Economic Environment, Business Environment Video Lecture | Business Environment - B Com

hi there this video is a continuation of
the external business environment we're
going to start by discussing the
economic environment we're going to
break down each of the different
dimensions this video is going to be
devoted entirely though to the economic
environment just describing essentially
what it is what are some of the
different variables that are considered
in this type of environment of course as
we've mentioned before the economic
environment exists outside of the scope
or control of a particular business and
so unfortunately we don't have the
ability to affect what happens but by
studying it by analyzing it we can put
ourselves in a position where we can
potentially adapt to it and make some
changes to our overall strategy for the
purpose of making better decisions and
ultimately reaching a better outcome
whatever that may look like so really
what is the economic environment so the
economic environment primarily concerns
the health of the economy where the
business actually operates and so we're
concerned with ultimately what is the
condition of the economy what type of
position is it in and how ultimately can
that potentially impact our business and
so being concerned about the the health
of the actual economy we're typically
concerned with things like potentially
GDP and the unemployment rate
we can also be concerned about things
like consumer confidence consumer
confidence being how confident consumers
are that their financial position is
going to be better off at some point in
the future and so if consumer confidence
is low then obviously people have a
tendency to try and save more they don't
want to spend because they feel like
their financial position may not get
better this is pretty common now we have
a lot of uncertainty with regards to the
looming fiscal cliff and so consumer
confidence has been decreasing somewhat
because there's a little bit of concern
over you know obviously a financial
position if tax rates obviously go up if
spending decreases in certain areas and
so that causes consumers to pull back on
spending and so what happens though is
because of GDP 2/3 of gross domestic
product is dependent upon consumer
confidence on how confident people like
you and I feel because if I'm not
confident I'm not going to spend money
which is going to affect the economy
it's going to affect the actual
unemployment rate and so this all works
in a very kind of cyclical fashion if
you will because how confident consumers
are will affect ultimately what
businesses produce because they're not
going to have demand and then what GDP
effects will be unemployment and it kind
of goes in this signal type fashion here
but how this relates back to the
economic environment is businesses are
very very careful to assess what is the
economy like what are the conditions
like what is gross domestic product like
what is the unemployment rate what is
consumer confidence at because if I get
a gauge for the health of the economy I
can better understand you know how do I
adapt to what the economy is like now we
saw in 2008 when the recession
officially took hold that a lot of
companies were downsizing you know they
were reducing unemployment
were laying off or terminating employees
because the demand for their goods and
services couldn't substantiate the size
of the workforce and so by being in tune
with what happens in the economy
businesses can make decisions in areas
such as maybe production it can also
look at things like capital investments
right ultimately if we're going to pay
to expand or to purchase additional
equipment that's obviously a very very
important piece as well that businesses
want to consider is their demand enough
for me to purchase additional machinery
even your labor force right are we going
to need to hire additional employees and
all this essentially relates to demand
for your particular products and so
without demand we know that businesses
aren't going to necessarily front thrive
a business needs to maintain some level
of profits in order to continue to
operate and so if that isn't present
then businesses need to make adjustments
so that they can continue to operate in
assessing the economic environment can
certainly provide businesses with an
advantage if they know ultimately what
to anticipate in terms of demand so they
can in turn match the supply of goods
and services with that level of demand
like I mentioned before businesses
cannot affect what happens in the
economy the best we can do is react to
it and put ourselves in a position to
leverage those opportunities and attempt
to insulate ourselves against those
threats