case study of business environment class 12

CBSE Class 12 Case Studies In Business Studies – Business Environment

BUSINESS ENVIRONMENT Business Environment: Definition 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.

Importance of Business Environment

• It enables the firm to identify opportunities and getting the first mover advantage instead of losing them to its competitors.
• It helps the firm to identify threats and early warning signals which are likely to hinder a firm’s performance and take timely actions.
• It helps in tapping useful resources as the enterprise designs policies that allow it to get the resources that it needs so that it can convert those resources into outputs that the environment desires.
• It helps in coping with rapid changes as the managers are able to understand and examine the environment and develop appropriate courses of action.
• It helps in assisting in planning and policy formulation as its understanding and analysis can be the basis for deciding the future course of action or decision making. It helps in improving performance of an enterprise through continuous monitoring of the environment and adopting suitable business practices which help to improve both their present and future performance
• It helps in improving performance of an enterprise through continuous monitoring of the environment and adopting suitable business practices which help to improve both their present and future performance.

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Features of Business Environment

• It is a sum total of all the forces external to business firms.
• It consists of both specific forces such as investors, customers, competitors and suppliers which affect individual enterprises directly and immediately in their day-to¬day working and general forces such as social, political, legal and technological conditions which have impact on all business enterprises and thus may affect an individual firm only indirectly.
• All the elements of business environment are closely interrelated.
• It is dynamic in nature and keeps on changing due to technological upgradations, shifts in consumer preferences or increase in competition in the market.
• It is highly uncertain as it is not always possible to predict future happenings, especially when environment changes are taking place too frequently as in the case of information technology or fashion industries.
• It is complex in nature as it is relatively easier to understand in parts but difficult to comprehend in its totality because it consists of numerous interrelated and dynamic conditions or forces which arise from different sources.
• It is a relative concept since it differs from country to country and even region to region

DIMENSIONS OF BUSINESS ENVIRONMENT Dimensions of the business environment include economic, social, technological, political and legal conditions which are considered relevant for decision-making and improving the performance of an enterprise.

Various Factors Constituting the General Environment of Business

• Economic Environment comprises of factors that can affect management practices ina business enterprise. It includes interest rates, inflation rates, changes in disposable income of people, stock market indices and the value of rupee etc.
• Social Environment includes the social forces like customs and traditions, values, social trends, society’s expectations from business, etc.
• 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 business.
• Political Environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business.
• 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— center, state or local.

ECONOMIC ENVIRONMENT IN INDIA  Various Macro-level Factors of Economic Environment in India

• Stage of economic development of the country.
• The economic structure in the form of mixed economy which recognises the role of both public and private sectors.
• Economic policies of the Government, including industrial, monetary and fiscal policies.
• Economic planning, including five year plans, annual budgets, and so on.
• Economic indices, like national income, distribution of income, rate and growth of GNP, per capita income, disposal personal income, rate of savings and investments, value of exports and imports, balance of payments, etc.
• Infrastructural factors, such as, financial institutions, banks, modes of transportation communication facilities etc.

The Constituents of Economic Environment of Business in India at the time of Independence

• The Indian economy was mainly agricultural and rural in character.
• About 70% of the working population was employed in agriculture.
• About 85% of the population was living in the villages.
• Production was carried out using irrational, low productivity technology
• Communicable diseases were widespread, mortality rates were high and there was no good public health system.

Key Aspects of the Economic Planning in India After Independence

• Initiate rapid economic growth to raise the standard of living, reduce unemployment and poverty.
• Become self-reliant and set upa strong industrial base with emphasis on heavy and basic industries.
• Reduce inequalities of income and wealth.
• Adopt a socialist pattern of development— based on equality and prevent exploitation of man by man.

NEW INDUSTRIAL POLICY OF 1991 Three Major Componenets of New Industrial Policy of 1991

• Liberalisation
• Privatisation
• Globalisation

Disinvestment definition Disinvestments refers to transfer from public sector enterprises to the private sector through dilution of state of the Government in the public enterprise

The Broad Feature of New Industrial Policy, 1991

• The Government reduced the number of industries under compulsory licensing to six.
• Many of the industries reserved for the public sector under the earlier policy, were dereserved. The role of the public sector was limited only to four industries of strategic importance.
• Disinvestment was carried out in case of many public sector industrial enterprises.
• The share of foreign equity participation was increased and in many activities 100 per cent Foreign Direct Investment (FDI) was permitted.
• Automatic permission was now granted for technology agreements with foreign companies.
• Foreign Investment Promotion Board (FIPB) was set up to promote and channelise foreign investment in India.

Liberalisation  These economic reforms signalled the The new set of economic Globalisation means the end of the licence-permit-quota raj reforms aimed at giving integration of the various and were aimed at liberalising the greater role to the private economies of the world Indian business and industry from all sector in the nation building leading towards the unnecessary controls and restrictions. Simplifying procedures for imports and exports. Key initiatives of the government:

• Abolishing licensing requirement in most of the industries except a short list .
• Freedom in deciding the scale of business activities
• Removal of restrictions on the movement of goods and services.
• Freedom in fixing the prices of goods and services.
• Reduction in tax rates and lifting of unnecessary controls over the economy.
• Making it easier to attract foreign capital and technology to India.

Privatisation The new set of economic Globalisation means the end of the licence-permit-quota raj reforms aimed at giving integration of the various and were aimed at liberalising the greater role to the private economies of the world Indian business and industry from all sector in the nation building leading towards the unnecessary controls and restrictions. process and a reduced role emergence of a cohesive to the public sector. Key initiatives of the government:

• Adopted the policy of planned disinvestments of the public sector.
• Decided to refer the loss making and sick enterprises to the Board of Industrial and Financial Reconstruction.

Globalisation These economic reforms signalled the The new set of economic Globalisation means the end of the licence-permit-quota raj reforms aimed at giving integration of the various and were aimed at liberalising the greater role to the private economies of the world Indian business and industry from all sector in the nation building leading towards the unnecessary controls and restrictions. process and a reduced role emergence of a cohesive to the public sector. global economy. Key initiatives of the government:

• Import liberalisation and export promotion through rationalisation of the tariff structure and reforms with respect to foreign exchange.
• Increased level of interaction and interdependence among the various nations of the global economy.

Impact of Government Policy Changes on Business and Industry/ Challenges faced by the Indian Corporate Sector

• Increasing competition for Indian firms due to changes in the rules of industrial licensing and entry of foreign firms.
• More demanding customers as they are more aware and are offered wider choice in purchasing better quality of goods and services due to high competition.
• Repidly changing technological environment creates tough challenges before smaller firms.
• Necessity for change in the way of their operations.
• Need for developing human resource as the new market conditions require people with higher competence and greater commitment. Hence the need for developing human resources.
• Market orientation as the firms have to study and analyse the market first and produce goods accordingly.
• Loss of budgetary support to the public sector has declined over the years

Managerial Response to Changes in Business Environment

• Acquisitions and mergers
• Diversification
• Brand building
• Innovative distribution and selling techniques.
• Changes in capital structure
• Customer-oriented approach
• Technological developments
• Better labour relations

LATEST CBSE QUESTIONS

Question 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 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.

• In the above paragraph, two major concepts related to government policy have been discussed. Identify and explain these concepts.
• Also, explain briefly any three impacts of these concepts on Indian business and industry.
• Liberalisation: These economic reforms signalled the end of the licence-pemit-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.
• 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 expections of the consumers has 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.

Question 2: Naman and Govind 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.

• Identify and state the component of business environment highlighted in the above Para.
• State any two features of business environment as discussed by Professor Mehta with Naman and Govind.
• Also state two points of importance of business environment as stated by Professor Mehta in the above situation.
• 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.
• Dynamic nature: It is dynamic in nature and keeps on changing due to technological upgradations, 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.
• 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.

Question 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. Answer: The various dimensions of business environment being referred to in the above case are as follows:

• Social environment: Social Environment includes the social forces like customs and traditions, values, social trends, society’s expectations from business, etc.
• 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.

Question 4: A recent rate cut in the interest on loans announced by the banks encouraged Amit, 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. Answer: The various dimensions of business environment being referred to in the above case are as follows:

• 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.
• 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.

Question 5: ‘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. Answer: The various dimensions of business environment being referred to in the above case are as follows:

• 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.

Question 6: After completing her MBA, Beni took up a job with a multinational company named Fortio. The company paid good salaries and perks to its employees. The wages were within the paying capacity of the company that provided the employees with a 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 organisation but due to long working hours, she did not have time to cook her meals. She had to depend upon outside food which was deteriorating her health. She observed that this problem was faced by many of her colleagues, not only in her company but also in many other companies. This was because of increase 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 her job to supply packaged home-cooked food to office-goers at a reasonable price. At the end of the day, she also distributed the leftover food to the nearby night-shelters.

• State the dimension of business environment being discussed above.
• State the principle of management being followed by Fortio.
• Identify any two values being communicated by the company to society in above case.
• The dimension of business environment being discussed above is Social. Social Environment includes the social forces like customs and traditions, values, social trends, society’s expectations from business, etc.
• The principle of management being followed by Fortio is ‘Remuneration of employees’. Remuneration of employees: The overall pay and compensation should be fair to both employees and the organization. The employees should be paid fair wages, which should give them at least a reasonable standard of living. At the same time it should be within the paying capacity of the company i.e. remuneration should be just and equitable.
• Ethical Behaviour

Question 7: After completing his MBA from the USA, Mr. Ajay 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. Identify and quote the lines from the above paragraph which highlight the significance of understanding business environment. Answer:

• The understanding of business environment helps in assisting in planning and policy formulation as its understanding and analysis can be the basis for deciding the future course of action or decision making. It enables the firm to identify opportunities and getting the first mover advantage instead of losing them to its competitors. ” After completing his MBA from USA, Mr. Ajay 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 UK and the USA but not in India.”
• It helps in improving performance of an enterprise through continuous monitoring of the environment and adopting suitable business practices which help to improve both their present and future performance. “His business started flourishing in India.”
• It helps the firm to identify threats and early warning signals that is likely to hinder a firm’s performance and take timely actions. “As a result, more Indian companies entered into the market with other subjects.”

Question 8: 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:

• Its consumption is injurious to health.
• 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.

Answer: The various dimensions of business environment being referred to the in the above case are as follows:

• Legal Environment: “As per the directions issued by the Supreme Court.’
• Political Environment: “The government passed an order to ban the sale of tobacco products within the area of 200 meters of all educational institutions.”
• Social Environment: “Its consumption is injurious to health and people are becoming more conscious about health and fitness.”

Question 9: The court passed an order to ban polythene bags as:

• These bags create many environmental problems which affect the life of people.
• 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.

Answer: The various dimensions of business environment being referred to in the above case are as follows:

• Legal Environment: “The court passed an order to ban polythene bags.”
• 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.”
• Political Environment: “The government decided to give a subsidy to the jute industry in order to promote this business.”
• Technological environment: “Innovative techniques are being developed to manufacture jute bags at low rate.”
• Economic Environment: “Incomes are rising and people can afford to buy these bags.”

Question 10: The court passed an order that all schools must have water purifiers for the school children as:

• Society in general is more concerned about the quality of life. .
• Innovative techniques are being developed to manufacture water purifiers at competitive rates.
• Incomes are rising and children are drinking purified water at their homes as well.
• 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.
• Legal Environment: “The court passed an order that all schools must have water purifiers for the school children.”
• Social Environment: “Society in general is more concerned about the quality of life.”
• Political Environment: “The government is also showing a positive attitude towards the business of water purifiers.”
• Technological environment: “Innovative techniques are being developed to manufacture water purifiers at competitive rate.”
• Economic Environment: “Incomes are rising and children are drinking purified water at their homes as well.”

Question 11: Just after the declaration of the results of the Lok Sabha Elections, 2009, the Bombay Stock Exchange’s price index (Sensex) rose by 2100 points in a day. Identify the environmental factor which led to this rise. Answer: Political environment has led to the rise in the sensex.

Question 12: 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? Answer: Privatisation as a reform is the reason for this change in the government policy.

ADDITIONAL QUESTIONS

Question 1: On 8 November 2016, the Government of India announced the demonetisation making all Rs.500 and Rs. 1,000 banknotes 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 percent 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 has also seen a rise. In context of the above case:

• Identify and explain the various dimensions of business environment which relate to the above mentioned case.
• List any through two values that the government seeks to promote through demonetisation.
• 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 .
• 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.
• Transparency in dealings
• Promote well being of people

Question 2: Post demonitisation 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. Answer: The various dimensions of business environment which relate to the above mentioned case stated below:

• Political environment
• Legal environment
• Technology environment

Question 3: 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:

• Identify the various dimensions of business environment being referred to by quoting lines from the paragraph.
• List any two values which the Government of India wants to convey through this initiative.
• 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.”
• High quality standards
• Concern for environment

Question 4: 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. Answer: 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.

Question 5: 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 :

• Define the term ‘Business Environment’.
• Explain the terms ‘Threats’ and ‘Opportunities’ by quoting lines from the paragraph.
• 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.
• 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.”

Question 6: “Zero Defect Zero Effect” (ZED) is a slogan coined by the Prime Minister of India, Narendra Modi with reference to the Make in India initiative launched by the government. The slogan reflects the efficiency of production processes, i.e. the products have no defects and the process through which the product is made has zero adverse environmental and ecological effects. The ZED model aims to make India the manufacturing hub of the world and prevent the products developed in India from being rejected by the global market. Moreover, before the initiative was launched, the limits of foreign direct investment in various sectors had been relaxed. The application for licences was made available online and the validity of licences was increased to three years. Various other norms and procedures were also relaxed by the government. In the light of the above paragraph, identify and explain the major component of New Economic Policy of 1991 that are being referred to by quoting lines from the paragraph. Answer: The major components of New Economic Policy of 1991 that are being referred to are as follows:

• Liberalisation: These economic reforms signalled the end of the licence-pemit-quota raj and were aimed at liberalising the Indian business and industry from all unnecessary controls and restrictions. “Moreover, before the initiative was launched, the limits of foreign direct investment in various sectors had been relaxed. The application for licences was made available online and the validity of licences was increased to three years. Various other norms and procedures were also relaxed by the government.”
• Globalisation: Globalisation means the integration of the various economies of the world leading towards the emergence of a cohesive global economy. “The ZED model aims to make India the manufacturing hub of the world and prevent the products developed in India from being rejected by the global market.”

Question 7: It is interesting to know that the menu items of the multinational food chains are customised to suit the general palates of the local people in the region. When McDonald’s started its business in India in the year 1996, the company went through a complete localisation strategy. McDonald’s changed its product menu to accommodate the vegetable burger given the large vegetarian population. It also altered its store design and even reduced the product price by close to fifteen per cent. Also , the “McAloo Tikki burger” is not available anywhere but in the Indian outlets of McDonalds. Identify the relevant feature of business environment being discussed above. Answer: Relativity is the relevant feature of business environment which is being discussed above.

Question 8: Eco-friendly products are gaining power as the consumers’ awareness about environmental issues has increased over the years and they are conscious about choosing products that do not have adverse effects on the environment. They are now more conscious about the carbon emission and climate change effects, and want themselves to be ‘seen’ as a green advocate among their peers. In such a scenario, it has become a challenge for the companies as they have to not only meet the needs of the consumers but also ensure that their products are safe and environment friendly. As a result, there is growing need for better and advanced technologies to works as a catalyst in this regard.

