Chapter 3 Business Environment

NCERT Business Research Solutions 

Very Short Answer Questions Chapter 12 Chapter 3


What does business environment mean?

The sum total of all forces (external, institutional and individual) over which a business organization has no control is called the business environment. The forces mentioned here can be of various natures, such as social, economic, political, legal or technological. These forces are beyond the control of the organization but can certainly have a positive or negative impact on its performance. Before.
g. Changing the design of an effective product will lead to its demand in the market, while sub-standard performance and degradation of the design will result in an inferior product.


How can understanding the business environment help improve business 

performance?

Organizations with a good understanding of the business environment can develop plans and policies based on the environment, thereby dramatically improving performance. It also helps counter any negativity present in the market with well-defined strategies.
This will help organizations perform at their best every time.


Give an example of a business enterprise operating in the many interdependent elements that make up the business environment. (Tip: Highlight examples of how business context dimensions interrelate).

The different elements of a business organization are interdependent and the result depends on all these elements. The business environment is made up of economic, social, technological, legal and other elements.
Let's understand with an example that a car manufacturer will be affected by the combination of all these factors in a business environment.


If there is a global recession or economic downturn, it will lead to lower car sales. The economics of buying a car come into play and will impact the business.


As new technologies are introduced, automakers need to follow them as an industry standard, which will benefit the organization. It is the impact of technical factors on the business environment.
With the introduction of GST, car manufacturers can now charge GST, which is mandatory for businesses, and it is a legal factor affecting the business environment.

Krishna Furnishers Mart has been in operation since 1954 and has become a market leader in the industry due to its original design and operational efficiency. They have a constant demand for their products, but over the years they have seen their market share decline due to new entrants entering the field. The company decided to take a fresh look at its operations and decided that it needed to research and analyze market trends to counter the competition, and then design and develop its products accordingly. List two impacts of changes in the business environment on the operations of Krishna Furnishers Mart.
(Hint: increased competition and market orientation).



The business environment of Krishna Furnishers Mart has changed with the following effects



The increase in competitors has led to more intense competition.

Design innovation is necessary to differentiate a product from its competitors.




5. Name two specific forces in the business environment that affect business.
Some forces have a direct impact on how a business is run. This may be due to changes in:


Changes in customer tastes.


Competitive Strategy


Evolution of Investor Loyalty





NCERT Business Research Solutions Course Short Answer Questions Chapter 12 Chapter 3 4
4 to 4 Is it important to understand their business environment? explain.
Understanding the business environment is important because it helps determine the success or failure of an organization. The functioning and performance of an organization depends on various factors which may be external. When we understand the business environment, it becomes easier to drive the factors that contribute to growth.

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


Businesses can identify opportunities that benefit them.
It will help you take the first step and stay ahead of the competition.


Businesses can identify potential threats by studying the business environment that may affect the growth of the organization. Therefore, studying the business environment is beneficial in identifying threats and determining the best solutions to eliminate them.


Business operations require a variety of resources, studying the local business environment to determine appropriate resources. These inputs are used to create various products.
The business environment is dynamic in nature, with factors such as technology, consumer preferences and government policies changing in response to demand. Knowing the business environment will make it easier to easily adapt to changes.


Business environment studies help develop new programs and policies based on market trends and more in tune with current conditions.


The analysis of the business environment will lead to a better performance of the organization.


Explain the following terms:

liberalization


privatization

globalization

1. Liberalization Liberalization is the process or means of removing state control over economic activities. It gives business enterprises more autonomy in decision-making and eliminates government interference. The purpose of liberalization is to increase competition between businesses. It also promotes foreign trade between countries. This also helps the business expand its global footprint. Opening up the economy improves the economic development of a nation through the inflow of funds from foreign sources. The basic features of liberalization are: Liberalization brought about the abolition of the licensing policy. Only a handful of industries remained, such as cigarettes, spirits, defense equipment, pharmaceuticals, and hazardous chemicals. A business can decide the amount of goods it wants to produce according to market conditions. This applies to companies with an asset base of 100 million crowns. Liberalization helped remove various trade restrictions, duties, tariffs, which helped in easy movement of goods and services. Liberalization has helped in promoting foreign direct investment and increased competition attracting foreign service providers. Privatization Privatization can be explained as the process of transferring ownership from the public sector to the private sector. This is also known as loss of business investment. Privatization aims to reduce government ownership in industries. It reduces the workload of public enterprises and also paves the way for economic development by encouraging foreign direct investment (FDI). The main features of privatization are: The government adopted two different disinvestment methods. In this case, the first way was to sell part of the equity in one of the PSUs and the second process was to sell the PSUs strategically. Many businesses have been sold with these methods. These include big companies like Maruti Udyog, BALCO etc. A board was established that was specifically charged with the recovery of companies that were sick or making losses. It was known as the Board of Industrial and Financial Reconstruction. In privatization, the role of the public sector was substantially reduced, with only 8 companies under government control. As it stands, only 3 industries are under the government and they are Atomic Energy, Railways and Atomic Minerals. To improve efficiency among public sector companies and increase the level of professionalism, the government has decided to award the title of Navaratna to all 9 high-performing PSUs (Public Sector Units). Globalization Globalization can be understood as the integration of the national economy with the world economy. It represents the free flow of information, technology, goods and services, ideas, capital and even people as a form of resource across different countries. Globalization helps improve cross-border connectivity between different markets in the form of investment, trade and cultural exchanges. Below are the main features of globalization: It removed or reduced all trade barriers such as tariffs, trade restrictions, customs duties etc. which led to more trade to and from India. Export and import duties were reduced, which helped in promoting free trade between India and the world. The goal of globalization was to support the establishment of foreign capital in the form of FDI (Foreign Direct Investment), it also resulted in the creation of SEZs (Special Economic Zones) and the creation of FEMA (Foreign Exchange Management Act).