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business environment


Today we are going to discuss the new chapter of business studies CBSE class 12 that is Business Environment. With videos, Notes, Case Studies and more

Also, we are going to give you study notes, video lectures, and also PDF of handly lecture notes. Firstly, I want to share with you what are all the topics which we are going to cover in this article. Also, you can watch all the chapters videos on my YouTube channel by clicking here.

business environment
business environment

In this chapter, we will discuss about the following topics:

  1. What is the business environment?
  2. Features of Business Environment
  3. Importance of Business Environment
  4. Features Of New Economic Policy,1991
  5. Liberalisation
  6. Privatisation
  7. Globalisation
  8. Impact of government policy changes on business and industry

What is a Business Environment?

“Business environment means the totality of all individual, institution, or forces that are outside the control of business enterprise but have a major impact on its performance.”

Business environment has two components:

1_ Internal management- It can be controlled.

2_External management- It cannot be controlled.

External environment comprises following:

(I)_ Micro/ Specific force

  • Customers
  • Competitors
  • Suppliers

(II)_Macro/ General force

  • Political
  • Social
  • Legal
  • Technological
  • Economical

Features of Business Environment

1_Totality of external forces: It is the sum of individual institutions of forces that impact any business in two ways- either positively or negatively.

2_Specific or general forces: Specific forces (customers, competitors, and suppliers)are those forces that impact any business directly and general forces (political, social, technological, legal, and economical) are those forces that impact any business indirectly.

3_Inter Relatedness: It means that external forces are inter related to each other.

4_ Uncertainity: It means business is uncertain because demands and trends keeps changing.

5_ Complexity: Business is complex and it will be difficult in understanding unless its external forces got divided.

6_Relativity: It says that business environment differs from country to country and religion to religion.

7_Dynamic nature: It means that business environment factors keep changing So, the business environment should be scanned on a regular basis.

Importance of Business Environment

1_It enables firms to identify opportunity and getting the first mover advantage.

2_It enables firms to identify threats and early warning signals.

3_It helps in tapping/ collecting useful resources.

4_It helps in coping with rapid changes.

5_It helps in assisting in planning and policy formulation.

6_It helps in improving performance.

Features Of New Economic Policy,1991

After independence, India decided to follow a mixed economy among capitalism, socialism, and mixed economy.

Capitalism: Types of economy where powers lies I private sector.

Socialism: Types of economy where power lies in the hands of government.

Mixed Economy: Types of the economy where powers are distributed among the hands of both private and government.

Components of new economic policy are following :





“It is an economic policy to remove unnecessary restrictions and government regulations on business.”

Steps taken by government :

1_Abolishing licensing requirements in most of the industries except a short list.

2_Freedom in deciding the scale of the business activity.

3_Removal of restrictions on the movement of goods and services.

4_Freedom in fixing the prices of goods and services.

5_Reduction in tax rates and lifting of unnecessary control.

6_Simplifying procedure of import and export.


“It means increasing the role of private sector and decreasing the role of pubkic sector in business.”

After policy (economic policy,1991), government adopted policy of disinvestment.

Disinvestment means transferring public sector into private sector.

To revive or close the public sectors that are in loss, the government set up a Board of Industrial and Financial Reconstruction(BFIR).


“It means the integration of various economy of the world to facilitate the free flow of trade, capital, people, and technology.”

Government did following things in globalisation:

  • Rationalization of tariff structure.
  • Allocation of export duty and reduction of import duty.

Import- It is the process of buying goods from other countries.

Export- It is the process of selling goods to other countries.

Impact of government policy changes on business and industry

1_Increasing competition: Because of globalisation, many multinational companies came to India which leads to tough competition in the Indian Market.

2_More demanding customers: Customers got many options. So, their choices kept increasing.

3_Rapidly changing technological environment: Because of competition between Indian and foreign companies, technologies kept changing rapidly.

4_Necessity for change: Every business needs to change its strategy according to the business environment.

5_Need for developing human resources: Companies need to train their workers and increase their skills and expertise.

6_Loss of budgeting support to the public sector: The government said that the public sector also needs to work effectively and efficiently otherwise they will need to face disinvestment.

7_Market orientation: Prior policy, Indian companies used to follow selling concept and after policy they started following research and wants of customers.

So, Guys, we have finally over with this chapter.

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Business Vidya

Hello, my name is KUNAL LONHARE. I am an entrepreneur based in india. This is a blog and I am the founder of it, where I post how can a person acquire Good marks In academics without wasting any money for tuition fees.

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