Economic Environment

Economic Environment
of Business
of Business
Business Environment;
Business Environment;
Growth & Development;
Growth & Development;
Business Cycles
Business Cycles
Business Environment
Business EnvironmentInternal
Internal
.
.Value System
Value System
.
.Objective
Objective
.
.Relationships
Relationships
.
.Human Resources
Human Resources
.
.Marketing
Marketing
.
.Physical Assets
Physical Assets
.
.Technical
Technical
Capabilities
Capabilities
.
.Management
Management
Structure
Structure
.
.Financial
Financial
Business Environment
Business EnvironmentExternal
External
Micro
Micro
.
.Suppliers of Inputs
Suppliers of Inputs
.
.Workers & their
Workers & their
Unions
Unions
.
.Customers
Customers
.
.Marketing
Marketing
Intermediaries
Intermediaries
.
.Competitors
Competitors
.
.Publics
Publics
Macro
Macro
.
.Economic
Economic

National
National

Global
Global
.
.Political & Legal
Political & Legal
.
.Socio
Socio-
-cultural
cultural
.
.Demographic
Demographic
.
.Technological
Technological
.
.Natural
Natural
Economic Environment of Business
Economic Environment of Business
Macro Environment of a co refers to all the
Macro Environment of a co refers to all the
eco & non eco factors which influence
eco & non eco factors which influence
business activity in general & thus
business activity in general & thus
determine opportunities that a co may
determine opportunities that a co may
have to promote its business.
have to promote its business.
Economic Environment of Business is
Economic Environment of Business is
created by the Business Sector, Household
created by the Business Sector, Household
Sector, Capital Market, Government &
Sector, Capital Market, Government &
External Sector.
External Sector.
The Scope & Subject Matter of
The Scope & Subject Matter of
Macroeconomics
Macroeconomics
.
.National Income
National Income
.
.Growth & Development
Growth & Development
.
.Business Cycles
Business Cycles
.
.Markets
Markets
Product, Money, Capital, Labour
Product, Money, Capital, Labour
.
.Savings & Investment
Savings & Investment
.
.Inflation
Inflation
.
.Policies
Policies
Industrial, Trade, Fiscal,
Industrial, Trade, Fiscal,
Monetary
Monetary
.
.WTO & RTAs
WTO & RTAs
Importance of Studying Business
Importance of Studying Business
Environment
Environment
Environmental Analysis >>>SWOT
Environmental Analysis >>>SWOT
Analysis
Analysis
SWOT>>> Strategy & Planning,
SWOT>>> Strategy & Planning,
Organizing, Leading & Controlling
Organizing, Leading & Controlling
Economics of Growth &
Economics of Growth &
Development
Development

Economic Growth refers to an

Economic Growth refers to an increase over time in a countrys real
increase over time in a countrys real output of goods & services or
output of goods & services or product per capita.
product per capita.
Economic Development implies
Economic Development implies progressive changes in the socio
progressive changes in the socio-
-economic structure of a country like
economic structure of a country like decrease in agriculture, increase in
decrease in agriculture, increase in services, trade, etc.
services, trade, etc.
Economic Development
Economic Development
Factors in Economic Development
Factors in Economic Development

Economic
Economic

.
.Capital Formation
Capital Formation
.
.Marketable Surplus of Agriculture
Marketable Surplus of Agriculture
.
.Foreign Trade
Foreign Trade
.
.Economic System
Economic System
Non
Non-
-economic
economic

.
.Human Resources
Human Resources
.
.Technical Knowledge
Technical Knowledge
.
.Social Organization
Social Organization
Natural Resources
Natural Resources
Business Cycle
Business Cycle
A wave like fluctuation of business activity
A wave like fluctuation of business activity
characterized by recurrent phases of
characterized by recurrent phases of
expansion & contraction in periods varying
expansion & contraction in periods varying
from 3 to 4 years.
from 3 to 4 years.
Prosperity or Expansion
Prosperity or Expansion
Initially
Initially
.
.Increasing economic activity
Increasing economic activity
.
.Increasing employment
Increasing employment
.
.Increasing demand
Increasing demand
.
.Rising profits
Rising profits
Later
Later
.
.Increasing prices
Increasing prices
.
.Increasing costs (wages)
Increasing costs (wages)
.
.Stock prices & real estate rise
Stock prices & real estate rise
.
.Increase in production & therefore Inventories
Increase in production & therefore Inventories
Eventually, rise of costs relative to prices narrows
Eventually, rise of costs relative to prices narrows
profit, inefficiencies creep in, marginal returns start
profit, inefficiencies creep in, marginal returns start
dropping and this phase comes to an end.
dropping and this phase comes to an end.
Recession
Recession
Initially
Initially
.
.New projects are abandoned
New projects are abandoned
.
.Decrease in demand of capital goods
Decrease in demand of capital goods
.
.Liquidation in stock market & bank
Liquidation in stock market & bank
loans
loans
Later
Later
.
.Fall in demand of consumption goods
Fall in demand of consumption goods
.
.Fall in prices as inventories are
Fall in prices as inventories are
offloaded
offloaded
Depression or Contraction
Depression or Contraction
Initially
Initially
.
.Fall in production
Fall in production
.
.Fall in employment & therefore income
Fall in employment & therefore income
.
.Decrease in demand of goods esp. capital
Decrease in demand of goods esp. capital
goods but also consumption goods
goods but also consumption goods
particularly durables
particularly durables
Later
Later
.
.Inventories decrease
Inventories decrease
.
.Some firms shut down
Some firms shut down
Gradually the forces of contraction die down
Gradually the forces of contraction die down
and this phase comes to an end.
and this phase comes to an end.
Recovery
Recovery
Initially
Initially
.
.Supplies become scarce & price fall is
Supplies become scarce & price fall is
arrested
arrested
.
.Production starts increasing
Production starts increasing
.
.Employment rises
Employment rises
.
.Income and therefore demand rises
Income and therefore demand rises
Later
Later
.
.Costs start falling compared to prices
Costs start falling compared to prices
.
.Profits increase
Profits increase
.
.Stock market starts rising
Stock market starts rising
And the Cycle repeats itself
And the Cycle repeats itself