Business Environment Model Question Solution BITM 6th Sem 2025
Group “A”: Brief Answer Questions [10 × 2 = 20 Marks]
1. What is environmental scanning?
Environmental scanning is the process through which an organization gathers, analyzes, and interprets information from the internal and external environment to identify potential opportunities and threats that could impact its strategic decisions.
Thank you for reading this post, don't forget to subscribe!2. Write two objectives of preparing fiscal policy?
Fiscal policy is the policy adopted by the government to manage the economy by controlling its revenue and expenditure.
Two objectives of preparing fiscal policy are:
- To Maintain Economic Stability
- To Achieve Economic Growth and Development
3. Mention different techniques of environmental scanning.
Below are the major techniques of environmental scanning:
- SWOT Analysis
- PESTLE Analysis
- Competitive Analysis
- Market Research
- Scenario Planning
4. Elaborate the term “inflation”.
Inflation refers to the general rise in the prices of goods and services in an economy over a period of time, which reduces the purchasing power of money.
- When inflation occurs, each unit of currency buys fewer goods and services than before, meaning the cost of living increases.
5. What is meant by acculturation.
Acculturation refers to the process by which individuals or groups adopt certain cultural traits or social patterns of another group, often due to contact between different cultures.
- It doesn’t mean abandoning one’s culture entirely — rather, it involves borrowing and blending certain elements such as language, fashion, food, lifestyle, and technology.
6. Mention two objectives of SAFTA.
Two objectives of SAFTA include:
- Promote Intra-Regional Trade
- Ensure Free Movement of Goods
7. Define political risk.
Political risk refers to the uncertainty and potential financial losses that businesses face due to political events or decisions made by government authorities.
- These risks can arise from policy changes, political instability, corruption, or conflicts within a country.
8. Mention two key indicator of macroeconomic environment.
Two key indicator of macroeconomic environment are:
- Gross Domestic Product
- Inflation Rate
- Unemployment Rate
- Balance of Payments (BOP)
9. Enlist any four institutions support business in Nepal.
Any four institutions support business in Nepal:
- Department of Industry (DoI)
- Nepal Rastra Bank (NRB)
- Nepal Chamber of Commerce (NCC)
- Trade and Export Promotion Centre (TEPC)
- Federation of Nepalese Chambers of Commerce and Industry (FNCCI)
10. Mention two advantages of WTO membership in Nepal.
Two advantages of WTO membership in Nepal are:
- Access to International Markets
- Promotion of Foreign Investment
- Trade Dispute Settlement
- Encouragement of Economic Reforms
Group “B”: Short Answer Questions [6 × 5 = 30 Marks]
11. Describe how does task environment factors influence business.
The task environment of a business refers to the immediate external factors or forces that directly affect a company’s operations, performance, and decision-making.
- Unlike the general environment, which is broader, the task environment includes stakeholders and entities with whom the business interacts frequently.
Key task environment factors include: customers, suppliers, competitors, government agencies, creditors, and labor unions.
How Task Environment Factors Influence Business:
- Customers
- Businesses depend on customers for revenue.
- Changing customer preferences, demands, and expectations influence product design, quality, pricing, and marketing strategies.
- Example: A rise in demand for eco-friendly products pushes businesses to adopt sustainable practices.
- Suppliers
- Suppliers provide raw materials, goods, and services.
- Their pricing, reliability, and quality directly affect production costs, inventory management, and overall profitability.
- Example: A shortage of raw materials can delay production and increase costs.
- Competitors
- Competitors influence market strategy, pricing, and innovation.
- Businesses must continuously monitor competitors to maintain market share and competitive advantage.
- Example: If a competitor lowers prices, a business may need to adjust its pricing or offer better value.
- Government Agencies
- Regulatory authorities, licensing bodies, and tax departments influence business operations through laws, policies, and regulations.
- Compliance ensures legality and can also provide incentives for growth.
- Creditors and Financial Institutions
- Banks and other financial institutions influence the availability and cost of capital, which affects business expansion and investment.
