Ll12 Economics And Politics : Assessment Answers

Describe the influence of two contrasting economic environments on business activities within a selected organisation.

Task 1:
The impact of the economic environment on businesses
You have been given the following brief by your line manager:
You need to select two different economic environments to focus on ; you will then need to give a description of what each economic environment is. You will then need to move onto researching how each economic environment has affected the way your selected business operates and include a description of this in your report, with relevant facts to support your work.
Within your description of the impact the different economic environments have on your selected business you should make reference to:
The ripple effect; levels of inflation; rates of interest linking this to the availability and cost of credit; changes in government policy (legal, fiscal, monetary)
For each economic environment and the points above you should describe the business activities your chosen business undertakes in each environment to: take advantage of the positives to increase profit/surplus or minimise the impact of negatives and protect profit/surplus.

Business activities could include the actions of the following functional areas:
H/R, marketing, finance, IT, production, product development, sales, customer service.
You will then need to compare the challenges each economic environment brings to your business by highlighting similarities and differences between the two. Include your findings in your report with facts to support your work. This can be completed in a table.
Evidence you must produce for this task
A word document with relevant facts and a bibliography of sources of information and images used.

Answer:

Introduction

Economic environment comprises of the external factors within a business market and broader economy that has an impact on the business. The microeconomic environment affects the arena of decision making of a business like the actions taken by the firms. Macroeconomic environment has an impact on the entire economy. The external constraints that are imposed on an organization affect business and they include factors like tax, inflation, currency exchange rate, recession and depression (Gilani, 2014). 

Impact of economic environment on TESCO

TESCO is a British merchandise retailer that has its headquarters in England, United Kingdom. TESCO accounts for the third largest retailer on the basis of the profits and on the basis of revenues it is the ninth largest within the world. The supermarket plays a crucial role in the grocery market of Britain and makes sales by selling clothes, books and electrical goods. The recession of 2011 impacted them badly as there were many shoppers who avoided buying luxury products that are considered non-essential (Lamey, 2014). In order to attract the customers, the chief executive of TESCO Philip Clarke pledged that prices will be cut between 10 % and 30% of a large number of products that mainly included food items. TESCO operates in around 14 countries. Strong performance from the overseas store  helped TESCO to emerge out of the crisis. The growth of TESCO has slowed from 11 % between the years 1997 and 2009 to that of 5.8 % in recent recession and that of 7.2 % in the year 2010. The move into discretionary goods along with that of tough economic condition has hit the growth (Griffith, O'Connell & Smith, 2016).

TESCO has been able to control the rate of sales decline in February, 2016 because price cuts have helped in stemming the loss of customers. The sales fell by just 0.5 % and it was the best performance of the chain since that of November, 2013. TESCO has improved the basics and this has helped in encouraging more visits.

TESCO has a charity called “Tesco Charity Trust”, which was set up in the year 1987, in order to support the national along with local community charities. The grants influence the activities of TESCO as it helps in setting certain objectives within the international sphere. The taxation policy of the government changing means that TESCO also has to pay tax. TESCO has to pay it to government so that the government can provide service to that of the general public (Desai, 2015).  The Derby City Council wants to impose a great levy on the large super markets that can be used for helping the small business. The extra business rate levy would affect TESCO as it has a rateable value that is more than that of 500,000 Euro. TESCO faced an additional bill amounting to 110,000 Euro for each superstore as compared to that of the time when the Coalition came to power in the year 2010-11. The big four companies that is inclusive of TESCO, Sainsbury, Asda and Morrison have to pay 693,651 Euro more in relation to property tax (Babajana & Hughes, 2015).

Conclusion

The recession that hit UK had an adverse impact on TESCO as the consumers wanted to avoid purchasing luxury items. It had to cut down the prices in order to attract customers. The TESCO charity Trust helped in setting the objectives in relation to TESCO (Gillespie, 2014).  The extra business rate will also badly impact TESCO because it has a rateable value more than that of 500,000 Euro.

Bibliography:

Babajana, Z., & Hughes, A. (2015). Business Environment.

Desai, M. (2015). Tom Clark and Anthony Heath 2015 [2014] Hard Times: Inequality, Recession, Aftermath, Aftermath, New Haven and London: Yale University Press. The British Journal of Sociology, 66(3), 576-577.

Gilani, S. A. M. (2014). UK Supermarkets during the Economic Recession. The University of Edinburgh (United Kingdom).

Gillespie, A. (2014). Foundations of economics. Oxford University Press, USA.

Griffith, R., O'Connell, M., & Smith, K. (2016). Shopping around: how households adjusted food spending over the Great Recession. Economica, 83(330), 247-280.

Lamey, L. (2014). Hard economic times: a dream for discounters. European Journal of Marketing, 48(3/4), 641-656.