NCERT Solutions for Class 12 Business Chapter 3 - Business Environment

1. Which of the following does not characterise the business environment?

(a) Uncertainty (b) Employees (c) Relativity (d) Complexity

Ans: Employees do not characterise the company environment among the options listed above. Individuals, businesses, situations, and other external variables that affect an organization's success are referred to as the business environment. Changes in government economic policies, rapid technology breakthroughs, political uncertainty, changes in consumer styles and tastes, and greater market rivalry, for example, can have a significant impact on how a corporation operates. Employees are essential to a company's success, but they do not define its environment.

2. Which of the following best indicates the importance of the business environment? (a) Identification (b) Improvement in performance (c) Coping with rapid changes (d) All of them

Ans: All of the solutions outlined above emphasise the relevance of the company environment. Company managers who understand their environment may not only recognise and analyse external influences, but also respond to them. The following facts demonstrate the significance of the corporate environment and managers' comprehension of it:

• It assists the firm in identifying opportunities and gaining a competitive edge

• It assists the firm in identifying dangers and early warning signs

• It assists the firm in coping with rapid changes

• It aids in the planning and formulation of policies.

• It aids in the enhancement of performance.

The study of the business environment aids in detecting positive improvements as well as risks or hindrances that affect an organization's performance. As a result, it assists individuals in taking the necessary steps to improve their performance. Furthermore, a thorough examination of the always changing environment aids the organisation in better coping with it.

3. Which of the following is an example of social environment?

(a) Money supply in the economy (b) Consumer Protection Act (c) The constitution of the country (d) Composition of family

Ans: The term "social environment" refers to the social influences that influence company prospects and performance, such as customs, traditions, social values, and social trends.

Composition of family is an example of social environment among the possibilities provided in the question. The health-and-fitness craze, for example, has swept a substantial number of city inhabitants. Organic food, diet soft drinks, gyms, bottled (mineral) water, and food supplements have all seen an increase in demand as a result of this. However, other industries such as dairy processing, tobacco, and liquor have suffered as a result of this tendency.

4. Liberalisation means

(a) Integration among the economies (b) Reduced government controls and restrictions www.vedantu.com (c) Policy of planned disinvestment (d) None of them

Ans: Government controls and restrictions, like licences and quotas, are reduced as a result of liberalisation. The Indian industry has liberalised in the following areas:

(i) the elimination of licencing requirements in most industries except a small number of them.

(ii) the freedom to decide the scale of business activities (i.e., no restrictions on expansion or contraction of business activities).

(iii) the removal of restrictions on the movement of goods and services.

(iv) the freedom to fix the prices of goods and services.

(v) the reduction of tax rates and the lifting of unnecessary controls.

5. Which of the following does not explain the impact of Government policy changes on business and industry?

(a) More demanding customers (b) Increasing competition (c) Change in agricultural prices (d) Market orientation

Ans: Changes in agricultural prices are not one of the options that can explain the impact of government policy changes on business and industry. Changes in government policy, such as liberalisation, privatisation, and globalisation, have an impact on how businesses operate.

Consumers' rising demands, more competition, and a shift in market orientation all contribute to the impact of such legal changes. Changes in agricultural pricing, on the other hand, come as a result of changes in agricultural product demand and supply and are unrelated to changes in government policy.

6. What do you understand by business environment?

Ans: The term "business environment" refers to all of the external variables that influence a company's performance. Economic, social, political, technological, and legal forces are examples of such forces. Individuals, consumers, the government, and legal issues all contribute to the business environment. Changes in client tastes and preferences, for example, as well as changes in government policies, the political environment, and legal restrictions, all contribute to the business climate. Although such influences are outside the control of an organisation, they have an impact on its performance, either positively or negatively. A shift in consumer preferences in favour of a company's goods, for example, increases demand for that company's product.

Similarly, when a new technology is introduced, the firm's existing technology becomes obsolete, and its products become inferior.

The following characteristics characterise the business environment:

• The business environment is made up of a variety of external pressures.

• The business environment encompasses both specific and general elements that have an impact on the enterprise, either directly or indirectly.

• The business environment is dynamic in the sense that it is always changing.

• The business environment is primarily uncertain in the sense that future events are difficult to forecast.

7. Why it is important for business enterprises to understand their environment? Explain briefly

Ans: The ability to comprehend the business environment is critical to an organization's success.

