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Unit 1: The Business Environment

All of the below have been from the lessons and a PowerPoint given or www.businessdictionary.com . P5 Recession In a recession prices go down and businesses resist from investing into other businesses, but not always sometimes it’s the currency value that goes up. As fewer people would have jobs and not many getting pay rises, more benefits would have to be given out to the unemployed population. A recession is a slowdown in the economic activity. Household income is the amount of money going into a house, this includes wages and benefits, if a family with 2 adults and 2 kids bring in only 1 adults wages home per week then the family would suffer in this recession as the working adult would probably work longer hours and for less pay, prices would have risen so the cost of living is more expensive. If a business wanted to have the same profit margins the price of their product would have to go up, before a recession if a Pizza costs £1.30 to make and they sold them for £2 then they are making 70p profit, but during a recession the prices of ingredients would have risen costing £1.85 to make their profit would be 15p per pizza sold, but if they want to make the same profit per individual then the cost would have to rise. People lifestyles change as their diet could change to save money, 2 or 3 holidays per year could be changed to 0 as people can’t afford these. In a recession many businesses go bust, as they can’t afford to pay staff, prices of their product rises so they don’t sell and their product could go out of date or fashion. In a recession Aldi will certainly gain a lot more customers in a recession as people are being tighter on themselves and their family and will want to save as much money as possible, they will do this by shopping in cheaper alternative shops, will stop going out for meals and will eat cheap food.


Growth Growth is where there is more jobs available and the prices are low and relatively stable. Growth in the economic environment happens when goods are being produced and consumed quite rapidly , which causes incomes to rise meaning people have more ‘spare money’ to spend on holidays etc. this is when unemployment level is low as companies need products to be manufactured. Economic growth is the amount of income per head that gradually increases e.g. a teacher starts out on 20k a year and gets a 1k pay rise per school annual year. Tesco will gain customers and maybe have to build more stores as in the last growth period every £7 spent in the UK Tesco took 1 of them. Tesco will probably open stores in the growth period and Aldi will have to shut down as they just won’t get many customers.

Ripple effect The ripple effect is where people with more money can spend more even if they don’t need to, this means producers have to make more and more of their products. This would lead to more people needed to be employed, the higher demand, the more staff needed to produce the items. In a recession it would be the opposite, less people would be employed as less people will be buying. The companies would have to cut down on staff as they aren’t making as many products and the profit margin will shorten. Pay freezes meaning people have less money to spend. Also school leavers are hit really hard and most of them stay in education for longer instead of looking for their jobs. The only business which could gain customers from the ripple effect is Tesco as people will have more money on the go and could afford the better products for themselves. On the other side Aldi would lose some customers as people will have more money and will be able to afford the more luxury items.


Inflation Inflation occurs when the general price goes up for basically everything goes up in price as each raw material goes up, labour costs go up, the price per unit for gas, water, and electricity goes up meaning the cost of living goes. Because of this Tesco and Aldi both get affected as they have to pay more for raw materials and ingredients used for products. If a product cost and extra 50p to make then the price will have to go up by 50p the profit will stay the same but the amount of people that will buy the new priced product could change and Tesco could lose customers and Aldi will gain them as their overall price is a lot cheaper. Each country will buy less goods from other nations and try to cutback. The opposite of inflation is deflation this is where the cost of everything decreases and the cost of living, eating and working is cheaper. Nations will buy more from other nations as the supply of thing would be cheaper. Price for goods will decrease and quality products ranging from furniture, food and technology will be cheaper. If a top quality pizza decreases everywhere by a pound everyone will buy the top quality ones as they can afford them. In a deflation if Tesco’s prices dropped and their top quality products were available cheaper then everyone will shop there instead of shopping in cheaper alternatives e.g. Aldi. It would affect Tesco more than Aldi as Aldi will still be the cheaper shop.

Availability/ cost of credit Availability/Cost of credit is the amount of money the business borrowing is allowed and the limit on how much of it in a certain amount of time a business could borrow. A good example is in the crisis of Greece people were only allowed to take and spend a certain amount of money, banks had ques of people waiting, this happened in a recession so people didn’t have a lot of money in the first place anyway and Greece was a poor country anyway as tourism is one of its biggest industries and it was losing tourists everyday so the only way getting back out of a crisis was people putting money into a bank and the bank investing it for short term profit. If this happened in the UK people who did one big shopping every fortnight would struggle and will have to be limited and do several shops in Aldi.

