Question

Write short answers of the following.

What is the need and importance of business environment?

Answer 1

The following points highlight the need and importance of studying the business environment:

i. Identification of Opportunities - An analysis of the business environment enables an enterprise to identify various positive opportunities and thereby, be the first to take advantage in its competition with other companies.

ii. Identification of Threats - A study of the business environment can also help a company identify various threats or negative signals and enable it to take preventive measures timely and appropriately.

iii. Accumulation of Useful Resources - A business environment, on the one hand, provides an organisation various inputs required for its functioning, and on the other hand, acts as a source of demand for the goods and services produced by it. Thus, it is important for an organisation to understand its environment and use the resources that are required for the production of the goods and services in demand.

iv. Adjustment to Changes - A careful study of the business environment helps an organisation in dealing with various changes in the external forces better.