An analysis of business environment helps to identify strength, weakness, opportunities & threats. Analysis is very necessary for the survival and growth of the business enterprise. The importance of business environment is briefly explained in an analysis below.
(1) Identification of Strength: The analysis of the internal environment helps to identify strength of the firm. For instance, if the company has good personal policies in respect of promotion, transfer, training, etc than it can indicates strength of the firm in respect of personal policies. This strength can be identified through the job satisfaction and performance of the employees. After identifying the strengths the firm must try to consolidate its strengths by further improvement in its existing plans & policies.
(2) Identification of Weakness: The analysis of the internal environment indicates not only strengths but also the weakness of the firm. A firm may be strong in certain areas; where as it may be weak in some other areas. The firm should identify sue weakness so as to correct them as early as possible.
(3) Identification of Opportunities: An analysis of the external environment helps the business firm to identify the opportunities in the market. The business firm should make every possible effort to grab the opportunities as and when they come.
(4) Identification of Threats: Business may be subject to threats from competitors and others. Therefore environmental analysis helps to identify threats from the environment identification of threats at an earlier date is always beneficial to the firm as it helps to defuse the same.
(5) Exploitation of Business Opportunities: Environment opens new opportunities for the expansion of business activities. Study of environment is necessary in order to discover and exploit such opportunities fully.
(6) Keeping Business Enterprise Alert: Environment study is needed as