Business environment consists of two sub-environments

Micro Environment Macro Environment

Internal Environment External Environment

Market Size Interest RatesDemand TaxesSupply InflationCompetitors Currency Exchange ratesSuppliersUnemployment Rate

RecessionDepression

ECONOMIC FACTORS AFFECTING BUSINESS ENVIRONMENT

What IS INTEREST RATE REASONS FOR INTEREST RATE CHANGE TYPEs OF INTERES RATES

INTEREST RATES

UNEMPLOYMENT

Types and causesFrictional

unemployment.

Occupational and

structural.

Geographical Cyclical

Casual

1)Imperfect information 2)Disincentives 

1)Economic Change 2)Globalisation and Liberalisation of Trade 3)Capital replacement 1)immobili

ty of labor, 1)When an economy experiences a downturn

1)People with plenty of cash

Consequences Direct effects• Fall in National Output • Loss of personal income 

Indirect effects• Negative Multiplier Effect• Loss of tax revenue • Society 

Statistics

Factors of inflation

Increased cost of

production

Taxes and tariffs

Imported goods

Credit flow

Effects on business environment

Sales target

Income distribution

Future predictions

Reputation of the company

Deflation (a fall in prices – negative inflation) is very harmful.

 Moderate inflation enables adjustment of wages.

Inflation enables adjustment of relative prices.

advantages

Fiscal policy

Monetary policy

imports Income policy

Controlling the inflation

Labor cost

* Covers one of the major portions of the total cost of a product or job.

* Increase the profitability and competitiveness of the organization.* Labor cost is more difficult to control as compared to material

* Affected due to a change in government policy and requirement of trade union.

* Adversely affected due to dissatisfaction , irregularity, inefficiency, idle time, high labor turnover, lack of interest and negative attitude of the workers.

*Helpful in minimizing wastage of materials by workers , idle time and unusual overtime work.

Need and importance

Advantages1)Keeps cost down2)Flexible employment pattern3)Increased labor productivity

DISADVANTAGES1)HIGHER PRODUCTION COST2)IN EQUALITY ON INCOME DISTRIBUTION3)LOWER MORALE AND PRODUCTIVITY

COMPETITION

DISADVANTAGES

MARKET SHARE IS DIVIDED

NEGATIVE ADVERTISI

NG CAN HURT

ADVANTAGES

DRIVES INNOVATION AND QUALITY

it leads COLLECTIV

E LEARNING

Specific 

Measurable

Agreed 

BUSINESS OBJECTIVES

Realistic

Time specific 

OBJECTIVES CAN BE ACHIEVED BT CONSIDERING FOLLOWING CRITERIA

Disposable income ,taxes and tariffs

DISPOSABLE INCOMEHigh level of disposable income is good for producing luxury

goods.a large disparty in income distribution will promote businesses dealing in luxury goods as well as inferior

goods.

Taxes High level of taxes will lead to low disposable income and

contraction of demand in the economy. Business will find it difficult to attract consumers

Types of taxes Tariff Tariffs are taxes and imposed on imported goods. If the tariffs

are low the domestic market may be flooded with cheap imported goods and the local businesses will have tough time selling their products.

http://articles.economictimes.indiatimes.com/

http://www.yourarticlelibrary.com/ http://inflationdata.com/ http://marketrealist.com/

reference