D2: Evaluate how future changes in economic political, legal and social factors, may impact on the strategy of a specified organisation.
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Course
Unit 1 - The Business Environment
Institution
PEARSON (PEARSON)
Unit 1 - The Business Environment (D2)
Evaluate how future changes in economic political, legal and social factors, may impact on the strategy of a specified organisation. (D2)
Evaluate how future changes in economic political, legal and social factors,
may impact on the strategy of a specified organisation. (D2)
Sainsbury’s
Legal influence – Laws are continuously being updated in a wide range of areas. Examples are:
consumer protection legislation, environmental legislation, health and safety and employment law.
Sainsbury’s need to be aware of it and be ready for these changes, rather than rushing when there is
no time. Sainsbury’s need to be aware of the children and young customer’s law 2007 which says,
businesses can’t sell alcohol and tobacco to young customers that are under 18. They also have to
display a sign that say under 19 can’t buy tobacco products. So, if these products are served to under
18s, then Sainsbury’s can be fined. This unawareness of laws can force Sainsbury’s overheads to
increase which can eat up Sainsbury’s profits. In order to avoid these fines Sainsbury’s has to be
aware of new laws and should keep up to date every time. They can also arrange meetings and extra
training for employees to make sure they are aware of every new law being introduced. Now for
example in the future the law was to change and a new law was introduced that over 16s can buy
tobacco. The positive is that Sainsbury’s can sell their tobacco to more customers and receive more
profit. However, Sainsbury’s need to arrange meeting and training for employee to make sure they
understand what new laws say. So, it may cost Sainsbury’s which is a negative side. Next if there is
change in minimum wage rate (current minimum wage £6.15 – 18 to 20) it will raise Sainsbury’s
expenses which may eat up their profits. As such there is no advantage to Sainsbury’s due to
increase in minimum wage rate; however, employees may work with full potential and provide
better service as their pay is increased. From my point of view Sainsbury’s still can control their
expenses by reducing their workers. Most of the businesses like Sainsbury’s reduce their workers
when they expect that there will be rise in minimum wage rate.
Economic influence – UK economy goes through difference series of pattern with booms and
slumps, every business does well in the time period of boom and most businesses collapse in the
time period of slump or recession. Other economy changes that have influence on Sainsbury’s are
interest rates, wage rate and inflation rate. Recent UK economy hasn’t really grown due to the
financial crisis and high inflation which impacted on demand for goods and services in the UK.
Inflation as of October 2019 is 1.9%. The UK wants to aim for more than 2%. This will have a positive
effect on Sainsbury’s because they will be able to provide cheaper products. In this way Sainsbury’s
sales will boost up. However, Sainsbury’s rival may be able to provide products cheaper than
Sainsbury’s, which will increase the competition between Sainsbury’s and its rivals. Other negativity
is that inflation may rise again due to demand pull inflation. I will recommend that Sainsbury’s buy
goods and services in bulk when there is low inflation then Sainsbury’s can sell goods with high profit
margin. The GDP of the UK fell 0.2 in the second quarter of 2019 compared to the previous quarter.
This rate is 8 -tenths of one percent less than in the previous quarter, when changed 0.6%. This is
likely to have a negative effect on Sainsbury’s because people are less likely to buy expensive
products and services in this time period. It is predicted that in 2020 it could go down 0.1%. This
means it could get worse for Sainsbury’s. Prices of products will carry on increasing bit by bit which
means consumers want to spend less money. I will suggest Sainsbury’s to take full advantage of the
stable GDP by expanding the business, opening newer stores, and increasing the variety of products.
Social influence - Social influence relates to change in society and social structure. Change in
structure of the population, lifestyle and fashion affects business sales and productions. When the
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