CBSE Class 12 Business Studies Business Environment

Chapter – III

Business Environment

What is meant by “business environment”? –

Business environment means forces and institutions which the members of a firm must deal with in order to achieve the objectives of the organization. Forces include politic, economic, social, technological, etc (PEST) and Institutions include (competitors, customers, suppliers, etc)

The environment provides both constraints and opportunities. Discuss with examples

• An environment provides constraints (restrictions), which could be in the form of economic conditions, customs, government regulations, availability of natural resources, labour supply.

Example: Despite many initiatives, foreign direct investment in India is not picking up in the country because of political and bureaucratic reasons.

• On the other hand, environment also provides the firms numerous opportunities in the form of unmet and changing needs of the customer and market.

Example: the growing demand for air conditioners has attracted many new domestic as well as multinational firms in the industry

What is meant by environment scanning? – 

• Environment scanning is a process by which organizations monitor their relevant environment so that they can consider the impact different events, trends, issues, expectations have on its strategic management process.
• Example – in the Union Carbide gas leakage incident in Bhopal in Dec-1984, The accident and the holocaust that resulted, was an “event” The consciousness on the part of the Regulatory Authorities regarding the safety from hazardous exposure to chemicals, was the “trend” The rising concern about environmental pollution was the “issue” “expectations” of the public from the government was to amend the laws to include safety measures and stricter enforcement through various mechanisms.

Briefly discuss two dimensions of general environment? Classify business environment in two major categories and give one example of each? – 

The two dimensions of general environment are:

Economic environment : includes fiscal, monetary and industrial policies, etc

Non economic environment : includes social, cultural, political, legal, technological factors, etc

Explain economic environment? – 

Economic environment consists of (BIG PICCED)

Balance of payment

Inflation rate

Gross national product (GNP)

Productivity

Interest rate

Consumer Income

Corporate Profit

Employment rates

Debt & Spending

Give two examples of the factors and influences that operate in the Indian ECONOMIC ENVIRONMENT and which have had an impact on all business organizations – 

a.Rapid increase of production capacity after partial a. decontrol of cement in 1982. 

Banking sector reforms led to attractive deposit avenues, easier credit terms, better service and above all an effective and reliable banking system

b. Due to changes in economic and fiscal policies, entry for financial institutions and banks in stock trading became easier.

c. What is meant by SOCIAL ENVIRONMENT of business? – 

Social Environment describes the characteristics of the society in which the firm exist. The following form a part of the social environment: Customs, Age, Beliefs, Lifestyle, Educational levels (CABLE) Literacy rates, Values, Demographic distribution & mobility of population (VLDM) Managers should remember that although the attributes of the society may change slowly or quickly but they will eventually change. They should study the social traits of the area before moving in that area otherwise the cost of ignoring the taste, preference, customs, traditions taboos of the society could be very high.

Please refer to attached file for CBSE Class 12 Business Studies Business Environment