BTEC business level 3: unit 1 - exploring business task 2 : P4, P5, P6, M3, M4, D2, D3 (Distinction* grade *)

BTEC business level 3: unit 1 - exploring business task 2 : P4, P5, P6, M3, M4, D2, D3 (Distinction* grade *) P4 Introduction In this task I will be discussing how the internal and external environment affect an organization and the organization I have chosen is Tesco Public Limited Company. Tesco PLC, a British Grocery and merchandising retailing are a market leader in the United Kingdom’s grocery market, as well as a well-known grocery chain found across 12 countries. As a leading retailer with 450,000 employees, Tesco PLC serves millions of customers every week, in their stores and online. External Environment The External Environment has a great impact on businesses and is comprised of multiple factors. These factors are often used by businesses to help analyse how and why they will be successful. This analysis is known as PESTLE which stands for: • Political • Economic • Social • Technological • Legal • Environment Political Political factor is one of the main concerns for Tesco PLC. With its operations being within a globalised environment, with stores all over the globe, operating in Ireland, Poland, Thailand and so on, Tesco PLC’s performance is extremely highly influenced by the political and legislative conditions of the countries of which it operates within. They have to follow the rules and regulations of those countries and act accordingly. The UK Government adopted a tax measure a few years ago that heavily affected Tesco. In 2011, the UK government increased VAT from 17.5% to 20% with the aim to increase government revenue by £13bn every year. This increase in VAT will negatively affect Tesco, this is because the higher prices that the increase in VAT will cause, thus resulting in higher prices for the majority of goods Tesco sells. All of this will affect Tesco’s revenue, and effects to revenue can have a substantial effect on the company’s profits. Economic Economic factors are of great concern to Tesco PLC, this is because they are likely influenced by demand of product, cost of employment, pricing of goods and overall profits. The UK’s economy has recently provided both positive and negative signs because of the recent brexit. There might be some changes in how the UK will engage and trade with Europe and it may be either beneficial or non beneficial for Tesco PLC. There might be change in prices and if the price rate of the goods increases demands will decrease and vice versa. Fewer individuals with disposable income results in a decrease in spending, which will force Tesco PLC to lower prices or make lower quality foods and sell at lower prices, which ends damaging the overall profit potential of the company. And it may need to shift some employees and decrease workforce because they won't be able to pay for the manpower. It will ultimately affect profits and lower the amount the shareholders receive as dividends at the end of each financial pay out for Tesco PLC. However, recovery from such an economic recession stimulates revenue growth for Tesco PLC. Social In the United Kingdom, the number of elderly individuals is on a massive increase due to the baby boom generation. In past years, there used to be a decrease in the birth-rate and an increase in the life expectancy of people. This led to a shift of tastes of people which is required to be taken in to an account by Tesco PLc. Demographic changes such as the UK’s aging population, increases in the UK’s female workforce and the decline in home preparation meals, means that UK retailers are also focusing on added-value products and services. There are a variety of social changes that have caused trends to indicate that customers in the UK seem to move towards bulk shopping or one-time shopping for their groceries. A response to this social change by the company is an increase in the non-food items on sale within stores as well as on Tesco’s online store platform.