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 (4thquarter) 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.