• Identify the relevant feature of business environment being discussed above.
• Describe briefly any three points which highlight the importance of business environment and its understanding by managers.
• Inter-relatedness is the relevant feature of business environment which is being discussed above.
• It helps in tapping useful resources: As the enterprise designs policies that allow it to get the resources that it needs so that it can convert those resources into outputs that the environment desires.

Question 9: In the year 2016, the State Government of Kerala had made it mandatory for anganwadis hostels and canteens in educational institutions to secure the Food Safety and Standards Authority of India (FSSAI) licence to ensure food safety. As the educational institutions also get categorised as food business operators in the event of the annual turnover of the hostels, they run exceeding Rs. 12 lakh per annum. In context of the above case:

• Identify and explain the various dimensions of business environment being referred to here.
•  List any two values which the State Government of Kerala wants to convey through this initiative.
• 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.
• 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 -Center, State or Local .
• Good health

Question 10: Postage stamps have been unveiled to commemorate 140 years of existence of the country’s first stock exchange the Bombay Stock Exchange (BSE). The setting up of BSE is considered to be the greatest revolution that took place in the financial markets in India as it acts as a key driver for economic growth of a country. This is due to the fact that there exists a strong corelation between economic growth and capital accumulation. In the context of the above case:

• Identify the dimension of business environment of India being referred here.
• State any three factors which broadly affect the dimension of business environment of India as identified in part (a) of the question.
• Economic environment is the dimension of business environment of India being referred here.

Question 11: The organic food market in India is growing at 25-30 per cent which reflects a clear shift in consumer tastes and preferences. The current growth in the organic food market is driven by multiplicity of factors like rising health consciousness, changing lifestyles, increase in disposable income and growing availability of organic food products in shopping malls, retail outlets and online. In context of the above case:

• Identify and explain the features of business environment being referred to here.
• By quoting phrases from the paragraph identify the various components of general forces which have led to a growth in the organic food market.
• Social: “rising health consciousness, changing lifestyles”
• Economic: “increase in disposable income”
• Technological: “growing availability of organic food products in shopping malls, retail outlets and online.”

Question 12: Anurag, aspires to work with a socially and environmentally committed company as he does not want to work just for monetary benefits but also the brand value of the company he works for in the society matters a lot to him. Therefore, he has joined Cerebra Integrated Technologies a Bengaluru-based Infotech company. The company has built India’s largest e-waste recycling plant. The company strives to be one of the leading players in this business which has huge potential not only in terms of generating huge revenues and profits but also wants to contribute to the environment issues that have become crucial worldwide. The company sees big business in the mountains of e-waste in Bengaluru which produces 200,000 tonnes of e-waste a year. The company plans to make its millions by extracting metals such as gold and platinum from the e-waste piling up in the city. As a mobile phone, for example, is made up of a combination of rare earth and precious metals: it contains 250 mg of silver, 24 mg of gold and nine mg of palladium while a laptop has 1,000 mg of silver, 220 mg of gold and 500 grams of copper. To start the business, the company has obtained a licence from KSPCB ( Karnataka State Pollution Control Board) . In context of the above case:

• List any two values which the company wants to convey to the society.
• 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.
•  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— center, state or local.
• Social Environment: Social environment includes the social forces like customs and traditions, values, social trends, society’s expectations from business, etc.
• Sustainable development
• Concern for environment.

Question 13: The government wants to raise Rs.56,500 crore from the sale of stakes in state-owned enterprises National Thermal Power Corporation (NTPC) in the financial year 2016-17. Identify and explain the related concept. Answer: Disinvestment: Disinvestment refers to transfer in the public sector enterprises to the private sector through dilution of stake of the Government in the public enterprise.

Question 14: Bharat is running an ice cream parlour in a local market. Keeping in mind the changing perceptions about health among the people, one of his employee Abhiraj suggests to him that they should introduce a range a flavoured yogurt. Bharat accepts his suggestion as a result both the image and the profitability of his business increases. In the context of the above case:

• Identify the feature of management which is being highlighted.
• State the related dimension of the business environment.
• Name and explain the related principle of general management.
• The feature of management which is being highlighted is Dynamic.
• The related dimension of the business environment is Social.
• The related principle of general management is Initiative.

Initiative means taking the first step with self-motivation. The workers should be encouraged to develop and carry out their plans for improvement. Suggestion system should be adopted in the organization.

Question 15: As a result of the decision by Britian to exit to European Union the new trade agreements will come into force from the EU as it accounts for 35-40% of auto component exports from India. Tata Motors owned Britain’s largest carmaker Jaguar Land Rover (JLR) has been in Britain for three decades and makes 4,75,000 cars a year in the country of which most of them are exported inside the European Union and beyond. JLR estimates that their annual profit could be cut by one billion pounds ($1.47 billion) by the year 2020. In the context of the above case:

• Explain why are all the elements of business environment considered to be closely interrelated?
• Name any two related dimensions of the business environment.
• All the elements of business environment are considered to be closely interrelated as any change in one of them may necessitate a series of changes in other dimensions as well.
• The related dimensions of the business environment are Political and Legal.

Question 16: : After competing his education, Arun joins his father in their family business of manufacturing cookware. As a businessman, his father is rigid in his approach and has fixed ideas about various issues. He tends to maintain a distance from the factory workers. However, Arun is more receptive to the needs of the workers and doesn’t seem to believe in any class- differences. He believes that the prosperity of their business greatly depends upon the prosperity of their workers and vice versa. At the same time, he has a good understanding of the business environment. Therefore, he introduces a new range of green pans that provide a healthy cooking surface, as they are manufactured with all ceramic or silicon coating and are considered safer than the traditional petroleum based nonstick surfaces which may contain toxic substances. Although, the new cookware range is highly priced/, he expects a ready market for it as both the purchasing power of people and their preference for better quality products has increased over the years. In the context of the above case:

• Identify the nature of management which is being reflected in the different styles of management in practice adopted by Arun and his father.
• Name and explain the related principle of scientific management.
• State the related dimensions of business environment.
• The different styles of management in practice adopted by Arun and his father reflect that management is an art.
•  ‘Harmony, Not Discord’ is the related principle of scientific management. Taylor emphasised that there should be complete harmony between the management and workers instead of a kind of class-conflict, the mangers versus workers. To achieve this state, Taylor called for complete mental revolution on the part of both management and workers. The prosperity for the employer cannot exist for a long time unless it is accompanied by prosperity for the employees and vice versa. He advocated paternalistic style of management should be in practice.
• 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.

Question 17: ‘Gallant’ is a well known FMCG (Fast Moving Consumer Goods) company in India. However, for the past few years its profitability is diminishing due to the presence of a new company ‘Prakritik’. ‘Prakritik’ has gradually acquired a reasonable share in a wide variety segments like soaps, shampoos, detergents, dish wash and oral care. One of the key reason is that ‘Prakritik’ has positioned itself as a natural/Ayurvedic brand and this approach has worked well with the Indian consumer. In order to compete with this threat ‘Gallant’ has acquired a premium Ayurvedic brand ‘Madhumita’ from another group. Moreover its likely to increase its advertising budget to counter the threat from ‘Prakritik’. In the context of the above case:

• Identify the related component of the business environment which has contributed effectively towards the success of Prakritik.
• Also, state the two ways in which ‘Gallant’ has responded to the changes in its business environment.
• Social aspect is the related component of the business environment which has contributed effectively towards the success of Prakritik.
• Acquisition

Banknifty Pivot Point comes under business environment if you see in stock market.

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• MCQs – Nature & Significance of Management
• MCQs- Principles of Management
• MCQs – Chapter – Business Environment
• MCQs – Chapter Planning
• MCQs – Chapter – Organizing
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• MCQs – Chapter – Directing PART-1
• MCQs – Chapter – Directing – Part-2
• MCQs- Chapter Controlling
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• MCQs – Chapter – Marketing Management Part-1
• MCQs- Chapter- Marketing Management -Part-2
• MCQs – Chapter- Marketing Management – Part-3
• Case Studies- Principles of Management
• Case Study – Business Environment
• Case Study-Planning
• Case Study-Organizing
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• Case Study-Directing
• Case Study – Chapter Controlling
• MCQs – Ch-2 – An Entrepreneur – Part-1
• MCQs – Ch-2 – An Entrepreneur – Part-2
• Ch-3 MCQs for ENTREPRENEURIAL JOURNEY
• MCQs – Ch-4 Entrepreneurship As Innovation And Problem Solving
• Ch-5 MCQs Analysis of Market Env & Market Research
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Case Study – Business Environment

Welcome to study research . This time all-important case studies inform of questions and answers.

CASE STUDY – BUSINESS ENVIRONMENT

For class 12 cbse students of business studies..

Q1:  Anil a marketing manager of a car manufacturing company is of the view that in case of construction companies and automobiles manufacturers , low longer term rates are beneficial because they results in increased spending by consumers for buying homes and cars on borrowed money. Identify and explain the component of business environment that Anil is referring in the above case.

Q2:  In an interview , an interviewer asked the interviewee regarding the need of considering the changes of environment . In reply one of the interviewee replied,” Every business should consider the changes going on in inflation rates before taking any financial decisions because inflation rates 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 salaries to employees.” Interviewer liked the answer . Interviewee has put emphasis on the understanding of only one of the element of business environment. Identify that Element of Business environment.

Q3:’  Atul has got tremendous feedback from public for his newly started Gym plus gym related goods store which is a one stop solution for health conscious people. When asked about his success story then Atul said that the health and fitness trend has become popular among large number of urban dwellers. This has created a demand for products like organic food, diet soft drinks, gyms, bottled water and food supplements. that is why I thought of starting this business. Identify the dimension of business environment whose understanding has helped Atul in garnering the success,

Q4: Asia who is working as a advertisement advisor with one of the consumer goods manufacturing company is of the view that nowadays in order to inform and persuade the potential buyers to buy the product new and modified ways should be adopted by the companies to advertise their products. That is like CD-ROM’s , computerised information kiosks and internet/ world wide web multimedia pages highlighting the virtues of products. Marketing team really appreciated her idea. Identify the element of business environment on which Ashia has put the emphasis.

Q5: Ananya ‘s grand father while telling her about the past of Indian economy told her that even after opening up of our economy in 1991, foreign companies found it very difficult to cut through the bureaucratic red tape to get permits for doing business in India. Sometimes it took months to process even their application in process. As a result these companies were discouraged from investing in India but the situation has improved overtime. Identify the Element of business environment which was the cause for discouragement to foreign companies based on above case.

Q6: While doing labelling of the products companies have to write down certain statutory warnings over it. Understanding of which environment helped them taking above action Identify.

Q7:Identify the importance of Understanding business environment in the following cases:

(a) 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 petrol prices and a large middle class population of India.

Answer: It enables the firm to identify opportunities and getting first mover advantage.

(b) If  an Indian firm  finds that a foreign multinational is is entering  the Indian market with new varieties. On the basis of above information the Indian firms can prepare themselves to meet the threat by adopting such measures as improving quality of the products , reducing cost of the production , engaging in aggressive advertising and so on.

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• NCERT Solutions
• NCERT Class 12
• NCERT Class 12 Business Studies
• Chapter 3: Business Environment

NCERT Solution for Class 12 Business Studies Chapter 3 - Business Environment

NCERT Solutions are an extraordinarily helpful book while preparing for the CBSE Class 12 Business Studies examinations. These solutions of NCERT are collated by subject matter experts who have vast experience in the subject.

NCERT Solution for Class 12 Business Studies Chapter 3 Business Environment

Download PDF of NCERT Solutions for Class 12 Business Studies Chapter 3 Business Environment

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Very Short Answer Questions NCERT Business Studies Solutions Class 12 Chapter 3

1. What is meant by business environment?

The sum of all the forces (external, institutions and individuals) that are outside the control of a business organisation is referred to as the business environment. The forces mentioned here can be of varied nature, such as social, economic, political, legal or technological. The organisation is unable to control such types of forces, but it can definitely have a positive or negative impact on their performance. For e.g., altering the design of a product with efficiency leads to its demand in the market, whereas below-par performance and poor design will result in making the product inferior.

2. How does understanding of business environment help in improving performance of a business?

Understanding the business environment properly by the organisation results in developing plans and policies according to the environment, which results in great improvement in performance. It also helps to counter any negativity that may exist in the market with a well-defined strategy. This will help an organisation perform at its best every time.

3. Give an example to show that a business firm operates within numerous interrelated factors constituting the business environment. (Hint: example highlighting the interrelatedness of dimensions of business environment).

The various elements of a Business organisation are interrelated and the outcome depends on all these elements. The business environment consists of economic, social, technological, and legal elements.

Let us understand using one example

An automobile company will have the combined impact of all these factors in context of a business environment.

1. If there is a global recession or economic slowdown, it will result in fewer sales of cars. Economic factor comes into play for purchasing a car, and it will impact the business.

2. Due to the introduction of new technology, car manufacturers need to follow that as an industry standard, which will be beneficial for the organisation. This is the impact of technological factors on the business environment.

3. With the introduction of GST, car manufacturers can charge GST, and GST is mandatory for business, which is a legal factor impacting the business environment.

4. Krishna Furnishers Mart started its operations in the year 1954 and emerged as the market leader in the industry because of their original designs and efficiency in operations. They had a steady demand for their products but over the years, they found their market share declining because of new entrants in the field. The firm decided to review their operations and decided that in order to meet the competition, they need to study and analyze the market trends and then design and develop their products accordingly. List any two impacts of changes in business environment on Krishna Furnishers Mart’s operations. (Hint: increase in competition and Market orientation).

The following impacts can be seen with changing of the business environment for Krishna Furnishers Mart

1. Rise in competitors leads to more competition.

2. Innovation in design is needed to differentiate their products from that of their competitors.

5. Name any two Specific forces of business environment affecting business.

Specific forces have a direct impact on the way a business is run. It can be due to the following changes:

1. Changing tastes of customers.

2. Competitor strategy

3. Shift in investor loyalty

Short Answer Questions NCERT Business Studies Solutions Class 12 Chapter 3

1. Why it is important for business enterprises to understand their environment? Explain.

It is essential to understand the business environment as it helps in determining the success or failure of an organisation. The functioning and performance of an organisation are dependent on various factors, which can be external. When we understand the business environment, it becomes easier to drive factors that help in growth.

The following points highlight the importance of understanding the business environment for business enterprises.

1. Business enterprises can identify positive opportunities for a business. It will help in making the first move and staying ahead of the competition.

2. Businesses can identify potential threats by studying the business environment, which can impact the growth of the organisation. Therefore, a study of the business environment proves beneficial for identifying threats and determining the best solution to neutralize the threat.

3. Various resources are required for a business to run, and the appropriate resources are determined by studying the local business environment. These inputs are used to create various products.

4. Business environment is of dynamic nature. Factors such as technology, consumer preferences and government policies are subject to change based on demand. Knowing the business environment will make things easier to adapt easily to the change.

5. Study of the business environment helps in formulating new plans and policies as per the market trends, which makes it more relevant for the current scenario.

6. Analysing the business environment will result in better performance for the organisation.

2. Explain the following terms:

(a) Liberalisation

(b) Privatization

(c) Globalisation

Liberalisation is the process or means of the elimination of the control of the state over economic activities. It provides greater autonomy to the business enterprises in decision-making and eliminates government interference.

The purpose of liberalisation is to increase competition between enterprises. It also encourages foreign trade between countries. It also helps the business expand its global footprint. The opening up of the economy improves the economic development of a nation by the inflow of funds from foreign resources.

