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Question
What are the five key points that highlight the significance of Environmental scanning in guiding organisations to adapt to rapidly changing business environment?
Solution
Importance of business environment:
- Identify opportunities: Recognizing favourable external factors that a company can exploit to its advantage. Identifying opportunities allows businesses to capitalize on new markets, innovate their products or services, and gain a competitive edge.
- Identify threats: Recognizing external factors that could negatively impact the company's performance helps businesses develop strategies to mitigate risks and protect their market position.
- Use resources: Efficiently and effectively utilizing the company’s resources to achieve its objectives. Understanding the business environment helps companies allocate their resources optimally, ensuring that they are used where they can have the most significant impact.
- Cope with changes: Business leaders are expected to cope with rapid changes in the environment. In order to decide the direction and nature of change the leaders need to understand the aspirations of people and other environmental forces through environmental scanning. For example, the contemporary environment requires prompt decision-making and power to people.
- Planning and policy: Developing strategies and policies to guide the company’s operations and achieve its goals. A thorough understanding of the business environment is essential for effective planning and policy-making. It ensures that the company’s plans are realistic and aligned with external realities.
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Assertion (A): The business environment helps in understanding the threats which are likely to happen in the future.
Reason (R): Environmental awareness can help managers to identify various threats on time and serve as an early warning signal
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