Environmental Factors Text Book Solutions

Dear Class 12 Samacheer Kalvi students, here are the text book solutions for Chapter 19, Environmental Factors in Commerce for your reference.

I. Choose the Correct Answers:

II. Very Short Answer Questions:

1. What is internal environment?

Internal environment refers to those factors within an organisation e.g Policies and programmes, organisational structure, employees, financial and physical resources. These factors can be changed or altered and hence are known as controllable factors.

2. Give the meaning of corporate governance.

Corporate governance is a set of rules and policies which governs a company. It provides a frame work for managing a company and achieving its objectives. It gives guidelines for internal control, performance measurement and corporate disclosure. Corporate governance lays down the rules and responsibilities of the stakeholders of a company primarily the shareholders, the directors and the management.

3. What is GST?

GST is the indirect tax levied on goods and services across the country. It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

4. Expand VUCA.

The future environment of business in this age of rapid technological advancement has been captured aptly in the acronym VUCA – volatility, uncertainty, complexity and ambiguity, developed in the late 80’s by the U.S military.

III. Short Answer Questions:

1. What are the political environment factors? (any 3)

The framework for running a business is given by the political and legal environment. The success of a business lies in its ability to adapt and sustain to political and legal changes. The legislative, executive and judiciary are the three political institutions which directs and influences a business.The major elements of the legal and political environment are

1) The image of the leader and the country in the inter-national arena.
2) Legal framework of business and their degree of flexibility.
3) The constitution of the nation.

2 . Write about any three internal environmental factors of business.

Three major internal factors affecting business decisions are:

1. Vision and objectives: The vision and objectives of a business guides its operations and strategic decisions. Example ‘Amul the taste of India’ Gujarat Co-operative Milk Marketing Federation GCMMF Vision: Liberate our farmers from economic oppression and lead them to prosperity.

2. Human resources: The success of an enterprise is solely dependent on its manpower. Therefore the quality, skill competency, right attitude and commitment of its human resources is essential for the success of an organisation.

3. Company image: The image of an organisation plays an important role in introducing new products, selecting agents and dealers for distribution, forging alliances with suppliers, expanding and entering new markets both domestic and international, raising finance etc.

3. What do you know about Technological environment?

The development in the IT and telecommunications has created a global market. Technology is widely used in conducting market research for understanding the special needs of the customer. Digital and social media are used as a platform for advertising and promoting the products/services. Data-mining and data analytics are used to know the customer better. Technology is used in managing inventory, storing goods in warehouses, in distributing goods and in receiving payment. This dynamic environment also includes the following ;

1) the level of technology available within the country
2) rate of change in technology
3) technology adopted by competitors
4) technological obsolescence

IV. Long Answer Questions:

1. Discuss the role of macro environment of business. (any 5)

Macro environment is the general or overall environment in which the business operates. The success of the business is dependent on its ability to adapt the macro environment, since these are uncontrollable factors. They offer enormous opportunities to business and also poses serious threats to business. The general or remote environment factors are as follows:

1. Economic environment: The business is an integral part of the economic system prevalent in a nation. The multiple variables in the macro environment system which has a bearing on a business include the nature of economy, the nature of economic system, the economic policies of a nation, Economic indices, development of financial market and economic structure.

2. Socio-Cultural environment – Social environment refers to the sum total of factors of the society in which the business is located. Social and cultural environment of society affects the business. It is dynamic and includes the behaviour of individuals, the role and importance of family, customs, traditions, beliefs and values, religion and languages, ethical values, literacy level, and the social attitudes of the people of the society.

3. Political and Legal environment – The framework for running a business is given by the political and legal environment. The success of a business lies in its ability to adapt and sustain to political and legal changes. The legislative, executive and judiciary are the three political institutions which directs and influences a business. The major elements of the legal and political environment are Political stability, Political organization, the image of the leader and the country, legal framework of business, the constitution of the nation and the foreign policy of the country.

4. Geo-physical environment – The natural, geographical and ecological factors have a bearing on the business. These are the availability of natural resources, the weather and climatic conditions, topographical factors, ecological factors, location of certain industries and  availability of natural harbours and port facilities for transporting goods.

5. Technological environment – The development in IT and telecommunications has created a global market. Technology is widely used in conducting market research for understanding the special needs of the customer. Digital and social media are used as a platform for advertising and promoting the products/services. Data-mining and data analytics are used to know the customer better. Technology is used in managing inventory, storing goods in warehouses, in distributing goods and in receiving payment. This dynamic environment also includes the following ;

1) the level of technology available within the country
2) rate of change in technology
3) technology adopted by competitors
4) technological obsolescence.

2. Explain the micro environmental factors of business. (any 5)

Micro environmental factors refers to those factors which are in the immediate environment of a business affecting its performance. These include the following:

Financiers: The financiers of a business which includes the debenture holders and financial institutions play a significant part in the running of a business. Their financial capability, policies strategies, attitude towards risk and ability to give non–financial assistance are all important to a business.

Suppliers: In any organisation the suppliers of raw materials and other inputs play a very vital role. Timely procurement of materials from suppliers enables continuity in production and reduces the cost of maintaining stock/inventory. Organisations generally obtain supplies from a panel of suppliers instead of relying on a single source. Organisations have realised the importance of nurturing and maintaining good relationship with the suppliers.

Public: This refers to any group like media group, citizen action group and local public which has an impact on the business. The public group has the ability to make or mar a business. Many companies had to face closure due to actions by local public.

Customers: The aim of any business is to satisfy the needs of its customers. The customer is the king and the fulcrum around which the business revolves. Hence it is essential for any business to understand the needs of its customers like individuals, retailers, wholesalers, industries and government sector. Customer relationship management aims at creating and sustaining cordial relations with customers.

Competitors: All organisations face competition at all levels local, national and global. Competitors may be for the same product or for similar products. It is important for a business to understand its competitors and modify their business strategies in the face of competition.