ECONOMIC FACTORS Economic factors refer to the character and direction of the economic system within which the firm operates. Economic factors include the balance of payments, the state of the business cycle, the distribution of income within the population, and governmental monetary and fiscal policies. The impact of economic factors may also differ between industries. BALANCE OF PAYMENTS. The balance of payments of a country refers to the net difference in value of goods bought and sold by citizens of the country. To decrease the Kenyan shilling value of goods imported into the country, it is common practice to construct barriers to entry for particular classes of products. Such practices reduce competition for firms whose products are protected by the trade barriers. BUSINESS CYCLE. The business cycle is another economic factor that may influence the operation of a firm. Purchases of many long lasting products can be postponed during periods of recession and depression, as can purchases of new equipment and plant expansions. Economic downturns result in lower profits, reductions in hiring, increased borrowing, and decreased productivity for firms adversely affected by the recession. Positive consequences of recessions may include reductions in waste, more realistic perceptions of working conditions, exit of marginally efficient firms, and a more efficient system. Some organizations may benefit from an economic downturn. Eg banks cause there will be a lot of saving hence
The UK had recently emerged from the recession 2007-2009, the economy is now recovering. During the recession, many businesses had struggled to survive. The strategies that businesses had taken during recession may affect their long-term profits. For example, as people spend less during the recession, businesses try to reduce their costs and reduce prices in order to encourage customers to buy their product e.g. Primark, M&S etc and many businesses have also closed down branches in order to maintain their
The largest cause of unemployment can be attributed to recession. The term recession refers to the backward movement of the economy for a long period. People spend only when they have to. (Nagle 2009). With people spending less there would be less money in circulation therefore, enterprises would suffer financially and people would suffer too. This is so because recession reduces the fiscal bases of enterprises, forcing these enterprises to reduce their workforce through layoffs. These enterprises lay off their workers in order to cut the costs they incur in terms of wage and salary payments.
Another important factor to consider when starting a business is the “business cycle.” The business cycle is the fluctuations in economic activity that an economy will experience over a period of time. We have experience may business cycles in the United States. We refer to them as expansions and recessions. In an expansions, the economic outlook is good and growth happens, without inflation. Recessions are when the economy is shrinking and the determination factors for a recession include unemployment, low industry production, decrease sales and lower incomes. Since 1854, The United States has experienced 33
These are all about how and to what extent a government mediates in the economy. This can incorporate – government policy, political steadiness or precariousness in foreign markets, foreign trade policy, tax policy, labor law, environmental law, trade restrictions and so on.
Human behavior is sensitive to and strongly influenced by its environment. When the economy starts recession, manufactures would shrink the volume of production, investor will invest less and people will spend less money on new products, and as the result, which would causes the economy become worse. And on the other hand, good economy leads people to buy more.
1.Consider the following entry game. Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard", firm B ensures that firm A makes a loss of $1 million, but firm B only makes $1 million in profits. On the other hand, if firm B plays "soft", the new entrant takes half of the market, and each firm earns profits of $5 million. If firm A stays out, it earns zero while firm B earns $10 million. Which of the following are Nash equilibrium strategies?
A reduction in output means that the need for labour is reduced. In the early stages of a recession, companies tend to cut back on employee hours, rather than making workers redundant. If
Unit 38 Business and the Economic EnvironmentLearner name Assessor nameSameeha Hussain/Antonio ZarroDate unit issuedUnit DeadlineDate unit submitted by student27/01/1419/04/14 Criteria referenceTo achieve the criteria the evidence must show that the learner is able toAsst Task no. Assessor initial date when metPASS CRITERIAP1 Explain the effects of changes in the economic environment on a selected business P2 Identify how government policies impact on a selected business P3 Identify the impact of government spending on a selected businessP4 Explain how both fiscal and monetary policy decisions have affected a selected businessP5 Describe the impact of international factors on a selected business M1 Analyse the implications of
Recession: - customers continue to spend but overall load fall and product services become more costly. As a result to this businesses are strained to reduce the prices of their items to generate
All of these factors have an enormous impact on my selected business (Barclays) as the economy goes from growth and decline. As well as many others, Barclays is majorly affected as it is in the financial industry. These different factors appear throughout what is called the ‘Business Cycle’. The cycle shows the fluctuation of the activity within the economy over a period of time and consists of 4 main stages; as well as many others,
The current economy has hurt many retail businesses. Every month another retail giant closes its doors. Retail stores which we never would have imagined have gone bankrupt. Retail sales have declined greatly. Major cause of this declination is because many people are unemployed and cannot afford to purchase anything. Retailers are forced to discount prices to increase sales, but discounting still hurts margins. Retailers are assuming a very
Business, consumers and employees are more weak to downturns in the economies of trading partners. For example, recession in the USA leads to decrease in demand for UK’s exports, leading to falling in export incomes, lower GDP and incomes, decrease in domestic demand and rising in unemployment.
The term balance of payments refers to the accounting record of the country’s monetary transaction with the rest of the world. These transactions include the exports and imports of goods and services of the country, financial capital and financial transfers. The balance of payment record is a way to allow countries to recognize potential business partners for trade and to evaluate a country’s performance in the global economic competition. .
Timing of the business cycle is not predictable, but its phases seem to be. Many economists site four phases—prosperity, liquidation, depression, and recovery. During a period of prosperity, a rise in production leads to increases in employment, wages, and profits. Obstacles then begin to obstruct further expansion. Production costs can increase, helping create a rise in prices, and
Factors that happen in the external environment are known as external factors or influences. These will affect the main internal functions of the business and possibly the objectives of the business and its strategies. The main factor that affects most business is the degree of competition - how fiercely other businesses compete with the products that another business makes. The other factors that can affect the business are: