MBA Business Environment Examination Paper 2016 2017

MBA Business Environment Examination Paper 2016 2017

MBA Business Environment Examination Paper 2016 2017

mba Examination Paper
mba Examination Paper

MBA Examination, 2016-17
Business Environment
(RMB- 201


Time: 3 Hours] [Max. Marks: 70

Note: Be precise in your answer.

Section A

1. Explain the following:                                                  (2×7=14)

(a) What do you understand by business environment? 

Ans. Refer to Unit-1, Sec-A, Q.7.

(b) Explain the planning role of government in business. 

Ans. Refer to Unit-II, Sec-A, Q.2.

C) Explain cultural environment.

Ans. A cultural environment refers to a set of beliefs, practices, customs and behaviours which are found to be common to everyone that is living within a certain population. It shapes the way that every person develops, influencing ideologies and personalities. It is determined by the different aspects of culture that influence personal choices and behaviours.

(d) Define business ethics. 

Ans. Refer to Unit-III, Sec-A, Q.6.

(e) ‘Technology requires up gradation’. Explain how? 

Ans. Technology involves the use of tools, machines, materials, techniques and sources of power to make work easier and more productive. In the modern era, technology is changing very fast. Rapid improvements in technology requires the entrepreneurs to learn to cope, adopt and absorb technology. By constant use, machinery becomes obsolete and unserviceable. So, it is required to replace the worn out/obsolete machinery with improved ones. Technology upgradation is required to best suit the resources and requirements of an enterprise.

So, it can be said that technology requires upgradation so as to gain control over nature and to build a civilised way of life.

(f) Explain globalisation. 

Ans. Refer to Unit-V, Sec-A, Q.9.

(g) What is liberalisation? 

Ans. Refer to Unit-V, Sec-C, Q.10.

Section B

MBA Business Environment Examination Paper 2016 2017

2. Attempt any five of the following questions:                      (7×5=35)

(a) Explain the various types of business organisation with their advantages and


Ans. Refer to Unit-1, Sec-C, Q.2

Advantages of a Sole Proprietorship

(1) Simplest and least expensive form of business to establish and to dissolve. 

(11) The owner is making all the decisions and controlling the whole operations. 

(iii) All profit flows directly to the owner. 

(iv) it is subject to fewer regulations. 

(V) It has tax advantage. Any income is declared as the owner’s personal income tax return. therefore there are no corporate income taxes. 

Disadvantages of a Sole Proprietorship

(i) The owner is responsible for all the obligations of the business.

(ii) It is diicult to raise capital. It can only use the owner’s personal saving and consumer loans. 

Advantages of a Partnership

(i) It is relatively easy to form but considerable amount of time should be invested in developing the partnership agreement. 

(ii) It is easier to raise capital compared to a sole proprietorship as there are more than one investor 

(iii) Any income is declared as the partners’ personal income tax returns, therefore there are no corporate income taxes. 

(iv) Employees may be motivated and attracted to the business by the inventive to become a partner: 

Disadvantages of a Partnership

(i) Partners are jointly responsible for all the obligations of the business. 

(ii) Partners must make decision together therefore disputes or conflicts may occur. It may eventually lead to dissolving the partnership. 

Advantages of a Corporation

(i) It can raise additional funds through the sale of stock. 

(ii) Shareholders can easily transfer the ownership by selling their stock.

(iii) Individual owner’s liability is limited to the value of stock they are holding in the corporation. 

Disadvantages of a Corporation

(i) It is restricted by more regulations, more closely monitored by governmental agencies and are more costly to incorporate than other forms of the organisations. 

(ii) Profit of the business is taxed by the corporate tax rate. Dividends paid to shareholders are not deductible from corporate income, so this part of income is taxed twice as the shareholders must declare dividends as their personal income and pay personal income taxes too.

 Advantages of a Cooperative.

(i) Easier to Form: A cooperative is a lot easier to form than a corporation since it is not subject to a lot of government regulations. 

