What are three reasons why it is important for managers to understand the environments in which they operate?

Managers are required to understand the business environment to exploit opportunities, deal with threats, and adapt to current situations. Based on the opportunities (O) and threats (T) aspects of a SWOT analysis, it is understood that these two elements are brought about by external factors. The environment presents both opportunities and threats, and it is up to the manager to make the right decisions based on the situation to ensure the business survives and thrives. For instance, laws passed by governments may present opportunities for growth or threats to the firm. An economic crisis would pose a threat to the establishment by affecting the customers’ ability to buy. In this case, the manager will be required to make the right decisions with regards to pricing, production, promotions and other factors of the product to adapt to the situation.