- Labor Unions and Employees
- Labor forces and unions impact workforce productivity, wage policies, and industrial relations.
- Maintaining good relations ensures smooth operations and reduced labor disputes.
12. Do you believe the political stability leads to business development ? Justify your answer.
Political stability refers to a situation in which a government is predictable, consistent, and free from frequent changes, conflicts, or unrest, allowing laws, policies, and governance to function smoothly.
Yes, political stability significantly contributes to business development.
Justification:
- Predictable Policies and Regulations
Stable governments implement consistent economic and business policies, which help entrepreneurs and investors plan long-term investments without fear of sudden regulatory changes. - Confidence for Investors
Both domestic and foreign investors are more likely to invest in a country with political stability, as it reduces risks associated with political unrest, strikes, or policy reversals. - Efficient Implementation of Development Projects
Stable political environments allow governments to successfully implement infrastructure projects, industrial policies, and trade initiatives, which directly support business growth. - Economic Growth and Market Expansion
Political stability promotes overall economic stability, which encourages businesses to expand production, hire more employees, and explore new markets. - Reduction of Risk and Uncertainty
Frequent political changes or unrest create uncertainty, which can discourage investment, disrupt supply chains, and increase costs. Political stability reduces these risks, fostering a better business environment.
13. Describe different social changes in Nepal Influencing business.
Socio-cultural change refers to the transformation in society’s values, attitudes, lifestyles, customs, and habits over time. These changes may occur due to globalization, urbanization, education, technology, and demographic shifts.
Different social changes in Nepal Influencing business are described below:
- Change in Consumer Preferences
- Change in Market Dynamics
- Change in Lifestyle
- Increase in Competition Level
- Change in Communication Patterns
- Change in Distribution Channels
- Demographic and Educational Shifts
- Globalization and Cultural Integration
1. Change in Consumer Preferences
Consumer preferences are constantly evolving due to exposure to global trends, education, and media influence. Today’s consumers are more informed, selective, and quality-conscious.
Impact on Business:
- Businesses must innovate products and services to match new tastes and expectations.
- Branding and packaging must appeal to modern values such as sustainability and minimalism.
- Companies offering eco-friendly, organic, or digital solutions gain a competitive edge.
Example: In Nepal, the growing preference for online shopping and cashless transactions has encouraged businesses to adopt e-commerce platforms.
2. Change in Market Dynamics
The market itself is reshaped by social and cultural evolution. The rise of dual-income families, increased youth population, and urban migration have transformed market structures.
Impact on Business:
- Businesses now face diverse target audiences with different lifestyles and income levels.
- Demand has shifted toward convenience, innovation, and experience-based consumption.
- Companies must diversify their product lines and adopt customer segmentation strategies.
Example: The growth of supermarkets and online stores in Nepal reflects the shift from traditional marketplaces to organized retail systems.
3. Change in Lifestyle
Modern lifestyles are driven by technology, health awareness, and the pursuit of comfort and efficiency. This shift significantly affects how people consume products and services.
Impact on Business:
- Increase in demand for healthcare, fitness, organic food, digital gadgets, and leisure activities.
- Businesses must embrace work-from-home trends, flexible schedules, and digital platforms.
- The service sector (tourism, IT, education, and entertainment) is expanding rapidly.
Example: Fitness centers, wellness brands, and online learning platforms are flourishing in Nepal due to changing lifestyles.
4. Increase in Competition Level
Globalization and cultural openness have intensified competition across industries. Businesses now compete not only locally but also internationally.
Impact on Business:
- Local businesses must improve quality and efficiency to match global standards.
- There is a rising need for innovation, differentiation, and brand value.
- Collaboration, franchising, and foreign partnerships are becoming common survival strategies.
Example: In Nepal, global franchises like KFC, Ncell, and Daraz have forced local businesses to enhance service quality and marketing creativity.
