NCERT Questions for Class 12 Business Studies Chapter 3 – Business Environment

Important Questions with Solutions of Class 12 Business Studies Chapter 3 – Business Environment

1) How does an understanding of the business environment assist management in:

Ans –

A. Tapping Useful Resources: Understanding the company environment helps managers use external resources like finance, labor, and raw supplies. Businesses that analyze their workspace can identify valuable resources in the market, strategically purchase & incorporate them into their operations. It assists them in translating resources into goods and services, maximizing usage, and increasing overall efficiency.

B. Managing Rapid Changes: The company environment changes due to market conditions, customer preferences, and technology improvements. Managers with a solid understanding of their environment can predict and cope with changes. Managers should establish proactive ways to turn changes into opportunities rather than dangers to know about the latest trends. This knowledge can modify business strategies on time, meet changing client expectations, and keep competitive perks.

2) Describe the role of the political space in transforming business activities.

Ans – The political workspace impacts commercial activity influencing general stability, rules, and policies. The key attributes of the political environment are:

Political Stability and Leadership: A stable political climate creates trust in businesses by offering a predictable framework within which they can operate. Political stability supports investment and economic progress. On the other hand, political instability like frequent changes in government or leadership can cause uncertainty by disrupting corporate operations and hurting investor confidence.

Government Policies and Regulations: Taxation, trade, and industry regulations can influence company activity. For example, advantageous tax policy and trade rules can promote corporate development and expansion. On the other hand, strict or unexpected policy changes can create obstacles and raise operating expenses for enterprises.

Impact of Policy Changes: Frequent changes in government policy can cause disruptions in corporate operations. For example, if a new government implements policies that differ dramatically from its predecessor’s, firms can face unexpected modifications that affect their operations and profitability. Businesses must remain updated on political events shifts.

Example: After globalization, the Indian government established laws to attract foreign investment and allow international corporations to join the Indian market. This reform helped businesses, including the food processing sector, by bringing new technology and boosting competition. Such progressive changes to the law can open up potential for growth and development, indicating the favorable influence of a supportive political climate on corporate operations.

3) How does environmental scanning help to locate threats and provide early warning signals for businesses?

Ans – Environmental scanning is an important practice that helps firms discover possible risks and early warning signs by studying external factors that affect their operations. This is how it works.

Threat Identification: Adverse developments in the external business environment, such as shifts in market trends, new laws, or recessions, can represent serious risks to a company. Firms consistently monitor these external elements to uncover possible dangers before they become a reality.

Early Warning Signals: Environmental scanning is acquiring & evaluating data about the market space to discover possible risks. This proactive strategy allows them to predict issues.

Strategic Response: Early detection of risks enables organizations to develop plans to manage or fight these risks. Managers may take proactive measures to preserve the company’s interests and transform prospective obstacles into opportunities by identifying possible risks before they occur.

Assume there is a rumor that an MNC plans to join the Indian market, posing a possible threat to domestic enterprises. Environmental scanning enables Indian enterprises to notice this early warning signal and take proactive changes by increasing product quality, reducing prices, or improving customer service to compete with new entrants and reduce the effect of competition.

4) What are some negative impacts of liberalization & globalization?

Ans – Liberalization & globalization are good in many aspects but have some negative consequences:

Increased Competition from Multinational Corporations (MNCs): MNCs’ entry into local markets can be vital for small and medium-sized businesses (SMEs). These multinational corporations have better resources, technology, and market reach, making it more challenging for local markets to compete. This competition can drive local enterprises out of the market and limit variety.

Destabilization of Protected Markets: Some sectors were protected from foreign competition by taxes and restrictions pre-liberalization. When these safeguards are withdrawn, home industries may find it challenging to offer cost-effective products from global businesses. To stay competitive, Indian creators like Maruti must adjust by reducing prices & modernizing their vehicles.

Decline in Public Sector Efficiency: As private and foreign firms gain popularity; public sector enterprises’ performance and market share may suffer. As public sector enterprises lose growth, capacity utilization falls, limiting overall technical innovation and economics in the country.

Globalization results in an excessive of commodities due to increasing imports and competition. This transition from a sellers’ market, where demand exceeds supply, to a buyers’ market, where supply exceeds demand, leads to lower prices and reduced profit margins for local producers.

Redistribution of Economic and Political Power: Globalization can focus on economic and political power in the hands of major multinational businesses and powerful governments. This redistribution has the potential to destabilize economies and damage local firms, increasing economic inequality and reducing the importance of smaller economies in global affairs.

These effects underscore the complexities and problems connected with liberalization and globalization, highlighting the need for balanced policies that save local sectors while supporting global integration.

5) As we witness a drastic makeshift in consumption behavior among people – Neelesh, the owner of the sweet stall has switched to the chocolate-selling business. On a Diwali evening, he curated chocolates in the most appealing package model at affordable rates. He also expected more people to buy his products so he built a personalized site called chocolove.com to book the delicacies online. It did wonders as he received many orders over the internet & gained massive profit with this chocolate business.

Identify and explain the dimensions of the business environment illustrated in Neelesh’s transition from a sweets shop to a chocolate business.

Ans – The story of Neelesh highlights the following characteristics of the corporate environment:

1. The social environment refers to the norms, traditions, values, culture, and trends that affect company operations. In Neelesh’s example, the shift in customer behavior toward chocolate during festive seasons such as Diwali indicates shifts in social preferences. The availability of chocolates in beautiful wrappers at reasonable costs meets seasonal demand, demonstrating how social trends and cultural habits impact commercial potential.

Quote: “Changes in people’s consumption habits.”

2. Advancements and developments in science and technology affect manufacturing and company operations. Neelesh’s development of the website chocolove.com for online orders shows the use of technology to reach a larger audience and speed up the buying process. This tech implementation demonstrates how innovation may improve corporate efficiency and customer satisfaction.

The following quote applies: “Created a website chocolove.com for taking orders online.”

6) An environmentally conscious multinational corporation called “AXN Ltd.” minimizes staff turnover by adhering to a set of well-defined business rules. ‘AXN Ltd.’ adheres to the following significant environmental factors:

1. Respect every nation’s law & order based on regular functioning.
2. Acknowledge the culture & traditions of different countries worldwide.
3. Offer clean & hygienic products to improve the global standard of living.
4. Foster an expressive environment in your firm by encouraging standalone creativity & appreciating teamwork by having concurrent respect & loyalty among the managerial group and hardworking employees.

Based on the practices of the environmentally-conscious multinational company “AXN Ltd.,” identify and explain one general management concept and one dimension of the business environment illustrated in their approach. Also, outline the values being conveyed by these practices.

Ans – i) General Management Principles & Business Environment Dimensions

AXN Ltd. illustrates the idea of Esprit de Corps, which promotes unity and collaboration within the firm. AXN Ltd. supports this thinking by creating a culture that encourages individual innovation, cooperation, and mutual respect between management and labour.

Paradigm of the Business Environment: Legal Environment

The Legal Environment refers to the rules, regulations, and legal norms that regulate corporate activities. AXN Ltd.’s dedication to respecting the laws of every country of operation shows its attention to this dimension, which ensures legal compliance across several countries.

ii) Values Being Communicated:

• Respect for the Law: AXN Ltd. displays its commitment to legal compliance by respecting the laws of each nation in which it operates.
• Cleanliness & Hygiene: The business’s focus on providing clean and safe products demonstrates its commitment to maintaining increased cleanliness and hygiene levels.
• Concern for Society and Employees: AXN Ltd.’s focus on increasing individual creativity while creating mutual trust and respect between management and labour demonstrates a strong concern for social influence and employee welfare.