CAT / FIA FMA Syllabus F. Performance Measurement - Economic and market conditions - Notes ^{3 / 4}

External factors may be an important influence on an organisation’s ability to achieve objectives.  

In particular, market conditions and government policy will be outside of the control of the organisation’s management and will need to be carefully monitored to ensure forecasts remain accurate

General economic conditions

• General economic conditions influence the demand and supply for a company’s products.

• Government economic policy affects demand quite rapidly.

• Changes in interest rates are determined largely by government policy and have a direct effect on credit sales.

Market conditions

A business operates in a competitive environment and suppliers, customers and competitors all influence one another’s operations.  

The entry of a new competitor will certainly affect the organisation.