CA Foundation – Importance of Business Environment & Relation between Organization and its Environment
In this article, I tried to make understand why the business environment is important for a business organization how both of them affects each other.
There are some of the important points mentioned as under:
- Determination of opportunity and threats:
A healthy interaction is necessary in between business organization and environment for the timely determination of opportunity and threats exist in the environment. By doing this a business organization can improve its activities and enable itself to move ahead towards profitability or to reduce losses and other downfalls.
- Giving directions for growth:
Continuous and sound interactions with environment enhance skills of a business organization to find out the growth area of the current business activities and expansion possibilities of business.
- Continuous learning:
Nature of dynamic change is very difficult to face but it carries positive phase too that due to dynamicity it has a great scope of learning and a great motivation to administration of business to get update the knowledge, skills to enhance understanding, vision for predicted changes and skills to implementation of adequate input to get the best results.
- Image building:
Any business organization which is sensitive towards the environment in which it exists and executes its activities according to environmental situation and demand does have a positive image in compression to those which behaves insensible.
- Meeting competition:
It aids organization to analyze and understand rivals strategies and enable to formulate their own according to situational requirement.
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Relation between the organization and its environment:
If we talk of a particular organization the external organization at one or different point of times provides opportunity, threats, and pressure thereby affects the structure and functioning of enterprises.
The relationship between the organization and its environment can be understood after going through the following points.
- Exchange of information:
In previous points of importance, it is mentioned that healthy communication with the environment by doing this an organization enables itself analyze and appraisal of different variable their behavior, changes a generation of important information and uses it for planning strategy and decision making. Most of the organizational structuring and functioning based on the external environment, and its information. Problem of uncertainty and complexity of the external environment may be reduced by way of generation and gathering important information and appropriate use of it.
Information needs to be gathered on all necessary and influential factors like economic activities, marketing conditions, technological and legal changes, political changes affecting functionalities of an organization. In addition to collecting information an organization also need to transmit necessary and related information to several external stakeholders.
Point to be noted: Any date having commercial importance is treated as information.
- Exchange of resources:
Organization receives input from the external environment can be denoted by 5 Ms which are Men, Money, Method, Machine, and Material. Organization uses above as input for producing goods or to provide services. A business organization gathers all these inputs from the external environment. Sometimes it competes; sometimes it collaborates with the external environmental factors to successfully execute its work and give the best and consistent results.
- Exchange of power and influence
External environment might always have a ruling attitude on business organization. Because a business organization can not control the external factor of the environment. Every external factor has its own will to provide input based on their terms and conditions. Sometimes it may lead to having inadequate inputs for an organization to provide adequate and demanded output to the external environment. All and all we can say external environment des always have power over to individual organization and may compel an organization to fall in line.
That is all about importance and relationship of business organization with its environment. For further knowledge and study please register with Takshila learning online classes as per student’s convenience and choice.
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