The benefits of understanding the relevant environment of business are:
(i)Identification of opportunities to get first mover advantage: By keeping in touch with the changes in the external environment, an enterprise can identify opportunities and find strategies to capitalise on the opportunities at the earliest. For Example, Volvo, the Swedish brand has 74% share in the luxury bus segment as it had entered India earlier.
(ii)Formulation of strategies and policies: It helps in identifying threats and opportunities in the market. These can serve as the basis of formulation of strategies to counter threats and capitalise on opportunities in the market.
(iii)Tapping useful resources: If the company has a thorough knowledge of the external environment, it can tap raw materials, technology and even financial resources from the market at economical prices at the right time.
(iv)Better performance: Proper understanding of the various elements of the external environment is necessary to take timely action to deal with the threats and avail opportunities for the purpose of improvement in the performance of the firm.
(v)Sensitisation of entrepreneurs to cope up with rapid changes: A keen watch on the trends in environment would help to sensitise the entrepreneur to the changing technology, competition, government policies and changing needs of the customers. E.g., changing trends in clothing.
