Question

Konark Ltd.’ is an electronic goods manufacturing enterprise situated in Shivpuri, Madhya Pradesh. It is earning a very low revenue in comparison to a competing electronic goods manufacturing enterprise, ‘Nova Ltd.’situated in Mumbai. Both Konark’s and Nova’s operations are affected directly by the investors, customers, competitors and suppliers, which are unique to their respective locations. In addition to this, individual firms of this field are affected indirectly by the factors like the money supply in the economy, composition of the families, the technological changes, etc. 

1. Identify and state the feature of the concept discussed in the above paragraph. 

2. Also, state any four points of importance of this concept.

Answer 1

1. The concept discussed in the given paragraph is Business Environment which consists of specific and general forces. Business Environment includes both specific and general forces. Specific forces affect individual enterprises directly and immediately in their day-to-day working. General forces have impact on all business enterprises and thus may affect an individual firm only indirectly. 

2. Following points highlight the importance of business environment for a business enterprises : 

First mover advantage – Environment provides numerous opportunities to a firm understanding environment, helps a firm to identify the opportunity and to be the first to exploit it to its advantage. It gives an edge to the firm over its competitors.

For example, Maruti Udyog became the leader in the small car market because it was first to identify the preference of middle class population in the context of rising fuel cost.

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.

Tapping useful resources – Environment is a source of various resources for running a business. A business enterprise designs policies to get its inputs like raw-materials, machines, finance, labour, etc. from the environment. It uses such inputs and produces goods and services desired by the customers and then, supplies the output to the environment. 

Coping with changes – In order to effectively cope with rapid changes in technology, fashion and government policies, managers should understand the environment.