TN State Board 12th Commerce Important Questions Chapter 19 Environmental Factors
Question 1.
Define Business environment.
Answer:
Arthur M. Weimer defines as follows – “Business environment encompasses the climate or set of conditions, economic, social, political, or institutional in which the business operations are conducted”.
Question 2.
What is internal environment?
Answer:
Internal environment refers to those factors within an organization. Eg: policies and programmes, organizational structure, employees, financial and physical resources. These factors can be changed or altered and hence are known as controllable factors.
Question 3.
Give the meaning of corporate governance.
Answer:
Corporate governance is a set of rules and policies which governs a company. It provides a frame work for managing a company and achieving its objectives. It gives guidelines for internal control, performance measurement and corporate disclosure.
Question 4.
What is GST?
Answer:
GST is the indirect tax levied on goods and services across the country. It is comprehensive, multi-stage, destination – based tax that is levied on every value addition.
Question 5.
Expand VUCA.
Answer:
VUCA – Volatility, Uncertainty, Complexity and Ambiguity
Question 6.
What is mixed economy?
Answer:
Mixed economy is a combination of both state owned and private sector ownership. Co-existence of public and private sector institutions exercise economic control.
Question 7.
Explain the natural environment of business.
Answer:
- The availability of natural resources like minerals oil etc since setting up of industries.
- The weather and climate conditions and availability of water and other natural resources is essential for the agricultural sector.
- Topographical factors like the terrain impacts type of business since the demand and consumption pattern may vary in these regions.
- Location of certain industries is influenced by the geographical conditions.
- Availability of natural harbours and port facilities for transporting goods.
Question 8.
What are the political environment factors?
Answer:
- The legislative, executive and judiciary are the three political institutions which directs and influences a business.
- Political stability is reflected by the following parameters like the election system, the law and order situation, military, police the declaration of president rule civil war etc.
- Political organization refers to the idealogy and philosophy of the political parties.
- The image of the leader and the country in the international arena.
- Legal frame work of business and their degree of flexibility.
- The constitution of the nation.
- The foreign policy of the country with special reference to tariff and free trade.
Question 9.
Write about any three internal environmental factors of business.
Answer:
The major internal factors affecting business decisions are:
(i) Value system:
The value of the founder/owner of the business, percolates down to the entire organization and has a profound effect on the organization.
(ii) Vision and objectives:
The vision and objectives of a business guides its operations and strategic decisions.
(iii) Company image:
The image of an organization plays an important role introducing, new products, selecting agents and dealers for distribution, expanding new markets both domestic and international raising finance etc.
Question 10.
State the framework of Corporate Governance in India.
Answer:
- To have independent directors on the board, at least one third of the directors have to be independent.
- To have at least one independent women director.
- To disclose all deals and payments to related parties.
- To disclose details of managerial compensation.
- CEO and CFO to sign stating that the governance norms have been complied within the financial statements.
Question 11.
What are the functions of the GST council?
Answer:
- Goods and services tax council is a constitutional body for making recommendations to the union and State Government on issues related to goods and service tax.
- The GST Council is chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in-charge of Finance or Taxation of all the states.
- The goods and service tax council shall make recommendations to the union and the state.
Question 6.
Write a note on future environment of business.
Answer:
- The future environment business in this age of rapid technological advancement has been captured aptly in the acronym VUCA.
- VUCA – Volatility, Uncertainty, Complexity and Ambiguity developed in the late 80’s by the US military.
- It is now important for every business to meet the challenges posed by the environment in order to remain competitive.
- In an VUCA environment, a firm has to be forward looking anticipating the changes adaptability will remain essential for the success of any business in an ambigious, uncertain environment.
Question 12.
What do you know about Technological environment?
Answer:
- The development in the IT and telecommunication has created a global market.
- Technology is widely used in conducting market research for understanding the special needs of the customer.
- Digital and social media are used as a platform for advertising and promoting the product and services.
- Technology is used in managing inventory storing goods in warehouses in distributing goods and in receiving payments.
- Data mining and data analytics are used to know the customer better.
Question 13.
Discuss the role of macro environment of business.
Answer:
(i) Economic environment:
The nature of economy based on the stage of development. The nature of economic system can be classified as capitalistic, socialistic and mixed economy. Economic policies of a nation monetary fiscal Policy, export – import policy industrial policy, trade policy, foreign exchange policy etc., are the economic environment.
(ii) Social and cultural environment:
Social and cultural environment of society affects the business. It is dynamic includes the behaviour of individuals, the role, importance of family customs, traditions, beliefs, Values, religion languages and ethical values.
(iii) Political and legal environment:
The framework for running a business is given by the political and legal environment.. The legislative, executive and judiciary are the three political situations which directs and influences as a business.
(iv) Geo physical environment:
The natural, geographical and ecological factors have a bearing on the business.
