Business Environment
What this domain tests
Business environment dimensions, micro versus macro, SWOT, and Indian policy shifts such as liberalisation and GST.
Core rules
- Business environment is the sum of external factors affecting business; it is dynamic, complex and uncertain.
- Micro environment: customers, competitors, suppliers, intermediaries and the public. Macro environment: economic, social, technological, political-legal and natural.
- SWOT: strengths and weaknesses are internal; opportunities and threats are external.
- The 1991 liberalisation reduced licensing and opened sectors; GST in 2017 unified indirect taxes; Make in India targets manufacturing.
Worked example
A small ayurvedic soap maker faces a multinational entrant. Strengths: traditional formula and local trust. Weaknesses: weak distribution and a small advertising budget. Opportunities: the wellness trend and e-commerce. Threats: a price war and big-brand shelf space. Reasoning: pair each internal factor with an external one, for example using e-commerce (opportunity) to offset weak distribution (weakness), rather than merely listing items.
Traps that cost marks
- Treating strengths as opportunities; SWOT categories are not interchangeable.
- Calling all external factors macro; customers and competitors are micro.
- Confusing liberalisation with privatisation.
- Writing generic statements without naming environment dimensions.