It is very important for business firms to understand their environment and changes occurring in it. Business enterprises which know their environment and our ready to adapt to environmental changes would be successful on the other hand which fails to adapt to the environment unlikely to survive in the long run. For example: some Indian firm suffered considerably because they failed to appreciate the tightening regulation against environmental pollution. Knowledge of environmental changes is very helpful in the formulation and implementation of the business plan.
The environment provides both opportunities and constraints to business. Environment forces create opportunities for expansion and grow through opening of:
New market
Technological advancements
Increase in population and income etc.
It is also essential for business firms to be aware of the forces and institutions that exist in the environment. Business enterprises must be manage in harmony with these forces and institution so that they can achieve their objectives.
Business environment exercises tremendous influence on the working and success of the business firm. Therefore management of a business enterprise must have a deep understanding and appreciation of the environment.
The changes taking place in environment must be continuously monitor to judge the impact on business. Appropriate and timely steps must be taken to face the environmental challenges.
