It has been already pointed out that the way in which the three basic economic questions are answered depends on the economic system which functions in a country. To understand how these answers differ among the economic systems, we should understand the different types of economic systems. Major Types of Economic Systems Economic systems may broadly be classified into three categories: Capitalism, Socialism and Mixed economy. A number of other types also emerged but all of them came close to any one of the above three types of economic systems. Let us now discuss the features, strengths and weaknesses of each one of these economic systems. 1. Capitalism Capitalism is an economic system based on the principle of free enterprise. Individual ownership of resources is an important feature. With control and command over resources, individuals can conduct any type of business. The object in such a system is to maximize Continue reading
Global Business Environment
The international/global business environment can be defined as the environment in different sovereign countries, with factors exogenous to the home environment of the organization, influencing decision-making on resource use and capabilities. The international business environment includes social, political, economic, regulatory, tax, cultural, legal, and technological aspects.
Definition and Meaning of Economic System
Economic system refers to the organizations and institutions created for the purpose of satisfying the wants of human beings. In a country, available resources have to be utilized to manufacture and distribute goods and services, which would meet the needs of the people so that they are satisfied. These institutions and organizations function with their own rules and regulations. The economic system has certain broad characteristics. The economic system always functions with scarcity of resources. How the system effectively and efficiently uses the resources will determine the extent to which the needs of the people are met. An economic system comprises people. That is, a society of human beings alone can constitute economic system. A set of institutions are created and used for the purpose of smooth functioning of an economic system. For example, banks, money, technology, government, price mechanism, planning etc., are all institutions through which the systems Continue reading
External Environment Factors Causing Uncertainty in Organizations
Businesses are bound to encounter several forces whenever they are in operation. In some cases, these forces are over and above their control. In spite of this reality, there is no single business which can exist without going through the external environmental forces. It is therefore imperative for a business establishment to put into consideration all the possible external forces which may affect its operations either positively or negatively. In this regard, opportunities and threats are worth noting because they account for the external factors which would often affect a business environment. When the external factors are considered and concurrently compared with the internal factors, it will be possible for a business management to formulate the right policies of dealing with the inevitable external forces. Some of the factors which may cause uncertainty in the external business environment are inadequate needs of customers, technological changes, regulations and elimination of foreign Continue reading
Economic Policies Affecting Business Environment
The economic environment of business is composed of various set of economic policies, economic system, strategy of economic growth and development, resource endowment, size of market and status of infrastructural facilities in a country. All these economic policies affecting business environment one way or the other. Economic policies include fiscal policy, monetary policy, foreign trade policy, price policy, etc. These policies lay the framework within which every organization has to function. To understand the impact of these policies on business environment, let us discuss each one of these components in detail. 1. Fiscal Policy By fiscal policy we mean, the government’s tax efforts, public expenditure and public borrowing. Through these the government can effectively encourage consumption, investment and savings habits and also restrict them. For example, suppose there is inflation in a country. Inflation implies that the people have high purchasing power and so they demand goods. To curb this, Continue reading
Deficit Financing – Meaning, Purposes and Limitations
Deficit financing is understood in different ways in different countries. It is understood as the excess of current expenditure over current revenue which is financed either through public borrowing or the creation of new money by the government. So the deficit budget is also called deficit financing in USA. But in India deficit financing is understood in a different way from deficit budget. While the former refers to a situation where the current expenditure exceeds current revenue of the government, the latter is taken to mean the excess of aggregate expenditure (both on current and capital accounts) over aggregate revenue. The former is called deficit budgeting and the latter deficit financing in India. Deficit financing in Indian context refers to the meeting of budgetary deficit through the creation of new money adding to the existing money supply in the economy. Deficit financing includes any or all of the following in Continue reading
Business Competition – Meaning and Types
Meaning of Competition To a particular business, competition usually refers to firms that market similar or substitutable products in the same geographic area. In general, the term business competition refers to the rivalry among businesses for consumer dollars. For example, the manager of a fast food outlet in an airport views all other fast food outlets near the airport as competition but probably does not think fast food outlets in other geographic areas as competition. In general, all the fast food outlets near the airport compete for passengers’ dollars. In developing and implementing a marketing program, an organization must consider the types of business competition in its markets and assess the actions of its competition. Types of Business Competition The number of organizations that sell a product may affect the strength of competition. When there are many business selling a particular product, for example, price considerations and product differences are Continue reading