Globalization

Globalization

What are the economic factors affecting business environment

Business today is affected by the economic, socio-cultural, legal/political, technological, international, and natural factors. These factors collectively form business environment. Those factors are the total of all external forces, which affect the organisation and operations of business. Each organization must continuously adapt to the environment if it is to survive and prosper.

Economic dimension: Economic dimension represents the general economic health of the country or region. Organizations today are operated in global environment; the economic dimension has become extraordinary complex and creates enormous uncertainty for managers. Also, the economic environment consists of factors that affect consumer purchasing power and spending patterns. Economic factors include business cycles, inflation, unemployment, interest rates, and income. Changes in major economic variables have a significant impact on the marketplace. For example, income affects consumer spending which affects sales for organizations. Consumers spend less money in buying products if they have laid off in work, and consumers buy more products if they make much salary.

Political/ legal dimension: Political/legal dimension includes government regulation at the local, state, and federal levels. Organizations must operate within a framework of governmental regulation and legislation. Government relationships with organizations embrace subsidies, tariffs, import quotas, and deregulation of industries. The political environment includes special interest groups that influence and limit various organizations, and individuals in a given society. Organizations hire lobbyists and run advocacy ads that state their point of view on public issues. Special interest groups have grown in number and power as putting more constraints on marketers. The public requires organizations to be ethical...