2.2. Economic Environment

The current state of the economy can affect how a company performs. The rate of growth in the economy is a measure of the overall change in demand for goods and services. http://www.accaglobal.com/publications/studentaccountant/32530

All businesses are affected by economical factors nationally and globally. Interest rate policy and fiscal policy will have to be set accordingly. Within the UK the climate of the economy dictates how consumer may behave within society. Whether an economy is in a boom, recession or recovery will  also effect consumer confidence and behaviour. 

 

 

An economy which is booming, is characterised by certain variables. Unemployment is low, job confidence is high, because of this confidence spending by consumers is also high. This has an impact on most businesses. Organisations have to be able to keep up with the increased demand if they are to increase turnover. An economy which is in a recession is characterised by high unemployment, and low confidence. Because of high unemployment spending is low, confidence about job security is also low. Businesses face a tough time, consumers will not spend because of low disposable income. Many businesses start cutting back on costs i.e. Labour, introduce shorter weeks and cut back on advertising to save money.

Case: In the early 1990’s when the UK economy was in a slump, and businesses were folding repeatedly, a security company called ‘Dreadlocks security’ to combat falling sales embarked on strategy of cutting back on labour costs, and doubling advertising expenditure. The companies’ theory was that not their entire target segment was affected by the recession and he had to fight for the customers that still had the income to spend on security products.

Economies globally also have an impact on UK businesses, cheaper labour abroad affects the competitiveness of UK products nationally and globally.  An increase in interest rates in the USA will effect the share price of UK stocks or adverse weather conditions in India may affect the price of tea. A truly global player has to be aware of economic conditions across all borders and ensure they employ strategies and tactics that their protects their business. http://www.learnmarketing.net/environment.htm

2.3. Socio-cultural Environment

Ultimately, however, all the various PEST factors are governed by the sociocultural factors. These are the elements that build society. Social factors influence people's choices and include societal beliefs, values and attitudes. So understanding changes in this area can be crucial, as they lead to political and societal change. You need to consider demographic changes and also consumer views on your product & industry; environmental issues (especially if your product involves hazardous or potentially damaging production processes); lifestyle changes and attitudes to health, wealth age (children, the elderly, etc.), gender, work and leisure. Added complications when looking at social and cultural factors are differences in ethnic and social groups. Not all groups have the same attitudes - and this influences how they view various products and services http://www.marketing-intelligence.co.uk/help/Q&A/question14.htm