BUSINESS

ENVIRONMENT
XII BUSINSESS STUDIES
2022-2023
OFFICIAL SYLLABUS
 Meaning
Business environment refers to factor, forces, individual and institutions which
are outside the control of business enterprise but these may effect its
performance.
OR
In Simple words, the business environment is the surrounding in
which business exists

BUSINESS ENVIRONMENT
 ENVIRONMENT SCANNING

Environment Scanning refers to

complete awareness and understanding
of business environment.
Environment Scanning is conducted to
find out the influence of different
factors and persons on the business
transactions.

SUNIL PANDA COMMERCE CLASSES

Business environment provides constraints as well as opportunities for
the businessman.
Constraint or threats refers to conditions
which restricts business activities.

Opportunities refers to conditions

which allows growth &
expansion of business activities.

SUNIL PANDA COMMERCE CLASSES

 Features/ Characteristics/ Nature of Business Environment

All the external

Inter-relation Dynamic
forces Relativity

Specific and Uncertainty Complex

general forces
1. All the external forces:- Business environment includes all the forces,
institutions and factors which are external to business organisations.
2. Specific and general forces:- Business environment includes both
specific and general forces.
Specific forces:- Specific forces affect business enterprises directly and
immediately in their day to day working These include supplier, investor,
customers.
General Forces:- General forces area social, political, legal, technological
conditions have impact on all the enterprises and effect individual firm
only directly.
3. Inter-relation:- All the forces and factors of business environment are inter-
related to each other. For example with inclination of youth towards western
culture, the demand for fast food is increasing; increase in awareness of health
care, Raise the demand of Organic food, oil free food, roasted food, gym, yoga,
spa etc.

4. Uncertainty:- It is very difficult to predict the changes of business

environment, as environment is changing very fast. For example in IT,
Fashion industry frequent and fast changes are taking place
5. Dynamic:- Business environment is highly flexible and keeps changing it
is not static or rigid that is why it is essential to monitor and scan the
business environment continuously

6. Complex:- It is very difficult to understand the impact of business

environment on the companies. Although it is easy to scan the
environment but it is very difficult to know how these changes will
influence business decisions. Sometimes change may be minor but it might
have large impact. For example a change in government policy to increase
the tax rate by 10% may affect the income of company by large amount
7. Relativity:- Business environment differs from country to country region to
region as political conditions culture are different in different countries. For
example there may be more demand for sarees in India as compared to USA or
UK. Same condition in the environment may have different effect on different
enterprises. For example when consumer organization found pesticides in cold
drink. It came as constraint for cold drink industry but it was an opportunity for
juice industry.
Opportunity for one business and Threats for another business.
 Importance of Business Environment

1. Enables the Firm to Identify Opportunities and Getting First Mover Advantage.
2. Helps the firm to Identify the Threats and Early Warning Signal.

3. Helpful in Tapping and Assembling Resources.

4. Helps to Adjust and Adapt with the Rapid Changes.

5. Helps in planning and policy Making.

6. Improvement in Performance.
1. Enables the Firm to Identify Opportunities and Getting First Mover
Advantages:- The Businessman who are able to understand and scan the
opportunities of business environment at early stages they get maximum
benefit or they can capture a big share in the market. They can go much ahead
of their competitors.
2. Helps the firm to Identify the Threats and Early Warning Signal:- The
Businessman who are able to scan and understand the business environment
on time get a warning signal to deal with the constraints or the negative
policies of business environment timely scanning of business environment and
the qualitative information which businessmen get is taken as warning signal
and changes are made in the company accordingly.
3. Helpful in Tapping and Assembling Resources:- Businessman have to supply
the goods to market according to the demand in market. To supply output they
need input, raw materials, etc. They select resources according to availability in
environment and demand of output environment

4. Helps to Adjust and Adapt with the Rapid Changes:- Today changes are taking
place very fast and these changes have great impact on business. So it is
essential to understand these changes as early as possible. Business
environment scanning helps the companies to scan and understand these
changes with environment scanning. Businessman makes changes in their
internal environment also to match the external environment. So environment
scanning helps in coping with the rapid changes.
5. Helps in planning and policy Making:- Plans and policy in the organizations are
formed keeping in mind the environment so these must be made by keeping in
mind the environment factors through environment scanning we can made
plans and policies to remove threat and grab opportunities

