Business Environment – CS Foundation Business Environment Notes

Introduction:
Chester I. Barnard, “Environment consists of atoms and molecules, agglomeration of things in motion, alive, of men and emotions, of physical, and social laws, social ideas, norms of actions, of forces and resistence. The number is infinite and they are always present, they are always changing.”

  • Environment is always changing.
  • Each business operates in a unique environment.
  • Environment influence businesses and in turn, businesses influences environment.

Meaning of Business Environment:

  1. The term ‘business is wide and is put to different usages.
  2. ‘Business’ can referred as any activity consisting of purchase, sale, manufacture, processing and /or marketing of products and/or services.
  3. Business is said to exist for profits.
  4. Both society and business cannot function without each other.
  5. Business vary in size, as measured by the number of employees or by sales volume etc.
  6. There is the single word that describes today’s business, it is ‘change’.
  7. “Modern business is dynamic”.
  8. ‘Environment’ refers to the surroundings.
  9. ‘Business environment’ is the sum of several external and internal forces that affects the functioning of business.
  10. “Environment factors or constraints are largely if not totally, external and beyond the control of individual industrial enterprises and their managements.”
  11. There is close interaction between Business and its Environment.
  12. Factors such as change in technology, factors etc., are to be considered by an organisation in order to survive in the changing business environment.
  13. In order to be successful, business is required to not only recognise various elements of environment but also have to respect, adapt or manage and influence them.
  14. Environment possess threat to the firm as well as offer immense opportunities for exploitation.
  15. However, besides earning profits, business survives for various other reasons in the society. They are –
    (a) becoming an important institution of society
    (b) supplying goods and services
    (c) creating jobs for unemployed
    (d) offering better standard/quality of life
    (e) contributing to the overall economic growth of the country.

Features of Business Environment:
1. The following features of business environment helps a person to understand the environment within which his business has to function:
(i) Dynamic: Business environment is always changing in nature. This is due to the various types of influences operating in the environment like needs of customers, fashion, technology, etc.

(ii) Multi-faceted: Any change occurring in the business environment are viewed differently by different persons. What form does this change takes depends upon the observer’s perception. E.g. a same development may be taken as opportunity for some while it may be taken as threat for some others.

(iii) Sum of external forces: Business environment is an aggregate of various externa! factors.

(iv) Uncertainty: In today’s world, environment is changing every moment. Thus, with such frequent changes it is difficult to predict the future happenings and non-happening.

(v) Both specific and general forces: Business environment consists of both specific and general forces. Specific forces refers to the forces that affects the individual enterprises iike customers* suppliers etc. General forces refers to the forces that affects all the enterprises in an industry together like social, legal conditions etc.

(vi) Relativity: Business environment can be regarded as a relative concept as it changes from one region to another, from one country to another and even from one individual to another individual.

2. Importance of Business Environment: Giving Direction for Growth: Correct assessment and interaction with environment leads to new frontiers of growth for the business enterprises. Adoption of the changes in the business environment and thereby, moving along with it, helps the business in various ways which are as follows:
(i) Threat Identification: Identifying the threats operating in the environment beforehand helps the firms to take corrective and preventive measures. This is essential for the firms in order to survive competition.

Example : Microsoft keeps upgrading its product and launches new version of windows in order to be the market leader similar is the case with i-phone.

(ii) Performance Improvement: By keeping a continuous check on the environment, the firms can adopt the business practices suitable for the present situation, thus improving its performance.

(iii) Meeting Competition: Keeping track with the changing environment helps the firm to analyze its competitor’s strengths, weaknesses and further strategies. Thus, the firm can form its own strategies accordingly. Example : Nokia has launched its Lumia Series Phones in order to cope competition with Samsung Galaxy.

(iv) Advantage of first mover: The firm can succeed its competitors only by exploiting the opportunities coming their way before their competitors.

(v) Able to cope with rapid changes: All firms must understand the dynamic environment properly and must take suitable steps in order to cope up with these rapid changes taking place.

(vi) Continuous learning: Business environment helps the managers to face the challenges as it requires them to update their skills and knowledge.

(vii) Building image: Company’s which are more sensitive to the changes in the environment are in better position than others. Thus, it helps the company to build its goodwill. Example : Windows are frequently updated by Microsoft.

Vision Statement:
1. ‘Vision Statement’ is a road map of a company’s future. It describes the desired future position of the company.

2. Vision Statement answers the following question:

  • Who we are and where we are new?
  • Where we are going?

Some examples of Vision Statement:

  • Disney’s Mission : is to entertain inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands creative minds and innovative technologies that make ours the world’s premier entertainment company.
  • ICSI : ‘to be a global leader in promoting good corporate governance’

Mission Statement:
1. ‘Mission Statement’ helps defining the company’s business, its objectives and. its approach to reach those objectives. It broadly describes an organisation’s present capabilities, customer focus, activities, and business make up.

2. When your vision is your ultimate goal, your mission is how you will get there.

3. Mission Statement answers the following questions:

  • What does our company do?
  • Who do we do it for?
  • Where do we exist?
  • How does we do it?
  • Why does our company do it?

4. The business vision and mission is paramount to the future growth and success of the business no matter the size of the organisation.

5. Internal factors include the vision and mission of the organization and other internal mechanism of the organization.

Some examples of mission statement:

  1. Reliance Industries : ‘To become major player in chemical business and grow in other growth oriented industries like infrastructure’.
  2. ICSI : To develop high caliber professionals facilitating good corporate governance.
  3. Facebook : ‘To give people the power to share and make the world more open and connected’
  4. Ranbaxy : To become a $1 billion research – based global pharmaceuticals’.

Uses of Vision And Mission Statement:
Vision and Mission Statement provides various uses to the organization:

Internally:

  1. Helps in defining performance standards.
  2. Guides the employees in decision making.
  3. Guides the management while planning on strategic issues.
  4. Inspires the employees to work more productively.
  5. Helps establishing a framework for ethical behaviour.

Externally:

  1. Helps in better communication with customers, suppliers and alliance partners and also create closer linkage.
  2. Provides external support.
  3. Serves as a public relations tool.
    Business Environment – CS Foundation Business Environment Notes 1

Internal Environment: It consists of the factors that are within the control of business.
(i) Man i.e. Human Resources: It is the strength and weakness of any organisation and must possess various characteristics like, skills, quality high morale, attitude etc.

(ii) Money i.e. Financial Resources: Various financial factors like the financial position, financial policies and its resources affects the business functioning. The source of finance is share capital banking and other financial institutions etc.

(iii) Various Marketing Resources: Factors like brand, equity, distribution network etc. effects the marketing efficiency and performance of a company directly, thereby affecting the company’s decision making.

(iv) Machinery i.e. Physical Assets: Efficient working of any organisation is possible only on proper acquisition and working of assets. Money invested in such assets must provide enough returns and profits so as to satisfy the organisation. It also depends on the technical development and government policy.

(v) Management Structure: It includes the internal structure of any organisation like the Board of Director’s Composition etc. which directly affect the company’s decision. It also affects the strategies undertaken by the company. The management structure must be in accordance with the business environment.

(vi) Miscellaneous Factors: It includes:
1. R & D:- R & D refers to the company’s ability to innovate and compete, it is mainly focused on technological improvement, (i.e. designing, producing and distributing product in a more creative innovation manner.)

