Economic environment: concept and general characteristic

Organization should be understood as an open and complex system that receives resources from the external (economic) environment and also delivers its product to it. In our article, we consider the concept and characteristics of the presented category, as well as other equally important aspects of the issue.

The concept of the economic environment

The functioning environment of an enterprise should be considered as a complex of interconnections with economic entities, infrastructure links, natural and social systems, as well as with government bodies. The economic environment of the structure is classified as follows:

Microenvironment. In this case, the areas of direct impact on the organization are such entities: suppliers of material and technical resources; competitors; consumers of a product or company services; marketing and resellers; government bodies and laws; financial institutions; other contact audiences.
The macroenvironment is notable for its indirect effects. Here are the following components: the state of the economy; international events; political factors; NTP; socio-cultural conditions.

How to determine the state of the environment?

Next, we will analyze the factors of the economic environment. So, the state of the environment of the functioning of the structure is determined by a number of factors:

Economic forces. It is worth noting that through them the state of the economy is revealed, which affects the goals of the organization and how to achieve them. It is advisable to include inflation, the level of employment, the international balance of payments, etc.
Political factors. It must be borne in mind that the level of investment inflow and other resources to a particular region depends precisely on political stability in society. The attitude of administrative management structures to business is expressed, first of all, in the establishment of various duties or benefits that can develop entrepreneurship in the region or supplant it, creating unequal conditions for different enterprises.
Socio-cultural factors. In this case, we are talking primarily about the traditions and life values that prevail in society.
Scientific and technical progress. This factor reveals the possibility of increasing the efficiency of production processes, and therefore, the effectiveness of methods to satisfy consumer needs.
Factors of international importance. If earlier there was an opinion that the international environment is considered an object of attention only of those structures that carry out economic activities for export, then at present the changes in the world community concern almost all enterprises.

Intensive and extensive economic growth

Today it is customary to distinguish between two types of growth in the economy. It is about intensive and extensive economic growth. In the latter case, the increase in the social product is carried out by increasing production factors in quantitative terms: involving additional type of labor, production assets (capital), and land in the process of production of resources.

It is worth noting that while the technological basis of production remains unchanged. Thus, the plowing of virgin lands to obtain the maximum number of grain, the involvement of an extremely large number of employees for the construction of power plants, as well as the production of the maximum number of combine harvesters are all examples of an extensive option to increase the social product.

An intensive variety of economic growth, first of all, is characterized by an increase in the scale of output of marketable products. It is worth noting that the latter is based on the widespread use of more efficient and qualitatively advanced production factors. Increasing the scale of production is usually ensured through the use of the best technology, scientific achievements, advanced technologies, the most economical resources, as well as through staff development. Thanks to these factors, an improvement in the quality characteristics of products is achieved, as well as an increase in resource conservation, labor productivity and other indicators of the economic environment.

During the scientific and technological revolution, that is, from the middle of the 20th century, in the western countries of the industrial type, it is precisely intensive growth in the economy that gets the advantage.

Environmental characteristics

Further, it is advisable to analyze the characteristics of the economic environment. The main ones are uncertainty, complexity, mobility, as well as the relationship of factors. The latter category is a kind of economic relationship or force with which a change in factor A affects other environmental conditions.

Complexity in this case is interpreted as the number of factors that the production mechanism is required to respond to in order to survive. In addition, this is the level of variation of each of the factors.

Mobility and uncertainty

Among the characteristics of the socio-economic environment, uncertainty and mobility are distinguished. The latter is also referred to as dynamism. It should be understood as the speed with which changes are made in the economic environment of a commercial structure. For example, in some industries (chemical, pharmaceutical, electronic, and so on), these changes are being implemented at a relatively rapid pace. In others (for example, mining), they are somewhat slowed down.

Under the uncertainty should be understood a function that depends on the amount of information that the company has regarding a specific factor in the economic environment, as well as a function of confidence in the accuracy of the data available. The more uncertain the external environment is, the more difficult it is to make decisions that are considered effective.

Dynamic relationship

The company's relations with the external environment are defined as dynamic. The economic environment is characterized by a large number of relations between its components, which are conditionally classified into horizontal and vertical. It is advisable to consider the categories presented in more detail.

Vertical and horizontal connections

Vertical connections appear immediately after the state registration of the structure, since each economic entity carries out the corresponding functions in accordance with the legislation in force in the country.

Horizontal communications primarily ensure the continuity of production processes and the sale of marketable products. They reflect the relationships of producers of material plan resources with suppliers, product buyers, business partners, and, of course, competitors. Schematically and enlarged communication of the subject of economic activity in the external environment will be discussed below.

Horizontal Link Category

So, the main link of horizontal ties is the manufacturer of marketable products. It interacts with the following individuals and structures (in other words, with counterparties):