NCERT Solutions Class 12 Business Studies Chapter 3 Business Environment
NCERT Solutions Class 12 Business Studies Chapter 3 Business Environment: National Council of Educational Research and Training (NCERT) Class 12 Business Studies Chapter 3 Solutions – Business Environment.
Board |
NCERT |
Class |
12 |
Subject |
Business Studies |
Chapter |
3 |
Chapter Name |
Business Environment |
Topic |
Exercise Solutions |
Very short Answer Type:
(1) What is must by business environment?
Ans: Business environment means the sum total of all individuals, institutions and other forces that are outside the control of a business enterprise but that may affect its performance.
(2) How does understanding of business environment help in improving performance of a business?
Ans: Understanding of business environment helps to improve performance of a business as it enables in identification and helps to get the first mover advantage.
(3) Give an example to show that a business firm operates within numerous inter related factors constituting the business environment.
Ans: The demand for a product is guided by customers choice and preference and other social and cultural factors which is a part of business environment.
(4) 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 competitions, they need to study and analyze the market trends and then design and develop then products accordingly. List any two impacts of changes in business environment on Krishna furnishers Mart’s operation.
Ans: The impact of changes in business environment on Krishna furnishers operations are as follows:
(i) The firm must do market orientation about the product i.e. the firm has to stud and analyze the demands of the customers in terms of features to be added to the product.
(ii) The firm has to fight back stiff competitors with its innovative product.
(5) Name any two specific forces of business environment affecting business.
Ans: Two specific forces of business environment affecting business are as follows: Investors, customers etc.
Short Answer Type:
(1) Why is it important for business enterprises to understand their environment? Explain
Ans: The importance of understanding business environment are as —–.
(a) It enables the firm to identify opportunities: Opportunities refer to the positive external trends or changes that will help the firm to improve their performance.
(b) It helps the firm to identify threats: Threats refers to the external environmental trends and changes that hinders firm’s performance. Awareness about business environment helps managers to identify such threats and work on it.
(c) It helps in tapping useful resource: It is essential for business to design policies that allows it get the resource that it needs to convert them into its output.
(2) Explain the following terms:
(a) Liberalisation
(b) Privatisation
(c) Globalisation
Ans: (a) Liberalisation: Economic reforms that were introduced were aimed at liberalising the Indian business and industry. It had taken place in the form of abolishing licensing requirement in most industries except a few, freedom of deciding the scale of business activities.
(b) Privatisation: The government of India redefined the role of public sector in the new Industrial policy of 1991 and adopted the policy of planned disinvestments of the public sector i.e. – dilution of stake of the government in public enterprise.
(c) Globalisation: This means the integration of the various economics of the world leading toward the emergence of a cohesive global economy.
(3) Briefly discuss the impact of government policy changes on business and industry.
Ans: The impact of the government policy changes on business and industry are as follows:
(i) Increasing competition: Competition for Indian firms has increased in services industry – telecommunication, airline, banking etc due to change in industrial licensing policy of the government.
(ii) Rapidly changing technological environment: New technology make it possible to improve the products and services of the firm as increased competition forces the firms to develop new ways to survive and grow in the market.
(iii) More demanding customers: customers today have become more demanding as they are well-informed and aware about their rights and choices of the product.
(4) National digital library of India (NDL India) is a pilot project initiated by the H.R.D ministry. It works towards developing a framework of virtual repository of learning resources with a single-window search facility. It provides support to all academic levels including researchers, differently abled learners etc, at free of cost. State the dimensions of business environment highlighted above.
Ans: The dimensions of business environment highlighted in the above case are – social environment and technological environment.
(a) Social environment: This include the social forces like customs and traditions, values, social services, society’s expectation from business etc. This defines business responsibility towards the upliftment of society.
(b) Technological environment: This includes forces relating to scientific and technological improvements and innovations which provide new ways or producing goods and services and new ways and techniques of operating a business.
(5) State the impact of demonetisation of interest rates, private and real estate.
Ans: The impact of demonetisation on interest rates are as follows:
(a) Cash transactions have reduced and increase in financial savings.
(b) Increase in bank deposits.
Impact on prive wealth due to demonetisation:
(a) Private wealth have declined as some high demonetized notes were not returned.
(b) Decrease in prices of real estate.
Impact of demonetization on real estate:
(a) Prices of real estates decreased.
Long Answer Type:
(1) How would you characterise business environment? Explain with examples, the difference between general and specific environment.
Ans: The features or characteristics of business environment are as follows.