2. Company’s Image & Brand Equity: Image of the company in the outside environment (market) has a direct bearing over the internal environment of the company (ex: raising finance, making JV, expansions, acquisitions etc.)

3. Value system: The principle of wrong and right that are accepted by an individual or organisation are what comprise value system. Value system has important bearing on the business policies, mission, objectives and practices.

  • Company’s brand image and goodwill
  • Competitor’s action it involves
  • Identifying Competitor’s
  • Assessing their strengths, weakness etc.
  • Selecting strategy to deal with them
  • Research and Development
  • Value System of Business

External Environment : It consists of the factors that are outside the company’s boundaries, thus the company have no control over them. Company must adapt to such changes. External environment can be micro or macro.

Micro Environment:

  • It is also known as task or operating environment.
  • It is the immediate environment with which the organisation interacts for its day to day operations.
  • These factors are more closely linked with the company than the macro factors.
  • It affects a particular firm only.
  • The micro environmental forces, though are external factors, still have a direct bearing on the operations of the firms.

It deals with the following:
(i) Consumers/Customers: The main aim of every business is to create and retain customers. Customers pay for company’s product. Thus, they must be provided quality goods at most reasonable prices. Organisation survive on the basis of meeting ‘customer needs & wants’.

(ii) Competitors: Before making any strategy, business must be aware of its competitor’s actions to the environment changes. This will maintain and improve the company’s position. The name of the game in marketing a product is differentiation. Every firm has Unique Selling Point (USP).

(iii) Employees: It includes Board of Directors, owners and employees that are considered as the backbone of the organisation. They influence the day to day functioning of organisation and should be provided with proper training and development while considering the dividend policy of the company. We can say Training & Development play important role.

(iv) Suppliers: They provide raw material for the business’s production activities. They have their own bargaining power which seriously affects the industry’s cost structure.

(v) Shareholders: They invest in company’s capital thus are the owners of company. They affects the company’s operations as they have a right to vote on ail the decisions. Balance must be maintained between organisation’s health and shareholder’s interest.

(vi) Media: It must be organised in such a way that it promotes the ‘ positive things of organisation while reduces the impact of negative things. It helps in building image and reputation.

Some organisation employ (PR) consultants to manage particular event or incident. Positive media can ‘make’ an organisation & negative media attention can ‘break’ an are required.

Macro Environment:

  • When the macro factors become uncontrollable the success 01 company depends upon its adaptability to the environment.
  • It is also known as General or Remote environment.
  • It is beyond the direct influence and control of organisation.
  • These factors are more uncontrollable than micro factors.
  • It covers the broader issues with which the organisation deals for long term working.

It deals with the following: (STEEP)
(i) Socio-Cultural and Demographics: It consists of societal values, lifestyle and various characteristics of population. Those characteristics have to be identified which affects the further strategic competitiveness of the company. They affect directly or indirectly to the business environment. It include social factor like customs, tradition, values, beliefs, poverty, literacy, life expectancy rate etc.

(ii) Technological: This environment includes the methods, techniques and approaches adopted for production of goods and services and their distribution. Technology and business are highly inter related and inter-dependent. Technology influences the business operations and brings many opportunities for the business. It come in many form like medical devices etc.

(iii) Economic: It represents the situation of the region and nation in which the firm operates. Business obtains all its inputs from the economic environment and all its outputs are also absorbed there. It includes the following factors :
(a) Economic Conditions

  • Gross Domestic Product,
  • Per Capital Income,
  • Capital Availability,
  • Foreign Exchange Reserves etc.
  • Markets
  • Foreign Trade
  • Capital Market

(b) Economic Policies

  • Industrial Policy,
  • Fiscal Policy,
  • Monetary Policy,
  • Foreign Investment Policy,
  • EXIM Policy, etc.

(c) Economic System

  • Capitalistic Economy,
  • Socialistic Economy,
  • Mixed Economy.

(iv) Ecology and Physical Environment: These factors are important for those units which carry on production and manufacturing activities. It includes weather, climatic conditions, availability of natural resources, location aspect etc. They play an important role for those who carry out production & manufacturing activities.

(v) Political and Legal: Political environment means the political system, the government policies and their attitude towards the business community. Political groups put pressure on business for political gain by raising the sensitive issues relating to public.

Legal environment means the flexibility and adaptability of law and other legal rules governing the business. Every business has to work within the framework of law. Political Environment refer three political institution viz. legislature, executive, judiciary in shaping, directing and controlling business activities.

Global Integration: There was a growth in NNP, per capita income, infrastructure etc.

  • Government has taken several steps to speed up the industrial growth and solve various economic problems.
  • Government efforts resulted in a mixed response.
  • Radical change in economic policies was brought in 1991.
  • Foreign Investment Promotion Board was set up to channelize the foreign capital investment in India.
  • It includes – Liberalisation, Privatisation and Globalisation
  • This resulted in increase in Per Capita income, Net National Product, Infrastructure development, etc.

Features of Current Phase of Globalisation:

  • Developing new financial markets
  • Growing Global Consumer Market with global brands.
  • Reducing anti-trust laws and proliferating mergers and acquisitions.
  • Growing trend of multilateral agreements
  • Conventions and agreements on the global environment

Liberalisation – refers to relaxation of previous government restrictions usually in areas of social and economic policies. It refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises.

Liberalisation Includes:

  • Abolishing industrial licencing requirement
  • Freedom in fixation of prices of goods and services.
  • Reduction in tax rates.
  • Freedom in deciding business scale.
  • Simplifying import export procedure.
  • High foreign exchange reserve.

Benefits of Liberalisation:

  • Liberalisation has led to expansion of Indian Economy.
  • Easy entry of foreign business organisations in India.
  • Stiff competition has led to increase in efficiency.
  • High growth rate.
  • Availability of goods at competitive prices.
  • Healthy stock market
  • Low inflation rate, etc.
  • Good industrial relation
  • Strong rupee
  • High foreign exchange Rate

Privatization:
1.  Privatization refers to the transfer of assets or service functions from public to private ownership or control. “It means the withdrawal of the state from an industry or sector – partially or fully.”

2. Privatization has become a universal trend. Even in communist countries it became a measure of economic rejuvenation.

3. Launching and sustaining transformation of the economy from a command to a market mode (capitalistic).

4. Its objectives are:

  • To increase the size of private sector, distributing more widely in the population at large.
  • Improving the performance of Public Sector Units.
  • Encourage private sector investments.
  • Revenue generation.
  • Reduction of administrative burden.
  • Launching and sustaining the transformation of the economy for a command to a market model.

Routes of privatization/Methods of privatization:

  • Divestiture : The partial or full disposal of an investment or asset through sale, exchange, closure or bankruptcy. Business may divest by selling of ownership stakes.
  • Contracting : Under this, the government give contracts for services to be performed and delivered to other organisations.
  • Liquidation : It can be formal (sale of assets and closure of enjire enterprise) or informal (suspending some of its operations).
  • Denationalisation/Reprivatization : it means transferring something from state ownership to private ownership.
  • Franchising : Government gives authorisation to someone to sell or distribute its goods or services in a certain designated area.
  • Leasing : It is a process by which government can obtain the use of certain fixed assets for which it may pay a series of payments.
  • Government withdrawal : Government withdraws its production from certain goods and services, leaving them completely with private enterprises.

