Economic Factors Affecting Business
Economic factors affect small and large businesses. They include demand for goods and services, access to credit, regulation and advancement in technology. Savvy business men therefore need to stay on the pulse of current and future economic changes to be successful and run their operations smoothly.
For instance, employing the latest technological advancements helps you to increase your economic advantage. As a result, it will be easy for you to compete efficiently in the global economy.
Access to credit
A business is bound to grow very well when it experiences low interest rates. This is based on the fact that low interest rates leads to accessibility of low cost financial resources. Therefore, with low interest rates, it is very easy to start up or expand a business. Even if you are on the verge of bankruptcy, low interest rates can help you stay off bankruptcy completely.
A business is also affected by rate of inflation, wage rate and interest rate. All these measure the general cost of operating business. When these rates go up, the cost of running and maintaining a business also go up. In the end, the cost of products and services also go up.
It is also imperative to note that high interest rates affect retail businesses because of easy spending. There is always more disposable income amongst consumers when interest rates are low. This creates room for businesses to make good profits.
Federal and local regulations also affect economic opportunities of a business. It also affects the way in which a business adapts to its economic landscape. Generally, regulation standards affect the ability of a small business to create revenue and jobs. Bankruptcy loans on the other hand ensure assets are reallocated within the shortest time possible.
Similarly, investment and property rights protection creates trust in consumers and investors alike. With the protection policy, investors will start to invest without concerns over low profits or losses.
Over the past years, advancement in technology has led to enhanced customer service and demand for products and services. This is a common scenario especially on communication world where modern technologies including online databases have created room for efficient transmission of information. With the advancements, businesses can easily share information with their customers.
Supply and demand
Demand and supply also affects businesses. When the demand for a product or service drops, business growth also decline. This usually occurs as a result of pricing pressures that drive away consumers. The profitability of any business is also affected depending on consumer spending. When there is high demand for products and services, a business will make huge profits.
Likewise, high interest rates, unemployment rate and foreclosures affect a business negatively. It affects consumer spending as individuals and businesses try to juggle the increased costs of running a business with the high demand for specific products and services.
With high supply of products and services, the rate of consumption also goes up. More consumers will afford to purchase products and services and this can mean low profits to a business.
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