Class xii

Business studies
Business environment

REASON-BASED,
EVALUATION & HOTS
Q. 1. "Most of the big companies and MNCs are hesitant to invest in some
of the north-eastern states of India due to instability of government and
lack of incentives by the government." Which environment is referred
here?
OR
"Allowing Coca Cola to operate in India." This is an example of a key
component of the business environment. Name the component discussed
in given case.
Ans. Political Environment.

Q. 2. There has been tremendous growth in business process outsourcing

(BPO) and knowledge process outsourcing (KPO) services. Identify and
state the economic reform responsible for this trend?
Ans. Globalisation.
Globalisation refers to integrating the national economy with the world
economy through removal of barriers on international trade and capital
movements.

Q. 3. "Companies that fail to adapt to their environment are unlikely to

survive in the long run."
Ans. The given statement is true.
Discuss 'Importance of Business Environment'.

Q. 4. Due to a significant decrease in the goods and services tax in Gujarat,

many of the fast-growing companies have planned to set up their
www.fhic.in
production plants there. Which key component of the business
environment is discussed in the given case? Ans. Economic Environment.

Q. 5. "Business environment offers both opportunities as well as threats."

Do you agree with the given statement? Discuss it with the help of
examples.
Ans. Yes, I agree with the given statement. Awareness about the
environment helps an organisation to identify opportunities and threats.
Threats can be in the form of increased competition, non-availability of
trained workforce, shortage of raw materials, shift in consumer demand to
other products, etc. For example, with increase in Chinese toys, Indian toys
manufacturers have to face cut throat competition from Chinese toys.
• Business environment also provides opportunities in the form of easy
accessibility to new technology, opening up of new investment avenues,
increased orders, world quality products due to competition, etc. For
example, Maruti Udyog became the leader in small car market because it
was the first to recognise the opportunity of need for small car.

Q. 6. Increased awareness for health has benefitted the business

enterprises engaged in manufacturing of exercise equipment. Which key
component of business environment is highlighted in the given statement?
Ans. Social Environment.

Q. 7. "According to the Weights and Measures Act, every eatable product

should explicitly bear a green dot for vegetarian contents and brown dot for
non-vegetarian ingredients." Which key component of the business
environment is discussed in the given case?
Ans. Legal Environment.

Q.8. The RBI has reduced the bank rate to face the situation of inflation.
Identify the dimension of business environment?
Ans. Economic environment.

Q. 9. The court passed an order that all the schools must have water
purifiers for the school children as:
 Society in general is more concerned about quality of life;
www.fhic.in
 • Innovative techniques are being developed to manufacture water
purifiers at competitive rates; Incomes are rising and children at
home are also drinking purified water. The Government is also
showing positive attitude towards the water purifier business.
Identify the different dimensions of business environment by quoting from
the above details.
{CBSE, Delhi 2013}
Ans. (i) Legal Environment: 'The court passed an order that all schools
must have water purifiers for the school children';
(ii) Social Environment: 'Society in general is more concerned about
quality of life';
(iii) Technological Environment: 'Innovative techniques are being
developed to manufacture water purifiers at competitive rates';
(iv) Economic Environment: 'Income are rising';
(v) Political Environment: 'The government is also showing positive
attitude towards the water purifier business'.

Q. 10. Match the 'Dimensions of Business Environment' given under •A'

with the suitable statements under 'B':
(A) (B)
(i) Legal a. Includes the economic factors that
Environment can affect management practices in a
business enterprise.
(ii) b. Reflects specific attitudes that elected
Technological government representatives hold
Environment towards business.
(iii) Social c. Refers to various legislations within
Environment which business transactions are to
take place.
(iv) Economic d. Includes forces relating to scientific
Environment improvements and innovations.
(v) Political e. Include the social forces like customs
Environment & traditions, values, social trends,
etc.
Ans. (i) c; (ii) d; (iii) e; (iv) a; (v) b.

www.fhic.in
Q. 11. How can scientific improvements and innovations change the
management practices in a business enterprise? Explain with the help of an
example.
{CBSE, All India Compt. 2016}
Ans. Recent technological changes in computers and electronics have
modified the ways in which companies advertise their products. It is
common now to see CDROM's, computerized information kiosks and
Internet highlighting the virtues of the products.

Q. 12. Identify the appropriate Dimension of Business Environment

highlighted in the given statements:
i. It describes characteristics of technology in which business firms
operate.
ii. It describes framework of laws and legislations within which business
firms operate. It describes forces which have economic impact on
business.
iii. It describes nature of government intervention in business.
iv. It describes the characteristics of the society in which business firms
operate.
Ans. (i) Technological Environment; (ii) Legal Environment; (iii) Economic
Environment; (iv) Political Environment; (v) Social Environment.

Q. 13. How can customs and traditions, values, social trends and society's
expectations-change the management practices in a business enterprise?
Explain with the help of an example.
{CBSE, All India Compt. 2016}
Ans. Celebration of Diwali, Id, Christmas and Guru Parva in India provides
significant financial opportunities for greeting card companies, sweets or
confectionery manufacturers, tailoring outlets or many other related
businesses.

