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Business Environment Class 12 Notes CBSE Business Studies Chapter 3 [Free PDF Download]


Revision Notes for CBSE Class 12 Business Studies Chapter 3 - Free PDF Download

Class 12 is one of the most important stages in a student’s life when students should deliver their utmost attention to every subject. Learning from the proper notes is essential for securing good marks in the board exam. Class 12 Business Studies Chapter 3 revision notes are prepared as per the guidelines of the CBSE board and are helpful for developing the conceptual understanding of the topics covered in this chapter. The following article is prepared for helping out students with a thorough discussion of the topics of the third chapter of Class 12 Business Studies.

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Access Class 12 Business Studies Chapter 3 - Business Environment Notes

Meaning of Business Environment

Business environment refers to all the factors that are outside the control of the business enterprise but may equally affect the performance of the business. The social, political, economic, technological factors that operate outside a business forms a part of the business environment.

Features of Business Environment

  • Totality of external forces: Includes every external or outside force that could impact a business organisation such as government, competitors, etc.

  • Specific and general forces: Specific forces are the forces which directly affect a specific business organisation. General forces are those forces which pose a direct impact on the overall industry, but pose an indirect effect on a business enterprise.

  • Inter-relatedness: The changes in general forces may result in changes in specific forces. For example, a change in the government (a political force) may lead to a change in tax rates, import-export rates (an economic force)

  • Dynamic nature: The external forces keep changing due to constant change in technology, consumer preferences, availability of different types of raw material etc.

  • Uncertainty: Constant changes in environment makes it difficult to predict changes in the external environment.

  • Complexity: The interrelated and dynamic nature of external forces makes it difficult to prepare one single strategy to handle all the changes.

  • Relativity: The impact of changes depends on business to business country to country region to region etc.

Importance of Business Environment

  • Identification of Opportunities: It enables the firm to identify opportunities and get the first mover advantage. The positive external changes provide opportunities to a business organisation to improve its performance.

  • Identifying Threat: It helps the firm to identify threats and provide early warning signals. Adverse changes in the external factors act as ‘threats’ to the business which hinders performance. Early identification of threats helps managers to make strategies to convert threats into opportunities.

  • Tapping Useful Resources: Business utilizes the resources of the external environment as inputs like finance, labour etc., and supplies its output to the environment in the form of goods and services, taxes, etc.

  • Coping with Rapid Changes: The business environment is extremely dynamic so the managers need to develop strategies not only to cope with the changes but also to use them as their strengths to improve their market shares.

  • Planning and Policy Formulation: Clear understanding and analysis of the business environment help businesses to formulate its future plans and strategies to cope with all the external changes.

  • Improves Performance: The continuous monitoring of the business environment and changing business practices from traditional methods help business in improving their present performance and also continue to retain its market position in the long run.

Dimensions in Business Environment

  • Economic Environment: It refers to all those factors and forces that have an economic impact on the business activities. Key economic factors include inflation, money supply, price level, etc. For example, increase in inflation rates result in fall in disposable incomes and as a result the demand for products falls.

  • Social Environment: Social environment represents the customs and traditions, values, culture, social trends, beliefs, ethics of society in which business operate. For example, with greater awareness among consumers about their rights, businesses are more concerned about the quality of goods they sell.

  • Political Environment: It includes political stability such as political leadership, political stability,practices of the ruling party, etc. For example, change in government, or unstable government.

  • Legal Environment: It includes all the legislations passed, administrative orders issued, court judgements or decisions taken by government or its related offices. For example, all cigarette packets must carry a warning ‘smoking is injurious to health’.

  • Technological Environment: It consists of forces relating to scientific improvements and innovations, which lead to better production techniques and methods to produce goods. For example, shift from books to e-books, telephones to touch screen mobile phones. 

Economic Environment In India

The Indian economic environment consists of various factors that impact the means of production and distribution of wealth. 

Some of the factors are:

  • Economic development stages of the country.

  • The economic structure of the country; Mixed economy structure.

