Economic factors in a global economy
Economic factors affecting businesses are regulation, access to credit, demand for goods and/or services and technological advancement. Savvy businesspeople need to stay on the pulse of future changes in business in order to compete and advance instead of trying to catch up and adapt later. Employing the latest relevant technologies will increase the economic advantage of any business competing in the global economy.
Regulation
Local and federal regulations influence how well a business can take advantage of economic opportunities and adapt to the changing economic landscape. Regulation standards affect the ability of smaller businesses to create jobs and revenue. Efficient laws on bankruptcy ensure that assets are quickly reallocated. Stable property rights and investment protection establish trust so that investors start investing again.
Credit
Businesses grow when they experience low interest rates because a low rate ensures that it will cost less to get the needed financial resources to start or expand a business, or stave off bankruptcy. Businesses are influenced by the interest rate, wage rate and rate of inflation, all of which measure the general cost of doing business. If these rates rise, so does the cost of maintaining a business, which in turn necessitates higher prices for products and services. The interest rate affects retail sales, as lower rates indicate that people have more disposable income to spend. The mortgage meltdown that started in 2007 made lenders increasingly cautious about the risks of all loans.
Supply and demand
Demand = Sales = Profit
When the demand for a product or service declines, so does growth. This can result in pricing pressures and lost customers. The profitability of a business depends upon consumer spending reflected in the demand for products and services. High interest rates, foreclosures and unemployment undermine consumer spending as both businesses and individuals juggle the increasing cost of business with decreasing demand for their goods and services.
Technology
Technology expedites business.
Technology has improved customer service and demand. This is especially true of modern communication technology, because online databases enable vast quantities of information to be shared easily and quickly between businesses and their customers. Digital technology positively impacts the distribution of goods and services via the Internet, improving the speed and efficiency with which goods and services are accessed by consumers and then delivered via online businesses.
Tags: goods services, consumer spending, global economy, interest rate, interest rates, products services