Economic and non economic environments of business

Economic Environment of Business and its Importance:

Economic environment of business includes all those forces which have an economic impact on business. Business enterprise which has to play its role under the existing economic environment is an economic institution. It works, with the objective of profit maximization.

Therefore, economic decisions of business enterprise are determined by both micro and macro-economic environment. But the economic environment of business normally reflects the prevailing economic system and thereby it gives more emphasis on macro-economic environment.

The economic environment of business of modern times is highly complex. Total economic environment is consisting of prevailing economic system, basic economic philosophy and economic policies of the government, stages of economic development, agricultural and industrial production, infrastructure, planning process, trade cycles, national income, savings, population, money supply and price level. Business decisions are always taken considering all these complex factors constituting economic environment of business.

Again, in a modern economic set up, broadly five sectors viz. the business sector, the household sector, the capital market, the external sector and the government sector usually work simultaneously. The business sector maintains close link with all the four other sectors.

The structure of the economy is conditioned by the five sectors jointly. But the activities of all these sectors create an economic environment on which business firms are working. Although, individually the business firms cannot change the economic environment prevailing there on but collectively they can change the economic environment to their favour under capitalist and mixed economic system by putting pressure on the government through their associations.

In India various organisations like Confederation of Indian Industry (CII), the Federation of Indian Chamber of Commerce (FICCI), ASSOCHAM are exercising considering influence __________ __________ ___ _________ ______ ___ ________ _______ _______ ______ ________ ______.
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