Why is it important for managers to understand the external environment?

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In many ways, the external environment can predict the trends and needs of consumers, and managers need to be able to interpret consumer trends and apply those insights to the company. Whether consumers are becoming frustrated with the company itself, are growing tired of the competition (and therefore opening up potential purchasing power), are looking for a new product, or are developing new concerns regarding the company's image, the power of the consumer to change the economics of the company should be recognized by managers.

The sociocultural force of a population can also influence the company and should be recognized by managers. Products are generally targeted to a fairly specific sociocultural group, and the values of each group will change over time. While a particular population may support the company's image or products initially, managers should be in touch with this population's perceptions and values to recognize when those values may begin to shift. Doing so allows the...

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