Lewis Ranis-Fei Model of Economic Development

Lewis Ranis-Fei Model of Economic Development William Arthur Lewis, with his most famous published work, â€Å"Economic Development with Unlimited Supplies of Labour† (Manchester School, May 1954) and â€Å"The Theory of Economic Growth† (Allen and Unwin, 1955), made a great contribution to the theories of economic development. Based on his findings, Ranis and Fei succeeded to extend the initial Lewis model and assessed the changes in the agricultural and industrial labour in more detail. I will start this paper by introducing the foundations of the model before following with the implications, basing the majority of my arguments on the analysis by Ranis and Fei in â€Å"A Theory of Economic Development† (1961). The central idea behind the Lewis model is fairly simple. Lewis divided labour force into two differentiated groups â€Å"subsistence sector† and â€Å"capitalist sector† where the former is assumed to contain unlimited supply and consequently, a pool of surplus labour[1] that sets labour-supply conditions for the latter. The concept of a dual economy is heavily criticised. As Leeson (1982) pointed out, â€Å"dual economy† models are â€Å"held to imply a false picture of the nature of the historical process of change in underdeveloped countries†. In this paper, I will not assess the strengths or weaknesses of the model, but instead, for the sake of simplicity and clarity, assume that the sectors are agricultural and industrial, respectively. Subsequently, Ranis and Feis extension to Lewis model can be analysed. They observed the model by reading it from left to right and assessed the changes in the output and wage as more and more people moved from agriculture to the industry. A new concept was added namely, disguised unemployment, which appears in the traditional subsistence sector. The marginal product of labour, which is observed as the slope of the production function, in agricultural sector is lower than in industry in fact, it is zero before point B on Figure 1.3. Under competitive assumptions, the real wage rate would fall to zero, but due to the presence of institutional or non-market forces, the institutional wage is sustained. Therefore, there are gains to be had by switching resources away to the industrial sector. Nevertheless, it is generally not likely to happen because the market, left on its own, does not change. If the industrial sector does pay according to marginal product, then, as noted by Ray (199 8), there would be efficiency gains available as long as the marginal product of the agricultural labour is less than the wage, whether it is zero or not. By decreasing the labour force in agriculture by a small amount (whilst still remaining in the surplus labour area), the total wage bill in agriculture falls along the diagonal straight line in Figure 1.3 , provided that the wage in agriculture does not rise. Since output does not fall, the reduction in the total wage bill gives an economy an agricultural surplus. Only at point C will this process come to an end because there is no more disguised unemployment it only appears at points at which the marginal product of labour is less than the institutional wage. Hence, condition for the existence of disguised unemployment is: W > MPL Ranis and Fei subsequently claimed that the average wage bill in agricultural sector is no longer measured as a straight line. At point C, the slope of the production function is parallel to the wage bill line, yielding that the disguised unemployment is no longer observed. Furthermore, beyond point C (when the disguisedly unemployed have been absorbed) the marginal product of labour exceeds the traditionally given wage rate (Ranis and Fei, 1961). The wage in agriculture begins to rise, because it becomes profitable to bid for labour[2]. As a result, wage bill falls more slowly. This brings me to the central point of the paper capturing the â€Å"turning points† in the Lewis-Ranis-Fei model. Ranis and Fei divided the model into three phases[3]. I have used Figure 1.1. to illustrate this issue. This figure contains the demand curves for labour by industry (downward sloping). The supply curve is initially a vertical line, because of surplus labour. Hence, the intersection of the labour and demand curves gives the equivalent quantity of labour and wage rate x and w*, respectively. Since the economy is in the surplus phase, there will be a certain quantity of labour transferring from agricultural to industrial sector, which explains the increase of the labour in industry from x to y whilst keeping the wage rate constant. The wage rate remains constant as long as there is surplus labour in the agriculture that can be employed more productively in the industry at a constant subsistence wage rate (Berry, 1970). It must be noted though that for any further investment, the demand curve for labour is going to shift to a point where the compensatory wage must rise. The phase where the supply wage of labour tilts upwards is referred to as the â€Å"first turning point†. At this point, redundant labour disappears altogether (Jorgenson, 1967). Employment in the industry would have risen as far as point z had the turning point not occurred. However, since it did and since the wage rate began to rise as demand was pushed upwards, employment can only rise up to z where demand meets supply. As I briefly mentioned earlier, it is evident that as more and more agricultural workers are withdrawn and no longer demand a portion of the agricultural goods, the surplus of agricultural goods begins to appear. It must be noted that each individual that moves from agricultural sector to the industry carries their own subsistence bundle together with them, meaning that they must be compensated for the transfer. Ranis and Fei named the portion of total agricultural output in excess of the consumption requirements of the agricultural labour force at the institutional wage as the total agricultural surplus TAS (Ranis and Fei, 