Unit 1 P5

Topics: Economics, Inflation, Economy Pages: 2 (960 words) Published: May 1, 2014
P5. Describe the influence of two contrasting economic environments on business activities within a selected organisation. There are two very important economic environments that effect Tesco, economic growth and the recession. An economic growth will be good for Tesco as business will be booming, more goods are being produced and profits are increasing. When this happens Tesco becomes a very high profit business and invest in new products or stores which can lead to Tesco being more profitable business wise. Profits are increased during economic growth as customers want more products; they have the money to spend and choose to spend it in Tesco’s. This leads to a much higher product demand, which affects the primary sector – farmers. Farmers will need more animals and more farm hands effectively as they are producing for a large company and if the demands aren’t met they will lose business. For example during an economic boom people tend to buy luxuries as they have the spare money to spend, so a customer instead of buying a ready meal might decide they will have a steak instead and there could be a large amount of Tesco’s customers with the same thought process, this will in turn mean that Tesco will order a large amount of steak’s from the farmers and if they can’t supply this they will lose Tesco’s business and also Tesco won’t be able to meet its customer demands and could also lose business. People will also stop buying Tesco value products such as cereal, canned goods and start buying branded names as they can afford it and we are a brand loving country which means that Tesco generate more money as people are buying the much more expensive goods. In 2011/2012 Tesco had a reasonable growth in profit even in a challenging economic environment, Tesco’s sales increased by 7.4% to £72 billion. Tesco however did not make the profit that they would have liked they were running their business in a very challengeable time during 2011/2012 as the recession is...
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