Essay
BTEC Business, Unit 1 The Business Environment, Pass 5 and 6
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This document is my assignment for Business Environment, Unit 1 BTEC Business. It includes the work I did to achieve Pass 5 and 6.
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Unit 1 Assignment 2 - P5, P6An economic environment is the external factors which can affect the business market, such
as supply & demand, market structure, employment, income, etc. these factors can be
influenced by things like consumers, suppliers, banks, the government and more. Factors which
can potentially change the economic environment are government policy, growth & recession,
level of inflation and the availability & cost of credit.
The economic environment impacts a business that operates in the EU, such as Tesco,
because laws and factors such as Brexit will affect the way they are able to operate, and Tesco
have to make sure their policies comply with the laws and acts in the countries they operate in.
When laws and policies change, they may have to change how the store is run, change
suppliers, etc, to be able to continue to operate or to cut cost. For example, Unilever were trying
to up their price due to the fall in the pound after brexit, however Tesco refused this and they
had to make an unknown agreement to keep prices from being raised too much. Factors in the
economic environment, such as income, affect Tesco also because if people do not have as
much income they will have to spend less which will damage Tesco’s profits, whereas if people
have more income they will be likely to spend more which would positively impact Tesco’s
profits. Currently, the EU economic environment is being affected by Brexit, as there is a lot of
uncertainty surrounding it, therefore people are unsure when it comes to making business
moves, as they don’t know if this will be viable in the future once brexit deals have been
decided. This uncertainty is causing the economy in the EU to have slowed compared to usual.
In the UK, growth isn’t as high as it could be due to economic and political uncertainty relating
to the outcome of the Brexit negotiations. Some work sectors will have slower growth because
of these uncertainties, for example, the manufacturing sector has slowed in growth and the
construction sector has fallen in output.
The fall in the pound can also have an affect on Tesco, because it can make imports more
expensive. These expenses will either have to passed onto consumers (which may lead to less
consumer spending) or they will have to take these expenses themselves, both of which can
affect their profits negatively. The interest rates rising due to the fall in the pound means some
people (especially those with a mortgage) will have less disposable income which can lead to
them spending less in Tesco, therefore affecting the supermarket’s profits.
However, economic growth has increased over the past year in the UK, compared to 2016 and
2017, showing the effect of the Brexit vote is having less of an effect on the economy, although
this may change when the Brexit deals are decided in the future. Despite the economy doing
better than in the past two years, the UK was one of the slowest growing economies in the EU
in 2018, although the UK has its unemployment levels at the lowest it's been in the past 43
years, so consumer spending may increase as people have more disposable income. This will
have a positive effect on Tesco, especially since they sell essentials and things which people
may buy as small treats rather than having pricey products.
PESTLE on Tesco
Political
Factors such as legislation, tax and political instability can have an effect on Tesco. For
example, the political instability due to Brexit may have an effect on their UK and possibly EU
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