5. Change in Communication Patterns
Communication technology has revolutionized how businesses interact with customers and employees. Social media, mobile applications, and instant messaging have replaced traditional advertising and customer service methods.
Impact on Business:
- Businesses must maintain active digital presence through social platforms.
- Customer feedback and engagement now happen in real time.
- Online marketing and influencer partnerships have become key promotional tools.
Example: Nepalese businesses are increasingly using Facebook, TikTok, and Instagram for branding, marketing, and customer relations.
6. Change in Distribution Channels
The traditional distribution systems have transformed with technology and logistics advancements. The shift from physical to digital has made products more accessible to global consumers.
Impact on Business:
- Rise of e-commerce platforms and digital marketplaces.
- Direct-to-consumer (D2C) models are replacing multi-layered supply chains.
- Businesses must manage logistics, packaging, and delivery efficiently to retain customers.
Example: E-commerce businesses like Daraz and SastoDeal have changed how products are distributed across Nepal.
7. Demographic and Educational Shifts
Changes in population composition, literacy levels, and gender roles have major business implications.
Impact on Business:
- Youth-dominated populations demand innovation, employment, and digital services.
- Increased female participation in the workforce leads to new product categories and work policies.
- Educated consumers expect transparency, quality, and corporate responsibility.
Example: The rise of women entrepreneurs and young startups in Nepal illustrates a progressive socio-cultural change influencing business growth.
8. Globalization and Cultural Integration
Global cultural exchange has created a hybrid society where local and international influences coexist.
Impact on Business:
- Businesses must adapt products to local tastes while maintaining global appeal (glocalization).
- Cross-cultural management becomes crucial for multinational companies.
- Increased exposure to global ethics and standards influences business conduct.
Example: Nepalese hotels and tourism businesses blend local hospitality traditions with international service standards to attract global travelers.
14. Describe the major legal provisions on business start ups in Nepal.
Starting a business in Nepal requires compliance with various legal provisions to ensure that the business is registered, legitimate, and operates within the framework of national laws. These provisions cover business registration, licensing, taxation, labor, and sector-specific regulations.
The major legal provisions on business start ups in Nepal are:
- Business Registration
- Licensing Requirements
- Tax Registration
- Labor and Social Security Compliance
- Sectoral or Specialized Compliance
- Intellectual Property and Brand Protection
1. Business Registration
All businesses must be registered with the Office of the Company Registrar or local authorities. The type of business—sole proprietorship, partnership, or company—determines the registration process. Registration provides legal recognition and enables the business to enter contracts, open bank accounts, and access government support.
2. Licensing Requirements
Certain businesses require special licenses or permits from government authorities depending on the nature of the business. For example:
- Food and beverage businesses require a health and food license.
- Industrial or manufacturing businesses require an industrial enterprise license from the Department of Industry (DoI).
- Import/export businesses require trade licenses from the local municipality and export/import permits from the Trade and Export Promotion Centre (TEPC).
3. Tax Registration
Every business must register with the Inland Revenue Department (IRD) to obtain a Permanent Account Number (PAN) and a VAT registration if applicable. Compliance ensures legal operation and proper payment of taxes, including income tax, VAT, and other applicable duties.
4. Labor and Social Security Compliance
Employers must comply with the Labour Act and Social Security Act, including providing employment contracts, minimum wages, workplace safety, and social security contributions for employees. These legal requirements protect workers’ rights and ensure responsible business operation.
5. Sectoral or Specialized Compliance
Some businesses must follow sector-specific laws and standards. For example:
- Tourism businesses must comply with the Tourism Act and regulations.
- Banking and finance enterprises must follow NRB regulations.
- Environmental laws must be followed for industries affecting natural resources.
6. Intellectual Property and Brand Protection
Start-ups are encouraged to register trademarks, patents, or copyrights to protect their ideas, brand, or inventions under the Intellectual Property Rights laws of Nepal. This ensures legal ownership and prevents unauthorized use.
15. How capital market reforms in Nepal affect Nepalese business.
Capital Market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc.
