CHAPTER 3

BUSINESS
ENVIRONMENT
4 CONTENTS OF CHAPTER
3
• Understand the concept of ‘Business Environment’.
• Describe the importance of Business Environment
• Dimensions of Business Environment- Economic, Social,
Technological, Political and Legal
• Demonetization - concept and features
• Impact of Government policy changes on business with special
reference to liberalization, privatization and globalization in
India
• Discuss managerial response to changes in business
environment

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
5 What is
environment ?
🠶 The or conditions in which a person,
surroundings
animal, or plant lives or
operates.
🠶 The natural world, as a whole or in a particular
geographical area, especially as affected by
human activity.

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
6 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.

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
 Examples of business environment on
7 business :
🠶 Higher taxes → expensive products (GST)
🠶 Increase in petrol prices → increase in overall prices of products /
services
🠶 Cart → Rails → Local Trains → Airplanes → Metro
Trains
🠶 Retail Shopping → Weekly markets → Malls → Internet (Amazon,
Flipkart)
🠶 COVID-19 → Higher data packs sold by Vodafone
🠶 Demonetisation → Paytm, PhonePe, Debit Cards,
Credit Cards → Big Bazaar started home delivery
services1500 Cr. for COVID-19 (Social changes)
🠶 Ratan Tata donated
🠶 Landline → Cordless → Nokia → Android / Apple (Tech.)
🠶 Orkut → Facebook → Selfies → Instagram → TikTok

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
8 Features of Business
Environment
🠶Totality of external forces
🠶Specific and general forces
🠶Inter-relatedness
🠶Dynamic nature
🠶Uncertainty
🠶Complexity
🠶Relativity (different)
CBSE-XII- BUSINESS STUDIES-BY HENNA
PUNJABI
9 Importance of Business
Environment
🠶It enables the firm to identify opportunities and getting
the first mover advantage
🠶It helps the firm to identify threats and early warning
signals
🠶It helps in tapping useful resources
🠶It helps in coping with rapid changes
🠶It helps in assisting in planning and policy formulation
🠶It helps in improving performance

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
1 ELEMENTS / COMPONENTS / DIMENSIONS
0
OF BUSINESS ENVIRONMENT

🠶POLITICAL
🠶ECONOMIC
🠶SOCIAL
🠶TECHNOLOGICAL
🠶LEGAL
CBSE-XII- BUSINESS STUDIES-BY HENNA
PUNJABI
 POLITICAL ENVIRONMENT

• General stability
• Peace in country
• Government leadership
• Investment in business projects
• Industrial policy
• Red tapism and bureaucracy
• Political morality
• Relations with foreign countries
 ECONOMICAL ENVIRONMENT
• Interest rates • Rates of saving and
• Inflation rates investment
• Stock market indices • Agriculture and Industrial
• Value of rupee sector
• Changes in disposable • Role of Public and private
income of people sector
• Per capita income • Profit earning rate
• GNP • Productivity rate
• Foreign trade • Employment rate
1 ECONOMICAL
4
🠶 GDP ENVIRONMENT
🠶 High inflation rate → High cost of production leading to rise in prices
of products
🠶 Fall in rate of interest → Increase in demand for home loans
🠶 GST → increase in prices of products
🠶 Demonetisation → slowdown of cash based
businesses
→ Jewelers business in boom
🠶 Banking sector → schemes
🠶 Savings and investment rates
🠶 Role of private and public sector

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
 SOCIAL
1
6 ENVIRONMENT
• Customs and traditions
• Values and belief systems
• Social trends
• Culture – way of life (eating habits, clothing habits)
• Money spending habits (save or spend)
• Standard of living
• Tastes and preferences
• Festivals → Sweets, clothes, decorations

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
 SOCIAL
1
6 ENVIRONMENT
• Life expectancy
• Consumption habits / consumer preferences
• Composition of family
• Birth and death rates (shortage of medical facilities)
• Population shifts
• Educational system and literacy rates
• Expectations from workforce
• Role of women in society
• Attitude towards innovation, lifestyle, occupational
choices, etc.
CBSE-XII- BUSINESS STUDIES-BY HENNA
PUNJABI
1
6
TECHNOLOGICAL ENVIRONMENT

• Scientific improvements
• Innovations
• New techniques of production

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
1 Technological
8
Environment
🠶 Floppy to pen drive
🠶 Online grocery
🠶 Online booking
🠶 Trivago, Oyo
🠶 Compact Laptops
🠶 Plastic money
🠶 BookMyShow
🠶 E-ticketing by railways

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
 Legal
Legislations passedEnvironment
1
9 • by government
• Administrative orders issued by government authorities
• Court judgements
• Decisions rendered by various commissions and agencies
• The Companies Act, 2013
• Factories Act, 1948
• Workmen’s Compensation Act, 1923
• Competition Act, 2002
• Industries (D&R) Act, 1951
• FEMA and Import Exports Control Act, 1947
• Trade Union Act, 1926
• The Consumer Protection Act, 2019
• Industrial Dispute Act, 1947
CBSE-XII- BUSINESS STUDIES-BY HENNA
 Legal
Legislations passedEnvironment
1
9 • by government
• Administrative orders issued by government authorities
• Court judgements
• Decisions rendered by various commissions and agencies
• Advertisement of alcoholic beverages
• Statutory warning on cigarettes
• Baby food

