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Question
How does understanding of business environment help in improving performance of a business?
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Solution
An understanding of business environment help in improving performance of a business due to the following reasons:
a. It helps to identify the best opportunities and getting the first-mover advantage. It is better to analyze the market and grab the opportunity rather than losing it to the competitors. It can prove to positively contribute to the business.
b. A detailed analysis of the business environment helps in the identification of thread which may have a negative effect on the functioning of the Enterprise. They can become an early warning signal and help the Enterprise to formulate adequate steps to cope up with it.
c. The environment provides various resources that are helpful to the business for its running in the long term environment. In return, the environment is provided with output in the form of goods and services by the Enterprise. So the environment is considered to be both a source of demand and the source of resources. So the Enterprises must arrange for the best possible resources which can be done only after a detailed studying of the business environment.
d. The environment is constantly changing in terms of technology, government policies, taste and preference of the consumer, etc. The manager of the firm must analyze the business environment to cope up with the changes.
e. It also helps in formulating new plans and policies according to the current scenario. This, in turn, helps to improve the overall performance of the Enterprise
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