1961). They described the TAS (captured in Figure 1.3) as the vertical distance between the straight line OX and the total physical productivity curve (with the exception of phase 3 where the distance will be reduced). In order to find out the required minimum industrial wage, the average wage must be multiplied by the relative price between agriculture and industry. In the surplus phase, it remains constant, because the average agricultural surplus is not changing (captured in Figure 1.2.). At this point, an expansion in the industrial sector would not drive up the wage rate. If an individual that moves from agriculture to the industry when labour in agriculture is at the surplus phase, there will be no compensation needed for that particular individual, as he carries his own food basket to the industry. In fact, industrial wage is constant and this individual is not worse off as a result. At the second phase, however, the average agricultural surplus begins to decline, because there will not be sufficient agricultural output to feed all the new industrial arrivals at the institutional wage level (Ranis and Fei, 1961). In other words, the same wage would not compensate them for the move anymore, b ecause the agricultural surplus has fallen below the average wage (A.W.) and it is not possible for them to buy A.W. units of food. As a result, the supply curve tilts up. There appears to be a worsening of the terms of trade. The relative prices begin to increase and in order to compensate for this price effect and facilitate the move, the industrial wage must rise. The wage must also compensate for the declining agricultural surplus and a movement of the terms of trade against industry. Put differently, the shortage of agricultural goods measured in agricultural surplus lead to a rise in the industrial wage measured in terms of industrial goods. Simultaneously, the agriculture gains some extra resources, because the agricultural output is divided between less people as more and more people move away from agriculture. If it happened that the individuals at the surplus zone wanted to consume more than the average, the government could step in and tax them to restrict their consumption. That surplus could then be used up in the investment to feed those individuals that move to the industry. In addition, it could also be used to support the new industrial arrivals as the wage rate in industry is set to increase. During phase three, this process becomes even more apparent as the now commercialized wage in agriculture becomes operative. Hence, there is an even sharper decrease in the agricultural surplus. What is more, beyond the â€Å"commercialization† point, the contribution from a worker is greater than the wage (as MPL > W). This, on the other hand, increases agricultural wage rate as was seen in Figure 1.3. From the p revious results, it is clear that after a second turning point the industry would have to compensate even more to get the workers. As a result, it gives an incentive to bargain for a worker. According to Chen (2005), Lewis-Ranis-Fei model should be considered a classical model because of the usage of industrial wage. However, Jorgenson claims that once the commercialization point is reached, instead of the classical approach, the neo-classical theory of growth for an advanced economy is to be observed (Jorgenson, 1967). Berry came to a significant conclusion of the Lewis-Ranis-Fei model. In effect, a shift in the terms of trade has a negative effect on the industry, forcing capitalist employers to pay a higher wage and thus generating less profits and less investment (Berry, 1970). However, there is a role of interdependence between the two sectors (Ranis and Fei). In fact, raising the price of goods in agriculture would give an agricultural sector an incentive to raise the output, thus encouraging investments in agriculture, leading to a decline in the terms of trade, which in turn lowers wages, increases profits and generates more investment in the industry. Consequently, there will be a balanced expansion in both, agriculture and industry. In other words, what Ranis and Fei observed was that the allocation of investment funds must be such that as to â€Å"continuously sustain investment incentives in both sectors of the economy†. The terms of trade should not deteriorate substantially agai nst either sector. I have illustrated this in Figure 2. The lower diagram in Figure 2 contains a supply curve S and a demand curve D1. Initially, the size of industrial labour force is OB and the industrial sector is making a profit equal to the area B0. This profit can be considered as an investment fund and could be allocated in part to both sectors. Consequently, the demand curve shifts up and there will be a new intersection point which lies on the balanced-growth path and this new equilibrium allows the economy to enjoy even further profits. After the first turning point, there will be a small proportion of profit that will be forgone because the first turning point occurs, yet the overall amount of profit increases. Nevertheless, it becomes clear that it is reasonable to have a policy to invest in both sectors as the economy will then maintain the balanced growth path. To conclude, I have shown the main ideas behind the Lewis-Ranis-Fei model and used the consecutive analysis of the model to explain why it is important to invest in both sectors in order to remain on the balanced growth path and maintain the rate of industrialization. The existence of surplus labour in agriculture allows the industry to continue to pay the institutional wage and therefore enjoy further profits and continued investment. At the same time, as more and more people are moving away from agriculture, there will be some amount of agricultural surplus that can be used up to fuel further development. This process continues until the surplus labour is absorbed. Hence, saving and investment are a crucial part in the Lewis-Ranis-Fei to support economic development.