6. Improvement in Performance:- With continuous scan of business environment

companies can easily improve their performance.
By making changes in the internal environment matching to external
environment. A business can stay in market for long period and capture a big
share in the market.
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 Dimensions of Business environment

Economical Social Political Legal Technological

Environment Environment Environment Environment Environment

It means all the factors, forces and institutions which have direct or indirect
influence over the business
1. Economical Environment:- Economic
environment refers to all the forces and
factors which are directly influence the
economy of your country. A businessman
must scan the economic environment and
take timely actions to deal with these
environment because it have direct impact
on the business. It includes are
GDP/Per Capita GDP, Inflation Rate,
Deflation Rate, Bank Rate, Repo Rate, GST
Demonetization, Banking Sector Reform,
Fiscal policy, Money Supply, BOT, BOP,
International debt and their interest.
2. Social Environment:- Social environment
consists of the customs and traditions of the
society in which business is existing. I includes
the standard of living, taste, preference and
educational level of the people living in the
society were as business exists. It includes are
Celebration of Diwali, ID, Christmas, Guruparv,
etc.
increase the sale of sweets, greeting card, etc.
Reservation of job for minority and women
Health and fitness trend has become poplar
Equal status to women.
Girl education
Change in quality of life
Birth rate, Death rate, Population
Educations, literacy rate, life styles
Traditions, custom, habit of people
Innovation, lifestyle
3. Political Environment:- These all are the
factors related to govt. affairs such as type of
govt in power, attitude of govt towards
different groups. The political environment
has immediate and great impact on the
business transactions so businessman must
scan this environment very carefully.
e.g. in 1997 when janta party govt came in
power they made the policy of sending back
all the foreign companies. As a result the coca
cola company had to close it business and
leave country it includes are
Swachh Bharat Abhiyan by BJP govt
Skill India movement started by BJP govt
Political stability encourage business enterprises to invest in long term
projects
Constitution of the country, govt intervention in business, foreign policy of
govt, foreign relation values of ideology of political party
4. Legal Environment:- The management of every
business enterprises has to obey the law of land,
therefore it is essential for every business
enterprises to have adequate knowledge of rules
and regulation framed by govt. it includes areLaw
and legislative act, Administrative order issued by
govt, Industry act, FERA, FEMA, factories act,
Trade union act, Legal policies of Licensing and
Foreign Trade.
e.g. Packet of cigarette must have statutory
warning, The advertisement of alcohol product is
prohibited, Advertisement on baby food must
inform that mother’s milk is the best, etc.
5. Technological Environment:- It refers to change
taking place in the method of production, use of
new equipment and machinery to improve the
quality of product. Technological changes always
bring quality improvement and more benefits for
customers.
Digital watches closed the business of traditional
watches, Led replace the TV, Phot copier machine
closed the business of carbon paper
This leads to development of IT sector, scientific
improvement, improve computer technology,
online booking tickets.
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 Demonetization
• It is a situation where the central bank of the country withdraws the old
currency notes of certain denomination as an official modes of payments
• On 8 November,2016 The government of India announced the
Demonetization of all ₹500 and ₹1,000 banks notes of the Mahatma Gandhi
series. It also announced the issuance of new ₹500 and ₹2,000 banks notes in
exchange for more than 105 people had died in the post demonetization also
hit small business demonetization caused loss of about 15 lakh jobs ₹500 and
₹1,000 notes were 86% of the currency in circulation. Demonetization was a
failure because 99.30% of demonetized money back in the system, as per RBI
Report.
Aim of Demonetization
1. To curb corruption and Penalize for illegal activities.
2. To stop the circulation of black money in the market
3. Prevent terror funding
4. Prevent tax evasion
5. Promote cash less economy
Demonetization has been done in various countries like Nigeria, Zimbawe,
Myanmar, Australia, etc.
India also face demonetization in year 1946 and 1978.

RBI WITHDRAW 2000 NOTE FROM CIRCULATION

ADVISED TO EXCHANGE THESE NOTES WITH BANKS TILL 30 SEPTEMBER
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