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Why is the understanding of business environment important for managers? Explain with the help of any four points. |
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Answer» 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 theexternal opportunities early and to make the first move, makes an organisation the market leader.Environment provides numerous opportunities for business success. Early identification of opportunitieshelps an enterprise to be the first to exploit them instead of losing them to competitors and become themarket follower. (ii) It helps the firm to identify threats and early warning signals: Business environment is prone to numerousthreats. Environmental awareness can help managers to identify various threats on time and serve as an earlywarning signal. (iii) It helps in tapping useful resources: Environment is the source of all resources a business needs for itsoperation. It takes natural resources, human resource and financial resource and convert them to goods andservices to customers, make payment of taxes to government, return on financial investment to investors andso on. As an organisation is completely dependent on the resources from environment, a manager shouldhave a good understanding about business environment. (iv) It helps in assisting in planning and policy formulation: Business environment is very dynamic and is asource of both opportunities and threats. Only with a clear understanding of the various aspects of theenvironment, a manager can make plans for future and formulate policies. |
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