans, Ans, Ans, 7 Ans. using «payment options. This is another milestone in the direction to further push to cashless economy. ‘Identify and explain any two dimensions of business environment which relate to the above mentioned case, (CBSE SQP 2018-19) (4 marks) ‘The various dimensions of business environment which relate to the above mentioned case are stated below: (@) Political Environment (6) Legal Environment (©) Technological Environment (gy tue with explracion) ‘With rapid advancements in the field of replacing manual work with machines, a Robot named ‘Sujan" has been invented and developed and is likely to get the citizenship of the country of its origin. Tehas led to a stage where machines are being used in place of human beings. ‘Sujas’ is doing all types ‘of work whether routine or hazardous and even answering the queries of people. However, this issue has to be carefully looked into keeping in mind the consumer attitude towards product innovations, problem of unemployment and its impact on the quality of life. Through the orders and decisions of various commissions and agencies at Centre, State or Local level the Indian Government is playing « very significant role in balanciag the use of human and machine power. Various dimensions of business ‘environment are being discussed in the above para. By quoting the lines from the above identify and explain any three dimensions, (CBSE 2018) (6 marlss) () Technological Environment: Wish nipidl adowncenterts te the field of replacing, marl work with machives a robot named Sujan’ har been imvenrad and developed. (i) Social Environment: ‘However, ais issue bas ro be carefvly loo ked ro keeping im neind she consunaer acstudle towards product ienouztions, problem of wxenyployment stad its impact ou the quality of life. (iil) Legal environment: ‘Through the orders and decisions of various commissions and agencies at Centre, State or sal devel the fndian Government i playing a very significa nt role ine blaacing the use of human aed machine power” (Give explanation of these dimensions) Reserve Bank of ladia (RBI) has set the deadline for replacing all magnetic strip based ATM cards into EMV cards by December 31, 2018. EMV stands for Europay, Mastercard and Visa from which the standards for a chip enabled card emerged. The EMV card provides a higher lovel of security as compared to magnetic strip cands which can be easily cloned. This switching to secure system may push up the costs ‘of the bankiag sector. Identify the twa dimensioas of business environment ia the above para, (1 marl: Legal Environment and Technological Environment Tt Ls heartening that the implementation of compliance requirements of the Companies Act, 2013 has progressed substantially with NIFTY S00 companies. Data shows a significant increase in women's participation in the top management of Indian Companies from 5% few years age to 13% now. Even ‘companies which are not in NIFTY 500 have undertaken drives to increase women’s participation across different areas of work. The goverament had also announced that it would support such companies. ‘Idewtify and explain the dimensions of business environment discussed above which brought about the change. (CBSE SQP 2018) (4 marks) ‘The dimensions of Business environment discussed above which brought about the above change are: (a) Legal environment (b) Political environment (Explain) ‘The court passed an order that all schools must have water purifier for the school children as (0) Soctety in general is more concemed abour quality of life. (tt) Innovative techniques are being developed to manufacture water purifier at competitive rates. (lié) Incomes are rising and children at home are also drinking purified water. ‘The government is also showing positive attitude towards the water purifier business. ‘Identify the different dimensions of business environment by quoting from the above details. (5 marks) (i) Legal environment: The cours paved an onder rhat all hook must dave water purifier for the schoot children.” (ii) Social environment: ‘Society #n genent! i more concerned abous quality of life” (iii) Technological environment: ‘hmovatine rechoriques are being dewloped 10 mumuficture water purifier ‘competitive rites’ (ix) Economic environment: “incomes are rising and children at honae are aso drinking puryfiad water (») Political environment: ‘The poverentent is alia showing positive avsirtde romeands the water purifier”cre oeen a formed ment cUL 8. The Prime minister Mr. Nareader Modi launched a Campaign of ‘Swachh Bharat’ and invited various -colebrities to be a part of this Abhiyaan. This spread awareness among the people in socioty and in general, people started becoming more careful and aware about the cleanliness around thelr area. To continue its impact, a new service tax for Swachh Bharat was also started. The government Is planaing to import sew and better technology to adopt new methods of treating the garbage and waste. Explain the various dimensions of business environment mentioned in the above para quoting the lines ‘from the above para. 4 marks) Ans. (1) Political Environment: “The Prime minirer Mr. Marender Madi launched a Campaign of Swachh Bhanar’ (i) Social Environment: pegple started biroraing more cavefiel and aware abour the cleanlines around their area.” (Wi) Esonomic Environment. i new grvce tax for Swachh Bhanar wets aie red” x) Technological Environment: Somporr wen amd berver sechmolrgy 10 adepr new methods of wearing abe garbuge cad waste.’ (Explain) Poem eres tary Liberalisation ‘The economic reforms that were introduced were aimed at liberalising the Indian business and industry from all unnecessary controls and restrictions. They signalled the end of the Hicence-permic-guota na} Liberalisation means removal of unnecessary controls and restrictions on business. Features of Liberalisation () Abolishing licensing requirement in mest of the industries except a short list. (ii) Freedom in deciding the scale of business activities, ic. no restrictions on expansion or contraction of business activities. i) Removal of restrictions on the mavement of goods and services. (iv) Frocdom in fixing the prices of goods and services. (¥) Reduction in tax rates and lifting of unnecessary controls aver the economy. (vi) Simplifying procedures for imports and exports. (vii) Making it casicr co attract foreign capital and technology to India. Privatisation Privatisation mcans giving greatcr rolc to the private sector in the nation building