Students can Download Business Studies Chapter 3 Management and Business Environment Questions and Answers, Notes Pdf, 2nd PUC Business Studies Question Bank with Answers helps you to revise the complete Karnataka State Board Syllabus and to clear all their doubts, score well in final exams.
Karnataka 2nd PUC Business Studies Question Bank Chapter 3 Management and Business Environment
What is business environment? ( 2 Marks )
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 effect its performance.
Explain any four features (or characteristics) of business environment. ( 4 Marks )
Business environment has the following features.
(1) Totality of external forces: Business environment is the sum total of all things external to business firms. It is aggregative in nature.
(2) Specific and general forces: Business environment includes both specific and general forces. Specific forces such as customers, suppliers, competitors and investors affect individual enterprises directly and immediately in their day to day working. General forces such as social, political, legal and technological conditions affect an individual firm indirectly.
(3) Inter – relatedness: Different elements or parts of business environment are closely inter related. For example,, increased awareness for health care has increased the demand for many health products and services like fat free cooking oil and health resorts.
(4) Dynamic nature: Business environment is dynamic in nature. It keeps on changing. For example, there may be shift in consumer preferences, there may be entry of new competitor in the market and so on.
(5) Uncertainty: Business environment is largely uncertain. In some areas like information technology and fashion industries, environment changes are taking place too frequently making it very difficult to predict future happenings.
(6) Complexity: Business environment is a complex phenomenon. It is easier to understand in parts but difficult to grasp in its totality. For example, if 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.
(7) Relativity: Business environment is a relative concept since it differs from country to country and even region
to region. For example, demand for sarees is fairly high in India while demand for sarees is almost nil in France. (Write any four points)
State any two features of business environment. ( 2 Marks )
Two features of business environment are:
- Totality of external forces: Business environment is the sum total of all things external to business firms.
- Specific and general forces: Business environment includes both specific forces (such as customers and suppliers) and general forces (such as social and technological conditions)
- Dynamic in nature: Business environment is dynamic in nature. It keeps on changing.
- Uncertainty: Business environment is largely uncertain.
- Complexity: Business environment is a complex phenomenon.
- Relativity: Business environment is a relative concept (Write any 2 points)
Explain any four points to explain how important the understanding of business environment for manger is. (4 Marks)
Importance of a good understanding of business environment:
A good understanding of business environment by business managers helps them in the following ways.
(1) It enables the firm to identity opportunities and getting the first mover advantage: Understanding of business environment helps to identify the business opportunities at the earliest. Early identification of opportunities (positive external change that will help a firm to improve its performance) helps an enterprise to be the first to exploit them instead of losing them to competitors.
For example, Maruti Udyog became the leader in the small car market because it was the first to recognize the need for small cars in an environment of rising petrol prices and a large middle class population in India. Similarly early identification of online business opportunities (e-commerce) in India helped Flipkart to become a leader in e.commerce.
(2) It helps the firm to identify threats and early warning signals: Environmental awareness can help managers to identify various threats (i.e., external environment changes that will hinder a firm’s performance) on time and serve as an early warning signal.
(3) It helps in tapping useful resources: Better understanding of environment helps managers to assemble various resources such as finance, machines, raw materials, power, water, labour etc. from its environment.
(4) It helps in coping with rapid changes: Better understanding of business environment helps managers to develop suitable courses of action to run the business successfully even in the midst of rapid changes in the business environment such as turbulent market conditions, bargaining customers, changes in technology and intense global competition.
(5) It helps in planning and policy formulation: Understanding and analysis of business opportunities and threats (i.e., business environment) will assist the managers in planning (deciding the future course of action) and in formulation of policies.
(6) It helps in improving performance: Continuous monitoring and understanding of business environment helps managers to adopt suitable business practices which improves their present as well as future performance.
Thus, understanding of business environment helps managers to achieve success in their business.
