Summary

Here is a summary of this NCERT chapter (Chapter 3 — Business Environment) from the CBSE Class 12 Business Studies textbook:

• Meaning of business environment: The business environment is the totality of all individuals, institutions and other forces that are outside a business but that potentially affect its performance.
• Features of business environment: It can be characterised in terms of (a) totality of external forces, (b) specific and general forces, (c) inter-relatedness, (d) dynamic nature, (e) uncertainty, (f) complexity and (g) relativity.
• Importance of business environment: Understanding it is important for (i) enabling the identification of opportunities and getting the first-mover advantage, (ii) helping in the identification of threats and early warning signals, (iii) coping with rapid changes, (iv) assisting in planning and policy formulation, and (v) improving performance.
• Elements (dimensions) of business environment: The business environment consists of five important dimensions — economic, social, technological, political and legal.
  • Economic environment includes factors such as interest rates, inflation rates, changes in the disposable income of people, stock-market indices and the value of the rupee.
  • Social environment includes social forces like customs and traditions, values, social trends and society's expectations from business.
  • Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
  • Political environment includes political conditions such as the general stability and peace in the country and the specific attitudes that elected government representatives hold towards business.
  • Legal environment includes the various legislations passed by the government, administrative orders issued by government authorities, court judgments and the decisions rendered by various commissions and agencies at every level of government — centre, state or local.
• Economic environment in India: It consists of various macro-level factors related to the means of production and distribution of wealth that affect business and industry. It has been changing steadily since Independence, mainly due to government policies. To solve the country's economic problems at Independence, the government relied on state control of key industries, central planning and a reduced role for the private sector; these steps gave mixed results until, in 1991, the economy faced a serious foreign-exchange crisis, a high government deficit and rising prices despite bumper crops. …