- It consists of primary market and secondary market.
- Primary Market deals with trade of new stocks and other securities,
- Whereas Secondary Market deals with the exchange of existing or previously issued securities.
Capital market reforms in Nepal refer to the set of policy, regulatory and structural changes introduced to strengthen, modernize and expand the country’s securities and financial markets.
These reforms directly and indirectly affect Nepalese businesses in several ways:
- Easier Access to Capital
- Increased Investor Confidence
- Promotion of Entrepreneurship and Business Growth
- Encouragement of Long-Term Investments
- Development of Financial Discipline
- Facilitates Economic Growth
1. Easier Access to Capital
Reforms such as the modernization of the stock market and introduction of new financial instruments enable businesses to raise capital through equity, debentures, and bonds. This helps companies expand operations, invest in new projects, and finance technological upgrades.
2. Increased Investor Confidence
Regulations for transparency, corporate governance, and investor protection increase investor trust. When investors feel secure, both domestic and foreign investments in Nepalese businesses rise, providing more financial resources for growth.
3. Promotion of Entrepreneurship and Business Growth
Capital market reforms encourage entrepreneurial ventures by making it easier to list new companies, issue shares, and attract funds. This supports small and medium enterprises (SMEs) in scaling up their operations.
4. Encouragement of Long-Term Investments
By providing a structured and regulated market, reforms promote long-term investments in businesses rather than speculative short-term gains. This stability benefits companies in planning expansions and strategic projects.
5. Development of Financial Discipline
Businesses must adhere to accounting standards, regular disclosure, and audit requirements to participate in the capital market. This enhances financial discipline, transparency, and governance, improving business credibility and sustainability.
6. Facilitates Economic Growth
A strong capital market enables businesses to mobilize savings and channel them into productive investments, contributing to overall economic growth and development in Nepal.
16. Explain the functions of Trade and Export Promotion Center (TEPC), Nepal.
The Trade and Export Promotion Centre (TEPC) is a government agency in Nepal established to promote, facilitate, and develop the country’s exports.
- It acts as a bridge between Nepali exporters and international markets, helping businesses expand their reach and competitiveness globally.
The functions of Trade and Export Promotion Center (TEPC), Nepal are:
- Provide Advice to the Government
- Strength National Economy
- Support for Poverty Alleviation
- Cooperate to Diversify Trade
- Attract Investment
- Acts as Information Pool
- Identify the Problems in Foreign Trade
- Support to the Exporters
1. Provide Advice to the Government
TEPC advises the government on trade policies, export strategies, and measures to enhance Nepal’s participation in international markets. This helps formulate effective policies that support exporters and the national economy.
2. Strengthen National Economy
By promoting exports and facilitating international trade, TEPC contributes to economic growth, employment generation, and national revenue, strengthening Nepal’s overall economy.
3. Support for Poverty Alleviation
Encouraging export-oriented industries creates jobs and income opportunities, especially for rural and marginalized communities, thereby contributing to poverty reduction.
4. Cooperate to Diversify Trade
TEPC helps businesses diversify products and markets, reducing dependence on a few commodities or countries and expanding Nepal’s global trade presence.
5. Attract Investment
TEPC promotes Nepal as a favorable destination for foreign and domestic investment, particularly in export-oriented sectors, by providing information and facilitating investor access.
6. Acts as Information Pool
The centre serves as a repository of trade-related data, providing exporters with market trends, trade statistics, international regulations, and other essential information.
7. Identify the Problems in Foreign Trade
TEPC identifies challenges faced by exporters, such as market barriers, tariff restrictions, quality issues, and procedural difficulties, and recommends solutions to overcome them.
8. Support to the Exporters
TEPC provides practical assistance to exporters, including help with documentation, compliance with international standards, training programs, and participation in trade fairs, ensuring they remain competitive in global markets.
17. Discuss various issues related to technology transfer.
Technology transfer refers to the process by which existing knowledge, skills, technologies, or innovations are transferred from one organization, country, or institution to another for the purpose of further development, commercialization, or efficient utilization.
