Importance of Business

Environment

Presented To: Mr. Kamlesh Kumar

Presented By : Arjun Kumar

Enrolment number:- MGCUB2020MGMT4010

Business environment have its own importance as a
course about Business Management
 A study of business environment is highly
significant for business management for the
following reasons:
(i) To Ensure Smooth Functioning of Business Cycle:

Smooth functioning of business cycle depends on availability of inputs

and disposal of output.
Business enterprises obtain inputs like raw-materials, machines,
technology, manpower etc. from the society (which is part of business
environment); and dispose of output i.e. finished goods to society.
Hence, business managements must study business environmental factors
so as to be aware of changes in input supplies, changes in social factors
like consumer behavior, state of competition in industry etc. to ensure
smooth functioning of their business cycles.
(ii) To Take Advantage of Environmental Opportunities:

A study of business environment is essential to take full

advantage of opportunities for gain hidden in the business
environment.
Some examples of opportunities for gain might be:
1. Export concessions offered by the government.
2. Rising demand for many products (due to expanding
markets)3. Availability of skilled man-power (due to rising levels
of education in society).
4. Availability of latest technology etc.
(iii) To Avoid Legal Consequences:
Legal regulatory factors are important dimensions of business
environment. By studying business environment intelligently,
management can avoid legal consequences which many arise due
to non-adherence to legal provisions applicable to the business
enterprise. It is better to swim with the current than against it.
Legal regulatory factors are important dimensions of business
environment. By studying business environment intelligently,
management can avoid legal consequences which many arise due
to non-adherence to legal provisions applicable to the business
enterprise. It is better to swim with the current than against it.
(iv) To Ensure Better Competitiveness and Higher
Profitability

By studying business environmental factors (particularly

competitive and technological); management can ensure better
competitiveness and higher profitability for the business
enterprise.
(v) To Ensure Survival and Growth of Enterprise:
A study of business environment is a great aid in ensuring
survival and growth of the business enterprise amidst volatile
and turbulent environmental factors (Volatile and turbulent
factors are those which are likely to change suddenly and easily
becoming dangerous). For ensuring survival and growth under
the circumstances management can do better planning;
introduce organizational flexibilities; come out with
innovations; resort to joint ventures and mergers or follow a
policy of systematic adaptation (These concepts are explained
in the next sub-title i.e. managerial response to changes in
business environment).
(vi) To Better Meet Social Responsibilities:
By studying social-religious-cultural factors, business
management, can capitalize on (i.e. to take advantage of)
changing social values like emerging fashions, craze for a
higher standard of living (creating demand for new types of
luxurious goods/services) etc. Managerial response to changes
in business external environment means how a business
enterprise cope with environmental uncertainties. A business
which cannot manage environmental influences successfully
may disappear in the short-run or long-run.
 Some of the means through which business
managements can respond to changes in business
environment are suggested below:
(i) Installation of MIS (Management Information
System):

For scientific decision making under conditions of

environmental uncertainties, accurate, precise and timely
information is needed by management. This purpose may be
well-served by installing a MIS. MIS is a planned and well
organized information system; under which vital information
for management decision-making is collected, processed,
evaluated and timely supplied to executives – needing such
information.
(ii) Forecasting:

Systematic forecasting of relevant business environmental

factors may help management in taking sound strategic
decisions. Statistical and mathematical techniques like
probability, index numbers, correlation, regression, time-series
etc. may be used for purposes of scientific forecasting. Of late,
much management experts have also conducted forecasting on
the basis of astrology.
(iii) Recruitment of Experts:

Experts from social, economic, financial and political fields

may be recruited by business enterprises; that may help
management in skilled decision-making – by providing the
advantage of their expert knowledge.
 (iv) Innovations:

Management may try to maneuvers business environmental

influences by coming out with innovations, which may include:

1. Development of new shapes, sizes and designs of old products

2. Expansion of old markets, by introducing new products.

3. Discovery of new markets – for old and new products.

4. Development of a new process or technique of production.

5. Suggesting new uses of the old product.

(v) Path of Least Resistance:

This is a strategic device to cope with business environmental

forces. Under the approach of ‘path of least resistance’, a
business enterprise may follow a new course of action to
continue with its operations successfully rather than
confronting with environmental forces.

For example, finding intense competition in the urban market

for its products, a firm may start searching rural markets for
selling its products where there is less acute competition.
 (vi) Acquisitions, Mergers and Joint-Ventures:

This again is a strategic measure devised for coping with

business environmental influences. Acquisitions, mergers and
joint ventures are a sort of business combinations, which make
business units stronger by combining with one another; and
enable them to face environmental pressures and uncertainties
with more strength and confidence.
(vi) Systematic Adaptation:
Intelligent business managements, adopt a policy of ‘systematic adaptation’ to business
environmental changes. In the light of the trend of environmental changes, they may
evolve certain techniques to more successfully managing environmental forces.

Some such techniques may be:

1. Gradual de-centration of authority to lower levels of management which are in a better

position to feel the pulse of the market.

2. Introducing flexibility in organizational structure.

3. Emphasizing more on social responsibilities, to win the popularity of general public’s,

in their favour.

4.Gradually switching over to new technology etc.

THANK YOU