MACRO-ECONOMIC ENVIRONMENT

Economic factors are important to be considered by any organization, whether it is a new start-up or a well established firm. When the economy is bad, almost every business suffers; this in turn, can lead to job losses. When the economy is recovering, things get better for almost all firms.

The diagram below shows a typical cycle of an economy.

Today, the world is facing an economic downturn, which means there is a negative economic growth.

Current economic climate

Business thrives on confidence. Confident consumers are willing to dip into their savings for a holiday, or to borrow to buy a new carpet or car. Confident investors are willing to put more money into businesses in return for shares. And the companies themselves will spend to invest in their future: New factory buildings, new machinery and new computer systems, etc. All this spending can create a strong improvement in economics activities. However, when the economy is in a crisis (recession), business will face serious problems. Thus, economic climate is important. The following economic factors (see the diagram) can create an economy either of optimism or pessimism.