Importance - Business Environment | Business Environment - B Com PDF Download

1. Identification of Opportunities: By studying environment scanning, an enterprise can identify opportunities and strategies to capitalize on the opportunities at the earliest. Latest example is the invention of KG-6 oil by Mukesh Ambani’s industries. Reliance industries saw opportunity in this business and now they are trying to cash on it.

2. Identification of Threats: Environment scanning or SWOT Analysis helps to identify threats of an enterprise by studying all the external factors. For example, the proposal of Tata Motors with coming out of ‘lakhtakiya car’ i.e. Nano by the month of November 2008 is posing a threats to other small car makers.

3. Deal with the Internal Environment: A business should be completely familiar with its internal environment because all goals, objectives, plans, procedures and strategies depend upon the internal environment. Environment analysis helps in knowing the internal environment properly and in formulation of strategies as well. It can be seen in the case study of Kellogg’scompany world’s leading producer of breakfast cereal. At the declining stage of one product ‘nutri-grain’ it decided to re-launch and re-brand the product and it helps the brand grew at almost three times that of the market.

4. Better Understanding of the Market: A business has to compete in the market. Therefore, it is very necessary to have the knowledge of the composition of the market. The business should have the understanding of the changes taking place at national and international levels. For instance, Volkswagen is the largest car maker in Europe and Skoda became one of its distinct brands. Skoda prepared a SWOT Analysis to audit its position. Skoda took the opportunity to develop a new market approach. Other car makers have straplines that put the emphasis on a feature such as technology or luxury. Skoda decided to use the key strength identified and focus on ‘happy customers’.

5. Image Building: The companies which are able to scan and respond to environmental factors quickly are able to build a good image for themselves. So, the companies which are proactive in their approach, they make good image for themselves in the eyes of public. For instance, in 2006, Cadbury recalled its products after revelations that the product may be contaminated with the bacterium salmonella. This really enhances the image of the company.

6. Better Performance: With continuous scan of business environment companies can perform in a better way. By making changes in the internal environment matching to the external environment, organisations can prosper and improve their market share.