Several economic conditions in the market, individually or collectively, impact the performance

of companies positively or negatively. These conditions include political, environmental,

currency (money), global economics, and government influences.

Political Factors

Political factors affecting a company's performance refer to government decisions and laws
influencing the market environment. Political factors in the external environment are
unpredictable and impact a company's performance. According to Marcus et al. (2022), political
influences are not limited to overseas companies, as domestic companies also feel the pressure of
changes in the political environment. However, foreign companies may be a particular target for
government actions increasing the pressure of political risks (Marcus et al., 2022). The political
stability of a country or a region is a critical political factor component that can affect companies'
operations. For instance, acts of violence, such as overthrowing an existing government, can
create a chaotic environment that negatively affects the performance of a business. Another
example of political influence involves the issue of corporate taxes. A government can increase
taxes for specific companies, and this would reduce the net profits of such companies.
Additionally, government regulations such as foreign trade regulations can make the business
environment attractive or unattractive for expanding operations into other regions or countries.

Environmental Factors

Environmental factors are another external business environmental influence that can have
diverse positive and negative impacts on the performance of companies. These factors refer to
forces in the physical environment companies operate in, including adverse weather, climate, and
natural disasters such as earthquakes, hurricanes, and typhoons. Companies have no power over
environmental factors as they are considered acts of God. Environmental factors such as adverse
weather like floods can make it difficult or impossible to transport products to the market,
adversely affecting a company's performance. For manufacturing companies that use a lot of
power to run their operations, an earthquake or any natural disaster that can lead to power
shortages can negatively impact their processes, leading to a decline in their performance.
Additionally, companies that deal in seasonal products are adversely affected by weather
changes that do not favor the sale of their products. Apart from the physical conditions of the
environment that companies operate in, contemporary companies must protect their image by
taking measures to conserve the environment. Any act of a company that destroys the
environment can damage its image and reputation, which can cause customers to abandon its
products. Also, the company can face lawsuits which can cost it large sums of money in the form
of fines.

Currency (Money)

Multinational corporations operate in many countries and regions globally that use different
currencies. Currency influences refer to the effects companies feel from exchanging money in
various areas into a common currency. Exchange rates are volatile and can positively and
negatively impact multinational companies. For instU.S.-based based, companies must confine
all their money to the U.S. dollar. A decline in the U.S. dollar would mean that the company's
product becomes cheap in the overseas markets leading to less revenue. On the other hand, a
U.S.-based manufacturing company that relies on raw materials from different regions would
buy fewer materials leading to an increase in the cost of production. The additional cost would
be passed down to the customers by charging high prices for the products, which can lead to a
decline in sales as customers can shift to other companies which use raw materials from the local
markets whose prices are more affordable. In contrast, a high U.S. dollar value helps a company
sell its products at higher prices abroad and buy more raw materials from these markets.
Subsequently, the high value of the U.S. dollar would positively impact the performance of U.S.-
based companies conducting such businesses in the international markets.

Global Economies

Global economies refer to the sum of economic activities within a country and between several
other countries. Globalization is a primary concept that is instrumental to the issue of global
economies. In global economies, each country or region has its distinctive production unit, labor
market, resources, and financial need, which impacts the performance of multinational
companies positively and negatively. Some of the crucial components of global economies that
affect the performance of companies include rates of inflation, unemployment, and interest. High
inflation rates can lead to increased production costs due to expensive raw materials and fuel
products essential to producing goods. Companies operating in countries with high inflation are
forced to increase their goods' prices to cover the high production cost. Consumers would be
reluctant to buy products at high prices beyond their disposable means, leading to a drop in sales
and revenues for the company. Regarding interest rates, companies can borrow and invest more
when interest rates are low compared to when financial institutions charge high-interest rates.
Thus, high-interest rates adversely affect companies desiring to expand their operations through
borrowed funds.

Government Influence

Federal and local governments significantly influence the performance of the companies, and
companies have no power over their authority. One critical government influence that impacts
the performance of companies revolves around their capacity to make changes to monetary and
fiscal policy. The government can increase or decrease interest rates, affecting companies'
performance immensely. Lowering the interest rates makes the market environment ideal for
companies to invest more and earn more sales and revenues, positively impacting their
performance. The government also plays a role in improving consumer spending, which
positively impacts the performance of companies as consumers have more money to buy their
products. The government can also help companies by improving various infrastructures, making
it easy for companies to operate. Additionally, reducing energy costs can help companies reduce
production costs and increase their profit margins.