A business does not operate on its own. It is always in contact with the environment. The fact that it produces goods or services for buyers and compete with rivals already shows that without any relations with its environment, a business could simply not be. It needs to be in touch with the outside world in order to be successful. Considering the world is "constantly changing-, does this mean that companies need to focus only on reacting in an effective and flexible way to these changes? therefore undermining the importance of strategies?.
First of all it is useful to understand the concept of environment and explain how and why it is vital for a company to be aware of it and to take appropriate steps. The idea of a strategy being important to a company should also be emphasised along with the prerequisites to establish the strategy. .
First of all it is a fact the companies are constantly interacting with their environment. They try to satisfy customer demand by adapting to them, they respect the laws when operating and they may suffer when the economy is not going well.
There is thus a relation between a business and its environment.
There are two major external forces which may have an influence over a company's decision. The macro environment and the industry in which the company is.
The macro environment concerns aspects of the world which surrounds a company such as the economy, society and politics, the law, the technology and the demography. These factors may be of significant importance to a business. Indeed the knowledge of laws and regulations implemented by a government seems to be vital for a business. For example management should know what laws and regulations are applied in the case of redundancy; a business should also be aware of technological progress which could help improve productivity. Any changes in lifestyles, concerns or culture should be taken into account by a company if it wants to be aware of customer demand.