Q.

No Unit - II - Part - B – Question

(i) How does knowledge of the business environment benefit the
1 entrepreneur? ENTREPRENEURSHIP DEVELOPMENT
(8 marks) UNIT-II

Failure to understand the environmental factors for business shall create number of
problems, which in fact are difficult to solve. It will reduce the profit margin and
will make the opportunities for expansion to slip. But a proper appreciation of the
environmental factors will bring many benefits. They are as follows:

1. Successful Conduct of Business

The business executive can successfully conduct the business operation. Since
chances for losses are minimized, the firm can withstand in the long run, widen its
financial base and face competition more effectively. All these finally lead the
business venture to a grand success.

2. Opening of New Avenues

Environment opens fresh avenues for the expansion of new entrepreneurial
operations. When the business climate is favorable, new ideas, schemes and
ventures may be put into action. The firm can utilize its resources advantageously
and derive the maximum benefits.

3. Dynamism in Approach
Business enterprise is essentially a dynamic endeavor. Hence the business executive
should be a dynamic personality. Acquisition of knowledge about the changing
environment will keep the businessmen always alert and dynamic in his approach.
His dynamic approach in turn will help the firm to avoid ecological stresses and to
maintain harmony with the environment.

4. Chances for Growth

By identifying itself with the changing situations and environment, the firm can gain
the popular support and win the confidence of the consumers and others. This
popular support will produce many chances for growth and development of the firm.

5. Control over Environment

We all know that environment exercises vital control over the scope and
performance of a business firm. A proper understanding of the nature, character and
influence of the environment over the activities of the firm and its continued efforts
to identify with the changing economic conditions will at one stage enable the
business firm to exercise control over the environment itself. This will result in a
smooth and successful running of the venture in the short run as well as in the long
run.

ii) Explain the social and legal environment and their impact on business(5
marks)

Social environment
The country’s social environment affects the functioning of the business since
it determines the value system of the society. Sociological factors establish the
culture of work, labor mobility, work groups1 etc, hence, business operation of an
enterprise. These factors include cost structure, customs and conventions, cultural
heritage, peoples’ view towards wealth and income and scientific methods, seniority
respect, mobility of labor (Shaikh 2010). All these factors have big impact on the