(Write any four points)
Briefly explain any four dimensions (or elements) of business environment. (4 Marks )
Dimensions (or factors or elements) of business environment consists of economic, social, technological, political and legal conditions which are considered relevant for decision making and improving the performance of an enterprise.
(1) Economic environment: Interest rates, inflation rates, changes in disposable income of people, stock market indices, and the value of rupee are some of the economic factors that can affect management practices in a business enterprise. For example, in case of construction companies and automobile manufacturers, low longterm interest rates are beneficial because they result in increased spending by consumers for buying homes and cars on borrowed money.
(2) Social environment: The social environment of business include the social forces like customs and traditions, values, social trends, societies expectations from business etc. For example, the celebration of Diwali, Id and Christmas in India provides significant business opportunities for greetings card companies, sweets and confectionary manufacturers, tailoring outlets and many other related business.
(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. For example, there was shift in demand from typewriters to computers due to technological improvement.
(4) 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. Political stability builds up confidence among business people, while political instability can shake that confidence.
(5) Legal environment: It includes various legislations passed by the government, administrative orders issued by government authorities, court judgements as well as the decisions rendered by various commissions and agencies at every level of the government – cenre, state or local.
The management of every enterprise has to obey the law of the land. In India a working knowledge of the Companies Act, 2013, Consumer protection Act, 1986, Factories Act, 1948 and host of other legal enactments is important for doing business.
State any two dimensions of business environment. ( 2 Marks )
1. 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. For example, there was shift in demand from typewriters to computers due to technological improvement.
2. 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. Political stability builds up confidence among business people, while political instability can shake that confidence.
Show the different elements of business environment that influence the success of business enterprises with a neat diagram. ( 5 Marks )
Elements of business environment
Economic Environment in India: It consists of various macro level factors related to the means of production and distribution of wealth which have an impact on business and industry. The economic environment in India has been steadily changing since independence mainly due to govt, policies.
As a part of economic reforms the Govt, of India announced a new industrial policy in July, 1991, which sought to liberate the industry from licensing system, (liberalization), drastically reduce the role of public sector (Privatisation) and encourage foreign private participation in industrial development (Globalisation)
What is liberalization? ( 2 Marks )
Liberalising the Indian business and industry from all unnecessary controls and restrictions is called liberalization. Liberalization signaled the end of licensing system.
What is privatization? ( 2 Marks )
Privatisation is the process of transfer of ownership and management of public sector enterprises to private sector through the process of disinvestment.
Give the meaning of globalization. ( 2 Marks )
Globalisation means the integration of the various economies of the world leading towards the emergence of a global economy.
Explain any four challenges that were to be faced by business and industry due to changes in Govt, policy. ( 4 Marks )
Briefly explain the impact of government policy changes on business and industry, (any four points).
Business and industry has to face the following challenges due to changes in govt, policy (i.e., The impact of govt, policy changes on business and industry):
- Increasing competition: Competition for firms has increased due to the entry of foreign firms (which is the result of liberalization) especially in service industries like telecommunications, airlines, banking, insurance etc.
- More demanding customers: Being well informed about govt, policy and competition which is present in the market, customers have become more demanding. They expect better quality goods and services.
- Rapidly changing technological environment: Increased competition forces the firms to develop new ‘ ways to survive and grow in the market. The rapidly changing technological environment creates tough
challenges before smaller firms.
- Necessity for change: After the introduction of the policy of liberalization (After 1991), the market forces have become turbulent as a result of which the enterprises have to continuously modify their operations.
- Need for developing human resource: The new market conditions require people with higher competence and greater commitment. It calls for the development of human resources.
- Market orientation: The government policy changes requires the firms to study and analyse the market first and then produce goods accordingly.
- Loss of budgetary support to the public sector: The central government’s budgetary support for financing the public sector outlays has declined over the years. The public sector enterprises have to be more efficient and generate their own resources for the purpose.
On the whole, the impact of government policy changes particularly in respect of liberalization, privatisation and globalization has been positive. Indian enterprises have developed strategies and adopted business processes and procedures to meet the challenge of competition.