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Let's make simple, easy-to-understand notes for Business Environment

& Legal Aspect of Business (BMB 201), unit by unit.

Unit-I: Your Business's Immediate Surroundings (Micro Environment)

What is this unit about?
This unit helps you understand the forces very close to a business that affect its daily
operations and decisions. Think of it as the people and groups a company interacts with
directly.
Key Topics:
1. Understanding the Business Environment:
○ Simply put: Everything outside the business that can affect how it operates,
succeeds, or fails.
○ Business: Any organization that sells goods or services to make a profit.
○ Why it's important: Businesses need to know their environment to find
opportunities and avoid threats.
2. Types of Business Organizations:
○ Different ways businesses can be set up (e.g., Sole Proprietorship,
Partnership, Company – you don't need deep detail here, just recognize that
different structures exist).
3. SWOT Analysis:
○ What it is: A simple tool to look at a business's:
■ Strengths (things it does well internally).
■ Weaknesses (things it doesn't do well internally).
■ Opportunities (favorable conditions outside the business).
■ Threats (unfavorable conditions outside the business).
○ Purpose: Helps a business plan its strategy by matching its internal strengths
to external opportunities, and dealing with internal weaknesses and external
threats.
4. Micro Environment (Internal to the Enterprise):
○ These are factors inside the company that affect its operations.
○ Value System: The beliefs and ethics of the company and its founders.
○ Management Structure: How the company is organized (who reports to
whom).
○ Human Resources: The employees, their skills, motivation.
○ Company Image & Brand Value: How the public sees the company and its
brands.
 ○ Physical Assets: Buildings, machinery, land.
○ Facilities: Offices, factories, stores.
○ Research & Development (R&D): How much the company invests in
creating new products or improving old ones.
○ Intangibles: Things you can't touch but have value (e.g., patents,
trademarks, company reputation).
○ Competitive Advantage: What makes the company better than its rivals.
5. Micro Environment (External to the Enterprise - but still close):
○ These are outside the company but directly affect it.
○ Suppliers: Companies that provide raw materials or components. (Their
quality, reliability, and prices matter).
○ Customers: The people or businesses who buy the products/services.
(Understanding their needs is key).
○ Market Intermediaries: People or organizations who help the company sell
its products (e.g., wholesalers, retailers, distributors).
○ Public: Any group that has an actual or potential interest in or impact on an
organization’s ability to achieve its objectives1 (e.g., media, government, local
communities).
○ Competitors: Other companies offering similar products or services.
6. Michael Porter’s Five Forces Analysis:
○ What it is: A powerful tool to understand how competitive an industry is and
how profitable a company within that industry might be.
○ The Five Forces:
1. Threat of New Entrants: How easy or hard is it for new companies to
start in this industry? (If easy, more competition).
2. Bargaining Power of Buyers: How much power do customers have to
push prices down? (If many options, buyers have more power).
3. Bargaining Power of Suppliers: How much power do suppliers have to
raise prices? (If few suppliers, they have more power).
4. Threat of Substitute Products or Services: Are there other ways
customers can satisfy the same need? (E.g., email is a substitute for
postal mail).
5. Rivalry Among Existing Competitors: How intense is the competition
among companies already in the industry? (High rivalry means less profit).
7. Competitive Strategies:
○ How a company plans to beat its rivals (e.g., lower prices, better quality,
unique products).
Unit-II: The Bigger Picture (Macro Environment)
What is this unit about?
This unit looks at the larger, uncontrollable forces that affect all businesses in a society.
These are broader trends and conditions.
Key Topics:
1. Macro Environment (The PESTLE factors):
○ These are the big, external factors that generally affect all businesses, not
just one.
