P1 – Explain the effects of changes in the economic environment on Tesco
D1 - Evaluate the impact of changes in the economic environment on Tesco
The economy is very important as it determines the profit and success for everyone as a whole. For
example, if there is a high rate of unemployment this means that there are more people out of work
and relying on money from the Government like benefits. This would affect the quality of life as
working people may have to work longer hours for less pay because of the shortage of workers.
The economy focuses on the spending of others which is very important in regard to the growth of
the economy as one person’s spending is another person’s income. There are many aspects of what
affects the economy such as the inflation and deflation of products, the change in GDP, rates of
employment/unemployment, the trade deficit/surplus and ripple effects. The Government measures
all of these aspects and broadcasts the results via the news.
In this assignment, I will discuss the effects of changes on the economic environment in regards to
Tesco and explaining how certain changes in the economy can impact the way Tesco plans and
expands.
What is the Economic Environment?
Each country has its own economic environment meaning that other countries may have a better
economy whilst other countries have bad economies. An example of this is that the UK’s economy is
growing by 1% whilst other countries are not growing as fast. The economy has certain indicators
such as GDP, unemployment, rates of inflation and deflation, trade surplus’s/trade deficits and
balance of payments are all indicators.
The Business Cycle
The business cycle explains the current state of the economy; the business cycle shows the growth
and decline of the economy and shows the booms, slow down, recessions and recoveries.
Growth
Growth refers to something which increases and is in relation to the whole economy. Economic
growth occurs when a country produces more of its own goods and services. This will allow the
standard of living to change. Growth of the economy can cause the business to employ and make
more profit. Growth will impact on Tesco and people will start to have more money and therefore
Tesco will have high demands. This will be a good thing as Tesco will have more sales and therefore
start to recover with earning more money.
The Government wants the economy to grow because there will be more people employed and
paying taxes and there will be less people unemployed and receiving benefits. People also will be
spending more which increases demand for goods and services. Businesses will be spending more on
capital projects and equipment which creates more demand and therefore increases employment.
The Government will have more money to spend and thus provide better services for the people and
give more aid to businesses so that they can grow and expand. Growth breeds confidence in people
and business leaders. This confidence will encourage more spending, which creates more optimism.
The government also sets targets for growth each year which is 2%.
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