(ii) Limited Liability: Similar to a corporation, if a cooperative cannot pay off its liabilities, creditors cannot go after the personal assets of the members. 

(iii) Unlimited Life: A cooperative will continue to exist regardless if a member has died or has withdrawn their capital investment. 

(iv) Tax Advantages: A cooperative is favoured by the law. Some cooperatives have already sought for tax exemptions thus greatly reducing their costs.

Disadvantages of a Cooperative

(i) Lack of Mutual Interest: A cooperative is formed because of the common interests of the members. However, there are still members in a cooperative that lack the spirit of cooperation which results to disagreements and rivalries among members.

(ii) Lack of Profit: The profits of a cooperative are generally not up to par to that of a corporation. 

(iii) Corruption: Corruption, in a way, could result from the lack of profit of cooperatives which leads to misappropriation of funds by the officials. 

(iv) Lack of Business Knowledge: Not all members of a cooperative are knowledgeable when it comes to business. Operations of a cooperative usually go down the drain when members without business know-how get elected as members of the board of directors. 

Advantages of the LLC

(i) LLCs do not require annual meetings and require few ongoing formalities. 

(ii) Owners are protected from personal liability for company debts and obligations.

(iii) LLCs enjoy partnership-style, pass-through taxation, which is favourable to many small businesses. 

Disadvantages of the LLC

LLCs do not have a reliable body of legal precedent to guide owners and managers, although LLC law is becoming more reliable as time passes. 

(ii) An LLC is not an appropriate vehicle for businesses seeking to become public eventually or to raise money in the capital markets. 

(iii) LLCs are more expensive to set up than partnerships. 

(iv) LLCs usually requires annual fees and periodic filings with the state. 

(v) Some states do not allow the organisation of LLCs for certain professional vocations.

(b) Explain in brief LEPT factors of business environment. 

Ans. Refer to Unit-I, Sec-C, Q.4.

(C) Differentiate between the macro and micro environmental factors. 

Ans. Refer to Unit-1, Sec-B, Q.5.

(d) ‘Government plays an important role in development of business in every nation’s economy! Explain the above statement with suitable examples. 

Ans. Refer to Unit-II, Sec-B, Q.2.

(e) Discuss the impact of technology on the growth of business. 

Ans. Refer to Unit-IV, Sec-C, Q.5.

(f) What is MRTP Act? Why it has been enacted? What are its main features? 

Ans. Refer to Unit-II, Sec-C, Q.6.

(g) How capitalism is different form socialism? Explain with an example. 

Ans. Differences between Capitalism and Socialism 

The following are the major differences between capitalism and socialism: 

(i) The economic system, in which the trade and industry are owned and controlled by private individuals is known as capitalism. Socialism, on the other hand, is also an economic system, where the economic activities are owned and regulated by the state itself. 

(ii) The basis of capitalism is the principle of individual rights, whereas socialism is based on the principle of equality. Guin

(iii) Capitalism encourages innovation and individual goals while socialism promotes equality and fairness among society. 

(iv) In the socialist economy, the resources are state-owned but in the case of the capitalist economy, the means of production are privately owned. 

(v) In capitalism the prices are determined by the market forces and therefore, the firms can exercise monopoly power, by charging higher prices. Conversely, in socialism government decides the rates of any article which leads to shortages or surfeit. 

(vi) In capitalism the competition between firms is very close whereas in socialism there is no or marginal competition because the government controls the market.

(vii) in capitalism, there is a large gap between rich class and poor class because of unequal distribution of wealth as opposed to socialism where there is no such gap because of equal distribution of income. 

(viii) In capitalism, every individual works for his own capital accumulation, but in socialism, the wealth is shared by all the people equally. 

(ix) In capitalism every person has the right to freedom of religion which also exists in socialism, but socialism gives more emphasis on secularism. 

(x) In capitalism, the efficiency is higher as compared to socialism because of the profit incentive that encourages the firm to produce such products that are highly demanded by the customers while in a socialist economy there is a lack of motivation to earn money, which leads to inefficiency. 

