Unit 1 P5 Describe the influence of two contrasting economic environment on business activities within Tescos

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P5 Describe the influence of two contrasting economic environment on business activities with in a selected organisation

This report will be describing the influence of two contrasting economic environment on business activities with in a selected organisation, which will be Tesco plc. The report will be looking at how the demands and supply affect the economic and how it influences recession and excessive growths affect the economic. This report will be also explaining the interaction of how globalisation influences businesses.

The economic is made out of two things which are the buyers demand and the suppliers that sell goods.

The types of groups who make up the economic environment are the demands and the suppliers.

Economic environment is the factor that influences the economic such as recession when a period where the economic growth slows down and the level of output may actually decrease. Unemployment will be likely to increase the recession. The boom factor influences the economic by a period of fast economic growth which is a high output due to increased demands and unemployment. Another factor is the slump which is a period when an output slows down due to a reduction in demand. Recovery is another factor which is a period when the economy moves between recession and a boom.

The importance of stability will keep the economic sustainable this is because it will decrease the chance of the ripple effect and recession. For example if the economic is booming the prices of products will increase and people will demand more money from work and it will also cause the businesses to keep on increase the prices. If the county is in recession the people will lack confidence in demanding from supplies this is because the people will not be earning enough money and people will not get jobs due not earning enough money in businesses.

If the demand from consumers is increasing the suppliers will increase the amount of goods in the economy for consumer, but increasing the demand and supplies in businesses will have its, down fall for example the prices of products will increase prices which means it will create a high level of inflation.

When the supply is in recession the prices of the products will decrease this is because demands will decrease. This is caused by the people not earning enough money and people are not demanding enough from the suppliers. This gives an indication that suppliers need to break even or their business will close down.

The factors such as the GDP (gross domestic products) growth is shown on a trade cycle graph which shows the supplies in businesses. Level of inflation is the measurement of prices in businesses which can influence the GPD for example high level of inflation can produce more goods, businesses can invest more machinery, consumers spend more money, more money is collected by the government in income tax and VAT. This indicates that having more money could lead to more demands and consumers may lead to extra spending. Low level of inflation can cause a recession in the GPD this is because less people are demanding so businesses will cut back on production some businesses may go bankrupt, less money is collected by the government income tax and vat, consumers will spend less and prices will start to fall due to less demands. This indicates recession on the GPD shows that businesses could be bankrupt because more money is spent by the government on unemployment benefits and there are less demands because people are not confidence in the future.

The ripple effect is when in economic is in recession and creates an indirect effect that spreads out from the direct or main effect to reach businesses in areas. For example, People begin to cut down their spending when they are laid off and that has a ripple effect throughout the entire economy.

The problem associated with excessive growth is that it creates tax’s to increase which will increase the prices of products in stores so it won’t be beneficial to the people and employed people will want a pay rise because since the company is getting lots of money, taxes are ...

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The problem associated with prolonged recession Low Consumer confidence, in a recession there will be rising unemployment and therefore a fall in consumer confidence. This will cause a rise in the savings ratio. In other words people will spend less of their disposable income and save more leading to a bigger fall in advertisement. In a recession the Bank of England could cut interest rates to stimulate demand. Lower interest rates reduce the cost of borrowing and therefore people should be more willing to spend and invest.

Changes in recession in government policy occur in time in recession. If the economy goes into recession, it will cost many workers their jobs, and at the same time causing corporate profits to decline. This causes less income tax revenue to flow to the government, along with less corporate income tax revenue. Occasionally the flow of income to the government will still grow, but at a slower rate than inflation, meaning that flow of tax revenue has fallen in real terms. So the government spends more money, to people who struggle for money so money starts flowing out of the government faster than it used too, which causes the government's budget to go into deficit.

Growth changes government policy in times of growth when there is excessive grow in the economic this is because demands and are high so this gives an interaction that people are earning more money, Which will cause the government change the policy to increase tax and businesses to increase the prices of the products and goods.

Demands

The demand means the amount of people that demands a particular type of product by buying the products from the suppliers. The table below explains how the demands are influenced by the factors on the table.

Supply

Supply is the amount available at a specific price or the total amount of a specific product such as Tesco plc. asda, etc. Businesses like them supply the products to consumers. The table below explains the how supply is influenced by the factors below.

The factors that which the demand curve for the meals have shifted rightwards is because the price of the meals have increased by 4 pounds and the amount of demands has decreased which has caused the demand curve to rightward shift.

The factors of the demand curve shifting leftward is by making the prices low so the demands will increase because the price is at an affordable and adequate price. This will cause the curve to shift leftward.

The factors that might cause the supply curve to shift rightwards, is when the demands start to increase because of the quality of the products.

The factors of the curve to shift leftwards will be caused when the quality of the product is poor and the publicity of the product is poor. This will cause the demand to drop and create a leftward shift.