Labour costs Labour costs is the wages paid to the workers, they can either get paid daily, monthly or just per job they do. Business also could have to pay for overtime, payroll and taxes for their workers. If a store has 10 workers and each gets paid £15,000 per year then they need to pay them plus buy more goods to fill shelves so they need to be earning around £300,000 in order for them to make enough money to pay staff and to buy goods. If one Tesco store drops in sales then they can pay their wages from other more busier stores around the world however if Aldi did this they have a lot less stores they might have to sack their staff in order to save money. In a growth Tesco will be taking more money in and could require extra staff, this would cost money but services could be improved and even more sales could be made, on the other side Aldi would lose customers as more people can afford higher quality products , they could sack staff. If there’s no recession or no growth but money is still being made both stores could employ younger staff or apprentices to save money instead of having a full time adult worker.

The government has a responsibility to manage the economy through a range of things these are fiscal and monetary policies. Fiscal relate to the governments revenue and taxes. By introducing the smoking law where you aren’t allowed to smoke inside a public place e.g. a pub or bar, this lead to people not going out with their mates as it stopped them from smoking indoors. Longer trading laws were introduced to get each business to sell more products. Competition laws were introduced where businesses are not allowed to agree on how much something costs it was meant to be introduced to increase competition. Monetary policies were introduced to change the amount of money was available In banks this would encourage them to lend more to businesses. Increasing money in the UK is called quantitative easing, this is where more money gets put out from the banks, into the economy, into businesses and into people. The opposite of this would be restricting borrowing. Monetary policy also restricts spending and raises taxes. Quantitative easing is the bank making money to buy bonds with businesses, this would lead to a fall in interest rates meaning more people and business would borrow money from banks so they can spend more and create jobs which boosts the economy. The 5p charge on bags costs both businesses money as they have to buy the bags and give the 5p to a charity as they have to buy the bags for all of their UK store then they have to spend a lot of money, each bag costs a penny and on each one 4 pennies are being made per bag sold, a penny doesn’t sound like a lot but they both have over 1800 stores combined in the UK and if each sells bags for 5 pence then it all adds up and does cost both companies a lot of money from selling these bags as no money is returned from the bags so whatever they have to spend on them the money will come out from the profit each store gains.

Demand The word demand means the amount of goods or service that people are willingly to pay for it. The need or desire for a good, service, or asset among consumers at a given price. The amount of demand at a given price is determined by supply and the availability of similar or replacements goods and services, among other factors. While demand for some water products is relatively constant regardless of price, most of the time the price has a large influence on the level of demand. Demand for a good or service tends to increase as its price decreases.

Affordability Affordability is whether or not people have the money to buy a product or some might afford it, so businesses need to differ their prices or make an own brand which is a cheaper substitute to the real thing. Tesco’s customers and Aldi’s customers will both be in their shops as they can buy their even if it is their own brands their buying they can afford them. Aldi’s own brands are in the same price margin as Tesco’s own brand just slightly cheaper. If Tesco started to price their own brands at high prices then people will buy the branded products instead same goes to Aldi.

Competition If there’s a high demand for a product other retailers or people could start a new similar cheaper alternative to the product, we know this as there are so many cheaper substitutes to everything cars, every type of food, clothes, accessories and technology. You name it and there is a cheap substitute which tastes near enough the same, performs the same and looks the same. Also there are stores which compete Tesco and Asda both compete and in quality but prices. Supermarkets compete and win every time against markets on fruit and veg as the supermarkets have more buying power and more accessibility to suppliers. However markets only have local sources to buy their goods. The law is that competitors and companies can’t legally decide on a price of a product, the government put this in place so competition could exist, only labelled products e.g. a can of cola has a marked price of 50p, these have to cost 50p a product. Tesco and Aldi both compete with one another.

Availability of substitutes A high demand of cheaper substitutes meaning the high cost products, in a recession the demand for cheap substitutes and in a growth period the demand for low cost products is low. Tesco will benefit from selling more quality products and Aldi will suffer as they sell cheaper substitutes. In a growth period people have more money to spend on more quality products and will buy them for themselves and won’t be that tight on themselves. Aldi is a substitute for Tesco, this means that these shops will compete for prices for the same service or product.



