It is important for business organisations to understand their environment because of the following reasons
1. It enables the Firm to identify opportunities and getting the first Mover advantage: Environment provides numerous opportunities for business. Early identification of opportunities helps an enterprise to use it before instead of losing them to competitors.
It helps the Firm to identify threats and early Warning Signals. Environmental awareness can help managers to identify various threats on time and serve as an early warning signals.
It helps in tapping useful Resources Environment is a source for the various resources for running a business. To engage in any type of activity, a business enterprise assembles various resources called inputs. This can be done better by understanding what the environment has to offer.
It helps in coping with rapid changes. All types of enterprises are facing increasingly dynamic environment. In order to effectively cope with these significant changes, managers must understand and examine the environment and develop suitable courses of action.
It helps in assisting in Planning and Policy formulation. Since environment is the source of opportunities and threats, it’* understanding and analysis becomes the base for various policies to be framed and strategies to be made.
It helps in improving performance The enterprises that continuously monitor their environment and adopt suitable business practices are the ones which not only improve their present performance but also continue to succeed in the market for a longer **.