Benefits of privatization:

  • Reducing fiscal burden
  • Reviving sick units
  • Reducing the size of administrative machinery
  • Helps in generating funds
  • Enabling the government to concentrate on essential states.
  • Private sector registered fast growth in the post liberalized period.

Functions of privatization:

  • Better management of enterprises
  • Encourage entrepreneurship
  • Accelerate pace of economic development
  • Increase number of workers and common man who an shareholders.

Problems in privatization:

  • Growth of monopoly power
  • Loss making units are not bought
  • Lop- sided industrial development

Globalization (Became a buzzword):
(i) It refers to integration of world into one huge market by removing the trade barriers among countries. It means, the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows, and also through the more rapid and wide spread diffusion of technology.

(ii) Globalisation is at two levels:

  • Macro and
  • Micro

(ii) Reasons for globalisation:

  • Rapid shrinking of time and distance.
  • Domestic markets are no longer adequate and rich.
  • Foreign market becomes large enough to justify foreign investment.
  • Reduce high transportation cost
  • Political stability
  • To get technology
  • To secure reliable or cheaper source of raw materials.
  • Generate higher sales
  • Better cash flows.

US, Canada and Mexico have signed the North America Free Trade Agreement (NAFTA) to remove all trade barriers among their countries.

The following are the features of the current phase of globalization:
New Markets –

  • Growing global markets in services – banking, insurance, transport.
  • New financial markets- deregulated, globally linked, working around the clock, with action at a distance in real time, with new instruments such as derivatives.
  • Deregulation of anti-trust laws and proliferation of mergers and acquisitions.
  • Global consumer markets with global brands.

(iv) New Rules and Norms –

  • Market economic policies spreading around the world, with greater privatization and liberalization than in earlier decades
  • Widespread adoption of democracy as the choice of political regime
  • Human rights conventions and instruments building up in both coverage and number of signatories – and growing awareness among people around the world
  • Consensus goals and action agenda for development
  • Conventions and agreements on the global environment – biodiversity, ozone layer, disposal of hazardous wastes, desertification, climate change.
  • Multilateral agreements in trade, taking on such new agendas as environmental and social conditions.
    New multilateral agreements for services, intellectual property, communications – more binding on national governments than any previous agreements
  • The multilateral agreement on investment under debate.

(v) Comparative Analysis of Business Environment – India and other countries:
1. Business Environment of a company comprises of all factors which, directly affect the functioning of a company or business enterprise.

2. Every country is different in terms of micro environment and macro environment which it provides to corporate entities operating there. India has a young population, with around 65% in the age group of 15 to 64 years.

3. The Companies Act, 2013 has also greatly impacted the doing business in India.

4. As per the World Bank doing business, India made the biggest improvement in business regulation, increasing its distance to frontier score by 2 points and moving up in the ease of dong business ranking from 134 in 2015 to 130 out of 189 countries in 2016.

5. The ‘Doing Business’ rankings are published by the World Bank each years and the rankings are based on 10 parameters.

7. India ranks in the top 10 in Protecting Minority Investors.

8. India is a vibrant market for telecommunication products such as mobile telephones and internet connections, automobiles and several other consumer and luxury goods.

9. India has witnessed massive improvement in the quality of Its automobile manufacturing after 1990s when several international players began manufacturing their products in India.

10. The socio-cultural fabric is another important environmental factor that should be analysed while comparing business India with respect to other countries.

11. The differences in language sometimes pose a serious problem, even necessitating a change in the brand name.

12. Geographical and ecological factors, such as natural resources endowments, weather and climatic conditions, topographical factors, locational etc. are all relevant to business.

13. Technological factors sometimes pose problems. A firm, which is unable to cope with the technological changes may not survive.

14. India is the world’s largest democracy in terms of voters and is a parliamentary form of government with a two timed parliament executive and judiciary all having district but inter related functions.

15. India has reasonably liberalized economy since the economic reforms initiated in 1991.

16. GDP growth rate in India is 7% per annum.

17. India is a country with strong banking system and vibrant capital market.

18. India’s financial system is led by its large banking industry with total deposits of all scheduled commercial banks in India in nearly US $ 1.52 trillion.

19. Outstanding loans and advances is approx US $ 1.1 trillion (₹ 74,352 billion) as on March, 2014.

20. As per the latest data from world federation of exchanges the share of the US in world cap is 38%, that of India 2.00% and of China 14.3%.

21. The foreign investment has shown positive growth in both portfolio and direct investment terms over the last two decades.

22. The factors of the business environment can be broadly divided as:
(a) Micro environment: It consists of factors specific to the company such as its customers, competitors, suppliers, investors and creditors of the company which impact functioning and performance of the company directly and is part of its immediate environment.

(b) Macro environment: The macro environment consist of factors which impact all companies or corporate entities functioning in a country and include legal and taxation issues, regulators, political and government influences, social and cultural issues, technological and economic factor.

23. These parameters are as follows:

  • Starting a business
  • Dealing with construction permits
  • Getting electricity
  • Registering property
  • Getting credit
  • Protecting minority investors
  • Paying taxes
  • Trading across borders
  • Enforcing contracts, and
  • Resolving insolvency.

Multiple Choice Questions

Question 1.
Profit is the only objective of all business firms _______.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(b) False

Question 2.
Modern business is _______.
(a) Constant
(b) Profitable
(c) Dynamic
(d) Stable
Answer:
(c) Dynamic

Question 3.
Features of business environment does not include:
(a) Uncertainty
(b) Relativity
(c) Static Nature
(d) Specific and General forces
Answer:
(c) Static Nature

Question 4.
_______ tells the purpose of business existence.
(a) Vision
(b) Mission
(c) Both (a) and (b)
(d) None of the above
Answer:
(b) Mission

Question 5.
Both Vision and Mission statements are commonly used to:
(a) define measurement standards
(b) create wider linkages with customers, suppliers and alliance partners
(c) guide managements thinking on strategic issues
(d) enlist internal support
Answer:
(c) guide managements thinking on strategic issues

Question 6.
“Where you can visualize your business in 7 years time”. This is a:
(a) Mission Statement
(b) Vision Statement
(c) Business Statement
(d) Statement of purpose.
Answer:
(b) Vision Statement

Question 7.
“To be a global leader in promoting good corporate governance” is a _______ of ICSI .
(a) Vision
(b) Mission
(c) None of the above
(d) Both (a) and (b) above.
Answer:
(a) Vision

Question 8.
Types of Business Environment includes the following:
(a) Internal
(b) External
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

Question 9.
Internal business environment does not include:
(a) Man
(b) Money
(c) Marketing Resources
(d) Government Policies.
Answer:
(d) Government Policies.

Question 10.
Environment factors which are within the control of business are known as:
(a) Micro factors
(b) Internal factors
(c) Macro factors
(d) External factors
Answer:
(a) Micro factors

Question 11.
_______ is a type of external environment.
a) Operating
(b) General
(c) Remote
(d) All of the above.
Answer:
(d) All of the above.

