how future changes in economic political, legal and social factors, may impact on the strategy of an organisation

Evaluate how future changes in economic political, legal and social factors, may impact on the strategy of an organisation.

Before business make any future plans it is important that it investigate the social, political, environmental, and legal influences on it.

ASDA is the business I had researched on and this is a profit making organisation. ASDA is privately owned. ASDA provide goods and services which customers require in their daily life. ASDA keep their prices on which customers are willing to buy their goods and services. But ASDA main aim is to make revenue more than their expenses. ASDA is almost expended all over the UK. 

Legal influence:

Laws are continually being updated in a wide range of areas, e.g. consumer protection legislation, environmental legislation, health & safety and employment law, etc. ASDA needs to be aware of it and be ready for these changes, rather than rushing when there is no time. If ASDA was not aware of children and young customer’s law 2007 which says, business can’t sell alcohol and cigarette (tobacco stuff) to young customers and businesses also have display a sign that say under 18 can’t buy tobacco products. So if these products are served to under 18, than ASDA will be fined up to £2500. All these unawareness of laws can force ASDA’s overheads to increase which may eat up ASDA’s profit. So in order to avoid these fines ASDA has to be aware of new laws and should keep up-to-date every time. Then ASDA should try to arrange meeting and training for employee to make sure that they are aware of every new law.

Now let say in future this law changes and say that over 16 can buy tobacco product, so there is a positive thing for ASDA that they can sell their tobacco products to more customers. However ASDA still needs to arrange training and meeting for their staff to make sure that understand what new law says. So it may cost ASDA which is a negative side of new laws.   

Next if there is change in minimum wage rate (current minimum wage £6.19) it will raise ASDA’s expenses which may eat up their profits. As such there is no advantage to ASDA due to increase in minimum wage rate; however employee may work with full potential and provide better service as their pay is increased. From my point of view ASDA still can control their expenses by reducing their workers. Most of the businesses like ASDA reduce their workers when they expect that there will be rise in minimum wage rate.

Economic influence:

UK economy goes through difference series of pattern with booms to slumps. Every business does well in the time period of boom and most businesses collapse in the time period of slump or recession. Other economy changes that have influence on ASDA are interest rate, wage rate and inflation rate.

Recent years UK economy has barely grown due the financial crisis and high inflation which impacted on demand for goods and services in UK. Inflation is still 2% above the target but according to prediction of bank of England inflation rate will be on target. So it will have positive effect on ASDA because ASDA will be able to provide cheaper products, in this way ASDA’s sales will boost up. However ASDA’s rival may be able to provide products cheaper than ASDA, which will increase the competition between ASDA and its rivals. Other negativity is that inflation may rise again due to demand pull inflation. I will recommend that ASDA buy goods and services in bulk when there is low inflation then ASDA can sell goods with high profit margin.

GDP is likely to fall in Q4 (4^thquarter) of 2012 according to the report of Bank of England. It has a negative effect on ASDA because people are less likely to buy expenses products and services in that time period. However forecast describes that UK will recover its GDP growth rate in coming years but slowly. It definitely has a positive impact on ASDA in coming years. Because UK’s productivity will increase and Cost and prices will be stable. So customer will buy goods and service more than they bought in 2011 and 2012. I will suggest ASDA that in order take full advantage of stable GDP expand the business, open more new store, and increase the variety of products.      

Political Influence:

Political influence relates to changes in the government policies. Business should know about the changes that are putting in as an effect of:

Ø  Political decisions

Ø  Change in society

There is a freedom of movement and trade in the European Union. UK as a part of EU has led to increase competition from all European companies. So ASDA has a great effect on its cost and sales due high competition. ASDA has to increase its advertising cost to advertise more. Higher competition has also led ASDA to decrease their prices to maintain their customers. German store like LiDL and AILDI are the main rivals of the ASDA because of their cheap prices products.

In order to avoid this competition ASDA needs to provide excellent customer service. Not only ASDA also needs to keep their standard higher than their rivals. ASDA has increased its varieties of products time by time and trying to bring in their own branded products, which I believe is main reason that ASDA can still insist their customers to visit them.

Government’s future plan is to increase taxes on Oil because of it is running out of natural resources. It definitely has effect on ASDA’s Oil price. ASDA’s oil price will increased because tax on oil will be raised by government. It directly has effect on ASDA’s sales and less sales means less profit. Actually it’s have effect on ASDA’s image because ASDA is known as the cheapest store in UK but high prices due to taxes may lead a bad relationship between ASDA and its customers. ASDA image may also get affected. My suggestion would be that ASDA should stop buying and selling Oil in future to maintain its image and prices. ASDA’s low prices and Image are more important than the selling of Oil. ASDA should also suggest the Manufacture to product electric cars and products to reduce use of oil. ASDA start campaign which insists people reduce global and reduce the use if limited natural resources. It will have a positive effect on ASDA’s image because people will believe that ASDA’s cares about environment matters.  

     

Social Influence:

Social influence relates to change in society and social structure. Change in structure of the population, lifestyle and fashion affects business’s sales and productions. When population of the country increases, there is an increase in demands for goods and services. On other hand it also increases the number of the worker available for work. Alternative, when people move to particularly city or area (e.g. London) to settle, it increase demand for goods and services in that area only and also more people available for work in that city or area.

ASDA has to produce goods and service with the size of the population. According to BBC news report number of people over 65 is projected to increase by 23%, which is certainly increasing because of high standard of living in fact people aged 60’s death rate has been declined. It has positive effect on ASDA because there will general increase in demand for products and service. So ASDA’s sales will boost up. More sales mean more profit. Furthermore, another advantage of high population is that there will be also many people available to work at ASDA, so as it can hired very skilled worker. ASDA can react to this by increasing its variety of products and supply of goods and service to cover all people. There is also a negative point of high population, that there can be shortage of supply due high demand for goods and services. It can also boost up the inflation rates in future. Natural resources also may run out of natural resources. 70% of total increase in population of the UK is due to immigrants. 180,000 new immigrants will arrive in UK for next 25 years, which will have a great effect on ASDA’s sales, revenue, and supply. Again my suggestion is that ASDA should open new store and buy products in bulk to meet up the demands for the products of customers. ASDA should introduce new department which forecast the population changes in future to make sure ASDA supply right number of products to reduce their waste.