1. In what way do socio-economic factors affect business and industry?
2. Can socio-economic status of the costumer affect business and industry? why?
Answers
Explanation:
Economic Factors and Their Effect on Business
Economic factors are an essential part of all business analysis, no matter whether it is PEST analysis, PESTLE analysis, or any other kind of business analysis. These are the main factors considered when a company makes financial decisions.
These factors are connected to money, goods and services. They affect businesses on a micro-level, but they are a lot more powerful than that – they also affect the entire economy on a macro-level. The economy, whether a local economy or a global one, will pretty much be the determining factor in the details associated with the operation of a company, such as the value of its assets, consumer demand and even taxes.
Some economic factors you must think about in your business include exchange rates, interest rates, recession, inflation, taxes, and demand and supply. Here is a closer look into three of these factors and their connection to businesses:
Interest Rates
Interest rates are everywhere, and are imposed by many different people. In fact, banking institutions are obsessed with knowing what the status for interest rates in the economy is for a good reason. It is how they determine their lending practices. It is also good information for a company that relies on debt capital to finance ambitious projects.
Exchange Rates
This is a slightly more nuanced topic than that of interest rates. At the heart of it, exchange rates are an important factor to consider for any business involved in importation and exportation of various goods and services. When exchange rates fluctuate, they affect the ability of a company to pay its international suppliers in a satisfactory manner. This can also affect the profit margin of the company, as well as the amount of resources it needs to stay afloat.
Recession
Whenever an economy faces a recession, it has the potential to change the attitude taken by consumers toward their purchasing decisions. This may force companies to drop prices to stay afloat.