Economic Factors Affecting Tesco
Tesco is one of the largest food retail stores across the globe. Besides food, the store has also expanded its line of business to toiletries, household goods, clothing and electrical items. It has been successful over the years it has been in operation. However, like any other business, it faces economic challenges and it affects its profitability.
Laws and government regulations
Laws and government regulations are some of the major economic challenges facing Tesco. Being a successful business, its competitive advantage relates to its physical presence. As a result, regulations governing monopolies as well as competition have been identified through analysis.
State regulations and laws are aimed at protecting consumers. They also create an opportunity for entrepreneurs to compete in an economic market based on consumer law. Due to the current economy, many businesses are failing even before they enter the market. Therefore, Tesco has not been able to reach out to the markets it desires because of state regulations.
Regulations and laws also affect the pricing of products and services by Tesco. There is always the risk of paying high prices. Even though the company has never been assessed if it risks consumer exploitation or not, there are chances that an assessment will affect its dominance in the market.
Additionally, because of government regulations and laws Planning Permission has to be taken care of by Tesco. It is highly regulated in the UK and it plays a crucial role in determining the success of Tesco in the areas it occupies and new markets that the company has explored.
High unemployment rates
Tesco is negatively affected by economic elements because it affects its price profits and the cost of its products and services. Unemployment rate is one of the factors that affect the company’s profitability. Unemployment decreases the demand for its products and services and in the end, its profitability.
Unemployment is a major concern to the company because it is beyond its control. It affects its marketing opportunities and its overall performance in local and international markets. Even though Tesco is expanding its operations globally, it doesn’t make the profits it would be able to make because of unemployment. Its income over the past few years have greatly increased but since it is largely dependent on UK market; unemployment rate in the country will mean low profits for Tesco.
There are also availability of substitutes for Tesco’s products and services. The company has been forced to review the prices of its products and services because of substitutes. Substitutes affect the demand of products and services produced by Tesco.
These economic factors are beyond the control of Tesco. They affect the company’s performance and as a result, marketing mix can be very intense. Therefore, Tesco will be badly affected by any economic slowdown in the UK and more specifically the UK’s food market. This is based on the fact that the company is exposed to a wide range of market concentration risks.
Other economic factors affecting Tesco includes the demand and supply of its products. With high demand, the company makes huge profits and vice versa.
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