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Meaning of Business Environment Learning Objectives
The term business environment refers to external forces, (As per ISC scope of syllabus).
factors and institutions that are beyond the control of the
business and they affect the functioning of a business •Meaning of Business Environment.
enterprise. These include •Importance of Business Environment.
• Dimensions of Business Environment:
customers, competitors, suppliers, government, and the social,
political, legal and technological factors, etc. •Micro Environment and Macro
Environment
•SWOT Analysis.
Features of Business Environment (any five points)
1. All the external forces: Business Environment includes all the forces, institutions and factors which
directly or indirectly affect the Business Organizations.
2. Specific and general forces: Business environment includes specific forces such as investors, customers,
competitors and suppliers. Non-human or general forces are Social, Legal, Technological, Political, etc.
which affect the Business indirectly
3. Inter-relation: All the forces and factors of Business Environment are interrelated to each other. For
example with inclination of youth towards western culture, the demand for fast food is increasing
4. Uncertainty: It is very difficult to predict the changes of Business Environment. As environment is
changing very fast for example in IT, fashion industry frequent and fast changes are taking place.
5. Dynamic: Business environment is highly flexible and keep changing. It is not static or rigid that is why it is
essential to monitor and scan the business environment continuously.
6. Complex: It is very difficult to understand the impact of Business environment on the companies. Although
it is easy to scan the environment but it is very difficult to know how these changes will influence Business
decisions. Some- time change may be minor but it might have large impact. For example, a change in
government policy to increase the tax rate by 5% may affect the income of company by large amount.
7. Relativity: The impact of Business environment may differ from company to company or country to
country. For example, when consumer organisation CES (Centre for Science and Environment) published the
report of finding pesticides in cold drinks, resulted in decrease in sale of cold drinks, on the other hand it
increased the sale of juice and other drinks.
Importance of Business Environment (any five points)
1. Determining Opportunities and Threats: The interaction between the business and its environment would
identify opportunities for and threats to the business. It helps the business enterprises for meeting the
challenges successfully For examples of first movers include innovative companies such as eBay and Coca-
Cola. eBay was the first company to take the auction process online, kicking off operations in 1995. Coca-Cola
was the first cola producer, and began selling its product to the public in 1886; it has been a perennial
powerhouse in the industry ever since.
2. Giving Direction for Growth: The interaction with the environment leads to opening up new frontiers of
growth for the business firms. It enables the business to identify the areas for growth and expansion of their
activities.
3. Continuous Learning: Environmental analysis makes the task of managers easier in dealing with business
challenges. The managers are motivated to continuously update their knowledge, understanding and skills to
meet the predicted changes in realm of business.
4. Image Building: Environmental understanding helps the business organizations in improving their image
by showing their sensitivity to the environment within which they are working.
For example, in view of the shortage of power, many companies have set up Captive Power.
Plants (CPP) in their factories to meet their own requirement of power.
For example, Earlier GE (General Electric Company) had various products including air conditioners,
computers, etc. But it discontinued production of air conditioners, computers as it could not achieve a
reasonable market share in these segments. GE had the policy that it should either capture a major market
share for their products, supplying the best to its customers or else get out of the concerned business.
5. Meeting Competition: It helps the firms to analyze the competitors' strategies and formulate their own
strategies accordingly.
6. Identifying Firm's Strength and Weakness: Business environment helps to identify the individual
strengths and weaknesses in view of the technological and global developments.
7. Identification of Threats or Early Warning Signals: Threats refer to the negative or unfavorable external
factors that are likely to create hurdles for a business. Environmental scanning is a must as it helps the
organization to identify possible threats in future.
For example, an Indian firm finds that an MNC is entering in the Indian market with new substitute. This
should be worked out as a warning signal for the Indian firm. Based on this information the Indian firm can
improve the quality of its product, reduce its cost of production, apply aggressive advertising, etc. The
proposal of TATA Motors to launch small segment cars by 2008 was a warning signal for then dominant
Maruti Suzuki to cut its cost or introduce economic models.
Environmental Scanning
Careful monitoring of an organization's internal and external environments for detecting early signs of
opportunities and threats that may influence its current and future plAns. With the help of environmental
scanning, an enterprise can understand the impact of different events, trends, issues and expectations on its
business operations. In comparison, surveillance is confined to a specific objective or a narrow sector.
Dimensions of Business Environment
The dimension of business environment involves Micro and Macro factors. 'Micro' means small or pertaining
to one item in the environment/system. It is the opposite of 'macro". "Macro' means broad, large scale or
overall that which is generally applicable to the environment system.
The environment of a business enterprise is usually divided into three distinct levels. The levels are the
Internal environment [Micro], the Operating or the Specific environment also known as External
environment [Micro) and the General environment [Macro].
Micro Environment
Micro Environment refers to those Internal and External factors which exercise a direct influence on the
working and performance of an individual business firm. It is popularly known as Direct Section
Environment or Task Environment.
(a) Internal Environment
The conditions, entities, events, and factors within an organization that influence its activities and choices,
particularly the behavior of the employees. Factors that are frequently considered part of the internal
environment include the organization's mission statement, leadership styles, and its organizational culture.
The main Internal Factors which influence business firm are as follows: [any four points]
1. The strength of employees: It is an essential internal business factor. Check if employees are motivated,
hard- working and talented. They will produce better results compared to an unmotivated andless talented
workforce. The processes and relationships between and within departments can also improve effectiveness
