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Table of Contents:-

c Definition

c romponents of Economic Environment

c r ssifictions of the Economic Environment

c „ctors Affecting the Economic Environment

c rctic study or Imp ementtion of Economic

Environment on Business.

c Dt ro ection Methods.

c °  An ysis

c ronc usion

c ˜ecommendtions.

c ˜eferences

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DE„INIIN:
he economic environment is n incorportion of vrious economic
fctors, such s tot emp oyment, productivity, income, we th,
inf tion nd interest rtes. hese fctors inf uence the spending
ptterns of individu s nd firms.

romponents of the Economic Environment

he economic environment comprises of:

Income and wealth: Income in n economy is mesured by


GD, GN nd per cpit income. High v ues of these fctors show 
progressive economic environment.

Employment levels: High emp oyment represents  positive


picture of the economy. However, there re mny forms of
unemp oyment, inc uding prti emp oyment nd disguised
unemp oyment.

Productivity: his is the output generted from  given mount


of inputs. High eve s of productivity support the economic
environment

r ssifictions of the Economic Environment

he economic environment cn be c ssified into:

c !icroeconomic environment: It inc udes the economic


environment of  prticu r industry, firm or househo d nd is
primri y concerned with price determintion of individu
fctors. he min considertion from  microeconomic

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perspective is the efficient  oction of resources. his is
necessry to mimize tot output.

c !acroeconomic environment: It inc udes  the economic


fctors in tot ity. he min considertion here is the
determintion of the eve s of income nd emp oyment in the
economy.

ver the course of the twentieth century, the focus hs shifted from
cities nd countries to the g ob economy being the chief economic
unit.

„ctors Affecting the Economic Environment

he economic environment of  ntion s we s the wor d is impcted


by:

c Inflation and deflation: Inf tionry nd def tionry


pressures  ter the purchsing power of money. his hs  direct
impct on consumer spending, business investment,
emp oyment rtes, government progrms nd t po icies.

c Interest rates: Interest rtes determine the cost of borrowing


nd the f ow of money towrds businesses.

c Exchange rates: his impcts the price of imports, the profits


mde by eporters nd investors nd emp oyment eve s ( so
through the impct on the tourism industry).
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c !onetary and fiscal policy: his he ps in ttining fu


emp oyment, price stbi ity nd economic growth.

he economic environment is  so inf uenced by vrious po itic , soci


nd techno ogic fctors. hese inc ude  chnge in government nd
the deve opment of new techno ogy nd business too s.

c °ecurity Conditions: his he ps in deve oping business nd


its ctivities.

he better the security conditions, the better wi be the business


environment. rustomers fee secure nd wi ing to purchse.

c ovt. Taxes: Government tes re the most importnt issue


in deve oping the business ctivity. It hs  direct re tionship
with the purchsing power of the customer. A Low Government
t rises the purchsing power of customer. High Govt. es
then ower wi be purchsing power of the customer.
c ïnknown Catastrophe °ituations:

ïnknown ctstrophic situtions men unknown dissters in the


country. If n erthquke comes with some dissters, hevi y
rin cused f oods;  storm rose in the se etc. Any such
sitution which disturbs economic nd soci ife of individu s
nd businesses. „or emp e, recent f ood in kistn chnges
comp ete y the picture of economy nd soci ife of common
humn being.

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c rctic study or Imp ementtion of Economic

Environment on Business.

Now, prctic y we re going to imp ement the „ctors of Economic


Environment on Business. he business which I choose for my
rctic °tudy is It ws deve oped in the yer 1996. heir first office
ws in Is mbd which now grows into  huge compny. It hs now
two new brnches t Lhore nd Krchi. he min theme of the
business is to Import Items from vrious foreign countries nd se s it
to their customers. he components of economic environment nd
fctors re discussed be ow:

c romponents of Economic Environment in K.M.


