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Market Influences: Definition & Examples

Instructor: Yusuf Abdullah

Yusuf has taught Science and Mathematics at school level and Finance and Economics at University level. He has recently earned his Ph.D in Financial Econometrics.

This lesson identifies and defines market influences. Learn about PESTLE analysis, which comprises of political, economic, social, technological, legal, and environmental factors affecting the economy and industries.

Market Influences

Market influences are the broad factors that affect the economy, industry, and companies as a whole. These factors affect the operations and profitability of the companies in a given economic region. Businesses analyze these factors before making an investment within a country or a region. Government across the globe aim to increase or decrease the effect of market influence in a way that it is constructive to the economic activity.

Factors

Market influences are determined by six main factors, which are political, economic, social, technological, legal, and environmental. This is also known as PESTLE analysis, which is mostly used in a marketing context for a company but applies to industries and economies too.

Political

The political factors include government stability and policies, taxation and labor law, corruption, and trade restrictions on companies and the industries. Stability and pro-business policies increase economic activity. Tough laws and taxation decrease economic activity. Restrictions may be placed to make domestic companies more competitive.

Economic

Economic market influences include inflation, exchange rate, GDP growth, unemployment, and interest rates, among others. An increased GDP growth rate and a favorable exchange rate depending on trade balance increases the economic activity. Inflation and interest rate should ideally be in check with reduced unemployment for higher economic growth.

Social

The social factors that contribute to better economic, industrial, and company growth include suitable population growth which is within check. A high population might be detrimental to growth but also comes with an increased labor force due to a younger population. Women's safety, career attitude, entrepreneurship, and health factors are some of the social factors that alter economic growth rates.

Technological

Technological factors include advances in science and research and development. Labor and capital investment can increase the growth rate to a limit. New research leads to newer and more efficient products and operational efficiencies. This increases the growth rate of the economy and companies.

The legal framework of the country affects economic activity to a large extent. Protection against illegal activities such as copyrights/patent infringement, anti-trust laws, consumer rights, safety standards, and laws providing healthy competition increase growth rate. A good legal framework attracts more investment and provides an impetus to economic growth.

Environmental

Environmental factors relate to business activities without harming the environment. Various laws attempt to decrease environmental degradation. There is a tradeoff between environmental regulations and economic activity. Reducing pollution, carbon footprints, and ethical considerations can be costly and increase cost which may repel investments.

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