Chapter – III

Business Environment
(2+5 =7-marks)

What is meant by “business environment”? – 2 marks

Business environment means forces and institutions which the members of a firm must deal with in order to achieve the objectives of the organization.

Forces include politic, economic, social, technological, etc (PEST) and Institutions include (competitors, customers, suppliers, etc)

The environment provides both constraints and opportunities. Discuss with examples

• An environment provides constraints (restrictions), which could be in the form of economic conditions, customs, government regulations, availability of natural resources, labour supply.
  Example: Despite many initiatives, foreign direct investment in India is not picking up in the country because of political and bureaucratic reasons.
• On the other hand, environment also provides the firms numerous opportunities in the form of unmet and changing needs of the customer and market.
  Example: the growing demand for air conditioners has attracted many new domestic as well as multinational firms in the industry .......