A dairy company needs loans from banks, milk from farmers and electricity from the state power board. Before asking for these, its managers study what each of them expects in return and arrange the company’s terms so that it can get what it needs. Which importance of understanding business environment does this show?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → It helps in tapping useful resources
Option (1) It helps in coping with rapid changes — Incorrect. This point is about the fast pace of change in today’s environment, which managers must keep up with. The dairy is not reacting to a change; it is arranging its inputs.
Option (2) It helps in improving performance — Incorrect. This point says that firms which keep watching their environment do better and succeed for longer. The case is about getting loans, milk and power.
Option (3) It helps in tapping useful resources — Correct. A firm gets its inputs, like finance, raw materials and power, from financiers, suppliers and the government. These parties give them with their own expectations to get something in return. By learning what each one expects, the dairy can set its terms and get the resources it needs.
Option (4) It helps in assisting in planning and policy formulation — Incorrect. This point uses the study of opportunities and threats to decide the future course of action. The dairy is meeting the expectations of those who supply its inputs.
NCERT (2026-27 Edition): “(iii) It helps in tapping useful resources: Environment is a source of various resources for running a business. To engage in any type of activity, a business enterprise assembles various resources called inputs like finance, machines, raw materials, power and water, labour, etc., from its environment including financiers, government and suppliers. They decide to provide these resources with their own expectations to get something in return from the enterprise. The business enterprise supplies the environment with its outputs such as goods and services for customers, payment of taxes to government, return on financial investment to investors and so on. Because the enterprise depends on the environment as a source of inputs or resources and as an outlet for outputs, it only makes sense that the enterprise designs policies that allow it to get the resources that it needs so that it can convert those resources into outputs that the environment desires. This can be done better by understanding what the environment has to offer.” |