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The macroeconomic environment is one of the most powerful external influences on a business's strategic position. Changes in GDP, taxation, exchange rates, inflation and government economic policy directly affect demand for products, the cost of inputs, access to finance and the viability of strategic plans. This lesson covers AQA specification topic 3.7.5.
GDP is the total value of all goods and services produced in an economy over a given period (usually one year). It is the most widely used measure of economic output and, by extension, of the health of the economy.
| GDP Trend | Business Impact |
|---|---|
| GDP growth | Rising consumer incomes and spending; increased demand for goods and services; business confidence rises; investment increases |
| GDP stagnation | Flat or slow growth; businesses compete for a static market; cost-cutting and efficiency become priorities |
| GDP decline (recession) | Two consecutive quarters of negative GDP growth; falling demand; business failures rise; unemployment increases |
The economy moves through a recurring pattern of boom, slowdown, recession and recovery. Businesses must adapt their strategies to each phase:
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