The Black Lace Fan my Mother Gave me Essay examples -- English Literat

The Black Lace Fan my Mother Gave me Commentary on â€Å"The Black Lace Fan my Mother Gave me† by Eavan Bolland The Black Lace Fan my Mother Gave me by Eavan Bolland reflects on the last of a love life of a couple during pre-war Paris using a symbol, a ‘Black Lace Fan’. Bolland achieves this through the use of weather imagery, the changing of his tense from past to present, and using literary features such as simile, metaphor, personification and repetition. In the first stanza of the poem, Bolland disconcerts the reader by using the diction â€Å"it† twice, though representing different things. The first ‘it’ represents the lace and the second ‘it’ is used to substitute the climate of the setting. â€Å"It was stifling. /A starless drought made the nights stormy.† This quotation starts building up the tension in the reader’s mind because of the suffocated feeling the poet creates by mentioning the word â€Å"stifling† in a short sentence that creates a frustrated tone. The metaphor describing the stormy night also produces a sense of insecurity through the weather imagery by expressing anxiety through contradicting dictions like â€Å"drought† and â€Å"stormy†. The first two lines of the second stanza have a repetition of the word â€Å"they† as the first word of each line. This repetition is used to create a rhythm and to describe the routine of the man and woman meeting in cafes and the woman always being early. â€Å"They met in cafes. She was always early. / He was late. That evening he was later. / They wrapped the fan. He looked at his watch.† The syntax of this quotation produces a tone that is frantic because the sentences are short and the reader tends to read that part of the poem fast, and with a jerk at the middle of each... ... express that the man was lost and was unheard of, though what happens to the man next is left to the reader’s imagination. The last stanza completely changes subject and describes the actions of a blackbird in a summer morning. The weather once again is a factor in this poem and the climatic conditions are described using the diction â€Å"sultry† and â€Å"heat†. The last sentence, â€Å"Suddenly she puts out her wing – the whole flirtatious span of it† is a personification that is used to express the symbolism of the black lace fan. Finally, this poem reflects upon the story of a loving couple and the significance of the black lace, in the woman’s life, who loses her man. The poem is expressed by the use of weather imagery, the changing of tenses from past to present, and also the use of literary features such as metaphors, simile, personification and repetition.