and efficiency In a high performing workplace, the workers not only have talent, but they also work better
together. The employees and departments collaborate on ideas and resolutions.
The internal factors basically include the inner strengths and weaknesses. Internal factors can affect how a
company meets its objectives. Strengths have a favorable impact on a business. Weaknesses have a harmful
effect on the Firm.
2. Organizational and operational: These are a part of the operational and administrative procedures. This
includes disorganized or inaccurate record keeping. Interruptions to your supply chain and out-dated or
faulty IT systems are also factors you should evaluate. If you do not overcome these, your customers might
see you as unreliable. You can also lose all your data.
3. Strategic risks: These affect your firm's ability to reach the goals in the business plan. They could be due to
the impacts of changes in technological evolutions or customer demand. These factors could pose as threats
as they can alter how customers perceive your product. Based on these, customers might think a product is
overpriced, dull and out-dated.
4. Innovation: Your business needs innovation in order to keep up with competitors. It is essential to get one
step ahead. Innovation could come in the form of marketing. It could also be through promotional initiatives
in the marketing plan, staff training, and welfare. Embracing new technology is the best way to keep up with
technological advancements.
A lack of innovation can pose a serious risk to a growing business. No innovation will cause a company to
remain boring. The company will become dull, stagnant and irrelevant.
5. Financial: The financial risks depend on the financial structure of your business. It is also dependent on
your business transactions and the financial systems. For example, changes in interest rates or being overly
reliant on one customer could affect business.
6. Employee risks: Employees are vital to business success. But, there are risks associated with them. For an
industry, strike action could lead to a lot of problems.
7. Corporate Culture: The values, beliefs and the attitude of the founders and the top management of the
organisation has a strong influence on the company stands for how it performs and what it considers
important. When the value system is shared by all or accepted by all it helps in overall growth of the business.
(b) External Factors
These factors or forces refer to those individuals and groups or agencies with which a particular business firm
comes into direct and frequent contact in the course of its functioning. These individuals or groups are
referred as the stakeholders.
The main External Factors which influence business firm are as follows: [any four points)
1. Competitors: The competitive environment consists of certain basic things which every firm has to take
note of. No company, howsoever large it may be, enjoys monopoly. In the original business world a company
encounters various forms of competition. The most common competition which a company's product now
faces is from differentiated products of other companies.
For example, in the Colour Television Market, Philips TV faces competition from other companies like
Videocon, Onida, BPL and others. This type of competition is called brand competition. It is found in all
durable product markets.
The consumer wants to purchase a two-wheeler, the next question in his mind is with gear or without gear,
100 cc or more than that, self-starter or kick starter, etc. This type is otherwise known as 'Product form
competition'.
2. Customers: Now a days, a business firm to be successful, must find customers for its products. This is the
reason the customers thus constitute the most important element in the micro environment of business.
Products sales depend mainly on the degree of consumer satisfaction.
In fact, this is a reason that gives more importance to customer satisfaction surveys. Now every business firm
set-up systems to regularly watch customer attitude and customer satisfaction, because today it is universally
accepted that the satisfaction of customers is the base for company's success. Normally the customers are not
in a same group, they are individuals, business enterprises, institutions and government.
From the company's point of view it is always better to have customer from various groups and legions for
that easily sustains demand for the company's product.
3. Suppliers: Regarding the suppliers, the organisation can think of availing the required material or labour
according to its manufacturing programme. It can adopt such a purchase policy which gives bargaining
power to the organisation.
Suppliers are either individuals or business houses. They combined together; provide resources that are
needed by the company. Now the company necessarily should go for developing specifications, searching for
potential suppliers, identifying and analysing the suppliers and thereafter choose those suppliers who offer
best mix of quality, delivery reliability, cred it, warranties and obviously low cost.
The development in the supplier's environment has a substantial impact on the operations of the company. In
recent trends companies can lower their supply cost and increase their product quality.
4. Public: Literally word 'public' refers to people in general. The company has a duty to satisfy the people at
large along with competitors and the consumers. It is an exercise which has a larger impact on the well-being
of the company for tomorrows' stay and growth. Create goodwill among public, help to get a favourable
response for a company "Companies must put their primary energy into effectively managing their
relationships with their customers, distributors and suppliers. Their overall success will be affected by how
other publics in the society view their activity. Companies would be wise to spend time monitoring all their
public understanding their needs and opinions and dealing with then constructively"
5. Marketing Intermediaries: Market intermediaries are either individuals or business houses who come to
the aid of the company in promoting, selling and distributing the goods to the ultimate consumers. They are
Middlemen (wholesalers, retailers and agents), distributing agencies, market service agencies and financial
institutions. Most of the companies find, it is too difficult to reach the consumers. In such a cases the agents
and distribution firms help to reach the product to the consumer.
6. Workers and Their Union: As per the production function theory, the labour gets more importance. He is
also one of the pillars of the company. The organised labours is highly secured their position compare to
unorganised workers So, the workers now prefer to join labour unions which invariably resort to collective
bargaining and thereby makes them less vulnerable to employer's exploitation.
On the other hand, Trade Unions are a major component of a modern business. Trade Union of workers is an
organisation formed by workers to protect their interests, improve their working conditions, etc. From the
point of view of the company, industrial relation is more important to improve the company, otherwise
conflict between labour and management leads to Sick Unit.

