Compare the environmental factors that apply in both the internal and external spheres of a business firm. Your report should explain the business economics concepts or theories and practice.

Assignment Brief

FELM4026 Financial and Economic Literacy for Managers

Learning outcomes assessed:

At the end of a module students will be expected to be able to:

1. Explain the principles of business and financial economics in an international context.
2. Identify and explain the impact of governmental, monetary and economic policy on decision making in a business context.
3. Describe and apply macro and micro concepts and models to business decision making.
4. Interpret financial information (external and internal) and apply to decision making within a business context.
5. Discuss the rationale and impact of decisions for business strategies to users and stakeholders.
6. Examine and discuss the relationship between theory, application in business and financial economics in an international context.

Assignment Questions

Write ONE report that addresses:

(a) Compare the environmental factors that apply in both the internal and external spheres of a business firm. Your report should explain the business economics concepts or theories and practice.  

(600 words) (15marks).

FELM4026 Financial and Economic Literacy for Managers

(Learning outcome 1 and 6) (TESCO PLC should be used here as a well-known retail company)

(b) The retail Sector has seen rapid changes in consumer shopping in recent years. Choose a well-known retail company (TESCO PLC) that trades globally and do a web search on how well it has performed in the past five years and how it has been influenced by various aspects of its business organisation. Your answer should include both the theory of business concepts and empirical evidences. (600 words) (25 marks). 

(Learning outcome 3 and 6)

(c) Changes in demand or supply cause markets to adjust. Whenever such changes occur the resulting ‘disequilibrium’ (i.e. a balance of demand and supply) will bring an automatic change in prices.  Discuss two or more businesses that supply goods and services to consumers. You may wish to include supermarkets such as Asda, or service sector firms like the London Underground and McDonalds. Your answer should include both the theory of these concepts and relevant hypothetical examples (600 words) (20 marks) 

(Learning Outcomes 3 and 6)

FELM4026 Financial and Economic Literacy for Managers

Managers need to be aware of financial intermediaries because they create financial instruments, for example, bank deposits and bank loans, which help the transfer of funds between lenders and borrowers. Identify four UK financial intermediaries and discuss their usefulness to a business organisation within the retail industry. Your answer should include both the theory of these concepts and hypothetical examples.  (600 words) (20 marks) Explain the principles of business and financial economics in an international context.

(Learning outcomes 4 and 5) 

5(a) Extract from the Zenobia Limited Accounts

For the Years Ended 31 March

Current Assets

Creditors

Net Current Assets

Operating Costs Breakdown

Required: FELM4026 Financial and Economic Literacy for Managers

Zenobia plc is in a service industry, dealing in telecommunications. Interpret the above financial ratios and recommend how to improve the performance in year 2019 (10 Marks)   

(b) Suppose that Zara has decided that she wants to pay herself £1550 each year for the next three years rather than deposit these amounts in her savings account.  If she can invest a lump-sum amount in a savings account that pays 3 percent interest per year, how much money does Alice need to deposit today to accomplish her goal? Explain the principles of business and financial economics in an international context.

(6 marks) [Hint: Present Value].

FELM4026 Financial and Economic Literacy for Managers

Tobe is proposing two mutually exclusive projects for a possible investment in the Greenford and Greenwich Boroughs of London. He has provided the following projected cash flows for your advice:

Year	Greenford Project	Greenwich Project
0	(£150,000)	(£175,000)
1	30,000	60,000
2	25,625	30,000
3	26,000	25,000
4	30,000	20,000
5	75,000	40,500

If the required rate of return on these projects is 6.75 percent, which would be chosen and why? Show your calculations/explanations.  (10 marks) [Hint: Net Present Value]

(100 words) (20 marks total) (Learning outcomes 4 and 5) 

Sample Answer

FELM4026: Financial & Economic Literacy for Managers

Tesco PLC is one of the UK’s largest retailers and operates in a competitive and fast-changing environment. To understand how Tesco succeeds and makes decisions, it is important to look at both internal and external environmental factors that affect the business. These environmental factors are studied in business economics to help managers make informed decisions.

Internal Environmental Factors

Internal environmental factors are those that exist within the company. These are the things Tesco can control to some extent. Important internal factors include:

1. Company Culture – Tesco’s work culture focuses on customer service, innovation, and efficiency. A positive and motivated workforce contributes to better customer experiences.

2. Human Resources – Tesco relies heavily on its staff, from store workers to managers. Training and development influence how well employees perform and how productive they are.

3. Organisational Structure – Tesco has a clear structure, with local managers reporting to regional teams. This helps in fast decision-making and accountability.

4. Financial Resources – Tesco’s ability to invest in technology, new stores, and marketing depends on its financial strength. Strong financial management is an internal factor that supports strategic decisions.

5. Innovation and Technology – Tesco’s internal investment in self-checkouts, Clubcard data analysis, and online shopping tools shows its use of technology to gain competitive advantage.

These internal factors shape how Tesco operates every day. When internal resources are strong, Tesco can better face external pressures.

External Environmental Factors

External environmental factors are those that happen outside the company and are mostly beyond Tesco’s control. However, Tesco must adapt to them. These include:

1. Political Factors – Tesco operates in many countries and must follow different laws and regulations, such as those related to taxation, food safety, and labour. For example, Brexit impacted Tesco`s supply chain and costs due to trade barriers and new import rules.

2. Economic Factors – Interest rates, inflation, and exchange rates affect customer spending and Tesco’s costs. In times of economic downturn (e.g., during COVID-19), people may spend less, affecting Tesco`s sales.

3. Social Factors – Trends such as healthy eating, ethical sourcing, and sustainability have influenced Tesco’s product range. Tesco has increased its plant-based products and reduced plastic packaging in response to social concerns.

4. Technological Factors – Advances in technology push Tesco to offer mobile apps, online delivery, and cashier-less stores. Tesco must invest to stay competitive in this area.

5. Environmental Factors – Climate change has made environmental sustainability more important. Tesco now uses electric delivery vans and aims to be carbon neutral.

6. Legal Factors – Tesco must comply with national and international laws. Recent laws on data protection (GDPR) and working conditions affect how Tesco operates.

Application of Business Economics Theories

In business economics, models like SWOT analysis and PESTLE analysis help businesses understand internal (Strengths and Weaknesses) and external (Opportunities and Threats) factors. For example:

• SWOT Analysis: Tesco’s strength could be its brand loyalty, while a weakness could be its reliance on the UK market. Opportunities include expanding in Asia, while threats include competition from Aldi and Lidl.

• PESTLE Analysis: This tool is especially helpful in understanding external factors: Political, Economic, Social, Technological, Legal, and Environmental.

Tesco must always balance internal capabilities with external conditions to make smart decisions. For example, when inflation is high (external), Tesco may have to cut internal costs or change suppliers to keep prices low for customers.

Continued...