Question:

Rajat was carrying on a business of manufacturing plastic disposables like plastic plates, plastic cups and plastic straws. He heard about the upcoming ban on single use plastics. He was able to identify this external environmental trend which could hinder his firm’s performance. So he took action and shifted to manufacturing the plates, cups and straws from bamboo and palm leaves. As a result, his business not only survived but was able to generate profit.
The point of importance of Business Environment highlighted above is :

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Understanding business environment helps businesses react to risks before they become problems.
Updated On: Jun 23, 2025
  • It enables the firm to identify opportunities and getting the first mover advantage.
  • It helps the firm to identify threats and early warning signals.
  • It helps in tapping useful resources.
  • It helps in assisting in planning and policy formulation.
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The Correct Option is B

Solution and Explanation

The case describes how Rajat anticipated a threat to his plastic products business due to an upcoming ban on single-use plastics. His ability to foresee this threat early allowed him to pivot toward eco-friendly alternatives (bamboo, palm leaves), thereby saving and even growing his business.
This exemplifies the importance of business environment in providing early warning signals about possible threats so that firms can adapt their strategies in advance.
Final Answer: (B) It helps the firm to identify threats and early warning signals.
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