Privatisation can be explained as the process of transfer of ownership from the public sector to the private sector. It is also known as Disinvestment in business. Privatisation aims at reducing government ownership in industries.

It reduces the workload on the public enterprises and also paves the way for economic development by encouraging foreign direct investment (FDI).

Globalisation can be understood as the integration of the national economy with the world economy. It represents a free flow of information, technology, goods and services, ideas, capital, and even people as a form of resources across different countries. Globalisation helps in improving t cross border connectivity between different markets in the form of investments, trade, and cultural exchanges.

3. Briefly discuss the impact of government policy changes on the business and industry.

Government policy has the following impact on the business and industry

1. By relaxing the licensing policy and reducing import duties, domestic firms face tough competition. More players will be in the field with their offerings which leads to more competition.

2. Due to the increase in competition, consumers are flooded with choices for goods and services. This leads to an increase in the demand of consumers for better quality goods and services.

3. Government policy changes result in changes in the business policies of the business enterprises for sustaining and making a profit while following the current policies set by the government.

4. With increasing competition, firms need to reach customers with products, and hence they adopt more innovative ways to promote their products by using updated technology.

5. All the improvements in technology and product are possible with the help of trained manpower. Without proper skills, no organisation will be able to execute any plans properly. Therefore, improvements in human resources are very important in the current context.

6. Market orientation has become important as customers have become more demanding and hence businesses need to analyze the market before launching any product.

7. Public sector enterprises need to perform more efficiently in order to survive the competition and stop relying on government funds.

4. National Digital Library of India (NDL India) is a pilot project initiated by the HRD 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. State the dimensions of business environment highlighted above.

The following business dimensions are highlighted here:

1. By developing a framework of a virtual repository of learning resources, it highlights the technological dimension.

2. By supporting researchers, learners and differently-abled learners free of cost, it highlights the social dimension.

5. State the impact of demonetization on interest rates, private wealth and real estate.

Demonetisation had the following effect on these sectors

1. Interest rates: As demonetisation happened, the number of cash transactions reduced; bank deposits increased in the form of Jan Dhan Accounts. More financial savings by the people of the nation.

2. Private Wealth: Private wealth saw a decline as large-volume transactions were not possible with old notes.

3. Real Estate: Demonetisation led to a decline in real estate prices. The real estate industry witnessed a huge drop in business.

Long Answer Questions NCERT Business Studies Solutions Class 12 Chapter 3

1. How would you characterise business environment? Explain, with examples, the difference between general and specific environment.

The sum of all the forces (external, institutions and individuals) that are outside the control of a business organisation is referred to as the business environment. The forces mentioned here can be of varied nature, such as social, economic, political, legal or technological. The organisation is unable to control such types of forces, but it can definitely have a positive or negative impact on their performance.

The following are the characteristics of the business environment:

1. Business environment is the sum total of all external forces, which includes individuals, government, and consumers. These have an impact on the business performance that is either positive or negative.

2. The different forces that have an impact on the business environment are interrelated. This interrelation has an effect on the business environment. For e.g., if there is an increase in the annual income of the consumers, they are more likely to purchase goods that fulfil all their demands, and this leads to an increase in demand for electric appliances, mobile phones, gadgets etc.

3. Business environment is constantly evolving and therefore is dynamic in nature. This can be explained as we see changing trends in consumer behaviour, technology and policies of the government.

4. The business environment is an uncertain territory. The changes in the market dynamics cannot be predicted easily. Due to this, there exists uncertainty.

5. Business environment is the sum total of all interrelated dynamic forces. Hence, it is somewhat complex and difficult to understand. All the factors like social, political, technological, etc., have an effect on the performance of the organisation. It can be easy to ascertain the individual impact of all the forces; it can be difficult to determine their cumulative effect.

6. Business environment varies with each region and hence is relative. The reason behind the variation in the business environment is that the forces that determine the nature of the business environment are dynamic in nature and therefore change as per region.

Specific environment is said to be the external forces that play a role in functioning of an organisation directly. These forces are specific to a particular organisation or an enterprise. Specific environment is unique to a industry and has an impact on how the day to day business is run. For example, change in price of a raw material required for production will result in less demand and abundant supply of raw materials has a direct impact on the production of the company.

General Environment comprises of all the forces that has an impact on all organisations irrespective of the type of industry. These forces do not differentiate between the industries or types of business. They have a cumulative effect on the organisation’s performance. For example, a new technology for communication will have a impact on the quality and quantity of production or if there is a change in government then it will have an effect on all organisations.

2. How would you argue that success of a business is significantly influenced by its environment?

Any organisation is unable to function on its own. It is influenced by various political, legal, social, and technological forces. These forces form the business environment of an organisation. It is essential that an organisation has a good understanding of its business environment. It enables an organisation to identify those that help or those that obstruct the growth of organisation. Knowing them well will help in reacting better to these forces.

The success of a business is influenced by its environment in the following ways:

1. Whenever there is a change in the business environment, it provides the opportunity to start fresh. Careful observation of the business environment is helpful in identifying these opportunities. It also gives the first movers an advantage in the business. Organisations can reap the maximum benefit in comparison to their competitors.

2. Studying of business environment helps in identifying threats to the business. It helps take preventive measures in order to counter those negative forces.

3. Environment provides sources or inputs such as machinery, raw materials, labour, etc., which are essential for an organisation. Therefore, it makes sense for organisations to choose those resources from the environment and convert them into desired products.

4. Business environment is dynamic in nature. There is a constant change in the factors that make up the business environment. Having a good understanding of the business environment helps cope with the factors better and helps organisations derive benefits from them.

5. Various threats and opportunities are discovered during the analysis of the business environment. The business can thus formulate plans and policies that will be appropriate for the market in the existing scenario.

6. Knowing about the threats and opportunities helps one improve their performance by adapting to these changes in a more informed manner. Being prepared for the situation helps in providing the best performance.

3. Explain with examples, the various dimensions of the business environment.

The business environment has the following dimensions:

1. Economic: The economic dimension consists of economic variables such as income, stock markets, and interest rates that are directly related to the functioning of business enterprises. For example, if there is an increase in purchasing power of consumers, it automatically leads to an increase in demand for goods and services, whereas if purchasing power is low, there is a decrease in demand.

2. Social: The social dimension comprises various traditions, trends, social values, and cultures. For example, companies can use religious festivals to produce items that cater to the occasion.

3. Technological: This dimension comprises all the technological changes and improvements that are happening in the business. There can be many examples, like the introduction of computers which changed the way information was gathered to the more recent developments in mobile phones and the internet. Businesses not updating themselves in the technology field can find themselves in a spot of bother with competitors.

4. Legal: This dimension consists of the various legal rules and legislations that are passed by the government. Non-compliance can lead to legal trouble for the business. For example, the setting up of a company is governed by the Companies Act, and not acting according to the law will result in the company facing legal hassles.

5. Political: Political dimension consists of peace, law and order, and stability. If there is a change in the government, there will be a change in the rules and policies. Frequent changes in administration can result in a loss of interest of investors. Also, relaxing rules can encourage investment. Such an example is of forming of a new policy in 1991 that opened the Indian economy to the world.

4. The government of India announced Demonetization of ₹ 500 and ₹ 1,000 currency notes with effect from the midnight of November 8, 2016. As a result, the existing ₹ 500 and ₹ 1,000 currency notes ceased to be legal tender from that date. New currency notes of the denomination of ₹ 500 and ₹ 2,000 were issued by Reserve Bank of India after the announcement.

The 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 a rise in government revenue in the form of tax collection.

a. Enumerate the dimensions of business environment highlighted above.

b. State the features of Demonetization.

a. The following dimensions of the business environment are seen to be highlighted here:

1. Political: The government announced the demonetisation of the ₹ 500 and ₹ 1,000 currency notes with effect from midnight of November 8, 2016. It is a step by the government to curb the illegal use of money by some entities.

2. Legal: 500 and ₹ 1,000 currency notes stopped being the legal tender, and ₹ 500 and ₹ 2,000 became the new legal tender.

3. Technological: As demonetisation happened, there was a shortage of cash, which encouraged the use of digital forms of payment in the form of e-wallets like Paytm and other modes of cashless transactions.

The following are the features of demonetization:

1. Demonetization was done with the intention of exposing black money holders and those who evade tax.

2. Increase in savings of people. Earlier more people used to keep money at home rather than at the bank, and this step resulted in savings in the bank.

3. It helped in reducing the interest rates in banks.

4. To popularize the use of digital payments and reduce fraud.

5. What economic changes were initiated by the government under the Industrial Policy, 1991? What impact have these changes made on the business and industry?

The Industrial policy was introduced in 1991. The following are the major highlights of the policy:

1. As per the new Industrial policy of 1991, the system of licensing was abolished. This helped the private players in starting a new venture without the need to obtain a license. Some industries were not exempt, such as those involved in the manufacture of cigarettes, liquor, defence equipment, pharmaceuticals and dangerous chemicals.

2. There was a considerable reduction in the number of industries that were marked for the public sector. The private sector was given the liberty to operate across industries. The government chose to keep only selected industries under direct control, which were atomic energy, railways and atomic minerals.

3. Before the new policy was introduced, companies needed to seek permission from the government to expand production. The new policy relaxed these norms for companies which were having an asset base of 100 crores. These companies can increase production as per the market requirements.

4. The new policy allowed the industrialists to import capital goods from foreign countries and even allowed 100% of FDI in such cases.

5. There was a reform in the definition of small-scale industries. The maximum limit of investment was increased from 5 lakhs to 1 crore. This step helped the industries to develop and contribute more to the GDP of the nation. Industries became more modern with new technologies that made work easier for small-scale industries.

6. This policy also introduced the disinvestment concept, which allowed the government to sell some stakes to the private sector in order to bring development and monetary benefits to the public sector industries.

7. A board was set up to encourage foreign investment in India. It was called Foreign Investment Promotion Board.

The following were the impact of these changes in business and industry:

2. Due to the increase in competition, consumers are flooded with choices for goods and services. This led to an increase in consumers’ demand for better-quality goods and services.

4. With increasing competition, firms need to reach customers with products and hence they adopt more innovative ways to promote their products by using updated technology.

6. What are the essential features of 

i. Liberalisation

ii. Privatisation

iii. Globalisation

Liberalisation is the process or means of the elimination of the control of the state over economic activities. It provides greater autonomy to business enterprises in decision-making and eliminates government interference.

The purpose of liberalisation is to increase competition between enterprises. It also encourages foreign trade between countries. It also helps the business expand its global footprint. The opening up of the economy improves the economic development of a nation through the inflow of funds from foreign resources.

Essential features of liberalisation are:

1. Liberalisation brought about the abolition of licensing policies. Only a handful of industries were retained, such as those involved in the manufacture of cigarettes, liquor, defence equipment, pharmaceuticals and dangerous chemicals.

2. Businesses can decide on the number of goods they want to produce as per market conditions. This is applicable for those companies which have an asset base of 100 crores.

3. Liberalisation helped in the removal of various trade restrictions, tariffs, and duties which helped in the easy movement of goods and services.

4. Liberalisation helped encourage foreign direct investment and increased the competition attracting foreign service providers.

It reduces the workload on public enterprises and also paves the way for economic development by encouraging foreign direct investment (FDI).

The essential features of privatisation are:

1. Government adopted two different methods for disinvestment. In this, the first method was selling a part of the equity in one of the PSUs and the second process was strategic selling of PSUs. With these methods, many of the firms were sold off. This includes major companies like Maruti Udyog, BALCO etc.

2. A board was established that was specially entrusted with the revival of companies that were sick or loss-making. It was known as the Board of Industrial and Financial Reconstruction.

3. In privatisation, the role of the public sector was reduced substantially, with only 8 companies under government control. In the present condition, only 3 industries are under government control, and these are atomic energy, railways and atomic minerals.

4. To improve efficiency among public sector companies and increase the level of professionalism, the government decided to honour the title of Navaratna to all the 9 high-performing PSUs (Public Sector Units).

Globalisation can be understood as the integration of the national economy with the world economy. It represents a free flow of information, technology, goods and services, ideas, capital, and even people as a form of resources across different countries. Globalisation helps in improving cross-border connectivity between different markets in the form of investments, trade, and cultural exchanges.

The following are the essential features of globalisation:

1. It removed or reduced all the trade barriers such as tariffs, trade restrictions, customs duties, etc., which resulted in more business to and from India.

2. Export and Import duties were reduced, which helped in promoting free trade between India and the world.

3. The aim of globalisation was to encourage the setting up of foreign capital in the form of FDI (Foreign Direct Investment). It also resulted in the formation of SEZs (Special Economic Zones) and the creation of FEMA (Foreign Exchange Management Act).

This chapter in NCERT Solutions for Class 12 provides us with a brief introduction to the following concepts. It provides a clear picture of what and how the business environment operates.

• What is business environment? – It is a sum of all the external forces that influence enterprise and operation of business.
• Characteristics of business environment.

NCERT Solutions for Class 12 Business Studies Chapter 3 provides a broad range of illustrative examples, which helps the students to comprehend and learn quickly. The above-mentioned are the illustrations for the Class 12 CBSE syllabus. For more solutions and study materials of NCERT solutions for Class 12 Business Studies , visit BYJU’S or download the app for more information and the best learning experience.

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Class 12th Business Studies - Business Environment Case Study Questions and Answers 2022 - 2023

By QB365 on 08 Sep, 2022

QB365 provides a detailed and simple solution for every Possible Case Study Questions in Class 12 Business Studies Subject - Business Environment, CBSE. It will help Students to get more practice questions, Students can Practice these question papers in addition to score best marks.

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Business environment case study questions with answer key.

12th Standard CBSE

Final Semester - June 2015

Business Studies

The name and taste of Coca-Cola is known to almost each and every individual in India as well as throughout the world. This carbonated soft drink holds the most market share in the soft drink market and got itself a special seat in each and every gathering. The Coca-Cola Company has on occasion introduced other cola drinks under the Coke name. The most common of these are Diet Coke, along with others including Caffeine free Coca-Cola, Diet Coke Caffeine free, Coca-Cola Zero Sugar, Coca- Cola Cherry, Coca-Cola Vanilla and the list goes on. It has capitalized on each and every opportunity to market itself effectively and place itself in the middle of every gathering. The main reason for such an outstanding placement of product goes to the way they have established the connection between every occasion and the need for Coke to be present there, product design and creative advertising. 1. In the context of the above given case, identify one valid importance of Business Environment.

2. Identify the feature of Business Environment which The Coca-Cola Company managed to get in their favour.

3. Which business environment did Coca-Cola majorly tap into ?

4. Which of the following is not a product of COCA-COLA?

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Business environment case study questions with answer key answer keys.

1. (a) Enables a firm to identify opportunities and getting first-mover advantage. 2. (b) Specific and general forces 3. (b) Social Environment  4. (c) Coca-Cola Avocado

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Class 12 Business Studies Case Study Questions

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In this article, we will discuss how to get CBSE class 12 Business Studies Case Study Questions from the myCBSEguide App and our Student Dashboard for free.

For the students appearing for class 12 board exams from the Commerce Stream, Business Studies is a core subject. Business Studies as a subject provides a way of perceiving and interacting with the business ecosystem . It well establishes the interdependence of business on various social, political, legal and economic forces and vice-versa. Business Studies is a purely theoretical and a relevantly easier subject for the Commerce students. Business Studies class 12 exam is a highly scoring subject and it facilitates the students to increase their percentile and excel in academics.

