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Business Studies 4 Marks Question

Business Environment · CBSE STD 12 Commerce (CBSE - English Medium). 16 questions.

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4 Marks Question

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16 questions · timed · auto-graded

Question 14 Marks
With change in the consumption habits of people, Neelesh, who was running a sweet shop shifted to chocolate business. On the eve of Diwali, he offered chocolates in attractive packages at reasonable prices. He anticipated huge demand and created a website chocolates.corm for taking orders online. He got lot of orders online and earned huge profit by selling chocolates.
Identify and explain the dimensions of business environment discussed in the above case.
Answer
  1. Social Environment: Social Environment includes social forces like custom and traditions, values, social trends and society's expectation from business.
  2. Technological environment: Technological Environment of business includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
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Question 24 Marks
Explain the concept of ‘Business Environment’ and any three features of it.
Answer
The term business environment means the totality of all individuals, institutions and other forces that are outside a business but that potentially affect its performance.Basic features of business environment
  1. Totality of external forces: Business environment is the sum total of all things external to business firms and, as such, is aggregative in nature.
  2. Specific and general forces: Business environment includes both specific and general forces. Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working General forces (such as social, political, legal and technological conditions) have impact on all business enterprises and thus may affect an individual firm only indirectly.
  3. Inter-relatedness: Different elements or parts of business environment are closely interrelated. For example, increased life expectancy of people and increased awareness for health care have increased the demand for many health products and services like diet Coke, fat-free cooking oil, and health resorts. New health products and services have, in turn, changed people’s life styles.
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Question 34 Marks
‘Accent Electronics Ltd.’ was operating its business in Malaysia. The company started exporting its products to India when the Prime Minister announced relaxation in import duties on electronic items. The company appointed retailers in India who had direct on-line links with the suppliers to replenish stocks when needed.
Identify and explain the dimensions of business environment discussed in the above case.
Answer
Dimensions of, or the factors constituting the business environment include economic, social technological, political and legal conditions which are considered relevant for decision-making and improving the performance of an enterprise .The dimensions explained in the above case are as follows:
  1. Political Environment: Political environment includes political conditions such as general stability and peace in the counn try and specific attitudes that elected government representatives hold towards business. The significance of political conditions in business success lies in the predictability of business activities under stable political conditions. On the other hand, there may be uncertainty of business activities due to political unrest and threats to law and order. Political stability, thus, builds up confidence among business people to invest in the long term projects for the growth of the economy.
  2. Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
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Question 44 Marks
A recent rate cut in the interest on loans announced by the Banks encouraged Amit, a science student of Progressive School to take a loan from State Bank of India to experiment and develop cars to be powered by fuel produced from garbage. He developed such a car and exhibited it in the Science Fair organised by Directorate of Education. He was awarded first prize for his invention.
Identify and explain the dimensions of business environment discussed in the above case.
Answer
Dimensions of, or the factors constituting the business environment include economic, social technological, political and legal conditions which are considered relevant for decision-making and improving the performance of an enterprise.The dimensions explained in the above case are as follows:
  1. Economic environment: A fall in loan interest rate implies a variation in the economic environment of the country.
Economic environment includes the effect of changes in the interest rates, levels of income and stock market fluctuations.
Example: An increase in imports leads to a fall in the price of domestic currency and vice versa.
  1. Technological environment: Development of a car which is powered by fuel produced from garbage implies a change in technological environment of the economy.
Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
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Question 54 Marks
What is meant by 'business environment'? State any three points of its importance.
Answer
Meaning of business environment: The term business environment means the totality of all individuals, institutions and other forces that are outside a business but that potentially affect its performance.Importance of business environment:
  1. It enables the firm to identify opportunities and getting the first mover advantage: Opportunities refer to the positive external trends or changes that will help a firm to improve its performance. Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors.
  2. It helps the firm to identify threats and early warning signals: Threats refer to the external environment trends and changes that will hinder a firm’s performance. Besides opportunities, environment happens to be the source of many threats. Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.
  3. It helps in assisting in planning and policy formulation: Since environment is a source of both opportunities and threats for a business enterprise, its understanding and analysis can be the basis for deciding the future course of action (planning) or training guidelines for decision making (policy).
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Question 64 Marks
Why is the understanding of business environment important for managers? Explain with the help of any four points.
Answer
Business enterprises do not exist in isolation. Each business firm is not an island unto itself; it exists, survives and grows within the context of the element and forces of its environment.Importance of business environment:
  1. It enables the firm to identify opportunities and getting the first mover advantage: Opportunities refer to the positive external trends or changes that will help a firm to improve its performance. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors.
  2. It helps the firm to identify threats and early warning signals: Threats refer to the external environment trends and changes that will hinder a firm’s performance. Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.
  3. It helps in tapping useful resources: Environment is a source of various resources for running a business. To engage in any type of activity, a business enterprise assembles various resources called inputs like finance, machines, raw materials, power and water, labour, etc., from its environment including financiers, government and suppliers.
