the external enviroment

1.16 ECONOMIC ENVIRONMENT
The economic environment constitutes to economic conditions, economic polices, and the economic system that is important to external factors of business.
The economic conditions of the country include:
• Nature of the economy of the country.
• The general economic situation in the region, conditions in resource markets like money, material, market raw material components, services, supply markets and so on which influence the supply of inputs to the organisation, their costs, quality, availability and reliability of supply of products and services.
• It determines the economic strength and weakness in the market.
• Purchasing power of the individual depends upon the economic factors like current income, price, savings, circulation of money, debt and credit availability.
• People income distribution pattern analyses the market possibilities and impacts on enterprise.
• Development process of the country.
• Availability of economic resources of the country.
• The level of the economic income of the country.
• The distribution of income and assets of the country.
• Public finance of the country.
These are the very important determinants of business strategy in the organisation for formulating, implement and controlling of economic policies.
Economic environment refers to the nature and direction of the economy within which business organisation are to operate. For instance, in developing country, the low income may be reason for the very high demand for the product and services of the business.
3.2 The economic environment
Economic factors are of concern to marketing firms because they are likely to influence, among other things, demand, costs, prices and profits. These economic factors are largely outside the control of the individual firm, but their effects on individual enterprises can be profound. Political and economic forces are often strongly related. A much quoted example in this context is the ‘oil crisis’ caused by the Middle East War in 1973 which produced economic shock waves throughout the Western world, resulting in dramatically increased crude oil prices. This, in turn increased energy costs as well as the cost of many oil-based raw materials such as plastics and synthetic fibres. This contributed significantly to a world economic recession, and it all serves to demonstrate how dramatic economic change can upset the traditional structures and balances in the world business environment.