Evaluate the Impact of Changes in the Economic Environment on a Selected Business

The UK had recently emerged from the recession 2007-2009, the economy is now recovering. During the recession, many businesses had struggled to survive. The strategies that businesses had taken during recession may affect their long-term profits. For example, as people spend less during the recession, businesses try to reduce their costs and reduce prices in order to encourage customers to buy their product e.g. Primark, M&S etc and many businesses have also closed down branches in order to maintain their

Tesco's has recently had to make many changes in their staff and have had to change the management structure to be able to pay every manager fairly and pay the wages for their general employees. These effects were taken place due to a major profit change and an unstable financial system. Another effect that has been changed is the Tesco pension scheme back in 2012. The Tesco pension scheme had changed due to financial problems however this would mean employees who have a pension scheme with Tesco will have to work longer if they were in their early 60's . This became a challenge for Tesco's as they couldn't afford to pay out on pension schemes at that precise moment.

During these times of change business may have to change its orgainsation, operation and its nature to deal with the challenges of each stage in the business life cycle. For business to be successful they must constantly develop and change strategies to deal with the growth of the business or the life of the business may be cut short.

Tesco Plc is a Public Limited Company who securities and shares are included in the stock exchange and list of different countries. In UK, companies like Tesco Plc are registered under the companies Act 1980 and its shared are offered to public in regards of limited liability. In addition, Tesco is associated with retail sector that carries out a majority business of the company and contribute their share in country’s economy to a huge scale. Apart from the retail sector, Tesco Plc faced tough competition all over the world from companies like Wal-Mart, Asda, Sainsbury, and others. Although, Tesco is not in dominating position in the current retail market in the UK, but the company is one of the biggest retail companies working in the UK, North America, Asia, Europe and other. The company

Tesco benefit from economies of scale because they are constantly opening new stores around the country, such as their new store in Stockport. Therefore, they are always increasing their output, and so benefit from lower average costs. That is why Tesco seem

Businesses are affected by the economy and sometimes the economy can have a dramatic drop in countries causing issues for some business mainly due to 4 factors. These factors are inflation, Economic growth, Exchange rates and unemployment.

Political –how changes in government policy might affect the business, like a decision to subscribe building new houses in an area could be good for a local brick works.

The fiscal policy affects Tesco due to an increase in income tax which will cause the all customers to do less spending and have their spending habits change. This will affects Tesco’s profits, stock and cause them to lose stores and job losses which will create bad morale. Tesco’s market share might decrease depending on the effects on the competitors. Also Tesco will do less investment due to less profit to be able to spend. An increase in VAT will affect Tesco they will gain less profits for the same amount of sales. Tesco will either have to increase their

The General Election would affect Tesco as if Labour gets in charge Corporation tax, VAT and minimum wage would probably increase. This would cause Tesco to be in a negative

This information Tesco is gaining helps them as they are able to achieve more customers so this increase the rival competitors and they are also gaining an increase in profit and customers due to the fact more people are shopping at Tesco and using the services they provide, this also means Tesco are able to develop even more.

This will benefit John Lewis as sales for the good quality products would be increasing which furthermore could lead to John Lewis recovering from their losses if they were in one and go into break even or begin to start getting profits. John Lewis would buy more stock from its suppliers at this period of the economic environment as when demand increases you must get more supply to meet that demand. Also John Lewis at the time since they buy in bulk from their suppliers they can benefit from getting more stock at a good price that gives good value for money, as usually suppliers would offer you extra amounts of stock if you buy in large quantities. During this period of time interest rates would be low compared to in recession because there isn’t as much financial institutions to try get as much finance as they can from small amounts of borrowings from their company in this period as customers, business etc intend to borrow more money in this period of time as they are fairly financially stable, so to encourage the businesses and customers to begin taking sources of finance they lower the rates. So John Lewis is more likely to start borrowing sources of finance if needed then in the period of growth.

A macroeconomic event that would affect firms is unemployment rates. High unemployment rates have a big affect on the economy. A high percentage amount of people unemployment means the loss of disposable income for consumers to spend.

Tesco was feeling the pressure because they saw a fall in profit since 2008 and were worried that their customers would not return. However as time moved on the economy started to pick up again in 2009. Customers started to spend more and were more comfortable about their current financial situation. However Tesco realised that their customers were not purchasing goods of high price, meaning that customers were likely to purchase readymade meals and organic products. The demand for a product depends on the economic factors such as interest, inflation and local employment levels. Tesco doesn’t have control on the economic factors; however these do have an effect on the business.

As I have mentioned before, this research paper is being taken exclusively with the aim to evaluate the Tesco’s performance in both financial and business terms over a three years period. Since the financials will be compared with its three year

     A businesses environment creates many opportunities as well as problems for prospering businesses. The environment determines what a business can do by shaping and channeling its development. Businesses function within an environment by allowing entrepreneurs to raise capital and create profits freely. The supply of money available within a business as well as the economic stability through times of growth and recession have strong effects on businesses. Not only is the physical environment, including natural resources, pollution and energy as discussed previously, important, but many other