In this paper, I will be looking at the economic, social, political and environmental influences that tourism business has on the economy of Australia. This helps in lowering the labor wage expenses. This impacts the production process of the organization and increases the expenses as a result of which the cost of production increases and sales of a product decreases. Money and capital market impact the economic environment. Social and Political Environment analyzes the social meaning and justification of business, defining its rights, obligations, and purposes. For example, the more than 75 million members of the millennial generation were born between 1981 and 1997. Taxes not only affect the consumers, but it also affects businesses as high taxes results in the high cost of production. Income is the total earning of an individual or an entire family. For example, major U.S. pharmaceutical companies have been successful in getting the Food and Drug Administration (FDA) to speed up the approval process for new drugs. It consists of all those factors that have bearing on the business….. A set of conditions – Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization. Increasing interest rates also impact the businesses, especially those businesses where people require to take a loan to buy goods. We discuss the legal environment in greater detail in a separate appendix. INTRODUCTION Business is regarded as a human activity that is concerned with the production and distribution of goods and service. The application of technology can stimulate growth under capitalism or any other economic system. Introduction to Business by Rice University is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted. Surprisingly, none of the tech companies known for their generous work perks made the top 20 list in 2017. For example, A well-known American subsidiary company of PepsiCo, Frito Lays sells products like lays, Fritos, Doritos, etc., and you find the difference in the flavor of their products from one country to another. In the United States, for instance, there are significant differences in Democratic and Republican policies. Wolfe says companies that demonstrate empathy and work diligently to provide personal time for all employees tend to take the top spots on the work-life balance list. Therefore, it is one of the most important concerns of government to create jobs in the country in order to lower the unemployment level in the country so that the economic growth of the country can be saved. Therefore, inflation is undesirable by both consumers as well as businesses. The economic environment consists of economic factors which affect the buying habits of consumers and the commercial behavior of companies. There are three interconnected spheres of sustainability that describe the relationships between the environmental, economic, and social aspects of our world. They tend to spend low money on necessary goods for a living, such as basic food items like wheat grain, rice, etc. Location, Location, Location: Where Do We Make It? From Motivation Theory to Application, X. Business environment is therefore, the total of all external forces, which affect the organization and the business operations (Kotler &Armstrong 2004). According to the business dictionary, “The combination of internal and external factors that influence a company’s operating situation. Using Teams to Enhance Motivation and Performance, 56. The increase in the price of vegetables and fruits will reduce the profit margin of restaurants. Federal agencies play a significant role in business operations. Many boomers nearing retirement have money and are willing to spend it on their health, their comforts, leisure pursuits, and cars. Trends in Entrepreneurship and Small-Business Ownership, VI. https://www.marketingtutor.net/how-social-factors-affect-business-environment And spend they do—freely, even though they haven’t yet reached their peak income and spending years. The economic environment can be defined as the combination of all the economic factors such as, inflation, income, employment rate, etc. Sources: “Career Opportunities,” https://www.hrblock.com, accessed May 25, 2017; “About Us,” http://newsroom.hrblock.com, accessed May 25, 2017; Abigail Hess, “The 20 Best Companies for Work-Life Balance,” CNBC, http://www.cnbc.com, May 4, 2017; Kristen Bahler, “The 20 Best Companies for Work-Life Balance,” Money, http://time.com, April 20, 2017; Rachel Ritlop, “3 Benefits Companies Can Provide to Boost Work-Life Balance,” Forbes, http://www.forbes.com, January 30, 2017. Global oil conglomerate BP, which was responsible for the oil spill, has spent more than $60 billion in response to the disaster and cleanup. The theories of social economics often consider factors that are outside the focus of mainstream economics, including the effect of the environment and … Fluctuations in the level of economic activity create business cycles that affect businesses and individuals in many ways. SOCIAL FACTORS – BUSINESS ENVIRONMENT Introduction: The main factor that affects most business is the degree of competition – how fiercely other businesses compete with the products that another business makes. A) Suppliers of Inputs : This is a very important part of the external type of business environment … Competitors. Global competition is basically an uncontrollable element in the external environment. For example, high population means there are chances of finding skilled employees. The Federal Trade Commission will penalize Pfizer if its advertisements promoting the drug’s benefits are misleading. Meaning of market size is the total number of potential buyers in a market. Managers must understand how the environment is changing and the impact of those changes on the business. They also change as people move through different life stages. Managing a Socially Responsible Business, 15. Natural resources play an important role in the business environment. Components of Business Environment – Economic Environment, Technological Environment, Social Environment, Demographic Environment and a Few Others . Achieving High Performance through Human Resources Management, 70. New equipment and software that improve productivity and reduce costs can be among a company’s most valuable assets. Many business activities are reliable on natural resources. As a result of which, people start buying less, and thus, the economic environment gets impacted. Trends in Developing Products and Pricing, XII. Therefore, businesses become bound to increase the cost of products that they sell. Prosperity and recessions are the common phases through which the capitalist economy passes through periods. How restrictive are the regulations for foreign businesses, including foreign ownership of business property and taxation? The nation becomes self-sufficient, and areas like agriculture, banking, trade, etc. For example, fuel, water, mineral resources, soil, vegetation, rainfall, topography, etc. It conceives of the manager’s activity as an endeavor of political nature in the sense of art that promotes making things in organizations and their environment fair. What are the sectors of the business environment, and how do changes in them influence business decisions? Understanding Economic Systems and Business, 3. Minorities’ buying power has increased significantly as well, and companies are developing products and marketing campaigns that target different ethnic groups. Using Technology to Manage Information, 114. Even the social-cultural environment impacts the way products are produced. When economic activity is strong, unemployment rates are low, and income levels rise. Excellent question though. The social and cultural aspects have a great influence on the realities of economic and business environment. Leading, Guiding, and Motivating Others, 55. Robots help businesses automate repetitive tasks that free up workers to focus on more knowledge-based tasks critical to business operations. The tension between two countries or the increased tariff rates increases the import cost as a result of which the cost of production also increases. Trends in Ethics and Corporate Social Responsibility, 22. 83. Companies might be required to change the production process of a product according to the change in government policies. 5. Import tariffs, quotas, and export restrictions also must be taken into account. This category is one of the most important external influences on businesses. Companies are required to set up their business by being bound by the law, and violation of any law can result in a penalty or the cancellation of business license. Productivity is the amount of goods and services one worker can produce. Below are some microeconomic factors that may influence a business: 1. For example, people mostly buy houses and cars on loans. for example, unemployment, poverty, immorality, lower per capita income. Going to College Is an Opportunity of a Lifetime—Never Drop Out, 150. Economic environment within a country is closely linked with the political and legal environment there. Social and cultural environment put a great impact on the economic environment of business. Inflation and interest rates are other areas that change according to economic activity. Inflation rate impacts the commercial business, which deals in leisure services and sells branded goods. Social factors that affect the economic environment of a business are the cultural … 8. Innovation pose risk for already established businesses. Economic environment of business is also influenced by ups and downs or cyclical fluctuations in business activity. Public Relations Helps Build Goodwill, XIII. In some situations, however, a firm can influence external events through its strategies. The phrase, "people, planet, and profit" to describe the triple bottom line and the goal of sustainability, was coined by John Elkington in 1994 while at SustainAbility, and was later used as the title of the Anglo-Dutch oil company Shell's first sustainability report in 1997. Demographic factors are an uncontrollable factor in the business environment and extremely important to managers. In addition, the forces of supply and demand determine how prices and quantities of goods and services behave in a free market. They use their skills and resources to create goods and services that will satisfy existing and prospective customers. 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