12 Business Studies Paper Design

The exam is divided into 2 parts:

• Part A generally contains questions from Principles and Functions of Management and carries 60 marks.
• Part B comprises questions from Business Finance and Marketing, it carries a total of 40 marks.

The syllabus of class 12 Business Studies comprises 12 chapters that are divided into 2 books

• Principles and Functions of Management
• Business Finance and Marketing

Business Studies Syllabus

CBSE has released the latest class 12 syllabus (2022-23) for Business Studies. 

Business Studies Case Study Questions

Case-based questions have always been an integral part of Business Studies class 12 question papers for the past many years. Students are required to focus more on case studies as they require the application of their knowledge of the key business concepts. In the year 2021-22 CBSE introduced a few changes in the question paper pattern to enhance and develop analytical and reasoning skills among students. Sanyam Bhardwaj, controller of examinations, CBSE quoted that case-based questions would be based on real-life situations encountered by the students.

The purpose was to drift from rote learning to competency and situation-based learning. He emphasized the fact that it was the need of the hour to move away from the old system and formulate new policies to enhance the critical reasoning skills of students. Introducing case study questions was a step toward achieving the goals of the National Education Policy (NEP) 2020.

What is a case study question? (Business Studies)

A case study in reference to Business Studies can be thought of as a real-world test of how the implementation works. It is predominantly a report of an organization’s implementation of something such as a practice, a product, a system, or a service. Case studies based on NCERT text form a substantial part of the Business Studies examination. Initially, they were confusing for both students and teachers but now there is a clarity that has made the question paper more student-friendly. A significant weightage has been given to case-based and application-based questions.

Critical and Analytical Thinking

These questions demand critical and analytical thinking on behalf of the students. The best part of these questions is that they provide conceptual hints and keys that point to the right answer. According to the new pattern implemented by CBSE, case-based questions would carry a significant weightage of more than 30% in the Business Studies question paper.

Case Study Passage

As part of these questions, the students would be provided with a comprehensive passage, based on which analytical questions will have to be answered by them. The students would be required to read the passage carefully before attempting the questions. In the coming examination cycle (2022-23), case-based questions have a weightage of around 30%.

Types of Case Study questions in Business Studies

CBSE plans to increase the weightage of such questions in the following years, so as to enhance the intellectual and analytical abilities of the students. Case study questions would be based on various topics and chapters in Business Studies. It is expected from the students to have complete knowledge of the concepts in their syllabus.

They will have to let go of the shortcut techniques and get to read their textbooks with full concentration, especially for solving case-based questions in Business Studies for the passages given are generally lengthy and require an in-depth study. The best part of having these questions is that the question itself projects a hint of its solution.

The questions asked could be :

• Direct and simple-such questions can easily be solved as the answers are either there in the given passage or the student can solve it at ease by reading and analyzing the passage carefully.
• Indirect and application-based- These are the ones that would require the student to have complete knowledge of the topic and could be answered by application of the concepts. The answers to such questions are slightly tricky and not visible in the given passage, though the passage would highlight the concept on which the questions would be asked by CBSE.

Class 12 Business Studies Case Study

Case study questions asked by CBSE were stated to be quite challenging by many students. It prominently focuses on real and present scenarios of the business world. Though the exam, on the whole, was quite direct and its difficulty level was termed out to be moderate. Around 30% of the question paper consisted of case-based questions that required high-order thinking and analytical skills from the students.

Content of Case Study Questions

The concept of case-based questions is not new since CBSE has always included questions based on Higher Order Thinking Skills (HOTs) and case-based questions. Though now we will have an increased percentage of such questions in the question paper. The student has to keep in mind that the concept-based questions can be attempted only with the proper understanding of the business concepts.

Benefits Of Case-based Questions

Class 12 Business Studies syllabus comprises two books and CBSE can ask Case study questions from any of them. Students must prepare themselves thoroughly for both the books. They must practice class 12 Business Studies case-based questions from the various options available to them.

• Enhance the intellectual capabilities of the students.
• Provide a complete and deeper understanding of the subject.
• Inculcate analytical reasoning and temperament in students.
• Help students retain knowledge for longer periods of time.
• Would definitely help to discard the concept of rote learning and cramming without understanding the core of the subject.
• The questions would facilitate bringing out the much-awaited change in the prevalent system of education in India that hinders the strengthening of practical learning.

Some Case-Study Questions (Business Studies) Class 12

Here are some case study questions for CBSE class 12 Business Studies. If you wish to get more case study questions and other related study material, download the myCBSEguide App now. You can also access it through our Student Dashboard .

Business Studies Case Study 1

Read the following text and answer the questions: ABLEX Ltd. is a big and well-reputed company. The biggest challenge for the company is managing many employees at the same time. As the company has various departments like human resources, marketing, finance,etc., it is very necessary for the company to maintain unity in different departments. All the employees work hard for the organisation. Despite their different interest, they all perform various activities together so as to achieve the objectives of the company. The career of employees is shown a developmental path through proper training modules and job enrichment. Ajay is a manager who assigns all duties and responsibilities to his employees in the department. He uses all sources to develop proper communication with them and leaves no attempt to motivate them.

• It integrates Group Efforts
• It is a Continuous process
• It ensures Unity of Action
• It is Pervasive
• Top Level Management
• Middle-Level Management
• Lower Level Management
• Supervisory Level Management
• Economic objectives
• Social Objectives
• Organisational Objectives
• Personal Objectives

Answer Key:

• (c) It ensures unity of action
• (b) Middle-level management
• (c) Personal objectives
• (a) Directing

Business Studies Case Study 2

Read the following text and answer the question: Mohan works in a bulb manufacturing company. Each bulb that is manufactured is of standard size and quality. Further, if there is any unrequited type of bulb manufactured then its production is stopped. Last month when the company came to know that 10-watt bulbs were no more liked by customers, their production was stopped. He works in the purchasing department. His job is to purchase the filaments required to make bulbs. This time when he purchases the filament he gets the instruction from the seller that some special care needs to be taken in the first hour of fixing the filaments inside the bulb. Mohan knows this information should be given immediately to the production department before the assembling process starts. However, he finds that his company’s policies only allow him to give the message to his immediate boss who will further pass this message to his boss. The passing of this message will continue until it reaches the desired person in the production department. Based on the passage answer the following questions:

• Method study
• Fatigue study
• Standardization and simplification
• None of these
• Scalar chain
• Departmentalization
• Division of Work
• None of the above
• Organization
• Authority and Responsibility
• All of these
• Division of work
• Scalar Chain
• (b) Fatigue study
• (a) Scalar chain
• (c) Gang plank
• (a) Division of work

Business Studies Case Study 3

Read the following passage carefully and answer the questions that follow: Two years ago Radhika completed her degree in food technology. She worked for some time in a company manufacturing chutneys, pickles and murabbas. She was not happy in the company and decided to have her own organic food processing unit for the same. She set the objectives and the targets and formulated an action plan to achieve the same. One of her objectives was to earn 10% profit on the amount invested in the first year. It was decided that raw materials like fruits, vegetables, spices, etc. will be purchased on three months’ credit form farmers cultivating organic crops only. She also decided to follow the steps required for the marketing of the products through her own outlets. She appointed Rakesh as a production manager who decides the exact manner in which the production activities are to be carried out. Rakesh also prepared a statement showing the number of workers that will be required in the factory throughout the year. Radhika informed Mohan about her sales target for different products, area wise for the forthcoming quarter. While working on the production table a penalty of 100 per day for not wearing the caps, gloves and apron was announced.

• Standing Plan
• (a) Objectives
• (c) Procedure
• (b) Programme

Tips to Solve Case Study Questions in Business Studies

Let’s try to comprehend and solve case study questions of class 12 Business Studies. As mentioned earlier, the entire syllabus is divided into 2 books. It is expected from the students to rigorously follow the NCERT book as the language written is quite simple and crisp. The exam in spite of being totally theoretical is quite scoring.

• Read the passage in depth.
• Try to comprehend the situation and focus on the questions asked.
• Generally, the passage given in Business Studies is lengthy but the solutions are brief and simple.
• Can follow a reversal pattern, i.e read the questions before and then search for the answers. You will save time.
• Answer briefly and precisely.
• Focus on solidifying key Business Studies fundamentals for acing any case study. If your concepts are clear, you will hardly face any difficulty in answering them.
• While answering the case study, pick the keywords or any keyline based on which you are withdrawing your conclusion. You need to highlight the reason for your answer.

These simple points if kept in mind will definitely help the student to fetch good marks in case study-based questions in class 12 Business Studies.

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NCERT Solutions for Class 6, 7, 8, 9, 10, 11 and 12

NCERT Solutions for Class 12 Business Studies Chapter 3 Business Environment

September 30, 2019 by Sastry CBSE

Short Answer Type Questions

1. What do you understand by business environment? Ans:  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. The economic, social, political, technological and other forces, which operate outside the business enterprise are part of its environment.

2. Why it is important for business enterprises to understand their environment? Explain briefly. Ans:  It is important for business organisations to understand their environment because of the following reasons. (i) It Enables the Firm to Identify Opportunities and Getting the First Mover Advantage Environment provide numerous opportunities for business. Early identification of opportunities helps an enterprise to use it before instead of losing them to competitors. (ii) It Helps the Firm to Identify Threats and Early Warning Signals  Environmental awareness can help managers to identify various threats on time and serve as an early warning signals. (iii) It Helps in Tapping Useful Resources Environment is a source of various resources for running a business. To engage in any type of activity, a business enterprise assembles various resources called inputs. This can be done better by understanding what the environment has to offer. (iv) It Helps in Coping with Rapid Changes All types of enterprises facing increasingly dynamic environment. In order to effectively cope with these significant changes, managers must understand and examine the environment and develop suitable courses of action. (v) It Helps in Assisting in Planning and Policy Formulation Since environment is the source of opportunities and threats, its understanding and analysis becomes the base for various policies to be framed and strategies to be made. (vi) It Helps in Improving Performance The enterprises that continuously monitor their environment and adopt suitable business practices are the ones, which not only improve their present performance but also continue to succeed in the market for a longer period.

Q3. Mention the various dimensions of business environment. Ans:  (i) Economic Environment  Interest rates, inflation rates, value of rupee and many more are the economic factors that can affect management practices in a business enterprise. (ii) Social Environment  The social environment of business includes the social forces like customs and traditions, values, social trends etc. (iii) Technological Environment  This 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. (iv) Political Environment  This includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business. (v) Legal Environment  This includes various legislations passed by government authorities and court judgements. It is important for the management of every enterprise to obey the law of land and for this, enough of knowledge of rules, and regulations framed by the government is a pre-requisite for better performance.

4. Briefly explain the following (a) Liberalisation (b) Privatisation (c) Globalisation Ans:  The three important features of New Economic Policy, 1991 (a) Liberalisation Under the new economic policy of 1991, the economic reforms that were introduced aimed at liberalising the Indian business and industry from all unnecessary controls and restrictions. They signalled the end of the licence-permit quota raj. (b) Privatisation The new set of economic reforms that aim at giving greater role to the private sector in the nation building process and a reduced role to the public sector. (c) Globalisation Globalisation means the integration of the various economies of the world leading towards the emergence of a cohesive global economy. Till 1991, India had a policy which strictly regulated imports in value and volume terms. After 1991, the reforms aimed at import liberalisation.

5. Briefly discuss the impact of Government policy changes on business and industry. Ans:  Impact of Government policy changes on business and industry (i) Increasing Competition  As a result of liberalisation, privatisation and globalisation number of players increased in all sectors and increased competition for everyone. (ii) More Demanding Customers  Increased competition in the market gives the customer wider choices in purchasing better quality of goods and services, which makes them more demanding. (iii) Rapidly Changing Technological Environment  New technologies help to improve machines, process products and services. The rapidly changing technological environment creates tough challenges before smaller firms. (iv) Necessity for Change  After 1991, the market forces have become turbulent as a result of which the enterprises have to continuously modifying their operations. (v) Need for Developing Human Resource  The new market conditions require people with higher competence and greater commitment. Hence, the need for developing human resources emerged. (vi) Market Orientation  Earlier, production was taken up first and then selling was done. Now, due to increasing competition and more demanding customers firms have to study and analyse the market first and produce goods accordingly. (vii) Loss of Budgetary Support to the Public Sector  Public sector have less of budgetary support from the Central Government. Now, they have to generate their own resources and be more efficient in order to survive and grow.

Long Answer Type Questions

1. How would you characterise business environment? Explain with examples, the difference between general and specific environment. Ans:  Features of business environment (i) Totality of External Forces Business environment is aggregative in nature as it is the sum total of all things external to business firms. (ii) Inter-relatedness Different elements of business environment are closely related to each other, e.g., increased awareness of health care have increased the demand for many health products. (iii) Dynamic Nature The business environment is highly dynamic. It keeps on changing. Sometimes there is a change in technology, tastes and preference of consumer etc. (iv) Uncertainty The environment cannot be predicted. It is highly uncertain and unpredictable. (v) Complexity Since there are many elements of business. Environment and they are inter-related and dynamic in nature. Therefore, it becomes very difficult to understand them as a whole. Difference between Specific and General Environment There are two types of forces operating in business environment specific and general. Specific forces affect the individual enterprises directly and immediately, e.g., customers, suppliers. General forces affect the firms and only indirectly e.g., social conditions or political conditions.

2. How would you argue that the success of a business enterprise is significantly influenced by its environment? Ans:  Importance of business environment (i) It Enables the firm to Identify Opportunities and Getting the First Mover Advantage Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of loosing them to competitors, e.g., Eureka Forbes introduced Aquaguard and took away the cream of demand. (ii) It Helps the Firm to Identify Threats and Early Warning Signals  Environment happens to be the source of many threats. Environmental awareness can help managers to identify various threats on time and serve as an early warning signals e.g., Lakme took serious steps to improve the quality and types of products as foreign multinational cosmetics companies started coming to India after 1991. (iii) It Helps in Tapping Useful Resources  Environment offers various resources for running a business in return the business enterprise supplies the environment with its outputs such as goods and services for customers, taxes for government. In order to arrange for the best possible resources, better understanding of the environment becomes important. (iv) It Helps in Coping with Rapid Changes  It is not the fact of change itself that is so important as the pace of change. There are many changes taking place in the environment and at a fast speed. In order to effectively cope with these changes, managers must understand and examine the environment and develop suitable courses of action. (v) It Helps in Assisting in Planning and Policy Formulation Since environment is a source of both opportunities and threats, its understanding and analysis only helps in formulating the best possible policies to handle the future properly. (vi) It Helps in Improving Performance Continuous monitoring and adopting changes in an enterprise will help in improving not only their present performance, but also continue to succeed in the market in long run.

