1. Informal economy: refers to commercial activities that occur at least partly outside a governing body’s observation, taxation, and regulation.

* 1 central feature: it is unregulated by the institutions of society in a legal and social environment in which similar activities are regulated. * Reason to cause it happened:
(1). An inability of a nation’s economic environment to create a significant number of jobs relative to available workers.
(2). Global recession
(3). Government’s inability to facilitate growth efforts in their nation’s economic environment is another issue. * Threat: may have a cost advantage when competing against formal economy firms in that they do not pay taxes or incur the costs of regulations.

2. Formal economy: is comprised of commercial activities that a governing body taxes and monitors for society’s benefit and whose outputs are included in a country’s gross domestic product.

But the informal economy is also prominent in developed countries such as

Finland, Germany, and France (where this economy is estimated

to account for 18.3 percent, 16.3 percent, and 15.3 percent,

Hitt, Michael A.; Ireland, R. Duane; Hoskisson, Robert E. (2014-01-01). Strategic Management: Concepts and Cases: Competitiveness and Globalization (Page 51). South-Western College Pub. Kindle Edition.

the analysis of the general environment allows firms

to identify opportunities and threats.

Hitt, Michael A.; Ireland, R. Duane; Hoskisson, Robert E. (2014-01-01). Strategic Management: Concepts and Cases: Competitiveness and Globalization (Page 51). South-Western College Pub. Kindle Edition.

3.Industry: is a group of firms producing products that are close substitutes.

4. 5 forces that influence a company’s profitable ability within in an industry: * The threats posed by new entrants * The power of