Why is the understanding of business environment important for Explain with the help of any four points.
Understanding of business environment is important for managers because, (i) It helps the firm to identify opportunities and get the first mover advantage: The ability to identifying the external opportunities early and to make the first move, makes an organisation the market leader. Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors and become the market follower. (ii) It helps the firm to identify threats and early warning signals: Business environment is prone to numerous threats. Environmental awareness can help managers to identify various threats on time and serve as an early warning signal. (iii) It helps in tapping useful resources: Environment is the source of all resources a business needs for its operation. It takes natural resources, human resource and financial resource and convert them to goods and services to customers, make payment of taxes to government, return on financial investment to investors and so on. As an organisation is completely dependent on the resources from environment, a manager should have a good understanding about business environment. (iv) It helps in assisting in planning and policy formulation: Business environment is very dynamic and is a source of both opportunities and threats. Only with a clear understanding of the various aspects of the environment, a manager can make plans for future and formulate policies.