Levels of GDP The GDP in a recession is slowly falling and in a growth period the GDP rises, GDP is the gross domestic product, the total value of goods produced and services provided in a country during one year. If the GDP is low then you could tell it is a recession if it’s high it is a growth period. When the GDP is low then Aldi would benefit and Tesco will suffer. When the GDP is high Tesco will benefit and Aldi would struggle.


Needs and aspirations of consumers

The needs and aspirations of consumers is that we all need to eat and drink in some way or another and some of us will expect to eat better quality of food to others as some have more or less money. So Tesco and Aldi both need to have some higher quality products to succeed and meet customer expectations, Tesco for this has made and kept a Tesco Finest food where they use the highest quality ingredients and best butchers from the local area.

Supply and demand curve changes position regularly and in a recession the demand might fall, meaning it will shift to the left as less demand for it will be there as people wouldn’t want it. In a boom the demand will increase and will shift to the right as more of the product is demanded.

Supply The production, availability, and delivery of goods and services. In a recession the supply may fall as the market demands less and in a growth the supply would increase as more people will be buying.

Supply is the number of products or services ready to be sold to consumers. In a recession the competition of raw materials is low as prices will fall as the people could be needing to sell the raw materials so they need to get rid quick so the prices won’t drop even more. In a growth period the competition will be high as prices would rise, the competition will be high as more people buy the more the price rises.

Labour costs Labour market and wage bills are a huge costs for any company, to an organisation especially if it’s a labour intensive organisation such as a service business. Wages are approx. 70% of a company’s spending costs and does take up a lot of their profit. In a recession Aldi will have to recruit more staff as more people are shopping their but they’ll have to pay labour costs in a recession Tesco will have to fire some staff to save money and in a growth it would be total opposite Tesco will employ in a growth and Aldi would have to cut back on staff.

Logistics Logistics in a supply chain consists of moving raw materials to where they will be made into products. However in a boom the logistics could be cheaper as there could be lots of them left from the recession or for example more farms could be producing more food and more raw materials could be found in the Middle East. Logistics are concerned with organising this supply chain, normally done by a computer to remove human error hence you could now track your parcel. Therefore a farmer in Kenya supplying mangoes to Tesco and Aldi then he could supply a bigger fruit chain in Kenya so the mangoes can be exported to the UK. Then an even bigger fruit trading company like Del Monte could sell them to Tesco and Aldi.

Ability to produce profitably. Business supply in response to demand and will only do so when they can make a profit. Consumers will often buy more if a product is at a cheap price, so the companies like Tesco and Aldi try to get products for as cheap as possible so they could sell more, however this is not always possible saying Heinz beans costs 15p to make and the companies only want to pay 15p for it Heinz could turn round and say no we are not making any money from this so they ask for more money so the companies’ profits increase and Tesco and Aldi’s will decrease slightly.

Availability of raw materials Availability of raw materials, in a growth period more of the materials will be scarce and the price would be expensive as there is more of the material. In a recession the price would decrease as the less people will be wanting to buy any so the supplier will buy less of it as he expects to sell less during that period of time. The less supply of the raw material the more the price is and the more there is the lower the price. In a recession the availability of materials is high and less in a growth. Tesco and Aldi buy power and fruit and veg which need transporting, transporting costs varies as so does the cost of power. As the economy is growing more raw materials would be used up.

Government support Many products and industries receive government support, one local example is farming, and the farmer is supported by the EU. The effect of this it will cost less for the farm to harvest, production and packaging costs which will increase the supply. In a recession subsides could be provided to support selected businesses to help the business earn money and employ more people. If a farmer is saving money on his production of crops he could grow more which is increasing the supply of his products, which then could lead to the price to lower and businesses would buy more. For Tesco and Aldi this is a big thing for them as the cost of milk needs to be lowered from the farmer or increased on the shelfs, this could harm both businesses as 96/100 people in the UK buy milk weekly.

M2 Compare the challenges to the businesses in two economic environments.

