Benjamin Lee

Assignment 1
Business Environment

Student: Benjamin Lee

Tutor: Jewel Cole

Benjamin Lee

[LO1]

[1.1]
Identify the purposes of different types of organisation. Compare Tesco to other business
sectors.
The purpose of an organisation differs depending on its organisational structure, as an example, a not-forprofit organisation would have a completely different purpose to a sole trader.
Sole trader:
A sole trading business is a legal business structure where one person has complete control over how
the business operates; sole trading businesses are in many ways very similar to partnerships, the
major difference being a sole trading business has a single owner whereas partnerships have at least
two .The major benefits of being a sole trader over other business organisational structures, in
particular, partnerships includes: retaining 100% of the companys earnings, as opposed to a
partnership where the earnings are shared between the many business owners; having the freedom
to run the business as you see fit, which is in contrast to both a limited liability company where
investors have the ability to influence how the business operates and partnerships, where each of the
business owners has an equal say in how the business operates. Additionally, sole trading businesses
are easier to set up, only requiring the sole entrepreneur to register with HMRC (HM Revenue &
Customs) (Gov.uk and Entrepreneur, 2005), this is down to the fact that they only require a single
person and very little capital before they become operational, in contract to a partnership, which
requires the consent of several different people before the business becomes operational (Carter).
Due to the lax requirements and ease of running the business, sole trading businesses are favoured
by smaller, specialist businesses with local ties, where the risk is significantly reduced; as of 2014, the
vast majority of smaller businesses in the UK are sole traders (Summers, 2013) and sole traders are
credited for being the driving force the UKs economic growth (Dann, 2014). Sole traders may start of
small but they have the potential to become huge multinational businesses, here are some of the
more successful businesses which started out as sole trading businesses: Kurt Geiger (clothing), EBay
(internet entrepreneur), Kinkos (printing) and Annies Home-grown (food) (Gaebler.com).
Partnerships (General and Limited Liability):
A general partnership is a legal business structure where two or more people own the business and
have complete control over how the it operates; when the business is first initiated all partners agree,
either informally or formally (with a contract), the extent of the liabilities and how the companys
earnings will be distributed between the partners. A general partnership has many similarities to a
sole trading business; the major difference is that a partnership has multiple partners at the helm,
instead of only a single business owner (Investopedia). The advantages of a partnership over other
business structures, in particular, sole trading businesses include: shared liability, with a partnership,
the risks and liabilities are shared between each of the business owners, whereas, with a sole a
trading business the liability falls squarely on the single business owner. With a partnership you can
work to your partners strengths and run the company in a way in which complements every partners
strengths and weaknesses, whereas with a sole trading business you dont have that luxury as its just
a single entrepreneur. Partnerships have very little government regulation and are relatively easy to
set up, only requiring the consenting business owners to register with HMRC (HM Revenue &
Customs), whereas a larger company, a private limited company for example, has a multitude of
requirements before it can be set up, including stakeholders, at least one director, and an address for
the company (Gov.co.uk, 2015). General partnerships are free from investors, which allow the
company to be run however the business owners see fit; this is one of the major benefits over
business structures where shareholders have a presence as they will often use their influence to
impact how the business operates (Referenceforbusiness.com).
Limited liability partnerships share many similarities with a general partnership but come with many
of their own advantages, with the most prominent advantage being; limited liability, with a limited
liability partnership, partners are only liable to the extent of their investment, unlike general
partnerships where partners, between them, have unlimited liability ((Residual-rewards.com). An
additional benefit of limited liability partnerships is that they attract outside investment which could
potentially bring in additional capital to the business helping it expand, a luxury general partnerships
do not have. Limited liability partnerships are not a popular business structure, with many smaller
businesses preferring either a general partnership or to be a sole trading business. Due to the lax
requirements before they can be set up, general partnerships are favoured by smaller, specialist
businesses, some of the more successful businesses which started out as partnerships include: Ben
and Jerrys, McDonalds (restaurants), Microsoft (software), Apple, Hewlett Packard (hardware), Google
(internet entrepreneur) and Warner Brothers (Film) (Ralli Partnership Law, 2013)

Benjamin Lee

Cooperative:
A cooperative is a legal business structure which differs significantly to most other legal business
structures as it is owned by its members and not shareholders; because of this, the members of a
cooperative are prioritized above company earnings.
A cooperative is similar to a charity in that they are both run for a common good, a cooperative is run
to benefit its members whereas a charity is run to benefit a specific charitable cause. Stakeholders in
regards to a cooperative include: customers, employees, shareholders/investors and suppliers
(BusinessDictionary.com)
The advantages of being a cooperative are fairly numerous and include includes: giving all members
an equal say on how the business operates; this democratic style of running the business is achieved
by using a voting system which gives every member (indifferent to the position of said member) a
single vote which they can use to influence certain business decisions, the voting rights of
cooperative members extends to the board of directors, meaning, the board of directors will be
democratically elected within a cooperative; this is distinctly different from a private or public limited
company where major decisions are decided by shareholders or the business owners. Furthermore,
cooperatives believe that any single member will not be held responsible for any debts incurred by
the company, regardless of how much said member has invested into the company (unless debt is
incurred by a stupid decision by a specific member), which is very different from a sole trading
business where the single business owner is solely responsible for any debts incurred by the business
or a partnership where all partners are liable up to the formally agreed amounts (Webber). Another
advantage of cooperatives is the longevity of the business model, cooperatives are protected from
death insolvency, which means if the majority of members either die or leave the cooperative, the
cooperative will continue to operate, and the only way for a cooperative to be formally liquidated is if
all members decided to leave simultaneously. As mentioned previously, the most attractive feature
cooperatives offer is that they are owned by its members which allows cooperatives to be run free
from outside influence; as cooperatives are owned by their members it allows the earnings produced
by the cooperative to be reinvested back into the business to improve the experiences of all its
members (Johnston & Sessoms, 2015), which is distinctly different from other business structures, like
for example, partnerships where the partners split the earnings as per the agreement or public limited
companies where investors take their share of the earnings up to the extent of their investment.
Cooperatives are preferred by both big and small businesses, some examples of cooperatives include:
The Co-operative Group (retail), Nationwide Building Society (banking), Royal London Mutual
Insurance Society (insurance) and Britannia Building Society (credit union) (News, 2014)
Public limited company (PLC):
A public limited company (plc) is a legal business structure which is owned by each of its
shareholders, due to this, public limited companies allow the selling of shares to the public via the
global stock exchanges. With a public limited company, youre only liable to the extent of your
investment (limited liability) (BusinessDictionary.com). They are similar to private limited companies
(ltd), with the major differences being how the legal structures deal with stock exchanges, the number
of investors and the requirements to invest (Differencebetween.net). Advantages of a public limited
company include: limited liability, due to how a public limited company operates, which is to sell
shares to the public, shareholders have limited liability, which is to say they are only liable to the
extent of their investment. Another benefit to selling shares publically, is that public limited
companies have the ability to generate large sums of extra capital, coupled with the fact that public
limited companies have no limit on the amount of investors allowing public limited companies to
generate huge amounts of extra for relatively little work, which is distinctly different to private limited
companies which have a limit on the amount of investors and lack the ability to sell shares publically
via the worlds stock exchanges. Another benefit to public limited companies is how the company is
perceived in the eyes of the law; public limited companies are a separate legal entity, which is to say
if the business owner/president/priority shareholder was to die or retire, the business would still be
operational, a public limited company can only cease to exist if the company is formally liquidated,
which contrasts completely with a sole trading business where the owner of the business is seen as
the business, and if he/she was to die or retire, so would the business. Public limited companies can
take advantage of economies of scale, public limited companies avoid the drawbacks of smaller
business structures such as sole trading businesses and partnerships in regards to economies of scale
(lower cost of production as more products are produced) as public limited companies have the
manpower and the necessary capital to take advantage of economies of scale (TomorrowStudio.co.uk
& Companylawclub.co.uk). Additional benefits include the ease of setting up the business, with the

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passing of the Companies Act of 2006 (the act became law in 2009) (Legislation.gov.uk, 2015 &
Icaew.com), initiating a public limited company became significantly easier. Lastly, its easier for
public limited companies to borrow capital from banks; this is because a public limited company lacks
the required permission/guarantee from the directors that other business structures require
(Finweb.com). Some of the UKs biggest public limited companies include: HSBC Holdings (banking),
Vodafone (telecommunications) and BP (oil) (Forbes, 2015).

