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Impact of economics on business operations
How global factors influence the business environment
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The business environment is constantly changing as time goes by. There are several factors that affect the aspects of the business environment such as benefits, costs, and risks of conducting business. The type of business, economic, government, and legal influences are major contributors to the business environment, Riordan Manufacturing, Huffman Trucking, Kudler Fine Foods, McBride Financial Services, The Elias Group, and Smith Systems are business that are affecting by those influences. Types of business may include sole proprietorship, partnership, limited partnership, corporation, limited liability partnership, limited liability company, c-corporation, and s-corporation.
Riordan Manufacturing, Inc. is a global plastics manufacturer partnership that was founded in 1991. (Ecampus) The partnership makes it possible to raise more capital and to share ownership responsibilities. Like the sole proprietorship, the partnership arrangement carries unlimited liability for the owners.(Foundations) While the partnership offers the advantage of sharing possible losses, it presents the problem of owners with unequal wealth having to absorb losses. (Foundations)
It manufactures products such as plastic beverage containers, plastic fan parts, heart valves, and medical stents. Economic influences on the business environment are interest rates, inventory levels, consumer confidence, unemployment rate, and gross national product. All of these have a drastic effect on the business.
Government influences include regulations, export restrictions, import tariffs and quotas, and government debt. The government influences can help or cause major problems for a business. The changes in regulations will force the business to meet and stay up to ...
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... sued, engage in contracts, and acquire property. It provides information technology services primarily in the Western United States. SSC strives for excellence when providing development solutions, strengthening existing business processed and implementation services. Its business is influenced by economic, government, and legal changes.
The economic influences that affect SSC are interest rates, monetary policies, inflation rate, unemployment rate, and consumer confidence. Interest rates are rates that is charged or paid for the use of money while inflation rates increase the price of goods and services. Unemployment rate and consumer confidence have a drastic affect on business. If unemployment rises,
consumer confidence will decline as well as business and revenue. The government influences are regulations, payroll taxes, budget deficit, and government debt.
First, I will discuss the time period between 1973-1974. Because the unemployment and inflation rates are higher than normal, we can assume that the aggregate-demand curve is downward-sloping. When the aggregate-demand curve is downward-sloping, we know that the economy’s demand has slowed down. When the economy’s demand has slowed down, businesses have to choice but to raise prices and lay off workers in order to preserve profits. When employers throughout the country respond to their decrease in demand the same way, unemployment increases.
The amount of government regulation, restriction, and intervention in the economy is substantial. No free markets, and rapid innovations in technology and communications, the need for government intervention in the economy is necessary to correct abuses or to promote general welfare.
Interest rates can directly affect businesses as the increase of interest will discourage spending and more saving, whereas the decrease of interest will encourage more spending and less saving as money is cheaper to borrow.
It is important to recognise the main features that affect a business in view of the macro and micro-environmental factors.
Business environment includes the internal as well as external factors that affect the operation of a business. Therefore, business environment is the sum total of the forces or the surroundings that have an influence on the business operations. The internal environmental factors are usually controllable because the management has control over it. Whereas the external environmental factors are difficult to control by the company. There are two types of external environment: Microenvironment and Macro environment.
Environmental – External environmental factors are forces or trends that can affect a business whether it is an opportunity, threat, or constraint. They can be divided into three interrelated subcategories of remote, industry, and operating environments. The remote environment includes factors beyond a company’s operating situation such as the economic, social, political, technological, and ecological factors. The industry environment includes factors that have more of a direct influence on a company’s business such as entry barriers, competitor rivalry, the availability of substitutes, and the bargaining power of buyers and suppliers.
As a starting point, it is useful to consider what environmental influences have been particularly important in the past, and the extent to which there are changes occurring which may make any of these more or less significant in the future for the organization and its competitors.
The largest cause of unemployment can be attributed to recession. The term recession refers to the backward movement of the economy for a long period. People spend only when they have to. (Nagle 2009). With people spending less there would be less money in circulation therefore, enterprises would suffer financially and people would suffer too. This is so because recession reduces the fiscal bases of enterprises, forcing these enterprises to reduce their workforce through layoffs. These enterprises lay off their workers in order to cut the costs they incur in terms of wage and salary payments.
Businesses play a significant role with the economies of all countries, whether developed or developing. It contributes to the welfare of the society through the satisfaction of needs, provides a source of livelihood to millions of people worldwide. Businesses do not operate in vacuums but operate within business environments. The events in the environment of a company have a direct effect on the success or failure of that company. According to Jain, Trehan and Trehan (2009), business environments can be categorized in two: (1) internal business environment; (2) external business environment. Institutions and organizations are usually in a position of controlling their internal business environment. By doing so, they gain the ability of affecting their institutional performance. On the contrary, it is difficult for a business to control the external environment; however, businesses can identify in advance the opportunities and threats presented by the external environment and take decisive actions to ensure its continued success (Jain, Trehan & Trehan, 2009; Goyal & Goyal, 2009).
b) The primary environmental factors that affect category specialist sector include technological, economic, and demographic factors. First, technology can impact a market by helping firms find new and efficient ways of conducting business activities. A change in technology can open the door for new entrants to enter the market, as well as present new advantages among competition.
The factors affecting the external environment of a business are Political, Economic, Social and Technological. The political are based on how government policies affect a business. The economic are how the economy affects the business; inflation, interest rates. The social are how consumers and communities act and their opinions. Finally the technological shows the fast pace of change in processes and innovation that can affect the business.
Economic conditions change rapidly whose effects are far reaching and hence require changes in marketing strategy. If a country or a region goes through a rapid decline a consumers spending pattern also changes. Interest rates and inflation affect buying. Interest rates directly affect the economy or situation. This is particularly important for business markets. Interest rates usually increase during periods of inflation. The economies of the world are connected and the economy of one country affects another. International trade is increasing and thus the change in the economy of one country affects the trade and commerce in another country. A marketing manager must watch the economic environment carefully. In contrast to the social and cultural environment economic conditions change continuously.
Economic factors affecting negative or positive way the companies. The inflation and currencies rates have big influence.
3. The factors that affect the cost management are competition, growth in the same industry as the company, and improvements in manufacturing technology.
The business environment that firms operate in can be divided into the internal environment and the external environment.