BUSINESS ENVIRONMENT

2 MARK QUESTIONS
UNIT-I
1. What do your mean by environment?
Environment refers to all external forces which have a bearing on the functioning of the business.
2. What do you mean by business environment?
Business environment may be defined as the set of external factors such as the economic factors,
socio-cultural factors, government and legal factors, demographic factors, geophysical factors,
which are uncontrollable in nature and affects the business decisions of a firm or company.
3. Define business environment?
Business environment is the sum of those inputs to an organization which are under the control
of other organizations or interest groups or are influenced by interaction of several groups, such
as the economy- Paire and Anderson.
4. Define micro environment?
A companys micro environment consists of elements that directly affect the company such as
competitors, customers and suppliers- Charles Hill and Gareth Jones
5. Define macro environment?
The macro environment consists of the broader economic, social, demographic, political, legal
and technological setting within which the industry and the company are placed- Hill and Jones
6. Define economic environment?
It refers to the broad characteristics of the economic system in which the business operates.
Business sector has economic relations with the government, capital market, household sector
and of global sector. These sectors together influence the trends and structure of the economy.
7. Define political environment?
Political environment refers to the influence exerted by the three political institutions
1. Legislature
It decides the particular course of action.
2. Executive
Government is the executive and its job is to implement whatever was decided by parliament.
3. Judiciary
It has to ensure that both the legislature and executive function in public interest and within
the boundaries of constitution.
8. Define legal and political environment?
Legal and political environment provides a framework within which the business is to function
and its existence depends on the success with which it can face the various challenges constructed
out of political and legal framework.
9. Define socio-cultural environment?
Socio- cultural environment is very comprehensive because it may include the total social factors
within which an organization operates Culture consists of the cultivated behaviour of individuals
within a society.
10. Define natural environment?
In natural environment include geographical and ecological factors. The factors include the
following:
1. Natual resources endowments
2. Weather and climate conditions
3. Topographical factors
4. Location aspects
5. Port facilities etc.

11. Define demographic environment

Demographic factors include:
1. Size, growth rate, age composition, sex composition etc., of population
2. Family size
3. Economic stratification of population
4. Educational level
5. Caste, religion etc.
These factors affect the demand for goods and services.
12. Define technological environment
Every business enterprise has two basic functions
1. Marketing and
2. Innovation
In technological environment, the product or service remains the same but the methods of
performing the function is always new.
13. Define the techniques of environmental analysis
Techniques for environmental analysis refer to the methods of gathering the relevant information
for appraising the environment. William F.Glueck mentions the following techniques.
1. Verbal and written information
2. Search and scanning
3. Spying
4. Forecasting and formal studies
UNIT-II
14. Define national income
A national income estimate measures the volume of commodities and services turned out
during a given period, counted without duplication- National Income Committee Report
15. Define savings
Savings is that part of income which is not consumed rather is kept for further generation of
income or for future use.
It is the function of income and rate of interest.
16. What is investment?
Investment means that part of capital which is being used for the generation of further income. It
includes
(i)
Buying stocks and shares of existing/old companies
(ii)
Buying new machines, new factor, infrastructure, floating new company etc.
17. What do you mean by industry?
Industry means any systematic activity carried on by co-operation between an employer and his
worker.
18. What do you mean by industrial development?
Industrial development plays a crucial role in our development strategy particularly with regard to
the objectives of structural diversification, modernization, and self-reliance.
19. What is globalization?
The term globalization means the integration of the economy of each country with the world
economy.
20. What is privatization?
Privatization means the transfer of ownership, direction and effective control and/or
management from the public sector to the private sector. It also means withdrawal of state from
an industry or sector partially or fully.
21. What is liberalization?

