Chapter 3: Business Environment

Q1Written answer

What is meant by business environment?

Show solutionHide solution

Worked solution

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.

Q2Written answer

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

Show solutionHide solution

Worked solution

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.

Q3Written answer

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).

Show solutionHide solution

Worked solution

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.

Q4Written answer

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).

Show solutionHide solution

Worked solution

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.

Q5Written answer

Name any two Specific forces of business environment affecting business.

Show solutionHide solution

Worked solution

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

My Cart

Your Cart 0

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