3. Explain with examples, the various dimensions of business environment. Ans:  Dimension of business environment (i) Economic Environment  It includes the changes in the system due to economic policies made by the government. Reserve Bank of India is the key regulator of country’s economic environment since it (a) influences the interest rates (b) controls the flow of money in the economy (c) regulates the working of banks Example When the banks reduce the interest rates on long term loans, automobiles and construction industries get a boost to the business as more spending is made on the purchase of homes and cars through loans. (ii) Social Environment The social environment of business include the social forces like customs and traditions, values, social trends, society’s expectations from business etc. In business terms, these values translate into freedom of choice in the market. Major elements of social environment are (a) life expectancy (b) shifts in the presence of women in the workforce (c) consumption habits Example Due to the shift in the presence of women in the workforce, the demand for readymade ladies formal wear, cosmetics, packed/processed food, electronic gadgets has gone up. (iii) 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. Example Because of technological advancement, it has become possible to book railway tickets through internet from home, office etc. (iv) 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. It is only of use when a business enterprise can predict its business activities under stable political conditions. Major elements of political environment are (a) The constitution of the country (b) The nature and profile of political leadership and thinking of political personalities (c) Political ideology and practices of the ruling party. Example After the NEP of 1991, due to globalisation the foreign companies started coming to India, but due to the bureaucratic red tape it became difficult for them to cut through it to do business here. As a result, these companies were discouraged in our country regarding investments. The situation has improved overtime. (v) Legal Environment Legal environment 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. It is imperative for the management of every enterprise to obey the law of the land. Therefore, an adequate knowledge ohrules and regulations framed by the government is a pre-requisite for better business performance. Example There is a government regulation to protect consumer’s interest e.g., the advertisements of alcoholic beverages is prohibited.

4. What economic changes were initiated by the Government under the Industrial Policy, 1991? What impact have these changes made on business and industry? Ans:  Economic changes initiated by the government under the Industrial Policy, 1991 (i) The government reduced the number of industries under compulsory licensing to six. (ii) The role of public sector was reduced. It was now limited only to four industries of strategic importance. (iii) Disinvestment was carried out in case of many public sector industrial enterprises. (iv) Foreign Direct Investment was permitted. (v) Automatic permission was now granted for technology agreements with foreign companies. (vi) Foreign Investment Promotion Board (FIPB) was set up to promote and channelise foreign investment in India. The Indian corporate sector has come face-to-face with several challenges due to government policy changes. Some of them are (i) Increasing Competition The competition has increased due to entry of new players (privatisation and globalisation). (ii) More Demanding Customers Customers today, has 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. (iii) Rapidly Changes Technological Environment The rapidly changing technological environment creates tough challenges before smaller firms. (iv) Necessity for Change After 1991, the market forces have become turbulent as a result of which the enterprises have to continuously modify their operations. (v) Need for Developing Human Resources Earlier, Indian enterprises worked with inadequately trained personnel. The new market conditions require people with higher competence and greater commitment. Hence, the need for developing human resources. (vi) Market Orientation Before 1991, all firms worked with production oriented marketing operations. In a fast changing world, there was a shift to market orientation. The firms had to study and analyse the market first and produce goods accordingly. (vii) Loss of Budgetary Support to the Public Sector The public sector 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.

5. What are the essential features of (a) Liberalisation (b) Privatisation (c) Globalisation Ans:  Ans Essential features of (a) Liberalisation (i) Abolishing licensing requirements in most of the industries except a short list. (ii) No restriction on expansion or contraction of business. (iii) Free movement of goods and services. (iv) Freedom in fixing the prices of goods and services. (v) Reduction in tax rates. (vi) Simplifying procedures for imports and exports. (vii) Making it easier to attract foreign capital and technology to India. (b) Privatisation (i) The government redefined the role of public sector. (ii) Policy of planned disinvestments of the public sector. (iii) Refining of sick enterprises to the Board of Industrial and Financial Reconstruction. (c) Globalisation (i) Import liberalisation (ii) Export promotion (iii) Foreign exchange reforms

Case Problem

Lately many companies have planned for significant investment in organised retailing in India. Several factors have prompted their decision in this regard. Customers 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 government has also liberalised its economic policies in this regard and permitted even cent per cent foreign direct investment in some sectors of retailing.

1 . Identify changes in business environment under different heads – economic, social, technological, political and legal that have facilitated the companies decisions to plan significant invstments in organised retailing.

Ans:  Changes which have taken place in the following areas are as follows (i) Economic  Availability of more money because of employment opportunities increasing. (ii) Social  Tastes of customers are changing. As he is getting more exposure to the outside world his tastes are changing. (iii) Technological Technological advancements have led to advanced ways of counting, checking, coding, billing, discounts which are convenient for the customer and also retailer (iv) Political  Government policies are encouraging developers to go for mass construction on real estate. As MNCs are coming to India, they have to be provided an internationally based infrastructure to operate from. (v) Legal  As the government is providing more rights to the consumers, an organised retailing outlets would be more particular in taking care as compared to a small retailer.

2. What has been the impact of these changes with regard to globalisation and privatisation? Ans: Answer Due to globalisation and privatisation, more retailers from India and abroad are encouraged to make investments in organised retailing. The competition has increased, the consumers are more demanding and expert working force is required in order to cope up with the changes, which have taken place and are further changing.

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Environment Class 12 Business Studies Notes and Questions

Please refer to Environment Class 12 Business Studies notes and questions with solutions below. These revision notes and important examination questions have been prepared based on the latest Business Studies books for  Class 12 . You can go through the questions and solutions below which will help you to get better marks in your examinations.