  4. It helps in coping with rapid changes: Today’s business environment is getting increasingly dynamic where changes are taking place at a fast pace. It is not the fact of change itself that is so important as the pace of change. Turbulent market conditions, less brand loyalty, divisions and sub-divisions (fragmentation) of markets, more demanding customers, rapid changes in technology and intense global competition are just a few of the images used to describe today’s business environment.
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Question 74 Marks
Explain ‘New Industrial Policy’ and ‘New Trade Policy’ as economic changes initiated by the Government of India since 1991?
Answer
New Industrial Policy:
  1. A no. of industries have been liberalised from the clutches of licensing and control.
  2. Substantive changes have been introduced in matters like foreign investment and technology import.
  3. MRTP Act and Foreign Exchange Regulation Act have been diluted significantly.
  4. Role of public sector has been curtailed.
New Trade Policy:
  1. Almost all imports have been liberalised.
  2. Imports have been completely removed from the licensing fold.
  3. Steep reduction in import tariffs on a number of items, including capital goods.
  4. Simplification of procedure for promoting exports.
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Question 84 Marks
Mahinder Agro Ltd. started a new venture for distribution of harmful and chemical fertilizers free vegetables. They conducted a survey to find out consumer preferences for such vegetables.
They found that most of the consumers were concerned about the harmful chemicals being used in growing the vegetables. They found that 90% of the households were searching for its alternatives. The company contacted a group of agriculture experts to lay down the procedure for growing the vegetables by the farmers. They decided to train the farmers in new technology to grow chemical free vegetables according to new innovative methods. The experts also suggested soil management techniques through which farmers would be able to create an abundant and lasting harvest.
Identify and explain the two dimensions of business environment highlighted in the above para.
Answer
Dimensions of business environment highlighted above are:
  1. Social Dimension: Social Environment includes social forces like custom and traditions, values, social trends and society’s expectation from business.
  2. Technological Dimension: Technological Environment of business includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
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Question 94 Marks
Naman and Govind after finishing their graduation under vocational stream decided to start their own travel agency which will book Rail Tickets and Air Tickets on commission basis. They also thought of providing tickets within ten minutes through the use of internet. They discussed the idea with their Professor Mr. Mehta who liked the idea and suggested them to first analyse the business environment which consists of investors’, competitors and other forces like social, political etc. that may affect their business directly or indirectly. He further told them about the technological improvements and shifts in consumer preferences that were taking place and hence they should be aware of the environmental trends and changes which may hinder their business performance. He emphasised on making plans keeping in mind the threat posed by the competitors, so that they can deal with the situation effectively. This alignment of business operations with the business environment will result in better performance.
  1. Identify and state the component of business environment highlighted in the above
    Para.
  2. State any two features of business environment as discussed by Professor Mehta with Naman and Govind.
  3. Also state two points of importance of business environment as stated by Professor Mehta in the above situation.
Answer
  1. Technological Environment is the component of business environment highlighted in the above Para. Technological Environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
  2. The two features of business environment as discussed by Professor Mehta with Naman and Govind are as follows :
    • Dynamic nature: It is dynamic in nature and keeps on changing due to technological upgradations, shifts in consumer preferences or increase in competition in the market.
    • Inter-relatedness: All the elements of business environment are closely interrelated. Therefore, any change is one element may necessitate corresponding changes in the other elements as well.
  3. The two points of importance of business environment as stated by Professor Mehta in the above situation are described below:
    • It enables the firm to identify opportunities and getting the first mover advantage: The dynamic business environment provides numerous opportunities for a business to evolve as per the changing needs. Therefore, early identification of the forthcoming opportunities helps an enterprise to be the first to exploit them instead of losing them to the competitors.
    • It helps the firm to identify threats and early warning signals: Sometimes the changes in the external environment may pose as a threat and hinder a firm’s performance. An awareness about the business environment helps the managers to identify such threats on time and take necessary decisions and action.
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Question 104 Marks
What is meant by ‘Business environment’? State any three points of its importance.
Answer
Meaning of Business Environment: Business environment means the sum total of those factor which influence the business and over which the business has no control.
Importance of Business Environment:
The importance of business environment is highlighted by the following facts:
  1. First Mover Advantage: The study of business environment enables us to know about the opportunities available. A company which is more conscious about the changes taking place in the business environment is the first mover. It takes advantage of it by becoming the first supplier. In other words, a company which has the capacity to know the possibilities of the opportunities available can be the greatest beneficiary.
  2. Warning Signal: Along with the availability of opportunities provided by the study of business environment, we also come to know about the threats accompanying them. If the knowledge about the threats is available in time, efforts can easily be made to face or surmount them. This is possible only by regularly studying the changes taking place in the business environment.
  3. Tapping Useful Resources: An organisation needs a number of resources to carry on its business (e.g., material, machine, man, money, etc.). With the help of these resources goods and services are produced. A business gets resources from the environment and provides goods and services to the same environment. A study of business environment tells a business the requirements of the environment and what can it make available to get its needs fulfilled. Therefore, it is possible to get useful resources from the business environment.