Various issues related to technology transfer are discussed below:
- Limited Understanding
- Lack Mutual Benefits
- No Proper Planning
- Ignore Environment
- Ineffective Transfer Process
- Ignore local Culture
- Lack of Infrastructure
- No Feasibility Study
- Lack of Universal Perspective
- Ethical Problems
1. Limited Understanding
A major barrier is the lack of understanding of the technology by the recipient organization. If the users or managers do not fully comprehend how the technology works or how it can be integrated into existing systems, its effectiveness is compromised. Proper training and knowledge dissemination are essential to overcome this issue.
2. Lack of Mutual Benefits
Technology transfer often fails when it does not provide clear benefits to both the provider and the recipient. If one party perceives a loss or insufficient advantage, cooperation may be weak, reducing motivation to adopt and optimize the technology.
3. No Proper Planning
Successful technology transfer requires strategic planning, including assessing compatibility, resource allocation, and timelines. Without proper planning, technology may be introduced prematurely, inefficiently, or in an unsustainable manner, resulting in waste or failure.
4. Ignoring Environmental Considerations
Many technology transfer projects overlook environmental impacts. Introducing a technology without evaluating its ecological consequences can lead to pollution, resource depletion, and other sustainability issues, undermining long-term benefits.
5. Ineffective Transfer Process
An inefficient transfer process, including poor communication, inadequate documentation, or lack of hands-on training, can prevent recipients from fully utilizing the technology. Clear procedures, technical support, and follow-up are crucial for success.
6. Ignoring Local Culture
Technologies are often designed for foreign contexts. Ignoring local cultural, social, and organizational norms can create resistance among users, reducing adoption rates and limiting effectiveness. Technologies must be adapted to local conditions and practices.
7. Lack of Infrastructure
Many developing countries, including Nepal, face limited infrastructure, such as electricity, internet connectivity, or modern equipment. Without the necessary infrastructure, advanced technologies cannot function properly, and investments may be wasted.
8. No Feasibility Study
Introducing technology without a proper feasibility study—including cost, market, technical, and social analysis—can result in failures. Feasibility studies ensure that the technology is appropriate, sustainable, and economically viable in the target context.
9. Lack of Universal Perspective
Sometimes, technology transfer is narrowly focused, ignoring global standards, interoperability, and future scalability. A universal perspective ensures that the technology is adaptable, compatible with other systems, and future-proof.
10. Ethical Problems
Ethical issues may arise in technology transfer, such as intellectual property violations, unfair licensing, exploitation, or misuse of technology. Addressing ethical concerns is necessary to maintain trust, legality, and social responsibility.
Group “C”: Long Answer Questions [3 × 10 = 30 Marks]
18. Discuss the concept of Business Environment. How does the economic development plans influence the business environment?
Business environment refers to the total of all internal and external factors that affect the functioning, decision-making, performance, and strategies of a business directly and indirectly.
- A profitable business of today may not be in the same position in the future, if management is unable to adapt its business operation according to the changing environment.
- These factors include economic conditions, social trends, technological advancements, legal regulations, political conditions, and the natural environment.
An economic development plan is a systematic framework designed by the government to achieve sustained economic growth, social development, and improved living standards over a specified period.
Economic Development Plans Influence the Business Environment:
- Infrastructure Development
- Development plans focus on building roads, energy supply, communication networks, and industrial zones.
- Improved infrastructure reduces business costs, enhances efficiency, and encourages investment.
- Investment Opportunities
- Plans identify priority sectors for development, such as agriculture, tourism, hydropower, and manufacturing.
- This creates clear opportunities for entrepreneurs and investors to participate in growth sectors.
- Policy and Regulatory Framework
- Economic plans provide guidelines for taxation, subsidies, incentives, and trade policies.
- Businesses can plan operations and investments effectively with predictable policies.
- Employment and Skill Development
- Development programs often emphasize education, vocational training, and workforce development.
