Read the passage and answer the following questions.
Dynamic Horizons Ltd., a global brand, is known for its innovative approach to manufacturing and selling smartwatches. Recently, the company decided to launch its operations in two new markets- a developing country and a European nation. In the developing country, the company faced challenges such as unstable policies, a lack of proper infrastructure, limited purchasing power among the local population and an unfavorable attitude from the government. However, they noticed that the younger population was showing a growing interest in smartwatches, providing a potential market segment to target. But, the European nation presented an entirely different scenario with stringent laws and an established consumer base with high purchasing power and intense competition from local brands with similar watches. The smartwatch, which was desirable for populations in developing countries, was just another watch in European countries. Dynamic Horizons understood that they should adapt their products to the preferences of Europeans to gain a foothold here. So, the company in both the markets, leveraged advanced technological solutions including AI (Artificial Intelligence) technology and a tracking application in the smartwatch to enhance the customer experience. However, they faced challenges due to fluctuations in inflation rates which impacted raw material costs and transportation expenses. It is also imperative for the management of the enterprise to obey the law of the land.
Dynamic Horizon faced instability and an unfavorable attitude from the government. Which dimension of the business environment is reflected in this statement?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Political environment
Option (1) Political environment — Correct. The passage talks of unstable policies and an unfavourable attitude from the government. The political environment includes general stability and peace in the country. It also includes the attitude of the government towards business. Political instability shakes the confidence of business people. The government’s attitude can help or harm business.
Option (2) Legal environment — Incorrect. The legal environment is about laws, government orders and court judgments. The statement is about instability and the government’s attitude, not about any law.
Option (3) Social environment — Incorrect. The social environment is about customs, values and social trends. It is not about the government.
Option (4) Economic environment — Incorrect. The economic environment is about inflation, interest rates and income. Low buying power is an economic factor. But this statement is about instability and the government’s attitude.
NCERT (2026-27 Edition): “Summary … Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold toward business.” |