○ Economic Environment: Factors like interest rates, inflation, income levels,
economic growth, unemployment. (Affects how much people can buy).
○ Socio-cultural Environment: Society's values, beliefs, customs, lifestyle
trends, demographics (age, population size). (Affects what people want to
buy).
○ International Business Environment: Factors related to global trade,
international policies, global economic conditions, trade agreements.
○ Natural & Physical Environment: Availability of natural resources, pollution
levels, climate change, weather patterns.
○ Technological Environment: New technologies, innovation, automation,
internet use. (Can create new products or make old ones obsolete).
○ Legal & Political Environment: Government policies, laws, regulations,
political stability, taxes. (Affects what businesses can and cannot do).
2. Global Integration:
○ How different countries and their economies are becoming more connected
through trade, technology, and culture.
3. Business Policy & LPG Model:
○ LPG Model: Refers to major economic reforms in India:
■ Liberalization: Reducing government controls and restrictions on
businesses (e.g., easier to start businesses, import goods).
■ Privatization: Transferring ownership of government-run businesses to
private hands.
■ Globalization: Integrating the Indian economy with the world economy
(e.g., opening up to foreign investment, increasing trade).
○ Impact: These policies significantly changed the business environment in
India, bringing more competition and opportunities.
4. International Trade in Business:
○ The buying and selling of goods and services across national borders.
Unit-III: The Rules of Agreement (Law of Contract)
What is this unit about?
This unit introduces you to the basic rules that govern agreements between people and
businesses – what makes an agreement a legally binding contract.
Key Topics:
1. Contract:
○ Simply put: An agreement between two or more parties that is enforceable
by law. If someone breaks a valid contract, the other party can go to court.
○ Essentials of a Valid Contract (MUST-HAVES):
1. Offer: One party proposes terms (e.g., "I will sell you my car for ₹2 lakh").
2. Acceptance: The other party agrees to those terms exactly as offered.
3. Intention to Create Legal Relationship: Both parties must intend for
the agreement to be legally binding, not just a casual promise.
4. Lawful Consideration: Something of value exchanged by both parties
(e.g., money for a car). It can be "something for something."
5. Capacity of Parties: Both parties must be legally capable of entering a
contract (e.g., of legal age, sound mind).
6. Free Consent: Agreement must be genuine, not forced or misled.
7. Lawful Object: The purpose of the contract must be legal and not
against public policy.
8. Certainty: Terms must be clear and not vague.
9. Possibility of Performance: The agreement must be something that can
actually be done.
10. Not Expressly Declared Void: The law doesn't forbid it.
2. Key Concepts in Contract Law:
○ No consideration, no contract: Generally, if nothing of value is exchanged,
it's not a valid contract (with a few exceptions).
○ Doctrine of Privity of Contract: Only the parties to a contract can sue or be
sued on it. A third party generally cannot.
○ Quasi Contract: Not a real contract, but the law treats it like one to prevent
unfairness (e.g., if you accidentally receive someone else's package, you are
legally bound to return it).
○ Remedies for Breach of Contract: What happens if a contract is broken?
(e.g., damages/compensation, specific performance, injunction).
3. Sale of Goods Act (Basic Understanding):
 ○ Essentials: Deals with contracts where ownership of goods is transferred
from seller to buyer.
○ Sale vs. Agreement to Sell:
■ Sale: Ownership transfers immediately.
■ Agreement to Sell: Ownership transfers in the future (e.g., once goods
are made).
○ Conditions vs. Warranties:
■ Condition: A main term of the contract, essential to its purpose. Breach
allows the buyer to reject goods and claim damages.
■ Warranty: A minor term, collateral to the main purpose. Breach only
allows the buyer to claim damages, not reject goods.
○ Rights of Unpaid Seller: What a seller can do if the buyer doesn't pay for the
goods (e.g., lien on goods, right to resell).