  • Economic policies such as fiscal and monetary policies of the government.

  • Government’s economic planning for the country in terms of five year plans etc.

  • Economic indices of the country such as growth rate, national income, balance of payment, savings and investment rate etc.

  • Infrastructural facilities of the country such as health, communication, transportation etc.

Objectives of India's Development Plans

  • To raise the standard of living by reducing unemployment and poverty.

  • To set up a strong industrial base with emphasis on heavy and basic industries.

  • Self-Reliance.

  • Reduction in wealth and income inequalities.

  • Prevent exploitation and adopt a socialist pattern of development.

New Industrial Policy 1991

Due to economic problems like high government deficit, foreign exchange crisis and rising prices, the Government of India developed the new industrial policy with an aim to overcome the economic problems.


  • Industries under compulsory licensing were brought down to six by the government.

  • Dereservation of industries was done and the role of the public sector was limited only to four industries.

  • Disinvestment was carried out for many public sector industries.

  • Foreign capital policy was liberalised. 

  • FDI upto 100% was permitted for many sectors.

  • Automatic grants were given for technology agreements with foreign countries.

  • Foreign Investment Promotion Board (FIPB) was set up to promote foreign investment in India.


It is a reform which was introduced to remove unnecessary controls, licensing and government restrictions in an economy. This marked the end of license raj in India. 

The main objectives of introducing liberalisation were:

  • To restrict licensing requirements to only a few core industries.

  • To remove all restrictions related to scale of operation expansion or contraction of business activities.

  • To remove restrictions on the movement of goods and services.

  • To provide freedom to fix prices.

  • To reduce tax rates and remove unnecessary control.

  • Twinkle import of foreign capital and technology.

  • To simplify the procedures of import and export.


It refers to the shifting of the development responsibility from the public sector towards the private sector.  Private sector are those where the share of government in the ownership of the enterprise is less than 51 percent.


  • To introduce plant disinvestment of the public sector. 

  • Dilute the ownership stake in public sector companies to less than 51%.

  • Establishment of the Board of Industrial and Financial Reconstruction to evaluate the loss making and sick enterprises. 

  • Disinvestment, that means to transfer the ownership from the public sector to the private sector.


Globalisation means to open ways for the various economies of the world to participate in the making of a global economy. This was done to initiate a free flow of imports and exports in and around the world. 

Globalisation enabled rapid advancement in technology as geographical boundaries were no longer a barrier. 


  • The term demonetisation means to invalidate all the currency notes of a particular denomination by the government of a country. 

  • The Indian Government demonetised the two largest denomination notes of Rs 500 and Rs 1000 on 8th November, 2016. 

  • The aim of this move was to curb corruption and illegal activities and stop hoarding of black money.

Features of Demonetisation

  • After demonetisation, cash is deposited into banks for exchanging with new notes which makes the payment of tax compulsory with penalty rate.

  • Government introduced demonetisation to reduce tax evasion.

  • Demonetisation reduces the cash transactions in the economy which means more savings through the financial system and improving tax payment system.

  • Demonetisation facilitates tax administration, and pave way for a cashless economy

Impact of Demonetisation

Money/Interest rates

Decrease in transactions of cash.

Increase in bank deposits.

Financial savings increased.

Private wealth

High demonetised notes were not returned and real estate prices also fell which lead to decrease in private wealth.

Public sector wealth

There was no effect.


Increase in the digital transactions (like Rupay, AEPS) among new users.

Real estate

Decrease in the prices.

Tax collection

Due to higher disclosure there was rise in tax collection.

Impact of Government Policy Changes on Business and Industry

The LPG reforms brought about a significant impact on Indian business and industry. The challenges are:

  • Increased competition: Increase in the number of Indian firms and entry of foreign companies increased competition especially in the service industry.

  • More demanding customers: Increase in the number of enterprises gives consumers wider choice of products leading to rise in expectations and demands.

  • Rapidly changing technological environment: Fast changing technology requires companies to install the latest machinery, adopt latest techniques of production leading to an increase in investments in the business.