Price Elasticity of demands is the measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price elasticity of demand is often used when discussing price sensitivity. The formula for calculating price elasticity of demand is:

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

The reason why Tesco plc might choose to stock branded products as well as offering own branded products is because branded products tend to be affordable for Tesco plc so that they can put the prices up to make profit, but branded products tend to be expensive for consumers, so there is an alternative of the cheaper own branded products for consumers to purchase.

The influences of branding on price sensitivity and elasticity of demands effects the demands when the price is to high the demands will go down, this gives an indication that the price of the brand is sensitive to prices, and it also shows that the elasticity of the brand is inelastic which shows that the brand shouldn’t increase the price or the demands will go down.

Tesco plc might use elasticity of demand when marketing changes to prices of branded products for example if the prices have changed on particular product and the demand have decreased form that particular product for a period of time, using the elasticity formula by dividing the changes of demands by the changes of the change of price which will give a clear indication of the price elasticity of demands.

Global interaction

Globalisation is the process by which the world is gradually as a result of massively increased trade and cultural exchange.

Tesco plc. have acquired part of the of the ownership of the businesses to create subsidiaries in order to enter geographical market by opening new stores in different countries such as in china, India, hungry, Ireland, etc. this gives an indication that Tesco plc have expanded their stores to own businesses in different destination.

Tesco plc. has moved capitals and business operation to create foreign aboard, this is because Tesco plc have restriction in the UK to not grow any further. So this causes Tesco plc to send supplies and create capital and also new organisation in different countries around the world, Tesco plc are allowed to grow their business in different countries.

Tesco plc operates around the globe doing so will help them reduce the governments to regulate them. For example, Tesco plc have been regulated to stop growing bigger only in the UK, but having different Tesco’s in varies of countries, Tesco plc would not be regulated by the UK government in a different country such as china, this is because the UK government can’t tell china what to do. This gives an indication that Tesco plc can grow in different countries without being regulated by one government.

Case study

Recession influences business activities in a business for example by not gaining the consumers’ confidence, this is because consumers will limit their spending and stop demining. This will cause businesses to reduce the prices of their products and goods so that they can break even, this will cause revenue to fall which will limit the cost of staffs, marketing mix and stop investing. Profit margin will be reduce this is because the economic is in recession and people are limiting their spending which causes the less profit for businesses to break even instead maximizing their profit. Dividends will be decreased and shareholders prices will decrease their prices, this is because fewer businesses will stop spending on good and products, this will lead share holder to sell their thing somewhere else which could be a disadvantage to the business. Share price will also decrease this is because the economy is in recession so prices of the share is decreased. The CEO/management will employ less people and come up with strategies to recover from recession.

In 2008 Tesco plc was influenced by the recession but were capable to make some sales for example in the recession Tesco plc has made a total sale grow by 5.9 per cent over the quarter by focusing on like-for-like sales in the recession which indicates that Tesco plc has used sale strategies to make some sales in the recession. Tesco plc reduced the prices of the products in the store for example Tesco said “by giving our customer more affordable choices we have deflated our sales during the quarter by between two and three percentage points” this suggest that Tesco plc is trying to decrease the prices of their it products so that consumer are able to afford. Tesco PLC revenue was a lot less and growing slow in the recession for example on the article, Mr. Pritchard said “cash gross profit and the margin are less. This gives an indication that Tesco plc’s revenue will not be as much as it use too and it will grow a lot slower than before. In 2011 Tesco announced that they have decreased their prices of essential items from milk to pasta, fresh fruits and vegetables to help families all over the country in these tough economic times. By investing more than £500 million in the big price drop which is a result of showing that Tesco is listening carefully to the views over 200,000 customers. This gives an indication when Tesco plc was in recession Tesco plc invested in the big price drop scheme to get a visual of what consumer demand. Tesco plc also stopped investing into promotions and instead putting the emphasis on clear and reliable savings that everyone can benefit from. This gives an indication that Tesco PLC.

Recovery influences businesses activities out of recession in a business for example consumer’s confidence will be more confidence in the economy, which will give the consumer the courage to spend their money on good and products. When businesses are recovering from a recession the demands will start to increase which will make suppliers to supply more of the products for the demands. We would expect that the revenue will increase a lot quicker than usually, this is because consumers confidence are more confident and will start to demand which will increase the revenue in the business. The cost of the goods will increase, since many people are demanding more and comes to show that people have more money to spend. The amount of staffs will increase because more consumers will be purchasing more than before so labour is needed by employing more people to support the supplies in the business. When businesses are out of rescission investment will be invested in advertising, this because businesses need to get the message out to consumers that they have the supplies the consumers want. Profit margins should increase since demands are increasing and consumer’s confidences are more confident in purchasing goods. Dividends will increase because businesses will have enough money to pay shareholders out of its profits. Share price will increase because business will want a number of saleable stocks of a company. The CEO will set strategies to help increase sales since demands are increasing and a better vision of their business.