Fossil Fuels and Global Warming Essay

The use of fossil fuels as the primary source of energy has unwittingly landed humanity into its greatest challenge yet. As oil and coal are burnt up, the greenhouse gases are causing the melting of polar ice, leading to a chain reaction that threatens every other aspect of the ecosystem. This paper looks at the crisis that fossil fuels have brought about, as well exploring existent and proposed solutions, both at the collective and the individual level. Introduction Global warming technically refers to the overall rise in global temperatures. Its widespread use however also encompasses the courses of this rise in temperatures and the effects thereof. More importantly, it is synonymous with the role of human beings’ activity in contributing to these rises. Carbon emissions from planes, cars and industrial plants rise up into the atmosphere and create a blanket of heavy air that traps heat that radiates onto the earth’s surface. By not letting heat escape, over time the globe becomes warmer. This has a direct effect on the flow of ocean currents, directly responsible for weather patterns. It also causes the melting of polar ice, which besides also affecting climate, also causes the sea levels to rise. (Guggenheim D & Gore Albert, 2006). Effects of Global Warming Some critics are skeptical of the whole notion of global warming. Despite this criticism, it has grabbed the attention of masses, and they are increasingly examining its effects. The following is a brief insight; Agriculture is fundamental to life, as it is the source of food. Without food, human beings are at risk of extinction, and conflicts are bound to arise. Yet global warming is threatening agriculture. Due to climate change, the environments where bees and other creatures vital to pollination are used to dwelling in are no longer suitable, and the bees are disappearing in droves. More than that, rainfall and sunshine patterns are changing, rendering farmlands unsuitable for the crops that are used to growing there normally. The combined effect is that agricultural yields are negatively affected, and there arises a shortage in overall supply of food worldwide. In early 2008, with the human race hungrier, food prices rose to their highest levels ever, and inflation in many countries became unprecedented. This trend came to a head at the beginning of 2008, with riots and revolts in numerous countries. In the Philippines, soldiers were deployed to guard food crop farms from being raided. Haitians on their part overthrew their government in protest over untenable food costs. It is also here that people were reduced to eating mud, if only to fill up their stomachs. Similar scenarios were reported in Sierra Leone, Nigeria, and a good number of Asian emerging economies. Global warming is not the only factor in bringing about food shortage, but it does play a major role, and has come to the attention of masses around the globe that are willing to act to mitigate the negative effects (Auken, 2008). Another set of negative effect that has been tied to global warming are the now prevalent natural disasters pounding various parts of the world. Hurricanes that have brought devastation to New Orleans, Mexico and more recently Jamaica over the past few seasons have been the worst in recorded history. They have been attributed to rises in sea level resulting from glacial melts owing to global warming. They have brought unprecedented destruction, forcing many coastal cities to adopt new strategies to combat such events. Billions of dollars are now being invested in disaster prevention, and are resulting in an increase in taxation. Similar amounts are being invested in reconstruction efforts to restore damaged infrastructure. Housing models are being radically changed, with cheaper housing being favored to cut losses in case of any eventualities. Prevalent Solutions Such tools as carbon footprints and green qualifications are now being employed to influence the conduct of the common person to contribute toward reducing their personal negative impact on the globe; consumers in Europe and America are increasingly becoming conscious to purchase food with minimal carbon footprints for example. Carbon footprints refer to the amount of carbon dioxide emitted during the process of developing a product from scratch to the point where it gets to the consumer. In effect, products which use plenty of machinery to produce and have to be transported by heavily fuel reliant means such as planes and trucks have much higher carbon footprints than those that are produced using minimal fossil energy and are close to the market. Labels indicating the carbon footprint are put on products by organizations who take the initiative, in a bid to persuade consumers to buy the least destructive products. And the method seems to be working. In Europe especially, consumers are increasingly cutting on their contributions environmental degradation and products with high carbon footprints and finding increasingly limited market. Closely related is the issue of organic foods. These are gaining preference for the reason that they are produced using only natural material, rather than chemicals that are hazardous to human beings and detrimental to the environment. The level to which a product is free of chemical toxicity is referred to as its organic rating, just like carbon footprints are used to depict the level of carbon emissions of a product. Publications and other forms of media are used by proactive organizations to sensitize the public