Macro Environment
Macro environment refers to those factors which are external forces in the company's activities and do not
concern the immediate environment. It is referred as Indirect Action Environment.
Macro environment are the forces which indirectly affect company's operation and working condition. These
factors are uncontrollable and the company is powerless and incapable of exercising any control over them.
It can be classified into economic environment and non-economic environment. Since the business is
basically an economic activity, economic environment of business both national and international gets
importance.
Components of Macro Environment
A detailed analysis of the macro-environment or the environment as a whole is called PESTLE analysis, which
precisely means a bird's eye view of the PESTLE analysis business conduct. The PESTLE analysis ascertains
for the managers and the strategy builders as to where their market currently stands and where it will head
off in the future.
PESTLE analysis consists of components that influence the business environment and each letter in the
acronym denotes a set of factors that directly or indirectly affect every industry. The letters denote the
following things:
P for Political factors: These factors take into account the political situation of a country and the world in
relation to the country. For example, what sort of government leadership is affecting what decisions of a
country? All the policies, all the taxes laws and every tariff that a government levies over a trade falls under
this category of factors.
The major components of political environment are:
(i) Present political system.
(ii) Constitutional framework.
(iii) Political structure center- state relations.
(iv) Political philosophy & stability of the government.
(v) Political process-party system, election & their funding.
(vi) Profile of Politicization of business & economic system.
(vii) Foreign policy of the government.
(viii) Ideologies & value of political parties.
E for Economic factors: Economic factors include all the determinants of an economy and its condition. The
inflation rate, the interest rates, the monetary or fiscal policies, the foreign exchange rates that affect imports
and exports, all these determine the direction in which an economy might move, therefore businesses
analyse this factor based on their environment so as to build strategies that fall in line with all the changes
that are about to occur.
The major components of economic environment are:
(i) Economic conditions: These reflect the economic state of affairs that possibly influences economic
development of country/industry/region/sector.
(ii) Economic policies: These are the course of actions framed by the government, which attempt to
influence or control the behaviour of an economy.
(iii) Economic systems: These systems focus on organising the distribution and allocation of a country's
goods and services among individuals in an economy.
S for Social factors: Every country is different and every country has a unique mind-set. These mind-sets cast
an impact on the businesses and the sales of their products and services; therefore PESTLE analysis includes
these factors as well. The cultural implications, the gender and connected demographics, the social lifestyles,
the domestic structures; all of these are studied by companies to understand the market and the consumer
better.
The major components of social environment are:
(i) Quality of life.
(ii) Importance or place of women in workforce.
(iii) Birth and Death rates..
(iv) Attitude of customers towards innovation, life style, etc.
(v) Education and literacy rates.
(vi) Consumption habits.
(vii) Population.
(viii) Tradition, customs and habits of people.
T for Technological factors: Technology greatly influence a business, therefore PESTLE analysis is
conducted upon these factors too. Technology changes every minute and therefore companies need to stay
connected along the way and integrate as and when needed. Also, these factors are analysed to understand
how the consumers react to technological trends and how they utilize them for their benefit.
The major components of technological environment are:
(i) Levels of technology.
(ii) Pace of technology change.
(iii) Technology transfer.
(iv) Research and development budget.
L for Legal factors: Legislative changes occur from time-to-time and many of them affect the business
environment. For example, if a regulatory body would set up a regulation for the industries, then that law
would impact all the industries and business that strife in that economy, therefore businesses also analyse the
legal developments happening in their environment.
The major components of legal environment are:
(i) Various laws and legislative acts.
(ii) Legal policies related to licensing.
(iii) Legal policies related to foreign trade.
(iv) Statutory warnings essential to be printed on labels.
(v) Foreign Exchange Regulation and Management Act.
(vi) Laws to keep a check on Advertisements.
E for Environmental factors: The location of countries' influence on the trades that businesses do. Adding to
that, many climatic changes alter the trade of industries and the way consumers react towards a certain
offering that is launched in the market. The environmental factors include geographical location, the climate,
weather and other such factors that are not just limited to climatic conditions. These in particular affect the
agri-businesses, farming sectors, etc.
The major components of environmental environment are:
(i) Scarcity of the natural resources.
(ii) An increase of pollution and sustainability.
(iii) Recycling, carbon reduction, etc.
Meaning of SWOT Analysis
A SWOT analysis is a tool that identifies the strengths, weaknesses, opportunities and threats of an
organization. Specifically, SWOT is a basic, straight forward model that assesses what an organization can and
cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the
information from an environmental analysis and separate it into internal (strengths and weaknesses) and
external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may
assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve
desired results.
Importance of SWOT Analysis
SWOT analysis is not only concerned with making only four lists (SWOT) but it is much more than that.
The following points highlight its importance:
1. SWOT Analysis brings to light whether the business is healthy or sick.
2. An undertaking comes to know of both internal as well as external factors affecting its success or failure.
3. It helps in the formation of a strategy so as to make preparations for the possible threats from the
competitors.
4. SWOT analysis evaluates the business environment in a detailed manner so as to take strategic decisions for
the future course of action.
In India, the importance of SWOT analysis has further increased since 1991 i.e., after the adoption of the
policy of LPQ (Liberalization, Privatisation and Globalization). There is now a two-fold competition to our
own business concerns.
Internally, competition has increased on account of liberalization and privatization. Telecommunication,
Insurance, Banks and many other sectors have now been opened to the private sector. On account of
globalization, many multinational companies have come to India and are giving stiff competition to Indian
business concerns. Only a concern which makes its SWOT analysis can survive. Globalisation is an
opportunity because our entrepreneurs can now go to the foreign countries and sell their products. It is a
threat because our home market may be captured by multinationals if we do not produce quality products.
A basic understanding of SWOT Analysis or SWOT model (For Extra Knowledge)
A scan of the internal and external environment is an important part of the strategic planning process.
Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and
those external to the firm can be classified as opportunities (0) or threats (T). Such an analysis of the strategic
environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to
the competitive environment in which it operates. As such, it is instrumental in strategy formulation and
selection. The following diagram shows how a SWOT analysis fits into an environmental scan:
SWOT Analysis Framework

