IGNOU BUSINESS ENVIRONMENT (MCO - 04) SOLVED PAPER – (DEC - 2023)| (M.COM)| ENGLISH MEDIUM
MASTER OF COMMERCE
(M. COM.)
Term-End Examination
December - 2023
MCO-04
BUSINESS ENVIRONMENT
Time: 3 Hours
Maximum Marks: 100
Weightage: 70%
Note: (i) Answer any five questions.
(ii) All
questions carry equal marks.
हिंदी माध्यम: यहां क्लिक करें
1. (a) “Business Environment is dynamic, complex, multi-faceted and has a far-reaching impact.” Comment on the statement citing relevant example. 10
Ans:- The
statement "The business environment is dynamic, complex, multidimensional
and has far-reaching effects" accurately describes the characteristics of
the business environment.
Here is a
detailed description of each characteristic and a relevant example:-
(i)
Dynamic:
Definition: The
business environment is constantly changing due to various internal and
external factors.
Example: The
introduction of the Goods and Services Tax (GST) in India in 2017 significantly
changed the business landscape. It led to changes in pricing strategies, supply
chain management and tax compliance for businesses across various sectors.
(ii)
Complex:
Definition: The
business environment consists of many factors, events and conditions that
interact with each other, making it difficult to understand the relative impact
of each factor.
Example: The
economic environment in India is influenced by factors such as inflation rates,
interest rates and government policies. These factors interact with each other
and other environmental factors, making it complex to predict the exact impact
on businesses.
(iii)
Multidimensional:
Definition: A single
change in the business environment can be viewed differently by different
observers.
Example: The
introduction of a new technology such as artificial intelligence can be viewed
as both an opportunity and a threat by different businesses. For example, a
company investing in AI may see it as a competitive advantage, while another
company may see it as a threat to its existing business model.
(iv)
Far-reaching effects:
Definition: The
survival, growth, and profitability of a business depend heavily on the
environment in which it operates.
Example: The
COVID-19 pandemic had far-reaching effects on businesses around the world. It
caused changes in supply chains, shifts in consumer behavior, and significant
economic disruptions. Businesses that adapted quickly to these changes were
more likely to survive and thrive.
In
conclusion, the statement accurately reflects the dynamic, complex,
multidimensional, and far-reaching nature of the business environment. These
characteristics require businesses to be adaptable, responsive, and proactive
to succeed in a rapidly changing environment.
(b)
Explain various approaches and the process of „Environmental Scanning‟. 10
Ans:- Here
is a brief answer to the question on approaches and process of environmental
scanning:-
(A)
Approaches to Environmental Scanning
Experts
have identified three main approaches to environmental scanning:-
(i)
Systematic Approach: In this approach, information for
environmental scanning is collected systematically. It involves constantly
collecting data on factors such as markets, customers, changes in legislation,
government policies, etc. that directly affect the organization's activities.
(ii) Ad
Hoc Approach: Using this approach, an organization may undertake special
surveys and studies to examine specific environmental issues as needed, such as
when starting new projects or evaluating existing strategies.
(iii)
Processed-Form Approach: For this approach, the organization uses
information in processed form available from secondary sources both inside and
outside the organization, such as government agencies, trade journals, and
market research reports.
(B)
Process of Environmental Scanning
The
overall process of environmental scanning usually involves the following
steps:-
(i)
Identifying and studying key events and trends in the external environment.
(ii)
Establishing cause-and-effect relationships between these events/trends and the
organization's operations, both short-term and long-term.
(iii)
Preparing diagrams and models to measure and visualize the interrelationships
between various environmental factors.
(iv)
Reviewing the analysis with a group of experts providing inputs on potential
strategies.
Sources of
information for environmental scanning may include internal documents, trade
publications, government data, competitors, customers, suppliers, and market
research.
By
following a structured process of environmental scanning, organizations can
better identify opportunities and threats, and make more informed strategic
decisions.
2. (a) What is money market? How is it different from capital
market? 4+6
Ans:- Here
is a concise response addressing the key differences between money market and
capital market:-
Money
Market: The money market is a short-term borrowing and lending platform
that provides cash for businesses and governments to meet their immediate
operational needs. It deals in financial instruments with maturities of up to
one year, such as commercial paper, treasury bills, and certificates of
deposit.
Capital
Market: In contrast, the capital market is a long-term investment arena
where companies raise funds to expand their businesses and investors seek
potential growth opportunities. Capital market instruments have maturities
exceeding one year and include stocks, bonds, and other long-term securities.
The key
differences between money market and capital market are:-
(i)
Purpose and Function: Money markets focus on short-term borrowing
and lending to manage liquidity, while capital markets facilitate long-term
investment and capital formation.
(ii)
Instruments and Participants:
(a) Money
markets involve short-term instruments like commercial paper and treasury
bills, traded among banks, financial institutions, and large corporations.
(b)
Capital markets deal in long-term instruments like stocks and bonds, with a
broader range of participants including individual and institutional investors,
companies, and governments.
(iii) Risk
and Return: Money market instruments generally carry lower risk and offer
lower returns, while capital market investments have higher risk but potential
for higher returns.
(iv)
Regulation and Oversight: Money markets are more heavily regulated by
central banks to ensure stability, while capital markets have regulatory
oversight focused on fair trading and investor protection.
In
summary, the money market and capital market are complementary components
of the financial system, catering to distinct short-term and long-term
financing and investment needs.
(b)
Explain the constituents of capital markets and their importance to Indian
Economy. 10
Ans:- Capital
markets in India play a vital role in promoting the country's economic growth
and development.
The major
components of Indian capital markets and their significance are as follows:-
(i) Equity
Markets: Equity markets represented by stock exchanges such as BSE and NSE
allow companies to raise capital by issuing shares to the public. This enables
businesses to finance their operations, expand and invest in new projects, boosting
economic activity and generating employment. Equity markets also provide
investment opportunities for individuals and institutions, allowing them to
increase their wealth over the long term.
(ii) Debt
Markets: Debt markets facilitate the raising of capital through the
issuance of bonds and other fixed income securities by governments, public
sector enterprises and private companies. This provides an alternative source
of financing for large-scale, long-term infrastructure and development projects
that are critical to India's economic progress.
(iii)
Derivative Markets: Derivative markets, including futures and
options, allow investors to hedge risks and speculate on future movements of
asset prices. This improves the overall efficiency of the capital markets by
enhancing price discovery and liquidity.
(iv)
Regulatory bodies:
Bodies
such as the Securities and Exchange Board of India (SEBI) regulate and oversee
capital markets to ensure fairness, transparency and investor protection.
This helps
maintain the integrity and stability of the markets, which is essential for
attracting domestic and foreign investment.
(v)
Intermediaries:
Financial
intermediaries such as brokers, investment banks and mutual funds facilitate
the smooth functioning of capital markets by connecting issuers and investors.
They
provide essential services such as underwriting, market-making and investment
advice, thereby enabling efficient capital allocation.
In
conclusion, capital markets in India, with their diverse components, play a
vital role in mobilising savings, channelling investments and promoting
economic growth and development. By providing access to long-term financing,
investment opportunities and risk management tools, capital markets are
important drivers for India’s progress.
3. (a) Why is it necessary for the Government to bring capital
market reforms and regulatory measures? Discuss with examples. 10
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