Describe the Influence of Two Contrasting Economic Environments on Business Activities Within a Selected Organisation

Topics: Sociology, Inflation, Economics Pages: 5 (1715 words) Published: November 23, 2012
P5-Describe the influence of two contrasting economic environments on business activities within a selected organisation

Within my selected organisation, Tesco, there are 2 important economic environments that have an influence on business activities. Both economic environments will have a different way on affecting Tesco. The economic environments are growth and recession. Economic growth occurs when more goods are being produced and consumed, and incomes are rising. A growth company tends to have very profitable reinvestment opportunities for its own retained earnings. Economic growth will affect Tesco as it would increase their profits due to more people wanting more products and wanting to spend their money. As people have more money to spend on luxuries instead of the essentials it means that the higher value products will be brought. For example the Andrex toilet rolls will be brought instead of Tesco value, because of this it means more money is being spent in the store which is an advantage for Tesco. Recession occurs when people involved in business become more cautious and: * Customers cut back on spending, and start to save more

* Manufactures and sellers cut back on their orders, produce fewer goods and start to cut back costs in general, including by laying off workers. Because economic recessions will put Tesco’s customers under money worries they will only be purchasing from the store, instead of what they want; only what they need. Examples on what Tesco customers would want include: chocolate, ice cream, sweats, and walker’s crisps instead of Tesco value, the luxuries. Examples on what Tesco customers need include: toothpaste, milk, bread and more, just the essentials.

P6-Describe how political, legal and social factors are impacting upon the business activities of the selected organisations and their stakeholders

A PESTLE analysis for Tesco must consider all the important external factors impacting on the company. These factors may have political, economic, sociological, technological, legal or environmental dimensions. The political analysis must include the impact of local and national government, and the international situation. The Economic analysis needs to investigate the influences of the stock market and tax increases, amongst many other monetary matters. Sociological factors are difficult to suss out. We swim in the "water" of our culture without recognising it as an important determining factor. And sociological analysis is all about analysing the background culture. Technological factors are usually easier to spot, because new technologies involve change, and change is always noticed. For instance, online shopping has had a major impact on Tesco's recent success. The change created by technological advances often lead to legal problems, which is why legal analysis is always an important part of a PESTLE analysis. Tesco's operations obviously have a significant environmental impact, from fossil fuel use to packaging issues. Reducing the demand on the planet is a challenge for any big company. A PESTLE Analysis for Tesco must look at all the six factors we have mentioned. Here they are again, with examples of each: * Political: an increase in unemployment due to a downward turn in the world economy. * Economic: impact on sales of the credit crunch.

* Sociological: an increase in immigration from Eastern Europe resulting in a demand for new goods. * Technological: how can Tesco take full advantage of the World Wide Web? * Legal: how can Tesco avoid legal opposition to expanding into new high streets? * Environmental: - climate change is affecting supply and transport, how can Tesco adapt? In summary, any PESTLE Analysis for Tesco must consider all external factors if it has any hope of capturing the essence of the company.

Marketing decisions are strongly influenced by changes in the political environment. Changes such as new legislations put...
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