Any organisation cannot function without the help of others. Its operation and performance are also influenced by a number of external factors. Continuous review and understanding of the business environment enables a company to better account for these influences and, as a result, improve its performance. The following points emphasise the necessity of environmental awareness for businesses.

i. Recognizing opportunities and gaining a competitive advantage: Positive external trends or changes that will assist a company improve its performance are referred to as opportunities. There are several prospects for commercial success in the environment.

ii. Threat identification and early warning signals: Threats are external environment trends and changes that will impede a company's performance. A study of the business environment, in addition to good prospects, aids an organisation in identifying dangers or negative signals that may have a detrimental impact on its operations.

iii. Gathering Useful Resources: The environment supplies a firm with a variety of resources or inputs, such as raw materials, machinery, and labour.

Enterprises, on the other hand, generate output in the form of goods and services for the environment.

iv. Adapting to Changes: The business world is a dynamic place. Technology, customer tastes and preferences, and government policies all change on a regular basis. An enterprise's ability to deal with these changes and take appropriate action is aided by a thorough analysis and understanding of the environment.

v. Making Plans and Policies: An organization's ability to identify opportunities and risks is aided by a continuous study of the environment. As a result, it assists the organisation in developing appropriate plans and policies in light of the existing situation.

vi. Improving Performance: A continual analysis of the environment assists businesses in formulating appropriate policies and programmes, resulting in improved performance.

8. Mention the various dimensions of business environment.

Ans: i. Economic Environment: It includes economic variables such as interest rates, income, and stock market indexes that have an impact on how businesses operate. An increase in income, for example, has an impact on business demand for goods and services.

ii. Social Environment: The social forces of customs, traditions, social ideals, and social trends are all part of the social environment. Religious celebrations, for example, provide business opportunities for a variety of businesses, including those that produce sweets, decorations, and other things.

iii. Technological Environment: Technological developments and advances are part of the technological environment. Computers, the internet, and new telecommunications infrastructure, for example, all have an impact on businesses.

iv. Legal Environment: This refers to the government's regulations and rules, such as the Companies Act and the Trade Union Act. These regulations control how a company operates and behaves.

Enterprises must be aware of these laws because disobedience can land them in legal danger.

v. Political Environment: The political business environment is made up of political conditions such as peace and stability, as well as law and order. Political unrest has the potential to shatter that trust. Similarly, government officials' attitudes toward business can have a beneficial or negative impact on the economy. A condition of political upheaval, for example, erodes investor confidence and makes it difficult for businesses to run properly.

9. Briefly explain the following: 

(a) Liberalisation

Ans: The term "liberalisation" refers to the government's removal of needless regulations and limitations in the form of licences, permits, and quotas. India's industrial liberalisation took the following form.

i. The need for a licence to start a business was eliminated.

ii. Businesses gained control over the scope and size of their production as well as the pricing of their products.

iii. Restrictions on the movement of goods and services were lifted.

(b) Privatisation

Ans: Privatization entails giving the private sector a larger role while limiting the public sector's engagement. In India, privatisation proceeded in the following manner.

i. Public-sector enterprises are being disinvested.

ii. Establishing an Industrial and Financial Reconstruction Board to help ill and loss-making businesses get back on their feet.

iii. Reducing the government's stake in public-sector businesses.

(c) Globalisation

Ans: Globalisation is the process of diverse economies around the world integrating. It entails lowering import and export constraints such as licencing and tariffs. In terms of globalisation, India implemented the following policies.

i. Import restrictions are lifted

ii. Eliminating the export tax

iii. Reducing the import tax

10. Briefly discuss the impact of government policy changes on the business and industry.

Ans: The government's policies of liberalisation, privatisation, and globalisation have an impact on how businesses operate. The effects of government policy changes on business and industry are highlighted in the following points.

i. Increased Competition: As a result of initiatives such as loosening licencing requirements and lowering import tariffs, domestic enterprises face increased competition.

ii. Increased Demand: As competition grows, so does the number of goods and services available to consumers. As a result, consumers benefit from higher-quality items and more choice.

iii. Changes in Business Policies: Government policies have a direct impact on how businesses operate. As a result, they must adjust their policies accordingly.

iv. Technological Changes: As the market becomes more competitive, businesses must discover new and innovative ways to stay afloat. In this situation, technical advancements are required.

v. The Need for Trained Staff: Product innovation and improvement, as well as the application of new technologies, necessitate skilled and trained personnel. As a result, human resource development becomes necessary.

vi. Intensified Market Orientation: As competition has increased, production has become more market oriented.

vii. Public Sector Enterprises Rely Less on Budgetary Support: To survive growing competition, public sector enterprises must enhance efficiency and productivity rather than relying on budgetary support to absorb their losses. Overall, the impact of government policy changes, particularly those relating to liberalisation, privatisation, and globalisation, has been favourable, as Indian business and industry has demonstrated considerable resilience in dealing with the new economic order.

11. How would you characterise business environment? Explain, with examples, the difference between general and specific environment.

