CMA Foundation · Fundamentals of Business Economics and Management · Economic and Business Environment
Ramesh Textiles Ltd. finds that a new government policy permitting 100% foreign direct investment in its sector has attracted global rivals into the Indian market. This change belongs mainly to which component of the business environment?
The change is part of the political-legal environment, because a government policy on foreign direct investment is a regulatory decision. It alters the competitive conditions for the firm through law and policy, rather than through technology, social customs or natural resources.
- ATechnological environment
- BSocio-cultural environment
- CPolitical-legal environmentCorrect
- DNatural environment
Explanation
FDI policy is decided by the government through rules and regulations, so it falls within the political-legal environment. It is not a technology change, a change in social values, or a natural resource factor.
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