In a recession Tesco will have a difficult time finding customers as people are earning less money and unemployment is high, as Tesco sells the more quality products compared to Aldi the products will cost more in Tesco than they would in Aldi. So if the sales aren’t going up then the profit margin isn’t either meaning Tesco will have to sack some staff in order for them to same on Labour costs. On the other side in Aldi the cycle would be opposite as they offer cheaper alternatives to top quality products they will increase in sales, the stores would get busier meaning more staff could be employed in order to maintain good quality customer service throughout the stores. The biggest challenge for Tesco is finding customers and an easier task for Aldi is to find a staff member for a stores as unemployment is high it would be easy to employ someone.

In a growth period of time this would mean people will be earning more money and will be able to afford more expensive food and expenses. Tesco will benefit the most in a growth period as more people will be shopping with them we know this as in the last growth period every £7 spent in the UK Tesco will take £1 in. Tesco will face more people in stores and sales increasing quickly so they would have to employ a member of staff into the busier stores or open up more stores like they did in 2010 they opened 8 stores during the slight growth period. This would mean they would have to pay labour costs to them and as their profits go up the profits would be spent on some staff. Aldi will lose a lot of their customers and will in some stores be losing money and will end up cutting back on staff. The biggest challenge for Tesco in a growth is to find a staff for the stores and it will be more difficult in a growth period as unemployment is low. In a growth period in 2004 Tesco opened 6 stores in the UK and Aldi opened 3 but lost 11 as people had money to buy and shop at Tesco. In the 2008 recession Tesco shutdown 13 stores and lost a total of £22 billion in the whole recession period and made 324 staff members redundant but still had a 2% growth and Aldi on the other side opened more stores than Tesco shut and bought 6 of Tesco’s shutdown stores.

Supply and demand curves

On a supply and demand graph you can identify what the price per unit is. There is a line for the supply and one for the demand the point in which they meet is the equilibrium. The the lines meet in the middle its an even graph. If a laptop for example was £300 and no people bought it the price would have to lowered to £250 and when peole start to buy it the demand will increase. The price can’t be too low or else no profit would be made but it can’t be too high or else no one would buy it. So the businesses have to be reasonable with their prices. If Tesco will price their top quality products for expensive prices everyone would not buyt them and the products could go off. If the price is too low they would be making less money per item sold. So they price has to be varied in the middle so the demand will still be there and the profit in with it.

In a recession the demand curve would drop and rise in a growth period, in a recession the supply curve would be lower as less people are buying in bulk or doing big shopping per fortnight and the supply curve in a growth would rise with the demand curve.


Price sensitivity

Price sensitivity is how sensetive the customers at stores like tesco and aldi, if a product has gone up in price then customers could have a different view on things and might not buy the product. The product prices varies from product to product for example if some Krave cereals are £2 per small box and a box 3 times bigger of cornflakes is there for £2.50 then the customer has different views on the product. Price sensetivity is mostly measured using the price elasticity of demand.

Influence of branding on price sensitivity.

If a product like apple is well recognised worldwide then people will buy the brand as its well-known it might not be a good product but people will recognise it. Price will not fear them from buying these products these range from food, technology and clothes. If a new apple product come out people will not be price sensitive about it and just buy it, this happens when people are really aware of these brands. If a family buys only Heinz beans each week the price will not determinate them buying it and will continue to buy them, this is because they get influenced by other or the past and will only buy these and never change.

Elasticity of demand

In business, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. Demand elasticity is important because it helps firms model the potential change in demand due to changes in price of the good, the effect of changes in prices of other goods and many other important market factors.

D2 evaluate the response of Tesco and Aldi to the economic environment.

