In trying to understand the environment and its influence on business, managers face many problems, mainly because of the following characteristics of the business environment:
a) Environment is complex:
The environment is not made of any one simple constituent but consists of a number of factors, events, conditions and influences, arising from different sources.
It is difficult to guess the factors that constitute a given environment. Hence, environment is at the same time complex and somewhat easy to understand in parts, but difficult in totality.
b) Environment is dynamic:
The environment does not remain constant but keeps on changing, For instance, the environment changes with the competitor’s products and strategies, govt, policies, customers’ preferences, etc.
Hence, in order to survive and grow, it becomes very important for every organization to understand its impact and adapt itself with such changes.
c) Environment is multi-faceted:
Same element or influence of environment affects different firms in different ways.
This is frequently seen when the same development, say liberalization, is welcomed as an opportunity by one company while another company perceives it as a threat.
d) Environment has a far reaching impact:
The environment has a long term and lasting impact on organisations. The growth and profitability of an organization depend critically on the environment in which it exists.