Enterprises5c
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lc Income and Wealth:
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Income nd we th re evnt to this specific orgniztion is
tht s this compny is c ssified s  so e proprietorship. he
initi investment in this orgniztion ws 15 Mi ion kistni
˜upees which now eceeds more thn the more thn 100
Mi ions k ˜s.. his shows  very positive economic ctivity
in business.

lc Employment Levels:
Initi y this compny hs 10 emp oyees t on y its hed
office. Now it hs more thn 25 emp oyees in its three offices
which inc ude Lhore nd Krchi. he numbers of emp oyee

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show tht economic environment is positive y ffecting the
business.

lc Productivity:

As this compny is not re evnt to production. But it on y


imports items nd hs  gret supp y chin of mchines nd its
spres prts to the oc production sectors.

c „Ar˜° A„„ErING Bï°INE°° ENVI˜NEMN:

lc Inflation and Deflation:


Inf tion decreses the purchsing power of the individu s nd
businesses. he GD nd GN of the ntion economy  so f .
he compny under discussed is  so ffected by inf tion nd
hs  direct re tionship with the s es nd purchse of this
compny.

n the other hnd, def tion  so ffects the business ctivity.


rompny suffers oss when def tion occurs. In kistn during
the few st yers, def tion rre y seems. Ech nd every
product price rises more thn 100%.

lc Interest ˜ates:
Most of the businesses in the wor d inc uding kistn, hs 
very powerfu re tionship with Interest ˜tes. Most of the
rompnies borrows money nd securities from the Govt. or
rommerci Bnks. If the rentr Bnk i.e. °tte Bnk of
kistn rises the Interest ˜tes rtio cross the country,
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which ffects the Businesses. rompny¶s profit mrgin
decreses which ffects in ow emp oyment rtes.

lc Exchange ˜ates:
Echnge ˜tes hve  very gret nd un-broken re tionship
with K.M. Enterprises. Higher the echnge rte in Do r or
Euros the higher wi be foreign purchse. Higher wi be tes
on its purchse. Low wi be profit nd compny wi suffer 
oss.

lc !onetary and Fiscal Policy:


he Monetry & „isc o icy unches by the Government.
Any new monetry & fisc po icy is deve oped by the current
sitution throughout the country. But sometimes its fruitfu to
some businesses nd disster for some businesses  so. New
tes hve been imp emented e.g. G° goes to 17% insted
of 16%. Income t goes to 4% insted of 2%. VA now wi
 so be unched s 17% t ctu on ech nd every
product.

A new f ood re ief t mounted to 10% wi be imp emented


to every purchse of the buyer.

As the bove structure of tes nd duties unched by the


Government, sure y reduces the purchse power of the
individu s nd businesses.

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lc ïnknown Catastrophe °ituations

„ ood run in the st few dys go cross the country which
ffects direct y to the individu s nd businesses. his oss
effects Govt. nd civi ins both. Government imposes  new
t s f ood t for mounted 10% t ctu on ech nd
every purchse for one time. hese types of ctstrophe
situtions prevent the investors to invest nd economy of the
country nd business sure y effects.

°ecurity ronditions:
°ecurity conditions re very poor in st few yers in kistn
which restricts foreign investments cross the country.
„oreign investor prefers Indi insted of kistn. ht¶s why
kistn economy is decresing continuous y.

o itic instbi ity in kistn is  so  mor issue even from


the eistence of kistn. o itic stbi ity is  mor fctor
for the investor to invest in our country.

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DAA rLLErIN MEHD°

Dt co ected from this ssignment is min y from the Internet nd
my course books.
he dt co ected for orgniztion is verb y co ected by interview
with Mr. Khw A eem Ahmed who is the „innce Mnger from 5
yers in this orgniztion.