Strengths
A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive
advantage.
Examples of such strengths include:
• Patents
• Strong brand names
• Good reputation among customers
• Cost advantages from proprietary know-how
• Exclusive access to high grade natural resources
• Favourable access to distribution networks
Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be
considered weaknesses:
• Lack of patent protection
• A weak brand name
• Poor reputation among customers
• High cost structure
• Lack of access to the best natural resources
• Lack of access to key distribution channels
In some cases, a weakness may be the flip side of its strength. Take the case in which a firm has a large
amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not
share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the
firm from reacting quickly to changes in the strategic environment.

Opportunities
The external environmental analysis may reveal certain new opportunities for profit and growth. Some
examples of such opportunities include:
• An unfulfilled customer need
• Arrival of new technologies
• Loosening of regulations
• Removal of international trade barriers

Threats
Changes in the external environmental also may present threats to the firm. Some examples of such threats
include:
• Shifts in consumer tastes away from the firm's products
• Emergence of substitute products
• New regulations
• Increased trade barriers

2 MARK QUESTIONS
1. What is the meaning of business environment?
2. Enumerate the components of macro environment of a business concern.
3. State two components of legal environment of a business concern.
4. What is meant by Macro Environment?
5. Name the two dimensions of business environment.

3-4-5 MARKS QUESTIONS

1. Briefly explain any five external factors of micro environment of business.
2. Explain any three internal factors of micro environment of a business organization.
3. Explain any three external elements of micro business environment.
4. Short note on: SWOT analysis.
5. Explain the importance of Business Environment in shaping the future of a business.
6. What is social environment? Enumerate any three components of social environment.
7. Explain any four features of Business Environment.
8. With reference to the various dimensions of Business Environment, state what is meant by Political
Environment. Mention any three components of Political Environment.
 OBJECTIVE QUESTIONS
A. TRUE OR FALSE
State with reasons whether the following statements are True or False.
1. Market intermediaries are part of a company's micro-environment.
2. All companies making the same product or class of products are the first level of competitors.
3. Hotels have moderately high barriers of entry and high barriers to exit.
4. The economic environment consists of factors that affect consumer's purchasing power and spending
patterns.
5. Computerized video checkout services are examples of the technological environmental factor.
6. Government legislation and regulation aiming at protecting consumers from unfair business practices is an
example of the political environmental factor.
7. Companies can use an environmental scanning plan to determine the environmental areas that need to be
monitored.
8. The internet is a major technological force influencing how we market hospitality and tourism products
and services.
9. Companies must stop thinking about the past and start competing for the future.
10. Visioning the future is the ability to understand how the business environment provides opportunities and
threats.
11. Often, managers focus too much attention on the long term without thinking about the immediate
business environment.
12. Complexity refers to the degree of change and the rate of change in the environment.
13. An organization is always powerless in the business environment and has no control over the changes.
14. The PESTLE factors are part of a firm's general (or contextual) environment.
15. A firm's macroeconomic environment includes influences such as inflation, employment levels, economic
growth and external.

