Economics and Business Strategy

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ECONOMIC CONCEPTS AND BUSINESS STRATEGY 1.0 Introduction Business strategy is inextricably linked with the market structure and other factors in the economic environment. The competitive environment determines the degree to which the firm can pursue a profit maximization or sales growth strategy. The factors of competitiveness are also developed in accordance with the nature of the market and the competitive strategy of rival firms. It is also important for firms to note that their business strategies would be different in an environment of perfect competition than in other forms of market structure where they may be able to exert some form of political power over competitors and the buyers. 2.0 Competitive Environment Business organizations are institutions through which the providers of capital seek to achieve their economic aims. These aims include a fair return on their investment and protection against illegal activities and unfair practices by other competitors. In order to achieve these aims, it is vital for a competitive environment to exist for business organizations to operate in. Business organizations develop their strategy after considering the political and economic environment in addition to other features of the environment. Hence, the competitiveness of the environment serves to shape the business strategy to a large extent. In this way, the competitive environment is strongly associated with the economic environment and business strategy. A
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