Socioeconomic Impact of Business to Consumers, Suppliers, and Households

Socioeconomic Impact Study

A socio-economic impact assessment weighs the socioeconomic cost against
the socio-economic benefit. As far as possible, the analysis includes the
consequences for all participants in society and all kinds of impacts, for
example: Social impacts (e.g. health) Economic impacts (can include effects
on employment

Socioeconomic issues
Poverty is a socio-economic issue. Socio-economic issues are factors that
have negative influence on an individuals' economic activity including: lack of
education, cultural and religious discrimination, overpopulation,
unemployment and corruption.

Importance of a Socioeconomic Impact Study in Planning a Business

Measuring socio-economic impact can help companies understand the needs,
aspirations, resources, and incentives of their customers – enabling them to
develop winning new products and services and improve existing offerings. It
can help companies answer questions like: Why haven't our sales grown as
expected?

Effects of Business on Consumers

A successful business influences the behavior of consumers to encourage
them to buy its products. The business does this by studying consumer needs
and adopting strategies to persuade as many consumers as possible that the
products have value
Methods to Influence Consumers
Influence Consumers Emotionally
- Consumers’ are more likely to respond to material that connects on an
emotional level, and surprise combined with repeated episodes of joy or
humor is effective.
2. Encourage Customers to Look for Value
- If you solve a common problem for consumers more effectively than your
competitors, or solve it at substantially lower cost, you can influence
consumers to switch to your brand

3. Offer Social Responsibility

- Consumers who want to buy from socially active and environmentally
responsible companies respond positively.
4. Change Behavior with Excellent Service
- The level of service individual customers experience when dealing with
your company can have a profound effect on customer behavior.

Factors that Impact Business and Consumer Confidence

Several common factors that have the potential to cause marked shifts in
sentiment includes the following:
1. Changes in interest rates and/or exchange rates, particularly if they are
rapid, large and unexpected;
2. Swings in the business cycle and associated movements in
employment/unemployment levels and business investment intentions;
3. Dominance of short-term thinking and absence of longer-term strategic
activity;
4. Risk of a decline in the economy’s structural growth rate and associated
deterioration in productivity growth
5. Shifts in the relative prices of non-discretionary goods and services,
notably petrol, healthcare, education and utilities prices;
6. Announced policy shifts in the stance of government fiscal policy, including
large structural spending cuts or increases/decreases in taxation rates.

Several important consequences from low and declining levels of

confidence, including:
1. Unusually high household and business savings rates, including the
hoarding of capital by financial and nonfinancial firms;
2. Subdued nominal income growth and tepid private sector credit growth
widespread household deleveraging;
3. Declining business investment spending and weak employment growth;

Selecting the Right Suppliers

Firms should take the following into account when choosing a supplier:
1. Supplier History and Reputation
2. Quality of the Product/Service provided by the Supplier
3. Price Charged by the Supplier and how does this impact on the quality of
the product/service provided by the supplier
4. Finance Strength
5. Size of the Supplier and its other Customers.
6. Capacity of the Supplier
7. Reliability of Service
8. Flexibility of Service
9. Turnaround Times
10. Payment Terms
11. Problem Resolution Process

Supplier Management
After agreeing a contract with a supplier, it is important to monitor the
supplier’s performance to ensure that they are providing the service that was
agreed with them. Some firms will agree targets known as Key Performance
Indicators (KPIs) that suppliers will need to meet.

Factor Affecting Household Spending

Household spending is the most important part of aggregate demand.
The pattern of spending changes over time as a result of changes in:
1. Household Income - some goods are normal goods while others are
inferior, so increases in income encourage households to shift spending
from goods with a low-income elasticity of demand, like food, to those
with high income elasticity of demand, like holidays.
2. Tastes and Fashions - over time spending on certain items that are “in
fashion” increase relative to those that go out of fashion.
3. Taxes and Subsidies - as indirect taxes and subsidies rise and fall,
households will be encouraged or discouraged from spending.
4. Relative Prices - as the prices of certain goods and services rise in
relation to other, household spending will adjust.

Determinants of Spending
1. The Current Level of National Income - Some extra spending is induced
by changes in the current level of national income.
2. The Level of Savings - Spending and saving are mutually exclusive,
which means that if income is fixed, any changes in household savings will
inversely affect spending
3. Expectations - If households are confident, and have positive
expectations about the future, current spending can rise.
4. Rates of Income Tax - Changes in tax rates can clearly affect disposable,
post-tax income, and hence affect household spending.
5. Interest Rates - By altering the level of savings - a rise in interest rates
will stimulate more savings, and less spending