Economic environment

Economic environment

1. ECONOMIC ENVIRONMENT

2. Contents Economic environment Its types Importance The Business cycle International Business environment Its significance

3. Economic environment It basically consists of external factors in a business market and the broader economy that can influence a business. The Economic environment in which a business operates has a great influence upon it It could be divided into two parts i.e. Microeconomic environment – This affects the business decision making such as individual actions of firms and consumers. Macroeconomic environment - This affects the entire economy and all of its participants.

4. Types of economic environment 1.)Macroeconomic environment – These are basically broad economic factors that either directly or indirectly affect the entire economy and all of its participants, including our business. These factors include such things as :- Interest rates Taxes Inflation Currency exchange rates Consumer discretionary income Savings rates Consumer confidence levels Unemployment rate Recession Depression

5. 2.) Microeconomic factors – These influences will have their impacts on the decision making of our business. Unlike macroeconomic factors, these factors are far less broad in scope and do not necessarily affect the entire economy as a whole. Microeconomic factors influencing a business include:- Market size Demand Supply Competitors Suppliers Distribution chain, such as retail stores

6. Significance of Economic Environment firm to identify opportunities and getting the first mover advantage firm to identify threats and early warning signals Coping with rapid changes Improving performance

7. The Business Cycle To gain a good understanding of the international economic climate and, how or why particular factors can affect it, it's important to have an understanding of the business cycle . business cycle represents the four stages of economic growth followed by economic decline. Peak/boom Contraction/slump Recession Expansion As the business cycle repeats itself on a continuous basis, the expansion stage would be followed by another peak. The following diagram is a pictorial representation of the business cycle.

8. International Business environment International business environment means the factors that affect/influence the MNC’s and transactional companies. Factors that affect international business environment are generally known as STEPIN. S  Social & cultural factors T  Technological Factors E  Economic Factors P  Political & Govt. Factors I  International Factors N  Natural Factors

9. Significance of International Business environment Helps in expansion Helps in managing product life cycle :  Technology advantages New business opportunities Proper use of resources :  Availability of quality products :

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