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Unit 1 - P6 - The Business Environment
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Essay of 6 pages for the course Unit 1 - The Business Environment at HSFC (Unit 1 P6)
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Xhuljan Vuthaj 44975Unit 1 P6
P6: Describe how political, legal and social factors are impacting upon
the business activities of the selected organisations and their
stakeholders.
Introduction
In this piece of work I will be focusing on external factors which affect businesses
in different environment and I will also be looking at social, political and legal
factors which would impact Tesco in the UK and Tesco in China.
Political factors are factors which impact a business directly from the
government. Politicians are constantly making important decisions, with each
decision having an impact on business in some sort of way. The UK is governed
by the Conservative Party which is led by Prime Minister David Cameron. The UK
is part of the European Union which is a body that includes members such as
Germany, France, Spain, Italy etc. They also make political decisions which all its
members have to abide by. Local councils also have political impacts on
businesses as they are elected representatives of their population and they make
decisions on local issues on behalf of the local community. Political factors
involve making decisions which will bear an impact on people and businesses.
Legal factors correlate with laws and regulations which can affect businesses and
their operations. Businesses must ensure that they are operating within the law
because if not they could get fined or even into serious trouble and worst case
scenario they could be shut down. There are thousands of legislations that affect
businesses and it is up to the business directors to make sure that they are
aware of them and are not breaking any.
Social factors are factors in society which affect businesses such as demographic
issues, changes in structure, household and families, education, attitude to work,
religions, attitude to male and female roles and also ethics. They mostly look at
how these social issues and changes will have an impact on businesses and its
operations.
Political Factors Impacting Tesco UK
In January 2011 the government had announced that it had rose VAT from 17.5%
to 20%. This is a political factor which would have an effect on Tesco because it
means that they will now need to charge customers 2.5% more because all
goods sold by Tesco include VAT. This rise in VAT means there will be an increase
in the cost of a product, this could have an impact on Tesco because if the cost of
goods is rising customers may be put off by the increase in the prices and may
opt for cheaper alternatives. It also affects Tesco in another way because it
means that they will have to pay suppliers more than were paying because VAT
is a tax that is added on all products. This taxation all goes to the government
who will use this money in all sorts of different ways.
, Xhuljan Vuthaj 44975
Tesco UK is based an EU Membered state which means they will have to comply
with the EU legislations. One which affects Tesco is the EU Antitrust Law, which is
a law which forbids Tesco from buying out other competitors. The reason this law
exists is because competition encourages businesses to offer goods and services
at the most favourable prices for consumers, it encourages efficiency and a
reduction in prices and also stops the market from becoming a monopoly. This
law states that companies should act independently of each other but subject to
competitive pressure exerted by each other. This affects Tesco because they will
not be able to buy out other completive supermarkets which would’ve made life
easier for Tesco as there would be less competition and so would force more
people to shop at Tesco and it would also give Tesco the power of being able to
control prices in the supermarket industry. This law means that Tesco would have
to grow organically rather than through acquisitions of other competitors.
Corporation Tax is another political factor that affects Tesco because businesses
are required to pay this. Corporation tax is tax on business profits and it is
divided into two different rates, this depends on how much profit your business is
making a year. If your business is making £300,00 or less then the corporation
tax rate for them stands at 20% whereas if your business is making above
£300,000 then the corporation tax rate stands at 21% and this the one which
applies to Tesco because there profits exceed £300,000. Corporation tax will
have an impact on a business like Tesco because this taxation will heavily
decrease their profit. This taxation on their profit cold has been used for several
other things within Tesco such as reinvestment in new technology and
infrastructure etc.
Legal Factors Impacting Tesco UK
Minimum Wage Act 1998 is a legal factor which affects Tesco UK because Tesco
have to make sure that they are following these laws and are acting correctly in
regards to the UK legislations. The minimum wage act states that employers are
not allowed to pay employees below a certain amount and these fall into four
different categories with each one having their own minimum wage rate, the first
one being 21 and over, second one being 18 to 20, third one being under 18 and
the last one being apprentice. The minimum wage affects Tesco because it
means that they can’t pay employees below a certain rate. The minimum wage
rate is rising each year and so this will have an impact on Tesco because majority
of their workforce occupy roles which are paid low wages, this means that
Tesco’s operating profit will start decrease to ensure that every employee in the
business is satisfied with the amount that they are being paid for their labour.
Tesco will need to utilise workers they have previously employed effectively and
efficiently, so that there is no need for new employers of the same calibre which
will allow Tesco to retain its operating profit which would have otherwise
potentially lost if it did employ new workers.
Health and Safety at Work Act 1974 is another legal factor which has a direct
impact on Tesco, as it ensures that Tesco employees are provided with healthy
and safe working conditions. If someone was to get injured while working for
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