Class 12 Business Studies Environment Notes and Questions

Case Studies – (Chapter- 3) Environment Q. 1. Mr. Ajay after completing MBA from USA comes to India to start a new business under the banner Ecom Creations Ltd. He launches a new product in a e-learning for senior Secondary School students in Commerce stream, which already has n 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.  Ans. ● “Comes to India to start a new business … launches a new product in e-learning for Senior secondary school students in Commerce stream.” 1. It helps in assisting in planning and policy formulation. 2. It helps the firm to identify opportunities and get the first mover advantage. ● “His business starts flourishing in India.” 1. It helps in improving performance. ● “Now more Indian companies entered into the market with different subjects also.” 1. It helps the firm to identify threats and early warning signals. Q. 2. Just after declaration 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 giving reason. Also explain any two other dimensions of business environment.  Ans. Rise in stock market index (Sensex) is economic environment. But Political environment (declaration of Lok Sabha Elections 2014 results)) led to this rise. Two other dimensions of business environment: 1. Legal Environment: 2. Technological environment: Q. 3. The court passed an order that all schools must have water purifier for the school children as 1. Society in general is more concerned about quality of life. 2. Innovative techniques are being developed to manufacture water purifier at competitive rates. 3. 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. Ans. 1. Legal environment: 2. Social environment: 3. Technological environment: 4. Economic environment: 5. Political environment: Q. 4. ‘It is common now to see CD-ROM’s, computerized information kiosks, and Internet/Word Wide Web multimedia pages highlighting the virtues of products.’ Name the dimension of the business environment highlighted by this stateme.  Ans. Technological environment Q. 5. Which component of business environment requires that advertisements of baby food must necessarily inform the potential buyers that mother’s milk is the best?  Ans. Legal environment. Q. 6. It is the process by which government control over the industry is being loosened. Give the term to which this statement is trying to indicate. Ans. Liberalization Q. 7. Due to entry of foreign firms, competition for Indian firms has increased, especially in service industries. Name such service industries. Ans. Telecommunications, airlines, banking, insurance, etc. Q. 8. The Court passed an order to ban polythene bags as 1. The bags are creating many environmental problems which affect the life of people in general. 2. Society in general is more concerned about quality of life. The Government decided to give subsidy to jute industry to promote this business. 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 the lines from the above particulars.  Ans. 1. Legal environment: 2. Social environment: 3. Political environment: 4. Technological environment: 5. Economic environment: Q. 9. 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. Q. 10. 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 socialize, host events and concerts, and provide ample Food and Beverages options. Consequently the share of entertainment segment 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. “Trough 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 or changes that will help a firm to improve its performance. “As a result, the company gains enormously by getting the first mover advantage.” Q. 11. “Zero Defect Zero Effect” (ZED) is a slogan coined by the Prime Minister of India, Narendra Modi with reference to the Make in India initiative launched by the government. The slogan reflects the efficiency of production processes, i.e. the products have no defects and the process through which the product is made has zero adverse environmental and ecological effects. The Zed model aims to make India the manufacturing hub of the world and prevent the products developed in India from being rejected by the global market. Moreover, before the initiative was launched, the limits of foreign direct investment in various sectors had been relaxed. The application for licences was made available online and the validity of licences was increased to three years. Various other norms and procedures were also relaxed by the government. In the light of the above paragraph, identify and explain the major component of New Economic Policy of 1991 that are being referred to by quoting lines from the paragraph. Ans. The major components of New Economic Policy of 1991 that are being referred to are as follows: ● Liberalization: The economic reforms signaled the end of the licence-permit-quota raj and were aimed at liberalizing the Indian business and industry from all unnecessary controls and restrictions. “Moreover, before the initiative was launched, the limits of foreign direct investment in various sectors has been relaxed.The application for licences was made available online and the validity of licences was increased to three years. Various other norms and procedures were also relaxed by the government.” ● Globalization: Globalization means the integration of the various economies of the world leading towards the emergence of a cohesive global economy. “The ZED model aims to make India the manufacturing hub of the world and prevent the products developed in India from being rejected by the global market.” Q. 12. Over the years, e-business in our country has witnessed tremendous growth due to several reasons. There is significant improvement in the Information Technology infrastructure over the last decade as the Government has taken important steps in high-speed Internet connectivity. As a result, the broadband networks have not only become better but also more affordable. Additionally, Government is trying to make rural India connected through broadband – a great possibility for e-business to expand the retail market by reaching out to the most remote rural customer. Another catalyst strengthening the e-business segment is the country’s favourable demography. It has more than 50% of its population below the age of 25 and more than 65% below the age of 35. It is expected that, in the year 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan, this promises for phenomenal increase in e-business. Moreover, the penetration of the smartphone in a large section of the population has aptly addressed the problem of compute illiteracy. Not with standing the fact that consumers also prefer e-business due to multiple factors like convenience, time etc. Identify and explain the various dimensions of business environment being referred to in the above case. Ans. The various dimensions of business environment being referred to in the above case are as follows: 1. Political Environment: 2. Technological Environment: 3. Social Environment: Q. 13. Beni, after completing her MBA, took up a job a multinational company named ‘Fortio’. The company was paying good salary and perks to its employees. The wages were within the paying capacity of the company that provided the employees a reasonable standard of living. The company also had a good work-culture and the behaviours 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 cook her meals. She had to depend on outside found, which was deteriorating her health. She observed that this problem was faced by many of her colleagues, not only in her company but also in many other companies. This was because of increase 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 her job to supply packaged home-cooked food to office goers at a reasonable price. At the end of the day she also distributing the left-over food in the nearby night-shelters. 1. State the dimension of business environment being discussed above. 2. State the principle of management being followed by ‘Fortio’. 3. Identify any two values being communicated by the company to the society in the above case. Ans. . Social environment which includes social forces like customs and traditions, values trends etc. ‘this was because of increase in the number of working women and non-availability of hygienic home-cooked food.’ 1. Remuneration of employees, which states that the overall pay and compensation should be fair to both employees and the organization. ‘The company was paying good salary and perks to its employees.The wages were within the paying capacity…standard of living.’ 1. Values being communicated by the company to the society are: (Any two) 1. Good work culture 2. Good behavior inhuman interaction 3. Concern for the employees 4. Respect for law Q. 14. Nakul, a manager of Zyco Ltd. always takes into account the changes taking place in business environment while determining plans. He accepts changes readily and gives useful suggestions to his superior, which results in reduction of costs. As a result, company’s profits increase. Nakul enjoys cordial relations with his co-workers and makes plans in consultation with his team to achieve organizational goals. 1. Which characteristic of management is highlighted in the above lines? 2. Identify and state any two principles of management followed by Zyco Ltd. 3. Give any two benefits which Zyco Ltd. get by taking into account the changes taking place in business environment, quoting the lines from the above para. 4. State any one value which Nakul wants to communicate to the society. Ans. 1. Management is a dynamic function. 2. 1. Initiative This principle indicates that the subordinates should be encouraged to give suggestions and make and execute plans within the prescribed limits of authority. 1. Spirit de corps This principle suggests that management should promote a team spirit of unity and harmony among the employees. 1. Benefits of business environment: It helps in assisting in planning and policy formulation. ‘… takes into account the changes taking place in business environment while determining plans.’ 1. It helps in improving performance. ‘He accepts changes readily and gives useful suggestions to his superior, which results in reduction of costs.As a result, company’s profits increase.’ 1. Value: ● Team work ● Adaptability Q. 15. It is interesting to know that the menu items of the multinational food chains are customized to suit the general palates of the local people in the region. When McDonald’s started its business in India in the year 1996, the company went through a complete localization strategy. McDonald’s changed its product menu to accommodate the vegetable burger given the large vegetarian population. It also altered its store design and even reduced the product price by close to fifteen per cent. Also, the “McAloo Tikki burger” is not available anywhere but in the Indian outlets of McDonalds. Identify the relevant feature of business environment being discussed above. Ans. Relativity is the relevant feature of business environment which is being discussed above. Q. 16. Eco-friendly products are gaining power as the consumers’ awareness about environmental issues has increased over the years and they are conscious about choosing products that do not have adverse effects on the environment. They are now more conscious about the carbon emission and climate change effects, and want themselves to be ‘seen’ as a green advocate among their peers. In such a scenario, it has become a challenge for the companies as they have to not only meet the needs of the consumers but also ensure that their products are safe and environment friendly. At a result, there is growing need for better and advanced technologies to works as a catalyst in this regard. 1. Identify the relevant feature of business environment being discussed above. 2. Describe briefly any three points which highlight the importance of business environment and its understanding by managers. Ans. 1. Inter-relatedness is the relevant feature of business environment which is being discussed above. 2. The three points which highlighted the importance of business environment and its understanding by managers are described below: 1. 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. 2. 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. 3. It helps in tapping useful resources as the enterprise designs policies that allow it to get the resources that it needs so that it can convert those resources into outputs that the environment desires. Q. 17. Ultra Paint Co. which is manufacturing paints has been enjoying a prominent market position as it manufactured best quality paints, made timely payment of taxes to government. It assembled various inputs like finance, machines, raw materials, etc. from its environment. But since last year it has been dumping its untreated poisonous waste on the river bank which has created many health problems for the people. As a result, the court passed an order to seal the manufacturing unit of the company. 1. State the importance of business environment highlighted quoting the line from the above case. 2. Identify any two dimensions of business environment mentioned in the above case by quoting lines from it. 3. State any two values which have been overlooked by the company? Ans. ( a) Business environment helps in tapping useful resources. ‘It assembled various inputs like finance, machines, raw materials, etc. from its environment.’ (b) (i) Social environment ‘…it has been dumping its untreated poisonous waste on the river bank which has created many health problems for the people.’ (ii) Legal environment …the court passed an order to seal the manufacturing unit of the company.’ 1. Value overlooked. ● Environment protection ● Concern for human life ● Respect for law and order ● Social responsibility Q. 18. Philips, a company manufacturing light bulbs incurred heavy expenditure on scientific Research and Development and discovered a technology that made it possible to produce an energy efficient light bulb that lasts at least twenty times as long as a standard bulb. It resulted in growth and profitability of the company. 1. Identify and state the dimension of business environment mentioned above. 2. State the importance of business environment mentioned above by quoting the lines. 3. State any one value which the company wants to communicate to the society. Ans. 1. 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. 2. Business environment helps a firm to improve its performance. ‘It resulted in growth and profitability of the company.’ 3. Value conservation of energy Q. 19. Disco Ltd. 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 consumers 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 demand 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) were present to discuss how to deal with the situation. After a long discussion, it was decided that they would study and analyze the market first to identify customer tastes and fashion and then manufacture garments accordingly. It was also decided to increase expenditure on advertising, after-sales services, etc. 1. Identify any two features of business environment by quoting the lines from the above case. 2. At which level of management the meeting of managers of Disco Ltd. was held? 3. Identify any two impact of government policy changes on business, quoting lines from the above case. 4. State the importance of understanding of environment by business managers in the light of the above para.  Ans. 1. Features of business environment: 1. Dynamic nature: ‘fashion and taste of the consumers is changing at a fast pace.’ 2. Uncertainty: ‘It is very difficult for the company to predict future happening.’ 3. Complexity: ‘It is difficult to know the extent of the relative impact of the social, economic, political, technological or legal factors on decrease in demand of its products in the market. 1. Top level management 2. Impact of government policy changes on business: 1. Increasing competition: ‘New competitors have entered the market with new designs.’ 2. More demanding customers: ‘Customers’ demand is increasing.’ 3. Market orientation: ‘it was decided that they would study and analyze the market first to identify customer tastes and fashion and then manufacture garments accordingly. It was also decided to increase expenditure on advertising, after-sales services, etc.’ 1. Business environment helps the manager in coping with rapid changes. Q. 20. The organic food market in India is grow at 25-30 per cent which reflects a clear shift in consumer tastes and preferences. The current growth in the organic food market is driven by multiplicity of factors like rising health consciousness, changing lifestyles, increase in disposable income and growing availability of organic food products in shopping malls, retail outlets and online. In context of the above case: 1. Identify and explain the features of business environment being referred to here. 2. By quoting phrases from the paragraph identify the various components of general forces which have led to a growth in the organic food market. Ans. 1. The features of business environment being referred to in the above case 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. 2. The various components of general forces which have led to a growth in the organic food market are as follows: 1. Social: “rising health consciousness, changing lifestyles” 2. Economic: “increase in disposable income” 3. Technological: “growing availability of organic food products in shopping malls, retail outlets and on line.” Q. 21. Anurag, aspires to work with a socially and environmentally committed company as he does not want to work just for monetary benefits but also the brand value of the company he works for in the society matters a lot to him. Therefore, he has joined Cerebra Integrated Technologies a Bengaluru-based Infotech company. The company has built India’s largest e-waste recycling plant. The company strives to be one of the leading players in this business which has huge potential not only in terms of generating huge revenues and profits but also wants to contribute to the environment issues that have become crucial worldwide. The company sees big business in the mountains of e-waste in Bengaluru which produces 2,00,000 tonnes of e-waste a year. The company plans to make its millions by extracting metals such as gold and platinum from the e-waste piling up in the city. As a mobile phone, for example, is made up of a combination of rare earth and precious metals: it contains 250 mg of silver, 24 mg of gold and nine mg of palladium while a laptop has 1,000 mg of silver, 220 mg of gold and 500 grams of copper. To start the business, the company has obtained a licence from KSPCB (Karnataka State Pollution Control Board). In context of the above case: 1. Identify the various dimensions of business environment being referred to by quoting lines form the paragraph. 2. List any two values which the company wants to convey to the society. Ans. 1. The various dimensions of business environment being referred to the in the above case are as follows: ● 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. 1. The two values which the Cerebra Integrated Technologies wants to convey through this initiative are: 1. Sustainable development 2. Concern for environment. Q. 22. After competing his education, Arun joins his father in their family business of manufacturing cookware. As a businessman, his father is rigid in his approach and has fixed ideas about various issues. He tends to maintain a distance from the factory workers. However, Arun is more receptive to the needs of the workers and doesn’t seem to believe in any class-differences. He believes that the prosperity of their business greatly depends upon the prosperity of their workers and vice versa. At the same time, he has a good understanding of the business environment. Therefore, he introduces a new range of green pans that provide a healthy cooking surface, as they are manufactured with all ceramic or silicon coating and are considered safer than the traditional petroleum based nonstick surfaces which may contain toxic substances. Although, the new cookware range is highly prices, he expects a ready market for it as both the purchasing power of people and their preference for better quality products has increased over the years. In context of the above case: 1. Identify the nature of management which is being reflected in the different styles of management in practice adopted by Arun and his father. 2. Name and explain the related principle of scientific management. 3. State the related dimensions of business environment. Ans. 1. The different styles of management in practice adopted by Arun and his father reflect that management is an art. 2. ‘Harmony, Not Discord’ is the related principle of scientific management. 3. The related dimensions of the business environment are: ● Economic Environment: ● Social Environment: ● Technological Environment: Q. 23. Continuous and comprehensive evaluation is a process of assessment, mandated by the right to Education Act, of India. This approach to assessment has been introduced by state governments in India, as well as by the Central Board of Secondary Education in India. With the introduction of (CCE) system in education there is greater focus on project based learning. As a result, besides time and effort the students are willing to invest money to enhance the visual appeal of their project files so as to score higher marks. In order to cash on the opportunity Rishabh has started a small business unit to manufacture different kinds of decorative materials for the project files. He has employed a team of four creative designers for developing the innovative material with the help of latest technology. However, he has a prejudice against women and therefore pays less salary to them as compared to the male staff for equal work. In the context of the above case: 1. Name any two functions of management that Rishabh will have to perform in order to manage his business successfully. 2. Name and explain the principle of management which is being violated by Rishabh. 3. Identify the related dimensions of the business environment. Ans. 1. The two functions of management that Rishabh will have to perform in order to manage his business successfully are Planning and Orgnising. 2. The principle of management which is being violated by Rishabh is Equity. 3. The related dimensions of the business environment are: 1. Legal Environment 2. Political Environment 3. Economic Environment 4. Social Environment 5. Technological Environment Q. 24. Government of India is seriously thinking to allow oil marketing public sector, undertaking to fix their own price for petrol and diesel. 1. Name the economic reform related to this decision of government. 2. Name other two reforms recommended in new economic policy. Ans. 1. Liberalization 2. Other two reforms: Privatization and Globalization. Q. 25. Recently many companies have planned for significant investment in organizes retailing in India. Various factors which have encouraged companies to take these decisions are customer income is increasing, rise in standard of living of people. People are ready to pay high price for quality goods, government policy of liberalization regarding MNC entry and FDI, etc. 1. Explain briefly changes in business environment under different heads that have facilitated the companies’ decision to plan significant investment in retailing. 2. What has been the impact of these changes with regards to globalization and privatization? Ans. 1. Explain recent changes in various environment heads, i.e., economic, social, political, legal and technological. 2. Explain the topic, impact of change in government policy/economic policy. Q. 26. Two big banner movies were scheduled to be released on the same date. On the last movement release of one of the movies has to be postponed due to opposition of a group of people due to some unethical contents related to their religion was shown in the that movie. The other movie released on time and made huge profit as there was no competition and movie which was postponed suffered loss.  1. Which feature of business environment is highlighted here. 2. Identify the dimension of business environment, which delayed the release of movie. Ans. 1. Feature highlighted in ………’relativity’. 2. The dimension is ……..’social environment’. Q. 27. After winning the election, Prime Minister Mr. Narender Modi launched a Campaign of ‘Swachh Brarat’ and invited various celebrities to be a part of this Abhiyaan. This spread awareness among the people in society and in general, people started becoming more careful and aware about the cleanliness around their area. To continue its impact, a new service tax for Swachh Bharat was also started. The government is planning to import new and better technology to adopt new methods of treating the garbage and waste. State the various dimension of business environment mentioned in the above para quoting the lines from the above para. Ans. 1. “After wining election ….. campaign of Swachh Bharat.” Political Environment 1. “People in society ….. around their area.” 2. Social Environment 3. “A new service tax ….. started.” Economic Environment 1. “Import new technology …. Garbage.” Technological Environment Q. 28. Even after opening up of Indian Economy, foreign companies found it extremely difficult to cut through the bureaucratic and red tapism in government offices. This discourages them from investing in India. Identify the dimension of environment mention in above para. Ans. Political Environment. Q. 29. Just after the declaration of Lok Sabha Elections in 2014, the Bombay Stock Exchange Index rose by 1000 points. Identify the dimension of business environment. Ans. Political Environment. Q. 30. ‘Mamta Rice Food Ltd’ is a well know rice producing company. The sales have been falling down from the beginning of the year. The managing director MR. Bhuvan is worried about this situation. With a view to find out the solution of this problem he made a team to find but the reasons for downfall of sales. The team conducted the survey and gave following four reasons for the downfall of company’s sale. 1. On account of increase in export duty made by the government, the foreign demand has gone down. 2. Due to availability of other eatable substitute the taste of people is diverted from rice. 3. The competitor’s imported new technology machine and are producing better quality rice. 4. Due to strain with neighbouring country’s government and our country’s government export is effected. Identify the dimension of Business Environment discussed in the above case. Ans. 1. Economic Environment 2. Social Environment 3. Technological Environment 4. Political Environment. Q. 31. 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 cased are as follows: 1. Social environment: 2. Technological environment: Q. 32. A recent rate cut in the interest on loans announced by the banks encouraged Amit, 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 form garbage. He developed such a car and exhibited it in the Science Fair organized 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: 2. Technological Environment: Q. 33. ‘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: 2. Technological Environment: Q. 34. 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 consumptions 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.” Q. 35. 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 minimizing 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: 1. Political Environment: 2. Technological Environment: 3. Economic Environment: 1. The two values which the Government of India wants to convey through this initiative are: 1. High quality standards 2. Concern for environment Q. 36. 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 Interest, 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. Q. 37. To mark the celebrations of International Family Day on 16 th may 2016, Kurkure flagged off India’s first family food train – Kurkure Family Express at New Delhi. The traintook forty families ona fun culinary experience of a lifetime through an eight-day journey across fourteen states in India. A whole lot of fun activities were hosted on the train by the travel and food anchors Rocky and mayor. The families were selected through an online campaign, ‘Chatpata family photos’. The contest attracted approximately 1,000 entries, of which 40 entries that gelled with the brand’s image were selected. The core idea of the campaign was to bring families from across India together over a journey like this. As in today’s time, everyone is busy with their life the family members may feel disconnected with each other. Identify and explain the various dimensions of business environment being referred to the in the above case by quoting lines from the paragraph. Ans. The various dimensions of business environment being referred to in the above case are as follows: 1. Technological environment: 2. Social environment: Q. 38. In the year 2016,the State Government of Kerala had made it mandatory for anganwadis hostels and canteens in educational institutions to secure the Food Safety and standards Authority of India (FSSAI) licence to ensure food safety. As the educational institutions also get categorized as food business operators in the event of the annual turnover of the hostels, they run exceeding Rs. 12 lakh per annum. In context of the above case: 1. Identify and explain the various dimensions of business environment being referred to here. 2. List any two values which the State Government of Kerala wants to convey through this initiative. Ans. 1. The various dimensions of business environment being referred to in the above case are as follows: 1. Political Environment: 2. Legal environment: 1. The two values which the State Government of Kerala wants to convey through this initiative are: 1. High quality standards 2. Good health Q. 39. Postage stamps have been unveiled to commemorate 140 years of existence of the country’s first stock exchange the Bombay Stock Exchange (BSE). The setting up of BSE is considered to be the greatest revolution that took place in the financial markets in India as it acts as a key driver for economic growth of a country. This is due to the fact that there exists a strong correlation between economic growth and capital accumulation. In the context of the above case: 1. Identify the dimension of business environment of India being referred here. 2. State any three factors which broadly affected the dimension of business environment of India as identified in part (a) of the question. Ans . 1. Economic environment is the dimension of business environment of India being referred here. 2. The three factors which broadly affect the economic environment of India are stated below; 1. Stage of economic development of the country. 2. The economic structure in the form of mixed economy which recognizes the role of both public and private sectors. 3. Economic planning, including five year plans, annual budgets, and so on Q. 40. In May 2016, the government had launched a web-based application which will provide as opportunity to all the industries dealing in hazardous waste to apply online and get online permissions for import and export of certain categories of waste, which is for reuse, recycling or recovery while it will also help authorities in web-based processing, generation and grant of various types of permissions to the entrepreneurs and industries. It is also aimed at implementing the concept of paperless and green office and provide information regarding number authorizations or consent order granted by the State Pollution control Boards (SPCBs). Identify the various dimensions of business environment being referred in the above case. Ans. 1. The various dimensions of business environment being referred to the in the above case are as follows: 1. Political Environment: 2. Technological Environment: 3. Legal Environment: 4. Social Environment: 5. Economic Environment: Q. 41. Bharat is running an ice cream parlour in a local market. Keeping in mind the changing perceptions about health among the people, one of his employee Abhiraj suggests to him that they should introduce a range a flavoured yogurt. Bharat accepts his suggestion as a result both the image and the profitability of his business increases. In the context of the above case: 1. Identify the feature of management which is being highlighted. 2. State the related dimension of the business environment. 3. Name and explain the related principle of general management. Ans. 1. The feature of management which is being highlighted is Dynamic. 2. The related dimension of the business environment is Social. 3. The related principle of general management is Initiative. Initiative means taking the first step with self-motivation. The workers should be encouraged to develop and carry out their plans for improvement. Suggestion system should be adopted in the organization. 

Important Notes for NCERT Class 12 Business Studies Chapter Environment

Business environment can be defined as those forces, individuals and institutions who have the ability to influence the working of an organisation. IMPORTANCE OF BUSINESS ENVIRONMENT 1. Identification of opportunities to get first mover advantage:  Understanding of business environment help an organisation in identifying advantageous opportunities and getting their benefits prior to competitors. 2. Identification of threats:  Correct knowledge of business environment help an organisation to identify those threats which may adversely affect its operations. 3. Tapping useful resources:  Business environment made available various resources such as capital, labour, machines, raw material etc to a business firm. In order to know the availability of resources and making them available on time knowledge of business environment is necessary. 4. Coping with Rapid changes:  Continuous study/scanning of business environment help in knowing the changes which are taking place and thus they can be faced effectively. 5. Assistance in planning and policy formulation:  Understanding and analysis of business environment help an organisation in planning & policy formulation. 6. helps in Improving Performance:  Correct and continuous monitoring of business environment help an organisation in improving its performance. DIMENSIONS / COMPONENTS OF BUSINESS ENVIRONMENT 1. Economic Environment:  It has immediate and direct impact on a business. Rate of interest, inflation rate, change in the income of people etc. are some economic factors which could affect business firms. Economic environment offers opportunities to a firm or it may put constraints. 2. Social Environment:  It includes various social forces such as customs, beliefs, literacy rate, educational levels, lifestyle, values etc. Changes in social environment affect an organisation in the long run. Example: now a days people are paying more attention towards their health as a result of which demand for mineral water, diet coke etc has increased while demand of tobacco, fatty food products has decreased. 3. Technological Environment:  It provides new and advance ways/ techniques of production. A businessman must closely monitor the technological changes taking place in the industry as it helps in facing competition and improving quality of the product. 4. Political Environment:  Changes in political situation also affect business organisations. Political stability builds confidence among business community white political instability and bad law & order situation, may bring uncertainly in business activities. Political environment has immediate and great impact on the business transactions, so the businessman must scan the environment carefully so that necessary changes can be made in the organisation as per requirements. 5. Legal Environment:  It constitutes the laws and legislation passed by the Government, administrative orders, court judgements & decisions of various commissions and agencies. Businessman had to act according to various legislations and so their knowledge is very necessary. Economic Reforms: As a part of Economic reforms, the Government of India announces new Industrial Policy in 1991, whose main features are as follows: 1. Only six industries were kept under licencing scheme. 2. The role of public sector was limited only to four industries. 3. Disinvestment was carried out in many public sector enterprises. 4. Foreign capital/investment policy was liberalised and in many sectors 100% direct foreign investment was allowed. 5. Automatic permission was given for signing technology agreements with foreign companies. 6. Foreign investment promotion board (FIPB) was setup to promote & bring foreign investment in India. 

