Evaluate the Impact of Changes in the Economic Environment

Evaluate the impact of changes in the economic environment on a selected business – D1 After various changes to the economic tax and interest rate, CPHP have conducted and compiled research into current public spending. The results show that there has been a dramatic reduction in the level of public spending in the UK. The changes in economic environment will affect a business, the profit of the business will be affected because its affect the price and income of a business, which are the main aspect of a business.

If Tesco decides to change the price of their goods, for example; the price of their doughnut in 2009 was 5 pieces for a pound, a reasonable price for students but with the economic environment it affected everything with the introduction of VAT from 17. 5% to 20% made the price of the doughnut to now cost around 1. 30p the change is affordable for some people but for other people it is not affordable. The reality of this economic environment is that when the price change and it becomes higher, consumers get less happy and this affects our range of time of buying certain products.

The article above shows how the economic environment tax income is affecting prices as a whole, the price of cigarettes and alcohol in going to increase. This will affect Tesco because this is where they make most of their sales from. They have almost to sessions for both cigarettes and alcohol. When these products increase, it means their sales on these products will reduce because not a lot of customers will still be buying these products.

Another policy that will affect the business Tesco is the fact their employee can’t work more than 39 hours, this policy will have impact on the business because they will have to recruit more workers and especially for the big 24 hours Tesco. This will affect Tesco income because it will increase the rate of their outcome because they will spend a lot of money on paying their workers. Another important economic environment impact will be the fact that Tesco will have to apply for more loans to be able to successfully run the business until it’s able to make enough money by itself and rely only on their income.

This will affect Tesco growth because the loans will affect their income, cash flow and business image. Tesco will pay more and profit will drop. Tesco also have social factors that affect them, as the business have charity centre in helping the less privilege people and the more these people gets poor, the more they will have to stretch to help out which also spending money. Recession causes unemployment, this will affect the demand for goods and Tesco profit will drop.

An economic factor that might affect Tesco is the demand of the consumer and customer which will decrease with the different problems; people are having in the world. As the demand decrease so the economy of the business will decrease and the profit of the business will decrease too. This refers in the fiscal and monetary, for example since when the government decided to raise the VAT from 17. 5% to 20%, the business increase their goods price and due to that reason the customers do not purchase enough goods like they used.

Social factors refer in the trend of customer which keeps changing their trend, and what the trend of their purchase. For example nowadays due to people’s work, they are really busy so they often decide to buy already cooked food. Technology refers in how Tesco adopt online shopping to attract customer, to purchase goods and services from the business. Another technology might be the introduction of delivery which refers in how the businesses deliver their goods around the customer’s address.