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

1721 Words Dec 4th, 2012 7 Pages
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
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One legislation that affects Tesco rather predominantly is planning permission; a law heavily regulated in the UK, and as Tesco has approximately 2.75 million meters of shop space (including car parks and stock rooms). Owning so much space and with so many large superstores can make this factor a very difficult one to overcome.

Legal-
The economy is different worldwide and fluctuates constantly, which makes this factor so complex for large multi-nationals like Tesco to tackle. To maintain maximum profitability overall, Tesco needs to raise its prices in accordance with inflation rates. If however prices are raised higher than the rate of inflation, customers may be urged to go somewhere else or spend less, and if the prices aren't raised high enough, they may not compensate with the rate of inflation and decrease the products profit margin. As there are people on different budgets, Tesco tries to accommodate for everyone, which is why over recent years they have introduced many different price-based ranges.

Social-
Social attitudes of today’s society have changed the way people live, people now are working longer hours to sustain the financial demand that is needed in-order to keep up a higher standard of living, “One quarter of working men and 11% of working women in the UK now work more than 50 hours per week” . This is a social problem because it encourages people to eat ‘fast food’ type products such as pasties, sausage rolls,
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