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What are Business Conditions?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 15 September 2016
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Business conditions are the factors which have an impact on the operation of businesses. People may refer to them as the business fundamentals or business climate. People who want to start businesses must familiarize themselves with the conditions in the area where they wish to open up a new business while ongoing businesses must be aware of shifting influences which may change the way in which they choose to do business. Consumers are also directly affected by business conditions because the business climate can determine things like pricing for goods and services.

The operating conditions present in an economy can have a number of facets. One is the health of the economy itself. Economies in runaway inflation or deflation, for example, are not great to do business in. Likewise, an economy which is experiencing a recession or depression is less favorable to business than one which is growing. Things which can affect the business climate include interest rates, inflation, and things like unemployment which determine how much money consumers have to spend.

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Another aspect of business conditions is the law surrounding the practice of business. Some nations have very liberalized laws which do not place many limitations on business and may provide numerous incentives in the form of tax breaks, credits, and other benefits for businesses. Other nations have a more restrictive legal climate which can make their markets difficult for new businesses to break into. Small businesses in particular can struggle in conditions that are restrictive because they may have trouble growing.

The political situation also has an impact on the economy, just as economic woes can create political problems. If a political system is unstable the business conditions are usually poor, while a country which is politically powerful has more pleasant conditions. Businesses may actively attempt to influence politics by being involved in elections, lawmaking, and other aspects of the political system in countries where they are allowed to do so.

Many governments have agencies concerned with economic development and one of the operations these agencies engage in is continuous evaluation of business conditions to determine if a nation has areas in which it needs improvement. Monitoring business conditions can involve everything from tracking interest rates to meeting with representatives of various industries.

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mutsy
Post 2

@Crispety -I have heard that argument before and I have to say that while I don’t know if it is true, we do have to have a balance between paying a living wage and operating a business, I am just glad that I don’t have to make these decisions but I am sure it is not cut and dry.

I think that inflation can also negatively affect businesses because it means that they have less buying power and they have to pass on these increased costs to their customers. It also means that the business will probably not expand and may even ask the current employees to become more productive and increase their workload.

I think that the fact that many businesses are having trouble borrowing money in order to expand their business also affects their general business conditions because the lack of capital does not allow the company to grow as it would have in the past.

Crispety
Post 1

I think that there is some debate as to whether minimum wage is beneficial or not. I know that some people believe that if there is a rise in the minimum wage the general business conditions would be such that businesses would be forced to hire less people which would cause the unemployment rate to rise.

Also, many people believe that businesses would pass on these additional expenses on to their customers in the form of higher prices. I don’t know if this is a fact, but it does make you wonder how some political decisions affect general business conditions.

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