Importance of business environment is as follows:
(i) Determine strategies and policies: The study of the environment helps a business to develop broad strategies and long-term policies based on relevant information that is feasible for smooth and efficient operations of business.
(ii) Ensure optimum utilisation of resources: A study of business environment can assist a business to determine the sources and means of obtaining and utilising required resources optimally.
(iii) Analyse competitors' strategies: Business environment continuously keeps collecting and displaying strategies adopted by competitors. Accordingly, businesses can formulate effective counter-plans to face them.
(iv) Foresee the impact of socio-cultural factors: With knowledge on socio-cultural factors like religion, caste, value system, education, family size, urbanisation, etc., businesses can make timely changes in their policies and strategies and accordingly adjust their products or services.