Question 12.
Micro factors are the factors that are in the company’s immediate environment.
(a) True
(b) False
(c) Partly True
(d) None of the above
Answer:
(a) True

Question 13.
Micro environmental factors can be described as _______ close to a business that have a direct impact on its strategy.
(a) External factors
(b) Internal factors
(c) Both (a) and (b)
(d) Competitive factors
Answer:
(b) Internal factors

Question 14.
Macro environment is also known as :
(a) Task environment
(b) Remote environment
(c) Global environment
(d) Operating environment
Answer:
(b) Remote environment

Question 15.
_______ factors affects the economy as a whole and are not Particular to any organisation.
(a) Micro
(b) Macro
(c) Internal
(d) None of the above
Answer:
(b) Macro

Question 16.
Change in technology, economic conditions, political and legal factors are _______ factors.
(a) Internal
(b) External
(c) Both (a) and (b)
(d) None of these
Answer:
(b) External

Question 17.
Which of the following is not included in liberalization _______.
(a) Reduction in tax matter
(b) Abolition of licensing
(c) Simplification of policies
(d) Imposition of tariff barriers.
Answer:
(d) Imposition of tariff barriers.

Question 18.
Which of the following is a type of economic system?
(a) Capitalistic economy
(b) Socialistic economy
(c) Mixed economy
(d) All of the above
Answer:
(d) All of the above

Question 19.
_______ is a process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises.
(a) Privatisation
(b) Globalisation
(c) Liberalisation
(d) None of the above.
Answer:
(c) Liberalisation

Question 20.
Liberalisation does not include:
(a) Abolishing industrial licensing requirement in most of the industries
(b) Freedom in fixing prices of goods and services
(c) Restriction in deciding the scale of business activities
(d) Simplifying the procedure for imports and exports.
Answer:
(c) Restriction in deciding the scale of business activities

Question 21.
Following is not an objective of privatisation :
(a) Improving the performance of PSU’s
(b) Decreasing the size of private sector
(c) Reducing administrative burden
(d) Revenue Generation.
Answer:
(b) Decreasing the size of private sector

Question 22.
Routes of privatisation include :
(a) Divestiture
(b) Contracting
(c) Nationalisation
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)

Question 23.
NAFTA stands for:
(a) New American Free Trade Agreement
(b) North African Free Trade Agreement
(c) North American Free Trade Agreement
(d) North American Full Trade Acceptance.
Answer:
(c) North American Free Trade Agreement

Question 24.
NAFTA was signed among following countries:
(a) US, Canada, Mexico
(b) India, US, Pakistan
(c) US, Canada, UK
(d) None of the above.
Answer:
(a) US, Canada, Mexico

Question 25.
_______ describes the desired future position of the company,
(a) Internal Environment
(b) Mission Statement
(c) Vision Statement
(d) External Environment.
Answer:
(c) Vision Statement

Question 26.
A Business has absolute control on the _______.
(a) Internal Environment
(b) External Environment
(c) Both (a) & (b)
(d) None of these.
Answer:
(a) Internal Environment

Question 27.
Micro and Macro Environment is the part of _______.
(a) Business Environment
(b) Internal Environment
(c) External Environment
(d) Both (b) & (c).
Answer:
(c) External Environment

Question 28.
Micro Environment is also known as _______.
(a) Operating Environment
(b) Task Environment
(c) Both (a) and (b)
(d) Either (a) or (b).
Answer:
(c) Both (a) and (b)

Question 29.
Financial Factors, Human Resource, Marketing Resource and Miscellaneous Factors are _______ Factors.
(a) Micro
(b) Macro
(c) Internal
(d) External.
Answer:
(c) Internal

Question 30.
GDP, Per capital income, foreign exchange are the examples of _______.
(a) Economic Policy
(b) Economic System
(c) Economic Conditions
(d) Both (a) and (b).
Answer:
(c) Economic Conditions

Question 31.
When did Government of India introduced a change in Economic Policy _______.
(a) 1892
(b) 1991
(c) 1895
(d) 1781
Answer:
(b) 1991

Question 32.
Through the _______ Process, Indian economy has opened up and started interacting with the world.
(a) Liberalisation
(b) Privatisation
(c) Globalisation
(d) None of these.
Answer:
(a) Liberalisation

Question 33.
Which process of development became a vital measure of economic rejuvenation in the communist countries:
(a) Liberalisation
(b) Privatisation
(c) Globalisation
(d) Both (a) and (b).
Answer:
(b) Privatisation

Question 34.
_______ has become universal trend.
(a) Liberalisation
(b) Privatisation
(c) Globalisation
(d) None of these.
Answer:
(b) Privatisation

Question 35.
High growth rate, easy availability of goods, at competitive rate, high foreign exchange reserve can be achieved by:
(a) Liberalisation
(b) Privatisation
(c) Globalisation
(d) All of the above.
Answer:
(a) Liberalisation

Question 36.
_______ means transferring something from state ownership to private ownership.
(a) Decentralisation
(b) Denationalisation
(c) Divestiture
(d) None of these.
Answer:
(b) Denationalisation

Question 37.
Problems in Privatisation are:
(a) Growth of monopoly power
(b) Loss making units are not bought
(c) Lop-sided industrial development
(d) All of the above.
Answer:
(d) All of the above.

Question 38.
_______ refers to integration of world into one huge market by removing the trade barriers among countries.
(a) Privatisation
(b) Liberalisation
(c) Globalisation
(d) None of these.
Answer:
(c) Globalisation

Question 39.
Benefits of Privatisation does not include _______.
(a) Reducing fiscal burden
(b) Sick units reconstruction
(c) Reducing the size of administrative machinery
(d) Low inflation rate.
Answer:
(d) Low inflation rate.

Question 40.
_______ is the process by which government can obtain the use of certain fixed assets for which it may pay a series of payments.
(a) Franchising
(b) Leasing
(c) Contracting
(d) Both (a) and (b).
Answer:
(b) Leasing

Question 41.
_______ helps defining the company’s business, its objectives and its approach to reach those objective.
(a) Vision statement
(b) Mission statement
(c) Business statement
(d) Statement of purpose.
Answer:
(b) Mission statement

Question 42.
_______ means the flexibility and adaptability of law and other legal rule governing the business.
(a) Political Environment
(b) Legal Environment
(c) Technological Environment
(d) Both (a) and (c)
Answer:
(b) Legal Environment

Question 43.
Economic Policies are framed by _______.
(a) Private
(b) Business
(c) Government
(d) Semi government
Answer:
(c) Government

Question 44.
Legislature, executive and the judiciary comes under the _______.
(a) Political Environment
(b) Physical Environment
(c) Legal Environment
(d) Both (a) and (c).
Answer:
(a) Political Environment

Question 45.
A statement answers the question “why do we exist”?
(a) Vision
(b) Mission
(c) Both (a) and (b)
(d) None of the above.
Answer:
(b) Mission

Question 46.
_______ Statement defines the company’s business, its objectives and its approach to reach these objectives.
(a) Vision
(b) Mission
(c) Profitability
(d) Annual Report
Answer:
(b) Mission

Question 47.
In a mission /vision Statement, the matters relating to guiding employee decision making, establishing ethical behaviour, performance standards etc are.
(a) Internal to organisation
(b) External to organisation
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(a) Internal to organisation