on which products are environmentally friendly, and these do have a major influence on consumer choices. The result is that farmers serving the European markets are using increasingly less machinery and chemicals, thereby reducing the emissions and chemical pollution of the agricultural industry to the environment. Manufacturers also have to adapt to a new way of production- with their carbon footprints being closely monitored, they are increasingly adjusting their production processes to get favorable ratings (Organic Trade Association, 2008). My Solution Proposal In the fight against global warming, I believe efforts should now be geared toward experiments on entirely new lifestyles and forms of organization, with successful experiments being replicated across the globe. In my case, I propose an experiment with a new eco city, preferably in an arid area, at a waterfront (e. g. a lake) for sustainability of life. This will kill quite a few birds with one stone, as the problems of food insecurity, unsustainable energy and wasted land would all be addressed. Implementation In designing such an urban development, cutting edge technology and radical thinking are required at every step of the way. Ecological urban planning concepts are necessary to take advantage of the lake breeze, which can be harnessed for wind energy to cater for a significant part of the new city’s energy requirements. The city plan should also allow for the breeze to penetrate the streets and residential areas rather than block it. When this is done, ecological architecture can be employed in designing self-cooling buildings, which have the advantage of not only saving on air conditioning. This is desirable because it both saves on energy and preserves the environment, seeing as most air conditioners are environmentally harmful. The urban plan also needs to take care of existing ecosystems – if there are any streams, trees or wildlife habitations, the city and building designs should be made around them. Buildings will need to be fitted with solar panels to take advantage of the abundant sun in arid lands, thus further adding to the energy supply provided by wind. Wherever possible, buildings should have green roofing. This is where gardens are made on top of roofs for purposes of food, beautification and more. This will have a number of advantages; food will be more abundant, a cool microclimate will be created (further reducing the need for air conditioning), and the carbon footprint will be drastically reduced or eliminated. The buildings can also be constructed with double walls using recycled material (for sustainability). Double walls have the effect of keeping temperatures low when it’s hot outside and warm when it’s cold outside. Stretches of idle land just outside the city can be used to plant ecologically friendly biofuel crops such as Jatropha Carcus, which is drought-resistant, to complete whatever energy requirements that may remain. Being at the lakefront, clean water for most chores might prove a challenge to get, thus the need to preserve and recycle whatever water can be harnessed. One of the ways to do this is by use of a Sewerage Treatment Plant (STP), which filters sewerage to produce water for irrigation and gas for cooking. This way, other clean sources of water can be less burdened. Energy needs will also be met. Gardens and parks should be organic to reduce the amount of fertilizer and chemical pesticides necessary to maintain them. Sustaining the Gains All the outlined gains of an eco-city would be to naught if the residents do not sustain them. Residents should be encouraged to carpool when going to work, or better still to cycle to work to minimize the carbon footprint. As much as possible, recycled material should be used and other material should be recycled. The use of plastic bags should be banned, instead encouraging the use of bio-degradable baskets. For lighting, energy-saving fluorescent bulbs and tubes should be used. Each home should have a garden in its compound, with at least a tree or two. The gardens, for domestic food consumption, should be grown organically. The beach area should be kept clean, with no littering or dumping of chemicals or effluent into the lake. This will help preserve marine life and overall aesthetic beauty. If such a city can be constructed, myriad gains will have been made; Positive Environmental Impact The immediate impact of all the new vegetation – the green roofs, home gardens, biofuel crops, etc – would be the creation of a cool microclimate in the developed area. Being in front of a lake, the arid land as it currently is cannot benefit because all the moisture being brought in by the breeze either evaporates or travels long distances inland, benefiting other areas with vegetation. With the new vegetation however, the moisture would be trapped, and as the plants perspire, vapor would rise into the local sky, thereby creating rain at that local level. The overall reduced heat levels would also slow down evaporation rates, ensuring that the soil remains moist, helped also by the increased rain. Naturally, more rain is bound to increase vegetation cover, further enhancing the value of the land and creating a positive cycle. Positive Impact on Soil As the vegetation grows and dies, the soil would be enriched organically as the foliage decomposes, increasing its productivity. This happens when the decomposed foliage turns into humus, and mixes with the local sand. This has the effect of bonding the soil together while creating an acceptable level of drainage