process and a reduced. sole to the public sector. To achieve this, the government redefined the role of the public sector in the New Industrial Policy of 1991, adopted the policy of planned disinvestments of the public sector and decided to refer the loss making and sick enterprises to the Board of Industrial and Financial Reconstruction. The term ‘disinvestment’ means transfering the public sector enterprises to the private sector Ie results in. dilution of stake of the government in the public enterprise, Top Tip if there is dilution of government ownership beyond 51 percent, it would resuitin transfer of ownership and management of the enterprise to the private sector. Globalisation Globalisation means integrating the various economics of the world leading towards the emergence of a cohesive global economy:rT Til 1991, the government of India had followed a policy of strictly regulating imports in value and volume terms. These regulations were with respect to (a) licensing of imports, (b) tariff restrictions and (<) quantitative restrictions. Aim * Removal of quantitative as well as tariff restrictions Import libenisation and export promotion through rationalisation of the tariff structure and forcign exchange reforms Free flow of goods and services across nations Free flow of capital across nations Free flow of information and technology Free morement of people across borders Demonetisation The Gevernment of India announced ‘demonctisation’ ‘of the two largest denomination notes, %500 and L000. As a result, the existing 500 and %1000 currency notes ceased to be legal tender: This led to 86% of the money in circulation invalid. Aim The aim of demonetisation was to curb corruption, counterfeiting the use of high denomination notes for illegal activities: and especially the accumulation of “black money’ generated by income that has not been declared to the tax authorities. Features Dee tees ts Tet suade possible by the eapid advancement in technology and thera! wade potieies by Goveramants Demonetisation: Canceling the legal tender status of a currency unitin circulation 1. Demonctisation is viewed as a tax administration measure. Cash holdings arising from declared, income was readily deposited in banks and exchanged for new notes. But those with blade money had to declare their unaccounted wealth and pay taxes at a penalty rate. 2. Demonetisation is also interpreted as a measure to improve tax compliance. Ic indicated that tax evasion will no longer be tolerated or accepted. Tax collection increased because of increased disclosure. Tax evasion decreased, 3. Demonetisation also led to channelizing savings into the formal financial system. Bank deposits increased. However, interest rates decreased. 4, Demonetisation is aimed to create a less- cash of cash-lite economy, Cath transactions declined. Digital transactions using RuPay cards. and Debit cards, Aadhar Enabled Payment System (AEPS), etc. increased. Digital transactions: using Debit cards and Foint-of- Sale (ToS) machinesee cur Gi Tip * ‘There are arguments agzinst cigitalisation as digital transactions require use of cell phones for custamersand Point-of-Sale (Pos) machines formerchants, which will only work if there is internet connectivity. On the contrary, these disadvantages are counterbalanced by an understanding that it helps people into the formal economy, thereby increasing financial saving and reducing tax evasion. Impact of Demonetisation 1. _[ Moneyiteret ter | (i) Deine inca transactions (i) Bank deposisincrewed (ik) Increme ln foancial saving 2. | date wealth Dedined secs sme high demonciaed notes were not returned wad cal extate price fll 3. | Pubic setor went | Nov effect | Digtiation Digtal tansuctons amongst nev wie (RuPayIAEPS) created 5._| Real came Prices declined 6 | Tax callection Pl a income ux caleton becuabe of incresied dilocure Impact of Government Policy Changes on Business and Industry The policy of liberalisation, privatisation and globalisation of the Government has made a significant impact on the working of enterprises in business and industry. The Indian corporate sector has come face-to-face with several challenges duc to government policy changes. These challenges can be explained as follows: 1. Increasing competition ‘Asa result of liberalisation of industrial licensing and entry of foreign firms, competition for Indian firms has increased especially in service industries like telecommunications, airlines, banking, insurance, ete, 2. More demanding customers (Customers today have 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. Market orientation Earlies firms used to produce first and go to the market for sale later. In other words, they had production oriented marketing operations, In a fst changing world, there isa shift to market orientation in as much as the firms have to study and analyse the market first and produce goods accordingly. 4, Rapidly changing technological environment Incrcasod competition forces the firms to develop new ways to survive and grow in the markct. New rechnolo- gies make it possible to improve machines, process, products and services. ‘The rapidly changing technological environment creates tough challenges before smaller firms. 5. Necessity for change In a regulated environment of pre- 1991 cra, the firms could have relatively stable policies and practices, After 1991, the market forces have become turbulent as a result of which the enterprises have to continuously modify their operations. 6. Need for developing human resource ‘The new market condisions require people with higher competence and greater commitment. Hence, there is a need for developing human resources.vee 7. Loss of budgetary support to the public sector “The central government's budgetary support for financing the public scctor outlays has declined over the years. The public scetor undertakings have realised that, in order to survive and grow, they will have to be more efficient and generate their own resources for the purpose. Top Tip >) ‘On the whole, the impact of Government policy changes particularly in respect of liberalisation, privatisation and slobalisation has been positive as the indian business and industry has shown great resilience in dealing with the new ‘2contomic order. Indian enterprises have developed strategies and adopted business processes and procedures to mest, the challenge of competition. They have become more customer focused and adopted measures ta improve customer relationship and satisfaction Managerial Responses to Changes in Business Environment 1. Diversification Spree ‘The corporate scene now witnesed a spate of divemsification. For example, Reliance has diversified into textiles, petrochemicals, IT, communication, cte. 2. Joint-Venture/Consolidation of Multinationals ‘Many multinationals enter India affesh through new joint ventures. Samples (i) Ford enters with Mahindra and Mahindra (ii) Honda enters with SIEL (iii) General Motors enters with Hindustan Motors. 