Liberalization means an essential pre-need for a successful privatization. Its aiming at to relax
rules and regulations and to offer scope for the expansion of the private sector.
22. What do you mean by foreign trade?
Foreign trade means sale, transfer or exchange of goods and services between two countries.
Indian merchants used to export various types of manufactured articles particularly textiles and
handicrafts which had been famous world wide.
23. What is balance of payments?
Balance of payments is a systematic record of all economic transactions in a period between one
country and rest of the world. A systematic record of all economic transactions between the
residents of the reporting country and of foreign countries during a given period of time.
24. What is balance of trade?
Balance of trade includes only the difference between the value of visible export and import.
Visible items are only material goods exported and imported. It is also known as merchandise
account of exports and imports.
25. What is money?
Money is anything that is generally acceptable as a means of exchange and at the same time acts
as a measure and store of money.
26. What do you mean by supply of money?
In India, reserve bank of India includes in the supply of money, currency with the public, demand
and time deposits with the banks and deposits with the post offices.
27. What do you mean by financial system?
The financial system of the country is concerned about money, credit and finance.
The financial system of a country consists of:
a. Well established net work of financial institutions.
b. Well developed financial markets
c. Well developed system of financial assets.
28. What do you mean by money market?
Money market refers to the organization for the lending and borrowing of short term funds
through the use of such instruments as commercial bills of exchange, short term government
securities, bankers acceptance etc.
29. What do you mean by capital market?
The capital market is an organized market which comprises sources of long term finance for the
industry and government.
30. What do you mean by inflation?
Inflation is a situation in which the value of money is falling i.e., prices are raising.
31. What do you mean by deflation?
Deflation is a situation in which the value of money is raising i.e., prices are decreasing.
UNIT -III
32. What is unemployment?
Unemployment refers to the situation in which the workers who are capable of working and
willing to work do not get employment.
33. What is poverty?
The world bank (1990) defines poverty as the inability to attain a minimal standard of living.
34. What do you mean by regional imbalances?
Regional imbalances implies that there is difference in economic development of different
regions. In India region means a state or district or union territory.
35. What is social injustice?

Social injustice means inequality of income, lack of social services and existence of socially
disadvantaged groups. It is the fact of a situation being unfair and of people not being treated
equally.
36. What is parallel economy?
It defines the existence of an unsanctioned or illegal sector in the economy. It is also defined as
black economy, illegal economy, unaccounted economy or unsanctioned economy.
37. What is black money?
Black money is aggregate of incomes which are taxable but are not reported to tax
authorities.-National Institute of Public Finance and Policy.
38. What is industrial sickness?
According to the sick industrial companies act, 1985 was defined as sick if,
a. It was registered for at least seven years.
b. It incurred cash losses for the current and preceding year and
c. Its net worth was eroded.
UNIT-IV
39. What is economic role of government?
According to World Development Report (1999-2000) captioned entering the 21 st century,
Government plays a vital role in development, but there is no simple set of rules that tells them
what to do.
40. What is political environment?
The political environment has enormous influence on the business. The political system
prevailing in a country promotes, shelters, directs and controls the business activities of the
country.
41. What is political and legal environment?
Legal and political environment provides a framework within which the business is to function
and its existence depends upon the success with which it can face the various challenges
constructed out of political and legal framework.
42. What are the factors of political instability?
There are some factors which may cause political instability:
a. Civil war
b. Declaration of emergency in the country
c. Changes in the form or structure of Administration of Government etc.
43. What is monetary policy?
Monetary policy is the process a Government, Central bank, or Monetary authority of a country
uses to control (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate
of interest to attain a set of objectives oriented towards the growth and stability of the economy.
Monetary theory provides insight into how to craft optimal monetary policy.
44. What is fiscal policy?
In Economics, fiscal policy is the use of government expenditure and revenue collection to

influence the economy.

A fiscal policy which could cope with the fiscal imbalances and achieve

a healthy budgetary scenario.

45. What is industrial licensing?
A license is a written permission issued by the Central Government to an industrial undertaking
to manufacture specified articles included in the schedule. The Act provided for a compulsory
registration of all scheduled undertaking with the government within a specified period.

46. What is industrial policy?

Industrial Policy is a statement which defines the role of government in Industrial development.
The place of the public and private sectors in industrialization of the country.
47. What do you mean by devaluation of rupee?
Devaluation or depreciation means reduction in the value of domestic currency in relation to
foreign currency.
48. What do you mean by export import policy?
The policy of country relates to various policies in the import sector and in the export sector. It is
basically governed by:
a. Provisions of the constitution
b. The directive principles of state policy.
c. It is also guided by the countrys general objectives of industrialization.
49. What is foreign direct investment?
Foreign direct investment refers to investment in a foreign country where the investor retains
control over the investment. It typically takes the form of starting a subsidiary, acquiring a stake
in an existing firm or starting a joint venture in the foreign country. Direct investment and
management of the firm concerned normally go together.