Impact of Business Environment Factors on Decision Making and Pricing

This report provides an analysis of the contemporary business environment, focusing on both internal and external factors that influence organizational operations and decision-making processes. It explores the impact of political, economic, social, and technological factors (PEST analysis) on a company's strategic choices, using Tesco as a case study. The report also employs SWOT analysis to evaluate the company's strengths, weaknesses, opportunities, and threats. Furthermore, the report examines how these factors affect pricing strategies, particularly cost-based pricing, and how competitor analysis influences product pricing decisions. The conclusion emphasizes the importance of considering both internal and external factors for effective decision-making and pricing strategies. The report includes references to academic sources to support its findings.

CONTEMPORARY
BUSINESS ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Business environment is basically all the factors whether internal or external which acts
upon the organization and influences their operations. This essay addresses the various internal
as well as external factors which influence the company' s environment, their impact on decision
making and factors affecting price of products.
MAIN BODY
TASK 1
External factors
Political factors
The main political factors include political stability of a country, tax policies, labour
laws, government policies etc. These all factors have an influential effect on the company. If the
political stability of the country is strong like less corruption then the companies operation within
that country would be stable enough. For example, The high impact of Brexit on the food prices
can affect TESCO in a variety of ways like they can be pressurized to seek much expensive UK
suppliers instead of EU suppliers.
Economic factors
These factors encompasses economic growth, interest rates, exchange rates etc. The
negative impact of this on organization is that if the unemployment rates are high then it would
be difficult for companies to retain and attract talented employees (Boone and et.al., 2019).
Besides this, if the economic growth of the country has flourished then it would be easy for the
company to operate as this the demand and supply chain will become more defined. For example
In 2017, the unemployment rates in UK has increased to 3% and is expected to rise in near
future. This can be difficult for TESCO to attract skilled candidates for its expansion and might
have to depend on the conventional recruitment for hiring and retaining the employees.
Social factors
Social factors encompasses the population rate, health consciousness, cultural barriers,
attitudes etc. The fluctuating trends of the consumers regarding the fashion and lifestyle can have
a negative impact on the organization as varied demographics will have varied cultures and
values (Phillips and Moutinho, 2018). On the other hand, growing awareness of the consumers
for the healthy diet can have positive impact on the food retailers. For example, nearly 47% of
the consumers in UK now focuses on low cholesterol low fat beverages and food and are looking

for low sugar alcoholic drinks which can help TESCO to emphasise more on healthy diets in
their supermarkets.
Technological factors
Technological factors include level of innovation, technological changes etc. The
increasing demand of the people for online platform can have positive impact on TESCO where
they are highly involved in providing majority of items on the online websites. But the heavy use
of advanced technology like fingerprint software to replace the use of card by their competitors
can have negative impact on them as TESCO spending in R & D is low.
Internal factors
SWOT analysis
Strength
TESCO dominates the Great Britain market
with around 5%market share.
The diversification strategy of TESCO is
imperative where their they provide a range of
product line and mix (Domanović and Janjić,
2018).
TESCO has global presence where they have
more than 6700 stores in around 14 countries.
Weakness
Some subsidiary's of TESCO have failed to
operate successfully and thus are more to
external factors.
The pressures from competitors have resulted
in price wars which has eventually eroded the
profit margin of TESCO suppliers.
Opportunities
Entering into a strategic partnership with
leading companies can be provide TESCO
with the golden opportunity to offer varied
products as well as attract the competitor's
customers.
There is a huge opportunity for TESCO to
grow their online business in various parts of
world as well as upgrade the delivery services.
Threats
The rising growth of their competitors like
Walmart, Carrefour, the market position of
TESCO make be threatened
The increasing unemployment rates in UK can
be a biggest threat for TESCO where it would
be difficult for them to attract skilled
candidates.

Effect on decision making
The impact of PEST highly impacts the decision making of TESCO where they have to
consider the each and every aspect while taking the major decisions for their organizations.
TESCO have to analyse the political stability of country where they want to expand their
business. Beside this, the demographic trend, social life, unemployment rate of the country
would also affect their decision as in high unemployment area, they would have to find various
ways to attract the candidates (Amankwah-Amoah and Wang, 2019). On the other hand, the
disposable income of the people living in that country would also be significant for them as the
high income means the consumers will spend heavy amount on consumer goods thus the pricing
decisions of TESCO would affect in a great way.
Factors impacting price of products
The most influential pricing model includes cost based pricing wherein the cost of the
production becomes the basis for fixing the final price which the consumers see while they
purchase the products. In short, in this the price of products and goods depends on the fixed
percentage of the total cost. In this model, The main factors which will impacts the pricing of the
goods of TESCO product cost and the competitor's price. Numerous costs like distribution cost,
promotion cost will be considered while fixing the selling price. Depending ion these costs, the
company fixes the final price on which the goods will be sold to the consumers. Like in TESCO,
while setting the final price of the newly launched food product, TESCO would have to analyse
the cost which they have incur in promoting it, producing it, distributing it to cover up the
overhead expenses (Namada, 2018). Besides this, price which the competitors charge also
becomes a prime factor while deciding the price of product. In free competitive market, it
becomes essential for the company to not only consider the prices offered by the competitors but
also their product's features. Like for example, if TESCO markets any product which has
additional features then they would have to revise their pricing in comparison to the competitors
which offering the same product.

Illustration 1: Cost based pricing
(Source: Cost based pricing, 2015)
CONCLUSION
It has been summarized that both external like political factors, economical factors as
well as internal factors becomes important which helps the organization in making decision s
regarding different aspects. Besides this, there are many forces like product cost which drives the
organization towards fixing the price of their products.

REFERENCES
Books and Journals
Amankwah-Amoah, J. and Wang, X., 2019. Opening editorial: contemporary business risks: an
overview and new research agenda.
Boone, L. E and et.al., 2019.Contemporary business. John Wiley & Sons.
Domanović, V. and Janjić, V., 2018. IMPLEMENTATION OF BUSINESS EXCELLENCE
MODELS IN CONTEMPORARY BUSINESS ENVIRONMENT. AUDITOR.21(81).
pp.51-61.
Namada, J.M., 2018. Organizational learning and competitive advantage. In Handbook of
Research on Knowledge Management for Contemporary Business Environments.(pp. 86-
104). IGI Global.
Phillips, P. and Moutinho, L., 2018. Business ethics. InContemporary Issues in Strategic
Management.(pp. 178-194). Routledge.
Online
Cost based pricing. 2015. [Online] Available Through: <https://marketing-insider.eu/cost-based-
pricing/>