ECON202 MACROECONOMICS FOR BUSINESS 4

ECON202Macroeconomics for Business

ECON202Macroeconomics for Business

Themacro environment of a business organizationis made up of all components that are beyond its control. It consistsof social, economic, political, cultural, technological andenvironmental factors. Of all these factorsthe economics play a central role in business shaping (Gottschalk,2007).The changes in the economic conditions possessstrong influence on the business organization functioning. This paperexplores two macroeconomic variables that affect the businessoperationperformance.

Endogenousand exogenous variables are the major categories of the macroeconomicvariables. Gross Domestic Production, price level, wages rate andinvestment constitute the indigenous variables whereas weatherand natural disasters make up the exogenous variables (Gottschalk,2007).

Localand foreign investments in a particular region have a directeffect on the performance of the business of the organization(Gottschalk,2007).Increased foreign investments have potential risks to the localservices and products of the businessinstitution. It also hasadverseeffects on the sales and revenue creation. The investments in thesector of technology haveposed one of the largest hurdlesto the organizations applying traditional ways (Sherwoog,1999).Despite all these, if an organization utilizes opportunities ininvestment of changes that prevail in the externalbusinessenvironment, it can lead to products of betterquality and excellent customer relations.

Theother vital macroeconomic variable having asubstantialimpact on the business environmentis fluctuations in rates of wages. Changes in the workers’ wageshave an influenceon their motivation to work and subsequently their job performance(Barro,2007).For example, in recession, the reduced wage rates affectthe workers’ productivity. They can underperform as a resultof variations in their salariesand incentives rates. Thismayhave a directeffect on the overall business operations.

References

Barro,R. (2007). Macroeconomics:a modern approach.Cengage Learning.

Gottschalk,J. (2007). MonetaryPolicy and the German Unemployment Problem in Macroeconomic Models:Theory and Evidence(Vol. 334). Springer Science &amp Business Media.

Sherwood-Smith,M. (1999). ITInvestment: Making a Business Case.Taylor &amp Francis.