ANSWERS
1. True 2. False 3. True 4. True 5. True 6. True 7. True 8. True 9. True 10. True
11. False 12. False 13. False 14. True 15. True

B. MULTIPLE CHOICE QUESTIONS

1. Which of the following is not a feature of business environment?
(a) Interrelated elements (b) Dynamics
(c) Complexity (d) Continuous

2. Identification of opportunities to get first more advantage is one of the importance of business
environment. This statement is:
(a) True (b) False
(c) Cannot say
3. Which of the following does not explain the impact of government policy changes on business and
industry?
(a) Increasing competition (b) More demanding market customers
(c) Market orientations (d) Change in agricultural prices

4. ________ refers to negative and unfavorable external factors that are likely to create hurdles for a firm:
(a) Opportunities (b) Warning
(c) Threats (d) None of these

5. Which of the following are the dimensions of the business environment?

(a) Economic and social (b) Technological and economic
(c) Legal and social (d) All of these

6. Liberalisation means:
(a) Policy of planned disinvestment (b) Integrating among economies.
(c) End of license and reduction of government (d) None of these
control

7. Globalisation does not involve:

(a) Reduction of barrier
(b) Free flow of goods & services
(c) Global mechanism for settlement of economic disputes
(d) Free flow of capital

8. Which of the following are the impact of govt. policy changes on business & industry?
(a) Increased competition (b) Need for change
(c) Demanding customers (d) All of these

9. Which of the following is not a part of the business environment?

(a) Customers (b) Suppliers
(c) Competitors (d) None of these

10. Which of the following is not a component of specific forces of business environment?
(a) Technological conditions (b) Customers
(c) Employees (d) Investors

11. The growing awareness about healthcare has led to an increase in the demand for healthcare products and
services in the country. Identify the feature of business environment being described in the above case.
(a) Dynamic nature (b) Uncertainty
(c) Relativity (d) Interrelatedness
12. Since more number of people have become more beauty and health conscious, our economy has
witnessed an unprecedented surge in the number of health and beauty spas and wellness clinics. Related
feature of business environment being described in the above lines is:
(a) Totality of external forces (b) Dynamic nature
(c) Interrelatedness (d) Relativity

13. Twinkle Stars' is a well-known resort for organising parties, especially for children. However, in past 6
months its popularity has reduced considerably as a new resort with better ambience and facilities has
opened within its vicinity. Name the related feature of business environment which has influenced the
business of 'Twinkle Stars' adversely.
(a) Totality of external forces (b) Dynamic nature
(c) Interrelatedness (d) Uncertainty

14. Any kind of external devices, like compact discs (CD's) for computer, have become obsolete. Google, with
its Google Drive service, Apple with its iCloud offering, enables the users store documents, photos, music and
movies on web- based servers. Identify the feature of business environment being described in the above
lines.
(a) Relativity (b) Dynamic nature
(c) Uncertainty (d) Interrelatedness

15. According to the United Nations Environmental Agency, the world produces around 300 million tons of
plastic each year, half of which constitutes single-use items. Ford is recycling over one billion plastic bottles
every year to develop elements of the car's interior, reducing the amount of plastic ending up in a landfill.
The American car maker has revealed that their Romanian-built EcoSport SUVs' carpets are made using 470
recycled single-use plastic bottles. The process for making Ford EcoSport carpets involves shredding bottles
and their caps into tiny flakes and then heating them to 260° C. Identify the related dimension of business
environment.
(a) Economic dimension (b) Social dimension
(c) Technological dimension (d) Political dimension

