Explore topic-wise InterviewSolutions in .

Value system, vision, mission and objective management structure, Internal power relationship, Human resources, Physical facilities, Marketing resources, etc. are the factors included in internal environment.

Technological environment

Technological environment consist of the method and technical of production.

Correct option is (c) Technological

(a) Internal environment factors

1. Shareholders

2. Employees

Positive Effects of Privatization:

• Rise in efficiency
• Absence of political interference,
• Qualitative goods and services
• Systematic Marketing
• Use of Ultra-modern activity,
• Hierarchical set up for accountability,
• Creation of competitive environment,
• Advantage of Research and Development,
• Advantage of modernization and innovation,
• Maximum utilization of means of production and
• Creation of Infrastructural facility.

Correct option is (D) Dearth of capital

Reasons for inefficient public sector units include:

• Bureaucracy
• Obsolete technology
• Rising corruption and bribery
• Absence of accountability
• Growing influence of labour unions
• Political interference, etc.

(A) Positive effects of privatization:

• Rise in production efficiency
• Absence of political interference
• Improved quality goods and services
• Systematic marketing
• Use of modern technology
• Hierarchical set-up for accountability
• Creation of competitive environment
• Advancement in research and development
• Advancement in modernization and innovation
• Maximum utilization of factors of production
• Growth of infrastructural facilities

(B) Negative effects of privatization:

• Exploitation of employees
• Misuse of powers by top management
• Unequal distribution of income and wealth
• Absence of job security
• Priority to profit
• Consumer exploitation, etc.

Before liberalization, most industries were dependent on licenses that they had to procure from the government by undergoing a very tedious and time consuming procedure. Critics called this as License Raj. After 1991, the government removed the License Raj (License System) and made the registration of new firms quite simple.

Under liberalization, the government removed barrier of foreign direct investment (FDI) in Indian industries and also increased its limit. Government also introduced Demat to attract more FDI.

Effects of Liberalization:

• By removing barrier to foreign direct investment in Indian Industries, maximum limit for foreign investors and businessmen has been gradually increased.
• In the field of share market, the procedure of purchase * and sale of shares have been made completely transparent by taking various steps.
• The Government started taking steps ^to make tax structure more simple and transparent.
• Indian currency has been given new symbol of •?’.
• ‘License Raj’ has almost been removed from India.
• Collective efforts are being made to increase the Exports of India.
• The changes were incorporated in Foreign Exchange Statute.
• Various changes have been made in Monopolies and Restrictive Trade Practices Act (MRTP Act) introducing number of relaxations in the Act.
• Reserve Bank of India has given freedom to various banks to decide the deposit and lending rate of interest, subject to certain conditions.
• The imports of goods and services have become easier and payment of foreign exchange has become simple.

Liberalization is a movement of business and trade from a controlled environment to an open and free system.

Business environment refers to the external environment which includes factor outside the business leading to opportunities or threats of the business

According to Bayard O. Wheeler “The total of all things external to firm and industries which affect their organization and operations is called as “Business Environment”

1. Liberalization refers to the process of eliminating unnecessary controls and restrictions for smooth functioning of business. 

2. Liberalization helps in achieving a high growth rate, easy availability of goods at competitive rates, high foreign exchange reserve, strong rupee and good industrial relation, etc.

Characteristics of Business Environment:

(i) Totality of all external forces affecting a business.

(ii) Includes both general and specific forces.

(iii) Inter-relatedness

(iv) Dynamic nature

(v) Uncertainty

(vi) Complexity

(vii) Relativity

Detailed Answer:

(i) Totality of all external forces affecting a business: It is aggregate of all things external to the business firms.

(ii) Specific and general forces: Specific forces affects individual film directly, general forces effects indirectly.

(iii) Inter-relatedness: Different elements of business environment are closely inter-related.

(iv) Dynamic nature: It keeps on changing due to changes in its various components.

(v) Uncertainity: It is very difficult to predict future happenings in business environment with accuracy.

(vi) Complexity: It is relatively easier to understand in parts but difficult to grasp in totality.

(vii) Relativity: It differs from country to country & region to region.

It means that business environment is related to the local conditions.

As it is the group of many outside forces, that is why, its nature is of totality.

1. False

2. False

Dimensions of, or the factors constituting 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.

Economic Environment includes interest rates, inflation rates, changes in disposable income of people, stock market indices and the value of rupee are some of the economic factors that can affect management practices in a business enterprise. Short and long term interest rates significantly affect the demand for product and services.

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.

It is said that business environment is uncertain because it is difficult to predict future happenings especially when environmental changes are taking place too frequently.

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.

(i) External Environment

(ii) Business Environment

(iii) Natural

(iv) Social

Understanding of Business Environment is very important for managers. It is highlighted through the following points.

(i) Identifying opportunities and getting first mover advantage: The businessmen, who are able to understand and scan the opportunities of business at early stage; can get maximum benefits or they can capture a big market before their competitors can grab these opportunities. For Example. Nerolac Goodlass company was the first company to understand the environment at an early stage to find out that there will be great demand of car painting in India and got all the car painting contract of Maruti company and today 90%, of car paint work of Maruti is done by Nerolac Goodlass company.

(ii) Identifying threats and early warning signals: Threats refers to the external environment trends and changes that will hinder a firm's performance. Threats work as warning signals for organisation to take suitable actions. By identifying threats and early warning signals, the organisation may effectively overcome it by adopting counter strategy. Timely scanning of business environment acts as warning signals for a business to prepare itself to modify its working in advance and try to utilize the qualitative information it receives about the competitors.

