1) Macro business environment
Provide a description of the macroeconomic environment in which the business operates noting:
- The overall ‘stability’ of the political system/government of the country in which the business operates.
- The general level of inflation, unemployment and ‘average’ interest rate of the country in which the business is physically located (and also the countries in which most customers live if different from the location of the firm). Discuss any recent changes in those variables. Does the economy seem to be in a recession, boom or otherwise?
- If ‘your’ business exports its products to other countries, provide some information about the (currency) exchange rate, discussing its current level, and recent changes in it.
Use the above information to comment on whether or not the overall macroeconomic conditions faced by the firm are likely to become more or less favourable over the coming years. In this part you should consider such things as:
- Whether your main products are likely to be ‘normal’ or ‘inferior’ and hence whether demand is likely to rise or fall during recessions and thus whether the economic climate of the countries in which most of your customers live is likely to reflect well or poorly on your sales.
- Whether you are likely to face problems getting access to key factors of production (e.g. are there skills shortages?), and whether this is likely to affect the business’ future operating costs.
- If your business exports its products or imports factors of production…whether recent trends in exchange rates are likely to be good or bad for costs and/or revenues.
2) Sustainability practice of the business
- Does the production process of the business generate any positive or negative externalities? If negative, has the government (or anyone else) put in place any measures to mitigate? What is done to mitigate by the business? If positive, what is done to take advantage of it?
- Does the consumption of the good produced by the business generate any positive or negative externalities? If negative, has the government (or anyone else) put in place any measures to mitigate? What is done to mitigate by the business? If positive, what is done to take advantage of it?
- Use the information from above to comment on how the sustainability practice by this business and other businesses in the same industry would affect their long-term business viability.