Business and its environment are closely inter-related and mutually interdependent. Environment has its bearing on business and business has its bearing on environment. The success of business lies in understanding the environmental changes and adapting its business policies accordingly.

The surroundings of business enterprise which are constantly changing, carry with them both opportunities and risks or uncertainties which can make or mar the future of business. Significance of the study of
environment in business sector may be explained as follows:

1. Early identification of opportunities helps a business organization to be the first to exploit them.
2. A business organization should make its policies keeping in view the demands of environment.
3. The study of business environment is important to ensure optimum utilization of resources like, financial resources, human resource and physical resource etc.
4. Environment analysis helps the business organizations to identify strengths and weaknesses.
5. Environment analysis helps the business organizations to identify threats and explore opportunities available to business.
6. Environment analysis helps in adapting latest technological development which results in improved efficiency.
7. Scanning the business environment helps to understand Political Situation and its effect on business.
8. Scanning the business environment helps to understand economic policies of Government and their impact on business.
9. Because of globalization, the impact of international events on business is increasing. To understand global events and their impact on business, study of international environment is must.
10. By environmental analysis, business organizations come to know about the strategies of competitors to formulate counter plans.
11. Environment analysis helps in understanding the market conditions i.e. change in demand/supply, change in fashion, taste, boom or depression etc.