Private limited company (LTD):

A private limited company (LTD) is legal business which is owned by its business owners and
shareholders alike (BusinessDictionary.com), however, unlike a public limited company (PLC), there
are restrictions imposed on the buying and selling of stock, these restrictions include the inability for
shareholders to sell their stock without first gaining permission from the business owners, secondly,
stock is not allowed to be sold to random civilians and will be prevented from being sold via the
worlds stock exchanges, lastly, unlike public limited companies which have no restrictions on the
potential amount of shareholders, private limited companies are limited to 50
(Differencebetween.net). The major advantages of a private limited company include: limited liability,
due to the nature of the legal structure and much like a public limited company, investors and
business owners are only liable to the extent of their investment. The continuity of a private limited
company is almost in perpetuity, meaning if the owner of the business dies whilst in office, the
company does not die with him/her, instead one of several outcomes could occur, such as having
close friends or family buy the recently deceased owners shares or an agreement in advance to
ascertain whom the shares will fall to (typically close friends or family of the deceased). The selling of
shares, selling shares is advantageous for private limited companies, however, unlike public limited
companies, which have no restrictions, private limited companies are limited to 50 investors at any
given time; the selling of shares allows for extra capital to be raised in a relatively short amount of
time. Lastly, a private limited is a stable form of business; typically, the business owner cannot be
ousted for a one off poor performance, as opposed to a public limited company where the investors
have the power to potentially remove the original business owner if the investors deem it necessary.
Additionally, private limited come with many tax incentives, private limited companies pay
corporation tax, as of 1st April 2015, cooperation tax is 20% (Gov.uk) and private limited companies
are also exempt from paying income tax, something which smaller business structures such as
partnerships and sole traders are subject to (Adrian, 2010). Some of the biggest private limited
companies in the UK include: Grosvenor (property development), Miller Group (property development)
and Gladedale (property development) (Telegraph.co.uk, 2008).
Charity and not-for-profit organisations:
Charity organisations and not-for-profit organisations are a legal business structure where the sole
purpose of the business is to benefit a specific charitable cause; earnings are used to keep the
business running and if necessary, pay the salaries of some employees (dependent on the charities
constitution) (Hope, 2013), with the majority of earnings going to said charitable cause (Investopedia)
Some of the benefits of being a not-for-profit/charitable business include: taxation, not-for-profit
organisations, provided they are registered with HMRC (HM Revenue & Customs) receive varying
degrees of tax relief with taxes such as stamp duty, gift aid tax relief and corporation tax
(Managementhelp.org). An additional benefit of being a not-for-profit is how much easier it is raise
capital via outside means; normally capital is raised by donations and grants from outside sources
which include grants from the local government, grants from non governmental institutions. The last
major benefit of being a not-for-profit is social recognition, due to the nature of not-for-profit
organisations (working to further a social cause) charities are well known for their charity work which
can greatly assist in raising funds (Knowhownonprofit.org, 2015). Some of the biggest (based on total
income) charities in the UK include: Lloyds Registration Foundation (public education), The British
Council (opportunities creator), The Arts Council (improving artistic skills) and Cancer Research UK
(cancer research) (Rogers, 2012).
Note
There exist three business sectors: primary, secondary and tertiary. The primary sector consists of
businesses which gather or extract raw materials and natural resources, the secondary sector consists
of businesses which take the natural resources and raw materials and then manufacture products for
consumer consumption and the tertiary sector is the retail and services sector which sells the
products manufactured by the secondary sector to consumers (Investopedia). Tesco is retail business

Benjamin Lee

which sells products and services to consumers based on consumer demand, meaning Tesco belongs
to the tertiary sector; Tesco is also a public limited company (PLC), meaning Tescos shares are
publically traded via the worlds stock exchanges, selling shares is advantageous for any company as
it allows a company to bring in shareholders (people whom the company is funded by) and extra
capital. As Tesco is a public limited company (PLC), the major overarching goal is to continually
expand the earnings of shareholders (shareholders within a public limited are the owners of the
business). Tescos mission statement is Our business was built with a simple mission to be the
champion for customers, helping them to enjoy a better quality of life and an easier way of living. This
hasnt changed. Customers want great products at great value which they can buy easily and its our
job to deliver this in the right way for them (Tesco PLC). Kelloggs differentiates itself from Tesco as
Kelloggs is a business which is instead situated in the secondary sector, this means Kelloggs
purchases raw materials (corn, wheat, rice, oats, potatoes, sugar beets and cane, cocoa, palm oil,
fruits and honey.) (Cheeseman, 2014) directly from the primary sector and uses said raw materials to
manufacture breakfast cereals which are then sold to tertiary sector businesses. Kelloggs is a public
limited company (PLC) meaning Kelloggs shares are publically traded via the worlds stock
exchanges, selling shares is advantageous for any company as it allows a company to bring in
shareholders (people whom the company is funded by) and extra capital. The major overarching goal
of any public limited company (PLC) is to continually expand the earnings of shareholders
(shareholders within a public limited are the owners of the business). Kelloggs mission statement is
By being mindful and committed to these ideals, we uphold our founders dedication to people and
their well-being. And we promote an environment where we can push beyond boundaries and across
borders to create foods and brands that help to fuel the best in everyone everywhere
(Kelloggcompany.com).
Benjamin Lee
Tesco has several long term goals outside of increasing the earnings for its shareholders, of particular
importance and partly due to the fact that Tesco is the largest retailer in the UK, is the impact Tesco
has on the environment, for example: Tesco has an environmental goal which is to decrease the
impact Tesco has on the environment, Tesco intends to reduce its carbon footprint by 30% by 2020
and intends to achieve this by working closely with its suppliers, additionally Tesco has several
workshops located around the United Kingdom where Tesco can educate its suppliers by informing
them of their plans to reduce carbon emissions (Tesco PLC), as an example of the commitment of
Tesco, Tesco opened its first carbon free store in Ramsey in 2010, which cost Tesco significantly more
when compared to a standard store (Finch, 2010). Another goal of Tesco is to significantly reduce the
amount of food which is wasted by the company; this is because food waste costs Tesco greatly each
year, Tesco intends to achieve this by ordering less surplus food, giving leftover food to charities (via
the food donation programs which Tesco has initiated) and turn excess food into animal feed; the
overarching objective of Tescos food waste goal is to lessen the impact that food waste has on the
environment and Tescos earnings, additionally, the goal of Tescos food waste policy is to also assist
charitable organisations by giving charities the excess food (Tesco PLC). Much like Tesco, Kelloggs
also has a long term goal for its company outside of increasing earnings for its shareholders; Kelloggs
2020 sustainability plan, which involves purchasing all corn, wheat, rice, oats, potatoes, sugar beets
and cane, cocoa, palm oil, fruits and honey from reputable certified sources, Kelloggs intends to
achieve this by purchasing only from Kelloggs certified organisations, organisations which must be
environmentally appropriate, socially beneficial and economically viable; the overarching aim of the
sustainability plan is to make agriculture more sustainable, doing this will benefit both Kelloggs and
the workers in the primary sector (Kelloggs.co.uk). Both Tesco and Kelloggs have a series of main
objectives which are numerous and varied; objectives are different from goals in that objectives are
goals which are realistically achievable in a shorter space of time, Tescos objectives include: meeting
the needs of its ever changing customer base, improving relations with all of its suppliers, assisting
the UK government on policies which ascertain to the food industry and improving the skills and
expertise of its work force through a series of varied training programs (Tesco.com), whereas the main
objectives of Kelloggs include educating the populace about a balanced diet and promoting healthy
eating, sustainable growth with reductions in the environmental footprint and using more recyclable
packaging with Kelloggs products (see sustainability goal 2020) expand into more regions by
improving product innovation and improving brand recognition and lastly, improve the working
environment for employees by improving the levels of health and safety at Kelloggs to make sure
suppliers offer the same levels of protection that Kelloggs does to its own employees
(Sites.cdnis.edu.hk)
Note

