Question

State any three points of importance of business environment.

Hint:

Any three of these: first mover advantage, early warning of threats, tapping resources, coping with change, and planning.

Answer 1

Step 1: Why business environment matters:
A firm works inside its environment and depends on it for inputs and customers. So a study of the environment helps the firm survive and grow.
Here are three points of its importance.

Step 2: Point 1: Identifies opportunities and gives first mover advantage:
A manager who studies the environment can spot a chance before others do.
The firm can then use it first, instead of losing it to a rival. This is called the first mover advantage.

Step 3: Point 2: Identifies threats and early warning signals:
Changes in the environment, such as a new competitor or a new law, can hurt a firm.
If the firm sees these signs early, it can prepare in time and reduce the damage.

Step 4: Point 3: Helps in tapping useful resources:
A firm takes inputs like money, material and labour from the environment and gives back goods and services.
By understanding the environment, it can design policies that help it get the resources it needs.

Step 5: Other points that can also be written:
It helps managers cope with rapid changes by choosing suitable courses of action.
It also helps in planning and policy formulation, because future plans and guidelines are based on environmental facts. Only any three points are needed.

Final Answer:
Three points are: it gives first mover advantage, it warns of threats early, and it helps the firm tap useful resources.