3. Brand Building Expenditures were enhanced by companies in building brands. Often, MNCs have invested huge amounts on building brands such as LG, Samsung, Hyundai. 4, Use of Latest Technology ‘Use of latest technology has become the slogan of the succesful companies, The best example is that of cellular phones. 5. Sharply Improved Compensation Levels Sharply improved compensation levels for special managerial and technical services, The starting salaries for engi- neering and management graduates have risen significantly. Incentive schemes of various kinds related to perfor- mance are becoming common. 6. Customer Focus “There has been increasing attention to customer needs and their satisfaction. There is a tremendous difference in the nature and quality of products offered to consumers today. Marketing rescarch, advertising, sales promotion techniques like BOGOF (Buy one get one free), public relations programmes, etc. have become more si t Governmess Poly Change sice 1981 CDordnn wae fenou efuecey cones an essing on uns esting ening reqenert, win hte ar see uftmncs icon ange pes edion tunes Salve cars ipo anny goat ane cpp} ‘Thesaan aan ne Deo seo ie eon ul pees nd a edcedrce the ui icant. sector. { Disinvestment’ means transferring the public sector enterprises to the private sector} Globalisation means integrating the various economias of the world leading towards the emergence of a cohesive global economy. (e.g. Removal of quantitative 2s well as tariff restrictions, Import liberalisation and export promotion through rationalisation of the tariff structure.and foreign exchange reforms, etc.)ee oad cenentsen Test erties cui, ech scare fi ener ene] Dope nite whore ec a brent tien cee i eh ant th nd (pay tax ata penalty rate. tna staccato cual nr 5 Boba aenctictceomicaue sic cin ceria cede 1 ier me ae RI a se pacer tne Impact of Government Policy Changes on Business and Industry NRI- LEN tmp emt oC eam oto wma enc _ name reenact 3. Rapidly changing technological environment: Technological environment is rapidly changing creating tough challenges for one ca ung: bens ces rns wage nt moh opts cg it ce eae tse delngunenesoueusthe eu mat candhonente en ering ere The need «comet eeomptc ee Tm unin sa ec hme ht vee St tthe ru guy apr tha ps cee ona felt that the public sector needs to be mare efficient in order to survive and grow. _I CT a eed Lberalisation means. {a) integration among economies {b) Reduced government controls and restrictions {¢) Policy of planned disinvestments {@) None of these Which of the following does not explain the impact of government policy changes on business and industry? {Choose the correct alternative) {Choose the correct alternative) {a) ore demanding customers {b) increasing competition {c)_ Change in agricultural prices {@) Market orientation Due to entry of foreign firms, competition for indian firms hag increased, especially in service industries. Name such service industries, Recently the government has decontrolled the price of petrol and diesel, this isan example of: {choose the correct alternative} (a) Privatisation {b) Slobalisation {c) uberalisation {@) Demonetisation Its the process by which government control aver the industry is being loosened. Give the term to which this statement is tying to indicate, B 6. Match the columns: {a)_ Ceasing the legal tender status of large denomination currency notes. (i) Privatisation (b}_The end of the Bcence-perm#-quota raj (i) Liberalisation (c}_ Transfer of ownership and management of the enterprise to the private sector. (iil) Globalisation (@) Import liberalisation and export promotion through rationalisation of the tariff| (iv) Demonetisation structure and foreign exchange reform,Fer) Cees eed [\Case Studies Analysing, Evaluating & Creating Type Questions 1. Metlapp Networks and Technologies Ltd. is a leader in technology innovation in the United States, creating products and solutions for connecting the world, It has a large research and development team which invented the first smart watch, named as W-7. The watch besides showing the time, also monitors few health parameters like heart beat, blood pressure, etc. ‘While in search of markets abroad, the company found that in India, the refonm process was underway with the aim of accelerating the pace of economic growth. The company decided to take advantage of simplified export procedure and removal of quauititative as-well as tariff restrictions in India. Ic set up its office in Jamnagar with a view to capture the Indian market. In a short span of time, the company emerged as a market leader, Success of the company attracted many other players to enter the market, Competition resulted in reduction in prices, thereby benefiting the customers. (a) In the above paragraph, two major concepts related to government policy have been discussed. dentify and these concepis. (b) Also, explain briefly any three impacts of these concepts on Indian business and industry. (CBSE 2017) (5 marks) Ans. (a) Two major concepts related to goverment policy are: (i) Liberalisation (i) Globalisation (Explain) (b)_ Impact of these concepts on Indian business and industry: (explain any three posits) 2. Lately many companies have planned for significant investment in organised retailing in India. Several factors have prompted their decisions in this regard. Customer 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 govemment has also liberalised its economic policies in this regard and permitted even cent percent foreign dinect investment in some sectors of retailing. (a) Mentify changes in business environment under different heads that have facilitated the companies’ decisions to plan significant investments in organised retailing. (b) What has been the impact of these changes with regard to globalisation and privatisation? (Any three) (6 marks) Ans. (a) G@) Economissnvironmens: "Customer income ts rising.” (Gi) Social environment: “People have developed a raste jor better quality products...” (Gil) Political