Define and explain what are the economic factors and what role they have within the business environment, and discuss how a company can affect the economic factors and how it can be affected by those factors?


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Musaddiq Akhtar answered
Economic factors are implications of the fiscal and monetary policy of a state, which directs the financial well-being of its subjects. They range from everything from interest rates to economies of scales, and everything in between!

Businesses these days are very interactive with the environment- which hosts its clients too. Any business decision has many facets to it; the business has to consider the political and social implications as well economic and legal outcomes.

A business can easily be affected by an increase in the rate of interest which could yield lower NPVs in investment appraisal, thus forbidding newer investments that would otherwise be worth-while. That is how a business can be affected.

On the other hand, a business can affect the economics of an industry by pursuing a shared value approach, and thus maximising the value added for the entire supply chain. For example, by counselling the farmers on how to yield better yields from their lands, they can enjoy higher economies of scale and thus cheaper products from the masses!

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