WORK SHEET – Business Environment

Instruction: Write answers of the questions given in this word file & send the completed worksheet when done.

Q1) Do you think that the present economic environment is favourable to business? Explain with the help of
examples.

Ans. The Coronavirus pandemic has completely eroded business world over with all industries struggling
amidst a global lockdown. Since the beginning of 2020, the spread of coronavirus has completely
destroyed the business ecosystem world over. Businesses world over have lost trillions of dollars and
one the worst global recessions have hit the world. Coronavirus Impact on Business Sectors
The coronavirus has forced governments to ensure all people are locked down and hence all businesses
have been impacted. Some of the biggest impacted businesses are tourism, airline industry, consumer
electronics, apparel, lifestyle, automobile and more.
1. Tourism & Airlines
Restrictions on global travel and quarantines mean millions of travelers have cancelled their plans
indefinitely. This has led to billions of dollars of business stalled. Places of tourist interest like Eiffel
Tower in Paris, Taj Mahal in India, Opera House in Sydney etc have all been shut down. This ripple
effect of no tourists has destroyed tourism.
2. Manufacturing
With China being the global leader in manufacturing, the impact of a lockdown has severely affected
business. Commodity prices have come down drastically. This is a severe business impact because of
the coronavirus.
3. Automobile, Consumer goods, Luxury goods
With a global recession inevitable, consumers all across the world have stopped purchases of any
product or service which is non-essential. The businesses in automobile, luxury, consumer goods etc
are impacted because of coronavirus. Shipments of laptop, mobile phones, smartwatches etc have
stopped completely.
4. Education
With people being locked down, schools and universities have been shut down which had led to the
current education system to collapse.
5. Hospitality, Entertainment
Coronavirus has impacted the hotel, restaurant, movie theatres business across the world to prevent
further spread of the virus. This pandemic has left thousands of hotels and millions of food joints to be
closed indefinitely.

Q2) Can you say that “Business Environment is Dynamic” if it is yes explain with examples. If not give
reasons.

Yes. Business environment is dynamic as it keeps on changing (uncertainty). For example, change in
government policies, change in taste and choice of the consumer, change in technology,etc. Such changes could
be triggered by internal or external factors and it can affect the growth,even the survival of business. That is
why business environment is called dynamic in nature. Businesses do not operate in a vacuum but rather in a
dynamic environment that has a direct influence on how they operate and whether they will achieve their
objectives. This external business environment is composed of numerous outside organizations and forces that
we can group into seven key subenvironments, as illustrates: economic, political and legal, demographic, social,
competitive, global, and technological. Each of these sectors creates a unique set of challenges and
opportunities for businesses.

Business owners and managers have a great deal of control over the internal environment of business, which
covers day-to-day decisions. They choose the supplies they purchase, which employees they hire, the products
they sell, and where they sell those products. They use their skills and resources to create goods and services
that will satisfy existing and prospective customers. However, the external environmental conditions that affect
a business are generally beyond the control of management and change constantly. To compete successfully,
business owners and managers must continuously study the environment and adapt their businesses accordingly.
Q3) Explain main components of economic environment.

Ans. Economic environment means the factors that affects economic conditions of the country.
Economic Environment includes Gross Domestic Product, Income level at national level and per capita
level, Profit earning rate, Productivity and Employment rate, Industrial, monetary and fiscal policy of
the government etc.

Components of Economic Environment

1. Role of Private and Public sector matters a lot in order to get investment. Because when the investors invest
money, they see industry growth and the role of private sectors in the economy.
2. Rate of growth of GDP, GNP, and Per Capita Income, When the gross domestic product of the
economy increases, it brings investment in the economy and show the growth of the economy to the
investors.
3. Transport and Communication System helps to increase the growth of the economy. When the
transport system will be good, it will increase the finished goods. When the communication system will
effective, it will connect more people and will give them opportunities to do more business.
4. International Debt also matters in the growth of the economy. if the economy has more international
debt, then the investors afraid to invest in the economy and vice-versa.

Q4) With the help of suitable examples explain how changes in micro and macro business environment affect
business decisions?

Ans. Every business is affected by a myriad of factors. In other words, an organization as such can never
exist and operate “in a vacuum”. It is a part of a larger entity known as the business environment. In broad
terms, this environment can be divided into two categories. The first one is the micro-environment. This
category influences the functionality of a particular business itself. The latter one is the macro-
environment which affects the operation of all existing business entities out there.
The two categories may be different, but both are essential to understand in order to truly see your
business in its full context. You have to be knowledgeable about the business environment in order to be
able to track and comprehend how various factors affect your company.
What is the micro-environment?
The micro-environment is basically the environment that has a direct impact on your business. It is related
to the particular area where your company operates and can directly affect all of your business processes.
In other words, it consists of all the factors that affect particularly your business. They have the ability to
influence your daily proceedings and general performance of the company. Still, the effect that they have
is not a long-lasting one.
The micro-environment includes customers, suppliers, resellers, competitors, and the general public.
What is the macro-environment?
The macro-environment is more general - it is the environment in the economy itself. It has an effect on
how all business groups operate, perform, make decisions, and form strategies simultaneously. It is quite
dynamic, which means that a business has to constantly track its changes. It consists of external factors
that the company itself doesn’t control but is certainly affected by.
The factors that make up the macro-environment are economic factors, demographic forces, technological
factors, natural and physical forces, political and legal forces, and social and cultural forces.

Both micro and macro factors have a strong influence on how successful your business is. Every decision
that you make needs to take these two environments into consideration. Your marketing strategies have to
be based on them as well, if you truly want them to be lucrative, and retain a reputable position on the
market.