Ans: The phrase "business environment" refers to all of the external circumstances that affect the functioning of a firm. Such pressures include economic, social, political, technical, and legal forces. The business environment is influenced by individuals, consumers, the government, and legal concerns. Changes in client tastes and preferences, for example, as well as changes in government policies, the political environment, and legal restrictions, all contribute to the business climate. Although such variables are outside an organization's control, they have an impact on its performance, either positively or adversely. For example, a movement in customer preferences towards a company's goods boosts demand for that company's product.

When a new technology is launched, the firm's present technology becomes obsolete, and its goods become obsolete.

The characteristics of the business environment are as follows.

i. Aggregate of External Influences: The business environment is the sum of all external forces that influence an organization's performance, whether positively or negatively, such as individuals, consumers, government, and legal issues.

ii. Interrelation: Different forces in the corporate environment are intertwined. For example, as consumer income rises, demand for consumer durables such as televisions and refrigerators rises as well.

iii. Dynamic and Ever-Changing: The business environment is dynamic and ever-changing.

The particular environment refers to external influences that have a direct impact on an organisation. These are factors that are unique to a specific firm or organisation. For example, a movement in customer tastes and preferences towards a company's products has a direct influence on demand. A delay in raw material delivery from suppliers, for example, has a direct influence on a company's output.

The general environment, on the other hand, refers to the external forces that affect all organisations. General forces, unlike specialised forces, do not affect the performance of a single organisation; rather, they affect the performance of all organisation. As a result, such influences only have a tangential impact on a certain organisation. A change in technology, for example, has an impact on the quantity and quality of production in all organisations. Similarly, a shift in political conditions has an impact on all businesses at the same time.

12. How would you argue that the success of a business enterprise is significantly influenced by its environment?

Ans: The environment has a tremendous impact on the success of a company enterprise. The following points emphasise the significance of environmental awareness for businesses:

i. Recognizing opportunities and gaining a competitive advantage: Positive external trends or changes that will assist a company improve its performance are referred to as opportunities. There are several prospects for commercial success in the environment.

ii. Threat identification and early warning signals: Threats are external environment trends and changes that will impede a company's performance. A study of the business environment, in addition to good prospects, aids an organisation in identifying dangers or negative signals that may have a detrimental impact on its operations.

iii. Gathering Useful Resources: The environment supplies a firm with a variety of resources or inputs, such as raw materials, machinery, and labour.

Enterprises, on the other hand, generate output in the form of goods and services for the environment.

iv. Adapting to Changes: The business world is a dynamic place. Technology, customer tastes and preferences, and government policies all change on a regular basis. An enterprise's ability to deal with these changes and take appropriate action is aided by a thorough analysis and understanding of the environment.

v. Making Plans and Policies: An organization's ability to identify opportunities and risks is aided by a continuous study of the environment. As a result, it assists the organisation in developing appropriate plans and policies in light of the existing situation.

vi. Improving Performance: A continual analysis of the environment assists businesses in formulating appropriate policies and programmes, resulting in improved performance.

13. What economic changes were initiated by the government under the Industrial Policy, 1991? What impact have these changes made on the business and industry?

Ans: In July 1991, the Indian government announced the Industrial Policy. The following are the policy's main points.

(i) Abolition of Licensing- The obligatory licencing system was eliminated under the new industrial strategy of 1991.

In other words, as a result of the industrial reforms, private actors were no longer required to seek a licence in order to start a new business.

(ii) Desegregation- The number of industries that are solely for the public sector has been drastically reduced.

The private sector was allowed to operate in the bulk of industries, with only three industries remaining under the government's sole control: railways, atomic minerals, and atomic energy.

(iii) Increased Production Capacity-Prior to the programme, industries had to seek authorization from the government to increase production size.

With the liberalisation policy, MRTP companies (those with assets of more than Rs 100 crore) were free to scale up their operations in accordance with market conditions.

(iv) Importing Capital Goods Freedom- Industrialists were allowed to import capital goods from other countries under the policy.

In the foreign capital, 100 percent FDI was permitted.

(v) Small-scale Industry Reforms—In India, small-scale industries are defined by the maximum amount of investment that can be made in a single unit.

(vi) Disinvestment- Many public sector firms have gone through the disinvestment process. As a result, a growing portion of the assets of governmental industrial firms have been sold to the private sector.

(vii) Foreign Investment Promotion Board: The Foreign Investment Promotion Board was established to stimulate and channel foreign investment into India. The following points emphasise the impact of these changes on business and industry.

(a) Increasing Competition: As a result of initiatives such as the elimination of the licencing policy and dereservation, domestic enterprises are facing increased competition. In the service business, such as telecommunications and banking, India's companies faced rivalry.

