Political, Legal, and Social Factors Impacting Business

Topics: Tax, Wage, Minimum wage Pages: 10 (3687 words) Published: May 1, 2013
P6 & M3: Political, legal and social factors impacting the business There is a range of influences that can affect the business in the business environment. Usually these influences cannot be controlled by the business itself. In P5 and M2 tasks I have presented the different economic impacts, and now I will present the political, legal and social factors in my P6, M3 and D2 tasks. Political factors

There are 3 types of government that affect the country and these are Local, National Government and International Government (e.g. European Union). The political party’s decision will affect large numbers of people and businesses. The decisions can be either positive or negative. For a business, a positive one could be an exemption from paying taxes, so increase their profit. An example of a negative one would be an increase of taxes which would mean the company’s profit would suffer. * Political stability

A manifesto is the plan of a political party so that once they are elected they can put it into action. This can therefore be used by businesses to asses these plans and how might they affect them, so they can come up with a strategy to decrease the negative effects and because once the political party is elected a business is provided with a degree of certainty until the time of next elections. Stability is essential for the economy. This stability means there is a predictable political environment and this will benefit both TESCO and its stakeholders because the company will want to invest and expand so therefore will increase economic growth of the country which in turn will increase public spending. On the other hand the political instability is not going to attract investors whom will rather choose to invest in companies in another country, meaning that TESCO share price could fall as well as the shareholders could withdraw their money and in a critical event make the company bust. Also political instability will affect an economic factor such as inflation. At the moment the political situation is stable in the UK after the recession in 2009-12 but unstable in India. TESCO is a global business therefore what happens to it in one country will certainly have an effect on branches in other countries. Likewise TESCO is a private sector organisation and so operates to make a profit and for this reason the political instability in India will reduce that profit. In this case TESCO India can introduce strategies for survival, e.g. focus on maintaining the profit instead of trying to increase it by keeping track of the necessary products with the highest demand. Also not introduce any new product because it is a risk, so if TESCO India buys it and it will not sell, they will risk suffering a deficit. Overall TESCO UK is more likely to expand and invest than TESCO India, meaning the GDP of UK will be higher and this will in turn stabilize inflation and decrease unemployment. * Taxation

Government implies tax on all companies by charging a certain percentage of the business's profit. It is called corporation tax and it has a direct impact on both TESCO UK and TESCO India. Corporation tax, as all taxes, helps the Government to raise revenue and the country to function effectively. The lower the tax the better for TESCO, because this will leave them with a greater profit. This is because the amount of revenue they'll get will not be reduced as much. Lowering the corporation tax is Government way to encourage new businesses. Corporation tax is UK is one of the lowest in the EU at 26% in 2012 and 24% in 2013 and is predicted to a decrease of a by maximum of 3% till 2014 to 21%, whereas in India the current rate is 32.8%. This trend and predictions will certainly boost investment in the UK in the next years. The rates suggest that TESCO India will generate less profit due to the high corporation tax. In contrast TESCO UK will be positively affected by the falling corporation tax percentage. TESCO UK will increase their...
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