In 1990-1992 there was a recession and the money earned was slowing down and Tesco suffered and lost a majority of their customers, a few years later Tesco introduced the club card in 1995 and a slow economic growth happened and 28% of customers with a club card bought more goods than customers without a club card and as that Sainsbury’s sales dropped by 16% meaning Tesco used the slow growth to their advantage and by giving their loyal customers a reward. A Tesco club card is a card which gives you points 1 point equals 1p, it doesn’t sound like a lot but it all adds up and the customers would receive coupons for branded products e.g. 20p off Robinsons squash. The company would still make money on each squash sold just less of it. Tesco’s club card system points work as if you reach to 150 points you can receive vouchers which can be switched to more vouchers to times your club card points by four for your shopping which then alternatively they can be used as 20p off each litre of fuel you buy which is another way Tesco would draw customers in in a recession when Tesco are struggling as they have an advantage over Aldi as they don’t have petrol stations in the UK. ‘It’s our way of giving you something back for doing your shopping with us’ reference: Tesco website However in a recession not all customers stayed loyal and went to cheaper alternative shops as money was tight. Tesco’s customers used the club card and free parking to their advantage and ditched the shop and moved to shops like Aldi, this meant profits would decrease. Some staff would need to be fired as the stores aren’t as busy anymore and in the worst cases stores had to be shut down around the world. ‘Tesco to shut 43 stores around the country including head office after another sales slump’ This is a quote from a newspaper heading published in January. To really gain customers in a recession in 1992 Tesco last option was to have the most offers and promotions in the entire country, the profit margin shortened but the customers did arrive and spend the money it their stores but their competitors like Aldi were ahead of the game.

Aldi and Lidl are both a shop which sell alternative products at cheaper prices, this year Tesco, Asda, M and S and Waitrose the four biggest supermarket chains in Britain have faced a loss in sale in the 1st twelve weeks of this year whilst Aldi and Lidl rocket up in sales. From the 2007 to 2009 recessions people carried on and got stuck to buying at Aldi and still to this day keep buying from there. As Tesco’s sales dropped in the recent recession Aldi’s sales went up by loads. In the recession Aldi sat back and let the customers flood in and just employ more staff and whilst Tesco shutdown Aldi stores opened up nationwide and took most of Tesco’s customers. At Aldi stores they stopped wasting cardboard boxes in which products came in and in each stores there is a box at the front with the boxes which people used these instead of plastic bags, this attracted a lot of customers which are eco-friendly, this was introduced in a growth period where you would see Aldi struggle in the economy but sales increased by 0.83% and they reckon most of the percentage would be because of that.

In a growth period Tesco would be taking in most of the customers and Aldi would be struggling behind them, the customers which still shopped at Aldi were given a chance to receive a coupon with various discounts if they recommend the store to a friend although this system was up for only 2 months in 1996 the scheme bought in more customers, some returned some didn’t. This was a hit and miss for Aldi. They did try some other schemes like in open a few ‘trial’ petrol stations to try lure customers in although this didn’t either work now in 2015 3 petrol stations were opened up around car parks offering the fuel for 52 cent per litre which is the cheapest the fuel has been in the continent in the past 3 decades. If this works for Aldi then we could see more petrol stations owned by Aldi offering fuel prices which are incredibly low, which could be a big turnaround in the economy for Aldi.

What can each store do in each economic environment?

In the future Tesco in a recession where they are struggling in they could give their staff more benefits so they can serve people better and quicker and overall improve their care for customers by this they could be mentioned in the media for having excellent customer care and people could go shop there to see if it’s correct. In order for them to do this Tesco could give their staff a fuel card to save money on transport to and from work, give them a few shopping vouchers as if they already spend money in store they receive a discount anyway but if you give them a £150 voucher per year in store to be spent on food the staff could try a bit more in the workplace e.g. instead of letting customers pack their own bags the person on the till can ask do they need help packing, this would make the customer feel cared for even if they reject the offer. In a recession Tesco could invest more into advertising to try and gain customers as they equal sales. They could show their main offers in an advert, if a real bargain is in store they could advertise it and if a customer will go out and buy it they would be more likely to buy something on the way to the till. Although it won’t seem like nothing but the customers could spot more bargains on the way and it could be a start to regularly shopping there. However in a growth period Tesco could open up more Tesco express and Tesco extra stores in the future as the population is expanding. Tesco extra is a bigger version of Tesco and offers the same prices but more people buy in bulk there. Tesco express would be a shop where you would see a co-op, it’s more of a local store for smaller towns or villages but they do appear in London. The Tesco extra shops are normally beside a motorway for passers-by’s, the most significant store is the Tesco extra on the way back from the M25, it works as commuters and people on the way back home stop by and the store can handle all these people as it’s a massive store with massive profits.

