Importance of business environment
(i) It Enables the firm to Identify Opportunities and Getting the First Mover Advantage:Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of loosing them to competitors, e.g., Eureka Forbes introduced Aquaguard and took away the cream of demand.
(ii) It Helps the Firm to Identify Threats and Early Warning Signals: Environment happens to be the source of many threats. Environmental awareness can help managers to identify various threats on time and serve as an early warning signals e.g., Lakme took serious steps to improve the quality and types of products as foreign multinational cosmetics companies started coming to India after 1991.
(iii) It Helps in Tapping Useful Resources: Environment offers various resources for running a business in return the business enterprise supplies the environment with its outputs such as goods and services for customers, taxes for government. In order to arrange for the best possible resources, better understanding of the environment becomes important.
(iv) It Helps in Coping with Rapid Changes: It is not the fact of change itself that is so important as the pace of change. There are many changes taking place in the environment and at a fast speed. In order to effectively cope with these changes, managers must understand and examine the environment and develop suitable courses of action.
(v) It Helps in Assisting in Planning and Policy Formulation: Since environment is a source of both opportunities and threats, its understanding and analysis only helps in formulating the best possible policies to handle the future properly.
(vi) It Helps in Improving Performance: Continuous monitoring and adopting changes in an enterprise will help in improving not only their present performance, but also continue to succeed in the market in long run.
