its a complete HomeBusinessBusiness Environment5 Reasons why study of Business Environment is Important 5 Reasons why study of Business Environment is Important Table of Contents [show] Importance of the Study of Business Environment A proper understanding of the environment is very essential for the business executive to achieve success in his business. Importance of the Study of Business Environment Image: Importance of the Study of Business Environment Failure to understand the environmental factors for business shall create number of problems, which in fact are difficult to solve. It will reduce the profit margin and will make the opportunities for expansion to slip. But a proper appreciation of the environmental factors will bring many benefits.

1. Namrata Ladha

4.  When we see around us, we observe that most of the people or
everyone around is doing some activity. Whether it be studying,
teaching, managing this whole institution.
 Farmers, students, teachers, staff, office boy, doctors,
housewives/husband.

5.  Human activities
 Two conditions needs fulfilled
 Aim is to earn money profits
 Doing it on regular basis
 Economic vs non economic activities
 Types of economic activities:- profession, employment,
business.
 Definitions of business
 Characteristics of business

7.  Ancient period upto 750 AD
 -farming and agriculture
 -exchange system- barter system
 -industry, trade and commerce in Harrapan civilization 4500
years ago
 Medieval period 750 to 1757 AD
 -trade routes, ports
 -administration
 -negotiable instruments- Hundi
 -foreign investors then invaders

8.  Modern period- british rule
 -railways
 Posts and telegraph
 Industrial revolution
 Modern industries- JRD Tata

9.  Important contribution of India to the world of business
 Objectives of business
 Economic
 Social
 human
 National
 Global

10.  The conditions or situations that affect business activities may
be regarded as the environment of business.
 Definition of environment
 Nature of business environment
 -system approach
 -social responsibility approach
 -creative approach
 Internal env
 External env- micro, macro

15.  Demographic Factors: Demographics refers to age, language,
lifestyle, income distribution, cultural differences, etc. Financial literacy
depends on demographics.
 Ecological and Physical Factors: Business performance depends on
various geographical and ecological forces—availability of natural
resources, climate change, weather conditions, biological balance,
pollution, etc.
 Political and Legal Factors: The government imposes various
regulations on businesses—employment laws, import/export laws,
copyright laws, labor laws, health and safety laws, and discrimination
laws.
 Economic Factors: Consumer buying decisions are significantly
impacted by macroeconomic factors—demand-supply, inflation, interest
rates, taxes, exchange rates, and recession.
 Technological Factors: Technological growth and advancement within
a nation greatly influence the production and sale of goods or services.
Innovation, automation, and internet facilities are some examples.
 Socio-Cultural Factors: A business needs to be socially responsible
and culturally aware. Socio-cultural factors comprise education,
population growth rate, life expectancy rate, social status, buying habits,
religion, etc.

16.  The macro environment comprises a range of
external factors—demographic, physical, natural,
economic, technological, political, legal, and socio-
cultural conditions.
 Neither businesses nor governments can entirely
control external factors. But, diligent decision-making
and strategies can reduce the impact on the
economy.
 Macroeconomics is a ‘top-down approach; it gives
a birds’ eye view of the economy. But data is not
readily available; it has to be collected from various
sources. During extreme situations like political
instability, the collection of data is difficult.

17.  Economic environment refers to the external forces
within an economy. Macro environment factors like
inflation, fiscal policy, monetary policy, consumer
spending, GDP, and employment rates considerably
affect business operations. Governments and
institutions strategize policies based on these
factors.
 Macro environment factors impact decision-making,
strategies, and growth of a business. But, at the
same time, the management cannot control factors.
For long-term sustainability, businesses try to predict
macro-environmental factors. Based on macro
analyses, businesses prepare for future threats and
opportunities.

19.  It is expected that it will raise the rates by another 75 basis points
to a range of 3 per cent to 3.25 per cent -- which would be the third
consecutive increase of that magnitude. Fed policymakers have
been reiterating their commitment to bring inflation down which
holds close to levels not seen in 40 years.
 US Federal Reserve Governor Christopher J. Waller recently gave
a hint the decision at the monetary policy meeting will be
"straightforward" and the central bank will continue to fight inflation
aggressively.
 Gold rates today in India fall to 7-month lows after Fed rate
hike
 Gold is seen as a hedge against inflation but rate hikes to tame
inflation tend to raise the opportunity cost of holding zero-yield
bullion.