(v) Technological environment:
The development of IT and telecommunications has created a global market. Technology is widely used in conducting market research for understanding the special needs of the customer. Digital and social media are used as a platform for advertising and promoting the products and services.
(vi) Global Environment:
With the rapid growth of technology the physical boundaries and fast disappearing and the new global market is emerging.
Question 14.
Describe the economic and socio cultural environment of business.
Answer:
The business is an integral part of the economic system prevalent in a nation. The nature of economic system can be classified as capitalistic, socialistic and mixed economy. Capitalistic economy is a free enterprise market where the individual ownership of wealth.
Socialistic economy is a state controlled with a lot of restrictions on private sector. Mixed economy is a combination of both state owned and private sector ownership. The economic indices like GDP, GNP, national income, per capita income balance of payments, rate of savings and investment etc., form an important part of economic environment.
Socio-cultural environment:
Business is a part of the society. Social environment refers to the sum total of factors of the society in which the business is located. Social and cultural environment of society affects the business.
The socio-cultural environment also includes the following:
- The social institutions and groups.
- Family structure prevalent in the society.
- Role of marriage as an institution.
- Caste system in the society.
- Customs, beliefs and values.
- Demographic factors which includes the size composition, literacy level distribution and mobility of the
population.
The life style of people and their tastes, likes and preferences.
Question 15.
Explain the micro environmental factors of business.
Answer:
(i) Suppliers:
In any organization the suppliers of raw materials and other inputs play a very vital role. Timely procurement of materials from suppliers enables continuity in production and reduces the cost of maintaining stock and inventory.
(ii) Customers:
The aim of any business is to satisfy the needs of its customers. Any business to understand and the needs of its varied customers like individuals, retailers wholesalers, industries and Government sectors. Consumers relationship management aims it creating and sustaining cordial relations with customers.
(iii) Competitions:
All organizations face competition at all levels local, national and global. It is important for a business to understand its competitors and modify their business strategies in the face of competition.
(iv) Financiers:
Financial institutions play a significant role in the running of a business. Their financial capability, policies, strategies attitude towards risk and ability to give non-financial assistance are all important to a business.
(v) Marketing channel members:
The marketing intermediaries are as a connecting link between the business and customers. The middle men like dealers, wholesalers and retailers ensure transfer of product to consumers. Market research agencies help the firm to understand the needs of the customer.
(vi) Public:
This refers to any group like media group citizen action group and local public which has an impact on the business. Many companies had to face closure due to actions by local public.
Question 16.
Discuss the significance of understanding business environment and the internalfactors affecting business.
Answer:
The significance of understanding the business environment as follows:
(i) Helps in formulating strategy and future planning
(ii) Enables to identify the opportunities available
(iii) Environmental scanning
(iv) Business aids
(v) Public images
Internal factors affecting business:
(i) Values system:
The value of the founder and owner of the business, percolates down to the entire organization and has a profound effect on the organization.
(ii) Vision and objectives:
The vision and objectives of a business guides its operations and strategic decisions.
(iii) Company image:
The image of an organization plays an important role in introducing new products, selecting agents and dealers for distribution and expanding new market both domestic and international raising finance etc. .
(iv) Internal power relations:
This refers to the internal power relations that exists in an organization. The relation among board members and the CEO and the level of support enjoyed by the board from its stake holders are significant factors which affects decision making and its implementation in an organization.
(v) Other factors:
The firms ability to innovate reflected by its research and development, the strength of the financial position and the capital structure, marketing and distribution network etc., which affects the success of a business.
Choose the correct answer:
Question 1.
VUCA stands for:
(a) Volume, Unlimited, Complete, and Assessment
(b) Volatility, Uncertainty, Complexity, and Ambiguity
(c) Value, Unreal, Competition, and Assumption
(d) None
Answer:
(b) Volatility, Uncertainty, Complexity, and Ambiguity
Question 2.
GST stands for:
(a) Goods and Services Tax
(b) Direct Tax
(c) Value Added Tax
(d) All the above
Answer:
(a) Goods and Services Tax
Question 3.
Factors within an organisation constitutes environment.
(a) External
(b) Internal
(c) Micro
(d) Macro
Answer:
(b) Internal
Question 4.
Macro Environment of business is an _____ factor.
(a) general
(b) functional
(c) controllable
(d) competitive
Answer:
(a) general
Question 5.
The two major types of business environment are _____ and ______.
(a) Internal and External
(b) Micro and Macro
(c) Present and Future
(d) None
Answer:
(a) Internal and External
Question 6.
________ environment includes weather and climate conditions.
(a) Geo physical
(b) Political
(c) Socio- culture
(d) Economic
Answer:
(a) Geo physical
Question 7.
The size and composition of the population is part of ________ environment.
(a) Political
(b) Global
(c) Legal
(d) Socio-cultural
Answer:
(d) Socio-cultural