A new political issue which could be put in place could be a tax on fizzy carbonated drinks which are bad for kids and in a lot of cases sends people to the dentists or doctors and costs money to do, if the government put a tax on these then less people will buy them and we know this as this happened in Mexico and reduced the sales of theses sugary drinks by 6% and reduced the cost being spent on dentists and doctors. Tesco will be ready for this and have a lot of storage space in the store and could replace the drinks with flavoured water, squash and juices and still put some unhealthy drink on the shelfs.

As the population is rising and the UK aging population is rising even more Tesco will and do now in most stores provide mobility scooters so it will suit some customers’ needs and will enable them to shop by themselves and not their carer 1.6% of Tesco’s customers have a disability need ( 2013 ) if Tesco did this in every store it could attract some customers even in a recession as Aldi do no supply these in their stores

P6 Tariff policy A tariff policy is where exports and imports have to be taxed, in other words know as international trade tariff or sometimes can be put in a group of items e.g. electrical tariff. Tesco and Aldi both import fruit and Veg for sure and some branded products also get imported into the country where the store is e.g. Red Bull is made in Austria but they are sold on the shelves in both these stores. Either Tesco in the UK pay for it to be imported here and have to pay a tariff or the red bull company transport it by themselves into the UK and store in a warehouse, either way it would still have to have a tariff on it. The way this effects the business is that if they have to pay for products to get imported they have to pay for it and the tariff on top of it add onto it meaning the price of the product will have to be raised or the store might not order it, then if the red bull import it themselves they can’t sell them at the usual price as each can had to be payed for it to be transported it and a tariff on top of it is charged as well meaning it would go up I price. For both of these stores tariff tax can affect them a lot as the price of goods have to be raised or the profit margin would be lowered.

Wage legislation Wage legislation which is wages and overtime. The minimum wage for a person aged 21 or over is £6.70, £3.87 for a person aged 16-18, £5.30 for people aged 18-21 and £3.30 for people on an apprentices aged 16-18 or in their first year of it when they are 19. These wages are at the minimum of their boundary and can go up to unlimited, no person in the UK should be getting paid less than this. Tesco and Aldi both need to pay their staff wages no matter how high on the hierarchy they are some might only get £9000 and some up to millions depending where about you are. Even if the stores aren’t busy they still by law have to pay their staff the money. The money they pay comes out their profits and budget for the store so the store has to be reasonable with the wages so the employees are happy but need money to fill the shelves as well. This can influence the store as most of the money they earn is used for staff’s wages. If the store pays them too much they can’t buy more goods to sell on meaning they can’t turn the money over.

Social Population changes every second, and is a big factor that depends how many people are buying, the more people there are on earth then the more food is needed to feed everyone and more people go shopping, however if there are less people on the planet with a low population density around a store less customers will arrive at the store compared to a high population density area. If Tesco or Aldi build a store near an area where no people live then they rely on passers-by’s and commuters to shop there, this could lead the store to shut down as no shoppers would go there. If the population was high then more people would come in and shop often and the store could need more staff in it, and if less customers come then less staff would be needed. This can influence a store a lot as they would have to spend their money for staff costs.

Another social issue is the trend of shopping and products if the population started eating this new product which does all this goodness to you and the people are queuing up to buy it, the store has to have a section of the shelves to store the products and enough for the demand which is for the product. The stores will have to make enough room for it meaning space for other products might not be there and the other goods might go off meaning the stores lose a load of money. The new product which the population is going crazy about might go out of fashion quickly leaving the stores with millions of £’s worth of it and could all go to waste. This can also be done with promoting it with a celebrity this is called endorsement and people could want to buy it as their idol eats or uses it.


Globalisation Global interactions is what is sounds like interacting with others from around the globe this is made from the new technology available these days like phones, computers and the internet as a whole. It is the way countries, businesses and people interact with each other. Tesco might be able to interact with a banana farmer who supplies his nation with class one bananas and they can do this with the power they have as Aldi might only be able to get in touch with a class 2 banana farmer from elsewhere but it’s the way they can get in touch with him.


Levels of interdependencies There are 3 levels of interdependencies pooled, sequential and reciprocal interdependencies. Pooled interdependency is where each department or a business performs completely separate functions, the different departments don’t interact and don’t rely on them either. Sequential interdependency is where one unit in the overall process needs to be done in order for them to do the next task. Reciprocal interdependency is where one department makes an output in order for the next department to make another output, these departments interact with each other for the tasks to be done.