environment: “The government... ermitted eneu cent percent foreign dinect investment srt sone sectors of retailing.” (b) Impact of globalisation and privatisation on business: (any three with explanation) (@) Increasing competition (i) More demanding customers (Gii) Rapidly changing technological environment (ix) Necessity for change (y)_ Need for developing human resource (vi) Market orientation (vil) Loss of budgetary support to the public sector 3. Disco Ld. manufactures fashionable and designer clothes. Recently it finds that the demand for Its products has been declining. After market research it was discovered that fashion and tastes of the cousumers is changing at a fast pace. Customers demand is increasing. New competitors have entered the market with new designs. It is very difficult for the company to predict future happenings. Also, it is difficult to know the extent of the relative impact of the social, economic, political, technological or legal factors on decrease in demaad of its products in the market. A meeting was held in which managers from different functional levels heading Production, Marketing, Finance, etc, for example, Chief Operating Officer, Chief Finance Officer, Vice President (Marketing) wore present to discuss how to deal with the situation. After a long discussion, it was decided that theyreed Fore would study and analyse the market fest to identify customer tastes and fashion and then manufacture ‘gurments accordingly: It was also decided to increase expenditure on advertising, after-sales services, etc. (a) Identify any two featuros of business environment by quoting the lines from the above case. (b) Identify any two Impact of government policy changes on busiiess, quoting lines from the above case. (c)_ State the point of importance of understanding of environment by business managers in the light of the above para. (5 marks) ‘Ans. (a) Features of business environment: (any rw) (© Dynamic nature: fishion and taste of the coustomers is changing ata fast pace.” () Uncerainny: ru very diffcute ir she company ro predict fre happewings.” (i) Complexity: ir 1 diffculs co know abe extenr of she relative impact of the cial, economic, politica, technological or kgal factors on decrease im demand of is products in she maarket.’ (6) Impact of government policy changes on business: (ary tw) (Increasing: competition: ‘New compattors have entered the market with mew design.” (). More demanding customers: ‘Cstomses' demand is increasing” (i) Market orientation: “it was decided that they wow saudy nad analyie the mane. frst ro identify customer tastes and fashion and then maraufcrure garments accortingly. Ir wes abo decided w increase experadiaure ow advertising, aftersales services, et.’ (©) Business environment helps the manager in coping, with rapid changes. usiness Environmant — The term ‘business environment’ means the cum total of all individual, institutions and ether forces that are outside the control of a business enterprize burt that may affect its performance. ‘General Environment —The economic, social, politcal, legal and technological forcas which operate outside a business ‘enterprise are part of fts general environment. Specific environment — the individual consumers or compating enterprises as wall as the governments, consumer eroups, competitors, courts, media and other institutions working outside an enterprise constitute its specific environment ‘Opportunities - Opportunities refer to the positive external trends or changes that will help a firm to improve its performance. Threats — Threats refer to the external environment trends and changes that will hinder a firm’s performance. Economic Environment ~ it refers to factors like interest rates, inflation ratas and changes in disposable income of people etc. which have an impact on business emterprise. Social Environment — ft includes social forces like custom and traditions, values, social trends and society's expectation from business. Political environment — It includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business. Legal environment — It includes various legislations passed by the Government, administrative orders issued by government authorities, court judgments and the decisions randered by various commissions and agencies at every level of the government (Centre, state or local). ‘Technological Environment - it includes forces relating to scientific improvements and innqvations which provide new ways of producing goods and services and new methods and techniques of operating a business. Liberalisation — It means removal of unnecessary controis and restrictions on business, privatisation — rt means giving greater role to the private sector in the nation building process and 2 reduced role to the public sector. Disinvestment — it means transferring the public sector enterprises to the private secter) Globalisation ~ rt means integrating the various economies cf the world leading towards the emergence of a cohesive global economy. Damenetisation — The aim of demonatication was to curb corruption, espacially the accumulztion of “black monay’ generated by income that has not been declared to the tax authorities.112 Cee ee oo eet end Eee Poca Business Environment Time allowed + | hour Masiniume Marks + 25 Qu is considered a major element of the political environment: (Choate the correct «ltermatéve) (1. mark) (a) The extent and nature of government intervention in business (b) planned outlay in public and private sectors (2 Expectations from the work Force (d) Administrative order issued by govemment aurhotities Q2. Match the columns: (a mark) ) Slmplifjing procedures for imports and export. (A) Liberalisation {Giving «reduced role tothe public vector inthe nation building process ©) Globalisation {il Removal of licensing oF imports, tris and quoxas [© Privatisation (iv) Counterfeiting the use of high denomination noes For legal acces (D)Demonecisation Qa mostly influences many enterprises.at the same time. (Specific envionment! General environment) (Choose the correct option) (1 male) Q4 Which of the following is not a component of economic environment of business? (mark) (2) Interst rates (b) Inflation rates (2) Literacy rates (4) Rates of savings and investments, Q:5 Stare any three features of “demonetisation’, G marks) Q.6 Krishna Furnishers Mart started its operations in the year 1954 and emerged as the market leader in the industry because oF cheie original designs and efficiency in operations. They