NCERT Solutions For Class 12 Business Studies Chapter 3 Business Environment - 2025-26

```html 1. Which of the following does not characterise the business environment?
(a) Uncertainty (b) Employees (c) Relativity (d) Complexity
Ans: Employees do not characterise the business environment. The business environment is made up of all external factors that affect an organisation, such as government policies, technological changes, and market competition. Employees are part of the internal environment, not the external.

2. Which of the following best indicates the importance of the business environment?
(a) Identification (b) Improvement in performance (c) Coping with rapid changes (d) All of them
Ans: All of the options show why the business environment matters. Knowing the business environment helps managers identify changes and challenges, respond effectively, and improve the company’s performance.

3. Which of the following is an example of social environment?
(a) Money supply in the economy (b) Consumer Protection Act (c) The constitution of the country (d) Composition of family
Ans: Composition of family is an example of social environment. Social environment involves influences like traditions, values, and social trends – changes in family structure are part of this.

4. Liberalisation means
(a) Integration among the economies (b) Reduced government controls and restrictions (c) Policy of planned disinvestment (d) None of them
Ans: Liberalisation means reduced government controls and restrictions. This includes removing licencing in most industries, allowing freedom to scale production, removing movement restrictions, letting businesses set their own prices, and reducing taxes and unnecessary controls.

5. Which of the following does not explain the impact of Government policy changes on business and industry?
(a) More demanding customers (b) Increasing competition (c) Change in agricultural prices (d) Market orientation
Ans: Change in agricultural prices does not explain the impact of government policy changes on business and industry. It is more a result of demand and supply changes in agriculture, not direct policy shifts. Other options (demanding customers, competition, market orientation) result from policy reforms.

6. What do you understand by business environment?
Summary: Business environment means all external factors that affect a company's work, like economic, social, political, technological, and legal factors.

• The business environment includes everything outside the company that can help or hurt its success.
• Main influences: economy, society, politics, new technology, and laws.
• Examples: Changing consumer tastes, updates in government policy, or new laws can affect how a business performs.
• These factors are usually beyond the company’s control but still have a big impact.
• For example, if consumer preferences shift towards a company's products, sales increase. But new technology could make current products outdated.
• Key features of the business environment: affects all organisations, can be positive or negative, and constantly changes.

7. Why it is important for business enterprises to understand their environment? Explain briefly
Summary: Understanding the business environment is crucial because it helps companies spot opportunities and threats and plan effectively.

• Recognising opportunities and gaining a competitive advantage: Helps spot positive changes or trends that could improve performance.
• Threat identification and early warning signals: Helps spot risky trends early so companies can prepare for them.
• Gathering Useful Resources: Businesses get resources like raw materials, labour, and machinery from outside, so knowing the environment matters.
• Adapting to Changes: The world changes fast—knowing the environment helps companies adjust quickly.
• Making Plans and Policies: Ongoing study helps companies make smart plans and policies.
• Improving Performance: Analysing the environment leads to better strategies and improved results.

8. Mention the various dimensions of business environment.
Ans:

• Economic Environment: Factors like interest rates, income, and share market that affect business demand. Example: Increased income means higher demand for goods.
• Social Environment: Customs, values, and social trends. Example: Religious festivals create demand for certain products.
• Technological Environment: New inventions and technological advances, such as the internet and computers, change how businesses work.
• Legal Environment: Laws and government rules businesses must follow, like the Companies Act. Breaking laws can be risky for businesses.
• Political Environment: Political stability and government policies. For example, political unrest reduces investor confidence and can make running a business hard.

9. Briefly explain the following:
(a) Liberalisation
(b) Privatisation
(c) Globalisation
(a) Liberalisation:

• Liberalisation means removing unnecessary government controls like licences and permits.
• Changes include: No more licences needed to start most businesses, freedom to set prices and scale, and fewer restrictions on moving goods.

(b) Privatisation:

• Privatisation is making the private sector's role bigger and reducing public sector involvement.
• This includes selling parts of government companies (disinvestment) and fixing loss-making public businesses.

(c) Globalisation:

• Globalisation means connecting the economy with the world—removing trade barriers and making international business easier.
• India’s steps: Relaxing import rules and export taxes and making it easier to bring in foreign investment.

10. Briefly discuss the impact of government policy changes on the business and industry.
Summary: Government policy changes like liberalisation, privatisation, and globalisation have affected business in India in many ways.

• Increased Competition: Fewer restrictions means more competition for businesses.
• Increased Demand: Competition brings more choices and better products for customers.
