The Business Environment Essay
The Business Environment
P6- describe how political, legal and social factors are impacting upon the business activities of the selected organisation and their stakeholders PEST- Political factors include government policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs etc. The economic factors relate to changes in the wider economy such as economic growth, interest rates, exchange rates and inflation rate, etc. Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, changes in tastes and buying patterns, etc. The technological factors relate to the application of new inventions and ideas such as R&D activity, automation, technology incentives and the rate of technological change. PEST in the UK
How does political affect Tesco in the UK?
Minimum wage- in the UK the minimum wage for 21 and over is £6.31. This would affect Tesco as their staff pay would come from their profit and would make Tesco’s profit smaller which is bad for the business. However the minimum wage for under 18 is £3.72. This is good for Tesco as they would have to pay their staff less which means they would have more profit. This also means Tesco would employees more under 18 as they don’t have to pay them more money. VAT- Another political factor is VAT. As the VAT rate increased from 17.5% to 20%. VAT rise cost each household £500 a year which means reduce spending on luxury items.
As this rate applies to most goods and services. This would affect Tesco as their suppliers will have to increase the prices for their goods. Which means Tesco have to pay more money for the goods they buy from their suppliers. This would affect Tesco customers as they have to pay more money for the goods and services they get from Tesco. Tesco have to pay their VAT on time even if their customer have not paid yet as they have purchased goods from Tesco on their credit card, this can cause Tesco to have cash-flow difficulties and having overdraft costs.
How does economic affect Tesco in the UK?
Recession- every business is affected by recession. And this also affects Tesco more as they are a global organisation operating in many different countries which means they would not only be affected in the UK but in other countries like China. For Tesco not to be affect by recession they would need to employ less people in order to save money doing this could save Tesco millions of money as they don’t need to waste it on unnecessary jobs. Tesco can be affect by recession if they price their products/goods expensively as their customers would intend to buy less. However not to be affected by recession Tesco could do cheap and affordable offers such as ‘ 3 for 1’ or ‘buy 3 cheapest one free’ this would help Tesco during recession s their customers would buy their products and they would make an increase in their profits. However during recession Tesco can be affect if people don’t have disposable income and this links to economic as people would only buy necessary items such as bread and milk and wont spend their money on luxury items. How does social affect Tesco in the UK?
Growth in Obesity- as the number of people becoming obese is increasing this would affect Tesco because of their readymade meals. When Tesco’s customers buy their readymade meals it did not show the percentage of calories, salt or fat was in them this would affect Tesco as their customers would complain or sue them this would also make people more obese as Tesco’s customers did not know how much to eat in a day. However the government introduced the traffic light and Tesco had to use the traffic light on their readymade meals, which showed their customers whether their readymade meal is a healthy choice as it showed the percentage of salt, at and calories.
How does technology affect Tesco in the UK?
Self scan checkout- Tesco has developed on customer’s service by upgrading their technology from tills to self-scan checkout. Tesco was first to introduce self scan checkout which allows customers to scan their own products then pay making this procedure more faster and efficient. This also means customers wont need to stand in queue and Tesco’s employees would be able to work in different areas in the stores.
Online Shopping- another way technology has affect Tesco is by online shopping. Which is very convenient for Tesco’s customers who are too busy and hardly have any free time. However online shopping can have negative affect on Tesco, as their customer may believe it is so convenient and rely on this. Also Tesco have introduced click and collect which means their customers are able to order their shopping online and collect their shopping from a store nearby or get free delivery. This also link too social as this would make Tesco’s customer more lazy and have health problems and lead to being obese.