Benjamin Lee

[1.2]
Describe the extent to which Tescos meets the objectives of its different stakeholders
Different stakeholders have different expectations and longer term goals, these stake holders and their
expectations include:
Customers Tescos customers expect Tescos employees to be knowledgeable about the products that
theyre selling, customers expect a quick, friendly and honest service. Customers also expect there to be a
wide range of products with a wide range of prices. Tescos interacts with customers face to face so they
can discuss any issues they may have, these meetings are called customer question times, additionally,
Tescos uses an anonymous customer feedback forum, the feedback from customers, either from the CQT
or the anonymous customer feedback form is used to improve customers shopping experiences with
Tescos.
Employees Tescos employees expect equal treatment and fair terms and conditions, the ability to
advance through the company and to work in a safe and secure environment. Tescos regularly conducts an
anonymous viewpoint survey to gather the opinions of its workforce, this could include anything from job
security to pay and benefits to support during hard times.
Suppliers Tescos suppliers expect to have the ability to gain a long term relationship with Tescos, to be
paid on time and to be treated with respect regardless of where they work in the supply chain, all Tescos
supplies take part in a supplier viewpoint where any of Tescos supplies can bring up any concerns that
they have with Tescos.
Government The government expects that Tescos is compliant with all government legalities and
regulations, continuous job opportunities for the public with taxes paid in on time, ethical trading
standards, and fair treatment for all. Tescos will regularly meet with governmental organisations so they
can discuss issues they government may have and Tescos keeps up to date with all relevant laws and
legislation.
Note
[1.3]
Explain the responsibilities of an organisation such as Tescos and strategies they have to meet them
What are the responsibilities of Tescos and similar organisations?
Legal responsibilities Tescos legal responsibilities are to abide by the law of the land because all legal
responsibilities are dictated to Tescos by the European Union (for example, the Labour Law), the United
Kingdom government (for example, the Bribery Act of 2010/2011), and the United Nations (for example,
the Global Compact Principle 10) other laws and legislation include:
The National minimum wage the national minimum wage was introduced into the United Kingdom in
1998 with the Nation Minimum Wage Act of 1998, the act ensures all workers are entitled to a minimum
wage regardless of the work they are doing.
Pensions Introduced with the Pensions Act of 2015 is the introduction of automatic enrolment, this means
that all employers must automatically enrol employees if they meet the set criteria, the criteria includes
being over the age of 22 and earning more than 10,000.
Discrimination in the workplace Discrimination in the workplace is prevented by The Equality Act of 2010
which merged all the previous anti discrimination acts into one single piece of legislation. It was introduced
into the United Kingdom to make sure all employees, regardless of job role, gender, sexuality or race are to
be treated equally within the workplace and that the workplace remains harassment free.
Contracts of employment With the Employment Rights Act of 1996 all employers are obliged to offer
current employees whom are looking to extend their contract with their employer and potential employees
to a contract with guaranteed hours.
Health and Safety The Health and Safety at Work Act of 1974 provides all employees a safe place to work,
ensures all potentially dangerous equipment and materials are correctly used and safely stored, necessary
safety equipment, provide a written safety assessment and to provide proper training and supervision and
make sure staff are aware of instructions provided by the equipment manufactures.

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Consumer Protection Consumers in the United Kingdom are protected by the Sales of Goods Act 1979,
this act gives consumers several rights, these include have the right to get what you pay for, the right to
have any fault repaired free of charge or offered a full refund and the right to get what you pay for.
Environmental laws The environment is protected by laws and regulations that organisations have to
adhere to, these regulations cover: the packaging companies use, how and what the company is recycling,
energy efficiency and the factory emissions. All these regulations are set either by the United Kingdom
government or the European Union.
Social and ethical responsibilities Tescos social and ethical responsibilities include:
Fair and ethical trading Tescos has participated in the ethical trading initiative since 1998. The ethical
trading imitative is based on four principles:
Monitoring Making sure all workers are treated fairly and equally throughout the supply chain and making
sure all their needs are met. 2. Improvement Improving any of the issues that have arose with any of
Tescos suppliers and fixing them. 3. Transparency Having an open and honest relationship with all
suppliers. 4. Values Tescos will only work with suppliers who share the same values as Tescos. Tescos
also participates in charitable events, namely with its community awards programme which is run by the
Tescos Charity Trust. All profits made by the TLC go towards helping the local communities of which Tescos
operates in; this can include health equipment, environmental sustainability programmes
and
opportunities for people from disadvantaged backgrounds.
Professional responsibilities Tescos professional responsibilities include setting a high standard shopping
experience for customers, an excellent working environment for employees and ensuring that the
relationship between Tescos and the supply chain remains in good faith. Tescos is committed to voluntary
codes, the major one being the ETI (ethical trading initiative) which aims for fair pay and a safe working
environment for all those working within Tescos supply chain.
How does Tescos meet its responsibilities?
Legal responsibilities:
To meet its legal responsibilities Tescos has to keep up to date with all United Kingdom
government and European Union legislation, to do this, Tescos works very closely with all the
governments of the countries of which they operate in.
Social and ethical responsibilities:
To meet its social and ethical responsibilities Tescos urges all its suppliers to have the same
values as the values described in Tescos own ethical trading initiative (fair pay, fair treatment,
gender equality, safe working environment), also, for any issue that cant be solved by the
supplier, Tescos will offer assistance to ensure the issue is resolved. Tescos also has its own
charity trust (Tescos Charity Trust) which rewards organisations and people for contributing
positively to society, Tescos works closely with the communities in which operate in, Tescos has
places for customers to donate money in every single store, and will give a 20% top-up to on for a
Tescos employees personal fundraising, this allowed Tescos to meet its social and ethical
responsibilities.
Professional responsibilities:
To meet its professional responsibilities, Tescos makes sure all its stores are clean and safe for
both the employees and customers. Tescos makes sure that a customers shopping experience is
second to none by training employees on how to deal with customers and making sure all
employees are knowledgeable about the products that they are selling.
Note

[LO2]
[2.1]
Explain how economic systems attempt to allocate resources effectively