(b) Increased Demand: As competition grows, so does the number of goods and services available to consumers. As a result, consumers benefit from higher-quality items and more choice.

(c) Changes in Business Policies: The government's policies under the new industrial policy had a direct impact on how businesses operated. As a result, they made the necessary changes to their policies and procedures.

(d) Technological Changes: As the market becomes more competitive, businesses must discover new and innovative ways to stay afloat. They are progressively embracing new technology and investing in research and development.

(e) Demand for Trained Employees: The demand for skilled, trained, and competent personnel has increased as a result of product developments and improvements, as well as the deployment of enhanced technology. As a result, human resource development becomes necessary.

(f) Greater Market Orientation: With increased competition, it is more important than ever for businesses to adapt their production to market demand. That is to say, production has become more market-driven.

(g) Less Reliance on Budgetary Support by Public Sector Firms: In order to compete, public-sector enterprises have realised the importance of increasing efficiency and productivity.

Case Problem

Several corporations have recently planned large investments in organised retailing in India. Numerous considerations influenced their choices in this regard. Customer earnings are increasing. Consumers have acquired a preference for higher-quality items, even if they must pay a higher price. The degree of aspiration has risen. The government has also liberalised its economic regulations in this area, allowing for 100 percent foreign direct investment in several retail industries.

1. Identify changes in business environment under different heads — economic, social, technological, political and legal that have facilitated the companies’ decisions to plan significant investments in organised retailing.

Ans:

Economic: Customer income increased as a result of new job prospects.

Social: Customers have acquired a preference for higher-quality products, even if they have to pay more for them.

Technological: Advances in technology have made it easier for customers and retailers to do business.

Political: The government has liberalised its policies on foreign direct investment.

Legal: The government protects customers' rights.

2. What has been the impact of these changes with regard to globalisation and privatisation?

Ans: The impact of these changes, particularly in terms of privatisation and globalisation, has prompted merchants to invest in organised retailing. As a result, competition increased, as did customer demand, and more job possibilities arose as a result.

Chapter 3 - Business Environment

NCERT Solutions Class 12 Business Studies - Free PDF Download

The Solution PDFs Business Studies for Class 12 provide a huge variety of questions to have a better understanding of the subject. Since Business Studies is one of the most important subjects, advanced knowledge about it is a must. Our PDF will give you detailed solutions for all the questions given in the textbook. The content writers for the subject Business Studies are experts in their field so be assured about the quality of the content. 

Along with this, some additional questions and some sample papers are also there for understanding. paper pattern. These NCERT solutions are based on the latest syllabus and practising them can help you score good marks in the exam. 

NCERT Solutions Class 12 BUSINESS STUDIES CHAPTERS

Chapter 3 - Business Environment

Business Environment is a part of Class 12 Business Studies. As the 3rd chapter in the book, it deals with various points covering the meaning of the business environment, characteristics of the business environment, the importance of the business environment, dimensions of the business environment, the economic environment in India, the government policy of liberalisation, privatisation, and globalisation, the impact of government policy changes on business and industry, etc. It gives a comprehensive outlook on what students need to know about the business environment.

Class 12 Business Studies Marks Weightage

Business Studies for Class 12 is one of the most important subjects. The theory paper for the subject of Business Studies is of 80 marks. It is divided into three parts. Those are as follows -

• Part A: Principles and Functions of Management - 50 marks

• Part B: Business Finance and Marketing - 30 marks

• Part C: It consists of one project work - 20 marks

For Example; Chapter 3 Business Environment falls under Part A and it has its importance since a lot of questions from this chapter keep repeating in the exam.

This, you would get to know once you start solving sample papers daily. But make sure you complete within 3 hours. This would prepare you to solve the question paper in the final examination.

Our PDFs contain all the useful resources required for Class 12 Business Studies. Like mock papers and previous years' board papers of Business Studies Class 12.

It would aid you in the final examination conducted by CBSE. And it is better to be updated with the pattern of questions.

Why Are NCERT Solutions For Business Studies Class 12 Chapter 3 Important? 

• NCERT solutions focus on fundamentals to help students to grasp basic concepts in an organized and quick way.  

• NCERT solutions provide detailed step by step explanations and help students to solve doubts by giving them proper guidance throughout the process. 

• These solutions give topic-wise answers along with important information about the topic.

• NCERT Class 12 Business Studies Solutions come with key points, explanations, and examples that reduce the effort before the examination and make it a great tool for quick revision.

• The easy languages of a brief overview of concepts, definitions, and examples can be very useful for the last-minute preparations and revisions as they can learn in a better and faster way.