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Question 114 Marks
What is micro environment? Explain any four components of it.
Answer
Micro Environment: Micro environment means that environment which includes those factors with which business is closely related. These factors influence every industrial unit differently. These factors are as under:
  1. Customers: Customers of an industrial unit can be of different types. They include household, government industry, commercial enterprises, etc. The number of different types of customers highly influences a firm. For example, a firm supplies goods only to the government. It means that firm has only one customer. If because of some reason their relations get soured, the supply of goods will stop and in that case the closure of that firm is certain. This clearly indicates that the customers do influence business. Therefore, a firm should make efforts to have different kinds of customers.
  2. Suppliers: Like the customers, the suppliers also influence business. If a business has only one supplier and he gets annoyed because of some reason, the supply of goods can be stopped and the very existence of the business can be threatened or endangered. Hence, efforts should be made to have various suppliers.
  3. Competitors: The competing firms can influence business in a number of ways. They can do so by bringing new and cheap products in the market or by launching some sale promotion scheme, etc.
  4. Public: Public has different constituents like the local public, press or media, etc. The attitude or behaviour of these constituents can affect business units. For example, the local population can oppose some established firm whose businessis excessively noisy. Similarly, if the media gives some favourable report about a particular company, the price of its share can register an increase on this count.
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Question 124 Marks
Explain the features of demonetisation?
Answer
The following are the main features of demonetisation:
  1. Tax Administrative Measure: Demonetisation is regarded as a measure of tax administration. People with cash-in-hand on account of their declared income readily deposited their cash in banks and got it exchanged for new currency. On the other hand, those who had black money had to come forward to declare their unaccounted cash and pay taxes along with a penalty.
  2. Tax Evasion Control Measure: Demonetisation is also known as the Government’s measure to control the mal-practices of tax evasion (avoiding tax illegally).
  3. Channelising Savings into the Formal Financial System: Demonetisation facilitates in channelising savings of the people into the formal financial system. As a result, some of the new deposits can be used for launching new profitable schemes and providing loans at lower interest rates.
  4. Creating Less-Cash Economy: Demonetisation helps in effecting (bringing about) understanding in people for channeling more savings through formal financial system and hence improving more chances of less cash economy. Consequently, despite the limitations (non-availability of Cell Phones, Point-of-Sale Machines— POS Machines, Internet Connectivity, etc.) of digitalising transactions, it helps in introducing formal economy.
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Question 134 Marks
With change in the consumption habits of people, Neelesh, who was running a sweets shop shifted to chocolate business. On the eve of Diwali he offered chocolates in attractive packages at reasonable prices. He anticipated huge demand and created a website chcolove.com for taking orders online. He got lot of orders online and earned huge profit by selling chocolates.
Identify and explain the dimensions of business environment discussed in the above case.
Answer
Dimensions of Business Environment discussed in the above case:
  1. Social Environment: It refers to the combination of all the characteristics of the society in which the organisation exists.
  2. Technological Environment: It refers to innovations relating to various business activities.
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Question 144 Marks
What are the main impacts of demonetisation?
Answer
S. No.    
1. Money/ Interest Rates i. Decline in cash transactions.
ii. Bank deposits increased.
iii. Increase in financial savings.
2. Private Wealth Declined since some high demonetised notes were not returned and real estate prices fell.
3. Public Sector Wealth No effect.
4. Digitisation Digital transactions amongst new users (Ru-Pay/ AEPS) increased.
5. Real Estate Prices declined.
6. Tax Collection Rise in income tax collection because of increased disclosure.
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Question 154 Marks
A recent rate cut in the interest on loans announced by the Banks encouraged Amit, a science student of Progressive School to take a loan from State Bank of India to experiment and develop cars to be powered by fuel produced from garbage. He developed such a car and exhibited it in the Science Fair organised by Directorate of Education. He was awarded first prize for his invention.
Identify and explain the dimensions of business environment discussed in the above case.
Answer
Dimensions of Business Environment discussed in the above case:
  1. Economic Environment: Economic environment refers to the combination of economic systems, economic policies and economic conditions of a country.
  2. Technological Environment: Technological environment refers to innovations relating to various business activities.
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Question 164 Marks
Explain the concept of ‘Business Environment’ and any three features of it.
Answer
Meaning of Business Environment: It refers to the sum total of those factors which influence the business and over which business has no control.
Features of Business Environment:
  1. Totality of external forces: Business environment is the sum total of all those factors/forces which are available outside the business and over which the business has no control. It is the group of many such forces, that is why, its nature is of totality.
  2. Specific and general forces: The forces present outside the business can be divided into two parts-specific and general.
  1. Specific: These forces affect the firms of an industry separately, e.g., customers, suppliers, competitive firms, investors, etc.
  2. General: These forces affect all the firms of an industry equally, e.g., social, political, legal and technical situations.
  1. Dynamic Nature: As is clear that environment is a mixture of many factors and changes in some or the other factors continue to take place. Therefore, it is said that business environment is dynamic.
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