External influences - economic Flashcards
What are some external economic influences?
- economic growth
- exchange rates
- inflation
- unemployment
- emerging markets
- consumer confidence
- interest rates
How does economic growth impact businesses?
- growth can lead to expansion leading to more job opportunities
- increased productivity (E.O.S)
- carbon emission?
- inflation
- better infrastructure
What is economic growth measured by?
GDP = disposable income = sales
How do exchange rates impact businesses?
- supply chains leading to raw materials being more expensive which can lead to increased international competition
- more demand
- exports become more expensive
- makes sales forecasting hard to predict
How does inflation impact businesses?
- can cause shrinkflation
- can cause demand-pull inflation
- Reduces sales
- can lead to fluctuating stock prices
What is inflation?
The general rise in prices of goods
What is shrinkflation?
When products usually produced by large TNCs get smaller to compensate from an increase in production costs caused by inflation.
How is inflation measured?
Using the CPI (Consumer Price Index)
What is demand-pull inflation?
This is when there is greater demand than supply so the price of the good increases until demand falls or supply increases.
How does unemployment impact businesses?
- lower consumer spending leading to less demand for elastic products
- increased demand for inferior supply
- greater labour supply
- less desirable for FDI and foreign aid
- more likely to gain government subsidies to improve employment
How do emerging markets impact businesses?
- gain subsidies by government for locating in their country
- certain workers
- cheaper tax and utilities
- economic of scale
- globalisation and glocalisation
- better access to customers –> grows foreign dynamics
- outsourcing of production
- open market
How does consumer confidence impact businesses?
- brand loyalty
- better with inelastic products
- influenced by other factors
- force oversea expansion to find other markets
How do interest rates impact businesses?
- riskier loans
- potentially more spending or saving
