FACTORS AFFECTING INTERNATIONAL BUSINESS – ECONOMIC ENVIRONMENT

  • The economic environment represents the economic conditions in the country/countries where the international organization operates. This part of the environment includes such factors as economic development, GDP/GNP, Per capita¬†income, infrastructure, resource and product markets; and exchange rates etc. In addition to these there are factors such as inflation, interest rates, and economic growth that are also the part of the international economic environment.
  • Economic conditions, economic policies and the economic system are the important external factors that constitute the economic environment of a business. The economic conditions of a country-for example, the nature of the economy, the stage of development of the economy, economic resources, and the level of income, the distribution of income and assets, etc. are among the very important determinants of business strategies.
  • In a developing country, the low-income may be the reason for the very low demand for a product. The sale of a product for which the demand is income elastic naturally increases with an increase in income.
  • In countries where investment and income are steadily and rapidly rising, business prospects are generally bright, and further investments are encouraged.
  • The economic policy of the government, needless to say, has a very great impact on business. An industry that falls within the priority sector in terms of the government policy may get a number of incentives and other positive support from the government, whereas those industries which are regarded as inessential may have the odds against them.
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