The business environment consists of different influences that are outside of a business from political, social and legal changes. These influences can change for the better or for the worst for the business economic factors.
The economic environment consist of many individuals who make decisions that buy and sell goods, borrow and lend money, raises taxes and change interest rates. Consumers are who purchases the goods for their own personal interests, suppliers who supplies goods to other businesses and customers, bankers and other lenders who lends money to businesses and to individuals who are qualified for a loan, the government who set taxes and also decides how much money and different parts of government should be spending, and the monetary policy committee who decides on the levels of interest rates in the country.
When in business one must consider the importance of stability, business people would rather a stable economy. This is when business people can make forecasts for short term and long term demands for their business when purchasing or selling products for the near future.
Forecast is predicting a positive outcome or maybe a negative outcome for what type of position your business is in now or purchasing decisions for the future, a business looks at what type of financial state it is in right now to make company decisions one must ensure that they can repay payments or purchase items while ensuring that there business is in the right financial position.
The impact changes in the economic environment.
Growth in the economy is when the economy is at a stable point where businesses are doing well when more goods are being produced and consumed, many jobs available, work available and opportunities to invest in companies, companies are doing well high purchasing power for business owners and suppliers, more goods and services sold and the value of goods may increase, and this has to do with the stability of the economy.
Recession is the opposite of growth, recession occurs when the economy is becoming unstable and if the economy has been unstable for s period of 6 months straight or more. When customers cut back on spending, and start to save more money, when manufacturers and sellers also cut back on thee orders and may end up producing fewer goods and may cut back cost in general. Recession may also include laying off employees and doing all what they can do to stay in survival mode depending on the impact of the recession.
Ripple effect is the outcome or impact that occurs within a business based on the economy position weather good or bad, these are all things that occurs based on what is happening in the point in time e.g during a recession employees can become fired from their jobs, banks aren’t giving out loans, lenders cannot repay bank loans, producers and sellers cuts back on production.
Inflation is the general increase in prices in an economy of currency, the value of currency changes. When inflation occurs businesses usually raise their prices, not every price will be rising but the average prices will, prices are measured by the government using a Consumer Price Index. Inflation creates uncertainty in businesses because a rise in the rate of inflation can reflect a rise in cost they have to pay, employees will more wages, cost materials may go up along with the cost of fuel energy these rising cost can have a negative effect on the business profits. Business can keep prices the same and loose in profits, or they can raise the prices and lose customers to other competitors who have a better flexible price than them.
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