Chapter 3 - What is a Business Environment?
(Questions and Answers)
CBSE Class 12 - Business Studies
Q1: Define Business Environment.
Answer: Business environment means the sum total of the factors which influence the business and over which the business has no control. The study of business environment enables the managers to identify threats and opportunities.
Q2: What is the basic difference between economic & non – economic environment?
Answer: The economic environment consist of factor like the fiscal policy, the monetary policy , the industrial policy, the pace of the economic development etc. The non-economic environment refer to social, cultural, political, legal, technological factor etc.
Q3: What are the features of Business Environment?
Answer: Features of Business Environment
1. Totality of external forces:
Business environment is the sum total of all the forces/factors external to a business firm.
2. Specific and general forces:
Business environment includes both specific and general forces. Specific forces influence business firm directly while general forces affect a business firm indirectly.
3. Inter-relatedness
All the forces/factors of a business environment are closely interrelated. For example, increased awareness of health care has raised the demand for organic food and roasted snacks in turn change the life style of people.
4. Dynamic:
Business environment is dynamic in nature which keeps on changing with time. It may be change in technology, fashion and tastes etc.
5. Uncertainty:
Business environment is uncertain as it is difficult to predict the future environmental changes and their impact with full accuracy.
6. Complexity:
Business environment is complex which is easy to understand in parts separately but it is difficult to understand in totality.
7. Relativity:
Business environment is a relative concept whose impact differs from country to country, region to region and firm to firm. For example, demand for ready to eat healthy food will be more in urban areas than in rural areas.
Q4: “Business environment is a relative concept.” Comment .
Answer: Business environment is a relative concept since it differ from country to country and even region political condition in the USA, for instance 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.
Q5: What is economic environment? State the component of economic environment?
Answer: Economic environment consist of Gross national product corporate profits, inflation rate productivity, employment rates, interest rates, debt and spending economic environment has stronger influence over organization policies and action.
Components of economic environment are as follows:
a) Rates of saving and export of different items.
b) Volume of import and export of different items.
c) Money supply in the economic.
d) Public debt.
e) Agricultural & industrial product.
Q6: State the features of the industrial policy 1991.
Answer: Features of the industrial policy 1991.
a) The government reduced members of industries under compulsory licensing to six.
b) Disinvestment was carried out in case of many public sectors industrial enterprises.
c) Many of the industries reserved for the public sector under the earlier policy, were dereserved.
d) Automatic permission was now granted for technology agreements with foreign component.
Q7: What is demonetisation? What was its aim when it was introduced by the government in 2016?
Answer: Demonetization is the withdrawal of a particular currency from circulation. In India, it was introduced by the government on November 8, 2016, in which ₹1000 and ₹500 notes were no longer accepted as medium of exchange. A new ₹2000 note was introduced as a legal tender. It led to loss of liquidity in India for some time.
Its aim was to:
• Curb corruption
• Reduce accumulation black money, and
• Counterfeit the use of high denomination notes for illegal activities
Q8: What are the important features of demonetisation?
Answer:
Features of demonetisation
1. Tax administration: People with black money had to declare their unaccounted wealth and pay taxes at a penalty rate.
2. Channelizing savings: Banks offered new deposit schemes in which people invested heavily. This led to increased liquidity in banks.
3. Cashless economy: It encouraged digital transactions or e-transactions, thus leading to cashless economy.
4. Elimination of terror funding: It will help in fighting against terror funding and smuggling by reducing the use of high value currency notes.
☛See also:
CH3: Business Environment (V Short Q & A)
CH3: Importance Of Business Environment
CH3: Business Environment - GOI Policy Changes since 1991
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