Q. 14. How can interest rates, inflation rates, changes in disposal income of
people, stock market indices and the value of rupee change the
management practices in a business enterprise. Explain with the help of an
example.
{CBSE, All India Compt. 2016}

www.fhic.in
Ans. Short- and long-term interest rates affect the demand for the product
and services. For example, in case of construction companies and
automobile manufacturers, low longer-term rates are beneficial because
they result in increased spending by consumers for buying homes and cars
on borrowed money.

Q. 15. Even after Economic reforms of 1991, many foreign companies were
not able to enter Indian market due to 'Bureaucratic Red Tape'. Which
dimension of environment is responsible for this?
Ans. Political Environment.

Q. 16. "With increase in birth rate and fall in death rate, the infants now
have bigger share in composition of population. It has increased the
demand for baby products, like milk bottles, toys, etc." Identify the
component of business environment.
Ans. Social Environment.

Q. 17. According to Consumer Protection Act, 1986, manufacturers are

under an obligation to provide all the relevant information (MRP,
ingredients, date of manufacturing, expiry date, etc.) about the product.
Which environment is highlighted in the given statement?
Ans. Legal Environment.

Q. 18. Skype Industries is facing a lot of opposition as it pays less salary to

women workers as compared to men workers. Which dimension of
environment is being violated by the company?
Ans. Social Environment.

www.fhic.in
CASE STUDIES
Q. 1. Express enterprise is an international company engaged in the
manufacturing of New Year and Christmas greeting cards. When the
company started its business in India, it started producing Diwali, Holi
and Raksha Bandhan Greeting cards also. Which component of
environment has induced the company to diversify its range of greeting
cards?
Ans. Social Environment.

Q. 2. "Release of a Bollywood movie is postponed due to opposition by one

of the Minister." This is an example of a key component of the business
environment.
i. Name the component.
ii. Why is it necessary for the business enterprises to systematically
analyse and diagnose this environment?
Ans.(i) Political Environment.
(ii) It is necessary (rather compulsory) for the business enterprises to
systematically analyse and diagnose the political environment
because policies and practices of the government strongly influence
the business activities.

Q. 3. Rapid Tours Ltd. is a travel agency which books rail tickets on

commission basis. It takes two days for the Rapid Tours to get the
tickets from Railway Reservation Counter and deliver the tickets to the
consumers. In the last one year, there has been drastic decrease in its
business as most of the consumers have shifted to Satya Tour and
Travels (another Travel Agency), which provides the tickets within 1/2
hour through use of internet.
i. Which component of business environment is being overlooked
by Rapid Tours Ltd.?
ii. Why is it necessary for the business enterprises to lay emphasis
to this dimension of business environment?
www.fhic.in
 iii. Identify the feature of business environment highlighted in the
following statement: 'Change of booking of rail tickets from
Railway Reservation Counter to Internet'.
Ans. (i) Technological Environment; (ii) It is necessary for the business
enterprises to emphasise on changes taking place in the technological
environment because change in technology is mostly associated with
better service and cost efficiency. Use of new technology is crucial for
survival as well as growth. Rapid Tours ltd. faced decrease in the
business because it failed to adopt new technology of internet booking;
(iii) Dynamic Nature.

Q. 4. An American shoe manufacturing company launched a new range of

footwear with imprints of Indian Lords. The company had expected
that it would impress the Indians living in America. However, the
Indian community was in a big shock, mixed with anguish and anger.
As a result, the company had to withdraw the entire stock from the
market and also apologized for this.
i. Which aspect of business environment is highlighted in the given
case?
ii. Why is it necessary for the business enterprises to analyse this
environment?
Ans. (i) Social Environment;
(ii) It is necessary for the business enterprises to analyse Social
Environment as it determines the products, services and standards
of conduct that are acceptable to society.

Q. 5. Two Big Banner Movies were scheduled to be released on the same

date. However, at the last moment, release of one movie had to be
postponed due to opposition by a group of people because of some
unethical content in the movie. The loss suffered by movie postponed,
provided opportunity for the released movie, to earn huge revenues.
i. Which feature of business environment is highlighted in the given case?
ii. Identify the component of business environment, which led to the
postponement of movie.
www.fhic.in
Ans. (i) Business Environment is a 'Relative Concept'; (ii) Social
Environment.

Q. 6. 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.
{CBSE, Delhi 2016}
Ans. Dimensions of business environment discussed in the above case are:
(i) Economic Environment; (ii) Technological Environment. For
explanation, refer the notes on dimensions.

Q. 7. Shakti Industries used to import animal fat for manufacturing

Vanaspati Ghee. However, due to public protest, the company was
forced to stop using animal fat in making of ghee. Which dimension of
business environment is being discussed here?
Ans. Social Environment.

