Macro environmental factors that affect the activities of a business

Document Type:Essay

Subject Area:Economics

Document 1

The factors include legal, environmental, political, economic, technological and social-cultural. Political environment. The three arms of government: the legislature, judiciary, and the executive constitute the political environment. They exert influence on business through various methods. The legislature makes laws which are implemented by the executive and streamlined by the judiciary. 32) All of these factors are important determinants of a business strategy. The economic conditions prevailing in a country such as per capita income, distribution of resources, national income, and economic development determine the growth strategies that a business may adopt. Technological environment. Technology is changing the way banks do business. Once in a while customers would be required to visit their bank to make changes to their account information or financial accounts (Jasper, 2013, p.

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The law requires banks to seek approval whenever they need to make any changes to their operations that may affect the customers. When introducing new account classes, Barclays is required to seek the approval of the central bank. A lot of times, these procedures delays the bank's decisions making process and may deter growth. Social environment. Social behavior of customers such as spending behavior, saving attitudes influence how people make use of banking services. Interest rate. Interest rate affects the amount of return that savers and investors get from their money. When one saves money in a bank, you receive interest on your deposit. Similarly, if you take a loan, you pay interest to the bank. If the interest rate for deposits is high savers are encouraged to save more.

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Government actions in the financial market may have a positive or negative impact on the demand for financial services. A government action that reduces money supply will affect banks’ ability to lend therefore lowering the supply of loans to customers (Laubach, 2009 p. Increasing money supply means banks have more cash to give out and this increases the supply of loans and other financial services. Changes in the level of income. Increased income means that people will have more to save with banks. Little is left for investments and saving. As a result, the demand for banks products such as fixed accounts, savings accounts or credit cards decline as the consumer’s income is relatively reduced. Effect of increase in interest on Barclays bank’s borrowing ability.

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When the government raises interest rates, it also requires banks to maintain a certain percentage of deposits in reserve to cover for bad loans. There’s little cash left for the banks to lend out as loans. Banks will end up with a lot of deposits which they cannot lend since people will not be willing to borrow due to the high-interest rates. How increased interest will impact Barclay's bank's growth. Increase in interest rate will have a direct impact on the yield of a bank. The profitability of a bank increases with increase in interest rates. Bank’s profit from the difference between the interests they generate from investments and what they pay to the customers (Jasper, 2013, p. Corporate governance focuses on setting rules for the proper management of the company and minimizing legal and ethical problems (Miyagiwa and Zhukovsky, 2012 p.

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Some of the examples of corporate governance include conflict of interest, hiring policies, the board of director’s membership, use of business assets, profit distribution, investment policies among others. A company that is listed in the FTSE300 index will have tremendous benefits I terms of good corporate governance. Some of the advantages Barclays bank will enjoy include: Improved reputation: Companies that are listed are expected to publish most their corporate governance policies among other things such as financial statements. Publishing of financial reports and corporate governance policies well and how they work, more stakeholders will be willing to work with your company. Good corporate governance will ensure that the company does not circumvent laws. Positive impact on share price: Listed companies make disclosures of their financial results and reports at year end.

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