Question

Naman and Govind after finishing their graduation under vocational stream decided to start their own travel agency which will book Rail Tickets and Air Tickets on commission ‘ basis. They also thought of providing tickets within ten minutes through the use of internet. 

They discussed the idea with their Professor Mr. Mehta who liked the idea and suggested them to first analyse the business environment which consists of investors, competitors and other forces like social, political etc, that may affect their business directly or indirectly. He further told them about the technological improvements and shifts in consumer preferences that were taking place and hence they should be aware of the environmental trends and changes which may hinder their business performance. He emphasised on making plans keeping in mind the threat posed by the competitors, so that they can deal with the situation effectively. This alignment of business operations with the business environment will result in better performance. 

1. Identify and state the component of business environment highlighted in the above para. 

2. State any two features of business environment as discussed by Professor Mehta with Naman and Govind. 

3. Also state two points of importance of business environment as stated by Professor Mehta in the above situation.

Answer 1

(1) Technological environment is the component of business environment highlighted in the given para. 

Technological environment – Technology is an important resource used by the business enterprises. Technology consists of those processes by which the organisation transforms inputs (raw materials, energy, capital etc.) into output (goods and services). Thus, the technological environment includes those scientific and technological advancements that affect organisation’s transformation process. Technological environment facilitates the organisation’s efficiency and effectiveness. 

 Following are examples of technological environment: 

(i). Use of robots in production process. 

(ii). Use of computer controlled machines and equipments. 

(iii). Computerised information technology.

 The change in technology has greater impact on many well-established practices of management. 

(2) Following are the features of business environment: 

• Dynamic nature – Business environment is dynamic in the sense that it keeps on changing very fast. For example, entry of new competitors in the market, change in the tastes and preferences of the consumers, improvement in technology etc. are ever changing. 
• Specific and general forces – Business environment includes both specific forces (such as investors, customers, competitors, suppliers) and general forces (such as social, political and technological conditions). 

(3) (a) Warning signal – A change in environment may be the source of many threats to a firm. A firm can anticipate the impact of such a change and prepare itself to meet such threat by adopting various measures. For example, if a firm finds that a new firm is entering into the market, it can meet such a threat by improving the quality of the product or engaging in aggressive advertising. 

(b) Planning and policy formulation – The knowledge of change in the environment helps in the formulation of plans and policies. Understanding the environment helps the management to identify opportunities and threats affecting the business