Business Environment Class 12 Notes: CBSE 12th Business Studies Chapter 3, Download PDF

Business Environment Class 12 Notes: This article hands out complete and detailed revision notes for CBSE Class 12 Business Studies Chapter 3, Business Environment. These business environment class 12 notes are available for PDF download for free. Class 12 Business Studies chapter 3 notes have been prepared by our subject matter experts, in accordance with the updated and revised CBSE Syllabus and guidelines.

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Related:

CBSE Class 12 Business Studies MCQs

CBSE Class 12 Business Studies Mind Maps

NCERT Solutions for Class 12 Business Studies 2023-2024

Business Environment Class 12 Revision Notes

Meaning of Business Environment

The term business environment means the totality of all individuals, institutions, and other forces that are outside a business but that potentially affect its performance. The economic, social, political, technological, and other forces that operate outside a business enterprise are part of its environment.

 Features of Business Environment

• It is the sum total of all the external factors that affect the environment of a business
• It is a combination of both specific forces such as investors, customers, competitors, and suppliers, and general forces such as social, political, legal, and technological conditions
• Different elements or parts of the business environment are closely interrelated.
• It is dynamic in that it keeps on changing
• The business environment is largely uncertain as it is very difficult to predict future happenings, especially when environmental changes are taking place too frequently
• Since business environment consists of numerous interrelated and dynamic conditions or forces that arise from different sources, it becomes difficult to comprehend at once what exactly constitutes a given environment.
• Business environment is a relative concept since it differs from country to country and even region to region.

Importance of Business Environment

• It enables the firm to identify opportunities and get the first mover advantage
• It helps the firm identify threats and early warning signals
• It helps in tapping useful resources
• It helps in coping with rapid changes
• It helps in assisting in planning and policy formulation
• It helps in improving performance

Dimensions of Business Environment

• Economic Environment- Interest rates, inflation rates, changes in disposable income of people, stock market indices, and the value of the rupee are some of the economic factors that can affect management practices in a business enterprise. Short and long-term interest rates significantly affect the demand for products and services.
• Social Environment  The social environment of business includes social forces like customs and traditions, values, social trends, society’s expectations from business, etc. Traditions define social practices that have lasted for decades or even centuries.
• Technological Environment- The technological environment includes forces relating to scientific improvements and innovations that provide new ways of producing goods and services and new methods and techniques of operating a business.
• Political Environment- The political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business. Political stability builds up confidence among business people to invest in long-term projects for the growth of the economy.
• Legal Environment-Legal environment includes various legislations passed by the Government administrative orders issued by government authorities, court judgments as well as the decisions rendered by various commissions and agencies at every level of the government— center, state, or local. Adequate knowledge of rules and regulations framed by the Government is a prerequisite for better business performance.

Factors Affecting Economic Environment in India

• Stage of economic development of the country
• The economic structure in the form of a mixed economy which recognizes the role of both public and private sectors
• Economic policies of the Government, including industrial, monetary, and fiscal policies
• Economic planning, including five-year plans, annual budgets, and so on
• Economic indices, like national income, distribution of income, rate and growth of GNP, per capita income, disposal of personal income, rate of savings and investments, value of exports and imports, balance of payments, and so on.
• Infrastructural factors, such as financial institutions, banks, modes of transportation communication facilities, and so on.

Liberalisation

The economic reforms that were introduced were aimed at liberalizing the Indian business and industry from all unnecessary controls and restrictions. They signaled the end of the licence-permit-quota Raj. The following changes were brought into the country with the liberalization of the Indian economy:

• Abolishment of licensing requirements in most industries except a shortlist
• freedom in deciding the scale of business activities i.e., no restrictions on expansion or contraction of business activities
• removal of restrictions on the movement of goods and services
• freedom in fixing the prices of goods and services
• reduction in tax rates and lifting of unnecessary controls over the economy
• simplifying procedures for imports and exports
• making it easier to attract foreign capital and technology to India

Privatisation

The new set of economic reforms aimed at giving a greater role to the private sector in the nation-building process and a reduced role to the public sector. This was a reversal of the development strategy pursued so far by Indian planners. If there is dilution of Government ownership beyond 51 percent, it would result in a transfer of ownership and management of the enterprise to the private sector.

Globalisation

Globalisation means the integration of the various economies of the world leading towards the emergence of a cohesive global economy. The new economic reforms aimed at trade liberalization were directed towards import liberalization, export promotion through rationalization of the tariff structure, and reforms with respect to foreign exchange so that the country does not remain isolated from the rest of the world.

Demonetization

The Government of India made an announcement on November 8, 2016, with profound implications for the Indian economy. The two largest denomination notes, 500 `and 1,000, were ‘demonetized’ with immediate effect, ceasing to be legal tender except for a few specified purposes such as paying the utility bill. The aim of demonetization was to curb corruption, counterfeiting the use of high denomination notes for illegal activities; and especially the accumulation of ‘black money’ generated by income that has not been declared to the tax authorities.

Features of Demonetization

• Demonetization is viewed as a tax administration measure
• It is interpreted as a shift on the part of the government indicating that tax evasion will no longer be tolerated or accepted.
• Demonetization also led to tax administration channeling savings into the formal financial system.
• Another feature of demonetization is to create a less-cash or cash-lite economy, i.e., channeling more savings through the formal financial system and improving tax compliance.

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Also Read:

CBSE Class 12 Business Studies Syllabus 2023-2024

CBSE Class 12 Business Studies Sample Paper 2023-2024