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An economic system is when the government attempts to meet their citizens needs through the
production and distribution of goods and services, all services and products produced by the
country are limited by the resources (capital, land, labour workforce, natural resources) of the
country, this means the government needs to think carefully about how to prioritize the needs and
wants of its citizens.
What are the economic types around today and how does each economic type distribute resources
effectively:
Mixed economy What is a mixed economy? A mixed economy is an economic type which combines
both the socialist and capitalist systems, part of the economy is run by the government whilst the
other part is left for the free market (private business organisations), private business organisations
have huge amounts of freedom in this economic type, however, the government can intervene with
fiscal and monetary policies if the economy requires such a move. How does a missed economy
allocate resources effectively? A mixed economy can effectively allocate the countries resources as the
resources are split between the private sector (super markets, for example), and the public sector
(defence, for example) where resources are allocated by the government, several sectors within the
mixed economy type have resources allocated by the private sector and the public sector (health, for
example). This allows all the nations resources to be allocated effectively and with very little wasted.
This economic type is the most popular in the world with countries like the UK, France, Sweden,
Finland, United States, and Canada using it
Command economy What is a command economy? A command economy is an economic type where
the government decides what needs to be made, how many need producing and how much said
products should cost; in most command economies the free market doesnt exist (some command
economies are starting to open up economically, China for example) as this would loosen the
governments grip on the economy, this means that all private business organisations operating within
a command economy are heavily influenced by the government, sometimes the government will even
take ownership of a private organisation if the organisation isnt doing what the government wants,
the government has complete control over the economy. How does a command economy effectively
allocate resources? The command economy can effectively allocate resources because the
government has complete control over the countries citizens and the countrys economy and has all
the sufficient information it needs to be able to effectively allocate its countries resources. The
command economy is not a popular economic type because the government may not have all the
relevant information which can lead to shortages of certain resources which will lead to millions of
people dying. The countries which use this economic system are Cuba, North Korea, and most
infamously the former Soviet Union. China and Vietnam also use this economic type but are becoming
more open.
(Free) Market economy What is a free market economy? A free market economy is an economic
system where the government has very little power and government regulation in a free market
economy is (almost) nonexistent. How do free market economies effectively allocate resources? Due to
lack of government interference and regulations and the complete economic freedom for private
business organisations companies can produce exactly what they need, their need is determined by
what consumers want and how much consumers are willing to pay. A market economy is able to
effectively allocate the nations recourses by allowing the market to determine what needs to be
produced, how many need producing and how much the products cost. All countries in the world have
some elements of a free market economy, countries with more free market influences include the UK,
USA and France (mixed economy) and some countries have less free market influence include China
and Vietnam (command economies)
Traditional economy What is a traditional economy? A traditional economy is an economic system
which relies on traditional customs and beliefs when dealing with the citizens being served, these
customs and beliefs dictate what needs to be produced and how much the produce being produced
should cost; agricultural countries use the traditional economy system. How does a traditional
economy effectively allocate resources? A traditional economy can effectively allocate recourses
because the resources are allocated based on the traditions and customs of the people being served. It
is used by several different tribes around the world, including the Inuit (Eskimo) people in the northern
most regions of Canada.
Note
[2.2]
Assess the impact of fiscal and monetary policy on different businesses and their activities.
What are the fiscal and monetary policies? A central governments fiscal policy encompasses the

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governments position on government spending and the overall levels of taxation, both for business
and citizen alike. The policies objective is to stimulate aggregate demand and by extension economic
activity. Fiscal policies can include: increasing taxes and increasing government spending or increasing
taxes and decreasing government spending as means to stimulate economic growth and to lower
inflation (BBC News, 2015). There exists two types of fiscal policy, expansionary and deflationary;
expansionary fiscal policy sets out to increase aggregate demand, it achieves this by cutting taxes
(giving consumers more disposable income) and increasing government expenditure, the extra
expenditure is funded via borrowing. With a deflationary fiscal policy the government intends to
decrease aggregate demand, it achieves this by cutting government spending and with tax increases
(giving consumers less disposable income) (Fontinelle, 2003)
Monetary policies are set by the central bank, in the UK that would be the BoE (Bank of England), the
central bank changes interest rates as a means to combat inflation rates, for example, if the central
bank wants to lower inflation rates (BoE inflation target is 2% (Bankofengland.co.uk), the central bank
will increase interest rates in order to keep inflation rates low, the aforementioned policies lead to
lower inflation rates because higher interest rates decrease consumer spending and borrowing
becomes more expensive (Investopedia). Two types of monetary policy exist, loose monetary policy
and tight monetary policy. Loose monetary policy encompasses cutting interest rates; doing so will
lead to cheaper borrowing and increased consumer spending (more disposable income for consumers
with mortgages). With tight monetary policy, the central bank will increase interest rates as means to
slow down economic growth and prevent inflation exceeding the 2% target set by the BoE
(Economicshelp.org). How businesses act depends entirely on the fiscal and monetary policies of the
government and the microeconomic systems of the central bank (BoE). For example, when the
governments monetary policy causes the interest rates to surge, businesses such as Tesco could face
difficulties financing its operations as the cost of capital will increase, which will in turn lead to the
overall consumption level of consumers decreasing, alternatively, if the governments monetary policy
decrease the interest rates it will have the reverse effect (less expensive to operate a business and
more consumer consumption) in 2010, the Independent reported on how food inflation can have a
disastrous impact on retailers such as Tesco (Lynch, 2010). Additionally, if the government was to
increase the tax burden, Tesco would have more of its profits taxed, meaning it will have less capital to
expand the business with (less employees hired, less supermarkets opened), as a means to make up
for the increased taxes, companies could increase the cost for consumers. However, if the tax burden
is reduced, the end results can only be positive for companies like Tesco (and consumers alike), as less
taxes means more disposable capital, said capital will be used to expand the business (hire more
employees, build more supermarkets) and keep prices low for consumers. The central banks reserve
requirement can affect businesses, for example, if the governments monetary policy is to cut the
reserve requirement, then inflation rates will drop and consumers will be more willing to spend,
however, if the central banks reserve requirement remains, inflation rates will increase, leading to
customers being less likely to spend their disposable income. Reuters reported that China on 27th June
2015 cut its reserve requirement for the fifth time for Chinas central bank in an attempt to stop the
downtrend of economic growth by lowering inflation rates (Heath, 2015). Exchange rates can greatly
affect a business, both in good and bad ways.
Currency appreciation (when the currency strengthens against foreign currencies, particularly the USD)
means that exporting goods overseas becomes significantly more expensive, this is because the price
of UK products will now be more expensive to people elsewhere in the world, which means foreign
businesses need to pay more to import products from UK businesses, this naturally leads to UK exports
being less desirable and due to the higher cost of exporting and lower cost of importing products into
the UK, the overall economy is likely to shrink because of the fall in domestic aggregate demand.
Currency depreciation (when a currency weakens against foreign currency, particularly the USD)
exports become significantly cheaper, this is because foreign companies can import UK products for a
reduced price, making UK exports more competitive in the process, another consequence of currency
depreciation is that imports to the UK are now more expensive, this is because the GBP has devalued
and is not worth as much as it used to be when compared to foreign currencies, lastly, the overall
economy is likely to grow with a devalued currency due to an increase in domestic aggregate demand,
for example, the Chinese government in an attempt to keep inflation low and employment high,
devalued its currency for the sixth time in 2015 (Irwin, 2015).
Note
[2.3]
Evaluate the impact of competition policy and other regulatory mechanisms on the activities of Tescos
Business competition in the United Kingdom is regulated by the 1998 Competition Act, Enterprise Bill
2002, these acts are used by the government to prevent monopolies and/or reduce their power and
influence in the market; the Office of Fair Trading and Competition Commission are also used by the UK
Government to help regulate the markets. Competition policy prevents businesses from disrupting the

Benjamin Lee

market balance, seeks to guarantee that the market remains free and fair for all businesses regardless
of whether they are big or small and supports innovation within the market which will help create jobs
and economic growth. Competition laws also prevent businesses from forming a conglomeration, any
merges which would give an organisation an unfair advantage over the competition, attempting to
control prices/price fixing with a competitor and creating an artificial shortage of supplies as an
attempt to increase the price for wholesale and retail.

