Fizzo Ltd., a soft drink maker, finds that the demand for its drinks has fallen this year. Its managers cannot work out how much of the fall is due to a new health trend, how much to a rise in tax and how much to a rival’s new technology.
Which feature of business environment does this situation show?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Complexity
Option (1) Uncertainty — Incorrect. Uncertainty means that it is very difficult to predict future happenings. Here the fall in demand has already happened, and the managers are trying to sort out its causes.
Option (2) Inter-relatedness — Incorrect. Inter-relatedness means that one part of the environment brings a change in another, as health awareness raised the demand for fat-free cooking oil. Fizzo’s problem is measuring the share of each cause.
Option (3) Complexity — Correct. The environment is made of many interrelated forces from different sources. So it is easier to understand in parts but difficult to grasp as a whole. It is hard to know the relative impact of social, economic and technological factors on a change in demand. Fizzo faces three such forces at once: a health trend, a tax rise and a rival’s technology.
Option (4) Dynamic nature — Incorrect. Dynamic nature means that the environment keeps on changing. The managers know that things have changed; what they cannot do is weigh each factor.
NCERT (2026-27 Edition): “(iv) Dynamic nature: Business environment is dynamic in that it keeps on changing whether in terms of technological improvement, shifts in consumer preferences or entry of new competition in the market.” “(v) Uncertainty: Business environment is largely uncertain as it is very difficult to predict future happenings, especially when environment changes are taking place too frequently as in the case of information technology or fashion industries.” “(vi) Complexity: Since business environment consists of numerous interrelated and dynamic conditions or forces which arise from different sources, it becomes difficult to comprehend at once what exactly constitutes a given environment. In other words, environment is a complex phenomenon that is relatively easier to understand in parts but difficult to grasp in its totality. For example, it may be difficult to know the extent of the relative impact of the social, economic, political, technological or legal factors on change in demand of a product in the market.” |