Economic environment

2. Contents
 Economic environment
 Its types
 Importance
 The Business cycle
 International Business environment
 Its significance

3. Economic environment
It basically consists of external factors in a business market and
the broader economy that can influence a business. The
Economic environment in which a business operates has a
great influence upon it
• It could be divided into two parts i.e.
Microeconomic environment – This affects the business
decision making such as individual actions of firms and
consumers.
Macroeconomic environment - This affects the entire
economy and all of its participants.

4. Types of economic environment
1.)Macroeconomic environment – These are basically broad
economic factors that either directly or indirectly affect the entire
economy and all of its participants, including our business. These
factors include such things as :-
 Interest rates
 Taxes
 Inflation
 Currency exchange rates
 Consumer discretionary income
 Savings rates
 Consumer confidence levels
 Unemployment rate
 Recession
 Depression

5. 2.) Microeconomic factors – These influences will
have their impacts on the decision making of our
business. Unlike macroeconomic factors, these factors
are far less broad in scope and do not necessarily affect
the entire economy as a whole. Microeconomic factors
influencing a business include:-
 Market size
 Demand
 Supply
 Competitors
 Suppliers
 Distribution chain, such as retail stores

6. Significance of Economic Environment
 firm to identify opportunities and getting the first mover
advantage
 firm to identify threats and early warning signals
 Coping with rapid changes
 Improving performance

7. The Business Cycle
To gain a good understanding of the international economic
climate and, how or why particular factors can affect it, it's
important to have an understanding of the business cycle.
business cycle represents the four stages of economic growth
followed by economic decline.
1. Peak/boom
2. Contraction/slump
3. Recession
4. Expansion
As the business cycle repeats itself on a continuous basis, the
expansion stage would be followed by another peak. The
following diagram is a pictorial representation of the business
cycle.

9. International Business environment
International business environment means the factors that
affect/influence the MNC’s and transactional companies.
Factors that affect international business environment are
generally known as STEPIN.
S  Social & cultural factors
T Technological Factors
E Economic Factors
P Political & Govt. Factors
I International Factors
N Natural Factors

10. Significance of International Business environment
 Helps in expansion
 Helps in managing product life cycle:
 Technology advantages
 New business opportunities
 Proper use of resources:
 Availability of quality products:

11. THANK You