  • Necessity for change: With change in government policies business had to modify their policies and practices, invest in research and development, innovation etc.

  • Need for developing human resource: With change in technology business enterprises need to educate and train their staff so that they are competent to handle changes.

  • Market orientation: With increased awareness among consumers business enterprises had to shift the product oriented operations to market oriented operations.

  • Loss of budgetary support to the public sector: Public sector had to run in competition with the private sector. Therefore, they had to organise their own resources and functions efficiently.

Class 12 Business Studies Chapter 3 Revision Notes: Free PDF Download

What is the Meaning of Business Environment?

The business environment refers to the individuals, institutions, and various other elements that has an impact on business performance but cannot be controlled by the business enterprise. As per class 12 business studies chapter 3 revision notes, the technological, economic, social and political forces are also a part of the business environment. 

The class 12 business studies chapter 3 revision notes also mention that besides the awareness about external forces it is also important for the businesses to be dynamic. The reason for this is dynamic businesses can easily adapt to business environmental change, and on the basis of these changes they can also formulate plans.

Highlights of Class 12 Business Studies Business Environment Revision Notes

  • Meaning of business environment

  • Features of the business environment

  • Importance of business environment

  • The dimension of the business environment

  • The economic environment in India

  • Branches of new economic policy

  • Impact of government policy changes of business and industry

Why Business Environment is Important?

The importance of a business environment is clearly stated in the revision notes class 12 business studies chapter 3. Following are the main points of the notes at a glance. 

  • The business environment helps the firm in the identification of opportunities. These opportunities are exploited by business firms to the advantages of the company. It is the opportunity that helps businesses to grow. 

  • It is also the environment that opens the door for businesses to collect various resources that are useful for the business. The understanding of the business environment allows the firms to formulate policies that will produce a beneficial outcome.

  • Lastly, the business environment helps the business to identify potential threats and serve warning signals. There are numerous companies that have altered their business approach to understand the rising competition in the market. If you want to know more about importance go through the class 12 notes Business Environment. 

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Vedantu is the app that has brought an evolution in the sphere of learning. There are numerous reasons why Vedantu is one of the trusted online education platforms which provide notes for all subjects and classes besides business studies class 12 chapter 3 revision notes. Here are a few reasons why you should make use of NCERT solutions chapter 3 class 12 business studies revision notes from Vedantu.

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So, download the class 12 revision notes chapter 3 and prepare for your exams without any hassles. 

CBSE Class 12 Revision Notes and Key Points

CBSE Class 12 Revision Notes on Business Studies are very helpful for the students to revise the entire syllabus during exam days. All the important formulas and concepts of the chapter are covered under the revision notes. After finishing reading each chapter from the textbook, students can refer to these revision notes to complete the preparation for the exam. If you want to have a quick revision of the chapters just before the stressful exam days, revision notes will surely help you save a lot of time.

You can also download the revision notes of the other chapters of CBSE Class 12 Business Studies available in free pdf format from our website. 


Students are advised to have an in-depth knowledge of each concept to secure high marks in the exam. As Chapter 3 Business Environment is an important chapter for Class 12, Revision Notes on Chapter 3 will help you clear your doubts during the last-minute revision before the exam. You can also check out the important questions and NCERT Solutions of Chapter 3 of Class 12 Business Studies from our website.

Other Chapter Links On CBSE Class 12 Business Studies Revision Notes

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FAQs on Business Environment Class 12 Notes CBSE Business Studies Chapter 3 [Free PDF Download]

1. What are topics covered in the CBSE Class 12 Business Studies Revision Notes Chapter 3- Business Environment?

The topics covered in the CBSE Class 12 Business Studies Revision Notes Chapter 3- Business Environment, are as follows.

