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Political Factors and Government Support of businesses

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Political factors are factors that can affect by government decision e.g. direct support.

Political stability is a factor that can affect Tesco, political stability is how stable an economy is, and how well firms can make predictions on this, for example is Tesco can make an assumption that ice and Ice related products will be the most profitable items in their stores in the summer season regardless of the economic climate, due to the frequent demand for the products and this certain time.

Vice Versa is political instability this is when a business cannot predict ahead in term of products that would be on high demand, this has happened in the UK due to poor weather, Tesco predicted that clothing products such as t shirt and vest would have been highly popular so the business decided to stock up but because of the constant rain and poor weather and also the recession, the products did not sell much.

The environmental tax was introduced in 1996, this tax means that vehicles that use oil and petrol would be more costly to own, Tesco use many vehicles that need these fuels to import their stock or deliver their products. The business decided to invest to make their vehicles more environmentally friendly by purchasing new vehicles that are powered by battery packs which is the hybrid series.

By doing this the business found a way to minimise environmental tax as well as improve their image to make it look like the firm is environmentally friendly and behave ethically.

This affected the shareholder of Tesco because the amount of dividends they would receive would decrease due to this investment in the short term.

Government Support

Government support is the aid that the government provides to business to help the business grow, expand and compete with opposing firms.

This affect Tesco because the supermarket retail industry is highly competitive, the firm is always in competition with firm such as Asda and Morrison’s because they also offer good quality products and a affordable price, the firms also have their own brand in their store which is significantly cheaper for example Tesco brand Lemonade would cost around 17p whereas Schweppes lemonade would cost up to £1.

Competition is good for the business so they are constantly looking for new ways to attract and satisfy consumer needs. The government can also step in if they think a business is too dominate in the specific business sector.

This will affect the shareholders of the firm, due to strategic planning the business would receive a higher demand for the products and thus increasing the shareholders dividends.

Javier Vazquez has written this article. He is currently working for a Google Ads expert digital agency and at the moment Javier is helping out the holiday agency apartamento vacacional San Sebastian, a short-term holiday apartment company in San Sebastian, Spain. Javier loves listening to Pink Floyd and God Is And Astronaut, and in his free time he enjoys playing with his Oculus VR device and reading about philosophy.

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