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Explain any FOUR Points of Importance of “Business Environment” .

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Business Environment refers to all Individuals or Institutions (Supplier, Customers, Competitors etc) and Other Forces (Economic, Social, Political etc) which are external to a business and beyond its control but that may affect its performance. 

Importance of “Business Environment” : 

  • Helps in Assisting in Planning and Policy Formulation : Environment analysis helps in identifying threats and opportunities in the market. These can serve as the basis for deciding the future course of action (planning) or training guidelines for decision-making (policy). 
  • Helps in Tapping Useful Resources: A business firm is an open system which gets resources from the environment, converts them into goods and services desired by the customers and then supplies its output to the environment. Thus, a business firm depends on its external environment for tapping various resources and for the sale of its output. 
  • Helps in Coping with Rapid Changes: Managers must understand and examine the business environment and develop suitable courses of action to cope with turbulent market conditions, rapid changes in technology, intense global competition, etc. 
  • Helps in Improving Performance: Enterprises which continuously monitor their environment and adopt suitable business practices not only improve their present performance, but also continue to succeed in the market for a longer period . If a firm is sensitive to the external environment, it will come out with new products and services to meet the future requirements of the customers. 
  • Image Building: If a firm is sensitive to the external environment, it will come out with new products and services to meet the requirements of the customers. This builds the image or reputation of the firm in the eyes of the customers and the general public. Because of sensitivity to Indian consumers’ requirements, LG was able to enhance its brand image in the Indian market in a short span of time.

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