• Changes in Business Policies: Companies must update their strategies to match new rules.
• Technological Changes: More competition pushes businesses to use new technologies.
• The Need for Trained Staff: New technologies and products require skilled workers, so training is important.
• Intensified Market Orientation: Production is now more focused on what customers want.
• Less Reliance on Budget Support: Public sector companies now focus on improving efficiency instead of depending on government funding.
• Overall, these changes have made business and industry in India stronger in meeting new challenges.

11. How would you characterise business environment? Explain, with examples, the difference between general and specific environment.
Summary: Business environment includes all outside factors affecting a company's work. General environment affects all organisations; specific environment directly affects one firm.

• Definition: The business environment is the set of outside forces—economic, social, political, technological, and legal—that affect a business’s performance.
• Characteristics:
  • It’s a mix of all external influences (government, consumers, laws, etc.).
  • The influences interact; for example, more consumer income increases demand for products.
  • It constantly changes.
• Specific Environment: Directly affects a single company, like changes in customer preferences for its products or supplier delays affecting production.
• General Environment: Affects all companies, like a new technology or a major political change that influences every business in the country.

12. How would you argue that the success of a business enterprise is significantly influenced by its environment?
Summary: The business environment heavily affects a company's success by giving opportunities, posing threats, and guiding decisions.

• Recognising Opportunities and Competitive Advantage: Helps businesses spot useful trends and take advantage of them.
• Threat Identification: Lets businesses spot risks early and act to avoid problems.
• Resources Gathering: Businesses get inputs like raw materials and workers from the environment.
• Adapting to Change: Helps businesses adjust to new technology, policies, or customer preferences.
• Making Plans: Studying the environment lets businesses plan better and create smarter policies.
• Improving Performance: Analysing the environment leads to better business results.

13. What economic changes were initiated by the government under the Industrial Policy, 1991? What impact have these changes made on the business and industry?
Summary: The Industrial Policy of 1991 changed the economy by reducing controls, encouraging private sector growth, and allowing more foreign investment.

• Main points of the policy:
  • Abolished licensing for most industries, so starting a business got easier.
  • Allowed private companies into more sectors (only three reserved for the government).
  • Let companies produce more without seeking permissions.
  • Allowed imports of capital goods and increased foreign direct investment (FDI).
  • Reformed small businesses and carried out disinvestment of public sector units.
  • Set up the Foreign Investment Promotion Board.
• Impact:
  • More competition, especially in services like telecommunications and banking.
  • More choices and better quality products for customers.
  • Businesses had to update their strategies to adjust to new rules.
  • Increased use of technology and more investment in innovation.
  • Higher need for skilled employees, so companies focused on training.
  • Businesses now produce based on what the market needs.
  • Public sector companies focus more on efficiency, less on government help.

Case Problem
Several corporations have recently planned large investments in organised retailing in India. Numerous considerations influenced their choices in this regard. Customer earnings are increasing. Consumers have acquired a preference for higher-quality items, even if they must pay a higher price. The degree of aspiration has risen. The government has also liberalised its economic regulations in this area, allowing for 100 percent foreign direct investment in several retail industries.
1. Identify changes in business environment under different heads — economic, social, technological, political and legal that have facilitated the companies’ decisions to plan significant investments in organised retailing.
Ans:

• Economic: More jobs have increased customer income.
• Social: People now prefer better-quality products and are willing to pay more.
• Technological: New technology has made shopping and business easier for both buyers and sellers.
• Political: The government has relaxed foreign direct investment rules for retail.
• Legal: The government protects consumers’ rights.

2. What has been the impact of these changes with regard to globalisation and privatisation?
Ans:

• These changes have encouraged retailers to invest in organised retailing in India.
• Competition has increased, which has also raised customer expectations and choices.
• There has been more job creation in this sector.
• Businesses can identify new opportunities, spot threats early, adapt quickly, and make better plans.
• Overall, company performance improves due to these changes.
• The business environment includes both specific and general elements that can affect businesses either directly or indirectly.
• The business environment is always changing, and it is often uncertain because the future is hard to predict.

Important Points to Remember from Business Environment Class 12 NCERT Solutions

• Business Environment includes all outside factors affecting a business's success.
• Understanding Business Environment Class 12 questions and answers helps in exam revision.
• Key terms: liberalisation, privatisation, and globalisation are important for this chapter.
• There are five main dimensions: economic, social, technological, political, and legal.
• NCERT solution Class 12 Business Studies Chapter 3 focuses on example-based and point-wise answers.

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