We hope the above  Environment Class 12 Business Studies  are useful for you. If you have any questions then post them in the comments section below. Our teachers will provide you an answer. Also refer to  MCQ Questions for Class 12 Business Studies

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Business Environment Case Studies for Class 12 Business Studies Chapter 3

• Last modified on: 7 months ago
• Reading Time: 7 Minutes

Table of Contents

Here you will find Case Study Questions for CBSE Class 12 Business Studies (BST) Chapter 3 Business Environment.

Business Environment Case Study Questions

Case Study Question 1:

Units and Chapter List:

Unit 1 – Nature and Significance of Management, Principles of Management and Business Environment

Chapter 1: Nature and Significance of Management Case Studies Chapter 2: Principles of Management Case Studies Chapter 3: Business Environment Case Studies

Unit 2 – Planning and Organising

Chapter 4: Planning Case Studies Chapter 5: Organising Case Studies

Unit 3 – Staffing, Directing and Controlling

Chapter 6: Staffing Case Studies Chapter 7: Directing Case Studies Chapter 8: Controlling Case Studies

Unit 4 – Financial Management and Financial Market

Chapter 9: Financial Management Case Studies Chapter 10: Financial Market Case Studies

Unit 5 – Marketing and Consumer Protection

Chapter 11: Marketing Case Studies Chapter 12: Consumer Protection Case Studies

How to Tackle Business Studies Case Studies in Exams

Here’s a tip on how to approach and answer case study questions for Class 12 BST (Business Studies) exams:

1. Understand the Format:

• Case study questions are designed to test your ability to analyze and apply your knowledge to real-world situations.
• These questions are usually longer in length, but your answers should be concise and to the point.

2. Careful Reading:

• Begin by carefully reading the entire case study. Don’t rush; understand the context and details provided.
• Pay attention to any data, statistics, or specific information presented in the case.

3. Examine the Question:

• Before diving into the case study, read the question(s) associated with it. This will help you focus on what to look for while reading the case.
• Identify the key concepts or issues the question is addressing.

4. Highlight Key Information:

• While reading the case, underline or highlight important facts, figures, or statements that seem relevant to the question.
• Make notes if necessary to organize your thoughts.

5. Analyze the Situation:

• Once you have a good grasp of the case and its details, analyze the situation. Consider the cause-and-effect relationships, potential solutions, and any ethical or business principles involved.

6. Structure Your Answer:

• Start your answer with a brief introduction, summarizing the main problem or situation presented in the case.
• Organize your response logically. You can use bullet points or numbered lists for clarity.
• Present your analysis, providing relevant business theories or concepts as appropriate.
• Offer solutions or recommendations based on your analysis. Be clear and concise in your suggestions.

7. Use Simple Language:

• Write your answers in clear and simple language. Avoid unnecessary jargon or complex vocabulary.
• Ensure your answers are easy to understand for the examiner.

8. Practice with Sample Papers:

• Practice case study questions from sample papers and previous year papers to get a feel for the format and types of questions that may be asked.
• Writing practice answers will help you refine your approach.

Remember to practice, and you’ll become more proficient at tackling case study questions effectively.

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Faith in three GURU-TEACHER, GOD, &; SELF. Sky is the limit. Give comments/ likes

Case Studies - (Chapter- 3) Business Environment , BST Class 12

Sir please solve this🙏 Case study:- Raman is the Sales Manager of a reputed Corporation. He has 25 employees in his Department, and all are paid commission for their sales in their territories. For the past three years, the market for the company’s goods has been steadily growing and the majority of Raman’s staff have met this growth with increased sales. However, one employee in particular, Krishnan has not kept up with the pace. Krishnan has been with this Corporation for over 20 years and is now 56 years old. Krishnan is a friendly man and is liked by his peers and those to whom he sells the company’s products on a regular basis. The company has always considered Krishnan dependable and loyal. Through the years Krishnan has been counted as an asset to the company, but at the age of 56 he has gone into a state of semi-retirement. Krishnan’s sales have not increased as the others have and he does not have the determination to acquire a significant increase in sales. Raman wishes to change this situation. He wants to motivate Krishnan into increasing his sales to match that of his younger peers. To accomplish this, Krishnan must begin to do more than put in his time, but Raman is not sure how to go about trying to motivate him. Unlike the majority of the new employees Krishnan is an old man, who within a few years will reach the age of retirement. If you were Raman what would you do?

Social environment

Thank you sir for posting these case studies :)

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CBSE Class 12 Important Questions for Business Studies Chapter 3: Business Environment

• Class 12 Important Question
• Business Studies
• Chapter 3: Business Environment

CBSE Class 12 Business Studies Chapter-3 Important Questions - Free PDF Download

Key Questions and Answers for CBSE Class 12 Business Studies Chapter 3 - Business Environment, produced by qualified Business Studies teachers from the most recent editions of CBSE (NCERT) books, are available for free PDF download. Join for online tutoring at Vedantu.com to improve your CBSE board test score.

Important Topics in Class 12 Business Studies Chapter 3

The main topics covered in this chapter are listed below.

Meaning of a Business Environment

Features of a Business Environment

Importance of a Business Environment

Dimensions of a Business Environment

Impact of Changes in Government Policy on Business and Industry

Related Chapters

Study Important Questions for Class 12 Business Studies Chapter 3 - Business Environment

Very Short Answer Questions (1 or 2 Marks)

1. What is Business Environment? 

Ans: Business environment refers to all the factors that are outside the control of the business enterprise but may equally affect the performance of the business. The social, political, economic, technological factors that operate outside a business forms a part of the business environment.

2. Which of the sectors was given importance after independence? 

Ans: After independence, the private sector was given more importance than the public sector. The role of the public sector slowly declined after independence and the private sector was given a leading role.

3. How have customers benefited by increased competition after liberalization and globalization? 

Ans: Globalization and liberalization had caused amplified competition in the market, which benefited the customers as they got a better quality and broader choice of goods and services while making a purchase. 

4. What do you mean by Liberalization? 

Ans: It is a reform which was introduced to remove unnecessary controls, licensing and government restrictions in an economy. It provides a greater autonomy to the business enterprises in decision-making and removes government interference.

5. How can the firms cope up with changing technological environment? 

Ans: In order to cope with the shifting technological environment a firm must remain conscious about the current changes in the technological field. Thereafter they must acclimate to such change to gain the benefit of new technology. Hence, they need to keep innovating and finding new ways so as to cope with the changing technological environment.

6. What is meant by opportunities? 

Ans Opportunity refers to the positive exterior trends that have the potential to add value to an enterprise. 

7. What do you mean by Globalization? 

Ans: Globalization is the word used to define the increasing interdependence of the world's economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and data. Hence, Globalisation means to open ways for the various economies of the world to participate in the making of a global economy. 

8. Which policy of the Indian Government has moved India towards globalization? 

Ans: The Industrial Policy of 1991 . 

9. What do you mean by Innovation? 

Ans: The actions required to create new ideas, procedures or products which when executed lead to a positive effective change is known as innovation. Innovation involves the practical application of an inventive act.

10. Name the economic reforms introduced to free Indian business from unnecessary controls and restrictions. 

Ans: Liberalization under the new economic policy of 1991 was introduced to free Indian business from unnecessary controls and restrictions. 

11. What do you mean by disinvestment? 

Ans: It   means to transfer the ownership from the public sector to the private sector. It is an action taken by the government for privatization. In this the government’s stake is diluted in a public enterprise.

12. Give one measure taken by Indian Government to introduce liberalization. 

Ans: Under liberalisation, the requirement of licensing was abolished except for five industries

liquor, 

cigarette, 

defense equipment, 

industrial explosives, and 

dangerous chemicals.

Short Answer Questions (3 or 4 Marks)

13. Explain how does the understanding of business environment help the management in the following: 

A. Tapping useful resources; and

Ans: Business utilizes the resources of the external environment as inputs like finance, labour etc., and supplies its output to the environment in the form of goods and services etc. Also, understanding of the business environment helps the firm to track the useful resources available in the environment and convert them into goods and services.

B. Coping with rapid changes.

Ans: The business environment is extremely dynamic so the managers need to develop strategies not only to cope with the changes but also to use them as their strengths to improve their market shares. In order to proficiently cope with the changes, managers must understand the environment and should adopt suitable courses of action at the right time. It helps management in becoming more aware about the shifting needs of customers. As a result, they are able to respond to such changes efficiently.

14. An environmental conscious multinational company "AXN Ltd." follows certain well defined business principles that result in minimizing employee turnover. Following are some of the important environmental factors followed by 'AXN Ltd.' 

Honour  the law of every country in which it operates. 

Respect the culture and customs of all nations. 

Provide clean and safe products to enhance the quality of life throughout the world

Develop a culture in the company that enhances individual creativity and teamwork while honouring mutual trust and respect between management and labour. 

 From the above: 

i)  Identify and state any one general principle of management and any one dimension  of the business environment.

Ans:   Principle of management :  Esprit de corps . 

As the culture of the company focuses on the developing and honouring of mutual trust and respect between management and labour, this is the principle followed by the company. Another principles can be the principle of initiative and stability of personnel.

Dimension of business environment: Legal environment :

It includes all the legislations passed, administrative orders issued, court judgements or decisions taken by government or its related offices. 

As in the case, it is stated that the firm was very particular about honouring the law of each country in which it operates. Other dimensions can be social and cultural environment, ecological environment.

ii) Values being conveyed: 

Respect for law

Cleanliness and hygiene

Concern for society and employees 

15. ‘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 on-line links to the suppliers to replenish stocks when needed. 

Identify and explain the dimensions of the business environment discussed in the above case. 

Ans: The dimensions of the business environment discussed in the above case are as follows. 

Political Environment: It includes political factors such as political leadership, political stability, practices of the ruling party, policies of the government etc. For example, change in government, or unstable government.

Quotation: “ Prime Minister allowed relaxation in import duties on electronic items”

Technological Environment: It consists of forces relating to scientific improvements and innovations, which lead to better production techniques and methods to produce goods. For example, shift from books to e-books, telephones to touch screen mobile phones. 

Quotation: “The company appointed retailers in India who had direct on-line links to the suppliers to replenish stocks when needed”

16. With change in the consumption habits of people, Neelesh, who was running a sweets 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 profit by selling chocolates. 

Identify and explain the dimensions of business environment discussed in the above case. 

Ans: The dimensions of the business environment that have been discussed here are as follows. 

Social Environment: Social environment represents the customs and traditions, values, culture, social trends, beliefs, ethics of society in which business operate. For example, religious celebrations provide business opportunities to many enterprises such as those producing sweets, decoration items, gifts etc. Similarly, in India a change in social trend towards western lifestyle has increased the demand for western wear, consumption of fast food, etc. 

Quotation: “ Change in consumption habits of people.”

Quotation: “ created a website chocolove.com for taking orders online. ”

17. Explain the role of political environment in shaping the business.? 

Ans: Political environment includes political factors such as political leadership, practices of the ruling party, policies, rules and regulations of the government, political stability  etc. 

Political stability builds confidence among the business community while political instability may bring uncertainty in business activities.

Hence the political environment holds the power to positively or negatively impact the business and its activities.

For example, if the government keeps on changing, and there is no political instability in the country, then with each change in the government, the ruling party will keep on bringing its own policies in the country, causing disruptions and losses in the activities of the business.

This is because a business functions within the framework of the political environment, and hence, when the government and its policies change, businesses are required to understand and follow such changes as well.

Factors like taxation policy and foreign trade policy affects a business in unthinkable ways. 

While on one hand, a progreesive and constructive change in these policies bring a positive change in the business, on the other hand, unstable, and unthought of changes in these policies disrupts the working and profitability of that business.

For example, after globalization, the Government of India allowed many companies to enter the Indian market to give a boost to the different industries like food processing industry etc. That paved the way for the entry of multinationals in India on a large scale. 

18. A recent rate cut in the interest on loans announced by the Banks encouraged Amit, 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 organized by the Directorate of Education. He was awarded first prize for his invention. 

Ans: The dimensions of the business environment discussed in the above case are as follows.  

Economic Environment: I t refers to all those factors and forces that have an economic impact on the business activities. Key economic factors include inflation, money supply, price level, income level, interest rates etc. For example, increase in inflation rates result in fall in disposable incomes and as a result the demand for products falls.

Quotation: “ A recent rate cut in the interest on loans announced by the Banks ”

Quotation: “developed such a car and exhibited it in the Science Fair organized by the Directorate of Education. He was awarded first prize for his invention. ”

19.   Enumerate the benefits of understanding the business environment. 

Ans: The benefits of understanding business environment are: 

Identification of Opportunities: It enables the firm to identify opportunities and get the first mover advantage. The positive external changes provide opportunities to a business organisation to improve its performance.

Identifying Threat: It helps the firm to identify threats and provide early warning signals. Adverse changes in the external factors act as ‘threats’ to the business which hinders performance. Early identification of threats helps managers to make strategies to convert threats into opportunities.

Tapping Useful Resources: Business utilizes the resources of the external environment as inputs like finance, labour etc., and supplies its output to the environment in the form of goods and services, taxes, etc.

Coping with Rapid Changes: The business environment is extremely dynamic so the managers need to develop strategies not only to cope with the changes but also to use them as their strengths to improve their market shares.

Planning and Policy Formulation: Clear understanding and analysis of the business environment help businesses to formulate its future plans and strategies to cope with all the external changes.

Improves Performance: The continuous monitoring of the business environment and changing business practices from traditional methods help business in improving their present performance and also continue to retain its market position in the long run.

20. Business environment or Environmental Scanning helps in the identification of threats and early warning signals." Explain? 

Ans: Adverse changes in the external factors act as ‘threats’ to the business which hinders a firm’s performance. Early identification of threats helps managers to make strategies to convert threats into opportunities.

Environmental scanning helps an enterprise to recognize valuable information about the market and environment in advance, which can be used to prepare a firm for facing likely challenges. 

For example, if there is a chance of an MNC entering an Indian market, then the Indian managers of firms dealing with the similar product have to consider it as a warning signal, and an upcoming threat. In such cases, the manager will take every possible action, such as improving quality of the product, cost reduction, better customer service, etc.,  to face the probable challenge arising from the entrance of an MNC.

21. Mention four examples of acquisitions and mergers. 

Ans: Four examples of mergers and acquisitions are: 

Disney, Pixar and Marvel. 

Google and Android 

Exxon and Mobil. 

Tata and Corus Steel.

Long Answer Questions (5 or 6 Marks)

22. 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 smartwatch, named as W-7. The watch besides showing the time also monitors a few health parameters like heart beat, 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. 

(a) In the above paragraph, two major concepts related to government policy have been discussed. Identify and explain these concepts. 

Ans: The two concepts related to the government policy discussed in the question are Liberalization and Globalization. 

Liberalization: It is a reform which was introduced to remove unnecessary controls, licensing and government restrictions in an economy. It provides a greater autonomy to the business enterprises in decision-making and removes government interference.

