Economic Environment as the Most Significant of all External Forces

Economic Environment as the Most Significant of all External Forces

Business is one unit of the total economy and whole business transaction are surrounded by economic scenario. Macro or broad economic factor influences the resource allocation, cost and revenue of business organization. The economic system, economic conditions, economic policies and economic blocks are the components influencing business heavily. Next to

the political environment, the economic environment is probably the most significant which exerts considerable influence on business. The business environment and operation would have effects of economic growth strategy pursued by the government in its development economic planning. Similarly, economic system also determines fate of private entrepreneur. Free market economy liberally motivates private capital mobilization where as central planned economy is controlled and regulated by the government.

Economic planning (especially five years plan) of the government fixed policies about production, priorities and employment generation. The development of agricultural industries, infrastructure also influences activities of the business. The economic policies have unavoidable effects on business activities. Monitory policy concentrates on money supply, interest rate and credit availability. Fiscal policy is related to taxation, revenues expenditure of the government. The subsidies, donation, aid also influences business. The economic condition represented by income level, business cycle, inflation, stage of economic development also have dominants role on business activities. The regional development like SAARC, SAFTA, ASEAN, EU etc. and global business group organization also have pressure of business.

The development of fiscal and financial sector also helps to boost-up economic condition of the society. The control of price and distribution channels, economic reforms package pursued by the government, population, per capita income also affect business. Hence in this ways, economic environment considered as the most significant of all external forces.