and porosity within it. If the soil is further enriched with the waste products of the STP process, the overall composition of the soil will become highly favorable to agriculture. It would also be conducive for worms and other soil organisms to grow, which in turn further enrich the soil with vital nutrients. Positive Economic Impact Another area of profound impact will be economic; from the time of construction right through to the establishment of offices and residences, employment opportunities will abound for both locals and immigrants. The eco-friendliness of the area will also attract investment – a lot of which these days is conscientious – thus spurring growth. Being at the lakefront, the city is also highly likely to attract considerable international tourism as tourists seek clean and new areas to escape from winter or simply to unwind. At the same time, the marine fishing industry is bound to experience a boost from the clean fishing areas, with ready market locally provided by residents within the new city. They may even be able to export, depending on other factors. At the domestic level, people will be able to grow food and reduce their household budget. They may even be able to sell some of it and generate income – the city can be a net exporter of food. Conclusion Global warming has blessed the world with a lot to ponder upon. With effects ranging from food shortage to natural catastrophes, mitigation should not be a question of whether, but how and when. Coupled with this is the need for newer energy sources, to reduce the globe’s dependency on fossil fuels. With concerted efforts and due diligence, the problems that these two factors portend can be contained to an extent. I propose an experiment with an eco city built on a waterfront as a means of studying how human beings can adopt a top down approach to addressing these pressing issues. I believe the gains to be made will not just be environmental but economic as well. Works Cited Associated press, June 20th 2007, Fossil fuels Tycoon plans largest wind farm- green machines- MSNBC. com, Retrieved 12th Feb 2009. , http://www. msnbc. msn. com/id/19231397 Auken, B. V, 15th April 2008, Amid mounting food crisis, governments fear revolution of the hungry, Retrieved 11th Sep, 2008, http://www. wsws. org/articles/2008/apr2008/food-a15. shtml The British Council (no date). Effects of Global Warming: Social Impact-Climate Change. Retrieved 12th Feb 2009. http://www. britishcouncil. org/climatechange-fact-sheets-global-warming-social-impact. htm Green Africa Foundation, 2008, Retrieved 12th Feb 2009, http://greenafricafoundation. org Guggenheim D, Gore Albert, 2006. An Inconvenient Truth (Film) Organic Trade Association (2008). NOSB Definition of Organic. Retrieved 12th Feb 2009. http://www. ota. com/standards/nosb/definition. html United States Environmental Protection Agency, Heat Island Effect. Retrieved 12th Feb 2009. http://www. epa. gov/heatisland/

Tesco Business Strategy Essay Example Pdf - Free Essay Example

Sample details Pages: 8 Words: 2492 Downloads: 6 Date added: 2017/06/26 Category Business Essay Type Analytical essay Level High school Did you like this example? Organisations in the current global economic landscape face both internal and external challenges within the fast, changing business environment in which they operate, and the supermarket industry is no exception. The general consensus, infact, among academics in relation to this sector, points to what Sparks (2000) in Smith and Elliot (2012, p.678) summarises as â€Å"an intensely competitive environment, where there is constant pressure to maximize profitability and reduce costs.† Studies into supermarkets that have been conducted to assess the pressures of everyday management have also concluded that the industry is results driven, with little work life balance and a hugely straining environment where those in positions of responsibility are essentially asked to run their own business. (See Grugulis, Bozkurt and Clegg, 2010; Ogbonna and Wilkinson, 2003). Don’t waste time! Our writers will create an original "Tesco Business Strategy Essay Example Pdf" essay for you Create order Clearly an industry with high expectations, the important question to answer is what are the internal and external factors which drive the business environment to be shaped in this way. More importantly, we must consider how these factors will essentially influence the future business environment for a large supermarket chain and what they will need to do to be a success in the industry. This paper will therefore analyse the current business environment for Britains largest supermarket chain, Tesco, essentially gaining an understanding of the factors affecting its everyday operations, decisions and ultimately successes or failures. Using the frameworks of SWOT and PEST analysis in order to assess the business environment, there will also be a suggestion as to how the future looks for the most successful retail chain in Britain. Before going on to analyse Tesco, it is important to understand exactly what is meant by the term ‘business environment. As a concept, the bus iness environment is not easy to pin down or define, due to its ‘myriad nature (Ward et al., 1995). Bourgoin and Pleskovic, (2006, p.197) provide a broad view calling it â€Å"the nexus of policies, institutions, physical infrastructure, human resources, and geographic features that influence the efficiency with which firms and industries operate.