had a steady demand for choir products but over the years, they found their market share declining, because of new entrants in the field. The firm decided to review thelr operations and decided that in order to meet the competition, they nead to study and analyze the market trends and then design and develop their products accordingly. Explain any two impacts of changes in business environment on Krishna Fumishers Marc operations. (3 marks) Q7 The Government is considering pioneer proposal to lunch a single debit-cum-credit card to increase the ease and usage for the consumers. The card which will be called the “National Mobility Card” will have unique advantages for making payments in metro, buses, parking and making transactions during visits abroad. ‘After hearing this news, Mega Bank decided to launch a "Mega Mobility Card" on similar lines , so that they could be the first to exploit the opportunity, arising due to the increasing trend of digitization, In order to improve their performance, they laid down a plan to hire more people in their marketing department and prepared guidelines to train their sales force to market the new card facility being hunched by the hank. By quoting the lines, identify and explain any two points of importance of understanding Business Environment discussed above, (4marls) Q8 National Digital Library of India (NDL India) isa pilot project initiated by the HIRD ministry. It works towards developing a framework of virtual repository of learning resources with a single-window search facility. It provides support to all academic levels including researchers, life-long learners and differently abled learners free oF cost. Identify and explain two dimensions of business environment highlighted above, 6 mark) Q9 Define business environment. State any five features of business environment. (marks)ied Glee Business Environment ae ood 13 Time allowed : 1 hour Maxinssem Marks + 25 QU. Match the following: (mak) (i) Stock market indices {a) Political Environment (ii) Customs and traditions {(b) Social Environment (iii)New methods and techniques of operating a business (¢) Technological Environment (iv) General stability and peace in the country (d) Economic Environment Qe is considered a major element of the economic environment. (Chose the correct alternative} (1 rat) (a) Public debe (internal and external) (©) The nature of relationship of our country with foreign countties (©) Birth and death rates (4) Education system and literacy rates 3. In order to solve economic problems of our country, the government took several steps including control by the state of certain industries, central planning and reduced importance of the private sactor. ‘Which dimension of environment is discussed above? (Choose the correct alternative) (1. mat) (a Economic environment (6) Political environment (@ Botha) and (b) (@) Legal environment Qe “Threats to law and order is an. example of environment of business. (Fill up she blank saith correct amsaver) (1. mack) Q5 Explain ‘market otientation’ and ‘necessity for change’ as impacts of government policy changes on business. 6 urls) Q6 ‘What is the aim of demonetisation’? Explain briefly its any two fearures, G marks) Q.7 Mahinder Agro Led. started a new venture for distribution of harmful and chemical free fertilizers vegetables. They conducted a survey to find out consumer preferences for such vegetables. They found that most of the consumers were concerned about the harmful chemicals being used in growing the vegetables. They found out that 90% of the households were searching for alternatives. The company contacted a group of agricultural experts to lay down the procedure for growing the vegetables by the farmers. They decided to train the farmers in new technology to grow chemical free vegetables according m new innovative methods. The experts also suggested soil management techniques through which farmers would be able to create an abundant and lasting harvest. Identify and explain the two dimensions of business environment highlighted in the above para. (4 marls) Q8_ Define business environment. State any four features of business environment. (6 marks) Q9 In an environment of rising petroleum prices and a large middle class population in India, KV Motors Led. recognized the need for small cars in India. It created a product fur superior than their competitors not only in terms of quality but alo in terms of overall driving experience. It soon became the leader in the small car market As the Indian government was en'couraging foreign investment, MNCs having a big name in car manufacturing entered the Indian market. KV Motors further expanded its service network and quality creating an entry barrier for the competitors, It depicted its swengths through various brand-building activities. As a result, the market share of KV Motors is refusing to go down in spite of all major automakers as its competitors. (4). Identify and explain briefly the economic reforms highlighted in the above case, (b) Quoting the lines, explain any two points of importance of Business Environment being highlighted in the above case. (6 marks)eed Gilaem Business Environment Time allowed : 1 hour Maximum Marks : 25 qi is considered an element of social environment. (Chome the correcr alternative) (1. mark) (a) Expansion of transportation and communication facilities. (b)_ Expectations from the workforce (@ The extent and nature of government interventions in busines. (d)_ Rate of saving and investment. Q2. Match the following : (mark) (Life expectancy (@)_ Ezonomic Environment (i) The nature of relationship of our country with foreign countries (b) Social Environment (iii) Planned outlay in private and public sectors (c)_ Political Environment (iv) The Companies Act, 2013 (@_Legal Environment Q3 ‘Decisions rendered by various commissions and agencies at every level of the government is an example of environment of business. (Fill up the Blank with comect answer) (1. mark) Q4 “Social trends present various opportunities and threats to business enterprises.” Give an example, (1 mark) QS. State any three features of business environment: G maris) Q6 Identify the impact of the government policy changes of liberalisation and globalisation from the following statements: (a) Earlier firms used to produce first and go to the marker for sale later. In a fast changing world, the firms have to study and analyse the market first and produce goods accordingly. (b) Ina regulated