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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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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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.