ANSWERS
1. (d) 2. (a) 3. (d) 4. (c) 5. (d) 6. (c) 7. (a) 8. (d) 9. (d) 10. (a)
11. (d) 12. (c) 13. (b) 14. (c) 15. (c)

CASE BASED QUESTIONS

CASE 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 heartbeat, blood pressure, etc.
While in search of markets abroad, the company found that in India, the reform 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 quantitative as well as tariff restrictions in India.
It 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.
1. In the above paragraph, two major concepts related to government policy have been discussed. Identify
and explain these concepts.
2. Also, explain briefly any three impacts of these concepts on Indian business and industry.
Ans. 1. Liberalization and globalization are the two major concepts related to government policy that
have been discussed.
•Liberalisation: These economic reforms signalled the end of the licence-permit-quota raj and were
aimed at liberalising the Indian business and industry from all unnecessary controls and restrictions.
• Globalisation: Globalisation means the integration of the various economies of the world leading
towards the emergence of a cohesive global economy.
2. The three impacts of reforms on Indian business and industry are outlined below:
• Increasing competition: The Indian firms are facing lot of competition due to changes in the rules of
industrial licensing and entry of foreign firms. This change is more apparent in the sectors which
were earlier reserved for private sector only like banking, insurance, telecommunications, etc.
•More demanding customers: With the easy availability of wider choice in purchasing better quality
of goods and services due to high competition consumers have become more aware and demanding.
The growing expectations of the consumers have increased the pressure on the business firms.
• Rapidly changing technological environment: With the entry of new firms which are far more
superior in terms of technology the small firms are facing a lot of challenges. Moreover, the firms are
constantly involved in innovating new products and upgrading present products with the help of
better technologies in order to satisfy the customers' demands.

CASE 2
Daljeet and Baljeet after finishing their graduation under vocational stream decided to start their own travel
agency which will book Rail Tickets and Air Tickets on commission basis. They also thought of providing
tickets 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 of investors',
competitors and other forces like social, political, etc., that may affect their business directly or indirectly. He
further told them about the technological improvements and shifts 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 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.
1. Identify and state the component of business environment highlighted in the above Para.
2. State any two features of business environment as discussed by Professor Mehta with Daljeet and Baljeet.
3. Also state two points of importance of business environment as stated by Professor Mehta in the above
situation.
Ans. 1. Technological Environment is the component of business environment highlighted in the
above Para. 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.
 2. The two features of business environment as discussed by Professor Mehta with Naman and Govind
are as follows:
• Dynamic nature: It is dynamic in nature and keeps on changing due to technological up gradations,
shifts in consumer preferences or increase in competition in the market.
• Inter-relatedness: All the elements of business environment are closely interrelated. Therefore, any
change is one element may necessitate corresponding changes in the other elements as well.
3. The two points of importance of business environment as stated by Professor Mehta in the above
situation are described below:
• It enables the firm to identify opportunities and getting the first mover advantage: The dynamic
business environment provides numerous opportunities for a business to evolve as per the changing
needs. Therefore, early identification of the forthcoming opportunities helps an enterprise to be the
first to exploit them instead of losing them to the Competitors.
• It helps the firm to identify threats and early warning signals: Sometimes the changes in the external
environment may pose as a threat and hinder a firm's performance. An awareness about the business
environment helps the managers to identify such threats on time and take necessary decisions and
action.

CASE 3
With changes in the consumption habits of people, Neelesh, who was running a sweet shop, shifted to the
chocolate business. On the eve of Diwali, he offered chocolates in attractive packages at reasonable prices. He
anticipated huge demand and created a website chocolove.com for taking orders online. He got a lot of orders
online and earned huge profits by selling the chocolate.
Identify and explain the dimensions of business environment discussed in the above case.
Ans. The various dimensions of business environment being referred to in the above case are as
follows:
1. Social environment: Social Environment includes the social forces like customs and traditions,
values, social trends, society's expectations from business, etc.
2. 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.