environment of pre-1991 era, the firms could have relatively stable policies and practices. After 1991, the market forces have hecome turbulent as a result of which the enterprises have to continuously modify their operations. (@)_ Increased competition in the market gives the customers wider choice in purchasing better quality of goods and services. G mars) Q7 How would you argue that the success of a business enterprise is significantly influenced by its environment? (4 marls) Q8 ‘The Indian corporate sector has come face to face with several challenges due to government policy changes in business and industry: Explain any five such challenges. (5 marks) Q9 India's craft heritage continues because of its customs and traditions. Crafts are used not only in the country by crafismen in Rajasthan, Gujarat and Assam but are also exported to USA, Germany, UK and France. The volume of exports and impors give India an advantage in balance of payments and the much needed foreign exchange reserves. The Prime Minister desires that the handicraft industry should be expanded by linking it with technology. Focus should be on changing the manuficturing process, ensuring durability and adapting innovations. (Quoting the lines from the above para, explain four dimensions of the busines environment. (6 maris)cro Gl Business Environment, Nature and Significance of Management and Principles of Management SEL Time allowed : 1 hour 30 minutes Maximsm Marks: 40 QL Match the following : (mark) Balance of payments and changes in foreign exchange reserves__| (a) Economic Environment (ii)_ Scientific improvements and innovations (b)_ Social environment (iii) ‘The degree of politilsations of business and economic isues (6) Political environment (iv)_Attitudes towards product innovations (d)_ Technological Environment Q2 Non-disciminatory employment practices is an example of ‘environment of business, (Choose the correcs alternative) (1. mark) (a) Economic (6) Socal (9) Political (4) Legal Q3 Complete the Sentence: (1 mark) ‘Management is concerned with the efficent use of resources, becanse Q4 “High efficiency is associated with high effectiveness” (TeuefFatbe) (1 mack QS. The Principles of management are guidelines to action but do not provide ready made straitjacket solutions to all managerial problems. Why? (1 mark) Q6 Derivation of management principles may be said to be a matter of (i) and their creative application may be regarded as (i) . (Fall up rhe blank wich correct answers) (1 mark) Q7 In accordance with the economic planning the government of India gave a lead role to the public sectors for infrastructure industries whereas the private sectors was broadly given the responsibility of developing consumer goods industry. At the same time, the government Impased several restrictions, requisitions and controls an. the ‘working of private sector enterprises. Identify and explain briefly any dimensions of business environment. G marks) QS Flavours Led. was engaged in the business of making handmade chocolates. Lately, the business was expanding due to good quality and reasonable prices. As the demand was increasing, Flavours Lid. decided to explore bakery products as well. In order to make bakery products the company directed its workforce to work avertime but this resulted in multiple problems. ‘Due to increased pressure the efficiency declined and the workers had to take orders from more than one superior. Workers were overburdened and their health was also affected. Gradually the quality of the products begins to dedine and market share also went down. The company realized that they had implemented changes ‘without waiting for the required infrastructure. Identify and explain the principle/technique of Taylor! Fayol referred to in the above para. 1G marks) Q9. Sunil Mukharjoe has recently joined AMV Ld., a company manufacturing refrigerators. He found that his department was understaffed. and other departments were not cooperating with his department for smooth functioning of the organization, Therefore, he ensured that his department has the required number of employees and its cooperation with other departments is improved. (2) Identify the level at which Sunil Mulcherjee was working. {b) Also, state two more functions required to be performed by Sunil Mukherjee at this level. (3 marks) Q.10 Briefly explain work study techniques that help in developing standards to be followed throughout the organisation (4 marks) Qu “Konark Ltd’ is an electronic goods manufacturing enterprise situated in Shivpuri, Madhya Pradesh. It is earning avery low revenue in comparison to a competing electronic goods manufacturing enterprise, ‘Nova Ltd.’ situated in Mumbai. Both Konark’s and Novils operations are affected directly by the investors, customers, competitorscet od qua. Qua Qu and suppliers, which are unique to their respective locations, In addition to this, individual firms of this field are affected indirectly by the factors like the money supply in the economy, composition of the families. the technological changes, ete. (a) Identify and state the feature of the concept discussed in the above paragraph. (b) Also, stare any three points of importance of this concept. (4 mars) ‘Aman, Ahmad and Ally are partners in a firm engaged in the distribution of dairy products in Maharashen state, Aman is a holder of Senior Secondary School Certificate from Central Board of Secondary Education with Business Studias as one of his elective subjects. Ahmad had done his post graduation in History and Ally in dairy farming. One day there was a seriousdiscussion between Ahmad and Ally regarding, the nature of management. ‘Ahmad argued that management was a profession whereas Ally argued against it saying that the legal and medical professions are the only professions because they fulfill ll the conditions of profession. ‘Aman on the basis of his knowledge of business studies explained the nature of management as a proféssion to ‘Ahmad and Ally. Explain, how Aman would have satisfied both Ahmad and Ally. (5 marks) ‘The govemment of India announced Demonetization of 2500 and €1,000 currency notes with effect from the midnight of November 8, 2016, As a result, the existing %500 and. 21,000 currency notes ceased to be legal tender from that dare. New currency notes of the denomination of 2500 and 22,000 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, e-wallets, digital cash and other modes of cashless transactions. Also, increased transparency in monetary