The External Environment Economic

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The External Environment Economic

The economic element of the Environment plays a very big role in determining the nature of business.When times are good and country enjoys full employment ,a firm may find that it can only expand by buying factors of production that are becoming more expensive. Thus ,to remain competitive, some firm have moved to Third World countries where certain resources such as labour are cheaper an more readily available.

Many firm expand rapidly during an economic boom have usually to cut down production drastically during an economic downturn. Often associated with economic downturn is rising unemployment which leads to more calls by local manufacturers for trade barriers on competitive imports.The licencing of importers,the control of foreign exchange ,the imposition of tariffs and quotas, the uses of embargoes and various form of administrative measures are examples of trade barrier designed to slow the inflow of foreign goods.

Tax policy is commonly used to achieve both economic and non-economic ends.A government my impose a tax on a particular industry in order to collect funds for certain national objectives.For instance ,a tax may be imposed on a firm’s total wage bill in order to force it to mechanise and recude its labour force ,and the government may the use the proceeds to retrain workers in the use of machines that will increase productivity.

Productivity in the face of scarce resources was the objective behind the nationalisation policy the British government in the 1940s and 1950s. It was believed that only the government could organise economic activities successfully and for the public good.Unfortunately some of these organisations bacame very bureaucractic and inefficient given their monopolistic situations.Hence, in the 1980s, the government has taken steps to privatise these organisations.

Growth areas in singapore

In 1985,Singapore experienced an economic downturn after 20 years of continuous growth.The government appointed the Economic Committee to find the reasons for the recessions,and to identify areas for future growth.The economic Committee’s Report on Singapore’s economy and the new directions ahead list the following as potential economic growth areas:

Agrotechnology. By applying technology to large scale farming systems in neighbouring countries.Singapore will be helping them increase production.

Accounting and audit service. There are opportunities for professionals to provide information systems,business advisory services and management consultancy services.

Courier services. The geo-strategic positon of Singapore can be used to improve the transmission of time-sensitive documents required by banks,trading organisations and transport companies.

Computer Services. Singapore is the leading country in computers in the region and computer firms should concentrate on software development to maintain this position.



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