8. Identify and state the importance of business environment from the following: (a) Maruti Udyog became leader in the small car market because it was the first to recognise the need for small cars in an environment of rising petroleum prices and a large middle class population in India. (b) Entry of new players in the market, which means more competition may make an enterprise think afresh about how to deal with the situation. (c) Many studies reveal that the future of an enterprise is closely bound up with what is happening in the environment. It really makes a difference in the performance of an enterprise.
Answers
The importance of business environment identified from cases (a), (b) and (c) are as follows:
Case (a)
- It enables the firm to identify opportunities and getting the first-mover advantage.
Maruti Udyog was able to identify the opportunity of manufacturing small cars in an environment of rising petroleum prices and a large middle-class population in India, thereby enabling them to plan and start with their business accordingly and as early as possible.
Case (b)
- It helps the firm to identify threats and early warning signals.
With the entry of new players in the market, competition and risks arise between various firms, enabling the firms to be aware of the possible hindrances that may arise in the situation and impact the firm's performance. This also helps them plan accordingly and avoid risks.
Case (c)
- It helps in improving performance.
Businesses that are able to foretell the possible risks/hindrances/changes that are about to take place, or rather, that are able to adapt to the dynamic environment of the market usually perform well, as they know what to be careful of and how to handle certain situations, as per the studies they've made with the changing business environment.