(iii) Helps in tapping useful resources: Businessmen have to supply the goods and services according to the demand and consumer needs. To supply and produce output, they need inputs like finance, power, machines, raw-material etc, keeping in mind their availability, in environment and demand of output in the market. So the existence enterprise depends on the environment as a source of inputs.

(iv) Improvement in performance: The study of environment acts as a major source of continuous learning on the part of managers. The enterprises that continuously monitor their environment and adopt suitable business practices at the right time are the ones which not only improve their present performance but also continue to succeed in the market for a longer period.

(v) Helps in assisting in planning and policy formulation: Environmental factors help in making plans and formulating policies for future. Scanning, understanding and analysing the business environment provides the base for planning and policy formulation (guidelines for decision making).

(vi) Helps in coping with rapid changes: It enables managements to become more sensitive to cover changing needs of customers. As a result, they are able to respond to such changes effectively.

No, as all the factors of business environment are related to each other.

Because they continue to change quickly.

i. Increase in Competition: Owing Privatisation of the Business Units of Public Sector, there has taken place an increase in competition. For example, the privatisation in telecommunication has resulted in a lot of increase in competition. Consequently, telecommunication services have become cheaper and of better quality.

ii. Reduction in Political Interference: Privatisation results in freedom from political interference. Consequently, there is no unnecessary delay in taking decisions and the work is done at a fast speed.

iii. Increase in Responsibility: Privatisation has led to the development of the sense of responsibility in the employees. The employees who used to be careless while working in Public Sector have now become honest in discharges their duties. Now, they are apprehensive of being fired from the company in case of non-performance. Such a change in the attitude/ approach of the employees has resulted in a positive impact on industry and business.

Business environment.

The following are the main features of demonetisation:

1. Tax Administrative Measure: Demonetisation is regarded as a measure of tax administration. People with cash-in-hand on account of their declared income readily deposited their cash in banks and got it exchanged for new currency. On the other hand, those who had black money had to come forward to declare their unaccounted cash and pay taxes along with a penalty.

2. Tax Evasion Control Measure: Demonetisation is also known as the Government’s measure to control the mal-practices of tax evasion (avoiding tax illegally).

3. Channelising Savings into the Formal Financial System: Demonetisation facilitates in channelising savings of the people into the formal financial system. As a result, some of the new deposits can be used for launching new profitable schemes and providing loans at lower interest rates.

4. Creating Less-Cash Economy: Demonetisation helps in effecting (bringing about) understanding in people for channeling more savings through formal financial system and hence improving more chances of less cash economy. Consequently, despite the limitations (non-availability of Cell Phones, Point-of Sale Machines— POS Machines, Internet Connectivity, etc.) of digitalising transactions, it helps in introducing formal economy.

Social, Political, Economic and Legal.

Political environment

Withdrawal of the status of ‘legal tender’ to the currency in circulation is called demonetisation.

Customers, Suppliers, Competitors and Investors.

(a) Understanding of business environment help the management in identification of threats on time which serves as an early warning signal enabling the firms to prepare themselves to meet the threats.

(b) Understanding of business environment helps the management in improving performance as the firms can then adopt suitable business practices not only to improve present performance but to continue to succeed in the long run.

Correct option is (d) Composition of family

Feature o business environment is indicated Complexity.

Business Environment: Business environment means the sum total of those factors which influence the business and over which the business has no control.

Changes: A prominent feature of business environment is its being dynamic. It means that business environment undergoes continuous changes, for example,

i. Change in the taste of the customers.

ii. Change in the attitude or conduct of the suppliers (for example, laying down the condition of advance payment).

iii. Change in the form or nature of competition because of the entry of many competitors in the market.

iv. Change in the attitude of the general public (for example, opposing the pollution spread firm).

v. Change in the expectation of the people from business.

vi. Change in the political structure.

vii. Change in the economic policies.

viii. Change in the legal regulations.

Managerial Response: After having clarified that there are compulsory changes going on in the business environment, the major question about the managerial response to these changes remains to be tackled. In other words, whether the managers give them any importance or not. In response to this question it would be appropriate to say that if the managers want that their business should continue to exist for a long time and that it should continue developing, giving importance to these changes is absolutely essential, otherwise not. It is obvious that all the managers would like to see their business to continue for a long time and flourish. Consequently, they would give importance to changes.

Correct option is (c) Legal environment

Dimensions of Business Environment discussed in the above case:

i. Economic Environment Economic environment refers to the combination of economic systems, economic policies and economic conditions of a country.

ii. Technological Environment Technological environment refers to innovations relating to various business activities.

1. Relativity is the feature of business environment discusses in the case above.

2. 1. The features of business environment are: 2. Determining opportunities and threats 

3. Identifying firm’s strength and weakness 

4. Continuous learning 

5. Image Building 

6. Meeting Competition 

7. Giving Direction for growth

Dimensions of Business Environment discussed in the above case:

i. Social Environment: It refers to the combination of all the characteristics of the society in which the organisation exists.

ii. Technological Environment: It refers to innovations relating to various business activities.

Correct option is (a)specific and general forces

Correct option is (c) technological environment

Correct option is (b) Legal

Correct option is (a) Identify opportunities

Technological environment

Correct option is (b) Identified threats

Company overlooked Environment protection, concern for human life, respect for law and order and social responsibility.