Ownership of business Sole trader is a business owned by one individual but can employ workers most common ones are plumbers, hairdressers and photographers. The advantage is that they keep all the money earned and easy to set up but the disadvantages would be long hours, unlimited liability and high responsibility. The next is a partnership which is owned by two or more people e.g. a dentist, agencies like housing and a pub. The advantages of this is one person could work and the other could go on holiday and still earn the business money and the worker makes money for himself, the disadvantage would be that if the people disagree on something they could end the business over something unnecessary. Limited companies have their own legal identity, the ownership is divided into shares which people buy into and become a shareholder. The big advantage is it has limited liability you can only lose the money you put in and nothing else. The last one is franchising where most people buy a whole business as a whole and no need to start from scratch, McDonalds is a big franchise and all stores feedback to the franchisor.

Government regulation of businesses Governments like global businesses as they bring big employment and pay taxes. However it is difficult to manage them because they can easily be moved and switch locations. For his reason the government will stay close to businesses like amazon and costa coffee.





Income distribution A - E Demographics Labour & Social mobility Lifestyle changes Attitudes to work and leisure Education Fashion and Fads Health & Welfare Living conditions Taxation Enhancing the workforce’s skills Environmental protection legislation Consumer protection Government’s attitude and financial support Competition regulation Provide infrastructure Employment/company law European law Health and Safety Taxation both corporate and consumer Consumer protection – contract law International trade barriers Competition Law - regulation

This is a management tool for business to look at external business environments for the purpose of my btec coursework I have simplified PEST and PESTLE analysis to focus on political, social and legal factors.

With the social factor, a business can analyse the socio-economic environment of its market via elements like customer demographics, cultural limitations, lifestyle attitude, and education. With these, a business can understand how consumer needs are shaped and what brings them to the market for a purchase.

Here government regulations and legal factors are assessed in terms of their ability to affect the business environment and trade markets. The main issues addressed in this section include political stability, tax guidelines, trade regulations, safety regulations, and employment laws.

These factors have both external and internal sides. There are certain laws that affect the business environment in a certain country while there are certain policies that companies maintain for themselves. Legal analysis takes into account both of these angles and then charts out the strategies in light of these legislations. For example, consumer laws, safety standards, labour laws etc.

M3 In M3 I will be talking about how each business adapted to different environmental.

Lifestyle changes differ from time to time as people are time conscious and have no time to eat so Tesco and Aldi both have to implement a shelf with these quick and easy microwave food in each store but then people are being healthy so they might have to segment their quick food into healthy and not so healthy, this would be easily done by Tesco than Aldi as they are a bigger store and space. Tesco have a bigger access into making healthier food as they can have experiment with them and take slight risks as Aldi cant. Also this might not be possible for Aldi’s smaller stores and Tesco’s express stores.

Environmental protection legislation has recently been put in action by the government to every business which has over 200 workers to start charging 5 pence for every carrier bag. As Tesco and Aldi both had these bags and they were made in bulk and stored in the storage room, each till needed a barcode for theses bags until the new ones were delivered with the barcode on them, this allowed them to scan the bags straight away. Tesco used they bags up quicker than Aldi, the bags cot both business money to produce and they money is put towards charities from the 5p bags, this means the stores have to pay for these bags but don’t get anything in return. Staff needed some small training to ask and inform customers they need to charge for bags and they need to ask for the bags.

Employment and company law, there was no minimum wage a few years back and then the government introduced it so worker got paid fairly. This meant if workers got underpaid at Tesco or Aldi their wages would have to by law at least go up to the minimum wage as that’s what the law was. Aldi would have to pay their works more money as their workers at the time on average in each store would be £6.59 and the minimum wage now is £ 6.70 so if this was back then Aldi would have to pay their staff more money by the law. Tesco average was more than Aldi’s and they were paying their staff slightly more than minimum wage meaning they could have payed them less at the time but decide to keep it the same and make it fair. Both business adapted to this Tesco quicker than Aldi.

I have discussed current political, legal and social factors and Tesco adapted to theses in a better way than Aldi as they have more stock and space and the examples show this and overall Tesco is a more powerful store.