What is included in ‘Political Environment of business? State.
Political environment includes political conditions such as general stability and peace in the country and the attitude of elected government towards business.
State any five impacts of government policy changes on business and industry.
1) Market Catalyst: The government can implement a policy that changes the social behaviour in the business environment. For example, the government can levy taxes on the use of carbon-based fuels and grant subsidies for businesses that use renewable energy. Similarly, tax and duty exemptions on a particular sector trigger investment in it and may generate growth.
2) Political Stability: Government policy will always depend on the political culture of the moment. A stable political system can make business-friendly decisions that promote local businesses and attract foreign investors. Unstable systems present challenges that has a negative affect on the business environment.
3) Government Spending: Governments get money to spend from taxation. Increased spending requires increases in taxes or borrowing. Any tax increase will discourage investment, especially among entrepreneurs, who take the risks of starting and managing businesses.
4) Interest Rates: Government policy can influence interest rates, a rise in which increases the cost of borrowing in the business community. Higher rates also lead to decreased consumer spending. Lower interest rates attract investment as businesses increase production.
5) Regulations: Trade regulations, and the requirements for permits or licenses have effects on business. Businesses might spend a lot of money and time to comply with regulations that ultimately prove to be ineffective and unnecessary. Fair and effective regulations, however, promote business growth.
Explain how does the understanding of business environment help the management in the following:
(a) Tapping useful resources; and
(b) Coping with rapid changes
(A) Tapping useful resources: Environment is the source of all resources a business needs for its operation. It takes natural resources, human resource and financial resource and convert them to goods and services to customers, make payment of taxes to government, return on financial investment to investors and so on. As an organisation is completely dependent on the resources from environment, a manager should have a good understanding about business environment.
(B) Coping with rapid changes: Business environment is increasingly dynamic where changes are taking place in a fast pace. Business, Social, political, economic and technological environment is changing in such a pace that managers must understand and examine the environment thoroughly and develop suitable course of action.
Why is the understanding of business environment important for managers? Explain with the help of any four points.
Understanding of business environment is important for managers because,
(i) It helps the firm to identify opportunities and get the first mover advantage: The ability to identifying the external opportunities early and to make the first move, makes an organisation the market leader. Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors and become the market follower.
(ii) It helps the firm to identify threats and early warning signals: Business environment is prone to numerous threats. Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.
(iii) It helps in tapping useful resources: Environment is the source of all resources a business needs for its operation. It takes natural resources, human resource and financial resource and convert them to goods and services to customers, make payment of taxes to government, return on financial investment to investors and so on. As an organisation is completely dependent on the resources from environment, a manager should have a good understanding about business environment.
(iv) It helps in assisting in planning and policy formulation: Business environment is very dynamic and is a source of both opportunities and threats. Only with a clear understanding of the various aspects of the environment, a manager can make plans for future and formulate policies.
An environmental conscious multinational company “AXN Ltd.” follows certain well-defined business principles that result to minimize the employee turnover. Following are some of the important environmental factors followed by ‘AXN Ltd.’
(1) Honour the law of every country in which it operates.
(2) Respect the culture and customs of all nations.
(3) Provide clean and safe products to enhance the quality of life throughout the world.
(4) Develop a culture in the company that enhances individual creativity and team work while honouring mutual trust and respect between management and labour.
From the above:
(i) identify and state any one general principle of management and any one dimension of business environment.
(ii) also identify any two values which the above guiding principles and environmental factors are conveying to the society.
(i) The general principles of management that can be identified is the principle of initiative and principle of Espirit De Corps (write anyone). According to Fayol, Workers should be encouraged to develop and carry out their plans for improvements. Here the company is enhancing individual creativity and thus encouraging initiative. In the same way through teamwork and by honouring mutual trust and respect, they are following the principle of Espirit De Corps.
The dimensions of business environment are legal environment, social environment and cultural environment.
(ii) Values, conveying are:
(a) Respect for law
(b) Cleanliness and hygiene
(c) Raising standard of living and