Evaluate how future economic, political, legal and social factors impact the strategy of an organization Economic Factors Economic factors have always been a concern for businesses like Deco’s this is because the economy is continuously changing. In 2008 we experienced a worldwide recession which affected every business after the stock market collapsed. Deco’s were also affected by the recession which resulted in their profits decreasing however they did find a way to benefit from the lack of flow of cash in the economy they did this by changes the prices of their products to match the state of the economy to continue to generate sales.
Deco’s is a high risk company to the recession and credit crunch, we can see this because of what happened when Woolworth were hit by the recession and failed to recover from it this shows how even a profitable company can fall if they cannot cope with the changes in the economic environment. Part of the economic crisis was inflation and the credit crunch, inflation is where there is a rise in the price of goods this means that customers were more likely to shop at discount stores rather than the likes of Tests cause they thought they were getting more for their money.
If the economy was then to go into a recession again this would have serious consequences for Tests which would leave them in a very risky position because after the first recession it would be too risky for Deco’s to lower their prices anymore without suffering too much loss for the company, in the worst case scenario Tests would end up having to close down stores in order to save money.
If the opposite were to happen which would be that the economy recover then this would allow Deco’s to have the freedom o increase their pricing which should lead to higher revenue and profits for their shareholders. Political Factors Political factors are a concern which all businesses have to face, if the government make changes to the law set in place this can affect businesses in either a positive or negative way such as a rise in tax would mean that customers have less disposable income which means they are not going to spend as much money in store as they would have normally.
Tax increase is also a problem for business such as Deco’s and Spar because they would have to pay more tax which means they will lose money Hereford lowering their profits. Another concern for these business is the Vat rise Evaluate how future economic, political, legal and social factors impact the strategy of an organization By Muffling Deco’s will have to pay more to their suppliers which results in Deco’s selling their products for a higher price in order to stop their profit from falling.
Fuel price rises are also another concern because Deco’s use fuel for things such as home deliveries and suppliers with fuel prices rising it is going to make these deliveries more costly which will either result in stopping certain services or rising prices which will have a negative effect on Deco’s customers because they will either have to pay more for the service or not receive it at all.
Legal Factors Legal factors are also important with the running of a business like Deco’s or Spar, these business need to ensure that they working within the laws enforced by the government and are up to date on any changes in the regulations, for example is the European Union became more strict on importing goods this could mean that certain reduces that Tests import could be declined because they don’t fit the regulations anymore and if Deco’s were found importing these goods after this law had been set into place they would be in trouble which would give Deco’s a bad review and they also would probably receive a large fine for breaking the law.
Social Factors Social factors are also an important issue which is continuously changing and that these businesses need to keep up to date on things such as a population increase or immigration can have a effect on Deco’s and Spar because they will find that there is higher demand for European food and other products so Deco’s and Spar would then need to purchase new products in order to fit the demand of the customers. If there was an increase in birth rate then Deco’s would need to purchase more baby related supplies or even purchase new products to fit this demand, so this is why it is important for Deco’s to understand what is going on within the general public so that they are able to fit the customers demand to ensure that they will not lose customers to competing chains who fit the customers needs better.