Question

Why it is important for business enterprises to understand their environment?

Options

• Identification of Opportunities

• Identification of Threats

• Identification of Threats

• All of the above

Answer 1

All of the above

Explanation -

The following points emphasise the significance of environmental understanding for business enterprises.

1. Identification of Opportunities : An enterprise can identify positive business opportunities by carefully analysing the business environment. Early identification of opportunities allows it to gain an early  competitive advantage.
2. Identification of Threats : In addition to positive opportunities, a study of the business environment assists an enterprise in identifying threats or negative signals that may have an adverse effect on its operation. As a result, it is able to take appropriate preventive measures.
3. Accumulating Useful Resources : The environment provides a business with various resources or inputs for its operation, such as raw materials, machinery, labour, and so on. Enterprises, on the other hand, generate output in the form of goods and services for the environment. That is, the environment serves as both a source of resources and a source of demand for the enterprises' products. As a result, it is logical for businesses to take up resources from the environment that can be converted into the desired output. This is only possible if the enterprises understand what the environment wants and what it can provide.