SIGNIFICANCE AND ELEMENTS OF ECONOMIC ENVIRONMENT
Economic means "pertaining to the production and use of income”. The Factors which have their affect on the working of a Enterprise are collectively known as “Economic Environment”. It includes System, Policies and Nature of an economy, Trade cycles, Economic resources, Level of Income, Distribution of income and wealth etc. The Economic Environment represents the Economic conditions in the country where the international organization operates. Economic environment is very dynamic and complex in nature. It does not remain the same. It keeps on changing from time to time with the changes in an economy with the changes in Govt. policies, political situations. It is concerned with the nature and direction of economy in which the organizations operate. Important elements that affect the Economic Environment are : Economic systems.
Regional Economic groups.
1. Economic Systems: Determines the scope of private and public sector ownership of the factors of production and market forces. The Different types of Economic Systems are:
Market Economy (or) Capitalistic Economy :- Business units or factors of production are privately owned and governed Command Economy (or) Socialistic Economy :- Government controls most of the factors of production decisions Mixed Economy :- Combination of both Capitalistic and Socialistic economy. 2. Economic policies: Business activities and operations are directly influenced by the economic policies framed by the government from time to time. Some of the important economic policies are: Industrial policy.
Foreign investment policy.
3. Economic conditions: Economic conditions such as standard of living, purchasing power of public, demand and supply, distribution of income etc., largely affects the size of the market. 4. Regional Economic Groups: They promote cooperation and free trade among members by removing tariff and other restrictions. Examples are: SAARC, ASIAN, EU.
Our assumptions, made on the basis of evaluating completed questionnaires that have been returned reflect our impressions. During the survey, businesses considered developments in the business environment as definitely favourable. In addition to reporting increasing uncertainty, they deemed Hungary’s political climate in the last years, domestic markets and social changes as having marked effects. After Hungary’s accession to the European Union, small and medium sized enterprises (SMEs) cannot perceive major impacts of accession, or blame the prevailing political situation for all changes. Small businesses do not capitalize on the opportunities offered by the European Union, do not make efforts to apply for EU grants and funds, or do not attempt to penetrate new markets. In our opinion, the companies participating in our survey are not aware of the opportunities available to them. Among the economic policy factors, a reliable monetary policy has the most benevolent impact on the operation of businesses. A survey of micro economic factors shows the most important areas to develop.
Keywords: competitiveness research environment; economic policy factors; effects of EU enlargement; environmental factors and responses; micro economic factors.
This article gives a clear view about the affect of Economic Environment on a new Business Enterprise directly and indirectly. For a Business Enterprise to be started, first it should be given designations about the Nature, Economic system, Conditions and Policies it should follow. It should be decided whether the Enterprise is to be controlled under Private or Public ownership depending upon the legal heirs of capital amount, partnerships etc., Here the Enterprises of Hungary gone through various problems given by Economic Environment. The small and medium...
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