Macro and micro economic factors affecting plant operations (Essay Sample)

Macro and micro economic factors affecting plant operations
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Introduction
The style of running business varies from one country to another. Skill and expertise is necessary towards achieving success in plant operations. The chances of succeeding in business are boosted once the business personnel from various cultural backgrounds discover new approach to handle business problems. The ability to create viable solutions through blending the various cultures that exist and analyzing issues from other people’s perspective is fundamental towards achieving immense business success. The business environment is a collection of factors that influence the operations around business. These factors may be within the plants ability to control (internal factors). They may also be uncontrollable (external factors)
Macro and Micro Economic Factors Affecting Plant Operations
Some of the uncontrollable factors include legal, political, technological, cultural, competitive and demographic factors. It is not possible for the plant to control such factors. The business will be affected by these external factors in the same measure the competitive environment affect its operations. The internal factors are within the ability of the plant to control through the process of management. The internal factors may include capital, location of business enterprise, labor, and land among other factors.
While developing a strategy for business it is important to pay attention to the global factors that influence business. The factors are legal, social, economic, technological and political. It is important to understand the factors while developing strategy for business. The social environment relates to the varying structure of the society. The social factors incorporate taste, lifestyle patterns, and people’s behavior. The structure adopted by the society and lifestyle greatly influences the patterns of buying. Factors such as gender and age play a great part in the buying patterns of the society. It is therefore fundamentally important to consider the various macro and micro economic factors in the cause of executing business.
Political factors
This is arguably the most important of all factors. The political environment widely influences the business environment either positively or negatively. A favorable political environment is necessary for business success. Some of the governments are faced with challenges of political instability. Government regimes may be unpredictable, dramatic and at times hostile leading to civil unrest. In such situations the success of business is put under serious jeopardy.
It is likely that the normal day to day business operations may be halted and unexpected strikes witnessed as a result of political instability. A good example is the current situation that was witnessed in Venezuela (Gutiérrez Briceno, T. 2002). The civil unrest experienced lead to closure of many business including banks. Workers went on strike, riots were evidenced, and private entities were robbed of their foodstuffs. The political environment is very sensitive to business success. Even in the presumably stable governments periods of caution are evidenced especially during transition from one administration to another.
Legal factors
Any plant anticipating business success must beware of the legal requirements at the local level and at the international level, where a business engages in international business. The legal requirements governing business activities often vary from nation to nation. The legal variations may be found in areas such as insurance, minimum wage, overtime regulations and maximum number of weeks of working. The rule of product safety standards and product quality test may vary depending with the country in question.
Below are some highlights of legal differences between countries that may significantly affect business (Brown, C. A et al, 1988)
Local content requirements: some of the local laws indicate that a certain percentage of products must be supplied by locals. In such situations, it becomes a requirement for any plant to utilize the locally available production factors. The significance of such a regulation is to ensure that economic activities at the local level are significant and hence more opportunities for the locals. This requirement may pose a great challenge for international investors especially when the quality of their product is compromised due to low quality of the locally available raw materials and unskilled labor.
Product safety law: in some countries the product safety regulation states that the plant may be held liable for any negative effects experienced by consumption of their products. The laws are widely enacted by countries in order to protect their nationals from reckless manufacturers. It is therefore important for the company to beware of product liability laws governing production in the country of operation.
Tax law: any country has its tax system aimed at achieving its taxation purpose. Taxation laws may be enacted by any government for varying reasons including protecting local products from international competition. This happens when the imported products are cheaper than the local products hence affecting the local manufacturers negatively. Increasing tax on such products makes them more expensive and therefore promotes the local products against those that are imported. The other purpose for tax is to finance the day to day government development activities such as payment of its employees and ongoing projects (Fritschler & Ross, 1980)
Economic factors
The government is able to regulate the business environment in many ways, for example; when it aims at encouraging international business, it may lighten the legal and tax requirement. This way the business environment becomes favorable for international business. In the same way the government may want to shield local investors from international competition. This way it will create trade barriers and other protective measures such as levying high tariffs and quotas (Brux, J. M. 2005)
Rate of currency exchange: international business is facilitated by currency. Most of the nations of the world use their local currencies to conduct business. The success at which the local currency exchanges in the international market is fundamental to business. It is important for any plant to explore the currency of any nation before deciding to invest there. A soft currency is one that is difficult to exchange with other currencies while a hard currency is relatively easy to exchange.
The economic system of any country is also elementary. Some of the economic systems adopted by countries may tend to favor specific business activities over others. There are various economic systems such as market economy, free market economy and centrally planned economy. All the systems have their own shortcomings although the free market economy has been widely accepted as the best system. It is wise noting that the conditions of the economy vary quite often in any country.
The economic stability of a country is vital for business. Several factors come in handy while analyzing the state of the economy. Inflation is one very important factor. It is the rise in product prices without a corresponding rise in the level of productivity. At times the government may be unable to control inflation by introducing monetary policies. The government may also be the reason for inflation when it prints currency in large amounts without fair considerations.
The performance of any currency against the other influences the economy positively or negatively. When the local currency diminishes in value against another currency ...