Correct Answer: Planning and policy formation

Solution : The major strategies or plan and policies in the organisation are formed keeping in mind business environment because the policies and strategies have to be implemented in the presence of environmental forces.

Since environment is a source of both opportunities and threats for a business enterprise, its understanding and analysis can be the basis for deciding the future course of action (planning) or training guidelines for decision making (policy).
Hence, option 1 is the correct answer.