°WOT Analysis
(An Overview)

°  n ysis is  simp e frmework for generting strtegic


 terntives from  sitution n ysis. It is pp icb e to either the
corporte eve or the business unit eve nd frequent y ppers in
mrketing p ns. °  (sometimes referred to s  °) stnds for
°trengths, eknesses, pportunities, nd hrets. It concentrtes on
the issues tht potenti y hve the most impct; the °  n ysis is
usefu when  very imited mount of time is vi b e to ddress 
comp e strtegic sitution.
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°ituation Analysis

Intern An ysis Etern An ysis

°trengths eknesses pportunities hrets

°WOT Profile
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he intern nd etern sitution n ysis cn produce  rge
mount of informtion, much of which my not be high y re evnt. he
°  n ysis cn serve s n interprettive fi ter to reduce the
informtion to  mngeb e quntity of key issues. he ° 
n ysis c ssifies the intern spects of the compny s strengths or
weknesses nd the etern sitution fctors s opportunities or
threts. °trengths cn serve s  foundtion for bui ding  competitive
dvntge, nd weknesses my hinder it. By understnding these
four spects of its sitution,  firm cn better everge its strengths,

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correct its weknesses, cpit ize on go den opportunities, nd deter
potenti y devstting threts.

Internal Analysis

he intern n ysis is  comprehensive ev ution of the intern


environment's potenti strengths nd weknesses. „ctors shou d be
ev uted cross the orgniztion in res such s:

c rompny cu ture
c rompny imge
c rgniztion structure
c Key stff
c osition on the eperience curve
c pertion efficiency
c pertion cpcity
c Brnd wreness
c Mrket shre
c „innci resources
c Ec usive contrcts
c tents nd trde secrets

he °  n ysis summrizes the intern fctors of the firm s  ist
of strengths nd weknesses.

External Analysis

An opportunity is the chnce to introduce  new product or service


tht cn generte superior returns. pportunities cn rise when
chnges occur in the etern environment. Mny of these chnges cn
be perceived s threts to the mrket position of eisting products nd

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my necessitte  chnge in product specifictions or the deve opment
of new products in order for the firm to remin competitive. rhnges
in the etern environment my be re ted to:

c rustomers
c rompetitors
c Mrket trends
c °upp iers
c rtners
c °oci chnges
c New techno ogy
c Economic environment
c o itic nd regu tory environment

he °  n ysis summrizes the etern environment fctors s


 ist of opportunities nd threts.

hen the n ysis hs been comp eted,  °  profi e cn be
generted nd used s the bsis of go setting, strtegy formu tion,
nd imp ementtion.

rNrLï°IN

„in y, it¶s the conc usion to summrize my who e ssignment. he


min purpose for this ssignment is to crete  concept of Economic
Environment tht eists in business nd non business orgniztion.
he economic environment deve ops n understnding tht economics
invo ves in the individu s nd businesses.

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Every fctor of economic environment hs corre tion with ech other.
Every fctor hs its importnce in wy tht ech fctor cn increse
productivity nd profits of some orgniztion.

rhnge in every fctor chnges the ife of individu s we s


orgniztions.

˜ECO!!ENDATION°

lc rompnies shou d ev ute its resources nd try to


imp ement those po icies which shou d fruitfu to the
running business.
lc Business shou d hve strong ru es nd regu tions which
don¶t contrdict with Government po icies i.e. monetry
po icies nd po icies unch by „eder Bord of ˜evenue.
lc Business shou d not re y on the credits from the Bnks nd
other inks to run their business to void the circumstnces
occurred by Interest ˜tes.
lc Businesses de ing with Echnge rtes shou d hve to
de their businesses with currency which is invo ved in
their purchses.
lc Eperience stff shou d be hired who cn fce unseen
circumstnces with their eperience with ese.
lc Emp oyee motivtion progrms shou d be unched.
lc n ob trinings shou d be there to meet the current
ttitudes of business.

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lc  nning Division shou d be unched or consu tncy shou d
be hired which n yses month y the current sitution of
business with the current economy to prevent business
from oss.

˜eferences:

lc ]]]  

lc ]]] 
 ] 


lc www.netamba.com

lc www.businessdictionary.com

lc www.yahoo.answers.com

lc Www.wikipedia.com

lc www.sbp.com.pk

lc www.fbr.gov.com.pk

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