The Competition Commission discovered that bigger retailers, such as Tescos, ASDA, Sainsburys and
Morrisons, make it significantly harder for smaller retailers to operate in the same area of which the
bigger retailers are operating in, this led to the Competition Commission advising the United Kingdom
government on how to prevent this from happening. The Competition Test ensures that Tescos and
other big retailers cant completely control a certain region; this is done by preventing Tescos and
other big retailers from opening a store within a 10 minute drive of another (this only applies if Tescos
has at least 60% of the market share in that specific region)

Retail organisations operating in the European Union also need to abide by European Union
regulations. Any changes in the laws or regulations will affect Tescos, for example, if the United
Kingdom government or the European Union decreases the maximum hours a worker can work, this
would have a negative impact on Tescos operations and profit margins as Tescos would have to
employ more people, or if the United Kingdom government increased the minimum wage to a living
wage, Tescos profit margins would take a hit due to needing to pay workers higher wages. If Tescos or
any other organisation in the UK or EU breaks the laws set by the 1998 Competition Act, Enterprise Bill
of 2002 and any of the EU laws and regulation they could face severe sanctions, fines and all merges
broken up along with court fees.
Have fair competition policies and government regulations been good for Tescos? A fair and
competitive retail market place has been incredibly advantageous and beneficial to not only Tescos
and other similarly sized retailers but to consumers as well. Competition helps spur innovation in what
would have otherwise been a stagnant market place if Tescos was the only major retailer in the
country, however, if you have many major retailers all competing against each other for the same core
market, innovation becomes a necessity as the retailers have to innovate to stay ahead of their
competitors, as an example, Tescos was the first retailer in the United Kingdom to introduce loyalty
cards and Tescos pioneered internet shopping with home deliveries, two innovations which were
universally adopted by the other major retailers.
Innovation leads to more efficiency and lower prices, this means that Tescos may lose money in the
short term but this short term downfall in profit will be more than made up for in the long term as
lower prices attract more customers, which leads to Tescos controlling a much larger percentage of
the overall market share. Customer service is also affected by competition as all the major retailers
seek to outdo their competition, Tescos always aims to provide a much better customer service than
the competition, this in turns creates loyal and returning customers, loyal customers are considered to
be the most important type of customer. The aforementioned reasons are why Tescos, as of March
2015 controls 28.1% of the current UK market share, significantly higher than the competition; a fair
competitive market place has made Tescos the market leader in the United Kingdom.
[LO3]
[3.1]
How market structures determine the pricing and output decisions of businesses
There are several different market structures, all with varying degrees of competiveness. The market
structures include Monopoly (no competition), Oligopoly (little competition), Monopolistic Competition
(huge amounts of competition) and Perfect Competition (huge amounts of competition); business
strategies which include the pricing of products and the output priorities are determined based on the
market structure.
How do the aforementioned market structures affect the pricing and output decisions of businesses?
Monopoly A Monopoly market structure is where a single business has complete control over the
market, leading to potential and current competitors being unable to enter the market or being driven
out of the market, respectively. This means that the business controlling the market will never have
any competition at all. Having no competition means the business is free to set the price to however
much the business sees fit, normally the mark ups are insanely high as the business would want to

Benjamin Lee

maximise profit margins, businesses are able to do this because customers have nowhere else to buy
the products which are being produced, this means customers are forced to pay the price set by the
business. A Monopolys output depends on consumer demand, if consumers are interested in
purchasing products from said business then the business will output at full capacity to meet the
demand, however, output capacity is lowered if there is less demand from consumers.
Oligopoly An Oligopoly market structure is where more than two large businesses control the market,
making it incredibly difficult, but not impossible (like with a Monopoly) for potential competitors to
enter the market. All businesses within an Oligopoly will be selling the same or very similar products.
Businesses present within an Oligopoly will set an going rate for their products, which will be matched
by their competitors, doing this removes the incentive for consumers to give preference to a business
competitor, however, after the initial pricing, the businesses will let consumer demand dictate the
future prices, more demand means the price will either stagnate or increase, furthermore, businesses
will decrease the price of their products when manufacturing prices decrease and/or consumer
demand decreases, meanwhile, prices will increase or decrease depending on the competitors pricing
strategy, if the competition lowers their prices, the other businesses will need to do as well, otherwise
they will lose a significant percentage of their market share. Output decisions are decided on by
consumer demand, more demand means higher output capacity, less demand means lower output
capacity.
Duopoly (Oligopoly) A Duopoly is another form of Oligopoly, a Duopoly is instead two businesses
(instead of more than two) which have complete control over the market, making it very difficult (but
not impossible) for potential competitors to enter the market. In Duopolies the products being
produced by both companies will be very similar, often with only minor differences. Pricing is dictated
by the businesses as one of the businesses will set a going rate for their products, the going rate will
be matched by the other business. The businesses will then let the consumer demand dictate future
prices, meaning if there is a large demand for the products then the price will either stagnate or
increase or if one of the two businesses lowers the price of their product, the other competing business
will have to lower their price as well in order to remain competitive and to prevent any loss of market
share, furthermore, if the price to manufacture the products decreases so too will the price consumers
pay. Output decisions in a Duopoly are based on consumer demand, more demand for a product
means the companies output increases and if the demand lessens the company output decreases.
Perfect Competition A Perfect Competition market structure is when theres many competitors within
the market all selling the same products, potential competitors can easily enter a Perfect Competition
market. Businesses price their products based on consumer demand, output decisions are also decided
solely by consumer demand.
Monopolistic (imperfect) competition A Monopolistic (imperfect) competition is a market structure
where many competitors are present and potential competitors have an incredibly easy time entering
the market. The Monopolistic market structure shares similarities with both the Monopoly and Perfect
Competition market structures. The products sold in this market structure are differentiated to varying
degrees, but all products produced within the market are interchangeable with each other, this means
prices in a Monopolistic market are determined by what competitors have priced their products at, as
consumers will switch to buying products from another business when they see that they can buy a
similar product for a cheaper price, and the manufacturing costs have an impact on the prices,
output decisions are based upon consumer demand
Note
[3.2]
Illustrate the way in which market forces shape organisational responses using a range of examples
Market forces are factors which affect the supply and demand of free market economies; it is
inherently important for businesses to understand the market forces of a particular market in order to
stay ahead of any and all competitors as this will allow by businesses to find a price that consumers
are willing to pay.
Market forces include:
Customers Customers are vitally important to each and every business as customers are the sole
reason why each for profit organisation justifies its existence. It is very important for a business to
keep in close contact with its consumer base, for example, if a business which is producing personal
computers, tablets and phones, as these gadgets are continually changing and evolving, its crucial to
understand what the customers want, if the business self righteously decides that it knows best then