(xi) In capitalism, there is no or marginal government interference which is just opposite in the case of socialism. Capitalism and socialism are different political, economic and social systems in use by countries around the world. The United States, for instance, is usually considered a prime example of a capitalist country. Sweden is often considered a strong example of a socialist society. Sweden is not socialist, however, in the true sense of the word. In practice, most countries have mixed economies with economic elements of both capitalism and socialism.

(h) What is Special Economic Zone (SEZ)? What are their objectives? How they are different from Export Processing Zone (EPZ)? Ans. Refer to Unit-V, Sec-B, Q.1, 2. 

Differences between SEZ and EPZ 

Following are the differences beween SEZ and EPZ:

(i) SEZ are much larger in geographical size than EPZ. 

(ii) SEZ has much larger scope of business than EPZ. 

(iii) SEZ is found all the countries but EPZ are generally located in under developed or developing countries. 

(iv) Infrastructure of SEZ consist of manufacturing units, townships, roads, hospitals, schools and other services but EPZ are confined to manufacturing establishments. 

(v) The benefits of SEZ are more towards the growth of domestic business whereas EPZ has the main objective of developing exports business. 

(vi) SEZ is open to all fields of business like manufacturing, trading and services but EPZ has more focus on manufacturing. 

(vii) Tax benefits in SEZ are much more than in EPZ. 

(viii) There is very limited accountability of export performance in SEZ but it has great influence over the business carried out in EPZ as the penalties and duty recovery is imposed in case of shortfall. 

(ix) The consumption of raw material that is imported duty free has to be consumed over a period of 5 years in SEZ but the time period in EPZ is only 1 year.

(x) Laws concerning the certification of the import goods are much more relaxed in SEZ than in EPZ. 

(xi) Custom department has less interference in the inspection of the premises in SEZ but EPZ requires routine customs inspection of cargo. 

(xii) FDI investment in manufacturing units does not require sanctions from the board as it is in EPZ.

MBA Business Environment Examination Paper 2016 2017

Section C

Note: Attempt any two of the following questions:

(10.5×2=21) 3. All creative human activities relating to the production of goods or services for satisfying human wants are known as business. It is also a gainful procedure through which individuals and groups exchange goods and services’. Explain how. 

Ans. All creative human activities relating to the production of goods or services for satisfying human Wants are known as business. It is also a gainful procedure through which individuals and groups exchange goods and services. Human activities may be categorised as economic and non-economic. Ss includes all those legal activities which are related with earning profit and all the economic

activities which are related with earning wealth. Every human activity which is engaged in for the sake thing profit may be called a business. Human activity is directed towards producing and acquiring wealth through buying and selling goods. 

Refer to Unit-I, Sec-C, Q.1.

4. explain the concept of mixed economy? Do you think our country has benefitted by following the mixed economic system? Support your answers with suitable examples.

Ans. Refer to Unit-II, Sec-C, Q.9.

India is the best example of mixed economy.

(i) In India we have both public and private banks. 

(ii) The awesome thing about the mixed economy is that capitalism and socialism works together. 

(iii) Consider the railway system of India. Actually what happens is that the trains are owned by the government but the railway stations are owned by the capitalist also. 

(iv) Take the example of airline sector we have both public and private airlines. We can see that Air India works well with the other capitalist company. 

(V) India has a problem with its distribution of income and access to free markets, since many of its residents are poor and have no way out of poverty. Most residents of India are hindus and although they either worship Shiva or Vishnu, India still struggles with the caste system ranking humans in inherited socioeconomic classes. For this reason, a person is either born rich or born poor and has no way to reverse that status going forward. With the idea that much of its population is considered ‘untouchable, dalit or unclean, it should be difficult for the country as a whole to prosper. But in fact, the rich get richer despite these internal issues. In the early part of the century, the caste system hampered India’s development, but today, lower castes are demanding to be reclassified and given full paying jobs which allow them to qualify for benefits, privileges and the chance at a higher quality life which was not possible in years past. 

