VARIOUS SOCIO-

ECONOMIC FACTORS
AFFECTING BUSINESS
AND INDUSTRY
LESSON 6
What are the socioeconomic factors and how these affect
businesses and industry in general?

Business has to pass through various socioeconomic factors and has to

be affected by such factors in its will of making money or profit by
producing or buying and selling products in the form goods and
services.

Socio-economic factors include all transactions that the business has to

interact with comprising land, labor, capital, and technology. Business
could not operate without a rented or owned real estate. It could not
function without employing laborers, and providing investment.

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Furthermore, Socio-economic factors are considerations about how the
business itself operates from within taking into account the capital, capacity
of business, the sources or suppliers, the product to be produced, and the
services to be offered, among others.

Socio-economic Factors Affecting Business also includes the practice of

consumer in using new products and services. If households are
experiencing poverty alleviation due to employment opportunities
adding more to their income, there is a great tendency for them to
spend more money in the market place demanding new products and
services. Thus, businesses are doing well in the process producing
sustainable employment in return or even expansion of the same
business or opening up another form of business catering not just the
basic needs but somehow luxurious wants of consumers.
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The impact of the availability of raw materials or supply for business is
another thing that affects business. It is necessary to determine the
investors’ needed capital and expected income. If raw materials needed
for supply become scarce there is a tendency for business to increase the
price employing the law of demand and supply to insure returns of
investment.
In a larger industry it may include the government intervention on taxes
or its policy on investment, and the import export dollar transactions that
the business maybe dealing with. If the policies of the government are
favourable to foreign trade and relations, then outside contacts and
influence will be promoted but if government adopts “nationalistic”
policies, then it will close the country to foreign influence which in turn
affect the viability of local business and industries.

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Other factors affecting business may include the following:
a. Payment of Government Taxes Barangay, Municipal, or City permits, and
real estate taxes, are paid in local government units while value added tax,
import-export duties, income taxes are due to national government. Taxes
paid by business enterprise are considered a component of production
cost because it is added to capital outlay of the business in the operation.

b. Mode of the International Trade Some businesses especially the

medium and large scale enterprises are usually affected by the dollar
exchange rate in the economic transactions, because it may directly
affect the exports and imports cost of products which in turn may
directly or indirectly affect production cost and the setting of the
selling price.
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c. Recession
Whenever an economy faces recession, it has the potential to change the
attitude taken by consumers toward their purchasing decisions. This may
force companies to drop prices to stay afloat.
How are You Going to Determine the Socio-Economic Status of Consumers
as a Factor Affecting Business or Industry?
Consumer’s Behavior and Its Significance on Business The determination of
the consumer’s behavior and their decisions on what to buy for
consumptions is another factor. Consumptions refer to the use of goods
and services to satisfy the basic needs and wants of consumers. Different
socioeconomic classes will generally have different priorities, and this will
affect how consumers spend their money.

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As investors ready to use capital for business, you must be able to look for a
secured or feasible consumers. The consumers are the persons who buy the
products business offers for sale. It is therefore imperative that we get to
please the consumer, so he/she will buy from you instead of from your
competitors. Once satisfied the buyer would be eventually become our ”suki”
or regular customer.
Determining the Socio-Economic Status of Consumers and Its Effects on
Industry
Wherever your small business or big business as an industry is located,
there are going to be socioeconomic factors that affect it, because social
class, that is upper class, middle class, and lower class individual status are
attributable to the socioeconomic factors that determine the success and
failure of every business. Be it being an industry (big business) or a
community investment (small or medium size business).
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The following are the main parameters of socio-economic status of
consumers or buyers:

1. Income - when income is scarce, customers tend to restrict their

spending to essential items;
2. Education/Skills - A society that has it that a well-educated and skilled
population flourishes because individuals are employable in well-paying
jobs; and
3. Occupation - refers to the type of jobs people perform by virtue of their
skills, experiences or choice.

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A person who may have education or skills has a greater tendency to
land a job or may acquire permanent occupation that generates
income. It is therefore important to consider the implications of
these socioeconomic factors on your business decision-making. Your
decisions should be sensitive to the prevailing economic conditions
(ex. when pricing and stocking your business). Consumers have the
tendency to avoid expensive items during periods of economic
failure. Moreover, customers in the different social classes have
different tastes and preferences. Be sure not to ignore the
consequences of these socioeconomic parameters in deciding what
products you are going to produce or sell.

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THANK YOU !
FLORA@CONTOSO.COM

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