† In this respect, it seems as though the business environment is the way an organisation carries out all aspects of its functions. Various external and internal factors can affect this, and this is what shapes the business environment. Exactly what these factors are though, and how much they really affect the business environment for a particular business or industry is open to interpretation and a certain level of ambiguity is possible. With this thought in mind we can consider all sorts of internal and external factors that affect the operations and functions of Tesco and the environment in which it operates. Given this assumption, it seems logical to combine the use of both PEST and SWOT analysis as a tool for gaining an insight into Britains largest supermarket chain if only to point out the possibility for a wide variety of factors affecting its operations and decisions. While PEST (Political, economic, social and technological) aids in providing what Ward and Rivani (2005) call a ‘satellite view of the external environment, an accurate SWOT (strengths, weaknesses, opportunities, threats) enables the opportunity to assess the company from an internal perspective as well as seeking to understand the external influences which can both threaten and improve the organisations future prospects. It is important to understand, however, that although both PEST and SWOT analysis are effective, this does not necessarily mean that the outcome of either framework analysis interlinks or in fact that any aspect of them will definitely apply to Tesco. There could potentially be a number of poli tical factors which shape the business environment of Tesco but at the same time, only a small number of social and technological factors. Equally, there could be a limited number of opportunities with a large amount of threats, or vice versa. Ultimately, the frameworks that are being used for analysis are static, but a business environment is ever changing. This is worth noting when analysis is considered for the business environment of Tesco. As already discussed, the supermarket environment is a very volatile one. It is fast paced, cutthroat and results driven. Tesco lies at the heart of this industry and represents these traits. But more broadly, the organisation has really led the change in the supermarket industry over the last 30 years, a story which is described by Smith and Sparks (2009, p.143) as â€Å"one of the more remarkable stories in British retailing.† Its internal policies which have enabled its significant rise to the top appears to be an obvious i ndicator to where the companies major strengths lie. The Tesco Loyalty card and its e-commerce operations are generally considered to be world-leading (Humby et al, 2003 in Smith and Sparks, 2009) while it has an â€Å"unrivalled ability to manage vast reams of data and translate that knowledge into sales.† (Capell, K, 2008, p.1). The innovational qualities which have been at the heart of the companys success have therefore ensured that Tesco has not just shaped the way it operates in its business environment, it has in some respects, shaped the environment of the whole supermarket industry in the UK. It has become dominant in its home market and increasingly significant on the international stage (Burt and Sparks, 2003). With a number of hypermarkets, supermarkets and convenience stores, sprawled across a vast number of countries, Tescos sphere of influence is much more extensive than its UK competitors. Added to this international presence is the salient fact that â €Å"a number of U.S. retailers have tried to copy Tesco strategy† (Capell, K, p.2) reflecting the incredible influence its practices have had, and with that, evidence of internal success that has shaped its business environment. The very fact that Tesco is the leading supermarket chain in the UK, with 12% of retail spending going through its tills (Retail week 2013) is in itself a huge advantage to operations. It means easier access to the most suitable employees, leverage with suppliers and a huge advertising reach to customers. Of course, this position of power in the market does not mean that the organisation is immune to a variety of potential threats, both in its internal operations and external influences. Despite expansion into international markets, Tesco has not always proved a hit with customers outside of the UK. For example, the chain of convenience store ‘Fresh Easy throughout the United States struggled from its implementation in 2007. Internation al expansion has become the detriment of UK stores too, whose profits have paid for it and as a result the quality of staff, service and range of products has begun to lag behind rivals Sainsburys and Asda in home operations. There is always also the added possibility that success could lead to the Icarus effect (Miller, 1990). This is a situation in which an organisation becomes so successful in using particular processes and procedures, that it becomes a danger to its own future business, with trajectories of decline appearing in strategy, goals, culture and structure. In essence, this means that Tesco may have the problem of developing a sense of tunnel vision, in which it sees only particular aspects of operating in the business environment rather than ensuring it continues to innovate to react to external factors which will influence its future outcomes. Of course this all depends exactly on what the external factors are. Threats come in various shapes and sizes for Tesc o. The scale and size of the supermarket industry is larger and more competitive than ever before, particularly with the expansion of