Why it is important for business enterprises to understand their environment? Explain briefly.
Answers
SOLUTION :
It is important for business enterprises to understand their environment because of the following reasons :
1.It helps business firms to identify opportunities and get the first mover advantage :
Opportunities are the positive trends that help firms to grow. A good knowledge of business environment helps the manager to identify opportunities earlier to take its benefit rather than losing it to other competing enterprises.
2. It helps business firms to identify threats and get warning signals :
The businessmen who are able to scan and understand the business environment on time get a warning signal to deal with such negative changes.
3. It helps in coping with rapid changes :
In order to cope up with such changes and derive benefit from them ,managers must examine the environment and develop suitable action.
4. It helps in planning and policy formulation :
Business environment is a source of identifying both opportunities and threats, its proper analysis and understanding provides the base for planning and guides in framing policies.
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