How business strategy is influenced by economic policy?

US military industry is a big player in shaping and tweaking economic policy of America. Their business strategist understands the direct and indirect effects of even an iota of change in state policy in terms of profit growth and turnover levels. This example forces every firm to calibrate its business strategy to get the max. 

To begin with, fundamental areas of economic policy can be departmentalized as fiscal, monetary and development areas. Generally speaking fiscal policy has the highest influence out of all three departments in running a country and by extension running a business. 

Public expenditure is in the driving seat when it comes to fiscal policy. The parameters of this policy includes the quantum & percentage that is distributed amongst the vital and pressing needs of a country. Recurrent expenditure is the one that accounts for significant portion here. Salaries, pension and various other payments made to public servants swallow vast amount of treasury a state bears at any time. To put it other way the more a country allocates for public expenditure the more money is available leading to the enhancement buying power.

In business strategy, the equation always runs as ends-means-goals. Simply stated “means” matter a lot. Business organizations have means that are used to create value, deliver value and capture value back from the customers; in simplest terms income is generated for the business. For the income to be generated there must be people out there who have the buying capacity prepped by the receipt of money in their hands in the form of salaries & wages.

In country where public sector is the engine of growth, business strategy must be attuned to satisfy the needs & wants of public servants so that there is a ready source for value creation & capture. This is valid in in countries with large population. Even in America public sector is too large and unwieldy so that the salary bill is huge despite anomalies therein!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist