The UK economy will go through changes of patterns, which include booms and slumps. Every business will go through changes of patterns and in the time of a boom the business will be succeeding and in the time of a slump the business will be declining this also happens during a recession. Following on from this additional economy changes that will have an impact on Tesco are interest rates, wage rates and inflation rates.
Over the last few years there has been high inflation and financial crisis and because of this the UK economy has hardly grown this has further impacted the demand for goods and services within the UK. Inflation is currently to this day 2% above the aim it should be but according to future estimates the bank of England inflation rate will reach its aim and be on target. This will have a positive impact on Tesco because they’ll be able to supply goods at a cheaper price and due to this Tescos sales are likely to rise meaning so will there profits. However Tescos competitors may be in the position to supply even cheaper products than Tesco meaning that the competition will increase between the businesses in the future. Another disadvantage is that it is likely that inflation is going to rise again because of demand-pull inflation. So that Tesco isn’t massively affected by this they should think about buying there products and services in advance in large bulks when there’s low inflation then Tesco can go on to sell the products with a higher profit margin rather than having to buy them when there’s a high inflation. If GDP is likely to fall in the future it will have a impact Tesco in a bad way as people are less likely to spend a lot/more money when shopping they will only spend money on necessities and not luxuries in that time frame. But if the GDP growth rate is on track and it is recovering slowly it will have a positive impact on Tesco in future years as the UKs Productivity will increase meaning prices and costs of products and services will be stable. So consumers are likely to buy more goods and services as they have more money to spend compared to if there was a low GDP. To made sure Tesco are able to stay stable for the future events they should take advantage when there’s a stable GDP and expand their business and opening new stores as well as increasing the ranges of products so they stay succeeding.
Political influences conveys to the changes in government policies and Businesses like Tesco need and should know about the changes that are going to affect them like the political decisions and changes in society.
In the European union there is freedom of movement and trade and as the UK being part of the EU it has enlarged the competition with all European businesses therefore Tesco has a larger effect on their costs and sales because of the increased competition. Tesco will have to advertise more to get their company more awareness but in doing so they will have to increase their advertising costs. By having higher competition Tesco have decreased their prices and added more offers to keep their consumers coming back to them rather than going elsewhere. Tescos main competitors are ASDA, LIDL and ALDI due to their very cheap products. In order to counter balance their prices with those companies to avoid as much competition as possible Tesco need to provide the best quality customer service they can. Tesco needs to make sure that they maintain higher standards than all of their rivals. Tesco has also increased its variety of products over time as well as bringing in their own brand products such as Tesco finest and Tesco value in order cater for everyone this is definitely a positive for Tesco and is what makes their consumers want to come back. However from all of this the UK is due to leave the EU within a few years so these factors could all be affected in the future it may even decrease the competition between the rival businesses. One big factor is that some products that Tesco may store now may not be stocked when the UK leaves the EU as some businesses and products are only sold within the EU also some of the products will increase in price as Tesco will have to pay more to get the products shipped to them compared to how much they pay now.