transactions and disclosure led to arise in government revenue in the form of tax collection, Explain the dimensions of business environment highlighted above, by quoting the lines from the above. (6 marks) Principles of Taylor and Fayol are mutually complementary. One believed that management should not close its ars to constructive suggestions made by the employees, while the other suggested that a good company should have an employee suggestion system, whereby suggestions which result in substantial time or cost reduction should be rewarded. Identify and explain the principles of Taylor and Fayol referred in the above para. (6 marks)a EE oe TP ae) Business Environment, Nature and Significance of Management and Principles of Management tts Time allowed : 1 hour 30° minutes Maximum Marks : 40 QU ‘Shifts in demand from typewriters to computer based word procesors' is an example of environment of business. (Fld up the Blank warh correct answer) (1 mare) Q consists of various macto-level factors related to the means of production and distribution of ‘wealth which have an impact on business and industry. (Choore we correct alternative) (1. mari) (@) Economic environment (b) Political environment (@. Sodal environment (4). Legal environment Qa ‘Express Tours Led.’ is a travel agency which books air tickets on commission basis, It takes two days for Express ‘Tours to get the tickets from airport reservation counter and deliver the same to customers. During the last one ‘year, there has been drastic decrease in its business.asmost of the customers have shifted to-another travel agency, “Shiva Tours and Travels’, which provides tickets within half-an-hour through Internet. Identify the dimension of business environment that is being overlooked by “Express Tours Ltd’. (1 malt) Q4 Which of the following will be included in economic environment? (Choose she correct alternanive) (1. mack) (a) Banks (b) National Income {@) Annual Budgets (d) Allof these Q5 “Planning cannot prevent problems.” (Tet False) (1. mar) Q6 ‘The method of time study will depend upon. . (Gomplere rhe sentence) (. matic) Q7 Match the example in column I with the function in column I: (1 mark) ‘Column I (Example) Column II (Function) ()__ Matching outcomes with targets (@)__ Planning i) Objectives ©) Orgonicing (U)__ Resources For implementation (6) Directing (iv) Recruitment and training Seating () Supervision and motivation (©) Contralling Select from the following choices: (a) (+8: Ges LDA iva (9) (6) (Hes Ha (4D; iv}; (1) (2. (+8: a5 (HDs Civ Hes (7) () (+25 Gas (ibs (ina (0) Q8 Sudha Chandran is one of the most successful managers of her company. ‘Krishna Ltd.’ She uses her creativity and initiative in handling, challenging situations at work. The knowledge gained by her during. her student days ata tenoymed management institute as well as through her observation and experience over the years isapplied by Sudha Chandran in a skillful manner in the context of the realities of a given situation. She often reads books and other literature in various fields of management to keep her knowledge updated. Explain any three features of the aspect of nature of management being highlighted in the above description. G marls) Q9 Explain any four points regarding significance of Principles of management. (4 marks) -10 Discus any four differenoes berween the contributions of Taylor and Fayol. (4 marks) y yl yo Qu11 Naman and Govind afier finishing their graduation under vocational stream decided co start their own. travel agency which will hook Rail Tickets and Air'Tickets on commission basis. They also thought of providing tickers ‘within ten minutes through the use of internet. They discussed the idea with their Professor Mr. Mehta who liked the idea and suggested them to first analyse the business environment which consists af investors, competitors and other farce: like social, political ec. that may affect their busines: directly or indirectly. He furcher told them about the technelogical improvements and shifis in consumer preferences that were taking place and hence they should be aware of the environmental trends and changes which may hinder their business performance. HeEE} Cee Ce ee Le Dig emphasised on making plans keeping in mind the threat posed by the competitors, so that they can deal with. the situation effectively. This alignment of business operations with the business environment will result in better performance. (i) Wdentify and state the component of business environment highlighted in the above Para. (ii) State any two features of business environment as discussed by Professor Mehta with Naman and Govind. (lif) Also state two points of importance of business environment as stated by Professor Mehta in the above situation. (6 marks) Quiz State any five features of coordination, (6 marks) QuI3. Asa part of economic reforms, the government of India announced a new industrial policy in July 1991. (a) The Government reduoed the number of industries under compulsory licensing to si. (b) Many of the industries reserved for the public sector under the earlier policy, were deserve the role of the public sector was limited only to four industries of strategic importance (©) Disinvestment was carried out in case of many public sectors industrial enterprises. (4) Policy towards foreign capital was liberalised. The share of foreign equity participation was increased and in. ‘many activities 100 per cent Foreign Direct Investment (FDI) was permitted. Identify and explain the dimensions of business environment highlighted above. (6 marks) Qu4 A company, Toyo Motor Ltd. follows certain well-defined business principles guiding its functioning. These are: TTo provide clean and safe products and to enhance the quality of life everywhere, to create and develop advanced technologies and provide outstanding products and services that Fulfil the needs of austomers worldvride and to foster a corporate culture that enhances individual creativity to develop and carry out their plans and teamwork value, while honouring mutual agreement and complete harmony and cooperation between management and labour ete. (a) Identify and explain any one principle of general management and one principle of scientific management followed by Toyo Motor Ltd. (b) Identify and explain the objective of management Toyo Motor Led. is fulfilling, (6 marks)eed fei ‘Objective Type Questions 3.1 1.) Employees 2. Complesity 3. Opportunites mfer the positive external treads and change that wil ep to improve a fs peoformanse. 