In 2013 When Tesco plc is recovering from recession the consumer are supposed to gain confidence to purchase goods for example in the article it says “Tesco will increase the value customers can get from their club card vouchers” this indicates that they haven’t recovered from the recession because people aren’t purchasing any products and goods from Tesco plc. It seems that Tesco plc prices remain the same of their products. Tesco plc’s maintaining its profits margin of 5.2 percent, but in the article its revenue in Britain has struggled more than many rivals. This suggests that Tesco plc is weren’t able to meet their revenue. For example the article says Tesco, which makes about two third of its revenue in Britain, has struggled more than many rivals. This suggests that consumers have found other alternatives such as Aldi, Iceland, lidl, etc. People weren’t demanding enough in the recovery for example in the article it says “weak demand for general merchandise” this shows that demands have changed and need something else in the market and it relates why the consumers are not confidence in the economy. Tesco plc’s shares were up 20 percent over the past years and now were down 16.6 pence at 1252 GMT. This gives an indication that Tesco’s shares are not sustainable in 2013. In the article it shows that the CEO is trying to maintain Tesco plc’s difficulty for example the Panmure Gordon analyst Philip Dorgan believes “beginning to get a grip on the steering wheel and now has a clear view its stores and online” this gives an indication that the Panmure Gordon analyst has analysed Tesco PLC’s have analysed the CEO’s plans to break through Tesco PLC’S struggles.

In conclusion, the economic environment is influenced by the demands and the supply which makes up the economic environment and it also shows the importance of the economic environment which could drastically affect other businesses such as Tesco. It Is important to keep the economic sustainable for example if there is excess growth there this will cause thing such as taxes to raise up and businesses to raise up the prices of their products. There are a key thing that influences the supply and demands for example supply is influenced by the availability of raw materials, availability of labour, logistic, ability to produce profitability, competition for raw materials and having government support. And demands are influenced by affordability, competition, availability of substitutes, level of gross domestic product (GDP) and the needs and aspiration of consumers.

M2: compare the challenges to selected business activities within a selected organisation, in two different economic environment

This report is going to compare the challenges to selected business activities within Tesco plc in two different economic environments.

In 2013 When Tesco PLC is recovering from recession the consumer are supposed to gain confidence to purchase goods for example in the article it says “Tesco will increase the value customers can get from their club card vouchers” this indicates that they haven’t recovered from the recession because people aren’t purchasing any products and goods from Tesco plc. But in when the economic was in recession Tesco plc. But in In 2008 Tesco PLC was influenced by the recession but were capable to make some sales for example in the recession Tesco PLC has made a total sale grow by 5.9 per cent over the quarter by focusing on like-for-like sales in the recession. This shows that Tesco plc. has done better in the recession by gaining more sales by concentrating on like- for-like sales which made a sale growth sale by 5.9 per cent, but in 2013 when recovering from recession Tesco PLC haven’t done well in increasing sales this because Tesco PLC were offering more club card vouchers to member so that consumers become loyal and start consuming from Tesco plc., this is because consumers will help increase Tesco plc.’s growth sales. This suggests that Tesco plc. is losing consumers because of other alternatives and is not confident in spending money. This indicates that in 2008 in the recession Tesco plc. Had more sales because of the like-for-like sales but maybe Tesco plc. weren’t concentrating on the like for like sales in 2011 and 2012 to help increase sales. But in the in the articles it says that the reason of not gaining sales is because “it’s sells a higher proportion of non-foods than other grocers and also because of years of under investment.” Which they did in the recession but not when they were recovering from recession.

Tesco PLC revenue was a lot less and growing slow in the recession for example on the article, Mr. Pritchard said “cash gross profit and the margin are less. This gives an indication that Tesco PLC’s revenue will not be as much as it use too and it will grow a lot slower than before. But when Tesco was in recovery in the article Tesco PLC revenue in Britain has struggled more than many rivals. This suggests that Tesco PLC weren’t able to meet their revenue. This suggest that in recession Tesco were supposed have a slow revenue growth but on the other hand when Tesco was in recovery Tesco PLC was supposed to have an increasing speed of growth revenue but haven’t.

When Tesco PLC invested more than £500 million in the big price drop, which is a result of showing that Tesco were listening carefully to the views over 200,000 customers and increased sales. This gives an indication when Tesco PLC was in recession Tesco PLC invested in the big price drop scheme to get a visual of what consumer demand. But when Tesco was recovering from recession Tesco PLC didn’t invest much than in the recession for example the article says “of years of underinvestment” which suggest that they weren’t investing as much in recovery.

In conclusion, Tesco PLC did a lot better in the recession for example using the like-for-like sales strategy to help gain sales, listening to consumers suggestions to get a visual of what consumers want. But in the recession but when Tesco was in recovery sales weren’t going up and they were underinvesting which comes to show that revenue will go down.

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