Question 48.
The matters relating to creating close linkages and letter communication with customers, suppliers and alliance partners given in a mission/ vision Statement are
(a) Internal to organization
(b) External to organization
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(b) External to organization

Question 49.
_______ is the future dream of a business.
(a) Balance Sheet
(b) Vision Statement
(c) Mission Statement
(d) None of the above
Answer:
(b) Vision Statement

Question 50.
The question like “Where do you exist”, “How does it do it” are covered by _______.
(a) Vision Statement
(b) Mission Statement
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(b) Mission Statement

Question 51.
Which of the following is-not covered by the organisation’s Internal Environment _______.
(a) Human Resource
(b) R & D
(c) Media
(d) Management Structure
Answer:
(c) Media

Question 52.
The forces which are external but still have a direct bearing on the operations of the firm are called.
(a) Micro Environment
(b) Macro environment
(c) Internal Environment
(d) All of the above
Answer:
(a) Micro Environment

Question 53.
Customers, shareholders, competitors, etc. are the elements of _______.
(a) Micro Environment
(b) Internal environment
(c) Macro Environment
(d) None of the above
Answer:
(a) Micro Environment

Question 54.
Technology, Culture, Demographics etc. are the elements of _______.
(a) Internal Environment
(b) Micro Environment
(c) Macro Environment
(d) None of the above
Answer:
(c) Macro Environment

Question 55.
The size, density, distribution and growth rate of population is called _______.
(a) Ecology
(b) Habitat
(c) Demographics
(d) None of the above
Answer:
(c) Demographics

Question 56.
_______ was Set up to channel foreiqn capital investment
(a) SEBI
(b) Foreign Investment Promotion Board
(c) Special Economic Zone
(d) International Trade Promotion Board
Answer:
(d) International Trade Promotion Board

Question 57.
Which of the following is an element of Political environment?
(a) Legislature
(b) Judiciary
(c) Executive
(d) All of the Above
Answer:

Question 58.
Which of the following is a method of Privatisation _______
(a) Divestiture
(b) Denationalization
(c) Franchising
(d) All of the above
Answer:
(d) All of the above

Question 59.
The form of privatisation in which the government company retains its legal status even though some or all of its operations are suspended is called.
(a) Controlling
(b) Formal liquidation
(c) Informal liquidation
(d) Denationalisation
Answer:
(c) Informal liquidation

Question 60.
The method of Privatisation in which the government authorises the delivery of certain services in a designated area is called _______.
(a) Franchising
(b) Leasing
(c) Contracting
(d) Divesture
Answer:
(a) Franchising

Question 61.
Which of the foliowing is not a use of Vision/Mission Statement?
(a) Inspiring the Employees
(b) Defining Problems & Standards
(c) Increasing the profits and revenue
(d) Defining the Performance Standards
Answer:
(c) Increasing the profits and revenue

Question 62.
Which of the following is not true in relation to the business environment?
(a) It is beyond the organisational
(b) It is a sum total of internal and external control factors
(c) Organisation can remain insensitive to the business environment
(d) It is dynamic in nature
Answer:
(c) Organisation can remain insensitive to the business environment

Question 63.
USP stands for _______.
(a) Unique Selling Price
(b) Unique Strategic Price
(c) Unique Selling Point
(d) Ultimate Selling Price
Answer:
(c) Unique Selling Point

Question 64.
The partial or full disposal of an investment or asset through sale, exchange, closure or bankruptcy is called as _______.
(a) Divestiture
(b) Environment withdrawal
(c) Denationalisation
(d) Reprivatisation
Answer:
(a) Divestiture

Question 65.
The process of restoring to its former properties seized by the government is called _______.
(a) Divestiture
(b) Restoration
(c) Reprivatisation
(d) Liquidation
Answer:
(c) Reprivatisation

Question 66.
Sole proprietorship for is most suitable for;
(a) Where the nature of business is simple
(b) Where manual skill is required
(c) Where the market for the product is small & local
(d) All of the above
Answer:
(d) All of the above

Question 67.
Which of the following can be treated as characteristics of business organization?
(a) All business enterprise engage in operation on a continuous basis.
(b) Business undertakings are not exposed to any risk for uncertainty.
(c) A business firms are owned by one individual and not by a group of individuals jointly.
(d) All of the above.
Answer:
(a) All business enterprise engage in operation on a continuous basis.

Question 68.
_______ in any organization must have characteristic like skills, quality, high morale, commitment towards the work, attitude etc.
(a) Marketing Resources
(b) Financial factors
(c) Human Resource
(d) All of the above
Answer:
(c) Human Resource

Question 69.
Which of the following is a part of liberalisation process?
(a) Making industrial licensing requirement mandatory in most of the industries
(b) Regulating the scale of business activities
(c) Fixing of prices of goods and services
(d) Simplifying the procedures for imports and exports
Answer:
(d) Liberalisation refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises.
It includes:

  • Abolishing industrial licensing requirement
  • Freedom in fixation of goods and services
  • Reduction in tax rates
  • Freedom in deciding business scale
  • Simplifying import export procedures

Thus, among the given options, simplifying the procedures for imports and exports is right.

Question 70.
Macro factors of business environment are generally:
(a) As controllable as micro factors
(b) Less controllable than micro factors
(c) More controllable than micro factors
(d) None of the above
Answer:
(b) Macro Environment also known as General or Remote Environment is beyond the direct control and influence of the organisation. These factors are more uncontrollable than micro factors i.e. they are less controllable than micro factors.

Question 71.
Which one of the following is the result of product differentiation?
(a) Brand Equity
(b) Competitive Advantage
(c) Value System
(d) None of the above
Answer:
(b) Competitor analysis is a critical aspect of analyzing the internal business environment. Competitor’s action affect the ability of the business to make profits, because competitors will continually seek to gain advantage over each other, by differentiating their product and service and by seeking to provide better value for money.

Question 72.
Which one of the following is the desired future position?
(a) Financial Statement
(b) Vision Statement
(c) Objectives
(d) All of the above
Answer:
(b) Vision Statement is a road map of a company’s future. It describes the desired future position of the company.

Question 73.
Mission Statement of a company is derived from its:
(a) Articles of Association
(b) Vision Statement
(c) Memorandum of Association
(d) Prospectus
Answer:
(b) Mission Statement helps defining the company’s business, its objectives and its approach to reach those objectives. It broadly describes an organisation’s present capabilities, customer focus, activities and business makes, thus helping an organisation to reach its desired future position as set out in its vision statement.
Thus, mission statement of a company is derived from its Vision Statement.

Question 74.
There is a close and interaction between the business and its
environment.
(a) Frequent
(b) Continuous
(c) Seldom
(d) Occasional
Answer:
(b) Business, environment is always changing in nature. Moreover, environment influences business and in turn, business influences environment. Thus, it can be said that there is close and continuous interaction between business and its environment.

Question 75.
Which one of the following shows a big picture of what a company wants to achieve in future?
(a) Vision statement
(b) Mission statement
(c) Value statement
(d) Quality statement.
Answer:
(a) Vision statement is where you want your business to reach at. It is your future dream for your business. Thus we can say that Vision Statement shows a big picture of what a company wants to achieve in future.

