How external factors can affect the ability of Tesco achieving its aims and objectives

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How external factors can affect the ability of Tesco achieving its aims and objectives

As well as internal factors there are also a number of external factors which can affect how a business prospers. Unlike internal factors companies have no control over external factors and have to try and adjust to them. A good company will make provisions for external factors changing in order to lighten the blow when they do change, but no company can ensure their measures will suffice. External factors could be the factors which makes a business fail so are just as important if not more important than internal factors. Therefore it is vital that companies pay close attention to changes in external factors and adjust accordingly to them or they could lose their competitive position.

There are many external factors which affect Tesco Monaghan including:

  • Cross border bank holidays
  • National Income
  • Legal Issues
  • Interest rates
  • Loom of recession (unemployment)
  • Bad external publicity
  • Strength of the Pound against the Euro (Exchange Rates)
  • Location
  • Ethical views (Climate change, Fair trade)
  • Nearby parking facilities (Externally owned)
  • Competition

Cross Border Holidays

Tesco Monaghan is located in Monaghan town which is part of the Republic of Ireland, however much of the nearby surrounding area is located in Northern Ireland as the diagram below illustrates:

For illustration purposes I have highlighted Northern Ireland by using yellow, any area not in yellow is located in the Republic of Ireland.

As you can see from the illustration shown above lots of the surrounding area is located in Northern Ireland. In fact part of Northern Ireland is just 6 miles outside Monaghan. This gives you an idea of the number of people from Northern Ireland who may visit Monagahan. As Northern Ireland is part of the UK they have different bank holidays than the Republic of Ireland. This basically means that it may be a bank holiday in Northern Ireland and not in the Republic which can be a great advantage to Tesco Monaghan.

When it is a bank holiday in the North, residents will be off work and more than likely may want to go shopping and as Monaghan is so close they may visit Monaghan. However it will not be a bank holiday in Republic and unless Tesco Monaghan are aware of the cross border holiday they may not be able to cope with the potentially high volume of people. Also they may not have the shelves stacked to cope with such a large volume of people and so may lose customers. Paul, Tesco Manager told me that on a UK Bank Holiday Tesco sales rise by 40%

National Income

National Income is a measure of a country economic activity which takes place over a year. National Income is the total value of goods and services created by a country in one year. GDP and GNP are both measures of National Income.

If National Income rises it indicates that a country is doing well ie – Low levels of unemployment etc. However if National Income in a country drops it is an indicator of falling economic activity and this could be in the form of rising levels of unemployment.

In 2004 the average Disposable Income per Person for the border area (Tesco Monaghan area) was €17,046, whilst the same figure in 2006 had risen to €18,277, indicating that people had more money to spend. In fact within this two year period there was a 6.8% rise in the Disposable Income per Person in the border areas. These figures are a clear indicator of economic success during this period, and the fact that people have had more disposable income meant that they could afford to spend more.

-So what affect can national income have on Tesco Monaghan?

Well as Tesco Monaghan is located in the border area these figures directly target the surrounding area of customers. As the disposable income per person has risen by 6.8% this means that people have over €1000 extra each year to spend. As Tesco Monaghan’s products are slightly higher quality than competitors they are also slightly higher priced. But when customers have the extra money they don’t mind spending it if they are getting a better product.

So therefore Tesco Monaghan would be the choice of many with increased disposable income. So therefore during the period of 2004-2006 Tesco Monaghan has benefited from this external factor and more then likely their sales and thus profits have increased as a result of this.

In the year 2007 to present incomes have fallen and Tesco have lost customers to LIDL due to LIDL being a budget store, mainly as a result of current recession. Paul told me that they have lost somewhere in the region of 8% of their customers. In order to counter this and try and regain customers Tesco Monaghan have slashed the price of 1000’s of items.

Legal issues

There are many legal issues that any company or organisation must adhere to at all times. These legal regulations, acts or laws are externally imposed by governments and local councils and if they are broken the company/organisation is eligible for prosecution in a court of law, and the punishment will vary depending on the offence.

Usually a company/organisation will be checked annually by a regulatory body to ensure they are meeting all the legal requirements set. If a company successfully passes the test they may be presented with a certificate which is proof they are meeting legal requirements set.

Legal requirements are there for a reason, mainly to maintain high standards of safety and professionalism, however they can have a great impact on a business and in turn its profits.

-So what affect can Legal Issues have on Tesco Monaghan?

Plastic bag levy

Legal issues can have a direct impact on the profits of Tesco Monaghan, as they found out with the introduction of the Plastic Bag Environmental Levy on the 4th March 2002. This new law was imposed to try and curb wasting plastic bags and to try helping the environment.

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From the 4th March 2008 Tesco Monaghan along with all other stores in Ireland were required by law to charge a €0.15 levy on plastic bags. This levy was to be charged at the point of sale and they were obligated by law to keep a record of each plastic bag they sold. Tesco Monaghan was also required by law to list the levy on the customers’ receipt to reflect the charge of the bag. The levy goes directly to the government into an Environmental Fund, to support waste management and litter.

The introduction of this law required Tesco ...

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