L.19 - Business Environment

Where the environment itself, Nourishes the ambition to succeed, There will occur the 'Sanskar', For the youth to be 'Achievement- Motivated'.

UDYAM SHASTRA- Chapter 4, Verse 4

Key Objectives:

Reading this module and doing the students activities will enable the students to:

    • Understand what affects business environment & the need for scanning the environment for survival of the enterprise.

Enterprise Concepts:

Business environment: The atmosphere surrounding business and enterprise organizations is called business environment. Important aspects of business environment are given by the short form STEPaL:


Scanning of environment: By scanning of environment means monitoring of trends in STEPaL i.e. Social, Technological, Economic, Political and Legal aspects of Environment.

1. Dynamism Of STEPaL As the real world situation remains very fluid, business has to keep a close watch on the dynamic STEPal environment. These environmental factors are not fully under control of the entrepreneur, hence the entrepreneur has to learn how best to manage the changes. The environmental forces create what may be given in short form as TRiCCO:

- Threats - Risks - Constraints - Competitiveness - Opportunities If the entrepreneur has the right perception, he/ she can convert risk and constraints into opportunities.

2. Patterns Of Change In Business Environment: Business environment could change based on following:

- It could change based on place to place, country-to-country etc.

- It could change over time in the same place.

Social environment: The social environment largely comprises of:

1. Social Structure i.e. family system, status of women etc.

2. Social Responsibility of business towards the investors, workers, government, customers, society in general etc.

Technological environment: Technology is the application of Science to practical aspects of life. The technological environment influences some of the following:

1. Productivity and competitive strength of a business.

2. Ability of the business to reach newer customers.

3. Meeting new consumer demands.

4. Bringing forth new products and services.

Economic environment: The economic environment largely comprises of:

1. Economic System:

The right to private property, planning, profits, market mechanism, role of Government etc. are aspects dependent on the economic system of a country. Examples of economic systems are capitalist, socialist, mixed system etc.

- Economic Policies: Economic policies cover export policy, industrial policy, pricing policy, labour policy etc.

Political environment: The main aspects of political environment are:

- Constitution of the nation that lays down the ideology of the nation.

- Political System for e.g. India has a democratic system.

- Role of Government: In India, the role of the Government in Business Environment is regulatory and enabling and it is broadly in areas of Regulation, Planning, Providing infrastructure like Railways, Postal System etc.

Legal environment: The legal environment plays a regulatory and promotional role in economic development. Economic interests of different sections of society are often conflicting in nature. Hence to protect the interests of all concerned parties, Government adopts certain legal measures, which form the "Legal Environment". The Monopolies and Restrictive Trade Practices Act, Companies act, Factories act, Income Tax act, Sales Tax act etc are some of the legislation by the Government. Activities:


Instruction To Students

  • Students should read the case study in their group and discuss it.

  • They should then answer the question.

  • After completing the activity, each group should present and share its main discussion points with the rest of the class.

The Business and Enterprise Environment is shown like a cycle wheel that is always moving.

The aspects of STEPal i.e.

- Social

- Technological

- Economic

- Political

- Legal

comprise the rim of this wheel.

Scanning the Environment is shown as the hub of the wheel.

Joining the aspects of STEPaL are the effects of environmental forces represented by TRiCCO i.e.

- Threats

- Risks

- Competitiveness

- Constraints

- Opportunities

The arrows on the sides indicate that the wheel is dynamic and keeps moving continuously i.e. to say the environment keeps changing every time.

Case Study-1

Mallya started a STD telephone booth in his town in a crowded market place in the year 1994. There were many small hotels around the place and hotel guests found Mallya a very friendly person to deal with. There were always long queues in front of his booth, especially in the evenings when the telephone rates were low. Mallya thought of opening two more STD booths in the year 2000. But suddenly he found the queues in front of his booth dwindling. He noticed that increasingly the hotel guests had started owning mobile phones.

“The mobile calls are expensive,” explained a guest,” But they are convenient

because we do not have to wait in a queue. Also our business associates can contact us throughout the day wherever we are”.


1. Identify Business Environment aspect that affected Mallya’s STD booth business?


2. How should Mallya take on the new challenge?


Case Study-2

Infosys Company is a world known software company. The success of Infosys can

be attributed to struggle for excellence, quality, good human resource management, ability to retain customers . An ‘Infosys Foundation’ was established in 1996 in order to promote education and vocational training for rural children. So far Infosys company has donated more than Rs.20 Crores for the upliftment of the poor. This represents fulfilling their social responsibility. ‘Infosys Company’ contributed 1% of its net profit to the foundation but it wants to increase its contribution to 5 % of the net profit.

The key schemes of this foundation are:-

1. Setting up science centers in rural areas

2. Setting up orphanages.

3. Constructing hospital wards, providing medical equipment.

4. A library for every school.

5. Scholarships for Ph.D. students


1. What aspect of Business environment does the above case study deal with?


2. What duty does the company feel they have towards the society?


Case Study-3

After attaining independence, the economy of our country has gone through many highs and lows.

Even though we have reached a creditable stage in our economy, considering the large population, it is nowhere when compared to the international standards.

Though we have a strong private sector, it has been the increasing number of international companies who have taken over business leadership in many important areas.

Hence it is very important that our bright and creative minds should find out ways to improve our economy, through starting self-enterprises. This will also help increase their own standard of living.


1. What aspect of Business Environment does the above case study deal with?


2. How could you contribute to the improvement of the country’s economy?


Case Study-4

J.R.D.Tata, took over the reins of the Tata empire of enterprises when he was just 34 years old. He was fondly called JRD by his people.

In 1946, JRD started TATA Airlines, a passenger airline.

In 1947, the then government approved of a Joint Sector Venture for AIR-INDIA. AIR-INDIA continued to do well under the leadership of JRD.

In 1953, the then political leaders at the helm of affairs of the Government, proposed nationalization of the AIR-INDIA. JRD cooperated wholeheartedly and continued as first chairman of the nationalized air-line and lead it successfully for over 20 years.

Apart from airlines, JRD led India through a glorious period of post-independence industrialization. The Tata group became the largest conglomerate of companies under JRD.

But JRD also felt that the country’s economy was getting stunted by too many government controls. He voiced concern to many a political leaders.

At last in July 1991 , the then Finance Minister of India announced much desired liberalization of economic policies. JRD was happy that there was a whiff of change in the country, when he heard the budget speech of the Finance Minister.


1. What aspect of Business Environment is seen prominently in the events that took place in 1947, 1953 and 1991 in the above case study. ?


2. Why is this aspect important for business and enterprise ?


Case Study-5

Due to the rise in number of road accidents in the city, the Regional Transport Authority (RTO) decided to pass new rules which stated that “All people using two wheelers like scooter and motor-cycles should compulsorily wear helmets. “

Following this rule, the demand for helmets sky-rocketed in the city. This came as a boon for helmet industries who increased their production and also increased their prices, to cash in on the boom.

Some vocational students, who had done their courses in plastic moulding etc. , also realized that there will be an increase in demand for ‘ helmet stands’ which are to be attached to two-wheelers’ to store and lock the helmets when the two-wheeler is parked. These vocational students set up successful enterprises as a result of the new legal provisions of RTO.


1. What aspect of Business Environment affected the ‘helmets’ business? How far was this aspect in the interest of two-wheeler riders??


2. How did vocational students see this as an opportunity?