Business Environment

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. In this chapter you will study its features, namely totality of external forces, specific and general forces, interrelatedness, dynamic nature, uncertainty, complexity and relativity, and its importance in helping a firm identify opportunities and threats, tap useful resources, cope with rapid changes, assist planning and improve performance. You will learn the five dimensions of business environment: economic, social, technological, political and legal. The chapter then examines the economic environment in India, especially the New Economic Policy of 1991 built on liberalisation, privatisation and globalisation, and later reforms such as demonetisation in November 2016 and the Goods and Services Tax introduced on 1 July 2017. You will analyse the impact of these changes on business and industry: increasing competition, more demanding customers, rapidly changing technology, the need for change and for developing human resources, market orientation and loss of budgetary support to the public sector.

Detailed Worksheet: Business Environment Section A - Definitions (10 marks) 1. Define business environment. Why is it described as relative in nature? (2 marks) 2. Distinguish between specific forces and general forces of the business environment with one example of each. (2 marks) 3. What is meant by liberalisation? State any two measures taken under it in 1991. (2 marks) 4. Explain the meaning of privatisation and globalisation. (2 marks) 5. What is demonetisation? State any two features of the demonetisation of November 2016. (2 marks) Section B - Calculations and Applications (15 marks) 6. A trader sells goods worth Rs 50,000 within his state, on which GST is levied at 18%. Calculate the total GST, and the CGST and SGST components. How would the tax be levied if he sold the goods to a buyer in another state? State two features of GST. (3 marks) 7. Before November 2016, Rs 500 and Rs 1,000 notes worth about Rs 15.4 lakh crore were in circulation, out of a total currency of about Rs 17.9 lakh crore. Calculate the percentage of currency that was demonetised, and explain two effects of this on small businesses. (3 marks) 8. Identify the dimension of business environment in each case: (i) rising demand for organic food due to health awareness (ii) a new law making e-invoicing mandatory (iii) a reduction in the repo rate by the RBI (iv) growth of UPI payments (v) political stability after elections (vi) increase in demand for gym equipment after the pandemic. (3 marks) 9. A smartphone company's sales rose from Rs 400 crore to Rs 520 crore in one year after it launched a low-cost 5G model ahead of its rivals. Calculate the percentage growth in sales, and name the importance of business environment illustrated. (3 marks) 10. Identify the impact of government policy changes on business in each case: (i) many foreign brands enter the Indian car market (ii) customers demand better quality and more choice (iii) public sector units must generate their own funds (iv) firms train employees in new technology. (3 marks) Section C - Diagrams (10 marks) 11. Draw a chart showing the five dimensions of business environment with one example of each, placing the business enterprise at the centre. (4 marks) 12. Draw a flowchart showing the components of the New Economic Policy of 1991 (liberalisation, privatisation and globalisation) and two measures under each. (3 marks) 13. Draw a chart showing the six features of business environment with a one-line explanation of each. (3 marks) Section D - Analysis and Higher-order Thinking (15 marks) 14. A home appliance company ignored the growing demand for energy-efficient products, while its competitor launched star-rated inverter appliances and captured a large market share. Analyse the importance of business environment illustrated by both companies and suggest how the first company should respond. (5 marks) 15. Explain the impact of government policy changes since 1991 on Indian business and industry under any five heads. Analyse whether these changes have been beneficial for Indian consumers. (5 marks) 16. A small kirana store owner says that the move towards digital payments after demonetisation has hurt his business, while a large retail chain says it has benefited. Analyse the reasons for these different views with reference to the features of demonetisation, and suggest how the kirana store can adapt. (5 marks) Instructions: Time allowed 2 hours. Attempt all sections. Quote relevant lines from cases while identifying concepts, and present flowcharts neatly.