1. “ The economic environment of business exercises a strong influence on the non-economic environment ”. Discuss this statement with the help of examples.
Ans. A business unit is a macro/micro economic unit. The business environment furnishes the macro-economic context within which the firm operates.-external factors or forces which affect the operation of the business unit.business firms must demonstrate adaptability as well as adoptability to environment. The economic environment of business is a complex one. The business unit has economic relation with 1. GOVERNMENT
2. CAPITAL MARKET
3. HOUSEHOLD SECTOR
4. FOREIGN SECTOR
These different sectors together influence trends and the structure of the economy. The design and structure of the economic system is conditioned by the socio-political arrangement which affect the macro-micro economic decisions.
THE NON-ECONOMIC MACRO ENVIRONMENT OF BUSINESS These non-economic environment is complex and dynamic. Political. Environmental regulations and protection
a). Tax policies: what tax hinder the business and what taxes incentives are available
b) International trade regulations and restrictions: Does the government encourage exports / with high tariffs on import c) Contract enforcement law/Consumer protection : Does the government enforce on consumer protection.
d) Employment laws: Does the government encouraging skilled immigrants with temp. permits
e) Government organization / attitude: - Does the government have a very positive attitude towards this industrY f) Competition regulation:- Are there regulation for limiting competition
g) Political Stability: politically , does the government have a very stable government
h) Safety regulations:- Has the government adopted some of the modern safety regulations
i) Economic growth : what is the economic growth rate / what are the reasons
j) Interest rates & monetary policies: are the interest rates under control / is there a sound monetary policies] -Government spending
k) is government spending is significant and is it under control
l) Unemployment policy: what is the employment / unemployment policies of the government m) Taxation: Has the taxation encouraged the industry n)Exchange rates: Is there well managed exchange controls and is it helping the industry
o) Inflation rates: Does the inflation well under control p) Stage of the business cycle: is your industry is on the growth pattern
q) Consumer confidence: is the consumer confidence is high/ strong and if not, why
r) Income distribution: is there balanced income distribution policy s) Demographics, Population growth rates, Age distribution: what is population growth and why
t) Labor / social mobility: -hat are the labor policies and is there labor mobility u) Lifestyle changes: Are there significant lifestyle changes taking place--more modernization/ why. v) Work/career and leisure attitudes: Are the population career minded and are seeking better lifestyle w) Education: what are the education policies / is it successful
The economic environment of business unit exercises a strong influence on the non-economic environment of the business just as the non-economic environment can influence the economic environment. THE ECONOMIC ENVIRONMENT IS BOTH
IT IS DETERMINED AS WELL AS DETERMINING.
(1) social factors affect the economic ...
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