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Unit 1 assignment 2 The Effects of the Environment on a Business
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I wrote a report on a large business that trades in the EU.
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THE EFFECTS OF THE ENVIRONMENT ON A BUSINESSIntroduction
In this report I will examine the environment in which businesses operate. I will explore and evaluate the
external and internal influences on Tesco and how they respond.
History of Tesco
Tesco is a British supermarket which is engaged in the business of offering sell-grocery based items. It
operates various store formats that offer products, such as fresh produce, wines and spirits, in-store
bakery, ready meals and sandwiches. Tesco now also provides finance, mobile, insurance, hardware
services and much more. The firm’s food brands include Tesco Finest and Tesco Value in the UK. Tesco
PCL is a public limited company in the private sector which is owned by shareholders. It was founded in
1919 by Jack Cohen when he began to sell war-surplus groceries from a stall at Well Street Market in
East London. In 1924 the first own-brand product sold, which Cohen promised would bring unequalled
value, was Tesco Tea. Eventually in 1929 the first official Tesco was born in Edgeware, North London.
Further on, in 1937 Jack started growing the business by buying 500 stores during 1955. Currently Tesco
operates in the tertiary sector.
PESTLE Analysis
Political Factors
The first external factor I will talk about is political, there are many political factors that affect Tesco. The
first of them is Brexit, which has a negative impact on Tesco. This is because transporting products from
the European Union would be more complicated because waiting at the border would be much longer.
Food (especially ready meals) have a short expiration date, which is why quick delivery to the store is
very important. When the UK leaves the European Union, waiting at the border will be much longer,
which can harm the loss of food. If the UK had stayed in the European Union, the food would have been
delivered to the shops immediately.
The second political factor is government support which has a positive effect on Tesco. An example is
when the government gives some money that doesn’t need to be paid back. Tesco can use this grant
money for a specific purpose to improve their business. For example, they can use money to create
better customer service, improve their products or add other new ones. The government has also
supported Tesco during pandemic by giving them an emergency coronavirus package which was worth
585 million pounds. This impacted Tesco in a positive way because they used this money to install plastic
shields at checkouts at thousands of stores to protect its staff. They also bought gloves and hand
sanitizer to keep themselves safe. That is why the government emergency package was very helpful and
impacted Tesco in a positive way.
The last political factor is US and China trade conflict which has a negative impact on Tesco. Tesco is a
British brand and does not have a direct relationship between the US and China, but their conflict has
affected the negation of prices. The Trump administration has imposed high tones on Chinese products
and all other imports. That is why the high taxation of imports, and the expert has affected the
, profitability of all companies doing business from the USA. The importation of products has become
much more expensive and unfavorable to Tesco, which is why this conflict has had a negative impact on
Tesco.
The external environment – Economic
The first economic factor is taxes. There are many of those that impact Tesco. There is income tax and
national insurance, which is taken out of the individual wage, for example a Tesco employee will earn a
monthly wage which a percentage will be taken out by the government. This will have a negative impact
on Tesco, as employees will get less, which can lead to less motivation for their work. Depending on
what profit Tesco is making, the government accepts interest as a corporate income tax. If the
cooperation tax rises, Tesco perhaps it will have to counteract this by increasing the prices of products /
services. As a result, it will negatively affect Tesco as it will reduce their profits and damage them in
general financial results, in addition, there is VAT (value added tax), this form of indirect tax affects
Tesco in two ways. "The first is input tax in which Tesco itself pays" their VAT suppliers for any products
they purchase. The second is output tax where Tesco taxes its goods and services that it provides to its
customers. As a result, this negatively affects Tesco as they must charge their customers more for luxury
items which can reduce sales as customers will be more reluctant to purchase the product due to price
increase.
The second economic factor is interest rates, which may negatively and positively affect Tesco. The Bank
of England is responsible for setting the price of interest rates and aims to: maintaining inflation at 2%. If
interest rates are high, customers who are in debt are less likely to spend money on Tesco products as
they will be focused on getting their debt back, such as overdrafts. Moreover, customers will be less
likely to borrow money because of the high interest rates, in turn, having less income to spend on Tesco
products than they will be saving your money. Overall, high interest rates will negatively affect Tesco as
customers will be more reluctant to buy products because they will have less income to spend. On the
other hand, low interest rates will positively affect Tesco. This is because customers will enjoy it more
discretionary income, which means more money to spend on less important items. In addition, they will
be more likely to borrow money and therefore have more income to spend on Tesco products as they
are less likely to save money. Therefore, it will positively affect Tesco, as customers buying more
products will generate more profit.
The external environment – Social Environment
The first social factor is Ethics which impacts Tesco in a positive way. Tesco decided to sell vegan and
vegetarian products to clients. This had a positive effect on Tesco, which entered a new market,
including this case is vegan and vegetarian. Which means there is potential to get new customers. An
example of this are advertisements that show how healthy vegan food is. At this age, teenagers look at
their idols and want to imitate them, so when they see their favorite artist eating vegetarian food, they
also want to try it. Clearly this shows that Tesco offering vegan and vegetarian food is beneficial as it
attracts customers with that nutritional requirement. It also creates a positive brand image for Tesco as
they respond to customer needs.
The second social factor is religion which also impact Tesco in a positive way as in the UK there are 3.3
million Muslims and 275,000 Jewish people. Tesco, thinking of them, decided to add to their market
halal and kosher meat products. Halal and Kosher refer to what's permitted by Islamic and Jewish
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