Importance of management understanding business environment

The environment contains those factors ‘surrounding the organization’. Therefore it includes more than the ‘ecological’ environment. In your answers you must ensure you discuss environmental factors such as competitors and legislation as well as factors such as environmental pollution and recycling.

To be viable (e.g. able to sustain itself through time) the organization must achieve an appropriate ‘fit’ with this environment. This includes:

 Results that meet the expectations of its owners (shareholders, government, members etc. )
 Products and services that meet its clients’ expectations at least as well as rivals’
 Ability to remain within the legal and ethical codes of the societies it works in
 Attractive as a place to work for its staff
 Satisfying the needs of other powerful or influential stakeholders

Rational planning approach: Environmental appraisal is a one-off assessment which establishes the forces acting on the business at present and forecasts how these may develop during the years of the plan. Strategic management approach: The need for environmental scanning. This is a continuous awareness by management of environmental issues enabling them to be routinely considered in decision making.

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