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BUSINESS BTEC UNIT 1 TASK 5 DISTINCTION 2
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BUSINESS BTEC UNIT 1
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Unit 1 – The Business EnvironmentTask 5
Distinction 2
Introduction:
In this assignment I will be looking at how future changes in Economic; Political; legal and Social
factors can impact the strategy of an organisation.
Legal Influences:
Changes in Laws and Legal clauses will have a large influence on the strategy put in place by an
organisation as they can have an impact on a wide variety of areas within an organisation, affecting
things like; Health and Safety; Environmental factors, etc. The McDonald’s organisation will have to
be aware of any and all changes made in the laws because of the fact that if these changes are made
and McDonald’s doesn’t comply with the terms set a fine will be sent to the company that could be a
large amount of money. An example of this would be the law on minimum wage; it is important that
the business has a clear idea of what this is and any changes that will be made because if there is a
change in the minimum wage and it becomes increased the organisation will have to increase the
wages of a majority of the employees within the organisation. This is a large expense for the
company to undertake as it could mean millions of their profits being used up by the work force
within the organisation, in addition if the minimum wage is increased by an amount large enough
McDonald’s might find that their budget cannot stretch to cover their expenses. However if they
stay on top of all information on possible changes made to the minimum wage they will be able to
plan ahead and alter the budget plans to help compensate for the extra company expenses –
allowing them to do successfully comply with the laws set and also keep the business running
smoothly.
Economic influences:
Changes in the economy will have a great influence on the company’s strategy and planning for the
future because of the fact that a change in the economy can affect the company in such a wide
variety of ways, from; the wage rate to prices of products and growth rate of the business.
An example of Economical influences would be the recession that took place within the UK; when
the recession was taking place the inflation rate still stayed 2% above its target meaning the inflation
rate will be on target – The Inflation rate is referring to the rate of change of a price index over time
– this means that because McDonald’s could decide to provide cheaper prices for their products
helping to boost sales for the amount of time the slump in the economy was going for, the increase
in sales will ultimately outweigh the amount lost by reducing the prices, meaning McDonald’s would
earn a larger amount of profit at the end of the crisis. This however is a risk because of the fact that
McDonald’s opposition could have the same idea about reducing prices for products meaning that
McDonald’s would reduce their prices but not sell enough to compensate and put them back into
profit. This makes knowing about changes in the economy important to the organisation as if they
are able to create and execute a plan before any opposing companies they will be able to use the
economic slump to their advantage; however if they are too late in acting they could potential put
the organisation out of business in the that area – or the worse scenario they put the business into
debt by applying for a large loan to put them back on track.
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