BIZ202 The Business Environment

Added on - 13 Sep 2021

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Running head: BUSINESS ENVIRONMENT
Business environment
Name of the student
Name of the university
Author note
1BUSINESS ENVIRONMENT
Introduction
Similar to the micro environmental factors, the contemporary business organizations are
also having the impacts and relevancy of the macro factors. This is due to the reason that the
current business factors are rapidly changing and evolving and it is getting more important for
the business entities to cope up with these changes. In this case, determination of the external
changes is relevant (Gupta, 2013). IGA is one of the leading retail players operating in
Australian market. However, the intensely competitive market scenario for them is leading to the
importance for measuring and evaluating the risks and impacts of the external factors. The
diversity of the external business factors is also getting increased with time. Hence, these factors
should be analyzed from different perspectives.
This report will discuss about the external business factors for IGA on the basis of the
PESTLE factors. In addition, the major challenges to be faced from these factors will also be
identified and solutions will be discussed.
Identification of macro factors
Political factors
Australia is having political stable economy with having democratically elected
government with pro business approach. It is reported in the global economy and that long term
political risks in the country are on the lower side. This denotes that IGA will have lower sets of
political risks in doing their business in Australia. However, on the other hand, it is also reported
in the same data facts that political stability in Australia is fluctuating in nature, which may pose
challenges (Navarro-García, Arenas-Gaitán & Rondán-Cataluña, 2014). This is due to the reason
that lack of political stability will create barriers in the seamless process of business operations.
2BUSINESS ENVIRONMENT
In terms of the corruption perception index also, Australia is continuously slipping with 88 in
2011 to 79 to 2016(theglobaleconomy.com, 2019). This denotes that impact of corruption is
increasing in the country and it will also have negative impact on the business of IGA. The
capitalistic approach of the government is actually helping the retailers to have lower political
interference and maximization of profitability.
Economical factors
Inflation is on the rise in Australia as it is identified that inflation rate went up from 1.3 to
1.9 between 2016 and 2017. Thus, the more will be the rate of inflation, the more will be the cost
of the end products, which will ultimately reduce the sales volume and business viability.
Moreover, in the case of the retail sector, consumer goods will be badly affected by the higher
inflation rate. IGA will find much lower sets of customers for their products. In addition, the
economic growth of Australia is also showing diminishing trend as it is reported that Australia’s
economic growth came down from 2.83 to 1.96 between 2016 and 2017(theglobaleconomy.com,
2019). This will also pose challenge for the retail sector as the lower will be the economical
growth; the lower will be the purchasing power of the customers. In terms of the foreign
exchange rate of the Australian currency, diminishing trend is identified. It is reported that value
of Australian currency compared to Dollar decreased from 1.28 in 2009 to 1.04 in 2014. Thus, it
will be challenging for IGA to initiate the international trading process due to the reason that
they will incur loss in the process due to the devaluation of the Australian currency. It is also
identified that the rate of taxation in goods and services is increasing in Australia (Bishop et al.,
2013). Thus, the more will be the rate of tax, the more will be the end price. This will also create
barriers in the targeting strategies of the retail brands.
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