Some of the direct benefits of understanding the environment are given below:
(i) First Mover Advantage: Awareness of environment helps an enterprise to take advantage of early opportunities instead of losing them to competitors. For example, Maruti Udyog became the leader in small car market because it was the first to recognise the need for small car on account of rising petroleum prices and a large middle class.
(ii) Early Warning Signal: Environmental awareness serves as an early warning signal. It makes a firm aware of the impending threat or crisis so that the firm can take timely action to minimize the adverse effects, if any, for example, when new firms entered in the mid segment cars (threat), Maruti Udyog increased the production of its Esteem threefold. Increase in production enabled the company to make faster delivery. As a result the company captured a substantial share of the market and became a leader in this segment.
(iii) Customer Focus: Environmental understanding makes the management sensitive to the changing needs and expectations of consumers. For example, Hindustan Unilever and several other FMCG companies launched small sachets of shampoo and other products realizing the wishes of customers. This move helped the firms to increase sales.
(iv) Strategy Formulation: Environmental monitoring provides relevant information about the business environment. Such information serves as the basis for strategy making. For example, ITC realized that there is a vast scope for growth in the travel and tourism industry in India and the Government is keen to promote this industry because of its employment potential. With the help of this knowledge, ITC planned new hotels both in India and abroad. Study of environment enables and organization to analyse its competitors’ strategies and thereby formulate effective counter strategies.
(v) Change Agent: Business leaders act as agents of change. They create a drive for change at the gross root level, In order to decide the direction and nature of change, the leaders need to understand the aspiration of people and other environmental forces through environmental scanning. For example, contemporary environment requires prompt decision-making and power to people. Therefore, business leaders are increasingly delegating authority to empower their staff and to eliminate procedural delays.
(vi) Public Image: A business firm can improve its image by showing that it is sensitive to its environment and responsive to the aspirations of public. Leading firms like Reliance Industries, ICICI Bank and others have built good image by being sensitive and responsive to environmental forces. Environmental understanding enables business to be responsive to their environment.
(vii) Continuous Learning: Environmental analysis serves as broad based and ongoing education for business executives. It keeps them in touch with the changing scenario so that they are never caught unaware. With the help of environmental learning managers can react in an appropriate manner and thereby increase the success of their organizations. Knowledge of changing environment can keep the organization dynamic in its approach.