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Economic forces affect the firm’s strategic decisions. Strategic require purchasing power as well as people. The available purchasing power in the market depends on current income, prices, savings, debts and credit availability.
The industrial structure of the economy will determine the level and distribution of income and this will in turn impact on the business of organization. Some of the important factors include;
1. The economic stage at which the country is in at a given point.
2. The economic structure adopted, such as capitalist, socialist, or mixed economy
3. The economic policies, such as industrial, monetary and fiscal policies.
4. Economic policies such as five-year plan, annual budget and so on.
5. Economic indices like national income, distribution of income, rate and growth of
GNP, per capita income, disposable income, rate of savings, balance of income etc.
6. Infrastructure factors such as financial institution, banks, modes of transport, communication facilities, and so on
Economic factors like GDP, inflation, interest rates (cost of borrowing), tax levels, government spending and business cycle need to be considered. During periods of boom, premium prices can be charged, during recession, demand for goods and services are low and prices depressed.
Titany answered the question on November 24, 2021 at 12:13