Significance of business environment

Contents

Significance of business environment

1. Helps in overall development

Environment helps in overall economic development of a business. A business acquires production, exchange and their allied services from the environment. Demand for goods, supply of raw materials, labour, transportation and infrastructure facilities etc. Which are the indicators of overall development, are acquired by a business from the environment.

2. Importance of social change

The social and cultural environment keeps on changing. Therefore, the business enterprises also have to change and adjust in changing environment. This will help in identifying key issues. find ways of coping with complexity and also assist in managerial thinking to handle challenges.

3. Preparing long-term plans

Business enterprises depend on the environment of preparing long term future plans. The environment performs decisive role at the different level of strategy formulations. The vision of strategic planning start from a situational analysis of the firm in the environmental context. Research and analysis help a business enterprise in formulation of long term strategy.

4. Knowledge of market position

A business enterprise gets the information of changing market situation from the environment around it. Information about customers taste, fashion, new entrants, change in production cost, sources and constraints of know how etc., are generated and anticipated.

5. Importance of technical changes

Modern technique is the pivot of the progress of a business unit. The firm which quickly adopts latest technology has competitive advantage over others. E-commerce and e-banking are the results of fastest technical changes in business.

6. Effect of government policy

The results of business is no determined by economic format only but they are also affected by the various government policies. Governments taxation policy, licensing policy, export-import policy, industrial policy, monetary policy, licensing policy, etc. create the favourable environment for the progress of business in country. The government policies are also modified to create favourable environment at the international level.

7. Struggle against problems

Just like human beings business also does not function in isolation or in vacuum. Business functions within a whole gambit of relevant environment and have to negotiate their way through it. The extent to which the business thrives depends on the manner in which it interacts with its environment. A business which continually remains passive to the relevant changes in the environment is destined to gradually fade away or go in oblivion. the business must continuously monitor and adopt to the environment it is to survive and prosper. Disturbance in the environment may spell extreme threats or open up new opportunities for the firm.

8. Importance of international events

The international environment is very important for certain categories of business. It has been observed that major international development have their effect spread on domestic business. Companies that seek new markets in foreign countries must do an environmental analysis, both internal and external. A good export market enables a firm to develop a more profitable mix and to consolidate its position in the domestic market; a company may be able to mitigate the effects of domestic recession by exporting goods.

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