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P5 & M2 The Buisness Environment

3048 words - 13 pages

M2 – Compare the challenges to selected business activities within a selected organisation in two different economic environments
The two contrasting environments I am going to look at are:
1) Economy in Growth –Economic growth is the increase in the market value of the goods and services produced by an economy over time. Economic growth can be measured by changes in inflation. Gross Domestic Product is used to measure population differences between countries.
Stability - Stable economic conditions for Tesco means that they can make better informed decisions because there is more stability within the economy. If the economy in the UK is stable, Tesco’s are likely to have a ...view middle of the document...

5% currently. This shows that borrowing money is very cheap at the moment. This would be good for Tesco if they wish to expand at present. If interest rates are low then Tesco will be willing to borrow as they feel that they can afford their repayments. This will increase demand for goods and services within their business and help economic growth.
Government support – The Government provides us with new road networks, rail and air structures may mean that if Tesco stores develops and locates in new areas it would be important that accessibility for consumers would be made more convenient. Tesco is helped by the Government in the area of planning policy. This has allowed them to dominate the retail landscape in many areas but is due to its long term policy of adding to its land bank and its capital programme. Tesco is subject to the same planning laws and constraints as any other supermarket chain. Apart from this, the Government doesn’t really help Tesco at all. Tesco are successful because of its long term commercial strategies and operational excellence.
Unemployment Rate - A low rate of unemployment means that there are less people unemployed and therefore demand for goods and services increases. This will have a positive effect for Tesco as they are able to employ more staff because of their increase in demand for their products. Tesco can offer more training programmes and staff can promote themselves within the Tesco business.

Demand and Supply –
Demand Curve
Supply Curve
Market Price
Market Quantity

The Demand and Supply curves determine the market price of the goods or services.
Demand is the quantity of goods or services that consumers are willing and able to buy at a given price and period of time. The diagram shows that as the price decreases the quantity demanded increases and as price increases the quantity demanded decreases. The demand curve slopes downwards from left to right.
Factors influencing demand on Tesco
Affordability – Tesco’s customers will buy their products if they are reasonably priced. During a time of recession, a customer may not have as much disposable income to spend on more expensive items therefore Tesco must adapt affordable prices.
Competition – Consumers will browse between different stores in order to obtain goods at the best price. It is important for Tesco to ensure that they offer competitive prices in order to make more sales.
Level of Income – When customers have more money to spend they will buy not only essential items but luxuries as well. If incomes are low it will have the reverse effect on businesses like Tesco. Tesco will be aware of the GDP and manage their business accordingly.
Needs of customers – Customers will buy according to whether or not they have enough money for essential items or if they have after essentials any disposable income. In times of high GDP customers will demand luxuries whereas if the GDP is low they are inclined...

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