IMPORTANCE OF BUSINESS ENVIRONMENT

April 21, 2020


Good morning boys!

I hope you all have understood the meaning and features of business environment. Now, today we are going to do the importance of business environment. Then, some case studies will be given to you for practice after completion of these topics.

LEARNING OUTCOMES FOR TODAY- At the end of the topic, students will be able to-
a) Understand the importance of business environment.
b) Identify the importance  of business environment in the case studies.


First watch the video given below for better understanding of the topic and then write:

NOW WRITE DOWN:

Q.4 Explain the importance of business environment. (6)
Ans- 1. It enables the firm to identify opportunities and getting the first mover advantage -
a) Opportunities refer to the positive external trends or changes that will help a firm to improve its performance. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to the competitors.
b) For example-  Maruti Udyog became the leader in the small car market because it was the first to recognise the need for small cars in India.
2. It helps the firm to identify threats and early warning signals-
a)Threats refer to external environment trends and changes that will hinder a firm's perfotmance .Business environment can help managers to identify various threats on time and serve as early warning signals .
b) For example- If an Indian firm finds that an MNC is entering the Indian market with new substitutes, it should act as a warning signal and they can prepare themselves to meet the threat by adopting measures like improving the quality of the product ,reducing the cost of production, engaging in aggressive advertising,etc.
3. It helps in assisting in planning and policy formulation -
a)Business environment is a source of both opportunities and threats for a business enterprise , its understanding and analysis can be the basis for deciding the future course of action or  training guidelines for decision making.
b) For example-  Entry of new players in the market , which means more competition may make an enterprise think about how to deal with the situation.
4)It helps in coping with rapid changes-
a) Business environment is increasingly dynamic where changes are taking place at a very fast rate.
b) Today's business environment comprises of turbulent market conditions, less brand loyalty,  fragmentation of market , more demanding customers,  rapid changes in technology and intense global competition. So managers must understand and examine the environment and develop suitable courses of action.
5)It helps in tapping useful resources-
a) Business enterprise assembles various resources like finance ,machines raw materials , etc and it supplies the environment with outputs like goods and services for customers, payment of taxes to government, etc.
b) It helps in tapping resources that it needs so that it can convert those resources into outputs that the environment desires.
6) It helps in improving performance-
a) The business enterprises that continuously monitor their environment and adopt suitable business practices cannot only improve their present performance but also continue to succeed in the market for a longer period.