Q. 8. Mr. Sanjay after completing MBA from USA comes to India to start a
new business under the banner Eco Creations Ltd. He launches a new
product in e-learning for Senior Secondary School students in
Commerce stream, which already has an established market in UK and
USA but not in India. His business starts flourishing in India. Now
more Indian companies entered into the market with other subjects
also.
Identify and quote the lines from above para which highlight the
significance of understanding business environment.
{CBSE, Sample Paper 2015}
Ans. (a) "Comes to India to start a new business ----- --- launches a new
product in e-learning for Senior secondary school students in
Commerce stream"
www.fhic.in
 • Assisting in planning and policy formulation.
• It enables the firm to identify opportunities and getting the first mover
advantage.

(b) "His business starts flourishing in India"

• It helps in improving performance.
(c) "Now more Indian companies entered into the market with
different subjects also"
• It helps the firm to identify threats and early warning signals.

Q. 9. 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.
Identify and state the component of business environment highlighted
in the above Para. State any two features of business environment as
discussed by Professor Mehta with Naman and Govind.
Also state two points of importance of business environment as stated by
Professor Mehta in the above situation. {CBSE, Sample Paper 2017}
Ans.
• Technological Environment. It includes forces relating to scientific
improvements and innovations which provide new ways of producing

www.fhic.in
 goods and services and new methods and techniques of operating a
business.
• Business environment includes both specific
and general forces. (b) Business environment is
Dynamic in nature.
• It helps the firm to identify threats and early
warning signals. (b) It helps in planning and
policy formulation.

Q. 10. Which dimension of environment is highlighted in the following

pictorial presentation?
Ans. Technological Environment.

Q. 11. The following headline appeared in the Mint Newspaper on 15th

October, 2014: "Govt mandates health warning to cover 85% display on
cigarettes packaging." Which dimension of environment is being
highlighted?
Ans. Legal Environment.

Q. 12. 'Konark Ltd.' is an electronic goods manufacturing enterprise

situated in Shivpuri, Madhya Pradesh. It is earning a very low revenue
in comparison to a competing electronic goods manufacturing
enterprise, 'Nova Ltd.' situated in Mumbai. Both Konark's and Nova's
operations are affected directly by the investors, customers,
competitors and suppliers, which are unique to their respective
locations. In addition to this, individual firms of this field are affected
indirectly by the factors like the money supply in the economy,
composition of the families, the technological changes, etc.
(a)Identify and state the feature of the concept discussed in the above
paragraph.
(b) Also, state any four points of importance of this concept.

{CBSE, Delhi & All India 2018}

Ans. (a) Specific and General Forces. For its explanation, refer
'Features/Characteristics of Business Environment'.
www.fhic.in
 (b) Refer 'Importance of business Environment'.

Q. 13. It is heartening that the implementation of compliance requirements

of the Companies Act, 2013 has progressed substantially with NIFTY
500 companies. Data shows a significant increase in women's
participation in the top management of Indian Companies from 5% few
years ago to 13% now. Even companies which are not in NIFTY 500
have undertaken drives to increase women's participation across
different areas of work. The government had also announced that it
would support such companies. Identify and explain the dimensions of
business environment discussed above which brought about the
change.
{CBSE, Sample Paper 2018}
Ans. The dimensions of Business environment discussed above which
brought about the above change are: (a) Legal
Environment; (b) Political Environment.
For explanation, refer the notes on dimensions of business environment.

Q. 14. With rapid advancements in the field of replacing manual work with
machines, a robot named
'Sujan' has been invented and developed and is likely to get the citizenship
of the country of its origin.
It has led to a stage where machines are being used in place of human
beings. 'Sujan' is doing all types of work whether routine or hazardous and
even answering the queries of people. However, this issue has to be
carefully looked into keeping in mind the consumer attitude towards
product innovations, problem of unemployment and its impact on the
quality of life. Through the orders and decisions of various commissions
and agencies at centre, state or local level, the Indian
Government is playing a very significant role in balancing the use of human
and machine power. Various dimensions of business environment are
being discussed in the above para. By quoting the lines from the above,
identify and explain any three dimensions.
{CBSE Delhi Compd. 2018}
Ans. (i) Technological Environment:
'With rapid advancements in the field of replacing manual work with
machines, a robot named 'Sujan' has been invented and developed'.
Technological Environment includes forces relating to scientific
improvements and innovations which provide new ways of producing
www.fhic.in
goods and services and new methods and techniques of operating a
business.
(ii) Social Environment:
'However, this issue has to be carefully looked into keeping in mind the
consumer attitude towards product innovations, problem of
unemployment and its impact on the quality of life'.
Social Environment includes social forces like customs and traditions,
values, social trends and society's expectation from business.
(iii) Legal Environment
'Through the orders and decisions of various commissions and agencies at
Centre, State or local level the Indian Government is playing a very
significant role in balancing the use of human and machine power.'
Legal environment includes various legislations passed by the Government
administrative orders issued by government authorities, courts judgments
as well as the decisions rendered by various commissions and agencies at
every level of the government— Centre, State or Local.

Please call @ 7078680406 for any doubt.

www.fhic.in