Economic Factors Essay

1486 Words Feb 24th, 2014 6 Pages
Economic Factors & Legal Concerns

The current business environment is an ever-changing and dynamic environment where most business operates. There are a number of factors that can have an impact on the operation of a business. These items are legal factors which can be an important factor that should be kept in mind while a business conducts its business activities. Another will be that of economics and the associated factors, these are considered the most important factor in all other external factors that affect the operation of a company or organization and will be at all levels which will include the local levels, and the state and national levels as well (Conklin, 2006). The economy is always going to be a concern
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The external environment can have a number of effects on the operation of a business and should be analyzed effectively. The macroeconomic factors determine market condition changes, and can help in reaching effective strategies to handle the changes that may occur. Some important macroeconomic factors that can affect a business include economic growth. This growth is related to the economic activities of the business. This refers to buying and selling activities for a particular amount of time. These activities can change continuously, and occur because of such things as changes in income level, change in prices of materials, natural disasters, political activities that are happening, etc. Economic growth can be tied to the level of gross domestic product or GDP. A decrease in GDP indicates a decline in demand for goods and/or services that a business produces. This reduction would reduce the revenue and profit that a company realizes. An increase in GDP would cause an increase in the demand for goods and/or services that a business produces, and would increase the revenue and profit. Another economic factor that management must be aware of is inflation. Inflation causes an increase in prices for products and/or services for a certain amount of time. This could affect ABCs profits in that the cost of products and services will be higher. This could also increase wages for employees.
Interest rates are an additional factor affecting the

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