Question 76.
Value system of an organisation have an impact on its:
I. Objectives
II. Policies
III. Practices
IV. Profit
The correct option is:
(a) I and II only
(b) I, II and III only
(c) II, III and IV only
(d) I, II, III and IV.
Answer:
(b) The principles of right and wrong that are accepted by an individual or organisation are what comprise value system. The value system of the founders and those at the helm of affairs has important bearing on the choice of business, the mission and objectives of the organisation, business policies and practices.
Thus, value system has no impact on profits of an organisation.

Question 77.
Which among the following are the key drivers of globalisation?
(a) Government action, exchange rates, competition and socio-demographic factors
(b) Market convergence, competition, exchange rates and cost advantages
(c) Cost advantages, government action, economic cycles and competition
(d) Market, cost, competition and government policies.
Answer:
(d) Key drivers of Globalisation:

  • Market driver
  • Cost driver,
  • Government driver
  • Competitive driver
  • Other drivers.

Question 78.
Which one of the following is not a feature of business environment?
(a) Dynamic nature
(b) Image building
(c) Uncertainty
(d) Totality of external forces
Answer:
(b) Following are the features of Business Environment:

  • Dynamic
  • Multi – faceted
  • Sum of external forces
  • Uncertainty
  • Both specific and general forces
  • Relatiyity

Therefore, image building is not a feature of business environment.

Question 79.
Which one of the following describes the desired future position of a company?
(a) Mission statement
(b) Vision Statement
(c) Competitive advantage
(d) Qualitative policy
Answer:
(b) ‘Vision Statement’ is a road map of a companies future. It describes the desired future position of the company.

Question 80.
The process of eliminating unnecessary controls and restrictions on the smooth functioning of a business enterprise is known as :
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) None of the above
Answer:
(a) Liberalisation refers to relaxation of previous government restrictions usually in areas of social and economic policies. It refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises.

Question 81.
Business environment consists of which element?
(a) Internal
(b) External
(c) Both (a) & (b)
(d) None of these
Answer:
(c) Business environment factors is a sum of several external and internal forces that affects the functioning of the business. Thus, it contains both internal and external elements.

Question 82.
Which of the following is not an economic policy?
(a) Industrial Policy
(b) Fiscal Policy
(c) Exim Policy
(d) Technological Policy
Answer:
(d) Economic policies are:

  • Industrial policy
  • Fiscal policy
  • EXIM policy
  • Foreign investment policy

Thus, technological policy is not an economic policy.

Question 83.
Macro environment, is concerned with major issues and upcoming changes in the environment.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(a) It is true that macro environment is concerned with major issues with which the organisation deals for long term working.

Question 84.
Which of the following factor is not included in micro-environment?
(a) Customers
(b) Employees
(c) Suppliers
(d) Technology
Answer:
(d) Micro economics comprises of following factors.

  • Consumer / Customers – Competitors
  • Employees – Suppliers
  • Share holders – Media

Thus, in the given question, technology is not a factor of micro environment.

Question 85.
The economic environment of business in India is changing at a fast rate mainly due to economic policies:
(a) True
(b) False
(c) Partly Yes
(d) Partly No
Answer:
(b) The economic conditions of a country refer to a set of economic factors that have great influence on business organisations. Hence, the given statement that economic environment of business in India is changing at a fast rate mainly due to economic policies are false.

Question 86.
Which of the following affects an individual enterprise?
(a) General forces
(b) Specific forces
(c) Both (a) and (b)
(d) None of these
Answer:
(b) General forces affect the enterprises or industry as a whole while the specific forces affect the individual enterprises.
Hence, option (b) is correct.

Question 87.
Which among the following is the vision of ICSI?
(a) “Promoting global excellence”
(b) ‘To be a global leader in promoting good corporate governance”
(c) “Partners in Nation building”
(d) “Building corporate responsibility”
Answer:
(b) Vision statement is a road map of a company’s future. Following is the vision of ICSI, “To be a global leader in promoting good corporate governance.

Question 88.
When a state owned enterprise is given in private hands, it is known as ______.
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) Transformation
Answer:
(c) Privatization refers to the transfer of assets or service functions from public to private ownership or control.
Thus, under privatisation a state owned enterprise is given in private hands.

Question 89.
Who started the process of liberalisation?
(a) Yashwant Singh
(b) Jashwant Singh
(c) Manmohan Singh
(d) Mahatma Gandhi
Answer:
(c) Manmohan Singh started the process of liberalisation.

Question 90.
Mission Statement is derived from ______.
(a) Future position of the company
(b) Company’s business and its objectives
(c) Both (a) and (b)
(d) None
Answer:
(b) Mission statement helps defining the Company’s business, its objectives and its approach to reach those objectives. It broadly describes an organisation’s present capabilities, customer focus activities and business makes, thus helping an organisation to reach its desired future position as set out in its vision statement.

Question 91.
Which one of the below is not an example of mission statement?
(a) Disney :‘To make people happy”.
(b) Facebook: “To give people the power to share and make the world more open and connected.”
(c) Google : ‘To organise the world’s information and make it universally accessible and useful.
(d) ICSI : “To develop high caliber professionals facilitating good corporate governance.”
(e) None of these
Answer:
(a) Vision Statement of Disney, ‘To make people Happy.”

Question 92.
Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing it to competitors. The mentioned advantage can be categorised under:
(a) First mover advantage
(b) Initial identifier advantage
(c) Earlier advantage
(d) Second mover advantage
Answer:
(a) Under first mover advantage, early identification of opportunities helps an enterprise to be the first to express them instead of losing them to competitors. For ex. Maruti Udyog became the leader in the small car market because it was the first to recognize the need of small cars in India.

Question 93.
Recruitment of public relations consultants are a part of ______.
(a) Operating Environment
(b) General Environment
(c) Macro Environment
(d) Competitive Environment
Answer:
(a) Public relations is a practice of managing the spread of information between an individual or an organisation the public. Public relations is the idea of creating coverage for clients, rather than marketing or advertising the aim of public relations is to inform the public, prospective customers, investors, partners, employees and other stakeholders and ultimately persuade them to maintain certain view about the organisation. So recruitment of public relation consultants is a part of Operating Environment.

Question 94.
Liberalization in India did not result in:
(a) A high growth rate
(b) A healthy and flourishing stock market
(c) Easy availability of goods at competitive prices
(d) Low foreign exchange reserves
Answer:
(d) Benefits of liberalization includes:

  • It has led to expansion of Indian Economy.
  • Easy entry of foreign business organisation in India.
  • High growth rate.
  • Availability of goods at competitive prices.
  • Healthy stock market.
  • Low inflation rate.

But it does not result in low foreign exchange reserves.

Question 95.
Where is company’s mission statement derived from?
(a) From the vision of the company ‘
(b) From the company policies
(c) Memorandum of Association of the Company
(d) All of the above
Answer:
(a) Elements of Mission and Vision statements are often combined to provide a statement of the purposes, goals and values of the companies. However, some times the two are used interchangeably. Where your vision is your ultimate goal, your mission is how you get there.

Question 96.
Opening up of an industry that has been reserved for the public sector to the private sector is an example of:
(a) Modernisation
(b) Liberalisation
(c) Globalisation
(d) Privatisation
Answer:
(d) Another dimension of privatization is opening up of an industry that has been reserved for the public sector of the private sector.