Morrisons, branching out into more and more parts of the country, and the rise of Aldi since the start of the economic downturn. Economic problems throughout the UK have undoubtedly been a major threat to Tesco. Despite traditionally having the capacity and advantage of catering for the majority, the recession saw the likes of Netto and Aldi increase sales significantly through even lower product prices, while Tesco has at times struggled (Retail week, 2013). These new, expanding and ultimately cheap supermarkets give consumers on a low budget an alternative, making them look likely to become major players in the future. Meeting customer needs has become increasingly important, with the speed of everyday modern day life meaning that trends and behaviour change much faster than in previous years and the variety of choice is astounding. Grocery re tailers now have to adapt by being more creative and efficient than ever before (Kumar 2008). In consideration of Porters five forces model, (Porter 1980) it is also worth considering how there is a threat to Tesco of new entrants into the supermarket industry. There are a number of reasons why this could occur. An organisation may be able to forge a stronger relationship with buyers or suppliers than that of Tesco, which would give them a significant advantage over its rivals, by limiting their access to distribution channels and reducing costs through economies of scale. However, this is more likely to occur from an already well established UK retailer within the supermarket industry, such as Sainsburys or Asdas. The potential for new entrants, in fact, seems relatively unlikely, given the already well established number and variety of supermarket chains. A major rival of Tesco could also prove threatening through providing better services, including technological ones. Although Tesco was the first supermarket to offer online shopping to Britain, it is no longer the only one to do so. The digital economy we now live in ensures that the internet is being increasingly used for weekly shopping and it is an aspect of business which is likely only to increase rapidly over the next decade. Tesco must therefore not only ensure that its delivery is efficient and effective to households, but also that its website is appealing to the public and consumers are constantly kept abreast of the latest information on deals and product offers. More specifically, Tesco will need to adapt to the increased use of mobile phone and tablet devices and ensure their technology is up to speed and prepared for the high numbers of web traffic which could potentially make use of their website much slower. Customer experience online is becoming more and more crucial to an organisations success (Rose et al., 2011), and operating in an industry in which affects any member of the public, the best available technology could prove to be vital to the future success of Tesco. Although a potential threat, Tesco should see this technological factor which affects their business environment as a fantastic opportunity. As the market leader within the UK supermarket industry it is best placed to make use of improvements in its online facilities with more access to the right talent. As the pioneers of online supermarket retailing, (Retail Week, 2013) they also have the foundations in place to continue innovation in this area of their business, as long as they are equally able to recognise the decrease in the use of hypermarkets and react accordingly. There is also a great opportunity for Tesco to develop their diversified services in banking due to the decline in trust of UK banks since the beginning of the economic downturn. Tesco have a real chance to show the consumer that they are an alternative lender and a company to trust in. Finally, Tesco have to recognise that its UK operations are beginning to become neglected, as is its image at home. It has set aside  £1bn to improve existing stores, with plans in place to increase staffing levels and to create a better environment for customers to shop in (Retail week 2013). It has also made significant steps into ensuring its brand image is improved, by hiring the agency Wieden and Kennedy to take charge of its marketing practices. There are ultimately a number of different factors, both external and internal, macro and micro, which affect the business environment of Tesco. Being the leading organisation within the supermarket industry, the company is in a good position to deal with the threats of competitors, which comes in various forms. The strength of Tescos UK operations have at times appeared to become neglected and this provides its main rivals, Asda and Sainsburys the opportunity to take advantage. Additionally, the weakened economic environment has allowed discount ers such as Aldi and Netto to gain a firm foothold and therefore potentially take a share of Tescos customer base. Despite new and existing competition, the reputation of Tesco and its success as Britains largest supermarket chain means it essentially has its destiny in its own hands. It has significant resources to ensure it can enhance its in store facilities, services and quality of staff and currently has the strongest relationship with suppliers, giving it the best bargaining power and allowing economies of scale. Finally, its history of developing online retail means it has the best opportunity out of all the UK supermarket chains to ensure the best standards of technology, where the future arguably lies for the industry. 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