- A skilled labor force improves productivity and competitiveness for businesses.
- Market Expansion
- Development plans aim to increase production, improve infrastructure, and enhance purchasing power.
- This expands domestic markets and creates a favorable environment for business growth.
- Encouragement of Technology and Innovation
- Plans often support research, technological advancement, and innovation, which helps businesses modernize and remain competitive.
19. FDI plays a vital role in economic development of the country. In light of this statement, explain the rationale of FDI and reasons of its poor inflow in Nepal
Foreign Direct Investment (FDI) refers to investment made by a foreign individual or company in the business or assets of another country, typically in the form of establishing new enterprises, acquiring shares, or investing in infrastructure and production facilities.
- FDI provides capital, technology, and expertise to the host country, contributing to economic development.
Rationale of FDI in Economic Development
FDI plays a vital role in the economic growth of Nepal for several reasons:
- Provision of Capital
- FDI brings much-needed financial resources to complement domestic savings and investment, allowing businesses and infrastructure projects to expand.
- Technology Transfer
- Foreign investors introduce modern technologies, advanced management practices, and innovation, enhancing productivity and competitiveness in domestic industries.
- Employment Generation
- FDI creates jobs in manufacturing, services, and infrastructure sectors, reducing unemployment and increasing household income.
- Boost to Exports
- Foreign investment often targets export-oriented industries, increasing foreign exchange earnings and improving the balance of payments.
- Economic Linkages and Skill Development
- FDI promotes linkages with local suppliers and service providers and contributes to skill enhancement of the workforce.
- Infrastructure Development
- FDI often supports development of transport, energy, and communication infrastructure, which benefits the broader economy.
Reasons for Poor Inflow of FDI in Nepal
Despite its benefits, Nepal receives relatively low FDI inflow due to several challenges:
- Political Instability
- Frequent government changes, policy uncertainty, and political unrest discourage foreign investors.
- Poor Infrastructure
- Inadequate transport, energy, and communication networks increase operational costs and reduce investor confidence.
- Bureaucratic and Regulatory Hurdles
- Complex licensing procedures, red tape, and slow administrative processes make investment difficult.
- Limited Market Size
- Nepal’s small domestic market reduces the attractiveness for large-scale foreign investment.
- Natural Disasters and Geographical Constraints
- Frequent earthquakes, floods, and difficult terrain increase project risks and costs.
- Lack of Skilled Workforce
- Limited availability of trained labor and technical expertise hinders the establishment of high-tech industries.
- Weak Legal and Financial Systems
- Inadequate investor protection, contract enforcement, and financial market development deter foreign investors.
20. Highlight the energy situation in Nepal. Analyze the opportunity and threat of the energy situation to Nepalese business.
Nepal is a country with abundant natural resources, particularly water, solar, and wind energy. Despite this potential, the country faces significant energy challenges that affect households, industries, and overall economic development.
- Nepal has huge potential of hydropower about 83,000 MW but less than 2% is currently produced and used.
Understanding the energy situation in Nepal requires examining the sources, consumption patterns, and challenges in the sector.
Opportunities of the Energy Situation for Nepalese Business
1. Expansion of Hydropower Development
The growing hydropower sector creates opportunities for investment in construction, engineering, transmission lines, and related services. Businesses can benefit by supplying materials, machinery, and technical services.
2. Lower Cost of Production in the Long Run
As Nepal increases its hydropower generation, electricity becomes a cheaper alternative to diesel and petroleum. This reduces production costs for industries and encourages new manufacturing units.
3. Growth of Energy-Based Industries
Stable and affordable electricity supports the growth of energy-intensive industries such as cement, iron and steel, hotels, IT services, and agro-processing industries.
4. Export Potential of Electricity
If surplus electricity is produced, Nepal can export power to India and other neighboring countries. This creates income opportunities for businesses operating in transmission, trade, and consulting services.
