Evaluate how future economic, political, legal and social factors impact the strategy of an organisation

Evaluate how future economic, political, legal and social factors impact the strategy of an organisation

Economic Factors

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Economic factors have always been a concern for businesses like Tesco’s this is because the economy is continuously changing. In 2008 we experienced a worldwide recession which affected every business after the stock market collapsed. Tesco’s were also affected by the recession which resulted in their profits decreasing however they did find a way to benefit from the lack of flow of cash in the economy they did this by changes the prices of their products to match the state of the economy to continue to generate sales. Tesco’s is a high risk company to the recession and credit crunch, we can see this because of what happened when Woolworths were hit by the recession and failed to recover from it this shows how even a profitable company can fall if they cannot cope with the changes in the economic environment.

Part of the economic crisis was inflation and the credit crunch, inflation is where there is a rise in the price of goods this means that customers were more likely to shop at discount stores rather than the likes of Tesco because they thought they were getting more for their money. If the economy was then to go into a recession again this would have serious consequences for Tesco which would leave them in a very risky position because after the first recession it would be too risky for Tesco’s to lower their prices anymore without suffering too much loss for the company, in the worst case scenario Tesco would end up having to close down stores in order to save money. If the opposite were to happen which would be that the economy recover then this would allow Tesco’s to have the freedom to increase their pricings which should lead to higher revenue and profits for their shareholders.

Political Factors

Political factors are a concern which all businesses have to face, if the government make changes to the law set in place this can affect businesses in either a positive or negative way such as a rise in tax would mean that customers have less disposable income which means they are not going to spend as much money in store as they would have normally. Tax increase is also a problem for business such as Tesco’s and Spar because they would have to pay more tax which means they will lose money therefore lowering their profits.

Another concern for these business is the Vat rise which has risen from 15% to 20% which has made prices higher which means that Tesco’s will have to pay more to their suppliers which results in Tesco’s selling their products for a higher price in order to stop their profit from falling. Fuel price rises are also another concern because Tesco’s use fuel for things such as home deliveries and suppliers with fuel prices rising it is going to make these deliveries more costly which will either result in stopping certain services or rising prices which will have a negative effect on Tesco’s customers because they will either have to pay more for the service or not receive it at all.

Legal Factors

Legal factors are also important with the running of a business like Tesco’s or Spar, these business need to ensure that they working within the laws enforced by the government a………………………….