Top 28 Business Environment Interview Questions You Must Prepare 08.Dec.2023

Consumerism is the movement seeking to protect and inform consumers by requiring such practices as honest packaging and advertising, product guarantees and improved safety standards. Rights of the consumer are :

  1. Right against exploitation by unfair trade practices.
  2. Right to protection of health and safety from the goods and services the consumers buy or are offered free.


The external factors are by and large, beyond the control of a company. The external or environmental factors such as the economic factors, socio-cultural factors, government and legal factors, demographic factors, geo-physical factors, etc., influence the process of business enterprises.

The micro environment consists of the factors in the company’s immediate environment that affects the performance of the company. These include the suppliers, marketing intermediaries, competitors, customers and the public.

The internal factors are generally regarded as controllable factors because the company has control over these factors; it can alter or modify such factors as its personnel, physical facilities, organization and functional me, such as marketing mix, to suit the environment.

Environmental analysis is defined as “the process by which strategists monitor the economic, governmental/legal, market/competitive, supplier/technological, geographic, and social settings to determine opportunities and threats to their firms.

The totality of all individuals, institutions and other forces that are outside a business enterprise but that may affect its functioning and performance.

  1. Political idedogy & practices of the ruling pa1ty
  2. Nature of relationship of our country with foreign countries


Socialism is generally understood as an economic system where the me of production are either owned or controlled by the state and where the resource allocation, investment pattern, consumption, income distribution, etc. are directed and regulated by the state.

Demarketing refers to the process of cutting consumer demand for a product back to level that can be supplied by the firm. Some oil companies—the Indian Oil Corporation, for example—have publicized tips on how to cut oil consumption.

When the fertilizer price shot up following the oil crisis, some fertilizer companies appealed to the farmers to use fertilizers only for important and remunerative crops. The importance of natural manure like compost as a substitute for chemical fertilizers was also emphasized.

There are certain environmental forces which drive companies towards adopting the marketing concept. These forces tend to make the survival of the companies otherwise difficult. Important among these forces are:

  1. growth of consumerisms and environmentalism;
  2. demand for social justice;
  3. government regulations; and
  4. changing competitive environment.

Well-organized and dynamic consumerism may be expected to produce the following results:

  1. Producers and sellers will not take the consumer for granted.
  2. Consumerism will provide feedback for the business.
  3. Producers will be able to enlist the support of consumers to minimise the imperfections on the distribution front.
  4. Consumerism will make the government more responsive to consumer interests, prompt it to take necessary statutory measures, and make the required institutional arrangements to safeguard consumer rights.


Market socialism is characterized primarily by the public ownership of the me of production. Decisions with reference to the allocation of resources are made both collectively and by individual producing and consuming units. Prices and markets are the primary mechanisms used to facilitate the exchange of products. The Yugoslav economy contains many of the elements of market socialism.

It enables the firm to identify opportunities & getting the first movers advantages

The economic conditions of a country—for example, the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets, etc—are among the very important determinants of business strategies.

“Environmental diagnosis consists of managerial decisions made by analysing the significance of the data (opportunities and threats) of the environmental analysis.”

Unregulated capitalism suffers from certain drawbacks:

  1. As investment allocation is guided by the profitability criterion, sufficient investment may not take place in areas where profitability is low, however essential they may be.
  2. The right to property and freedom of enterprise are likely to lead to concentration of income and wealth and the widening of interpersonal income disparities.
  3. Though, according to the theory, there will be free competition, in the real world the large firms are likely to gain an advantageous position which would eventually lead to monopolies.


Business environment refers to the totality of all the factors which are external and out of control of an individual, business enterprise and their management. The most important factors are socio-economic, technological, suppliers, competitors and government.

The economic conditions such as, the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets etc., all mean economic environment.

At the time of purchase customers get a wider choice of products and services They can compare quality of the products.

The socio-cultural fabric is an important environmental factor that should be analysed while formulating business strategies. The cost of ignoring the customs, traditions, taboos, tastes and preferences, etc., of a people could be very high.

The buying and consumption habits of the people their language, beliefs and values, customs and traditions, tastes and preferences, education are all factors that affect business.

Demographic factors like the size, growth rate, age composition, sex composition, etc. of the population, family size, economic stratification of the population, educational, levels, language, caste, religion, etc are the factors that are relevant to business.

Some drawbacks of the totalitarian socialism are:

  1. Civil liberties are suppressed.
  2. There is no consumer sovereignty.
  3. There is a limited scope for accommodating different views and making critical evaluations.
  4. As private enterprise is not allowed to operate, the talents of the nation are not fully utilised.
  5. People may lack incentive to work hard in the absence of private property.
  6. The absence of freedom of choice of occupation is undemocratic.


The capitalist system is one characterized by the private ownership of the me of production, individual decision making, and the use of the market mechanism to carry out the decision of individual participants and facilitate the flow of goods and services in markets.

The free market economy is not planned, controlled or regulated by the government. The government satisfies community or collective wants, but does not compete with private firms; nor does it tell the people where to work or what to produce.

The completely free market economy, however, is an abstract system rather than a real one Today, even the so-called market economies like the United States, Japan, Australia, Canada and member countries of the EEC are subject to a number of government regulations.

The salient features of a socialist system are:

  1. The major me of production are either owned by the Government or their use is controlled by the Government.
  2. Existence of a central authority like the central planning agency to formulate the national plan for development and to direct resource mobilization, allocation and investment to achieve the plan targets.
  3. The consumers have to content themselves with what the state thinks is sufficient for them.
  4. The freedom of occupation is absent or restricted.
  5. The wage rates and prices are fixed by the Government and not by market forces.
  6. An equitable distribution of income.


The command economy is characterized by public ownership of the me of production, collective determination of economic decisions, and the allocation of resources by commands issued by the planning elite. The primary feature of the command economy is the centralization of decision-making. There is no horizontal communication between producing and consuming units. All communication is vertical, i.e., between the individual economic unit and the planning agency.

They have to invest in R & @product innvovations and develop new ways

Economic conditions, economic policies and the economic system are the important external factors that constitute the economic environment of a business.