5. Development of Renewable Energy Business
There is high potential for private sector investment in solar, wind, biogas, and micro-hydro projects. Businesses providing renewable energy equipment and installation services can expand rapidly.
6. Attraction of Foreign Direct Investment (FDI)
The hydropower and renewable energy sector attracts significant FDI, creating opportunities in construction, finance, consulting, logistics, and public–private partnerships.
Threats of the Energy Situation to Nepalese Business
1. Dependence on Imported Petroleum
Nepal still imports all petroleum products, making businesses vulnerable to international price hikes and supply disruptions. Rising fuel prices directly increase transportation and production costs.
2. Instability in Power Supply
Although load shedding has reduced, voltage fluctuations, transmission losses, and regional outages still disrupt industrial operations and damage machinery, causing extra costs for businesses.
3. Slow Hydropower Development
Delays in hydropower projects due to political instability, bureaucratic hurdles, and financing problems create uncertainty for industries that rely on stable electricity.
4. Rising Energy Demand
Energy demand is growing faster than supply due to urbanization and industrial growth. If hydropower capacity does not expand rapidly, Nepal may again face shortages in the near future.
5. High Cost of Alternative Energy
For many rural businesses, installing solar or biogas systems is expensive. Without subsidies, many firms cannot afford these technologies, limiting business growth in remote areas.
6. Environmental and Social Issues
Hydropower projects often face problems such as displacement of local communities, environmental concerns, and conflicts over land acquisition. These delays affect businesses linked with the energy sector.
21. Explain the major firm specific business environment in Nepal.
The firm-specific business environment refers to the internal and external factors that directly affect a particular organization rather than the industry or economy as a whole.
- Management needs to estimate and forecast firm specific environmental influence to sustain its business operation in a competitive environment.
- It is necessary to maintain regular monitoring on environmental changes, which is helpful to grab opportunities and digest probable threats and challenges.
Scope of Firm-Specific Business Environment
The scope of firm-specific business environment covers all areas that directly influence an organization’s operations and decision-making. Understanding this environment helps a business respond effectively to internal and external challenges.
Scope of Firm-Specific Business Environment include:
- Identify Strengths and Weaknesses
- Identify Opportunities and Threats
- Formulation of Plans and Policies
- Support Adaptation of Change
- Best Use of Resources
- Understand Competitors’ Strategies
- Improve Performance Level
- Maintain Business Image
1. Identify Strengths and Weaknesses
Analyzing the internal environment allows a firm to recognize its strengths, such as skilled workforce, technology, or brand reputation, and weaknesses, such as lack of resources or outdated processes. This knowledge is essential for strategic planning. This self-awareness enables the firm to make better decisions and improve overall performance.
2. Identify Opportunities and Threats
By analyzing the firm-specific environment, organizations can spot opportunities that can be exploited for growth, such as new customer segments or technological innovations. Similarly, potential threats, such as aggressive competitors or supply chain disruptions, can be anticipated and mitigated. This proactive approach helps in minimizing risks and maximizing potential benefits.
3. Formulation of Plans and Policies
A thorough understanding of the firm-specific environment provides a foundation for creating effective business plans and policies. These strategies are tailored to the organization’s unique circumstances, ensuring they are realistic, achievable, and aligned with the company’s goals. Well-informed policies guide decision-making and resource allocation efficiently.
4. Support Adaptation of Change
The business environment is constantly evolving. By monitoring firm-specific factors, organizations can adapt more quickly to changes such as shifts in customer preferences, competitor strategies, or technological advancements. This adaptability ensures long-term survival and growth in a dynamic marketplace.
5. Best Use of Resources
Analyzing the firm-specific environment helps in optimizing the use of available resources. By understanding internal capabilities and external demands, companies can allocate human, financial, and technological resources more effectively, avoiding waste and increasing operational efficiency.
6. Understand Competitors’ Strategies
Studying the firm-specific environment includes keeping track of competitors’ actions, strengths, and weaknesses. This knowledge allows a company to anticipate competitors’ moves, identify gaps in the market, and develop strategies that provide a competitive edge.
