Question 2

How would you argue that the success of a business enterprise is significantly influenced by its environment?


Business enterprises cannot work in isolation. Therefore, a good understanding of the environment not only helps the manager to deal with uncertain situations, but also helps the organizations to identify and benefit from opportunities that the environment offers. The following point highlights the importance of business environment for the success of a business enterprise:

1. It enables the firm to identify opportunities and get 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. It helps the firm to identify threats and early warning signals: Threats means external environmental changes that hinder the performance of the firm. And proper awareness of the business environment helps the manager to identify the threats on time and then they can prepare themselves to meet the threats.

3. It helps in tapping useful resources: Environment is a source of various resources for running a business and it provides inputs to the business like finance, machines, raw materials, power, and water, labour etc. Every enterprise depends on the environment as a source of inputs or resources and in return the enterprise supplies outputs such as goods and services. And for that enterprise designs policies that allow it to get resources that it needs so that it can convert those resources into outputs that the environment desires.

4. It helps in coping with rapid changes: Business environment is dynamic in nature and changes are taking place at a fast pace. And to cope effectively with the changes managers must understand and examine the environment and develop suitable courses of action.

5. It helps in assisting in planning and policy formulation: Environment is a source of both opportunities and threats for the business enterprise. And its understanding and analyzing helps them to decide future course of action or training guidelines for making policies to deal with the present situation.

6. It helps in improving performance: The future of the business is bound with what is happening in the environment. And a continuous monitor to the environment helps to adopt suitable business policies and practices which not only improve the performance of the business but also continue to succeed in the market for long terms.

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