2. Given the importance of understanding the external environment, why do some firms fail to do so? Please provide examples based on what students can provide examples of firms that did not understand their external environment. What were the implications of the firm's failure to understand that environment?

Importance of understanding the external environment The needs and the current trends can be forecasted if the company understands the external environment. A company should understand the technologies currently used by most companies and use the latest technologies for production or trading activities so that consumers can get the latest trend. A company should comply with government policies and regulations so that it does not have to face any restrictions or be banned by the government while conducting business. If the company is successful to understand the demographic environment, then it can also be able to understand the company’s potential customers. Understanding the demographic environment can help the company to target the customers as in which area what customers should be targeted and also the taste and preferences of the consumers can be identified with the assessment of demographic understanding. The economic factors such as inflations, changes in the exchange rate, or other macroeconomic factors should also be assessed by the company analyst to know the future demand and supply in the market and also to know how the inflations can be adjusted by using the purchasing power theory or interest rate theory or any other theory (Zhang, Amankwah-Amoah and Beaverstock, 2019). Most firms fail to understand these external environments as the benefit that can be derived from the environmental changes are not known to them and also the company is using traditional styles of strategies to run and manage the companies. In this dynamic market, companies are not using the strategies of innovation. Many companies do not even implement new machines and technologies within the factories or companies. Those companies that do not implement strategic planning and who do not adhere to the rules and regulations of the government fail to assess the external environment. The business environment is always uncertain and companies should be ready to face these uncertainties they can only examine and assess these uncertainties when they are changing themselves with the changing environment all factors related to legal, political, economic, technological, etc. should be identified and analyzed in detail. For example, Nokia company who does not change with the latest technologies demanded by the market and fails to assess the substitute power such as Samsung mobile which results in a loss of customers in the market. Nokia company fails to analyze the threats that can arise from its substitutes and also fails to analyze the buyer and supplier power in the mobile industry, and because of these failures, Nokia's market value has also decreased due to which Nokia company can shut down at any time.