Economic and Non-Economic Environment : The Interaction Matrix

The economic environment of business exercises a strong influence on the non-economic environment of business just  as the non-economic environment influences the economic environment.  The economic environment is, thus, both exogenous and endogenous. it determines as well as it is determined by non-economic environment. Let us consider a few specific 'interactions'. 

The sociological environment affects ant/ gets   the economic environment of business. The social Attitude towards business and management determines how nanny people get attracted to private business as an'activity and to management as a career. If business gets a social sanction as a respectable profession, the occupational structure of a country will reflect a sizable category of professional enlargers. On the other hand, if more and more of tile active labour force joins professional management, the social attitude towards business  and its management also changes. Let us take another example. Social movements largely determine the economic system. If the workers cultivate an attitude of confrontation rather than co-operation with management, a repressive economic system may be needed to cope with industrial disorder. On the other hand, if the attainment of rapid economic growth is the target, the management must bring about a labour-productivity revolution and for that, payment may be based on the productivity of labour rather than the profitability of business. To operate on productivity-based wages is to operate on the system of incentives and positive attitudes of the labour. The attainment of a specific economic objective is thus, conditioned by a specific social attitude and discipline. 

The international-cultural environment and the economic  environment of brine also inter-repent.  The state of economic development  acts as a decisive factor in the choice of a system of education. For example, only a relatively high-income country can afford to import costly higher education in science and technology.  The system of education, on the other hand, may be responsible for a given economic environment. For example, the emphasis on education in the 'arts' and a lack of vocational courses may be held responsible for the economic problem of unemployment in many countries. At the corporate level, the inter-dependence between educational and economic environmental factors may at times take the form of a vicious circle. For example, a low-profit business concern may not find resources to finance management training or executive development programme. As a result, there may be a shortage of highly qualified and trained management personnel. Thus, lack of trained competent managers may lead to business inefficiency. 

The politico-legal environment and economic environment of Bulfinch. are also interlocked to such an extent that we sometimes think of the 'political-economy'  of business. In a situation of political stability, business enterprises happen to be forthcoming and businessmen are willing to take more economic  risks. But if there is political instability, business uncertainties multiply and, therefore, individuals may not like to take up new business ventures. The state of business in Punjab is a recent example. Similarly, the ideology of the ruling party influences the Nicole  system. The ruling party which believes in using socialism as a strategy and nationalization of enterprises as a tactic to strengthen the economy, may be detrimental to the interests of the private business sector. It nay kill its business incentives to expand its range of operations. On the other hand, sometimes a series of political legislation's may be necessary to cope with the economic environment. To fight economic and industrial recession, the strategy of streamlining of the administration and simplification of the procedural matters  may be adopted. In fact, different legislation of the government (like MRTP Act, FERA, and Urban Land Ceiling Act) are often politico-economic in character : this is borne out by an analysis of the content and intent of different legislations and political announcements. Also, the state of economic environment  decides the continuity or discontinuity of a particular political administration; the state of political environment, in its turn, decides the pattern of economic legislations. 

The historical environment and the correction environment of business  are also inter-pontoon. The present (economic) environment of business can be treated as a legacy of its past (historical) environment. Every business has a history, a history always has a lesson to teach. As such, the present is a reflection of the past, and the present can also be handled in terms of the experiences of the past. A Nuremberg of examples may be quoted. The economic environment of a country today is partly determined by the available structure of industry m that country. Today you find a number of extraction industries such as mines and plantations in our country. These industries can be traced back to the colonial pattern of investment in the past. The British respire was interested in the colonies so that it could easily (a) get the raw materials for its  industries, and (b) dump the finished manufactured products in the colonial markets. The colonies, thus, supplied the market as well as the raw materials : In other words, the economic environment of business in the newly independent nation-states is the outcome of the colonial infrastructure which those countries had in the past. Similarly, the past history is a record of events, and a storehouse of lessons which can provide guidelines for present econometric policy decisions. The achievements of the Five-Year-Plans in the past may provide direction to the formulation and implementation of the current Five-Year-Plan of an economy. And the present performance of a plan will decide the future course of planning. It suggests that the environmental factors are inter-related on the time scale too.