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Business Environment Class 12 Business Studies Chapter 3

The business environment refers to all external forces and factors that affect the operations of a business. It includes the economic, social, technological, political, and legal conditions and factors. Changes in the business environment necessitate changes in business policies and operations. Government policy changes like liberalization, privatization, and globalization have increased competition, made customers more demanding, accelerated technological changes, and required businesses to develop human resources and adopt a market orientation.

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0% found this document useful (1 vote)
2K views19 pages

Business Environment Class 12 Business Studies Chapter 3

The business environment refers to all external forces and factors that affect the operations of a business. It includes the economic, social, technological, political, and legal conditions and factors. Changes in the business environment necessitate changes in business policies and operations. Government policy changes like liberalization, privatization, and globalization have increased competition, made customers more demanding, accelerated technological changes, and required businesses to develop human resources and adopt a market orientation.

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anaya
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CHAPTER 3

BUSINESS ENVIRONMENT
CLASS 12
BUSINESS STUDIES AIL PROJECT

- ANAYA BHADURY CLASS 12F


Meaning of Business Environment

The term ‘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.
FEATURES OF BUSINESS ENVIRONMENT
IMPORTANCE OF BUSINESS
ENVIRONMENT
DIMENSIONS OF BUSINESS
ENVIRONMENT
ECONOMIC
ENVIRONMENT

It has immediate and direct economic impact on a


business.

Rate of interest, inflation rate, change in the income of


people, monetary policy, price level etc. are some
economic factors which could affect business firms.

Economic environment may offer opportunities to a firm


or it may put constraints.
SOCIAL
ENVIRONMENT
It includes various social forces such as customs,
beliefs, literacy rate, educational levels, lifestyle, values
etc.

Changes in social environment affect an organization in


the long run.

Example: Now a days people are paying more attention


towards their health, as a result of which demand for
mineral water, diet coke etc. has increased while
demand of tobacco, fatty food products has decreased.
TECHNOLOGICAL ENVIRONMENT

It provides new and advance ways/techniques of


production.

A businessman must closely monitor the


technological changes taking place in the industry
as it helps in facing competition and improving
quality of the product.

For Example, Digital watches in place of traditional


watches, artificial fabrics in place of traditional
cotton and silk fabrics, booking of railway tickets on
internet etc.
POLITICAL ENVIRONMENT

Changes in political situation also affect business organizations.

Political stability builds confidence among business community


while political instability and bad law & order situation may bring
uncertainty in business activities.

Ideology of the political party, attitude of government towards


business, type of government-single party or coalition government
affects the business

Example: Bangalore and Hyderabad have become the most popular


locations for IT due to supportive political climate.
LEGAL ENVIRONMENT

It constitutes the laws and legislations passed by the


Government, administrative orders, court judgements,
decisions of various commissions and agencies.

Businessmen must act according to various legislations


and their knowledge is very necessary.

Example: Advertisement of Alcoholic products is


prohibited, and it is compulsory to give statutory warning
on advertisement of cigarettes.
IMPACT OF GOVERNMENT POLICY CHANGES
ON BUSINESS AND INDUSTRY

1. Increasing Competition: De-licensing and entry of foreign firms in the Indian market is


increased the level of competition for Indian firms.
2. More Demanding Customers: Now customers are more aware, and they keep maximum
information of the market as the result of which now market is customer/buyer oriented, Now,
products are produced keeping in mind the demands of the customers.
3. Rapid Changing Technological Environment: Rapid Technological advancement has
changed/improved the production process as a result of which maximum production is
possible at minimum cost, but it leads to tough challenges in front of small firms.
4. Necessity for Change: After New Industrial. Policy the market forces (demand & supply)
are changing at a very fast rate. Change in the various components of business environment
has made it necessary for the business firms to modify their policies & operations from time
to time.
IMPACT OF GOVERNMENT POLICY CHANGES ON BUSINESS
AND INDUSTRY

5. Need for Developing Human Resources: The changing market conditions of today


requires people with higher competence and greater commitment, hence there is a need for
developing human resources which could increase their effectiveness and efficiency.
6. Market Orientation: Earlier selling concept was famous in the market now its place is
taken by the marketing concept. Today firms produce those goods & services which are
required by the customers. Marketing research, educational advertising, after sales services
have become more significant.
7. Reduction in budgetary Support to Public Sector: The budgetary support given by the
government to the public sector is reducing thus the public sector must survive and grow by
utilizing their own resources efficiently.
Liberalization means relaxation of various
government restrictions in the areas of social and
economic policies. Liberalizing trade policy by the
government that is removal of tariff, subsidies and
other restrictions on the flow of goods and services
between countries is also termed as liberalization. 
● Privatization can refer to the act of transferring
ownership of specified property or business
operations from a government organization to a
privately owned entity, as well as the transition of
ownership from a publicly traded, or owned, company
to a privately owned company. For a company to be
considered privately owned, it cannot secure funding
through public trades on a stock exchange.
Globalization is a process of interaction and integration
among the people, companies, and governments of
different nations, a process driven by international
trade and investment and aided by information
technology. This process has effects on the
environment, on culture, on political systems, on
economic development and prosperity, and on human
physical well-being in societies around the world.

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