This GSEB Class 12 Organization of Commerce and Management Notes Chapter 12 Business Environment Posting covers all the important topics and concepts as mentioned in the chapter.
Business Environment Class 12 GSEB Notes
Meaning of Business Environment:
Many surrounding factors affect business. The group of such factors is termed as business environment.
Economic, social, cultural, technological, political, legal, etc. factors are included in Business environment. Over and above this certain groups like; consumers, employees, competitors, suppliers of goods, etc. are also included in business environment.
In short, business environment is a group of such factors which continuously create new opportunities and new challenges for business.
Importance of Business Environment:
- Advantage of Early Entry
- Sensitivity of the Management
- Grab Opportunities,
- Identifying Dangers
- Helpful in Policy Decisions
- Continuous Study.
Factors Affecting Business Environment:
1. Internal Factors:
- Business Objectives,
- Managerial Systems, etc.
2. External Factors:
- Economic Factors:
- Economic – Systems
- Degree of Economic Development
- Sectoral Growth and Intersectoral Combinations
- National Income and Per Capita Income,
- Distribution of National Income,
- Monetary Policy
- Fiscal Policy and
- Other Factors.
- Social Factors
- Cultural Factors
- Technological Factors
- Political Factors
- Legal Factors
Liberalization, Privatization and Globalization:
In India after independence mixed economic system was accepted. The changes were made in the system to suit varying situations. Still however as required results were not seen after July, 1991, in Indian Economy, it started the process of Liberalization, Globalization and Privatization.
Meaning of Liberalization:
Liberalization is a movement of business and trade from a controlled environment to an open and free system.
Effects of Liberalization:
- By removing barrier to foreign direct investment in Indian Industries, maximum limit for foreign investors and businessmen has been gradually increased.
- In the field of share market, the procedure of purchase * and sale of shares have been made completely transparent by taking various steps.
- The Government started taking steps ^to make tax structure more simple and transparent.
- Indian currency has been given new symbol of •?’.
- ‘License Raj’ has almost been removed from India.
- Collective efforts are being made to increase the Exports of India.
- The changes were incorporated in Foreign Exchange Statute.
- Various changes have been made in Monopolies and Restrictive Trade Practices Act (MRTP Act) introducing number of relaxations in the Act.
- Reserve Bank of India has given freedom to various banks to decide the deposit and lending rate of interest, subject to certain conditions.
- The imports of goods and services have become easier and payment of foreign exchange has become simple.
Meaning of Privatization:
Privatization refers to transfer of control and management of public sector enterprise to private sector or in other words, the process of passing on the ownership and management of public sector unit to private firms.
It was expected in post independence period that to achieve certain objectives of economy, public sector will play very important role. In the year after 1991 as a part of economic policy privatization was accepted. This changed the role of public sector units. Certain public sector units were closed; in its equity general public was offered participation.
Positive Effects of Privatization:
- Rise in efficiency
- Absence of political interference,
- Qualitative goods and services
- Systematic Marketing
- Use of Ultra-modern activity,
- Hierarchical set up for accountability,
- Creation of competitive environment,
- Advantage of Research and Development,
- Advantage of modernization and innovation,
- Maximum utilization of means of production and
- Creation of Infrastructural facility.
Negative Effects of Privatization:
- Exploitation of employees
- Misuse of power by top management
- Unequal distribution of income and wealth
- Absence of job security for employees
- Priority to profit and
- Consumer exploitation, etc.
In spite of negative effects of privatization, in present time privatization is given more importance by Government.
Meaning of Globalization:
When any country permits foreign companies to do business in their domestic economy and allows domestic companies to do business globally, it is known as globalization.
In previous time every country used to form a policy to protect its trade and industry from foreign competition; In the beginning the companies of developed countries started doing business in other countries and developed countries granted permission to other countries’ companies to do business in their country. Hence, globalization started.
To develop business and industry of the entire world, formation of World Trade Organization was formed. As a part of policy of globalization India has accepted GATT -General Agreement for Trade and Tariff. The entire world turned to a global village.
Positive Effects of Globalization:
- Large Scale Production
- Increased Competition
- Availability of improvised, economical technology
- Reduction in price of the product 202 or service
- Opportunity for employment generation
- Creation of infrastructural facility in the country
- Increase in spread of education
- Setting up of new industry becoming easy
- The whole world has become global village and
- Freedom from political bureaucracy and red tapism.
Negative Effects of Globalization:
- Arrangement for market set up becomes difficult and costly
- Rise in the production of luxurious goods and services
- New problems caused by change in human mentality
- Rise in inequality of distribution of income and wealth
- Effect of economic condition of one country transferring to other countries
- Breach of ethical values
- Large scale units are at an advantage
- Spread of education is lesser than the spread of development
- Lower loyalty of multinational companies to their host country as compared to their home country and
- Subtle arrangement with political parties for suitable monetary policy by internationally renowned companies.