7. Improve Performance Level
Awareness of firm-specific factors allows organizations to continuously monitor and enhance their performance. By addressing weaknesses, leveraging strengths, and responding to opportunities and threats, companies can achieve higher productivity, better customer satisfaction, and improved profitability.
8. Maintain Business Image
A clear understanding of the firm-specific environment also helps in maintaining a positive business image. By consistently meeting customer expectations, managing stakeholder relationships, and responding appropriately to challenges, a company can build and sustain a strong reputation in the market.
Group “D”: Comprehensive / Case / Situation Analysis Questions [4 × 5 = 20 Marks]
Case: The Tea Industry in Nepal
(a) Identify two components of the task and general environment of the Nepalese tea industry.
Answer:
The business environment of the Nepalese tea industry consists of both task and general environment components.
Task Environment Components:
- Customers: Both domestic consumers (8 million kg) and international buyers (Europe, USA, India) directly influence demand and quality standards.
- Competitors: Indian tea producers and traders who are seeking a ban on non-organic Orthodox tea pose direct competitive pressure.
General Environment Components:
- Technological Environment: Introduction of research and innovation by NARC for developing a unique Nepali tea brand.
- Legal and Political Environment: Government policies and international trademarks regulating exports and branding of Nepali tea.
(b) In your opinion, what are the opportunities and threats for Nepalese tea industries?
Answer:
Opportunities:
- Growing Global Demand for Organic Tea: Western markets increasingly prefer eco-friendly and organic products.
- Brand Recognition: The new international trademark and logo for Nepali tea improve brand value globally.
- Research and Development: NARC’s initiative to develop a unique Nepali tea variety can boost export potential.
- Export Potential: 12 million kg of tea is exported annually — a strong foundation for global expansion.
Threats:
- Competition from Indian Tea: India’s demand to ban non-organic tea from Nepal poses a market risk.
- Quality and Health Concerns: Past contamination issues (anthropathone chemical) affect consumer trust.
- Climate Change: Unpredictable weather affects tea cultivation and productivity.
- Labor and Productivity Issues: Frequent strikes, low worker productivity, and high labor costs hinder efficiency.
(c) In view of the growing globalization, what strategies should Nepalese tea industries adopt to remain competitive in the market?
Answer:
To remain competitive globally, Nepalese tea industries should adopt the following strategic approaches:
- Adopt Organic and Sustainable Production: Shift gradually toward organic tea production to meet Western standards.
- Quality Assurance and Certification: Implement international quality certifications like ISO, HACCP, and Fair Trade.
- Brand Promotion and Market Diversification: Leverage the new logo and trademark to promote “Nepali Tea” as a premium global brand.
- Public-Private Partnerships: Collaborate with the government and international organizations for market access and export facilitation.
- Technology Adoption: Use modern cultivation, irrigation, and packaging technologies for higher efficiency and quality.
- Human Resource Development: Train workers to improve productivity and reduce labor-related disruptions.
These strategies would help the Nepalese tea industry enhance competitiveness, sustainability, and profitability in the global market.
(d) Write how innovation is being an important factor for Nepalese tea industries.
Answer:
Innovation plays a key role in transforming and sustaining the Nepalese tea industry in a competitive global market.
Importance of Innovation:
- Product Development: Research by NARC to create a unique Nepali variety of tea differentiates Nepalese products internationally.
- Quality Enhancement: Adoption of organic farming, bio-friendly fertilizers, and eco-labeling improves quality and consumer trust.
- Branding and Marketing Innovation: Introduction of international trademark and logo strengthens brand identity.
- Process Innovation: Use of modern technology in cultivation, plucking, and packaging increases productivity and reduces waste.
- Sustainability Innovation: Eco-friendly and climate-resilient farming methods ensure long-term growth.
Conclusion:
Innovation ensures that the Nepalese tea industry not only maintains competitiveness but also establishes a unique identity in the global organic tea market.