Importance of business environment with example

(A) It Helps in Identifying Opportunities and Making First Mover Advantage

• The environment provides numerous opportunities and it is necessary to identify the opportunities to improve the performance of a business.
• Early identification gives an opportunity to an enterprise be the first to identify opportunity instead of losing them to competitors.
• Example: ‘Airtel’ identified the need for fast internet and took first-mover advantage by providing 4G speed to its users followed by Vodafone and Idea.
• Asian paints lost market share to Nerolac because of its failure to match its technology.

(B) It Helps the Firm Identify Threats and Early Warning Signals

• The business environment helps in understanding the threats which are likely to happen in the future.
• Environmental awareness can help managers identify various threats on time and serve as an early warning signal.
• Example: Patanjali products have become a warning signal to the rest of the FMCG
• The sector to develop similar products. Similarly, if an Indian firm finds that a
• Foreign multinational is entering the Indian market with new substitutes, it needs to prepare accordingly.
• Chinese mobile phones have become a threat for Indian mobile phone manufacturers.

(C) It Helps in Tapping Useful Resources

• Business and industry avail the resources (inputs) from the environment
• and convert them into usable products (outputs) and provide to society.
• The environment provides various inputs (resources) the like finance, machines, raw materials, power and water, labour, etc.
• The business enterprise provides outputs such as goods and services to the
• Customers, payment of taxes to the government, to investors and so on.

Example: With the demand for the latest technology, manufacturers will tap the resources from the environment to manufacture LED TVs and Smart TVs rather than collecting resources for colour or Black & White TVs.