Benjamin Lee

the consumers will make their purchases at a different retailer, which will cause the business to lose
loyal customers and market share.
Supply and Demand When there is an overabundance of a particular product in a market, the
demand for that product will naturally decrease, however, if the supply of a particular product
decreases then the demand for it will increase. An organisation will respond to either an oversupply or
an undersupply by changing its production to match the demand of the market, which means if the
organisation is oversupplying the market then the organisation will decrease the amount it produces,
however, if the organisation is undersupplying the market the organisation will increase its production
of that particular product.
Demand is the amount of products and/or services required to satisfy the market needs. Demand for a
businesss products and/or services will either decrease or increase, businesses will respond
appropriately. Business profits plummet when demand for their products and/or services decreases,
meaning, businesses need to respond to decreased demand for their products by lowering the output
capacity, firing unnecessary workers and closing down redundant factories. If demand for a businesss
product and/or services increases then the response is to hire more workers, open more factories and
increase the overall output capacity of the business to meet the demand from consumers.
Employees Employees are the people who work for the business, they are vitally important to any
business, as if not for them the business wouldnt function. Employees can have an impact on how a
business acts, for example, if new legislation decreasing the maximum amount of hours a worker can
work is passed in either the United Kingdom or the European Union, the organisation will respond by
hiring more workers to make up for the loss of productivity.
Suppliers Suppliers are as important to businesses as customers, the reason being is that businesses
cannot function without them. If suppliers increase the costs of their work/raw materials/products then
the price for businesses and consumers will increase proportionally. If the products that the business
produces are price elastic then the demand will decrease when the business increases the price. The
organisations response will be to change suppliers, negotiate a better deal with the supplier, or do
nothing and accept the suppliers price increase without increasing the price of the products being sold
to consumers, taking a hit to profit but keeping customers happy.
Economy of scale An economy of scale is when the cost per unit is reduced as production increases,
this happens as manufacturing the products becomes more efficient. A business response to an
economy of scale would be to lower prices for consumers as the cost to manufacture the products
decreases.
Note
[3.3]
Judge how the business and cultural environments shape the behaviour of Tesco.
Its imperative for a company to acknowledge and understand all the possible business and cultural
environments when running a business, for these greatly affect how a business operates, both in the
present day and future.
Legal The legal environment in the UK encompasses all the business specific laws and legislations;
these laws and legislations are passed by the UK and EU governments. The aforementioned
governments set laws which businesses have to follow; these laws could be anything from an
increased minimum wage to competition regulation. The legal environment/culture has changed the
behaviour of Tesco as they have to acquiesce to all the UK and EU laws, legislation, regulations and
consumer protection. The Competition Commissions competition test has prevented Tesco from
expanding into certain areas, namely smaller towns; meaning Tesco has had to cut back expectations
for expansion and had to look elsewhere in order to expand its business portfolio (Lacoma).
Environmental The environmental culture can affect any and all businesses, however, it has the
biggest impact on agricultural businesses such as farming and fishing. Components of the
environmental culture include climate change, geographical location and sudden changes in weather
(Epa.gov). With Tesco Sustainable farming and Seafood sustainability Tesco actively supports the
British farming and fishing industries and relies heavily on both industries being successful. If the
farming sector suffers a severe winter, the farming business could lose many of its produce which
would force Tesco to intervene and subsidise the farm and its workers or to look for a partnership
elsewhere (Tesco Real Food & Tesco Real Food).
Technical The technical environment has changed significantly over the last decade, with more and
more consumers having access to the internet. The internet over all the other technological advances
in the last ten years has had the biggest impact on Tesco. With Tesco online shopping website, Tesco

Benjamin Lee

Direct Tesco was able to exploit the internet revolution, which started to happen in the early 2000s,
gaining significant market share in the online space before any of their competitors. The presence of
online shopping and the internet in general shaped the behaviour of Tesco because Tesco had to be
competitive; Tesco needed to have a huge online presence to prevent their competitors from doing so.
In order to stay competitive in an online world Tesco had to pour a significant amount of manpower
and money into doing so, more so then what Tesco was using prior to the internet becoming more
readily available (Rigby, 2010)
Political l From a business stand point, the political environment in the United Kingdom and
elsewhere in the world has been focused on the 2008 recession and what countries should do to lessen
its effect. The UK government pressured Tesco, the largest private sector organisation in the UK to
create 20,000 new jobs and apprenticeships by 2014 (two years), contributing greatly to the recovery
of the UK economy (BBC News, 2012).
Social The social attitudes of Tesco customers is constantly changing, social attitudes include:
cultural trends, consumer buying patterns, consumer demographics and the different opinions of said
consumers; all of the aforementioned social attitudes have a great impact on the demand for products.
Tescos behaviour is greatly affected by the changing social attitudes of its customer base, for
example, in the seasonal period the demand for Christmas related products skyrockets and Tesco has
to meet this demand. Tesco meets this demand by importing more seasonal products from both the
primary and secondary business sectors, in order to help deal with the overall increased demands of
the Christmas period, will employ more people (E4s.co.uk, 2009). Another way in which the social
environment affects the way in which companies operate is if large influxes of Polish migrants decide
to settle in an area where Tesco operates, Tesco will begin to market new Polish products in an attempt
to attract the newly arrived migrants to Tesco and away from competing supermarkets (Wallop, 2009).
Economical The economic environment in the UK has had a huge impact on way Tesco and other
competing businesses behave, especially in recent years with the advent of recession in 2008 (Mail
Online, 2008). The recession caused the income of consumers to drop, which in turn caused consumer
spending to drop significantly and the overall cost of running a business to increase, all of the
aforementioned issues led to a drastic drop in profit for Tesco; the 2008 recession caused Tesco to post
its lowest sales figures in sixteen years. The economical environment affected the behaviour of Tesco
as it forced Tesco to cut jobs, close stores and stop the expansion of Tescos worldwide infrastructure,
at least temporarily, as by 2011 Tesco posted record beating sales figures (Hawkes, 2011).
Note
It is imperative for businesses to react and adapt to the different and ever changing cultural
environments; the socio-cultural of the environment encompasses all of the customs, values and
demographics which represent the environment in which the business operates within
(BusinessDictionary.com). Culture differs from nation to nation, an example of this would be Tescos
American branch, Tesco may be the largest and most successful retailer in the UK but in 2012 Tesco
had to abandon its American assets, the cited reason for the decision was the difference between
British and American consumer culture, more specifically, American consumers like to buy products in
bulk, whereas British consumers prefer buying products in smaller quantities; Tescos American chains
only sold small quantities in the same manner as they would have done in the UK, which caused
American consumers to prefer the established American chains as opposed to a new British one
(Vulture, 2012). Demographics of consumers are also part of the cultural environment; the
demographic of consumers encompasses many different things, age, gender, religion and race are all
included. Take religion for example, if Tesco operates in an area with a large Muslim population, such
as Bradford (Bradford.gov.uk) then Tesco has to make amends to keep them happy, for example, in
2014, Tesco (and other large UK retailers) started selling halal meat (the only meat Muslims can
consume), this was done by Tesco as a means of meeting the demand of Tescos Muslim customers
(Webb, 2014). Similarly to religion, immigration and race are also important factors to consider in
regards to the cultural environment, for example, if an area where Tesco is operating in sees a large
influx of Polish migrants settle there, then Tesco has to make amends to both attract them to Tesco
and keep them as returning customers; Tesco did just that in 2009 when it significantly expanded the
amount of Polish food items it sold in its stores, though this change was only made to stores which
operate in areas which have seen large numbers of Polish migrants settle there (Wallop, 2009). Age is
also important when considering the culture environment; this is because the purchasing habits
changes as people grow older, meaning Tesco has to accommodate all age groups, if it intends to
remain the market leader in the UK (Ro, 2012).
Corporate culture is A blend of the values, beliefs, taboos, symbols, rituals and myths all companies
develop over time (Entrepreneur). Corporate culture is different from socio-culture as corporate
culture applies to the internal operations of a business whereas socio-culture applies to the
environment of which a business operates from. A businesses corporate culture can be gauged by its