Quotation: “take advantage of simplified export procedure and removal of quantitative as well as tariff restrictions in India. “

Globalization: Globalization is the word used to define the increasing interdependence of the world's economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and data. Hence, Globalisation means to open ways for the various economies of the world to participate in the making of a global economy. 

Quotations: “Metlapp Networks and Technologies Ltd. is a leader in technology innovation in the United States, creating products and solutions for connecting the world.“ and “It set up its office in Jamnagar with a view to capture the Indian market. “

(b) Also, explain briefly any three impacts of these concepts on Indian business and industry. 

Ans: The three major impacts of these concepts on Indian business and industry were: 

Increased Competition: Liberalisation and Globalisation added ease in conducting business as well as increased the entry and participation of new firms in the industry, thereby intensifying the competition in the market. Due this increased competition, companies now focus on adding value to their products, and reduce the prices so as to attract more and more customers. Ultimately, customers get benefited by a wider choice of products, and reduced prices.

Higher Customer base: Liberalisation and Globalisation pave the way for technological changes in the environment. As with more research and development, creativity, and innovation, high-end technological products could be made available that would ultimately enlarge the customer base of the product. In the case as well, the digital watch and its high-end features helped the company in becoming the market leader by capturing a huge customer base in the Indian market.

Business policies: With the change in government policies, businesses also have to alter the way in which it performs its activities. Such positive change in policies helps the business in tapping opportunities by altering the way and methodology with which they perform business. Because, if a business would not make changes inline with changes made by the government, it could not survive in the market in the long run. As in the case, change in government policies of India was immediately implemented and taken benefit by the company, and they took actions accordingly.

23. Social environment of business is important for a business enterprise". Explain ? 

Ans: Social environment represents the customs and traditions, values, culture, social trends, beliefs, ethics of society in which business operate. 

A business exists within an external social environment, as well as its own internal social environment. A business is a part of the society in which it operates, it takes resources from the society, and provides goods and services in return.

Social environment includes factors, like taste and preferences of customers, trends in the market, consumption habits, the language and culture of people in the society etc. The management needs to have a constant and vigil check on the changes in the social environment, so as to exploit the right opportunities and to mitigate prospective threats. 

Cooperation and coordination between a firm and the society will flourish as well as add value to an enterprise, whereas failure to adopt changes of social environment will lead to the shift of customers from their firm to the other firm. This shift of consumer intensely impacts the long term growth and survival of business.

For example, with greater awareness among consumers about their rights, businesses are more concerned about the quality of goods they sell, hence they are more cautious regarding the quantity, quality and pricing of the goods.

Also, the change in consumer habits led to the inclination of consumers towards healthy products. This has created abundant opportunities for businesses to add and create products that could match the needs and preferences of the consumers.

Moreover a business conforming to social values, and ethics in business is likely to be more beneficial than a business who violates the ethics and social principles.

Therefore, we can say that a social environment is very important for a business.

24. Enumerate any ten Positive impacts of liberalization and globalization. 

Ans: The positive impacts of liberalization and globalization are as follow: 

Increased Collaborations: One characteristic of globalisation is the encouragement of entrepreneurial collaborations in order to ensure fast modernisation, development, and technical improvement.

Process simplification: Liberalisation has simplified the procedures of import and exports. Hence simplification in regards to registration, setting up of businesses, licensing was made possible. This leads to higher motivation, and the saving of time, energy and money on the part of business enterprises.

Increased competition: Increase in the number of Indian firms and entry of foreign companies has increased competition. Such increase in competition has benefited both, the firm as well as the customers.

More demanding customers : Increase in the number of enterprises gives consumers wider choice of products leading to rise in expectations and demands.

Rapidly changing technological environment: Fast changing technology requires companies to install the latest machinery, adopt latest techniques of production leading to an increase in investments in the business. Hence, LPG made the firms aware of the fact that only change could make them survive in the competitive market.

Necessity for change: With change in government policies business had to modify their policies and practices, invest in research and development, innovation etc.

Need for developing human resource: With change in technology, business enterprises need to educate and train their staff so that they are competent to handle changes, thus enhancing the quality of the labor force.

Market orientation: With increased awareness among consumers business enterprises had to shift the product oriented operations to market oriented operations.

Loss of budgetary support to the public sector: Public sector had to run in competition with the private sector. Therefore, they had to organise their own resources and functions efficiently.

Opportunities: It enables the firm to identify opportunities and get the first mover advantage. The positive external changes provide opportunities to a business organisation to improve its performance. Positive change in policies helps the business in tapping opportunities by altering the way and methodology with which they perform business. 

Inflow of foreign capital: With globalisation, work and trade has been made possible outside the national boundaries. This benefited the country in increased exports and the inflow of foreign capital.

25.   Explain any five negative impacts of liberalization and globalization. 

Ans: Following are the negative effects of liberalization and globalization. 

Threats from multinational companies (MNCs) : With the arrival of multinationals it is becoming difficult for small and medium business units to even survive. The entry of multinationals in the Indian markets act as a threat for the domestic firms. There have been instances, where the entry of new MNCs have led to the exit of domestic firms from the market.

Destabilization of protected environment: With easier entry of multinational companies, the Indian business environment is fast losing its protective shield. Even manufacturers of Maruti cars could not retain their market share and had to remodel their products and announce heavy price reductions from time to time. 

Decline in public sector: Public sector is losing markets and their capacity utilization has declined, hampering the pace of the country's technological and economic growth. 

Sellers' market turned into buyers' market: With the entry of foreign goods and services, shortage of goods, which was a boon for the sellers, has now turned into surplus. Resulting in lower revenue and profits. Buyers dominate the market, as they are free to make choices.

Tremendous redistribution of economic power and political power: Tremendous redistribution of economic power and political power leads to destabilising effects on the economy. Despite the continuing emphasis on promoting global prosperity and achieving a more “just world,” negative aspects of globalization remain evident in our globe. 

26. 'Explain 'fiscal reforms' and 'monetary reforms' as per economic change initiated by the Government of India since 1991. 

Ans: The explanations are:

Fiscal Reforms

There has been a reduction in the taxes and simplification of the structure of taxes on individual incomes since 1991. Fearing a heavy burden and complex nature of taxes, people would often evade taxes.

Reforms have also been made in taxes levied on commodities. The Goods and Services Tax which was passed in 2016 and came to effect in 2017, was expected to generate additional government revenue and prevent tax evasion.

Measures have been taken for the reduction in the fiscal deficit. 

Decrease in subsidies has also been made. 

Monetary Reforms 

Phased reduction of statutory liquidity ratio (SLR).

Private sector banks are allowed to set up new branches.

Banks have now been allowed access to the capital market for raising capital.

Permission for disinvestment (up to 49% of total equity). 

27. Explain any five ways in which managers have responded to changes in business environment. 

Ans: Following are the ways in which managers have responded to changes in business environment: 

Successful Conduct of Business: The manager can successfully conduct the business operations with the timely observance of any prospective opportunity or probable threat in the business environment. The managers can take necessary action as soon as they foresee a positive and negative change, thus leading to a successful conduct of the business operations. Hence, timely action benefits the firms and managers in unthinkable ways.

Diversification spree: To face competition, and take the most benefit of opportunities, the managers are diversifying their operations in multiple fields. Such as Reliance diversifying in sectors such as telecommunication, food, petroleum etc.

Chances for Growth: By identifying the changing situations and environment, the firm can gain support and win the confidence of the consumers and others. This support will bring more chances for growth and development of the firm. Positive change in policies helps the business in tapping opportunities by altering the way and methodology with which they perform business. 

Brand Building: Companies are aggressively spending money on brand building, and positioning their products in the minds of the consumers. Focus is on securing prime positions for their brands, through creative media-mix, in the minds of consumers. 

Labor: Managers are changing their behavior towards labor. Labourers have also benefited from the business environment, through higher wages and other facilities like training to upgrade their skills and job enrichment.

28. Briefly discuss the impact of government policy changes on the business and industry. 

Ans: The policies of liberalization, privatization and globalization by the government affect the functioning of the business enterprises. 

The following points show the impact of government policy changes on the business and industry. 

Increased Competition: Liberalisation and Globalisation added ease in conducting business as well as increased the entry and participation of new firms in the industry, thereby intensifying the competition in the market. Due this increased competition, companies focussed on adding value to their products, and reduce the prices so as to attract more and more customers. Ultimately, customers get benefited by a wider choice of products, and reduced prices.

Higher Customer base: Liberalisation and Globalisation pave the way for technological changes in the environment. As with more research and development, creativity, and innovation, high-end technological products could be made available that would ultimately enlarge the customer base of the product. 

Business policies: With the change in government policies, businesses also have to alter the way in which it performs its activities. The government policies directly impact the functioning of the business enterprises, forcing the businesses to alter their policies accordingly. A positive change in policies helps the business in tapping opportunities by altering the way and methodology with which they perform business. Because, if a business would not make changes inline with changes made by the government, it could not survive in the market in the long run. 

Technological Changes: The change in government policies has lead to free entry of new firms, thus increasing market competition. Therefore, with change in government policies, businesses had to make efforts in developing and using new technology, modifying the obsolete technology, investing in research and development, innovation etc.

Need for Trained Personnel: With change in technology, business enterprises need to educate and train their staff so that they are competent to handle changes, thus enhancing the quality of the labor force

Greater Market Orientation: The orientation has shifted to market orientation with the intense competition taking place in the market. That is, the enterprises produce and provide the goods and services as per the demand in the market. 

Less Budgetary Support Reliance by Public Sector Enterprises: Rather than depending on the budgetary support so as to cover the losses, the public enterprises needs to make efforts in improving its work performance, efficiency and productivity so as to successfully face the increased competition, and curb the losses. 

On the whole, the impact of Government policy changes particularly in respect of liberalization, privatization and globalization has been positive as the Indian business and industry has shown great resilience in dealing with the new economic policy. 

29. What is meant by ‘business environment’? Explain any three features of business environment.

Ans: Meaning

Business environment refers to all the factors that are outside the control of the business enterprise but may equally affect the performance of the business. The social, political, economic, technological factors that operate outside a business forms a part of the business environment.

Features of Business Environment

Totality of external forces: Includes every external or outside force that could impact a business organisation such as government, competitors, etc.

Specific and general forces: Specific forces are the forces which directly affect a specific business organisation. General forces are those forces which pose a direct impact on the overall industry, but pose an indirect effect on a business enterprise.

Inter-relatedness: The changes in general forces may result in changes in specific forces. For example, a change in the government (a political force) may lead to a change in tax rates, import-export rates (an economic force)

Dynamic nature: The external forces keep changing due to constant change in technology, consumer preferences, availability of different types of raw material etc.

Uncertainty: Constant changes in environment makes it difficult to predict changes in the external environment.

Complexity: The interrelated and dynamic nature of external forces makes it difficult to prepare one single strategy to handle all the changes.

Relativity: The impact of changes depends on business to business country to country region to region etc.

30. Explain the dimensions of Business Environment.

Ans: The dimensions of business environment are:

Economic Environment: It refers to all those factors and forces that have an economic impact on the business activities. Key economic factors include inflation, money supply, price level, etc. For example, increase in inflation rates result in fall in disposable incomes and as a result the demand for products falls.

Social Environment: Social environment represents the customs and traditions, values, culture, social trends, beliefs, ethics of society in which business operate. For example, with greater awareness among consumers about their rights, businesses are more concerned about the quality of goods they sell, or the change in consumer habits led to the inclination of consumers towards healthy products.

Political Environment: Political environment includes political factors such as political leadership, practices of the ruling party, policies, rules and regulations of the government, political stability etc. 

Legal Environment: It includes all the legislations passed, administrative orders issued, court judgements or decisions taken by government or its related offices. For example, all cigarette packets must carry a warning ‘smoking is injurious to health’

Technological Environment: It consists of forces relating to scientific

improvements and innovations, which lead to better production techniques and methods to produce goods. For example, shift from books to e-books, telephones to touch screen mobile phones.

Important Topics in Class 12 Business Studies

The important topics covered in Class 12 Business Studies are given below.

What is Marketing Mix?

What is the Stock Exchange?

Importance of Consumer Protection

Marketing Vs Branding

CBSE Class 12 Business Studies Chapter 3 is one of the most highly rated chapters on the curriculum. The elements impacting an establishment's performance outside of its regulation, as you have seen in this chapter, are the forces influencing its business environment. This chapter will help you understand how understanding the company environment may assist you in tapping helpful resources and dealing with quick changes. Some of the other important topics covered in this chapter are ways by which a firm copes with varying technical environments, the role of the political environment in shaping a business, how the social environment of a business is important for an enterprise, and the benefits of knowing the business environment thoroughly.

You can also find study resources like NCERT Solutions for Class 12 Business Studies , and Revision Notes on Class 12 Business Studies , on Vedantu for free. Also, you can sign up for our customised study plans and one-on-one LIVE classes during which our experts will help you clear all your doubts and get a good score in the 12th Board exam.

Conclusion  

When drawing a conclusion on CBSE Class 12 Important Questions for Business Studies Chapter 3: Business Environment, it's important to consider the key topics and concepts covered in the chapter. The chapter "Business Environment" in Business Studies explores the external factors that influence business operations and decision-making. It covers aspects such as the economic, social, political, and technological environment in which businesses operate.

The important questions provided in the CBSE Class 12 Business Studies textbook, along with their solutions, serve as a valuable resource for students to assess their knowledge and prepare for examinations. By practising these questions, students can strengthen their understanding of the chapter and improve their performance in assessments.

FAQs on CBSE Class 12 Important Questions for Business Studies Chapter 3: Business Environment

1. How many chapters are there in Class 12 Business Studies?

There are a total of 12 chapters in NCERT Class 12 Business Studies. Business Environment is the third chapter of this book. Students are advised to learn and revise all chapters thoroughly to score well in the exam.

2. What are the main features of a business environment?

The business environment means all the forces that are not in an enterprise's control but can affect its performance. Some of the features of a business environment are -

Total of external forces - It is the sum of all external forces.

Specific and general forces - It may be related to investors or general as in politics.

Dynamic nature - Ever-changing

Uncertain in nature - Due to the ever-changing nature

Complexity - Due to many factors in play

Relativity - Differs from place to place

Inter-relatedness - Elements are related to each other

3. Why is the business environment uncertain?

There are many factors that influence a business environment. One of them is its uncertain nature. The business environment can be uncertain due to many reasons such as a change in political policies, change in customer preferences of fashion or taste, technological advancements, increase in competition, etc. All these factors can change at any time and this is what makes a business environment uncertain. As these changes take place frequently and quickly, it becomes difficult to predict the future of a business environment.

4. What are the books for Class 12 Business Studies?

The two important books for CBSE Class 12 Business Studies are the textbooks published by the NCERT, i.e., Principles and Functions of Management, and Business Finance and Marketing. Students can also learn from other reference books and solve previous years’ question papers available on Vedantu for their exam preparation.

5. What was the impact of demonetization on the Indian economy?

The Government of India on Nov 8, 2016, announced that the high denomination notes of Rs. 500 and Rs. 1000 were not legal tenders anymore and were demonetized. The main impacts that demonetization had are the following -

Decrease in cash transactions

Increase In bank deposits

Increase in financial savings

Decline in private wealth since many high denomination notes were not returned

Digital transactions increased

Prices of real estate declined

Income tax collection increased due to an increase in disclosure

CBSE Class 12 Business Studies Important Questions

Cbse study materials.