Skip to main content

How Does Economic Analysis Inform Business Decisions?

One element that rising business professionals must understand is that companies do not exist in a vacuum. Instead, they must be constantly adapting to an ever-changing world. As the economy around them changes, corporate managers must pivot their companies to set themselves, their businesses and their employees up for success.

The business environment undergoes continuous change, but business school graduates can rely on consistent rules for analyzing these economic trends. In the Southern Oregon University (SOU) online Master of Business Administration (MBA) with a Concentration in Information Analysis and Decision-Making program, students are equipped with IT-based tools that enhance economic analysis and support strategic business decisions, enabling them to navigate the dynamic business landscape effectively.

What Is Economic Analysis?

Business economics studies the financial, organizational, market-related and environmental issues corporations face. At its most basic, this means that managers must understand the economic elements that occur in the world and how they will impact the company’s operations. To conduct a thorough economic analysis, managers must look at microeconomic factors that directly impact a company, such as the following:

  • Cost structures
  • Market structures
  • Consumer preferences
  • Government regulation
  • Technological advancements

Economic analysis must also account for larger influences and macroeconomic factors that impact the broader economy. These include:

  • Inflation rates
  • Interest rates
  • Exchange rates
  • Government policies
  • Stock market performance

All of these factors can impact a business’s success. For example, a sudden price spike in the cost of a raw material could force a company to find a new supplier or switch to a new material entirely, or a change in industry regulations could create an opportunity for a company to start offering a new product/service to take advantage of a gap in the market.

Understanding the Relationship Between Economics and Business

Business leaders must monitor anything that can impact supply and demand and factor this into their decision-making. Although there are hundreds of economic indicators, Morning Consult highlights three in particular that business leaders must acknowledge:

  1. Consumer spending habits: Factors like purchasing power and shopping patterns across demographics can help businesses forecast demand and prepare for both good and bad times.
  2. Labor and employment conditions: Labor market conditions across and within countries can play a crucial role in the success of a business, especially those that rely on large workforces.
  3. Consumer confidence: How consumers feel about the economy can sometimes be more important than the economy’s actual performance. By understanding how consumers feel about their finances at any given point, companies can offer well-timed discounts, adjust their marketing strategy or make an effort to cut costs.

To excel in the workforce, graduating students must understand how these concepts help professionals understand and analyze business problems and trends. However, economic analysis is not only reserved for the private sector. It also applies to the public sector.

Economic Analysis in the Public Sector

Many U.S. federal agencies will use economic analysis to determine the best outcome between two options — with examples ranging from environmental regulators to building designs. As taxpayer-funded entities, federal agencies are not interested in maximizing profits. Instead, federal leaders must determine the most effective way to allocate resources.

There are two different types of economic analysis in the public sector. First, cost-effectiveness examines two programs to see which can produce the most impact for the least amount of money. Next, cost-benefit analysis and social return on investment both try to determine whether the intervention’s outcomes are worth the money and resources invested.

The latter style of analysis allows federal agencies to answer questions like “Is an initiative worth it?” and “Does this initiative work?” It also helps them determine a monetary value for the social good that an initiative or program will create.

The Role of Economic Analysis in Business Success

Regardless of the type of field that you want to enter, there’s little doubt that economic analysis will play a crucial role in your success — as well as the success of your organization. For college students who desire to be effective business leaders, it would be wise to consider pursuing an advanced degree, such as an MBA.

For example, SOU’s online MBA in Information Analysis and Decision-Making program has an Economic Analysis course that examines both micro and macroeconomics and their impact on the corporate world. In this course, students learn foundational aspects of economic theory and basic principles of finance theory. Additionally, they will learn about the economic decisions facing the modern corporate manager.

Students can complete this program fully online in as few as 16 months, gaining the necessary knowledge to apply economic analysis best practices to any role or business, large or small.

Learn more about Southern Oregon University’s online MBA with a Concentration in Information Analysis and Decision-Making program.

Related Articles

Our Commitment to Content Publishing Accuracy

Articles that appear on this website are for information purposes only. The nature of the information in all of the articles is intended to provide accurate and authoritative information in regard to the subject matter covered.

The information contained within this site has been sourced and presented with reasonable care. If there are errors, please contact us by completing the form below.

Timeliness: Note that most articles published on this website remain on the website indefinitely. Only those articles that have been published within the most recent months may be considered timely. We do not remove articles regardless of the date of publication, as many, but not all, of our earlier articles may still have important relevance to some of our visitors. Use appropriate caution in acting on the information of any article.

Request more information

Submit this form, and an Enrollment Specialist will contact you to answer your questions.

  • This field is for validation purposes and should be left unchanged.

Or call 800-490-7974

Begin application process

Start your application today!

Or call 800-490-7974 800-490-7974

for help with any questions you have.