Benjamin Lee

aims/objectives/priorities and mission/vision statement. Tescos priorities/values include: ensuring

community, corporate responsibility and sustainability are at the heart of our business, being a good
neighbour and being responsible, fair and honest and considering our social, economic and
environmental impact as we make our decisions (Corporate Responsibility, 2008). Group Chief
Executive Officer (CEO) Philip Clarke once said The Tesco values are embedded in the way we do
business at every level. Our values let our people know what kind of business they are working for and
let our customers know what they can expect from us. (Tr, 2013). The aforementioned
values/priorities have a fairly significantly impact on the operations of Tesco and have impacted on
Tescos financial performance, for example, due in part to the stated priorities of Tesco, they have been
able to set up businesses in poorer regions where smaller, independent companies are unable to serve
the people of said region. Another way in which corporate culture affects Tesco is with the introduction
of organic, free range and fair trade produce (mostly, meats, vegetables, eggs and dairy produce), due
to the increasing awareness of these products Tescos earnings have improved as selling said produce
allows for the largest customer range possible (Mail Online, 2007). Additionally, Tesco believes that the
stature of the business depends on the employees who interact with the consumers; which is why
Tesco uses the high commitment management structure. The high commitment management
structure depends strongly on the training and the overall development of employees (Clegg and
Bailey, 2008). Tesco has developed several training programs which cover each and every aspect of
the varying cultures, styles of learning and fluctuating responsibilities of the job. This is to help ensure
Tesco can meet its values and goals set out within the vision statement.
Note
[LO4]
Analyse the impact of global factors on UK business organisations.
[4.1]
Discuss the significance of international trade to Tesco and the retail sector.
International trade is the economic cooperation between different nations, where nations export and
import goods and services in exchange for capital (Businessdictionary.com). With production becoming
easier, faster and cheaper, and with the constantly improving international transport networks and
with the rise of the internet in the early 21st century, international trade has developed significantly in
the last 20 years. The development of international trade has been bolstered by the acceleration of the
globalized economy and with economic integration in Europe with the European Unions single market
and in Africa with the African Free Trade Zone; international trade has become increasingly important
for multinational retail businesses to succeed in an ever more competitive environment
(Globalization101.org). Tesco is an international company which operates on three different continents
(Europe, Asia and North America) with supermarket chains in twelve different countries (Tesco PLC);
this means that international trade is fundamentally important for Tesco, especially in the European
markets where its presence is the biggest; the European Unions single market allows Tesco to operate
without barriers and tariffs. International trade is important for Tesco and the UK retail sector as a
whole because many of the highly desirable products sold to the British public are often only
attainable from overseas, partly down to the UK climate, items such as Kiwi fruits, Oranges, Bananas,
and Grapes (Climatechoices.org.uk) are just some of the items that the UK is unable to naturally
produce and so the preferred method for retail businesses to obtain them is to import them from
overseas. The UK imports 46% of all the beef consumed in the UK, Tesco in 2011 stated that UK does
not produce enough beef to meet the countries demands and so attempted to mitigate the issue by
importing Angus beef from the United States of America as opposed to purchasing Angus beef locally
from UK farmers; Tescos reasoning for this decision was because British farmers in the UK do not
produce enough beef and so importing from overseas was a justified necessity (Poulter, 2011).
International trade can help businesses when a shortfall in production happens, for example in 2008,
the production of British milk dropped to a thirty year low, meaning Tesco and other UK retailers had to
import milk from overseas, mainly from the Netherlands and Belgium in order to supplement the needs
of Tescos customers (Simpson, 2008). The European Unions single market is a free trade bloc which
allows companies to sell products to other member states, with very little regulation and no tariffs; this
is advantageous for companies which operate in a multitude of EU nations of nations like Tesco.
Note
[4.2]
Analyse the impact of global factors on UK business organisations.
Global factors have a huge impact on how UK businesses operate; vast businesses which operate on
an international scale and small-scale businesses which operate only on a domestic scale are affected

Benjamin Lee

by contrasting global factors. Globalization is the process by which the world is becoming more
interconnected. Globalization affects businesses both big and small in a multitude of ways, including
jobs, the overall competitiveness of the business environment, employment, business expansionism
and the ability to outsource products to bring costs down.
Global factors include:
Competition: Competition is a global factor which affects businesses in a multitude of ways. The
globalization of the worlds economy means that it will become easier for businesses, both large and
small to be able to enter a specific market as the rules, regulation and legislation become more
liberalized, for example, the Indian government in 2011 allowed for the first time foreign supermarket
chains to set up in the country. The liberalisation of already established markets and the opening of
new markets like India and China have forced some companies to form mergers with others in order to
stay competitive in the that specific country and marketplace, an example of this is when Tescos
Chinese branch merged with the largest grocery retailer in China, Vanguard. Before a business can
expand into new territory, it must first examine the already established competitors and then examine
the potential competitors which are of equal importance. Globalization creates a hyper competitive
marketplace which is good for consumers as it increases quality and decreases prices. Globalization is
also good for large businesses because it allows them to expand into new territories with less
regulation and legislation, but its incredibly damaging for smaller businesses as they do not have the
resources to compete with a big globalized business. In 2014 it was reported by thisismoney.co.uk that
over half of small business start-ups in the United Kingdom fail within five years, this is in part due to
the competitive nature of the globalized economy.
Exchange rates: Exchange rates are vitally important not just for businesses but for the host nations
economy as well. A change in the exchange rates can be both a good and bad for businesses of all
sizes. Depreciation (devaluation) is when the value of a specific currency falls, take the GBP (Great
British Pound) as an example, in 2007 the GBP was valued at 2 USD (United States Dollar), so for every
GBP you would receive 2 USD, however, due to depreciation, in 2015 the GBP is now worth only 1.55
USD. When a currency devalues, exporting becomes more competitive because it is now cheaper for
businesses to import goods from the UK compared to previously; this is good for any big or small
business which export to many different countries, as it is now cheaper for overseas businesses to
import goods from the UK, however, with a depreciated currency, imports become notably more
expensive, which makes operating a business significantly more difficult, especially smaller businesses
which lack the resources to meet the new challenges.
Currency appreciation is when a specific currency strengthens against a different currency, for
example, the GBP was valued at 1.03 Euros in 2008 during the recession, so for every GBP you would
receive 1.030, but because of currency appreciation, by 2012 the GBP was worth 1.277 Euros;
appreciation makes exporting products overseas much more expensive, which in turn lowers the
interest of overseas businesses with regards to importing UK products. Currency appreciation can be
both good and bad for businesses of any size, for example, businesses which operate only
domestically in the UK, currency appreciation can only be a good thing as these businesses can now
import products from overseas for a significantly reduced price and risk and since businesses which
only operate domestically rarely if ever export overseas they can avert most of the bad side effects of
currency appreciation.
[4.3]
Evaluate the impact of policies of the European Union on UK business organisations
The European Union greatly affects businesses which operate in the United Kingdom (and elsewhere
within the European Unions borders) by enacting regulation, legislation and laws that directly affect
businesses, not all of these directly affect UK businesses as the UK is not a member of the Euro zone,
instead the UK is indirectly affected by them; all of these laws, regulations and legislations are legally
binding for businesses, which means that if a business is caught not abiding by the laws set by the EU
courts they can face severe sanctions.
The European Union policies which affect UK business are:
Economic and Monetary policies:
The EU economic and monetary policies (economic and monetary union) are policies set by the
European Union in an attempt to influence the interest rates and exchanges rates of a specific
European Union member state (or the euro zone as a whole) with the goal of obtaining sustained
economic growth and high employment. Individual member states set their own governmental budget
policies such as taxes. The aforementioned laws may not affect UK businesses directly as the UK is
not a member of the euro zone, but if a UK business has a presence in a euro zone member state, like
Spain, then the aforementioned economic and monetary policies of the European Union could have a

Benjamin Lee

huge impact on how the overall business operates, meaning the monetary and economic policies could
indirectly impact the UK side of the business, for example, the business could slash operations in the
UK to save revenue, revenue which would then be invested into the Spanish side of the business
instead.
Employment policy:
The European Unions employment policy encompasses many different areas such as:

Health and Safety at work

Equal opportunities for all

Protection against discrimination

Labour laws

Working abroad (freedom of movement)

EU funded skill training programs for EU citizens

The European Unions employment policy ensures that all workers in the UK have a fair chance to
progress throughout the company, regardless of race, sexuality, nationality and sex, (equal
opportunities for all and protection against discrimination acts) ensures that the freedom of movement
is respected by businesses throughout the European Union, which means citizens from a different EU
membership need to be treated in the same manner as the indigenous population. The EU skills
training program ensures that employment will always remain high as the EU trains EU citizens to have
the skills necessary to fill any skills shortages, EU prevents worker exploitation by setting the
maximum amount of hours an employee can work (Labour law legislation) and the EU protects workers
by implementing a standard for health and safety at the work place for all businesses across every
member state. The aforementioned laws greatly affect UK businesses as they are strictly enforced by
the EU and UK government, which means if a UK business refuses to abide by them, the business
could potentially receive a huge fine or be taken to court.

