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Assignment 3(P6-M3-D2)
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This assignment included information on the impact of political, legal and social factors on businesses.
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Fahad Khan Unit 1-Business Resources-Assignment 3P6
In this section of the assignment I will be talking about how Tesco is affected in
terms of the different business environments in the UK and China. The business
environment will be sub-sectioned into legal, political, social and economic
factors. This information will include how the company varies in the two
countries in terms of its business activities (recruitment of staff, product design
and transport of goods). I will select three of the most influential social features
in each country and discuss how they affect the business in the two very
different business environments.
Tesco in the UK
Political Factors
Tesco’s business activity can be deeply affected by political factors in the UK.
One of these factors are called corporation tax. Businesses pay this tax on all
taxable business profits. The corporation tax in the UK is currently 20%. This
means that Tesco in the UK will get taxed 20% of all of their taxable profits. In
2015, Tesco made (£m) 6,376 profit/(loss) before tax. The taxation for 2015 was
£657m – (1).Tesco have to price their products according to the corporation tax
of the country in which they operate in, if the tax in the UK went from 20% to
21% then the company would be forced to increase the prices of their products
as if they didn’t then they would lose a lot of money in the form of profits.
Another factor is known as import and excise duty. Import duty is when a country
places tax on goods which are imported into the country. Tesco is affected by this
as some of their stock is imported from countries mainly located in eastern Asia.
This is a common practice for big name companies as eastern Asian countries,
mainly China, have cheaper labour and the conditions are lesser than that of the
UK. Luckily, the UK import tax for Tesco products is 0%. - (2). Excise duty is a
duty which is put on different products and varies with different countries. An
example for this would be the fact that Tesco imports fuel and has functional
petrol stations. Excise duty would be placed on this product.
Legal Factors
Laws created for businesses can also heavily affect Tesco’s business activity.
One factor is the National Minimum Wage Act 1998- (3). This act applies to
workers which are of school leaving age and are working for a company. Because
this is a law within the UK, not paying employees minimum wage is a criminal
offence. Therefore Tesco have to accept the law and abide by it. However, if
minimum wage increases then the business has to pay workers more, which
would hurt the company’s profits. Due to this, when the government increases
minimum wage, many employees are fired as businesses cannot afford to have a
huge amount of employees. Therefore, Tesco have to align their employment of
staff on whether they can afford to pay them the minimum wage. The minimum
wage for anyone over 21 years of age is currently £6.70- (4)
, Fahad Khan Unit 1-Business Resources-Assignment 3
A second factor is the fact that Tesco are not allowed to discriminate against
employing workers. There are several laws which apply for various types of
discriminations such as; Race Relations Act 1976, Disability Act 1995 and
Employment Equality regulations 2003, which cover subjects such as
religion/beliefs, age and sexual orientation. – (5). These various laws and
regulations demand that all companies including Tesco show no discrimination
against any employee or potential employee. These laws are set in the UK to
ensure that there is equality among everyone and that no one is preferred over
someone else due to their race or beliefs. This will therefore direct the way Tesco
recruit their staff.
Social Factors
One main social factor which affects Tesco is Religion. There are many different
religions which people follow within the UK. From the 2011 census we can see
that while Christianity is still the major religion in the UK with 59.3% of the
population being Christians compared to 2001 census where the Christian
population consisted of 71.6% of the entire population. Islam is a religion which
has grown from 2.7% to 4.8% of the population being Muslim. – (6). Islam is a
religion which believes in a more humane way to kill animals for meat, this in the
Islamic world is known as Halal meat. Due to the fact that there are over 14
million Muslims in the UK, businesses such as Tesco have seen an opportunity to
appeal to these people as they are now integrating a range of Halal meat. This is
done to appeal to the rapidly growing population of Muslims.
A second social factor which affects Tesco’s business activities is Age. Currently,
it is necessary for people below the age of 18 to be in full time education. In the
UK most primary schools have uniforms which their students must wear. From
the 2011 census we can see that 0-14 year olds have a population of 11.1
million. This means that there are many students which require uniforms. Tesco
therefore see this as an opportunity and sell student clothing in many of their
stores.
A third factor is education. Businesses have different requirements for different
roles. The fact that in the UK all children have to stay in education until 18
means that there is also a higher number of educated and literate people in the
UK. Because of this, businesses with technical areas can strive as there are more
people which are competent with that level of skill. This also affects the
recruitment of staff in Tesco, as Tesco can look for people with a higher level of
education who will be more efficient at their jobs. Also, this allows Tesco to be
able to develop more advance technology for the store floor or even in
production, as there are more educated people to be able to develop and
operate more advance machinery and tools.
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