Question 97.
Mission statement is derived from ______.
(a) Vision statement
(b) Laws and statutes
(c) Company policies
(d) The company’s memorandum of association
Answer:
(a) The mission statement of a enterprise is derived from its vision, at some places mission and vision statements are used interchangeably.

Question 98.
Which of these is not included in (NAFTA) North American Free Trade Agreement?
(a) US
(b) India
(c) Mexico
(d) Canada
Answer:
(b) US, Canada and Mexico have signed the North American Free Trade Agreement to remove all trade barriers among these countries. India is not a part of NAFTA.

Question 99.
Who started the process of liberalisation?
(a) Yashwant Singh
(b) Jashwant Singh
(c) Manmohan Singh
(d) Mahatma Ghandhi
Answer:
(c) Manmohan Singh started the process of liberalisation.

Question 100.
When did Government of India introduced a change in Economic policy?
(a) 1892
(b) 1991
(c) 1895
(d) 1781
Answer:
(b) Government of India introduced a change in Economic policy 1991. This policy abolished licensing in most of the cases, allowed private participation in most industries, disinvestment was carried out in many public sector enterprises and opened up the economy considerably.

Question 101.
Mission statement is derived from:
(a) Company policies
(b) The Companies memorandum of association
(c) Vision statement
(d) Laws and statutes
Answer:
(c) Mission statement is derived from the vision statement, as mission statement defines the company’s objective, business and its approach to reach those objectives or the desired future position of the company. Thus, elements of mission and vision are often combined to provide a statement of purpose, goal and values of the company.

Question 102.
Product differentiation is an example of:
(a) Brand loyalty
(b) Value statement
(c) Brand equity
(d) Competitive advantage.
Answer:
(d) Product differentiation is an example of competitive advantage. To explain it is a critical aspect of analyzing the internal business environment. Competitor’s action affect the ability of the business to make profit and gain an advantage over each other; thus for seeking to provide better value for money.

Question 103.
Which of the following is correct?
(a) Privatisation got momentum in India after 1947
(b) Privatisation and liberalisation has no co-relation
(c) Privatisation facilitates liberalisation
(d) Liberalisation facilitates privatisation
Answer:
(b) Privatisation : The transfer of a business, industry or service from public to private ownership and control, liberalisation. The process of eliminating unnecessary controls and restrictions on the smooth ” functioning of business enterprises. Thus, we can say that there is no co-relation between privatisation and liberalisation.

Question 104.
_______ is not part of External Environment analysis:
(a) Analysing financial ratio
(b) Studying the political environment
(c) Analysis available technologies
(d) Analysis social, cultural, demographic and geographic forces
Answer:
(a) The external environment of an organisation comprises of all entities that exists outside its boundaries, but have significant influence over its growth and survival. Hence, analysing financial ratio is not a part of external environment analysis.

Question 105.
Which of the following is a part of internal environment scanning:
(a) Political environment
(b) Customer preferences
(c) Chain of command
(d) Law and order
Answer:
(b) Customer preferences is a part of internal environment scanning as the organisation survive on the basis of meeting “customer needs and wants” and providing benefits to their customers. Failure to do so will result in a failed business strategy.

Question 106.
Which of the following is not included in an analysis of the business environment?
(a) Economic trends
(b) Animal behaviour
(c) Social behaviour
(d) Political trends
Answer:
(b) The acronym for macro analysis is STEEP. The five areas of Interest are:

  • Socio Cultural and Demographics
  • Technology
  • Economic Condition
  • Ecology and Physical Environment
  • Political and Legal trend

Question 107.
Opening up of an industry that has been reserved for the public sector to the private sector is an example of:
(a) Modernization
(b) Globalization
(c) Liberalization
(d) Privatization
Answer:
(d) Privatization has become an universal trend means transfer of ownership or management from public sector to private sector.

It also means withdrawal of state from an industry or sector, partial or fully. Another dimension of privatization is opening up industry that has been reserved for public sector to private sector.

Question 108.
Which of the following is not correct?
(a) Identification of possible threats does not help an organization to face the competition
(b) Identification of possible threats helps an organization to grow even in competition
(c) Identification of possible threats helps in taking corrective and improving measures to survive the competition
(d) Identification of possible threats require thorough knowledge of business environment
Answer:
(a) Identification of possible threat help an organisation to face competition and even grow.

Question 109.
Generally the main reason behind starting a business is:
(a) Social service
(b) Earning profits
(c) Earning name
(d) Spiritual reasons
Answer:
(b) Every business serve a common purpose to earn profit. All other reasons are secondary.

Question 110.
Key goal in the firm’s growth phase is:
(a) Expansion of sales
(b) Expansion of capital
(c) Cutting costs
(d) Expansion of profit
Answer:
(a) After the successful introduction of a product, the company tries to increase its market share or sales in the growth phase, which is its percentage of sales volume compared to competitors in the same category. The company focuses on additional promotional and distribution efforts to reach as many potential end users as possible.

Question 111.
Competitors are a part of:
(a) External business environment
(b) Internal business environment
(c) Both External and Internal environ Merit
(d) Neither External nor Internal environment
Answer:
(a) External Environment consist of the factors that are outside the company’s boundaries, thus the company has no control over them. Competitors are the part of the same. Before making any strategy, business must be aware of its competitors actions to the environment changes.

Question 112.
An activity which is related with continuous and regular production and distribution of goods and services for satisfying human wants is called:
(a) Production
(b) Distribution
(c) Service
(d) Business
Answer:
(d) Business is very wide term and is put to different usages. It can be referred as the activity consisting of purchase, sale, manufacturing, processing and marketing of goods and services. It exist for profits and satisfying human wants in many ways. Therefore society and business cannot function without each other.

Question 114.
The World Trade Organisation (WTO) is stimulating:
(a) Privatisation
(b) Liberalisation
(c) Localization
(d) Globalisation
Answer:
(d) Globalisation refers to integration of world into huge market by removing the trade barrier among countries. US, Canada and Mexico have signed the North America Free Trade Agreement (NAFTA) to remove all the trade barrier among the countries. Thus, World Trade Organisation (WTO) has stimulated the cross borders trade.

Question 115.
Which of the following is correct?
(a) Liberalization facilitates privatization
(b) Privatization and liberalization have no co-relation
(c) Privatization got momentum in India after 1947
(d) Privatization facilitate liberalization
Answer:
(b) Privatisation and Liberalisation are 2 different concept and they have no correlation among them.

Question 116.
Globalization is an example of which environmental factor?
(a) Economic
(b) Political
(c) Social
(d) Legal
Answer:
(a) Globalisation is an example of economic environmental factor.

Question 117.
Every identification of opportunities help an enterprise to be the first to exploit them instead of losing them to competitors. The mentioned advantage can be categorized under:
(a) Second mover advantage
(b) First mover advantage
(c) Initial identifier advantage
(d) Earlier advantage
Answer:
(b) First mover advantage means early identification of opportunities allows enterprise to exploit them instead of losing them to competitors.

