'Sensitivity to environmental factors is essential for an entrepreneur.' In the light of this statement, explain the importance of environment scanning.

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Accepted Answer

Importance of environment scanning: An entrepreneur who is sensitive to the environment is better placed to succeed in the long run — as the rule of thumb puts it, if you don't adapt, you don't endure. The benefits of scanning the environment are:

1. Identification of opportunities to get first mover advantage — by keeping in touch with changes in the external environment, the enterprise can identify opportunities and capitalise on them at the earliest. For example, Volvo, the Swedish brand, holds a 74% share in the luxury bus segment because it entered India earlier.

2. Formulation of strategies and policies — scanning helps identify threats and opportunities in the market, which serve as the basis for formulating strategies to counter threats and capitalise on opportunities.

3. Tapping useful resources — with thorough knowledge of the external environment, the firm can tap raw materials, technology and even financial resources from the market at economical prices, at the right time.

4. Better performance — proper understanding of the various elements of the external environment is necessary to take timely action to deal with threats and avail opportunities, leading to improvement in the performance of the firm.

5. Sensitisation of entrepreneurs to cope with rapid changes — a keen watch on trends in the environment sensitises the entrepreneur to changing technology, competition, government policies and changing needs of customers, as seen in trends in clothing.

6. Image building — a company sensitive to the external environment comes out with new products and services to meet customer requirements, building the image or reputation of the firm, as with call-radio taxis offering GPS and online booking.

Without scanning, the entrepreneur is sure to fail — the right information, combined with the right adaptations, determines the organisation's future viability.