The general environment — Economic conditions
Economic conditions refer to all of those factors that affect how much money people and organisations can spend and how they choose to spend it. The obvious components of this are income, prices, the level of savings, the level of debt and the availability of credit.
Economic forces and conditions can change quickly and dramatically, and managers can find themselves facing a very different economic environment within a short period of time.
For example, as the global economic crisis began to undermine business investment, the demand for commodities such as coal and iron ore fell away dramatically. The economic slowdown in China, in particular, reduced demand for Australian mineral exports and thus the price began to drop. This sort of change can make operations unprofitable, and therefore unsustainable, almost overnight. Furthermore, the lower demand for Australian exports can trigger a fall in demand for Australian currency; devaluing the Australian dollar. This makes exports cheaper and imports more expensive, which can help local producers.