20.  Stress on credit markets from monetary tightening
 The difference between the average yield on investment-grade
U.S. corporate bonds and their risk-free Treasury counterparts,
known as the credit spread, has jumped about 70% over the
past year, pushing up borrowing costs for businesses.
 Higher borrowing costs
 Higher borrowing costs and a decline in equity prices since the
middle of August have tightened U.S. financial conditions to
levels not seen since March 2020, according to a Goldman
Sachs benchmark composed of credit spreads, stock prices,
interest rates and foreign exchange rates.
 Increasing risk of default on corporate debt

21.  Inflation in India has stayed above the central bank’s upper
tolerance limit for eight months now. Yet, when the monetary
policy committee (MPC) hikes interest rates next week, rising
prices won’t be the only reason. This year, the rupee has lost
value both domestically through inflation, and externally through
depreciation against the US dollar. The twin factors have
complicated the MPC’s task of maintaining financial stability in
a volatile global scenario.
 This year rupee has fallen from 74.5 to 79.8 per dollar. At the
same time, consumer prices have gone up by 6.8%

23.  The components are as follows:
 Inflation and Deflation: The rise or fall in the prices of goods and the
wage changes highly impact purchasing power.
 Consumer Spending: An increase or decrease in purchasing power
influences the demand and supply of commodities.
 Monetary Policies: The RBI controls the nation’s economic condition by
initiating appropriate monetary policies. Monetary policies bring changes
in cash reserve ratios, statutory liquidity ratios, repo rates, reverse repo
rates, bank rates, etc. Also, the central bank adopts various measures
for open market operations—the buying and selling of government
bonds.
 Fiscal Policies: The government often takes contractionary or
expansionary measures to deal with adverse situations like inflation
or deflation. These measures relate to government spending, borrowing,
and taxation.
 Gross Domestic Product: The national output is an aggregation of all
the goods and services produced in a country. A falling GDP indicates a
poor economic condition, whereas a soaring GDP reflects a
healthy economy.
 Employment Levels: Unemployment and the availability of skilled labor
drastically impact business operations.

27.  The country can become a $20-trn economy at a sustained growth rate of 7-7.5% for the next 25 years, says EAC-PM Chairman
 India can become an upper-middle-income country by 2047 if it manages to achieve a sustained growth rate of 7-7.5 per cent for the next 25
years, EAC-PM Chairman Bibek Debroy said on Tuesday.
 The country can become a USD 20 trillion economy by 2047 at this growth rate, he added.
 India, the world's sixth largest economy with a GDP of USD 2.7 trillion, is currently classified as a developing nation.
 "Even if you have relatively conservative real rates of growth of 7-7.5 per cent, we will get to a per capita income of about USD 10,000.
 "And you will get to a total size of the economy of a little less than USD 20 trillion in 2047," the Economic Advisory Council to the Prime Minister
(EAC-PM) Chairman said while releasing 'The Competitiveness Roadmap for India@100'.
 Prime Minister Narendra Modi has set an ambitious target of making India a developed nation by 2047.
 "...which means India will be in the upper middle-income category, not a higher-income category," Debroy said, adding that it also means that
the nature of Indian society will be completely transformed.
 According to the World Bank's definition, a country with a per capita annual income of over USD 12,000 is considered as a higher-income
nation.
 Noting that because what happens to India is an aggregate of what happens to the states, Debroy said, "And unless, the states jack up their
growth records, the overall growth records for India is not going be that high either".
 According to the International Monetary Fund, the Indian economy is forecast to expand by 7.4 per cent in 2022-23, making it one of the world's
fastest-growing economies.
 A developed country is typically characterised by a relatively high level of economic growth, a general standard of living, and higher per capita
income as well as performing well on the Human Development Index (HDI), which includes education, literacy and health.
 India was classified as a 'third-world' country at the time of Independence from British rule in 1947. But, over the past seven decades, its GDP
has grown from just Rs 2.7 trillion to Rs 150 trillion.

28.  For a High income country, GNI per capita should be :
 $>14,025
 $>4,025
 $ >6,096
 $ >12,695

29.  23: The low income economies are sometimes referred to
as -
 A.First World
 B.Second World
 C.Third world
 D.None of these

30.  India is currently:
 A.First World
 B.Second World
 C.Third world
 D.None of these

31.  The economic environment of a business includes
 A.Economic system
 B.Economic policies
 C.Economic conditions
 D.All of these

32.  An analysis of the external environment enables a firm to
identify -
 A.Strengths and opportunities
 B.Strength and weakness
 C.Weakness and threats
 D.Opportunities and threats

33.  In this type of economic system, the Government
intervention will be absent
 A.Free enterprise economy
 B.Socialist economy
 C.Mixed economy
 D.None of the above

34.  28: These are forces in company's immediate environment
that affect the company's performance
 A.Macro environment
 B.Micro environment
 C.Technological environment
 D.Natural environment