CBSE-XII- BUSINESS STUDIES-BY HENNA

 Government Policies and its
2
0 impact on businesses (LPG)
🠶LIBERALISATION
🠶PRIVATISATION
🠶GLOBALISATION

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
2 LIBERALISATIO
1
N
🠶 End of license, quota and restrictions prevailing before1991
🠶 Abolishing licensing
🠶 Freedom of expansion of business
🠶 Lesser taxes and controls
🠶 Lesser restrictions on imports and exports
🠶 Easy and simple procedures of foreign trade
🠶 Freedom in movement of goods and services
🠶 Freedom in fixing prices

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
2 PRIVATISATIO
2
N
🠶 Public sector is owned by govt. whereas private sector by
individuals
🠶 Greater role of private sector than public sector
🠶 Transfer from Public sector to Private Sector
🠶 BIFR (Reconstruction) – Revive or Close sick units
🠶 Dilution of Public sector

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
2 GLOBALISATIO
3
N
🠶 Removal of political boundaries, world became a global village.
🠶 Integration of economies of world
🠶 Till 1991 there were strict restrictions on imports
🠶 Import liberalization
🠶 FERA was replaced by FEMA
🠶 New tariff structure
🠶 Reduction of import duty
🠶 Abolition of export protocols

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
2 DEMONETISATIO
4
N
🠶 8th Nov., 2016
🠶 Rs.500 and Rs.1000 denomination notes withdrawn
🠶 Exchange of notes in banks
🠶 Restriction on cash withdrawal
🠶 Curb corruption
🠶 Control black money

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
2 Features of
5
Demonetisation
🠶 Demonetization as a tax administration measure
🠶 Non tolerance of tax evasion
🠶 Tax administrating and channelizing savings into formal
financial system
🠶 Creating less cash or Digital Cash lite economy

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
2 Impact of changes in Economic Policy
6 on the Business /
Effects of Liberalization and Globalization
🠶 Increasing competition
🠶 More Demanding Customers
🠶 Rapidly changing technological environment
🠶 Necessity for change
🠶 Developed Human Resources
🠶 Market orientation
🠶 Loss of Budgetary Support to Public Sector
🠶 Export a matter of Survival

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
2 Managerial responses to changes
7
in Bus. Env.
🠶Diversification (new businesses areas)
🠶Joint Ventures (mergers)
🠶Brand Building (Goodwill)
🠶Use of latest technology (innovation)
🠶Improved compensation level (HR policies)
🠶Customer focus (consumerism)

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
 Questions
28

1. Which of the following do not characterize business

environment ?
(a) Uncertainty (b) Employees (c) Relativity (d) Complexity
2. Which of the of
(a)Importance following best indicates
opportunities and imp. of business
(b) Improvement in
environment
threats ? performance
(c) Coping
3. Which with rapid changes
environment prohibits advertisement(d) All of these
of alcoholic beverages ?
(a) Political (b) Social (c) Economical (d) Legal
4. Name the component of business environment which includes Kiosks, Internet, Pen
drive.
(a) Political (b) Social (c) Technological (d) Legal
5. Liberalisation
(a)Integration ofmeans :
economies (c) Planned disinvestment
(b)Reduced government controls (d) None of these

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI
 Questions
29
6. Name the service industry.
(1) Coal mining (2) Banking (3) Tourism (4) C ell phones
(a) Only 1 (b) (2) & (3) (c) Only 2 (d) Only 3
7. Withdrawal of large denomination currency notes.
(a) Privatization (b) Liberalization (c) Demonetization
8. ABC Technologies Ltd. Is a leader in technology innovation in the US, creating products and solutions for
connecting the world. They developed the first smart watch S-19 which has health parameter features like heart
beat, blood pressure, etc. other than showing time options. While in search of markets abroad, the company found
that in India, the reform process was underway with the aim of accelerating the pace of economic growth. The
company decided to take advantage of simplified export procedure and removal of quantitative as well as tariff
restrictions. It set up its company in Jamnagar with a view to capture the Indian Market. In a short span of time the
company emerged as a market leader. Success in the company attracted many other players to enter the market.
Competition resulted in reduction in prices, thereby benefitting the customers.
(a) In the above paragraph two major concepts related to government policy have been discussed. Identify
and
explain these concepts.
Ans. Liberalization & Globalization
(b) Explain briefly any three impacts of these concepts on Indian business and industry.
Ans. Explain impact of each
CBSE-XII- BUSINESS STUDIES-BY HENNA
PUNJABI
 Thank
you
3
0

CBSE-XII- BUSINESS STUDIES-BY HENNA

PUNJABI