Economic Factors Affecting Business

ECONOMICAL FACTORS

Economic environment refers to those economic factors which have impact on the working of business viz. Economic system, economic policy, nature of economy, trade cycles, economic resources, level of income, distribution of income and wealth, economic legislation, etc. Economic environment of business is very complex in nature. It is very dynamic. It keeps on changing with change in government policies, change in political situations etc. The business has economic relation with the government, domestic household sector, capita market and foreign sector, etc. These different sectors together influence the trends and structure of economy. The form and functioning of business units is affected by changes in economic systems,

It is, to a large extent, an artificial construct that can be contrasted with the natural environment in which we live. Every society constructs its own social environment. Some of the customs, beliefs, practices and behaviors are similar across cultures, and some are not. For example, an American traveling to Britain will find many familiar practices but not so much if traveling to China. This social environment created by a society-at-large in which a business functions can be referred to as its external social environment. If a business operates in a multicultural society, then the social external social environment is even more complicated because the environment will consist of diverse sub-populations with their own unique values, beliefs and customs. A business also has its own social environment. We can refer to this as its internal social environment, which is simply the customs, beliefs, practices and behaviors within the confines of the business. A business has much more control over its internal social environment than it does with its external social

It also reads the global political condition’s effect on the country and business. When conducting this step, ask questions like “What kind of government leadership is impacting decisions of the firm?”

Some political factors are:

 Government policies

 Taxes laws and tariff

 Stability of government

 Entry mode regulations

ECONOMIC FACTORS

Economic factors involve all the determinants of the economy and its state. These are factors that can conclude the direction in which the economy might move. So, businesses analyze this factor based on the environment. It helps to set up strategies in line with changes.

Economic factors are affecting your business below:

 The inflation rate

 The interest rate

 Disposable income of buyers

 Credit accessibility

 Unemployment rates

 The monetary or fiscal policies

 The foreign exchange rate

SOCIAL FACTORS

Countries vary from each other. Every country has a distinctive mindset. These attitudes have an impact on the businesses. The social factors might ultimately affect the sales of products and services.

Some of the social factors:

 The cultural