Essay on Describe and Analyse the External Environment of Business.

The Federal Reserve has the dual job of ensuring price stability and maximum employment, which are contradictory objectives. The Feds try to achieve the goals through monetary policy which determines the demand and supply of money by controlling interest rates. The Fed’s goal is to achieve a natural rate of unemployment of more or less 5%. When the actual unemployment figures are below the natural rate of unemployment, inflation increases and there is a high demand of goods and services propelling the economy with the ensuing labor demands and the pressure it places on wages, which in turn produces inflation. When the Fed is faced with this scenario, it must increase the rates to slow the growth and achieve price stability (contractionary cycle).

External environmental factors are the macro environment affecting a business; they are factors outside the company and which they have no control over (Kotler & Armstrong, n.d.) these external factors bring about impacts to the company thus a company should always be prepared to react.

A recession occurs when a country’s real GDP begins to shrink. Even a milder economic slowdown in which GDP continues to grow, but very slowly can create unemployment and dislocation. GDP and employment are positively correlated. As GDP rises

Monetary policy is the regulation of the money supply to influence variables such as inflation, employment, and economic growth. Fiscal policies, on the other hand, use the ability to tax and spend in order to influence those same variables (McEachern, 2014, p. 57). A blend of both of these policies is essential for improving the economy when a recession has occurred.

I agree with Paul Krugman. The Federal Reserve Bank should put more money into economy because it can stop increase inflation. I believe that if the Federal Reserve Bank will put in more money in the economy this would bring positive outcomes. Money putted in the economy will regulate number of inflation. Also, Arnold says that” If according to classical economists, the economy is self-regulating, then a recessionary gap or an inflationary gap is only temporary”(266). It is true that inflation gap can be stopped because it is temporary and if the Federal Reserve Bank would put money into economy it will help to stop inflation. Besides, if the Federal Reserve Bank puts money into economy to invested, more people will invest at low interest

There are two ways the economy can be assisted in growing and sustaining itself. First through fiscal policy from the national governments help of changing taxes and spending, then Monetary policy, the managing of money. The two are supposed to work together to help create a better economy but, at times fall short. Leaders in the government for the most part have a top priority to stay in their position, with that in mind they tend to give the people the immediate satisfaction they want which is increased spending and reduced taxes. With this approach fiscal policy is considered expansionary, restrictive monetary policy is what is needed to stop inflation to counteract this.

Also the decisions of the Nixon Presidential time made its decision of tackling inflation no matter what no matter what the unemployment also might be since they couldn’t take both at the same time (Secrets of the Temple: How the Federal Reserve Runs The Country from http://www.investopedia.com/articles/economics/09/1970s-great-inflation.asp). This decision then also made the both the Fiscal and Monetary Policies to focus on Inflation causing the U.S. to go into the first recession of the double dip due to high inflation then also because of fiscal restraints put in play by the legislature and president. This caused a drop in aggregate Demand since higher inflation cost makes it go decrease and increases the unemployment.

External environment consists of forces that directly or indirectly influence organization’s business activities. The actors and forces outside marketing that affect management’s ability to build and maintain successful relationship with target customers.

In order to reduce inflation the Australian government has traditionally implemented both contractionary fiscal and monetary policy. This would involve an increase in taxation or reduced government expenditure as well as increases in the official cash rate which would lead to a rise in interest rates in the economy to contain aggregate demand.

It is crucial for the government to reinforce other factors that decrease the controversial effect of the boom in the inflation rate. For instance, increasing labor force, development in technology and a sustaining education system. Those factors will assist in moving the long-run aggregate supply curve (LRAS) towards right. It is obvious that the money demand will rise if Trump's campaign want to set the tax-cut as permanent law. Therefore, I believe with an increase in LRAS, the high price level can fixed society in a higher level of outputs, which benefits the domestic economy gradually.

Internal environment are SW which stands for strength and weakness, actually analysis of internal organization and external environment OT stands f opportunities and threats

External environment refers to external aspects of the surroundings of business enterprise, which have influence on the functioning of business. The external environment can provide both facilitating and inhibiting influences on organizational performance. Key dimension of the external environment principally consists of a micro environment and a macro environment.

Q3) In terms of the external environment analysis, we will focus on three areas, namely, general environment, industry environment and competitor’s environment.

There are different influences that cause inflation such as energy, food, commodities, and other goods and services. The entire economy is affected by rise of the cost of living. It also affects the cost of operating a business, borrowing money, mortgages, corporate and government bond yields, and every other aspect of the economy. There are several advantages of inflation in the economy. Some include moderate rates of inflation which allows prices to adjust. This is considered a sign of a healthy economy. With economic growth available we usually get a generous amount of inflation. Also moderate inflation rate reduces the actual value of debt. If there is a reduction, the real value of debt increase leads to a squeeze on usuable income.

An analysis of the external environment includes the factors in a business’s external environment about a business's industry, competition, and political and social environments, and affects the firm’s strategy (Aaker, 2001).