  • Features of Business Environment

  • Meaning of Business Environment

  • Importance of Business Environment

  • Dimensions of Business Environment

  • Economic Environment in India

  • The Branches of New Economic Policy

  • Demonetisation

  • Impact of Government Policy Changes on Business and Industry

Students are suggested to learn every topic in detail, so they can get a thorough understanding of the same. The CBSE Class 12 Business Studies Revision Notes Chapter 3- Business Environment will enhance their exam preparation and help them score well in their exams. 

2. Which is the best website for downloading the CBSE Class 12 Business Studies Revision Notes Chapter 3- Business Environment?

Vedantu is the best e-learning website for downloading the CBSE Class 12 Business Studies Revision Notes Chapter 3- Business Environment. Our subject-matter experts have prepared these revision notes after thoroughly examining the previous year question papers and the latest CBSE Class 12 Business Studies syllabus. Since these revision notes cover all the essential points from the chapter, students can refer to them for their exam preparation. These revision notes are available in a PDF file that is free to download. This ensures easy accessibility of the Class 12 Business Studies Business Environment revision notes for all students.

3. What is meant by demonetization?

Demonetisation is one of the most crucial administrative measures taken by the government of India, to check the circulation of black money. The currency notes of 500 and 1000 denominations were declared invalid or demonetized on 8 November 2016. As a result, 86 percent of the total cash in circulation happened to be invalid. The currency notes of 500 and 1000 denominations had to be exchanged for other notes or deposited in the bank and could be used to pay the utility bills.

4. What is meant by privatization?

The government of India redefined the roles of the private sector and the public sector as economic reform. As a part of privatization, the government f India promoted the transfer of ownership of public sector enterprises to the private sector. The ownership of enterprises that experienced a dilution of government ownership to more than 51 percent, have to be transferred to the private sector. Also, the enterprises that were incurring substantial losses over a considerable period, were referred to the Board of Industrial and Financial Reconstruction.

5. What do you mean by business environment according to Chapter 3 of Business Studies of Class 12?

The business environment is the totality of various individuals, institutions, and all other forces that do not form the business enterprise or are under the control of a business enterprise, but indirectly influences the performance of the business enterprise. From social, economic, technological, political to other such forces, they make the business environment. Government, consumers, media, courts, etc all influence a business. For example, government policies and changes in consumer behaviour and technology can affect businesses.  To understand more about the business environment in detail, visit Vedantu.

6. What is the significance of a business environment according to Chapter 3 of Business Studies of Class 12?

The business environment is important because it helps a business enterprise in getting various opportunities and the advantage of being the first mover. A business environment assists a business in identifying all the risks and warnings in engaging in an activity. Resources are also easily accessible for businesses through a business environment. It also helps in coping up with the ever-changing patterns of the environment relating to technology, consumer behaviour, global competition etc. Decision making and performance is also improved. 

7. What is liberalisation according to Chapter 3 of Business Studies of Class 12?

Liberalisation is a part of the economic reform which India had undertaken in 1991. The main aim of this liberalisation policy was to liberalise the businesses in India and lift the unnecessary restrictions and limitations posed by the government. This was mainly done to push away with the ‘License Permit Quota Raj’. The policy worked to abolish any license/permit required for most industries, remove restrictions on the movement of goods and services and on deciding the scale of business activities.

8. What is a legal environment according to Chapter 3 of Business Studies of Class 12?

The legal environment is one of the dimensions of the business environment. In a legal environment, all the legislations that are passed by the legislature and any other notice, policy, circular etc issued by the Government that might influence the functioning of a business is included. The judgments by the courts are also included in the legal environment. All business enterprises should follow these rules and guidelines that have been laid out by the three branches of the government. 

9. Where can I get the best Revision Notes for Chapter 3 of Business Studies of Class 12?

You can get the best Revision Notes for Chapter 3 of Business Studies of Class 12 at Vedantu. The notes are crisp but comprehensible. The lucid style helps students in grasping the concepts much more easily. You get a comprehensive summary of the full chapter with all the important points. Just going through this revision note will ensure that you have brushed through all the important topics that are required from the chapter to get maximum marks from this chapter in your exam.  The notes are free of cost and also available on Vedantu mobile app.