Business Environment Test - 2

Increased competition may lead efficiency and effectiveness in utilisation of resources. As well as it compelled the manufacturers to reduce their margin of profit. So that they can stay in competition for long period.

Liberalisation refers to end of licence, quota, unnecessary restrictions and controls over industry and trade.

Increase in the tax rate means increase in tax on a specific commodity. Such a tax may raise the price of the commodity to the consumer and reduce the net price received by the producer. Thus being an expense it will raise the cost of production.

Economic environment consists of Gross Domestic Product, Income level at national level and per capita level, profit earning rate, fiscal, monetary and industrial policy of govt etc.

Business environment 

• enables the firms to identify opportunities and getting first mover advantage
• helps to cope with rapid changes
• helps in improving performance

Technological environment includes changes relating to scientific improvement, method of production, use of new equipment and machineries to improve the quality of product etc.

Thus it is an example of technological environment.

Political environment includes political conditions such as type of government in power, attitude of govt towards different groups of societies, policy changes etc. Thus it is an example of political environment.

Privatisation is an economic reform aimed at giving greater role to private sector and limiting the area of public sector in the economy.

Political environment includes political conditions such as general stability and peace in the country and specific attitudes with the elected govt hold towards business.

Political instability will shake the confidence of business people.

The political stability builds up the confidence among business people to invest in long term plans.  Political instability can shake that confidence.