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CSEET · Economic and Business Environment · Business Environment

Ananya Textiles Ltd. finds that a new government import policy has made imported yarn cheaper, while a competitor has launched a lower-priced product. In classifying these forces, which statement is correct?

Government import policy is a macro external factor because it affects all businesses broadly, while a competitor belongs to the firm's immediate task environment and is a micro external factor. Neither is internal, since the firm does not control them, whatever their effect on its costs.

  1. ABoth are internal factors because they affect the firm's costs
  2. BThe import policy is a micro external factor and the competitor is a macro external factor
  3. CThe import policy is a macro external factor and the competitor is a micro external factorCorrect
  4. DBoth are internal factors because management must respond to them

Explanation

Government policy is a general, economy-wide force, so it is a macro (general) external factor. A competitor is part of the firm's immediate operating surroundings, so it is a micro (task) external factor. Option A is wrong because effect on cost does not make a factor internal.

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