35.  An environment which is increasingly complex and
turbulent, displays
 A.More orderly competition
 B.More predictable demand
 C.A reduced risk of product obsolescence
 D.Increased speed of innovation

36.  36: -------- is a social movement seeking to augment the
rights and powers of buyers.
 A.Consumer Movement
 B.Consumerism
 C.Flows
 D.None of these

37.  38: What does the PPP or P3 initiative refer to ?
 A.Public Policy Papers
 B.Public Private Partnership
 C.Private Procurement Production
 D.Personal Production Proposal

38.  NITI aayog stands for:

39.  47: The transfer of assets from public sector to private
sector is referred to as -
 A.Privatisation
 B.De-regulation
 C.Nationalisation
 D.Individualisation

48.  Q. Following is not a specific force environment?
 customers
 suppliers
 creditors
 social

49.  Q. technological environment includes:
 advances in production technology
 advances in information technology
 popularity of e -banking
 all of the above

50.  Q. Following is not a general force environment:
 political environment
 social environment
 competitors environment
 Economic environment

51.  Q. Following is the impact of government policy changes
on business and industry:
 technological upgradation
 Demanding customers
 Increased competition
 All of the above

52.  Q. Which of the following is not the element of political
environment:
 Constitution of the country
 prevailing political system
 popularity of e-banking
 Level of political morality

53.  Q. Following are the elements of social environment:
 Educational system and literacy rates
 family structure
 caste and occupational structure
 all of the above

54.  Q. Following is not the features of business environment:
 Totality of external forces
 dynamic nature
 industrial policy
 uncertainty

55.  Q. Legal environment includes:
 government policies related to pricing
 the constitutional framework
 goverment policies related to import and export
 all of the above

56.  Q. Following is not the importance of business
environment:
 Get first mover advantage
 complexity
 Tapping useful resources
 better performance

57.  Q. .Business environment does not have the following
characteristics:
 uncertainty
 employees
 relativity
 complexity

58.  Q. Liberalisation signifies:
 Integration among various economies of world
 Reduced government restrictions & control
 Policy of plannned disinvestment
 None of the above

59.  Q. Which of the following is an example of social
environment?
 money supply in the economy
 consumer protection act
 the constitution of the country
 composition of family

60.  Q. With the introduction of Photostat Machines in the
market, the carbon paper industry was adversely affected.
 Which component of environment was responsible for it?
 answer choices
 (a) Economic
 (b) Political
 (c) Technical
 (d) All the above

61.  Q. Identify the dimension of business environment in the
following case –
 Replacing old machinery with new one to meet the
requirements of pollution control regulations.
 answer choices
 a) Legal Environment.
 b) Technological Environment.
 c) Economic Environment.
 d) Social Environment.

62.  Q2. When a company taken over another one and clearly
becomes the new owner, the action is called
 A. Acquisition
 B. Merger
 C. Strategic Alliance
 D. None of the above
 Answer: A

63.  Q3. By which act does the government check restrictive
trade?
 A. MRTP Act
 B. FEMA act
 C. Industrial Policy Act 1991
 D. None of these

64.  Q4. Which among the following is not opened for private
sector participation
 A. Railways
 B. Telecommunication sector
 C. Education sector
 D. Power sector

65.  Q9. Laissez Faire policy is adopted in
 A. Socialist Economic system
 B. Capitalist Economic system
 C. Communist Economic System

66.  SWOT analysis
 Five forces analysis
 Ansoff matrix/ market matrix
 BCG matrix
 Mckensey growth pyramid
 PESTEL analysis

67.  Definition, nature, factors and causes of cultural change

68.  Govt controls over business in following ways
 -Economic planning
 -Industrial policy
 -Industrial policy
 -Industrial licensing
 -Regulation of foreign trade

69.  Federalism in India
 Unitary elements in Indian constitution
 Centre-state financial relations in India

70.  The Perils of Political Instability and Uncertainty
 If there is one thing that business leaders and entrepreneurs hate
that is instability in the macro environment. Businesses operate
according to forecasts and scenarios about the future that
comprise surprises as well as certainties.
 However, as much as businesses factor in uncertainty, the one
thing that wants to avoid at all costs is the instability in the macro
environment that results from political gridlock, extremism, and
political dysfunction.
 This is the reason why many emerging markets in Asia and Africa
either attract or repel foreign investors.
 Further, businesses like to operate in an environment that is not
marred by frequent strikes, social unrest, and chaos as their
operations would be hit adversely due to these factors.

71.  Popular examples- Brexit, Nitish sarkar in Bihar, takeover by
Army, Russia-ukraine War, North Korean king