CASE 4
A recent rate cut in the interest on loans announced by the banks encouraged Alok, a science student of
Progressive School, to take a loan from State Bank of India to experiment and develop cars to be powered by
fuel produced from garbage. He developed such a car and exhibited it in the Science Fair organised by the
Directorate of Education. He was awarded the first prize for his invention.
Identify and explain the dimensions of business environment discussed in the above case.
Ans. The various dimensions of business environment being referred to in the above case are as
follows:
1. Economic Environment: It comprises of factors that can affect management practices in a business
enterprise includes interest rates, inflation rates, changes in disposable income of people, stock
market indices and the value of rupee, etc.
2. 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 a business.
 CASE 5
S.V. Accent Electronics Ltd." was operating its business in Malaysia. The company started exporting its
products to India when the Prime Minister announced relaxation in import duties on electronic items. The
company appointed retailers in India who had direct online links with the suppliers to replenish stocks when
needed.
Identify and explain the dimensions of business environment discussed in the above case.
Ans. The various dimensions of business environment being referred to in the above case are as
follows:
1. Political Environment: Political Environment includes political conditions such as general stability
and peace in the country and specific attitudes that elected government representatives hold towards
business.
2. 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.

CASE 6
After completing his MBA from the USA, Mr. Ajay Tiwari came to India to start a new business under the
banner Ecom Creations Ltd. He launched a new product in e-learning for senior secondary school students in
the commerce stream which already had an established market in the UK and the USA but not in India. His
business started flourishing in India. As a result, more Indian companies entered into the market with other
subjects also.
As per the directions issued by the Supreme Court, the government passed an order to ban the sale of tobacco
products within the area of 200 meters of all educational institutions as:
1. Its consumption is injurious to health.
2. People are becoming more conscious about health and fitness. This indicates the government's attitude
towards this business.
Identify the business environment under three different dimensions by quoting from above paragraph.
Ans. The various dimensions of business environment being referred to the in the above case are as
follows:
1. Legal Environment: "As per the directions issued by the Supreme Court.
2. Political Environment: "The government passed an order to ban the sale of tobacco products within
the area of 200 meters of all educational institutions."
3. Social Environment: "Its consumption is injurious to health and people are becoming more
conscious about health and fitness."

CASE 7
The court passed an order to ban polythene bags as:
1. These bags create many environmental problems which affect the life of people.
2. Society at large is more concerned about the quality of life.
The government decided to give a subsidy to the jute industry in order to promote this business. As a result –
• Innovative techniques are being developed to manufacture jute bags at low rates.
• Incomes are rising and people can afford to buy these bags.
Identify the different dimensions of business environment by quoting lines from the above particulars.
 Ans. The various dimensions of business environment being referred to in the above case are as
follows:
1. Legal Environment: "The court passed an order to ban polythene bags."
2. Social Environment: "The bags create many environmental problems which affect the life of people
and society at large is more concerned about the, quality of life."
3. Political Environment: "The government decided to give a subsidy to the jute industry in order to
promote this business."
4. Technological Environment: "Innovative techniques are being developed to manufacture jute bags
at low rate."
5. Economic Environment: "Incomes are rising and people can afford to buy these bags."

CASE 8
The court passed an order that all schools must have water purifiers for the school children as:
1. Society in general is more concerned about the quality of life.
2. Innovative techniques are being developed to manufacture water purifiers at competitive rates.
3. Incomes are rising and children are drinking purified water at their homes as well.
4. The Government is also showing a positive attitude towards the business of water purification.
Identify the different dimensions of business environment by quoting from the above details.
Ans. The various dimensions of business environment being referred to the in the above case are as
follows:
1. Legal Environment: "The court passed an order that all schools must have water purifiers for the
school children."
2. Social Environment: "Society in general is more concerned about the quality of life."
3. Political Environment: "The government is also showing a positive attitude towards the business of
water purifiers."
4. Technological Environment: "Innovative techniques are being developed to manufacture water
purifiers at competitive
rate."

CASE 9
Just after the declaration of the results of the Lok Sabha Elections, 2014, the Bombay Stock Exchange's price
index (Sensex) rose by 2100 points in a day.
Identify the environmental factor which led to this rise.
Ans. Political environment has led to the rise in the Sensex.

CASE 10
The Government of India is seriously thinking of allowing the oil-marketing public sector undertaking to fix
their own prices for petrol and diesel.
Which economic reform is the reason for this change in the government's policy?
Ans. Privatisation as a reform is the reason for this change in the government policy.

