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Title: Business Environment
Description: A business environment is all the components that affect a business. These include both internal factors, like employees and resources, and external factors, like customers and markets. Each of these contributes to a company’s working environment and can influence how the business functions
Description: A business environment is all the components that affect a business. These include both internal factors, like employees and resources, and external factors, like customers and markets. Each of these contributes to a company’s working environment and can influence how the business functions
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Key Notes
CHAPTER – 3
BUSINESS ENVIRONMENT
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•
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Business environment can be defined as those forces, individuals and institutions who have
the ability to influence the working of an organization
...
(b) Specific and general forces: Business environment includes both specific and general
forces
...
who influence
business firm directly while general forces include social, political, economic, legal and
technological conditions which affect a business firm indirectly
...
For example, increased awareness of health care has raised the demand for
organic food and roasted snacks
...
(e) Uncertainty: Business environment is uncertain as it is difficult to predict the future
environmental changes and their impact with full accuracy
...
(g) Relativity: Business environment is a relative concept whose impact differs from
country to country, region to region and firm to firm
...
Importance of Business Environment
(a) Identification of opportunities to get first mover advantage: Understanding of
business environment helps an organization in identifying advantageous opportunities
and getting their benefits prior to competitors, thus reaping the benefits of being a
pioneer
...
For
example, Bajaj Auto made considerable improvements in its two wheelers when Honda
& other companies entered the auto industry
...
toa business firm
...
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Key Notes
(d) Coping with Rapid changes: Continuous study/scanning of business environment
helps in knowing the changes which are taking place and thus they can be faced
effectively
...
For
example, ITC Hotels planned new hotels in India after observing boom in tourism sector
...
Economic Environment in India: As a part of economic reforms, the Government of India
announced New Economic Policy in July 1991 for taking out the country out of economic
difficulty and speeding up the development of the country
...
Only six industries were kept under licensing scheme
...
The role of public sector was limited only to four industries
...
Disinvestment was carried out in many public sector enterprises
...
Foreign capital/investment policy was liberalized and in many sectors100% direct
foreign investment was allowed
...
Automatic permission was given for signing technology agreements with foreign
companies
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Foreign investment promotion board (FIPB) was setup to promote & bring foreign
investment in India
...
Various benefits were offered to small scale industries
...
(a) Liberalization: It means freeing of Indian Industry from all unnecessary government
controls and restrictions
...
(b) Privatization: Giving greater role to private sector in the nation building process and
reduced role of public sector; Disinvestment in many Public Sector undertaking etc
...
It
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Key Notes
•
•
aimed at improving efficiency and performance of government undertakings, reducing
budgetary deficit & better utilization of national resources
...
The measures taken by the Government include
trade liberalization which includes import liberalization; Export Promotion through
rationalization of tariff structure; Foreign exchange liberalization; increased interaction
among global economies under the aegis(protection/support) of World Trade
Organization
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Dimensions/Components of Business Environment:
(a) Economic Environment: It has immediate and direct economic impact on a business
...
are some economic factors which could affect business firms
...
(b) Social Environment: It includes various social forces such as customs, beliefs, literacy
rate, educational levels, lifestyle, values etc
...
Example: Now a day’s people are paying more attention
towards their health, as a result of which demand for mineral water, diet coke etc
...
(c) Technological Environment: It provides new and advance ways/techniques of
production
...
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 stability builds confidence among business community while
political instability and bad law & order situation may bring uncertainty in business
activities
...
(e) Legal Environment: It constitutes the laws and legislations passed by the Government,
administrative orders, court judgements, decisions of various commissions and
agencies
...
Example: Advertisement of Alcoholic products is prohibited and it is
compulsory to give statutory warning on advertisement of cigarettes
...
Efforts have been made to encourage foreign
investment
...
The age old restrictions have been eliminated
...
ncrtsolutions
...
The greatest problem confronting the Indian Govt
...
Fiscal Deficit - It means country is spending more than its income
Gross Domestic Product (GDP) - It is the sum total of the financial value of all goods &
services produced in a year in a country
...
(e) Capital Market Reforms- The Govt
...
(2) The restriction in respect of interest on debentures has been lifted
...
Dismantling Price control - The govt
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Restrictions on the import
of these things have also been removed
...
(b) 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
...
(d) Necessity for Change- After New Industrial
...
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
...
(f) Market Orientation: Earlier selling concept was famous in the market now its place is
taken by the marketing concept
...
Marketing research, educational advertising, after sales
services have become more significant
...
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Title: Business Environment
Description: A business environment is all the components that affect a business. These include both internal factors, like employees and resources, and external factors, like customers and markets. Each of these contributes to a company’s working environment and can influence how the business functions
Description: A business environment is all the components that affect a business. These include both internal factors, like employees and resources, and external factors, like customers and markets. Each of these contributes to a company’s working environment and can influence how the business functions