Chapter 3: Business Environment

It is essential to understand the business environment as it helps in determining the success or failure of an organisation. The functioning and performance of an organisation are dependent on various factors, which can be external. When we understand the business environment, it becomes easier to drive factors that help in growth.

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

1. Business enterprises can identify positive opportunities for a business. It will help in making the first move and staying ahead of the competition.

2. Businesses can identify potential threats by studying the business environment, which can impact the growth of the organisation. Therefore, a study of the business environment proves beneficial for identifying threats and determining the best solution to neutralize the threat.

3. Various resources are required for a business to run, and the appropriate resources are determined by studying the local business environment. These inputs are used to create various products.

4. Business environment is of dynamic nature. Factors such as technology, consumer preferences and government policies are subject to change based on demand. Knowing the business environment will make things easier to adapt easily to the change.

5. Study of the business environment helps in formulating new plans and policies as per the market trends, which makes it more relevant for the current scenario.

6. Analysing the business environment will result in better performance for the organisation.

Solution coming soon.

Government policy has the following impact on the business and industry

1. By relaxing the licensing policy and reducing import duties, domestic firms face tough competition. More players will be in the field with their offerings which leads to more competition.

2. Due to the increase in competition, consumers are flooded with choices for goods and services. This leads to an increase in the demand of consumers for better quality goods and services.

3. Government policy changes result in changes in the business policies of the business enterprises for sustaining and making a profit while following the current policies set by the government.

4. With increasing competition, firms need to reach customers with products, and hence they adopt more innovative ways to promote their products by using updated technology.

5. All the improvements in technology and product are possible with the help of trained manpower. Without proper skills, no organisation will be able to execute any plans properly. Therefore, improvements in human resources are very important in the current context.

6. Market orientation has become important as customers have become more demanding and hence businesses need to analyze the market before launching any product.

7. Public sector enterprises need to perform more efficiently in order to survive the competition and stop relying on government funds.

The following business dimensions are highlighted here:

1. By developing a framework of a virtual repository of learning resources, it highlights the technological dimension.

2. By supporting researchers, learners and differently-abled learners free of cost, it highlights the social dimension.

Demonetisation had the following effect on these sectors

1. Interest rates: As demonetisation happened, the number of cash transactions reduced; bank deposits increased in the form of Jan Dhan Accounts. More financial savings by the people of the nation.

2. Private Wealth: Private wealth saw a decline as large-volume transactions were not possible with old notes.

3. Real Estate: Demonetisation led to a decline in real estate prices. The real estate industry witnessed a huge drop in business.