4) -() (Bh Gi, (9) — ‘3. @) All of these ‘Objective Type Questions 3.2 1. Legal environment 2. Technologie environment 3. Legal eevironment 4. Polikal environment 5. (d) Campartion of family to Objective Type Questions 6. 0}, ~ (Gil) ~(2, (e) =) 7. (@) Technological 8. Patel envionment 9. Social environment 0, Economic Environment 1. Legal Bavironmene Objective Type Questions 3.3 1. (h) Reduced governmene controls and restrictions 2. () Change in agsicultural prices 3, Telecommunications, Ailines Banking, Inaarances ete 4. ©) Likerslisseion 5. Liberalisation 6.) =U). ©) — GD, = - d= CHD Answers to Self Assessment Tests Questions ‘Self Assessment Test 1 |. (a) The extent and nature of goverament intervention in business (=D. i = (C), GiB). (oe) 4D) General Environment (©) Litersy rates (0) Tncreace in competition (ii) Market orientation (esptain) Following are che points of imporeance of undemtanding Business Eavironment discussed: (explain any two) (O Te helps the firm in identifying threat and carly ‘warning signal. “pprove existing can fic’ (li) Tehelps to idencify opportunities and get fst mover advantage. "Eight eppertanaty arising” (ii Tehdlpsin improving performance. "Tprove their performsnce” (lr) Tthelgs in asisting in planning and policy formulation. “Planned to hire more guidelines to eran sale force” 8 (i) Political ervisonment (i) Technol gied environment Self Assessment Test 2 O~@), 0 —), Gi (©), ) -@) (a) Publis debe (internal and external} (6) Borh(a)and () poliieal Dimensions of businses savisonment highlighted above aes (explain) i) Socal Environment (i) Technological Environment 8. (a) Liberalisation and Globaliation Pe seep (0) Importance of Business Environment (any ts) () Ithelps the fin.to ideneify oppoccunities and get the frst maver schaneage. KV Motors Ltd recoguined the nea fr small exes is Indi.” (i) Te helps the firm in improving perfarmance. “Tecratad produc far supeior thas thr competitors raz ony intr of quay but ako in tome of cera diving experience Irsson za te ede in ebe sell car mare” (ii) ie haps che fim in planning and peicy foumulation SIV Motors further expanded its service network and quabisy creating am eury barrier for the competitor, He depicted its sens throng various brandbuilding activises.” Self Assessment Test 3 1. (h) Expectations from the workforce 2. WEL i)-40) be)-) 3. legal 4. Health and fines: tend has created demand for diet soft drinks, mineral water, food aupplements, ets. But this ‘wend has harmed busines in other industries like tobacco and Iiquox 6, (@) Madeetorfentation (b) Neseasty for chang {6} More demanding customers 8. Impact of government pelicy changes on business and industey: (coplain any fee)Cee es ics eee mg 8 Dimensions of business environment are: (explain) (9) Soclel environment: Indiak cvgft Aevinge continue became ft carton and radiions @) Economic envisonmere: The wohme of eons and ingore: gioe India a advantage in Balance of payoncnt andthe mowch needed frcign exchange reer: (9 Bollea! environmen: TBe Prime Minicer diver shat the banalcm induery should Be expancad by linking i teih echeelagy (2) Technological environment: Fecur should be on changing the manafactwing proces, cnsring drrability and adapsing innovations Self Assessment Test 4 1 2 3. 4 10, u. B. (fa) Cii)-(d) ff) -{e),(iv)-(B) () Sosial they seduce coms and ultimately lead to higher profes ‘True: High efficiency and high eflethencss i the aim of all managers. Poor management is duc to both ineflisiency and inefeceiveness. (Science (i) amare (2) Economic environment (b) Political environment (¢) Legal environment ) Uniry of Command (i) Fatigue Study (0) Middle Level Managemene () Functions ofthe middle level of management: (ony acs) (To toterprct the polices famed by the top ‘management. (i) To assign nosexary dutics and responsibilities to the employees of chee rapecthe departments far implementation of the plan. (ii) To motivate employees of their reopsstive deparemencs to achieve the desired objectives. Time study, motion study, fatigue study and method udy, explain) (a) Specific and General Forces (explain) (©) Importance of business environment: explain ony three points) (Leg Enviconmene: “The governmien of dis anrouncat Demoueizatien ef €500 and® 1,000 currency ete...” (0 Eeonamic Environment: " New currency meses of she dovominarion af ® 500 and © 2000 soe iad by Reserve Bank of india afer the annvuncersen:” “os incre senipareney in monary marmactons and cls ld to i im government sevens inthe form of tx collection.” (Technological Enviconment: “1 of Paine of Sale machines, eval, digital cach and ather made of sales treason” 14.) Management should mot cle ir anm £9 commute suggetions made ty the employe —the principle of (Cooperation, not Individualism. (i) “A goad coompany shoud Bave am employee suggertiom em whereby suggestions wich result sn substantial Fime on cont reduction should be rewanded'—the principle of Inieitive. Self Assessment Test 5 1. technological 2. @) Beanomic environment 3. Technological Environment 4. @ All of these 5. Ties Planning can only predict them and. pocpare ‘onlagency plane to deal with them ifand when dy cocur 6, volume and fisquency of the tase, the ope time of the don and time measuring coms, 7. (€) Gs tia; (its (iv) 6) 8, Management as an art “Those features that establish ie as an art are (@) Existence of theoretical knowledge (b) Petsonalised application. (©) Based on practice and creativity (give xplanarian) 11, @ Techaclopisal Environment: (explain) Gi) () Specific and genceal farces. (b} Dynamic nacare (il (a) Te helps the firm eo identify threats and early warning signals (b) fe helps in planning and policy formulation. (eplain! 13, @ Beanomic environment (i) Legal environment (i) Political eaviconment (explain) 14, (@) Fayol principle of management (). Eeprie de corps (rmmont sale) Gi) Discipline Bonowring mutual agrees) (Gii)lneitive (omhanc snaisidual eeaioty 20 cevelap cand cary ont their plans) (Eiplain anyone} Taylor's principle of managements (@ Harmony, ast Discocd (comple bavmony Beroven mumagenient and labet) (ii) Conpention, not Individualism —(coepention berworen management ana abou et \Esplain any one) (&) Toyo Motor Led, is falling the social objectives of management (“provide clean and sat products and 0 enhance the quality of ifs everjabene. Cran and develop advanced techrolegier and previ onistanding products and services thar fulfill she meade of exetomer: sword”)