CASE 11
On 8 November 2016, the Government of India announced the demonetisation making all 500 and 1,000 bank
notes of the Mahatma Gandhi Series invalid past midnight. The government claimed that the action would
curtail the use of illicit and counterfeit cash to fund illegal activity and terrorism. The BSE SENSEX and NIFTY
50 stock indices fell over 6 per cent on the day after the announcement. The decision was heavily criticised by
members of the opposition parties, leading to debates in both houses of parliament and triggering organised
protests against the government in several places across India. People seeking to exchange their bank notes
had to stand in lengthy queues, and several deaths were linked to the inconveniences caused due to the rush
to exchange cash. After demonetisation the demand for point of sales (POS) or card swipe machines has
increased. E-payment options like PayTm have also seen a rise.
In context of the above case:
1. Identify and explain the various dimensions of business environment which relate to the above mentioned
case.
2. List any through two values that the government seeks to promote through demonetisation.
Ans. 1. The various dimensions of business environment which relate to the above mentioned case are
outlined below:
• Political environment: Political environment includes political conditions such as general stability
and peace in the country and specific attitudes that elected government representatives hold towards
business.
• 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.
• Legal environment: Legal environment includes various legislations passed by the Government
administrative orders issued by government authorities, court judgments as well as the decisions
rendered by various commissions and agencies at every level of the government-centre, state or local.
• Social environment: Social environment includes the social forces like customs and traditions,
values, social trends, society's expectations from business, etc.
• Economic environment: Economic environment comprises of factors that can affect management
practices in a business enterprise includes interest rates, inflation rates, changes in disposable income
of people, stock market indices and the value of rupee, etc.
2. The two values that the government seeks to promote through demonetization are:
• Transparency in dealings.
• Promote well-being of people.
CASE 12
Post demonetization in a further push to cashless economy, the Central cabinet has recently approved the
ordinance for paying wages via electronic means. Accordingly, the government approved to Amend Section 6
of the Payment of Wages Act 1936, to allow employers of certain industries to make payment through the
electronic mode and cheques. The new ordinance will be applicable to the public sector.
Identify the various dimensions of business environment which relate to the above mentioned case.
Ans. The various dimensions of business environment which relate to the above mentioned case
stated below:
1. Political environment
2. Legal environment
3. Technology environment
CASE 13
Make in India is an initiative launched by the Government of India to encourage national and multinational
companies to manufacture their products in India. It focuses on job creation and skill enhancement and is in
twenty five sectors of the economy. Under the initiative, brochures on these sectors and a web portal were
released. The initiative aims at high quality standards and minimising the impact on the environment. It also
seeks to attract foreign capital investment in India.
In context of the above case:
1. Identify the various dimensions of business environment being referred to by quoting lines from the
paragraph.
2. List any two values which the Government of India wants to convey through this initiative.
Ans. 1. The various dimensions of business environment being referred to in the above case are as
follows:
• Political Environment: "Make in India is an initiative launched by the Government of India to
encourage national and multinational companies to manufacture their products in India."
• Technological Environment: "Under the initiative, brochures on the twenty five sectors and a web
portal were released."
• Economic Environment: "It also seeks to attract foreign capital investment in India."
2. The two values which the Government of India wants to convey through this initiative are:
• High quality standards
• Concern for environment
CASE 14
India's retail sector has been undergoing structural changes for the last two decades. On one hand, the 'mall
culture' has gradually become a way of life, especially in the metros and mini-metros. On the other hand,
there is accelerated growth in e-business as customers also prefer to buy products and services via the
Internet, telephone and television. However, operating in either of the segments is marked by the presence of
strong competitors.
Identify the components of specific forces and general forces being discussed in the above paragraph.
Ans. The components of specific forces discussed in the above paragraph are the customers and
competitors.
The components of general forces discussed in the above paragraph is the social and technological
conditions.
CASE 15
Kapil Sharma is working as the Country Head of a company which owns a chain of malls under the name of
'Virtuoso" in the various parts of India. Through an analysis report of the business environment, it has been
brought to his notice that in the coming years, shopping at a mall will not be a necessity for the buyers as
purchases can be made online from anywhere and at any time with ease and at the consumer's convenience.
Hence, malls will have to provide much more than shopping to be able to attract customers. So, he
recommends that "Virtuoso' malls should to be restructured into recreation centres, offering more spaces to
socialise, host events and concerts, and provide ample Food and Beverages options.
Consequently the share of entertainment segment and Food and Beverages segment in the overall mall space
is increased by 20%. As a result, the company gains enormously by getting the first mover advantage.
In context of the above case:
1. Define the term 'Business Environment".
2. Explain the terms "Threats' and 'Opportunities' by quoting lines from the paragraph.
Ans. 1. The term 'Business Environment' means the sum total of all individuals, institutions and other
forces that are outside the control of a business enterprise but that may affect its performance.
2. The term "Threats' refers to the external environment, trends and changes that will hinder a firm's
performance.
"Through an analysis report of the business environment, it has been brought to his notice that in the
coming years, shopping at a mall will not be a necessity for the buyers as purchases can be made
online from anywhere and at any time with ease and at the consumer's convenience. Hence, malls will
have to provide much more than shopping to be able to attract customers."
The term 'opportunities' refers to the positive external trends or changes that will help a firm to
improve its performance. "As a result, the company gains enormously by getting the first mover
advantage."