Unit-IV: Governing Companies (Companies Act)

What is this unit about?
This unit focuses on the legal framework for companies – how they are formed, run, and
dissolved in India.
Key Topics:
1. Companies Act:
○ Simply put: The main law that governs companies in India.
○ Company: An artificial person created by law, separate from its owners
(shareholders). It has a separate legal identity.
○ Characteristics of a Company:
■ Separate Legal Entity: The company is separate from its members. It
can own property, sue, and be sued in its own name.
■ Perpetual Succession: It continues to exist even if members die or
change.
■ Limited Liability: Members' liability is limited to the amount they invested
or guaranteed. Their personal assets are usually safe.
■ Common Seal: An official stamp (though often not mandatory now).
■ Transferability of Shares: Shares can generally be bought and sold.
2. Kinds of Companies:
○ Private Company: Has restrictions on transferring shares, limits the number
of members, and cannot invite the public to subscribe for shares.
○ Public Company: No restrictions on share transfer, no limit on members, can
invite the public to buy shares.
 ○ Other types like One Person Company (OPC).
3. Formation of a Company:
○ The steps involved in setting up a company (Promotion, Incorporation, Capital
Subscription, Commencement of Business).
4. Key Documents:
○ Memorandum of Association (MOA): The company's most important
document. It defines the company's main objects, powers, and relationship
with the outside world. (Like its constitution).
○ Articles of Association (AOA): Internal rules and regulations for managing
the company's affairs. (Like its bylaws).
○ Prospectus: An invitation to the public to buy shares or debentures of a
company.
5. Directors:
○ Individuals who manage the company's business.
○ Appointment: How they are chosen.
○ Powers, Duties, and Liabilities: What they can do, what they must do, and
what they are responsible for.
6. Meetings and Resolutions:
○ Types of Meetings: Board meetings, shareholder meetings (Annual General
Meeting - AGM, Extra-ordinary General Meeting - EGM).
○ Resolutions: Decisions passed at meetings (e.g., Ordinary Resolution,
Special Resolution).
7. Auditor:
○ An independent professional appointed to check the company's financial
records.
○ Appointment, Rights, and Liabilities.
8. Winding Up of a Company:
○ The process by which a company's existence is brought to an end
(liquidation).

Unit-V: Protecting Consumers & The Digital World (Consumer Protection & IT
Law)
What is this unit about?
This unit covers laws designed to protect consumers from unfair practices and laws dealing
with electronic transactions and cyber security.
Key Topics:
1. Consumer Protection Act (CPA):
 ○ Aim/Objective: To protect the rights and interests of consumers. Provides a
simpler and quicker way for consumers to get justice.
○ Who is a Consumer? Someone who buys goods or hires services for
personal use (not for resale or commercial purpose).
○ Rights of a Consumer:
■ Right to Safety
■ Right to Information
■ Right to Choose
■ Right to be Heard/Representation
■ Right to Seek Redressal
■ Right to Consumer Education
○ Consumer Protection Councils: Bodies established at district, state, and
national levels to promote and protect consumer rights.
○ Redressal Agencies: The three-tier system for handling consumer
complaints:
■ District Consumer Disputes Redressal Commission (District Forum)
■ State Consumer Disputes Redressal Commission (State Commission)
■ National Consumer Disputes Redressal Commission (National
Commission)2
○ Penalties for Violation: What happens if a company or person violates
consumer rights (e.g., fines, imprisonment in some cases).
2. Information Technology (IT) Act:
○ Simply put: The law in India that deals with cybercrime and e-commerce. It
gives legal recognition to electronic transactions.
○ Key Concepts:
■ Digital Signature: An electronic way to prove the identity of the sender
of a digital message and ensure the message hasn't been tampered with.
It's like an electronic signature.
■ Electronic Governance: Using electronic means to perform government
functions (e.g., online tax filing, e-filing of applications).
■ Electronic Records: Data, record, or data generated, image or sound
stored, received or sent in an electronic form.
■ Certifying Authorities: Entities licensed to issue Digital Signature
Certificates.
■ Duties of Subscribers: Responsibilities of people who get a Digital
Signature Certificate.
 ■ Penalties and Offences: The Act defines various cybercrimes (e.g.,
hacking, data theft, identity theft) and outlines penalties.

These notes should give you a solid and understandable foundation for "Business
Environment & Legal Aspect of Business." Remember to also check your specific
university's past papers for common questions!