(vi). Although many Indian residents are still illiterate (though Indian literacy rates are improving), they are realising that it is possible to pull themselves out of poverty by any means possible. At the upper levels of education, India excels and produces very highly qualified graduates who go on to study and work in other countries around the world. 

5. “The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG modell explain the above statement. 

Ans. The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG or Liberalisation, Privatisation and Globalisation model. The primary objective of this model was to make the economy of India the fastest developing economy in the globe with capabilities that help it match up with the biggest economies of the world.

The chain of reforms that took place with regards to business, manufacturing and financial services industries targeted at lifting the economy of the country to a more proficient level. These economic reforms has influenced the overall economic growth of the country in a significant manner.


Liberalisation refers to the slackening of government regulations. The economic liberalisation in India denotes the continuing financial reforms which began since July 24, 1991 

Privatisation and Globalisation

Privatisation refers to the participation of private entities in businesses and services and transfer of ownership from the public sector for government to the private sector as well. Globalisation stands For the consolidation of the various economies of the world. 

LPG and the Economic Reform Policy of India

Following its freedom on August 15. 1947. the Republic of India stuck to socialistic economic strategies.

In the 1980s, Rajiv Gandhi, the then Prime Minister of India. started a number of economic estructuring measures. In 1991. the country experienced a balance of payments dilemma following he Gulf War and the downfall of the erstwhile Soviet Union. The country had to make a deposit of 47 ons of gold to the Bank of England and 20 tons to the Union Bank of Switzerland. This was necessary under a recovery pact with the IMF or International Monetary Fund. Furthermore, the International Monetary Fund necessitated India to assume a sequence of systematic economic reorganisations. Consequently, the then Prime Minister of the country. P.V. Narasimha Rao initiated groundbreaking economic reforms. However, the Committee formed by Narasimha Rao did not put into operation a number of reforms which the International Monetary Fund looked for.

Dr. Manmohan Singh, the Ex-Prime Minister of India. was then the Finance Minister of the Government of India. He assisted Narasimha Rao and played a key role in implementing these reform policies.

The recommendations of the Narasimha Rao Committee were as follows:

Bringing in the Security “Regulations (Modified) and the SEBI Act of 1992 which rendered the egitimate power to the Securities Exchange Board of India to record and control all the mediators in he capital market.

(i) Doing away with the Controller of Capital matters in 1992 that determined the rates and number of stocks that companies were supposed to issue in the market. 

(ii) Launching of the National Stock Exchange in 1994 in the form of a computerised share buying and selling system which acted as a tool to influence the restructuring of the other stock exchanges in the country. By the year 1996, the National Stock Exchange surfaced as the biggest stock exchange in India. 

(iii) In 1992, the equity markets of the country were made available for investment through overseas corporate investors. The companies were allowed to raise funds from overseas markets through issuance of GDRs or Global Depository Receipts.

(iv) Promoting FDI (Foreign Direct Investment) by means of raising the highest cap on the contribution of international capital in business ventures or partnerships to 51 per cent from 40 per cent. In high priority industries, 100 per cent international equity was allowed.

(v) Cutting down duties from a mean level of 85 per cent to 25 per cent and withdrawing quantitative regulations. The rupee or the official Indian currency was turned into an exchangeable currency on trading account. 

(vi) Reorganisation of the methods for sanction of FDI in 35 sectors. The boundaries for international investment and involvement were demarcated. 

The outcome of these reorganisations can be estimated by the fact that the overall amount of Overseas investment comprising portfolio investment, FDI and investment collected from overseas equity capital markets rose to $5.3 billion in 1995-1996 in the country) from a microscopic US $132 million in 1991-1992. Narasimha Rao started industrial guideline changes with the production zones. He did away with the License Raj, leaving just 18 sectors which required licensing. Control on industries was moderated.

Thus, LPG model of economic reforms had resulted in the significant policy shifts in the beginning of the 1990s.

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