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Explain any four points to explain how important the understanding of business environment is for the managers.

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The importance of business environment can be explained in the following points:

1. Identification of opportunities: Business environment enables the firm to identify opportunities and getting the first mover advantage. Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors. 

2. Identification of threats: The study of business environment helps the firm to identify threats and helps to know early warning signals. 

3. Helps in tapping useful resources: Environment is a source of various resources for running a business. To engage in any type of activity, a business enterprise assembles various resources called inputs like finance, machines, etc from its environment. The business enterprise supplies the environment with its outputs such as goods and services for customers etc.

Because the enterprise depends on the environment as a source of inputs and as an outlet for outputs, the enterprise designs policies that allow it to get the resources that it needs so that it can convert those resources into outputs that he environment desires. This can be done better by understanding what the environment has to offer.

4. Coping up with rapid changes: Today’s business environment is getting increasingly dynamic. All business enterprises are facing increasingly dynamic environment. In order to effectively cope with these significant changes, managers must understand and examine the environment and develop suitable courses of action.

5. Assistance in planning and policy formulation: Since 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.

6. Improved performance: The future of an enterprise is closely bound up with what is happening in the environment. And the enterprises that continuously monitor their environment and adopt suitable business practices are the ones which not only improve their present performance but also continue to succeed in the market for a longer period

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