(a) Dynamic nature: Business environment is dynamic in that it keeps changing whether in terms of technological improvement, consumer preferences etc.
(b) Complexity: Business environment consists of numerous interrelate and dynamic conditions which makes it difficult to comprehend.
(c) Inter-relatedness: Difficult elements of business environment are closely interrelated and affects the demand and supply of each other’s product or services.
The differences between general and specific process of business environment is that general forces like social, legal & technological condition affect a firm indirectly and specific forces like – investors, customers competitors, suppliers affects a firm’s performance and survival direction.
(2) How would you argue that the success of a business enterprise is significantly influenced by its environment?
Ans: The argument for influenced of business by its environment are as —— advantage. Opportunities refer to the positive external trends o changes that will help a firm to improve its performance. Environment provides numerous opportunities for business to be successful.
For (ii) and (iii) refer to answer of Q1 short answer type questions.
(iv) It helps in coping with rapid changes: Today’s business environment is getting increasingly dynamic where changes are taking place at a fast pace. Less brand loyalty, divisions of markets, demanding customers, global competition etc are some of the aspects that are used to describe today’s business environment.
(4) The government of India announced demonetization of 500 & 1000 currency notes with effects from the midnight of Nov 8, 2016. As a result, the existing 500 and 100 currency notes ceased to be legal tender from that date. New currency notes of the denominations of 500 & 2000 were issued by reserve Bank of India after the announcement. This step resulted in a substantial increase in the awareness about and use of point of sale machines, e-wallets, digital cash and other modes of cashless transactions. Also, increased transparency in monetary transaction and disclosure led to a rise in government revenue in the form of tax collection.
(a) Enumerate the dimension of business environment highlighted above.
(b) State the features of demonetization.
Ans: (a) The dimension of business environment highlighted above is political environment.
(b) The features of demonetization are as follows:
(i) Demonetization is viewed as a tax administration measure. Cash holdings arising from declared incomes was readily deposited in banks and exchanged for new notes.
(ii) Demonetisation is interpreted as a shift on the part of the government indicating that tax evasion will no longer be tolerated or accepted.
(iii) If led to tax administration channelizing savings into the formal financial system.
(iv) Another feature of demonetisation is to create a less-cash or cash lite economy i.e. – channelizing more savings through the formal financial system and improving tax compliance.
(3) Explain with examples the various dimensions of business environment.
Ans: The various dimensions of business environment are as follows:
(i) Economic environment: The elements of this environment are – interest rates inflation rates, stock market indices, change in disposable income etc. For eg- construction companies low longer-term rates are beneficial as consumers can save more money and spend in buying home.
(ii) Social environment: This includes social factors like customs and tradition social values and society’s expectations from business for eg- during any festival the sale of sweets & gifts increases due to social customs.
(iii) Technological environment: This includes forces relating to scientific improvements and innovations that provide new ways of producing goods and services. For eg- World Wide Web multimedia pages used for advertising.
(iv) Political environment: It includes political conditions such as general stability and peace in the country and altitude of the elected government towards business.
(v) Legal environment: It include various legislations passed by the government administration orders issued by government authorities. For eg – the advertisement of alcoholic beverages is prohibited.
(5) What economic changes were initiated by the government under the industrial policy 1991? what impact have these change made on business and industry?
Ans: The changes initiated by government under the industrial policy of 1991 are as follows:
(a) The government reduced the number of industries under compulsory, licensing to six.
(b) Disinvestment was carried out in case of many public sector industries enterprises.
(c) The share of foreign equity participation was increased and in many activities 100% FDI was permitted.
(d) Freedom in fixing the prices of goods and services.
For impact of these changes on business and industry, refer to answer of Q3 of short answer type question.
(6) What are the essential features of:
(a) LIberalisation
(b) Privatisation
(c) Globalisation
Ans: The features of liberalisation are as follows:
(i) Abolishing licensing requirement in most of the industries.
(ii) Foreign investment promotion board (FIPB) was setup to promotion and channelis foreign investment in India
(iii) The role of public sector was limited only to four industries of strategic importance.
The features of privatisation are as follows:
(a) Disinvestment of shares or the transfer of public sector enterprise to the private sector.
(b) Board of industrial and financial reconstruction was set up to recover the loss making public sector enterprise.
(c) Dilution of government ownership beyond 51% resulted in transfer of ownership of management to private sector.
The main features of globalisation are as follows:
(i) Import liberalization and promotion of export through rationalization of tariff structure.
(ii) Globalisation involves increased level of interaction and interdependence among the various nations of the global economy.