Why is the understanding of business environment important for manager? Explain with the help of any four points.

Explanation

Understanding of Business Environment is very important for managers. It is highlighted through the following points.
(i) Identifying opportunities and getting first mover advantage: The businessmen, who are able to understand and scan the opportunities of business at early stage; can get maximum benefits or they can capture a big market before their competitors can grab these opportunities. For Example. Nerolac Goodlass company was the first company to understand the environment at an early stage to find out that there will be great demand of car painting in India and got all the car painting contract of Maruti company and today 90%, of car paint work of Maruti is done by Nerolac Goodlass company.
(ii) Identifying threats and early warning signals: Threats refers to the external environment trends and changes that will hinder a firm's performance. Threats work as warning signals for organisation to take suitable actions. By identifying threats and early warning signals, the organisation may effectively overcome it by adopting counter strategy. Timely scanning of business environment acts as warning signals for a business to prepare itself to modify its working in advance and try to utilize the qualitative information it receives about the competitors.
(iii) Helps in tapping useful resources: Businessmen have to supply the goods and services according to the demand and consumer needs. To supply and produce output, they need inputs like finance, power, machines, raw-material etc, keeping in mind their availability, in environment and demand of output in the market. So the existence enterprise depends on the environment as a source of inputs.
(iv) Improvement in performance: The study of environment acts as a major source of continuous learning on the part of managers. The enterprises that continuously monitor their environment and adopt suitable business practices at the right time are the ones which not only improve their present performance but also continue to succeed in the market for a longer period.
(v) Helps in assisting in planning and policy formulation: Environmental factors help in making plans and formulating policies for future. Scanning, understanding and analysing the business environment provides the base for planning and policy formulation (guidelines for decision making).
(vi) Helps in coping with rapid changes: It enables managements to become more sensitive to cover changing needs of customers. As a result, they are able to respond to such changes effectively.