Explain How Fiscal and Monetary Policy Decisions Have Affected a Selected Business

Every item you purchase legally has a VAT which increases the overall cost of the item. This is normally a 20% increase which is quite costly- depending on the item. If you were to buy a computer for £500(no VAT) then the final price would be £600. This means many families are forced into poverty while they have to struggle on surviving on minimum wage.

Tesco is the biggest private sector employers and market leader in the UK supermarket sector.

Tesco PLC is a major food retailer that operates primarily in the United Kingdom. The company operates 2,291 supermarkets, superstores and convenience stores in the United Kingdom, the rest of Europe and Asia. The company also offers financial products, such as insurance and banking services, as well as electrical appliances and telecommunication products. For the year 2007 to date, Tesco PLC achieved revenues that totaled £ 46,611 million, an increase of 10.9% against the previous year revenues that were £42,016 million. Tesco is one of the largest food retailers in the world, operating around 2,318 stores and employing over 326,000 people.

As a business Tesco needs to be aware of the social markets around them as and when they arise. For instance in August leading up to the new school year in September they will have school uniforms, stationary and other school equipment in stock. If they didn’t then parents may choose to do other shopping such as groceries in competitors stores who do provide such merchandise or who are closer to specialist retailers to save on multiple trips. This could impact on the businesses profits, especially if the store was in an area which had a high, school age population.

Tariff and Tax: The trade of a business organization also gets affected by the tariff and Tax laws. This could influence both positively or negatively. If the global market’s tax and tariff rate is high then TESCO could face difficulties to compete with those countries companies.

Monetary Policy, in the United States, is the process by which the Federal Reserve controls the money supply to promote economic growth and stability. It is based on the relationship between interest rates of the economy and the total supply of money. The Federal Reserve uses a variety of monetary policy tools to control one or both of these.

Another internal economy of scale from which Tesco benefit is technical. As they grow, they are able to use the latest equipment and incorporate new methods of production. An example of is their new self-service checkouts from which people can purchases their goods from a machine using a scanner. This increases efficiency and productivity, reducing average costs of output because it means they don’t have to employ as many workers.

Tesco is the Public Limited Company I will explore. To understand the size of Tesco, it has stores in 12 countries across Asia and Europe. There is a sum of 3739 Tesco stores within the UK (as of 2017). They also have 460,000 Colleagues at the end of 2016. This shows the size of Tesco and gets us to understand the effect that Tesco has on the UK’s economy and needs and goods of UK’s communities.

Monetary policy uses changes in the quantity of money to alter interest rates, which in turn affect the level of overall spending . “The object of monetary policy is to influence the nation’s economic performance, as measured by inflation”, the employment rate and the gross domestic product, an aggregate measure of economic output. Monetary policy is controlled by

      Monetary policy is under the control of the Federal Reserve System and is completely discretionary. It is the changes in interest rates and money supply to expand or contract aggregate demand. In a recession, the Fed will lower interest rates and increase the money supply. The Federal Reserve System’s control over the money supply is the key Mechanism of monetary policy. They use 3 monetary policy tools- Reserve Requirements, Discount Rates/Interest Rates, and Open Market Operations. The reserve requirement is the percentage of bank deposits a bank must hold in reserves and cannot loan out. By raising or lowering the reserve requirements, the Fed controls the amount of loanable funds. The interest rate is the amount the FED charges private banks, so they can meet the reserve requirements. The prime rate is currently set at 5%. If the Interest rate is low, the banks will borrow more money from the FED and the money supply will increase. Interest rates have been above average for the past 20 years, but are currently considered low. Open Market Operations is the most effective and most used

Profits for Tesco’s operations in Europe, Asia and Ireland increased by 78% during the last fiscal year. The company has a strong brand image, and is associated with good quality, trustworthy goods that represent excellent value. Tesco’s innovative ways of improving the customer shopping experience, as well as its efforts to branch out into finance and insurance have also capitalized on this.

Yahoo! Finance (2012) describes Tesco PLC as a company that "operates stores that primarily offer food products, as well as general merchandise, clothing products, and electrical products." In addition to that, Tesco PLC is also involved in the provision of insurance, financial as well as banking (retail) services (Yahoo! Finance, 2012). Taking into consideration the number of branches it has in various parts of the world, Tesco PLC can be regarded one of the largest retailers around the globe. Having been established sometimes in the year 1919 by Jack Cohen, the company has surely come a long way (Tesco, 2012). The phenomenal growth of Tesco PLC over time can largely be attributed to both the unwavering vision of the founder and the selection of a competent team of managers to run the company's operations during its growth phase. Currently, the company top management team comprises of its CEO Andrew Clarke, its Chief Financial Officer Laurie Mcllwee and Tim

The period following a recession, where the GDP of the economy is increasing, is encapsulated in the term ‘recovery’. Subsequently, an increase in national output would ensue, thus prompting the recovery and growth of the economy. As opposed to the previously existent contractionary period, the economy would now be working at higher capacity allowing factors such as the rate of unemployment to decline, in addition to increasing productivity. Illustrated in the diagram below shows the business cycle and recovery period.

Timing of the business cycle is not predictable, but its phases seem to be. Many economists site four phases—prosperity, liquidation, depression, and recovery. During a period of prosperity, a rise in production leads to increases in employment, wages, and profits. Obstacles then begin to obstruct further expansion. Production costs can increase, helping create a rise in prices, and

However, reduction in corporation tax rates may mean less revenue collected by government from CT. In 2014, Houlder reported that businesses will pay approximately £8bn less CT a year by 2016-17. Indicating, corporation tax cuts are costing the UK government more than £5bn a year causing other public funds to be cut. Reduction in CT liability may negatively affect “highly leveraged companies because…after-tax cost