Question 118.
Examples to an organization’s functional units include all of the following except:
(a) Research and development
(b) Competencies
(c) Marketing
(d) Production
Answer:
(b) Organisation’s functional units include :

  • Production
  • Marketing
  • Finance
  • HR
  • R & D

Competencies can not be included in organisations functional units.

Question 119.
Observing Business environmental changes on a continuous basis to ascertain the future value, is called:
(a) Monitoring
(b) Assessing
(c) Forecasting
Answer:
(c) Forecasting means ascertaining future value by continuous observing of environmental changes.

Question 120.
Which of the following shows a big picture of what a company wants to Achieve in future?
(a) Vision statement
(b) Mission statement
(c) Value statement
(d) Quality statement
Answer:
(a) The vision statement describes future position of company or we can say vision statement shows a big picture of what a company wants to achieve in future.

Question 121.
Value System of an organisation have an impact on its:
I. Objectives
II. Policies
III. Practices
IV. Profit
The correct option is:
(a) I and II only
(b) I, II, and III only
(c) II, III, and IV only
(d) I, II, III and IV
Answer:
(b) Value System : A coherent set of the principles of right and wrong accepted by a person, organisation or society. The value system of the founders and those pf helm of affairs has important bearing on the choice of business, the Mission and Objectives of the organisation, business Policies and Practices. Value System is used as a guide to operate the organisation. It is not related to profit.

Question 122.
Which of the following are the key drivers of globalisation?
(a) Government action, exchange rates, competition and socio-demographic factors
(b) Market coverages, competition exchange rates and cost advantages
(c) Cost advantages, Government action, economic cycles and competition
(d) Market, cost, competition and Government policies.
Answer:
(d) Globalisation means the growing economic interdependence of the countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also through the more rapid and wide spread diffusion of technology. Market cost, government policies and competition are the key drivers or integral part of globalisation.

Question 123.
In a business environment, which one of the following is not a political factor?
(a) Tax policy
(b) Employment laws
(c) Environment regulations
(d) Exchange rate
Answer:
(d) Exchange Rate does not come under political factor if we talk about in a business environment.
Entrepreneurs are classified as land owners who are financially independent aristocrat or aristocrat means governed by one person.

Question 124.
WTO is related with ________.
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) None of the above.
Answer:
(b) World Trade Organisation (WTO) promotes Globalisation,
option (b) is correct.

Question 125.
Reducing Government Control is a feature of:
(a) Globalisation
(b) Liberalisation
(c) Privatisation
(d) All of these
Answer:
(b) Features of liberalisation:

  • Abolishing industrial licensing requirement
  • Freedom in fixation of prices
  • Reduction in tax burden
  • Freedom in deciding business scale
  • High forex reserve
  • Relaxation / Reduction of government control

Question 126.
Which one of the following is not a feature of business environment?
(a) Dynamic building
(b) Image building
(c) Uncertainty
(d) Totaly of external forces
Answer:
(b) Business Environment has the following features.

  • Dynamic
  • Multi faceted
  • Sum of External Forces
  • Uncertainty
  • Both Specific and general forces
  • Relativity

Therefore, image building is not a feature of business environment.

Question 127.
Which one of the following describes the desired future position of a company?
(a) Mission Statement
(b) Vision Statement
(c) Competitive advantage
(d) Qualitative policy
Answer:
(b) Vision statement is where you want your business to reach at. It is your dream for your business. Thus we can say that Vision Statement describes the desired future position of a company.

Question 128.
The process-of eliminating unnecessary controls and restrictions on the smooth functioning of a business enterprise is known as:
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) None of the above
Answer:
(a) Liberalisation refers to relaxation of previous government restrictions usually in areas of social and economic policies. It refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of a business enterprise.

Question 129.
Product differentiation is an example of:
(a) Brand Loyalty
(b) Value Statement
(c) Brand Equity
(d) Competitive Advantage
Answer:
(d) Product differentiation is an example of competitive advantage. It is a critical aspect of analysing the internal business environment. Competitor’s action affect the ability of the business to make profits and gain an advantage over each other, thus for seeking to provide better value of money.

Question 130.
Which of them is a object of a business that goes beyond earring profits:
(a) An important institution in society
(b) Creating job opportunities
(c) Offering better quality of life
(d) All of the above
Answer:
(d) Beside earning profits, business survives for various other objects including –

  • Becoming an important institution of society
  • Supplying goods and services
  • Creating job’s for unemployed
  • Offering better Standard / quality of life
  • Contributing to the overall economic growth of the country

Thus all the above stated options are correct

Question 131.
Types of business Environment:
(a) Internal
(b) External
(c) Internal, External, General Specific
(d) (a) and (b) both
Answer:
(d) Business Environment has following two types –

  • Internal Environment the factors which are within the control of business entity.
  • External Environment factors that are out the company’s boundaries, thus the company have no control over them.

Thus the correct answer is option (d)

Question 132.
Match the following:
(a) Globalisation (i) To allow using once name and technique
(b) Franchising (ii) Global and cross border transactions
(c) Privatisation (iii) Abolishing industrial licensing
(d) Liberalisation (iv) Moving to private sectors from state ownership
Options:
(a) (a) III, (b) IV, (c) I, (d) II
(b) (a) II, (b) I, (c) IV, (d) III
(c) (a) IV, (b) I, (c) III, (d) II
(d) (a) I, (b) II, (c) III, (d) IV
Answer:
(b) Globalisation refers to integration of world into one huge market by removing trade barriers among countries. It comprises of global and cross border transactions. Franchising means giving authority to some one to use once name and technique.

Privatisation refers to transfer of assets or service function to private sector from state ownership. Liberalising refers to eliminating unnecessary controls and restrictions. It includes abolishing Industrial Licensing requirement. Thus the correct answer is option (b).

Question 133.
Which statement tells about company’s objectives, it’s approach to reach their objectives.
(a) Mission
(b) Vision
(c) Both
(d) Statement of objectives
Answer:
(a) A mission statements defines the company’s business its objectives and its approach to reach those objective. It can be crafted in the following steps:

  • What does company do?
  • What do you do it for?
  • Where do you exist?
  • How does it do it?
  • Why does your company do it?

Question 134.
To develop high caliber professionals facilitating good corporate governance is:
(a) Mission
(b) Vision
(c) Objective
(d) Motto
Answer:
(a) The Institute of Company Secretary of India has the mission statement as -“To develop high caliber professionals facilitating good corporate governance”.

Question 135.
Liberalisation includes:
(a) Simplifying the procedures for imports and exports.
(b) To generate revenue for the state
(c) It may result in better management of the company
(d) None
Answer:
(a) Liberalization refers to the process of eliminating unnecessary control and restrictions on the smooth functioning of business enterprises.

It includes:

  • Freedom in deciding the scale of business activities
  • Simplified policies to attract foreign capital and technology to India
  • Simplifying the procedures for imports and exports.
  • Reduction in tax rates, etc.

Question 136.
The withdrawal of the state from an industry or sector, partially or fully.
(a) Liberalization
(b) Privatization
(c) Both
(d) Globalisation
Answer:
(b) ‘Privatization’ which has become a universal trend means transfer of ownership and/or management of an enterprise from the public sector to the private sector. There is a withdrawal of the state from an industry or sector, partially or fully.

CS Foundation Business Environment and Law Notes