Regional policy:
The European Unions regional policy is a policy where investments are made into the most
underdeveloped regions of the European Union, the funding comes directly from the European
Regional Development Fund and the European Social Fund; the ERDF and European Social Fund are
both funded by the twenty eight member states of the European Union and make up one third of the
European Unions total budget.
The ERDF and the European Social Fund both help improve the living standards in the poorest regions
of the European Union, help cut youth unemployment by creating jobs in areas which have high areas
of youth unemployment, they both improve the infrastructure of said areas and both assist in ensuring
small and medium sized businesses remain competitive with bigger businesses.
The regional policy impacts businesses in the UK greatly as the European Union continuously uses the
ERDR and European Social Fund to invest into the poorer regions of the UK, these aforementioned
regions will typically have a significant number of under 25s (young people) unemployed. Part of the
investment includes money for the creation of youth employment programs (2014 2020 the
European Union will spend 206,000,000 on the youth employment initiative) these youth
unemployment programs are run by either the UK government or an independent body (which the
government overseas), the youth employment schemes will work directly with big businesses in the UK
(for example, PERA Training and House of Fraser), so as to give young unemployed people the chance
to work for (or to gain work experience with) some of the biggest employers in the UK. The ERDF and
the European Social Fund are also used to assist small and medium sized businesses in the UK, this
investment ensues that said businesses remain innovative and more importantly competitive with
their bigger competitors. Investment from the ERDF and European Social Fund is also being used to
connect rural areas to high speed internet, as the internet is absolutely vital for a modern business,
this allows for smaller and medium sized businesses to set up in more rural areas.
Free Trade policies:
Firstly, there is the single market, the single market allows unrestricted free trade between the twenty
eight member states, and secondly, the European Union negotiates free trades deals with non
European nations, the negotiations are handed by officials from both the European Union and from the
nation which wants to form a free trade deal.
The single market greatly affects UK businesses as it allows UK businesses to trade freely across
European Union territory; the European Union achieves this by: removing trade barriers and custom
controls, simplifies cross border trading, removing trade barriers for businesses in the service sector
(which allows said businesses to offer their services cross border), and allows for free movement of
people. All of the aforementioned reasons make trading throughout the EU significantly easier for UK
businesses, allowing them to expand into new markets and obtain new customers with relative ease.
The freedom of movement (see employment policy) ensures that UK businesses will always be able

Benjamin Lee

to meet their recruitment requirements. UK businesses additionally benefit from the European Unions
free trade agreements, the most recent being with Canada. Its estimated that the Canadian trade deal
boosted the EU economy by 7.9 billion and the UK economy (and by extension, UK businesses) by
1.3 billion a year.
Date: 10/08/2015.
To: David Lewis, CEO of Tesco PLC.
From: Benjamin Lee.
Subject: The impact the European Union has on your business, Tesco.
I am writing to you to inform you of the impact the European Unions polices have on both how you
operate in the United Kingdom and elsewhere within the Europeans borders. The ways in which the
European Union impacts your business are numerous and include include: Legislation, when the
European Union passes legislation it becomes the responsibility of Tesco to first acknowledge said
legislation, then you must amend your own policies to meet the demands of the new legislation.
Legislation enacted by the European Union is binding for all outlets in the United Kingdom as well as all
your outlets in the many different regions of the European Union from which you have a presence in.
Tesco is one of the largest businesses in Europe, with 2,800 stores located across many different EU
member states (Stocks, 2010), because of this, its imperative for you to acknowledge and abide by all
EU legislation, as failing to do so will resort in Tesco facing the European courts; punishments given out
by the European courts range from severe fines, to losing 15% of your annual turnover and in extreme
cases, you could lose the right to trade in a specific country, as your company trades in many different
EU nations (UK, Hungary and Slovakia) this could greatly impact your shareholders, shareholders
whom have put their trust into you and rely upon you and your business to increase their earnings.
The free trade policies of the EU have allowed your business to expand into new European territories;
the single market simplifies trading across borders which has allowed businesses such as Tesco to
expand into new territories, and because of this, Tesco has seen significant growth in its new territories
in recent years, for example sales in Slovakia rose to 6% in 2014 (Butler & Neville, 2013). Note
Due to climate change, the European Union has committed itself to significantly reduce the
greenhouse gas emissions it outputs by 2020 (Ec.europa.eu). The EUs climate change policy includes:
20% cut in greenhouse gas emissions, renewable energy making up 20% of total energy consumed
and a 20% increase in energy efficiency; because of this and because of pressure from the United
Kingdom government, Tesco also promised to reducing its own carbon footprint, by 2020 you stated
Tesco would have cut its own carbon footprint significantly by 2020. Your business intends to achieve
this by: using solar power and wind farms to create renewable energy, continuously investing into
renewable energy schemes, helping companies which supply Tesco set up their own renewable energy
infrastructures, reducing refrigerant emissions by 13% and a yearly decrease of 0.3% in overall carbon
emissions (Carbontrust.com)
One of the founding corner stones of the European Union was the freedom of movement of peoples,
this freedom ensures that EU citizen must be treated no differently from the native populations, this
freedom has ensured that Tesco has always met its recruitment needs (Mail Online, 2011), additionally,
the freedom of movement ensures that Tesco will always have the ability to recruit the best talent from
all over the EU, and, due to EU law, if an EU citizen isnt treated equally by Tesco, the EU citizen can
take Tesco to court. The health and safety at work policy of the European Union has impacted Tesco as
now Tesco has to continuously keep its safety regulations up-to-the-minute as not to be fined by the
EU courts, this piece of legislation has ensured that all of Tescos stakeholders have a safe
environment to work in. The competition law of the European Union ensures that all businesses, big
and small can compete fairly throughout the European Unions borders, this law has had an impact on
Tesco operations especially in the United Kingdom, stalling the expansionist ambitions of Tescos
shareholders (Bell, 2014)
Yours faithfully,
Benjamin Lee.
Note

Conclusion:
This report has discussed the many different reasons as why certain business organisational legal structures
are set up; learning about some of the advantages and disadvantages that come with them and the internal
and external factors which can impact on the performance of a business. The report also discussed the different

Benjamin Lee

types of economic types and how the governments using said economic types allocate resources to their
citizens. The report also covers what Tesco PLC does to please its stakeholders and the strategies Tesco uses;
how both corporate culture and socio-culture can impact a business a like Tesco PLC and how government
regulation, both from the UK government and the European Union can impact how a business operates.
The report found that Tesco PLC is a public limited company owned by its shareholders; Tesco has strategies for
meeting its responsibilities and its stakeholders (strategies such as, better customer service, better for training
staff, better relationship with suppliers). Tesco operates within a perfect competition marketplace, which means
Tesco has to adjust policies according to the competition, additionally; factors such as fiscal and monetary
policy are also policies Tesco must consider. Perfect competition means that Tescos prices are dictated by
supply and demand. The report discussed how Tesco is a UK business which means the legislation Tesco has to
abide by are dictated to Tesco by the UK government and EU government.
Note

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